CHECKLIST

1.Mutualassent(objectiveunderthecircumstances)
2.Offer
a.Definitive?Communicated?Objectiveassent?
b.Price;seeNebraskaSeed
c.Advertisement;seeLeonard;canbeofferifdefinitive
d.Termination(revocationdirect/indirect,counteroffer,lapse,death/mentalincapacity)
e.Irrevocableoffers(RK37):
i.Firmoffer(writing/merchant/assurance/3monthsorreasonabletime/noconsideration)
ii.OptionK87(1)(signedwritingw/consideration)
iii.OptionK87(2)(inducesreasonableact)
iv.OptionK45(partperformanceunderunilateralK)
3.Acceptance
a.Manifestagreement
b.Promise/performance
c.Mailboxrule
d.UCC2206(anymannerreasonable);commonlawisnarrower
e.Battleoftheforms/mirrorimagerule
4.Consideration
a.Gratuitouspromise
b.Settlementoflegalclaim(notlessthanowedregardless)(pastormoralconsideration)
c.Preexistingduty
i.RK89modificationundercircumstancesunforeseen
d.IllusoryPromise
e.Requirement/output/exclusivedealing(besteffort,goodfaith,reasonable)
5.Reliance
a.Promissoryestoppel(definitepromiseandreliance)
b.Equitableestoppel,seeGoodman(misrepresentations)
6.QuasiK
a.Cotnam,unjustenrichment
7.Defensesagainstformation
a.Capacity/duress/undueinfluence/publicpolicy
b.Statuteoffrauds
8.Interpretation
a.Ambiguity(4corners/context/oralagreement/courseofper/courseofdeal/tradeusage)
b.Indefiniteness(noKifincurableuncertaintyaboutmaterialaspect)(2204forgapfillers)
c.Mutualinterestatthetimeofcontracting
d.Parolevidencerule(mergerclause/extrinsicevidence)
4.Excuses
a.Mistake:mutual?(falsebelief,basicassumption,material,injureddidnotbearrisk)
b.Misrepresentation
c.Frustration/impracticabilityofpurpose(unexpectedevent,leastcostavoider)
d.Unconscionable/unilateralmistake
5.Breach
a.Anticipatoryrepudiation
b.Efficientbreach
c.Materialfailureorsubstantialperformance(curable?)
d.Cover
6.Remedies
a.Expectation(Mitigated?Uncertain?Remote?)(seeUCCbuyer/seller)
b.RelianceinjuredpartyinthepositionifKneverhappened(PE)
c.Restitutionvalueadded
d.Liquidated?Penalty?Reasonableinlightofanticipatedoractuallosses?
e.Specificperformanceornegativeinjunction

THELAWOFCONTRACT:NATUREANDLIMITS
Apromiseorsetofpromisesforthebreachofwhichthelawgivesaremedy,orperformanceof
whichthelawinsomewayrecognizesaduty.R1.
o Promise=manifestation(objective)ofintentiontoactorrefrainfromactingina
specifiedway,somadeastojustifyapromiseeinunderstandingthatacommitmenthas
beenmade;maybenonverbal.R2,4.
o Promisor=personmanifestingtheintention;promisee=towhomthemanifestation
isaddressed.R2.
o Agreement=manifestationofmutualassent.R3.
Broaderconceptthanbargain
o Bargain=exchangeofpromisesorperformance.R3.
Centralconceptofcontractlaw
Acontractrequiresabargain.R17.
VOIDCONTRACTS
Duressbyphysicalcompulsion
o Ifapartyisphysicallycompelledbyduress,theconductisnoteffectiveasa
manifestationofassent.R174.
Publicpolicyiflegislationprovidessooriftheinterestintheenforcementisoutweighedbya
publicpolicy.R178.
o Forenforcement:Partiesjustifiedexpectations?Forfeiturethatwouldresult?Special
publicinterestinenforcement?
o Againstenforcement:strengthofthepolicyasmanifestedbygovernmentalbodies?
Likelihoodthattherefusaltoenforcewillfurtherthepolicy?Seriousnessofthe
misconduct?Directnessofconnectionbetweenmisconductandtheterm?
o Maybederivedfrom(R179):
Legislation
Needtoprotectsomeaspectofthepublicwelfare
Restraintoftrade
Impairmentoffamilyrelations
Interferencewithotherprotectedrelations
Shaheenv.Knight:courtholdsthatitwouldbeagainstuniversalpublicsentimenttoaward
damagesforthenormalbirthofanormalchild
Johnsonv.Calvert:courtholdsthatshewhointendedtoprocreatethechildisthemother

Eveninbabyselling,whatcountsasagainstpublicpolicyisaveryclosequestion
o Pricegouginghypotheticals:considersellersarguments;incentivesforthefuture
VOIDABLECONTRACTS
Avoidablecontractisonewhereoneormorepartieshavethepower,byamanifestationof
electiontodoso,toavoidthelegalrelationscreatedbythecontract,orbyratificationofthe
contracttoextinguishthepowerofavoidance.R7.
o Guardianship
o Infancy:canonlyincurvoidablecontractualdutiesuntil18thyearunlessotherwise
providedforbystatute
o Mentalillness
Ispersonabletounderstandinareasonablemannerthenatureandconsequences
ofatransaction?
Ispersonabletoactinareasonablemannerinrelationtothetransactionandthe
otherpartyhasreasontoknowofhiscondition?
o Intoxication:canapersonunderstandinareasonablemannerthenatureand
consequencesoftransaction?
o DuressbyImproperThreat.R175.

Ifaparty'smanifestationofassentisinducedbyanimproperthreatbytheother
partythatleavesthevictimnoreasonablealternative,thecontractisvoidableby
thevictim.
Ifaparty'smanifestationofassentisinducedbyonewhoisnotapartytothe
transaction,thecontractisvoidablebythevictimunlesstheotherpartytothe
transactioningoodfaithandwithoutreasontoknowoftheduresseithergives
valueorreliesmateriallyonthetransaction.
Improperthreatsincludethefollowing:threateningacrime,tort,criminal
prosecution,civilprocess,badfaith,breachofthedutyofgoodfaithandfair
dealing
Improperthreatsalsoincludewhentheresultingexchangeisnotonfairterms:
threatenedactharmstherecipientanddoesnotsignificantlybenefitthe
threateningparty;priorunfairdealing;useofpowerforillegitimateends
o UndueInfluence.R177.
(1)Unfairpersuasionofaparty(2)underthedominationofthepersonexercising
thepersuasion;(3)orwhobyvirtueoftherelationshipbetweenthetwo,theparty
isjustifiedinbelievingtheotherwouldnotactinconsistentwithhiswelfare
Inducedbysomeonenotapartytothetransaction=voidableunlesstheother
partyingoodfaithandwithoutreasontoknowoftheundueinfluenceeither
givesvalueorreliesmateriallyonthetransaction
Odorizzifactors:
o Unusualplaceortime
o Insistenceonimmediatedecision,particularlywheretimeisnotoftheessence
o Emphasisonuntowardconsequenceofdelay
o Theuseofmultiplepersuaders
o Absenceofadvisertothesubservientpartyandinsistencethatthereisnotimetoobtain
counsel

UNCONSCIONABILITY
Catchalldefensetocontractenforcement;alimitationtopartiesfreedomofcontract
Substantive(maydistinguishitfromotherdefensesinholdingacontractunenforceableon
fairnessalone)andproceduralunconscionability
o Ifacontractortermisunconscionableatthetimethecontractismadeacourtmayrefuse
toenforcethecontract,ormayenforcethecontractwithouttheunconscionableterm,
ormaylimittheapplicationofthetermasjusticerequires.R208.UCC2302.
o Theprincipleisoneofthepreventionofoppressionandunfairsurprise
o Itispossibleforacontracttobeoppressiveeventhoughthereisnoweaknessinthe
bargainingprocess
Caspi,Carnival,Realnetworks
o Anotherwisefairterminaformcontractisnotunconscionablemerelybecausetheterm
isnotnegotiated,notunderstood,ornotreadbypromisor
o Efficiencyandconsumersavings
o Unfairsurpriseusedtopolicepotentialabuses
o Considerbattleoftheformsaswell
Alternatives?
o Refusetoenforceboilerplate,fillcontractw/backgroundrules
Sacrificesellerflexibility
Increaseconsumercosts
o Enforceeverywordofboilerplate
Trapconsumersunawareoflegalrule
Tradeoffbetweensubstanceandprocedure?
Williamsv.WalkerThomas
o Paternalismv.freedomofcontract
o Expost(proseller)andexanteperspectives

o
o

Economiccapabilitiesofjudges:legislativematter?
Bettersolutions:antitrustlaws,fixprices,redistributionofwealth

DAMAGESDOCTRINE
Subtopic
Rule
Expectation
AagreestopayB$100topaintAshouseandBagreestodotheworkforthisprice.
(Default)
ApaysBa$10deposit(restitution)andspends$5(reliance)tocleanthehousein
Benefitofthe
preparationforthework.BfailstoperformandAhiresanotherpainterfor$120.As
bargain
expectationdamagesare$35($140$105).
Goal:
(CorMK)*(#ofgoods);Buyercanrecoupconsequentialdamages.See2717for
compensation
partialbreachandinstallmentsales.
Remoteness
Proximateandusualconsequenceofcarriersaction.
(Foreseeability) ThemorerestrictivetacitagreementtestrejectedbyUCC;instead,acc.tocmt.b,
aninjuredpartycannotrecoverunlesshetriedtopreventthelossbycoverorotherwise
butifhecan,anylossthesellerhadreasontoknow.
Limitedliabilityrule(separatingequilibrium):Burdenisontheshippertoprove
specialcircumstances;fromanexanteperspective,thosewhowantextraprecaution
(presumablyasmaller%)negotiateforit.Unlimitedliabilitywouldresultinan
inefficientpoolingequilibrium(blendedpriceandprecauation)oraseparating
equilibrium(hugetransactioncosts).
Certainty
Inexchangefor$100K,AagreestosingforB;Bspends$10Kinreliance;A
(Reliance)
repudiatesbeforeconcert;BhiresCasreplacementforthesameprice;Bspends
Lost
another$10Kpromoting;Bnets150KbutbelievesAwouldhavehelpednet$200,
expenditures
makinghisdamages60K;aCt.wouldlikelyfindthatspeculativeandonlyaward10K
reliance(orexpectationdamagesw/zeroprofitassumption).
Mitigation
Paintedhouseinprepforawedding:Value=200;Price=100;CoverPrice=120.If
Waste
youdontcover,youonlyreceive20youfailedtomitigateandtheintrinsicvalueyou
placedonthepaintedhouseisirrelevant(seePeevyhouseandrelatedcasesfor
circumstanceswhenavaluelessthancoverpricemightberelevant).Incentivizesyou
tohireasubstituteandmakesefficientbreachpossible.
AagreestoconstructawallforBinexchangefor$200;Ascostis$75/sectionof
wall(2sections);Acompletesfirstsection;Brepudiates;Acontinuesanywayandsues
for$200.Damages:$75+$50profit=$125.Extra$75incurredincreasedAscosts
unnecessarily.(Seerestitution)(Ceasingworkisnotaburden).
Sellersremedies:timeofperformance(2708),ratherthanbuyerstimeof
repudiationremedy.
Specified
Nopunitiveremedies:1)expost,extraordinarilyhighliquidateddamages;2)easily
provabledamagesb/cof,say,athickmarket.Thus,aretheyreasonabledamages?
Fairgrounds,rollercoaster,andadvertising:asingleownerwouldmakedecisions
simultaneouslyandwiththerightbalanceofcosts.Expectationremedywouldhave
boththeFGandthecontractoroverinvestingb/cFGwilltreatprobabilityofsuccessas
100%andadvertiseaccordingly(sincetheyknowtheyllbefullycompensated);
likewise,contractorwillpredictthatFGwillspendexcessively,soitwillinvestin
higherprecautionstoavoidhighdamages.Accordingly,thepricesgoupandoutside
theoptimallevelliquidateddamagesreturnthesituationtooptimalpoint.
Specific
Damagesdifficulttoprove;noreadysubstituteandthusnomarketvalueforthe
Performance
contractualperformance;damagesdifficulttocollect(e.g.insolvency);concernthat
expectationremedywouldbeundercompensatoryb/coflimitationonuncertain
damages.Uniquepropertyoruniquegoods.
Negativeinjunctions:willnotbegrantedifiteffectivelycompelsperformancewhere
specificperformancewouldnotbegranted(MaryClark).Narrowerexpressorimplicit
covenantsmorelikelytobeenforced(NewYorkratherthantheworld;operasinging
ratherthananywork;timeofcontractratherthanforever).
Restitution
Unavailableonlywhereexpectationwouldbefullycompensatoryandeasyto
Disgorged
calculate.
profits
10Ktopainthouse;1Kdeposit;priortoperformance,repudiation.Ct.willoftencall

Provisions
R347;1103,
1106,2102,
2105,2106,
2712,2713,
2715,2717
R351;2715

R346,349,
352

R350;2706,
2708,2710,
2718

R355,356;2
718,2719

R357,359;2
716

R371,373,
374;2711,2
718

1Krestitution,butitcouldbeclassifiedasexpectation:thebenefitofthebargainwas
10,not11.
CASELAW
Subtopic
Expectation
(Default)

Remoteness

Certainty

Mitigation

Specified

Rule
Inamixedtransaction,considerthenatureoftheKandifthedisputeinquestion
primarilyconcernsgoodsorservices(Hooker).
Specificprovision(MK)ofUCCgovernsgeneral(lostprofits);themarketprice
formuladiscouragesbreachandencouragesmarketstability;note,too,thatadifferent
holdingwoulddestroyCoopandBambinosrelationshipb/cBambinowouldeither
alwaysoverpayorgetnodeliveryifTongishbreaches.
EfficientBreach:P=$100;C=$150;V=$120:repudiate.
Aremoteinjuryisnotcompensableunlessthepromisormakesthepromiseeawareof
thecircumstancesthatcouldgiverisetothatinjury(Hadley)(standardholding,but
mightbeevenmorerestrictiveofliabilitythanthissuggests)
Dragline;shipperclaimsonemonthrentalvalueasdamages;carrierclaimsthatwas
unforeseeable,nonotificationofspecialcircumstances,andrentalwasnotthemost
likelyuseoftheDragline.Holding:Martinezcanmakehiscaseforlostrentalvalueb/c
itisobviousthatamachinehasausevalue;Hadleydoesnotrequirethemost
foreseeableofpossibleharms;rentalvaluedamages=resaledamages(forumpost).
Morrowdemonstratesthattheresnotmuchdifferencebtwmajorityandminority
positionsretheTAT;courtsunderstandthateverypartofaKisopentointerpretation;
evenintherejectionoftheTATbytheUCC,Morrowstillwouldntrecover.
ChicagoColiseumwants:Lostprofits(purelyspeculative);expensespriortoK(did
notflowfromandwerenottheresultofbreach);expensespostK(necessary
expenditures,e.g.architectsfee,properreliancedamages);expensestogain
complianceandattnsfees(incurredattheirownperil).
PreKexpensesawardedinAnglia,characterizedaszeroprofitexpectationdamages:
itwasb/cofhisbreachthattheexpenditurewaswasted.HadtheKbeenperformed,
thepromiseewas2750worseoffb/cofReedsbreach.
19,500spentonreliance;Mistletoe:wastedexpenditures(seeR349);Ct.,sayscapital
investmentcanberecouped.
Synthesis:zeroprofitsontheproject:whenthereisabreachthatcausesthelossofa
contractualproject,apartyeitherpromiseeorpromisorwhoarguesthatthe
promiseewouldhavedonesomethingotherthanbreakevenhastheburdenof
supportingthiscontention.ButseeDempsey.
Expenseincurredinpartperformancebeforerepudiation+lostprofits(Rockingham).
Employeesrejectionoforfailuretoseekotheravailableemploymentofadifferentor
inferiorkindmaynotberesortedtoinordertomitigate(reduceawardof)damages
(Parker).Allornothingaspectofthedoctrine.Dissent(pushedtotheextreme):
MacLainesdamagesshouldbe750K(BloomerGirlprofit)500K(BigCountryprofit)
incentivizinghertoacceptthecoverandearn750Klessthe250Kcost,and
increasingthewealthtosocietybytheproductionofthemovie.Stillmightberightly
decided.
Hadbuyernotrepudiated,standardgoodssellercouldhaveearnedprofitonthatsale
andonanothersale:Alostvolumesellerthusentitledtolostprofitonthelostsale.
Stipulateddamagessubstantiallyinexcessofinjurymayjustifyaninferenceof
unfairnessinbargainingoranobjectionableinterroremagreementtodeterapartyfrom
breachingthecontract,tosecureperformance,andtopunishthebreachingpartyifthe
deterrentisineffective(Wassenaar,whichtakesaccountofmorefactorsthantheRs
2prongtest,holdthatapartydoesnothavetomitigateunderliquidateddamagesanda
courtmustlooktowhatisreasonableunderthetotalityofcircumstances).

Case
Hooker;
Tongish

Hadley;
Hector
Martinez;
Morrow

Dempsey;
Anglia;
Mistletoe

Rockingham
County;
Parker;Neri

Kemble;
Wassenaar;
LakeRiver

Specific
Performance

Restitution

IfdamageswouldbeeasyatthetimeofK,oriftheestimategreatlyexceedsa
reasonableupperestimateofwhatthedamagesarelikelytobe,itisapenalty(Lake
River).
CourtrefusestoenforceclauseinKemble,butR356suggestsitmightdootherwise.
Inmodernterms,thecontractresaledifferentialwouldbeinadequate(nottrue
expectation).Loveless,similartoTongishitdoesntmatterwhatyoudowiththeland
(ortheseeds).
Cumbest(uniquestereo);SchollandSedmakareessentiallysimilargoodsavailable
forreasonablyeasycover?
Banonnegativedamages(Bush).Promiseeusesrestitutiontoreceiveanawardthat
leaveshimbetteroffthanthepromisorsperformancewouldhave(KP=14,Deposit=
5,MP=11)
Laborersubstantiallybreaches,suesforwagesnotonthecontractbutonquantum
meruit(restitution)Ctgivesthereasonableworthoftheadvantagetheemployer
received,nottobeexceededbytheKpricefortheservice,lessanydamagethe
employerhassustained(Britton).3quarters=90,lessthe20(MP=50)forthe
employersexpectationdamage.
Vines:Deposit=standardsourceforbothliquidateddamagesandrestitution(conflict).
InVines,thecourtallowstheplaintifftoprovethattheliquidateddamageclausewas,
atthetimeofbreach,unreasonableinthat1)thecondocouldberesoldatasufficiently
higherpricethaninthecontractandcouldcompensatethesellerforanyincidentalor
consequentialdamagesor2)unconscionableorfraud.See2718;2711.
Cotnam:quasiK.Negotiationpossible?Norecovery.

Loveless;
Cumbest;
Scholl;
Sedmak;
MaryClark
Bush;
Britton;
Vines;
Cotnam

Summaryhypothetical:
o AagreestopayB$100topaintAshouse.Bagreestodotheworkforthisprice.A
paysB$10deposit.Aspends$5tocleanthehouseinpreparationforthework.Bfails
toperform.Ahiresanotherpainterfor$120.
Reliance(lostprofits)=$5,assumingAcleansthehouseasecondtime
Restitution(disgorgedprofits)=$10deposit,thoughthiscouldalsobe
consideredpartoftherelianceinterest
Expectation(benefitofthebargain)
PerformancewouldhaveyieldedApaintedhouse,less$100,less$5
cleaningexpense
BreachyieldedApaintedhouse,less$120,less$10cleaningexpense
(assuminghousewascleanedtwice),less$10deposit
Difference=$35
DoesnotmatterwhatvalueAputsonapaintedhouse
Alternateversion:
o Samefactsasabove,exceptitsinpreparationforaweddingandweknowthevalueof
theperformance.Thejobisworth$200toAbel(butworthnothingafterthewedding).
Bfailstoperform.Aisnotabletofindasubstitute.
PerformancewouldhaveyieldedApaintedhouse,worth$200,less$100
contractprice,less$5cleaningexpense:$95
BreachedyieldedAnothingbutalossofa$5cleaningexpenseanda$10
deposit:$15
Expectationinterest:$110,includingcompensationofwastedcleaningandreturn
ofthedeposit
o N.B.Subjectivevaluationinanactualcasedifficulttoprove.Thus,usuallyitwillturn
onthemarketandcontractpricedifference.
GeneralUCCrules:2102,2105,2106

SellersBreachunderUCC:2712,2713,2715,2717
o Aagreestosell250widgetstoBinexchangefor$100perwidget.Arepudiatesjust
beforethespecifieddeliverydate(whichAknewwasrightbeforeBssaleevent).B
mustcancelthesaleasaresult.Thecancellationrendersuseless$10worthof
promotionalmaterialsthatincludedthedateofthesale.Replacementwidgetsarebought
atapriceof$110.Thedateofthesaleeventischanged.
2712:Buyercanclaimcoverdamagesof$2,500(i.e.$10/widget)
2713:Buyercanclaimdamagesviathedifferencebetweenmarketandcontract
priceof$2,500
2715:Buyercanclaimconsequentialdamagesof$10inadditiontoany
incidentaldamages
Essentiallythesameremedyasthecommonlaw
o Samefacts,butthecontracthadbeenforinstallmentsales.Breachwasthusonlypartial.
2717:Thebuyeronnotifyingthesellerofhisintentiontodosomaydeductall
oranypartofthedamagesresultingfromanybreachofthecontractfromany
partofthepricestilldueunderthesamecontract.
Thus,buyerwouldhavebeenabletowithholdpaymentforearliershipmentsas
anoffsetofdamages,forcingsellertosueforanypaymentintheeventofa
dispute
ThisisaspecialruleundertheUCC
Tongishv.Thomas:whatmakesTongishinterestingisthepossibledifferencebetweenthemarket
pricedamagesandadamageremedybasedonwhatwouldhavebeenCoopsexpectedwealth
hadbothsidesfullyperformed,andwhatwasCoopswealthgivenbreach.

THEORYOFASSENT
Generaltheory
o Haseachpartybehavedinawaythatgivestheotherpartyreasontobelievethereisa
bargainbetweenthem?SeeR17,33(manifestationofmutualassent)
Writtenagreement?
Oralagreement?
Anactorafailuretoact?
o Howwouldareasonablepersoninterprettheconductofapartyagainstwhomcontract
enforcementissought?[Or,wasthereabargainandonwhatterms?]
Musthaveabasisfordeterminingtheexistenceofabreachandanappropriate
remedy(i.e.,stuffforthingsisnotaK)
Dependingoncontext,anunintentionalactcannotbindaparty,butifaparty
intentionallyactsinawaythatheknowsorhasreasontoknow(areasonable
inference,notknowledge)willbeinterpretedasassent,theconductissufficient
tobindtheactoreventhoughhedoesnotinfactassent.SeeR19.
Ifapartyswordsoracts,judgedbyareasonablestandard,manifestanintention
toagreeinregardtothematterinquestion,theagreementisestablished,anditis
immaterialwhatmaybetherealbutunexpressedstateofhismindonthe
subject.Embryv.Hargadine(employersstatementreasonablyconstitutedan
objectivemanifestationofassent).
Considerthebusinesssetting(holidaysv.stockholdersmeeting)andhow
elsetheemployerswordsmightbeinterpreted(Imbusy)
Lucyv.Zehmer(agreementtosellafarmfor$50kenforceableregardlessofDs
insistencethatitwasajokeb/cPreasonablyinterpretedDsactionsasassent)
Whenonepartyisinjest,andtheotherpartybelievesitreal,thelaw
takesthejokerathisword
Ifthedeceivedpartyhadreasontoknowthejoke,theremaybeaclaim
forfraudorunjustenrichment
Acourthastwooptionsregardingtheadmissibilityofevidence:
(1)Fourcornersonlythesignedwritingsasevidence(Texaco:barred
evidenceofsecretinternalcommunicationbtwTexacoandGetty,while
allowingthepressreleaseandmemoofagreementbtwGetty/Pennzoil)
(2)Liberalallowanceofextrinsicevidence
Offerandacceptance
o R22,24(offerdefined),33(termsofKreasonablycertainsoastoprovidebreachand
remedy),204(supplyinganessentialomittedterm);UCC2204,generallysimilarbut
morepermissiveastouncertainterms:UCC2305,308310[thoughdifferenceintone,
theyrenotnecessarilydifferentineffect]
Gapsserveadualpurpose:evidenceoftheabsenceofanofferorrelianceon
defaultrules
o Noquantityortimeofdeliverymentioned?Noacceptanceoroffer(i.e.itsan
advertisement).NebraskaSeed(1800bu.orthereaboutsofmilletseedisan
advertisement,notanoffer).
UCC2206:unlessotherwiseunambiguouslyindicatedbythelanguageor
circumstances,anoffertomakeaKshallbeconstruedasinvitingacceptancein
anymannerandbyanymediumreasonableinthecircumstances
R26(furthermanifestationofassentneededifanadvertisementistoconstitute
anoffer);R29(theofferorismasterofheroffer)
o Gapsimplythereisnooffer?Leonardv.Pepsico(applicationofR33).
Agreementsinprinciple
o Courtshave3optionswhenexaminingagreementsinprinciple:
(1)giveagreementsnobindingeffect

(2)giveagreementsbindingeffectastothetermsagreedupon,thenfillinthe
gapsw/backgroundrules
(3)givetheagreementbindingeffectastotermsagreeduponifonepartyseeks
enforcementw/gapsfavorabletotheotherparty
o Policyconsiderations:
Favorenforcementsothatpartiesmayhavethebenefitoftheirbargain
Disfavorenforcementsothatpartiesdonotfindthemselvesaccidentallybound
Ultimately,maynotmattertoomuchtowellrepresentedparties
o Preliminarynegotiationsw/nobindingeffectEmproapproach(decidedbyjudge)
Subjecttoapprovalbyboardandshareholdersclause;referencetoagreement
ongeneralterms;andreferencetoEmprosrighttotheirdepositpointtoward
anagreementinprinciple,notabindingcontractoranoptioncontractto
purchaseifitgrantedthedisputedcollateral
o Agreementw/opentermstobefilledinTexacoapproach(decidedbyjury)
MemorandumofAgreementtobeapprovedbyGettysBoD;pressrelease
announcingtheanagreementinprincipletoasalemerger;pressreleasewas
treatedasevidenceofthetermsofthepartiesagreement;courtdescribes4
factors:
Wasthereanexpressreservationtobeboundonlybyaformalwriting?
Wastherepartialperformancebythepartydisclaimingthecontract?
Wasthereagreementonallessentialterms?
Isthecomplexityandmagnitudeofthetransactionsuchthataformal
writingisrequiredforassent?
Revokinganoffer
o Powerofacceptanceisterminatedbyanyofthefollowing(R36,41):
(1)offereesrejectionofoffer
(2)counterofferthatisnotalsoanunequivocalacceptance
(3)lapseoftime,revocationoftheoffer,death,incapacity,orthenonoccurrence
ofanyconditionofacceptance
o Timingquestionsaracebetweenrevocationandacceptance?
Dickinsonv.Dodds(PattemptedtoacceptanofferafterhelearnedofDsintent
torevoke)
Optioncontract(offerwastobeleftoveruntilaspecificdate)wasnot
partoftheK,andthusunenforceable
MirrorImageRule(commonlaw)
o R61(unequivocalacceptance+additionaltermsiseffective)
o Acceptancemustbeunequivocaltoallterms;acounterofferisarejection
o Ardentev.Horan:Psacceptancewasacounterofferb/ctherewasanadditional
conditionw/oachangeinthepriceoffered
Acceptancecannotbeconditionedupontheofferorsassenttotheofferees
proposalforadditionalterms
Contractsformedbyperformance(see:R30,32,62;UCC2204,206)
o BilateralKexchangeofpromises;eachpartyowestheothersomethingatthetimeofK
formation
o UnilateralKatthemomentofformation,theoffereehasfullyperformed,leavingonly
theofferors(hence,unilateral)performanceoutstanding
Provemewrong/skillcases:
Arewardcasewhereofferorhopesthatnoonewillbeabletoaccept
Maynotbebargainedforexchangeinanymeaningfulsense,butthe
existenceoftheofferisvaluabletotheofferor(considerationdoctrine)
o BilateralK:offermadetoanotherpartywhentheyrenottogether?(Whitev.Corlies
Tifftcommonlawrule)

A,amerchant,mailsB,acarpenterinthesamecity,anoffertoemployBtofit
upA'sofficeinaccordancewithA'sspecificationsandB'sestimatepreviously
submitted,theworktobecompletedintwoweeks.Theoffersays,Youmay
beginatonce,andBimmediatelybuyslumberandbeginstoworkonitinhis
ownshop.Thenextday,beforeBhassentanoticeofacceptanceorbegunwork
atA'sofficeorrenderedthelumberunfitforotherjobs,Arevokestheoffer.The
revocationistimely,sinceBhasnotbeguntoperform.R62.
(1)Acceptancemustbemanifestedbyanappropriateactinaproperway
(3)Intheusualcourseofevents
(4)Inareasonableamountoftime(anofferorneednotknowimmediatelytobe
bound)
o UnilateralK:offermaybewithdrawnatanytimebeforethecompleteperformanceofthe
requestedactunderthecommonlawruleofPettersonv.Pattberg.
o R45createsa2partoffer(Pettersonwouldpresumablybeallowedanoptionofcomplete
tenderunderthisrule):
(1)Offerorproposesatermontheconditionthat(e.g.the$780forthemortgage
inPetterson)
(2)Theoffereedoesacertainact:offereehasearnedtheoptionanditshisright
tocompleteornotcompleteundereitherthespecifiedtimeorareasonable
amountoftimewithouttheofferorrevoking
o R69andHobbs:acceptancebysilence
Wordsorpastconductofanoffereecanmanifestassenttoanarrangement
throughwhichtheofferorcantreattheoffereesinaction/silenceasacceptance
(otherwise,noK)
BattleoftheForms(seechartfortheoreticalexamples)
o Rejectionofcommonlawmirrorimageruleandlastshotdoctrine
o Oncetheresaseasonableanddefiniteacceptance,thecontractisinterpretedbyreference
totheFORMS,nottheconductoftheparties,despitethepossibilitytheydidntassentto
theterms
o Whathappensifwehadjuststuckw/thecommonlaw?
Noagreementformedunlessconductmanifestsassent;lastformsentisthe
agreement
Notnecessarilytragicifthepartieswerethatworried,theyshouldjustpay
moreattentiontotheforms
Butperhaps,sinceinrealitynoteveryoneknowsthelaworhavegood
representation,2207issensible
Yetifyouregettingridofthecommonlawb/cnoonereadstheforms,theonly
thingthatmakessenseistosaythecontractequalstheagreeduponterms;
anythingelseisfilledinwithbackgroundrules,whichisessentially2207(3),
thoughinapplicableonceyouvedeterminedtheresbeenadefiniteand
seasonableexpressionofacceptance
o NotificationofobjectionPosnersaysunfairsurpriseinUnionCarbidewheneverthe
partieswouldntagreetoit(whichiseverything;obviouslynotwhatthedraftersintended
astheysaidunreasonablesurprise).Cf.R211.
o UnionCarbide:InvoiceandpricebookcontainclauserequiringOscarMeyertopaysales
taxes;UnionCarbideclaimsthatOscarMeyerowesbothsalestaxesandbacktaxesas
well
Ctrejectsthisreadingofthetaxclauseonthemerits(andthuscasecouldhave
endedthere),butproceedstoanalyzecaseunder2207
(OscarMeyers)purchaseorder=offer;(Carbides)invoice=acceptance
Thus,doesthesalestaxtermasinterpretedbyCarbidecreateanindemnification
thatbecomespartofthecontract?

No.ConductofthepartiesestablishesOscarspointofsaletaxes(1
205),butindemnificationwouldbeamaterialalterationundersec.2.
Oscarneverassented,expressorimplicit.
o ProCD:Offercontainedareferencetoadditionalterms,whichZeidenbergshouldhave
understoodwouldincludeanacceptorreturnprovision.Byusingthesoftware,rather
thanreturningit,Zbecameboundtotheterms.
Ctreasonsthat2207isinapplicableb/casthereasanofferbyform,and
acceptancebyconduct;thelatterdoesnotproposeanyadditionalordifferent
terms
Essentiallyanoptioncontract:heboughthimselfanoptiontolookattheterms
andthenhehastodecideifhelikesthetermsornot
o JudgeEasterbrookunderstandsbuyingaboxofsoftwareordeliveringacomputerthe
modernequivalentofsigningaform.Theprocessoforderingthingsonlinehasled
consumerstounderstandthattermstofollowispartofthearrangement,i.e.youre
agreeingtoenteranoption;youdolookforthetermsonthesideofthebox
JudgeVratildisagrees:consumersdontlookforterms;consumershavenomore
reasontoexaminetheboxthananOreobox
Insomeindustriesinsurance,travelthispracticeofadhesionhasalreadybeen
approved.Vratilonlyanalyzes2207:itsnotclearhowfarherdisagreement
withEasterbrookstretches.
o HillandKlocekInKlocek,Vratiltreatsthecustomersoralorderasanofferunder207;
InHill,Easterbrookquicklyrejectstheapplicationof207(Easterbrookisonthinground
callingthebuyertheofferee)[Seeslidesmoredetail]
BATTLEOFTHEFORMSUCC2207
FactPattern
Outcome
Anofferisfollowedbyaresponsethatisnotadefiniteor OfferandresponseKunder(1),(2)
seasonableexpressionofacceptance.
Offerthatdoesnotexpresslylimitacceptancetotheterms ResponsesadditionaltermsbecomepartoftheKsolongas
oftheoffer.Responseisaseasonableanddefinite
(1)itsbetweenmerchants,(2)theofferdoesnotexpressly
expressionofacceptance,butincludestermsadditionalto limitacceptancetotheoffersterms,(3)inclusionofthe
ordifferentfromthoseoffered.
additionaltermwouldconstituteanimmaterialalteration
ofwhattheagreementwouldbeabsenttheadditionalterm,
(4)notificationofobjectionisnotgivenwithina
reasonabletime.

Offerisfollowedbyaresponse,whichwhilean
acceptance,isexpresslymadeconditionalonassentto
additionalordifferentterms.

Offerexpresslylimitsacceptancetothetermsoftheoffer.
Offereerespondswithadditionalordifferentterms.

Additionaltermisotherwisedropped.Jurisdictionsdiffer
onwhetherthetermisdroppedout(offerstermremains)or
thedifferingtermsknockeachotherout(backgroundrules
apply)
(1)Offerorassentstoalladditionalordifferentterms,aKis
formedonthetermsoftheresponse
(2)Otherwise,noKunder(1),(2)eveniftheofferor
transacts(say,offeror/sellersendsthegoods)followinga
conditionalacceptance
(3)However,iftherehasbeensuchatransaction,there
mightbeaKunder(3)
(1)Usetheconditionsetoutintheofferasreasonto
disqualifytheresponseasadefiniteandseasonable
expressionofacceptance,takingthecaseoutsideofsec.1
(2)Anotherapproach,following(2)(a),whichimplicitly
contemplatesthatsucharesponsecanoperateasan
acceptancetosuchanoffer,istoallowtheresponsetoserve

PartieswritingsdonotestablishaK,eitherundercommon
lawor2207(1)or(2),butthepartiesconductestablishes
aK.

asanacceptanceandtotreattheresponsesadditional
termsasprerejectedforthepurposesofthestatute.One
couldthenimagineacourtdroppingouttheresponses
differenttermsgiventheexpressconditionoftheoffer.
(3)Thisoutcomeisnotcertain,dependingonwhetherthe
jurisdictiongenerallyusestheknockoutruleorthedropout
rule
(1)Termsintheconfirmationthatareadditionaltothe
agreementbecomepartoftheagreementiftheypassmuster
undersec.2;otherwise,theyaredropped
(2)Conflictingterms(i.e.different)aredropped
(1)Atermineitherconfirmationthatisadditionalto,not
differentfrom,theotherpartysanddoesnotconflictwith
theagreementbecomespartoftheagreementifitpasses
musterundersec.2;otherwisedropped
(2)Differenttermsknockeachotheroutandcannotbe
consideredasapossibleadditionaltermtotheagreement
eveniftheagreementissilentonthesubjectoftheterms
Undersec.3,thetermsofthecontractconsistoftheterms
onwhichthepartieswritingsagreetogetherwiththe
backgroundrulesthatwouldfillanycontractualgap

Partiesactualassenttothesameterms.

Kisformed,notwithstandingmachinationsof2207.

Agreementisreachedorally.Partysendswritten
confirmation.
Oralagreement.Partiesexchangeconfirmationsthat
includeadditionalordifferenttermsascomparedtoone
another.

INTERPRETINGTHEAGREEMENT
TheRoleofSubjectivity:Themeaningattachedbyapartywithnoknowledgeorreasontoknow
anothersmeaningcontrolsoverthemeaningattachedbyapartywithknowledgeorreasonto
knowanothersmeaning.R201
O ImagineIownanoldBuickandlovedReplicar;Iamfinanciallydistressedandyouare
awareofmylovefortheReplicar.Ioffertosellmycartoyoufor$10,000.Dowehave
acontract,andforwhatcar?Likelynocontract.TheReplicarisworth12Konthe
marketandtheBuickisworth8K;thefactspointindifferent,indeterminatedirections
Objectivelyambiguousterms(andnopartyssubjectiveintentwouldcontrol);
O Adairyagreestomakeaweeklydeliveryofbuttertoarestaurant,eachdeliverytooccur
nolaterthanmidweek.TheKistorunforoneyear.Duringthefirstsixmonths,the
dairysometimesdeliversonWednesday,butusuallyonThursday.Forsixmonths,each
Thursday,therestaurantexpressesadesirefordeliveriesnolaterthanWednesday.They
stillacceptthebutterwhenthedairyapologizes.AfteraThursdaydeliveryinthe7
month,therestaurantsaystheKisover.SeeR202.
Generallyprevailingmeaning
Technicalterms
Wordsofart
O UCC(1205;2208;1303)providesa(nonsensical)hierarchy:
(1)Expressterms
(2)Courseofperformance
(3)Courseofdealing[asequenceofpreviousconductbetweenthepartiestoa
particulartransactionwhichtofairlytoberegardedasestablishingacommon
basisofunderstandingforinterpretingtheirexpressionsandotherconduct]
(4)Usageoftrade[anypracticeormethodofdealinghavingsuchregularityof
observanceinaplace,vocationortradeastojustifyanexpectationthatitwillbe
observedwithrespecttothetransactioninquestion]
O UCC2208(3)essentiallypointsoutthemeaninglessnessofthishierarchybyestablishing
thewaiverandmodificationdespiteexpressterms

Waiveryoucanwaiveindividualrights;modificationischangingtheformal
contract
Inotherwords:itsallcontextandcourtsdifferontheextenttowhichthey
willlistentoextrinsicevidence
Thelitmustestwouldbeifcourtsenforceexpresstermsoveranobviouscourse
ofperformance:theydont.
O Asappliedtotherestaurantexample,courseofperformance(forsixmonths,thedairy
deliveredusuallyonThursday)helpsthedairyestablishthatitwasnotinbreachandthat
themidweektermwassimplywaived.2208(3).Still,dependingonhowtherestaurant
stateditspreferenceforearlierdeliveries,thismightnotbedispositiveasto
interpretationormodification.2208(1);R202(4):acceptancew/oobjectionisgiven
interpretativeweight.Restaurantwillthenarguethatwhileitmighthavewaivedits
rightsduringeachThursdaydelivery,itdoesnotconstituteamodification.The
restaurantshouldhavebeenclearerthatitreserveditsrighttotreatthenextThursday
deliveryasabreachbythedairy.
O Raffles:contractfordeliveryofcottontoarriveexPeerless.Peerless(Oct.)arrives,no
cotton;Peerless(Dec.)arrivesbearingthecotton.SellertenderthecottontoBuyer,but
Buyerrefuses.BuyerclaimsKwasforOct.Peerless.Courtfindsnomeetingofthe
minds,(perhaps)noobjectivebasistoresolvethedispute,andrefusestoenforcetheK.
Gilmore:ItisnotrelevanttotheKwhetherthecottonwasonOctorDecb/cto
arriveexPeerlesswasmerelyatermthatgavetheSelleranexcuseshouldthe
Peerlesssink.
Simpson:Disagrees.Theselectionoftheshiprepresentsagambleonthearrival
timethatwouldbereflectedinthepriceofcotton.
Troubled,too,bytheplightofthesellerwhowouldhaveawinningK
undereithershipment,astheMPwaslowerthantheKPoneithership.
SimpsonwouldhaveallowedSellerthebenefitofhisbargain
WhatifBushdidnotapplyandtherewerenegativedamages?
SellercouldhaveagreedthattheKwasforOctPeerless,andsuedBuyer
forhissavings,inanticipationofwhichBuyerlikelywouldhavejust
acceptedthetenderfromthePeerlessDec.However,notpossible.
Argumentsaside,theCt.couldnotresolveorfillthegapb/ctheyhadnobasis;
ct.interpretedtheagreementasfutures(betting)oncottonw/oknowingwho
wastakingwhatsideofthebet(cf.Texaco,wherehugegapsmustbefilled)
O Oswald:Seller:Swisscollection;Buyer:allSwisscoins.Ct.saysthisisjustRaffles.
Onthesellerspurportedunderstanding,onemighthaveexpectedaconversation
abouttheexcludedcoins.WhatSellerdoesnttrytopushformoresalesifshe
hadjustthoughthemeanttheRarityCollection.
Mightstillhavebeendifficult,giventhelanguagebarrier.
GapFilling
O SomecourtswilltryharderthanRafflesandOswald.InFrigaliment,e.g.,thecourtheld
thatwhereextrinsicevidencewillnotsuggestaclearbasisforinterpretation,theplaintiff
hastheburdenofshowingthatthenarrowmeaningofchickenwasused,ratherthan
thebroader.Butnobasisisofferedforthischoiceasadefaultrule.
O Theremightnotbeameaningfuldifferencebetweengapfillingandinterpretationone
cancharacterizewhatthecourtsaredoingaseither.Supplyingamissingtermor
interpretingtheexistingtermstoimplythatmissingterm.(DollarAmericanor
Australian?)
However,atermthatneedsinterpretingmaysignalgreaterimportanceto
thepartiesthandoesagapinthecontract
Anexpresstermthatcantbeinterpretedreliably,then,may(ormaynot)justify
thenegationofacontractevenwhereaKwithameregapwouldbeenforced
O Impliedinfactandimpliedinlaw

Termsonwhichthepartiesactuallyagree,thoughnotexpressly(IIF);no
evidenceonimplicitagreement,courtusescontexttodecidethemeaningofthe
term(IIL)
Littlepracticaldifference.R204:reasonableinthecircumstances.
O Defaultrule(R204)andmandatoryrule(i.e.goodfaithobligation)
O Texaco:arguesthatmanifestationofintentaside,theKbetweenGettyandPennzoil
lackedessentialterms(howthepricewouldbepaidtoshareholders,whowouldbearthe
taxpenalty):Ct.heldthatthejurywasfreetodecidewhetherthesegapscouldbefilled.
Arguably,thiscouldbereconciledw/Raffles,inthatindustrystandardscanbe
usedtodeterminepaymentsandtaxissues;butwhichboatandwhichcoins
suggestdisagreement,notgaps.ThedisagreementinRaffleswenttotheheartof
whatthecontractwasabout:paymenttoshareholdersinTexaco?Not
necessarily.
IllusoryPromises(or,lackingmutuality,tooindefinitetoenforce)
O RequirementsContract(selleragreestosupplyabuyer,ataspecifiedprice,anyquantity
ofgoodthatabuyerneedsandabuyeragreestopurchasethatgoodonlyfromthatseller)
Subjecttoanimplicitorimposedtermonthebuyerofgoodfaith:cantmakebad
faithdemands(thisobligationsavesitfrombeinganillusorypromise)
UCC2306addsarequirementofreasonablenesstothecommonlawsgood
faithimperative
O Outputcontract(buyeragreestopurchasefromaseller,ataspecifiedprice,anyquantity
ofgoodthatasellerproducesandaselleragreestosellthatgoodonlytothebuyer)
O NewYorkCentralIronWorks:USRadiatoragreestoprovideataspecifiedprice,NYC
IronWorksentireradiatorneedsfortheyear1899.IronWorksagreestopurchase
exclusivefromRadiator.MPforironincreases,IronWorksdemandsironproductin
quantitieswellinexcessofpriordemandunderearliercontracts.
Radiatorrefusestofilltheexcessdemand;implicittermoftheagreementlimited
thequantitytoanamountsuchashadbeencalledforinpreviousyearsofsimilar
dealingsbtwtheparties(Ctdeniedthisargument)
TheCtsaidtheneedsofIronWorkscouldbeindefinitelyenlargedwhenmarket
conditionsallowedthemtoundercuttheircompetitors
ThecourtdoesnotmeantoassertthatIronWorkshadtherightundertheKto
ordergoodsinanyamount.BothpartiesinsuchaKareboundtocarryitoutina
reasonableway.Theobligationofgoodfaithandfairdealingtowardseachother
isimpliedineverycontract.IronWorkscouldnotusethiscontractfor
speculation
Nopartywouldagreetoacontractthatallowedtheothertospeculate;
notlikelytheintendedbargain;anditwouldbeaonesidedbargain
ShouldgoodfaithevermeananythingmorethannotusingtheKforapurpose
withinthecontemplationofbothparties?
N.B.IronWorksprobablywouldnthaveprevailedundertheUCC2306
(unreasonablydisproportionate),thoughtherewouldstillbeaK,IronWorks
wouldjustbelimitedinhowmuchirontheycouldorder.
O UCCorcommonlawrule?Freedomofcontractconcerns.
UCCmayhaveprovidedthebestdefaultruleforanoutput/requirements
contract;
Butpartiesmightprefertobetonmarketsandinherentconstraintsratherthan
followadeterminationofwhatisunreasonablydisproportionate
Cmt.2:
Reasonableelasticityintherequirementsisexpresslyenvisagedbythis
sectionandgoodfaithvariationsfrompriorrequirementsarepermitted
evenwhenthevariationmaybesuchastoresultindiscontinuance.A

shutdownbyarequirementsbuyerforlackofordersmightbe
permissiblewhenashutdownmerelytocurtaillosseswouldnot.
Howdoesonedeterminewhetherashutdownisforlackofordersorto
curtaillosses?Isthereanydifferencebetweenthetwo?
Partiescaneffectivelynegatethegoodfaithruleiftheyexpresslypermit
it,eventhoughgoodfaithismandatory
Woodv.Lucy:WoodpromisestopayLucyofprofitsandrevenuesresultingfromthe
exclusiveagencyondesignsandtorenderaccountsmonthly.Ctsaysthiswasapromise
tousereasonableeffortstobringprofitsandrevenuesintoexistence.SeeUCC2306(2)
forbestefforts.
Theimputedobligationofreasonableeffortssavesthecontractfrombeing
illusory/lackofmutualityandleavesLucyboundtothecontract.
Arguably,theKcouldgoeitherway:1)theobligationisonlytoexpend
reasonableefforts;2)theparties,however,mighthavewantedtorelyonWoods
incentives,ratherthananenforceableobligation
Considerationproblems?
Contrastthiscasew/anonfamouspersongoingtoMacys
Goodfaith(R205;UCC1203)isamandatoryrule:butgoodfaithandreasonableness
arenotnecessarilysynonymous;perhapsgoodfaithshouldmeannomorethandoing
whatonehaspromisedtodo

EXTRINSICEVIDENCE
StatuteofFrauds(R110;2201)
Parolevidencerule:Awritingthatisafinalexpressionofanagreementdischargesanyprior(or
contemporaneousoral)agreementthatconflictswiththewritingorthataddsatermwithinthe
scopeofacomprehensiveportionofthewriting
o SeeR208218;UCC2202forformalterms(e.g.completelyintegratedagreement)
o Underlyingprinciple:thefinalwritingisthebestevidenceofanagreementsterms;when
itsindisputablyfinal,thereisnoreasonforacourttoevenadmitevidenceofadditional
termsoraconflictingagreement
o MuchofthecaselawrevolvingaroundthePERinvolvesearlierorcontemporaneous
agreementsthataddaconsistent(i.e.nonconflicting)termtotheagreement
Landscapehypotheticalemptyquadrantinthecenteroftheland,landowner
wantsafountainandsaystherewasanearlieragreementtothateffect.A)Ct
couldsayyouvegotamapthatcoverseverything.Itscomprehensive.Final
agreement.OrB)Ctcouldalsosaythatsinceitsintheemptyquadrant,its
withinthescopeoftheagreement,andwellhearevidencetodeemwehetherthe
agreementiscomprehensiveornot.
(Easy)solutiontosuchproblems:mergerclause
Intheabsenceofamergerclause,courtsaresplit:
(1)ThecourtinThompsonworriedthattoadmitevidencethata
seeminglycompletewrittensalescontractwasnotintendedtobe
comprehensivewouldbetoworkinacircle,andtopermittheveryevil
thatthePERwasdesignedtoprevent
o Thiswouldparticularlybethecaseiftheevidencewasonthe
purportedlyomittedtermitself
(2)InBrown,thecourt,quotingWigmoreforthepropositionthatacourt
canhearevidenceonnegotiationsforawrittenagreementincluding,
presumably,evidenceonpurportedadditionaltermsthenignoresuch
evidenceifthejudgeconcludesthatonthebalanceoftheevidencethe
writingwasintendedtobecomprehensivewithrespecttothesubject
matterofadditionalterms

Typicaltest:Wouldsuchanagreement,ifactual,benaturallyincludedinthe
writing?(Savesjudicialresources;promotescertainty:aclaimlikelytobe
fabricatedispresumedtobefabricated)(SeeThompson;Cf.R216(2)(b))
Extrinsicevidenceusedtointerpretanagreementormakeoutfraudintheinducement(R214;2
202)
o NothinginthePERexcludesevidencefortheuseofinterpretationorfraud,yetcourts
differontheuseofsuchevidence
o PacificGas:Traynor:Arulethatwouldlimitthedeterminationofthemeaningofa
writteninstrumenttoitsfourcornersmerelybecauseitseemstothecourttobeclearand
unambiguous,wouldeitherdenytherelevanceoftheintentionoftheparties,or
presupposeadegreeofverbalprecisionandstabilitythatourlanguagehasnotyet
obtained.
o TridentCenter:KozinskireversestrialCtandallowsTridenttomakeitscasebecausein
California,followingPacificGas,wordshavenomeaning.
o TheresnottoomuchdisagreementbetweenTraynorandKozinski:justdifferencesin
degree.Thesameoutcomewouldprobablyhappeninbothcases.Asamatterofpolicy,
itjustdependsonwhetheracourtprefersgettingitasrightaspossible;oraddingas
muchcertaintyandefficiencytolitigationaspossible

DOCTRINEOFCONSIDERATION
Note:TheUCChasdoneawayw/considerationinafewcircumstances,e.g.firmoffersand
whenacontractismodified.2205;2209.
Policy:importanceofexchangetoeconomicdevelopment(yetbargainsgobeyondbusiness)
Wasthereabargainedforexchange?R71.Promisetopaintahousefor10K;itsnottheworkor
themoneythatistheconsideration,itstheexchange,thebargain,thatconstitutesconsiderations
makespromisesenforceable.
o Johnsonv.Otterbein:Johnsonpromisesdefendant$100tobeusedexclusivelyinpaying
theuniversitysdebt.Otterbeinaccepts.
Noconsideration.Why?Aconditionisnotabargain.Theuniversitywas
alreadyobligatedtorepaythedebtitpromisedtorepay.
IfJohnsonweretoestablishabargain,hewouldhavetoarguethathevalued
havingtheUniversityrepayitsdebtssomethinghecouldnothavedone
unilaterallyandthattheuniversityresisteddespiteitsobligationtodoso
Dontgetconfusedbybenefit/detrimentlanguagejustproxiesforwhetherthere
wasanexchange.R79,81(motiveirrelevant)
o Hamerv.Sidway:Courtfindsabargain.Uncleextracteddesiredbehaviorfromhis
nephew,whowasundernoobligationtorefrainfromhisfavoredvices.
o Stilk:Noconsiderationwheninthecourseofperformance,twoseamendied,andthe
captainpromisestosplitthedeadmenswageamongtheremainingcrew.
Rationale:Theseamenhadsoldalltheirservicesuntilthevoyagewascompleted
whentheyenteredintothecontract;theyhadnoopportunitytoquittheship
duringitslandingsnorwerethetwoseamencapriciouslydischargedtotheextent
thattherestofthecrewwouldlosetheirmotivationforpickinguptheslack
o AlaskaPackers(seefishermenillustrationsbelow):Judgeframesitwiththerhetoricof
duress(stoppedworkasabody,demanded,stopworkimmediately),butholdsthat
therewasnoconsiderationundersuchcircumstances(largeinvestment,remotewaters,
shorttimeframe,impossibletosecuresubstituteperformance,etc.)becauseitwasto
rendertheexactservicesthattheywerealreadyundercontracttorender
Thestateofthenetsisacentralissue:theagreementdidntsaywhatqualitynets,
soimaginethedifferenthypotheticalsbelow.
Whatofthefishermenslikelyinsolvency?
Modificationwithoutconsideration(or,anewcontractthataltersorreplacesaprioragreement)

FishermenagreetoworkonaCaptainsboatfor$50plustwocentsforeveryfishcaught;
theagreementcallsfortheCaptaintoprovideGradeAQualityNets.Later,theCaptain
offerstheFishermen$100plustwocentsforeveryfishcaughtiftheFishermenare
willingtoacceptlesserqualitynets;theFishermenagree.Themodificationissupported
byconsideration:Comparedtotheoriginalcontract,theFishermengetahigherlump
sumpaymentinexchangefortheCaptainsfreedomtosupplylesser(andpresumably
lesscostly)equipment.Thereisalsonosuggestionofextortion,badfaith,orunfair
dealing.
ImagineanalternativescenariowheretheFishermenhavealreadybegunwork
onlytofindtheCaptainhasbreachedbynotprovidingGradeAQualityNets.
TheFishermenagreetoforegodamagesinexchangeforahigherpayfor
workingwithinferiornets.
Whatiftheagreementdidntspecifythequalityofthenets?Captainprovidesindustry
standard.AlthoughtheFishermenaresurprisedtheyexpectedbettertheirsurprise
doesnotamounttoanexcusefromperformanceunderthetermsoftheinitialagreement.
Iftheybreached,theywouldbeliabletotheCaptainforhisexpectationdamages(fish
notcaught);however,aretheysolvent?
WhatiftheFishermenthensaytheywillnotwork,thusbreaching,unlesstheCaptain
promisesthemafeeof$100plus2centsforeveryfishcaught?Toolatetohire
substitutes.IftheCaptainagreestotheincrease,andtheFishermenperformunderthis
modifiedcontract,willacourtenforcetheCaptainspromiseof$100?(AlaskaPackers
andStilk)
Thecourtineachcasefoundthatthecontractlackedconsiderationb/cthe
promisorontheoriginalcontract(thewouldbebeneficiaryofthemodification)
agreedtodonomoreinexchangefortheincreasedpaythantheywereobligated
todoundertheoriginalcontract
Somewhatcurious,astheFishermengaveuptheirrighttobreachandbe
answerableonlyindamages(isthatnotconsideration?)
InterpretationofwhatAdlerissaying:youalwayshavearighttobreach,
thatsyourprerogativeunderacontract:performorpay.Whetherthe
qualityofthenetsisthestandardorless,thefishermencouldhave
walkedawayatanytime;instead,theyagreedtoperformiftheygeta
raise.
Inotherwords,thedefectseemstobemoreaboutalackofgoodfaiththanof
consideration(i.e.ifenforcementiswrongitsbecausethemodificationis
unfair)
Preexistingdutycases;R89;UCC2209;StumpHome;AlaskaPackers
dictum
HadtheinferiorityofthenetsbeenknowntotheFishermenatthetime
ofcontracting,itdefinitelywouldhavebeenbadfaithandunenforceable
Butwheresurprisingconditionsdonotconstituteanexcusefrom
performance,whydoesthelaweverenforceamodificationbasedon
thoseconditions?
o Whereisthelinedrawn?Whatmetric?
Considertheperspectiveofthecaptain(thevictimofpossibleextortion):whenwould
sheprefertohaveherpromisesenforced?
Iffishermenaresolvent,Captainwillreceivethefullbenefitofherbargainand
shedoesntcarewhatthelegalruleisbecauseshehasnoincentivetoinduce
performanceofapreexistingduty
Ifthefishermenareinsolvent(andbothpartiesknowthelegalrulethatwill
applytothecaptainspromise):
Absentthepromiseofanegotiatedmodification,theFishermenwill
likelyinefficientlybreachthanexpendtheeffort(cost)ofperformance

b/cof1)initialcontractprice;2)realizedcostofperformance;3)assets
subjecttoliability.Agameofchicken?
TheCaptaincouldlosemorefrombreachthanthepayincreaseandthus
wouldwanttheoptiontomakeanenforceablepromiseofanincrease
wheretheanticipatedlackofenforcementwouldinducetheFishermento
breachdespiteherconcession.
ToprotecttheCaptain,thelawcouldrefusetoenforceapromised
payincreasewhereacourtbelievedthattheFishermenwouldhave
performedevenwithouttheincrease,butcouldenforcethepromise
otherwise.
Legaldoctrineadoptsthisapproachroughlyinitsleniencytoward
promisorswhohavelittlefinancialstrength,R89,cmt.b.
Pastormoralconsideration(thoughneitherareconsiderationintermsofbargainedfor
exchange)
o Pastconsideration:anactdonebythepromiseebeforethemakingofapromisesoughtto
beenforced:generallyunenforceable,thoughseedebtsbarredbySOL:
E.g.aborrowerpromisestorepayaloanthatisuncollectableatthetimeofthe
promiseb/ctheSOLoncollectionhasexpiredthisisconsideration
Abeneficiaryspromisetopayforemergencyoraccidentalrepairsmadetohis
homeinhisabsenceandwithouthisconsentthisisconsideration,basedon
quasicontract
o Moralconsideration:courtswontenforceafather
o Compare:apromisebyarecipientofagiftsheconsiderstogenerous,isnot,without
more,enforceable.R86.
o Generally:considertherationaleforaSOL;thedebthasbenextinguished,thepromisor
hasnofurtherobligationtothepromiseeandthebeneficiarydidntaskforit,hehad
waivedhisright.Thenthepromisorsayshellrepayitdoesntmakesensetopromise
unlessheintendedit(nogainforhim).Inthesecondsituation,therewouldlikehave
beenaquasicontract,acircumstancewhereagreatmajorityofbeneficiarieswouldhave
contractedforthisresultiftheycouldhave
o Thegiftsituationhasnosimilarcircumstances;nothingelsegoingonthere

PROMISSORY(ANDEQUITABLE)ESTOPPEL
Outsideofgratuitouspromises,itseemsrarethatyouwouldeverneedPEorEEb/c,asanalysis
ofthecasesshow,youcanusuallyfindconsideration.Unfortunately,judgesstilluseit,despiteit
beingdogsbreakfast
o Inotherwords,theinjuredpartysrelianceistheirownfault:ifwehadaclearrule,then
partieswouldknownottorelyortomakeacontract;however,therulecameoutoffacts,
notthesky,soitmakessensewhenpeoplemakeinformalcommitments
WithPE,Johnsonv.Otterbeinwouldcomeoutdifferently:courtsenforceacharitable
subscription(Dowhatyousaidyouwould,donor!)evenabsentdemonstrablereliance:the
generalruleisthatthepromiseewinsandusuallygetsspecificperformance.
Contractors:Bairdfacts:Subsubmitsbidtogen,whoincorporatesintoitssuccessfulbid;subs
bid/offerwaswithdrawnpriortoacceptanceandthuscannotbeaccepted.Adlersfourwaysto
interpretsuchanambiguousbid(thisoffercanbeacceptedonlythroughthecommunicationof
anoralorwrittenverbalassentwithinareasonabletimeafteryoulearnwhetheryouhavewon
theconstructionproject)
o (A)Untiltheofferisaccepted,Ihavetherighttorevoketheoffer(Baird,Handthinksno
partywouldputitselfintosuchaonesidedobligationlikeafirmoffer)
o (B)Ipromisetoleavethisofferopenuntilareasonabletimeafteryoulearnwhetheryou
havewontheconstructionproject(Drennan,Traynorbelievesthefactssuggestafirm
offer)

(C)Ioffer(asecondaryoffer)toleavetheprimaryofferopenuntilareasonabletimeafter
youlearnwhetheryouhavewontheconstructionproject;thesecondaryoffercanbe
acceptedthroughyouruseofmybidinyourownbid
o (D)Yourpromise(ofpayment)andtheresultingcontractwouldbesubjecttothe
conditionthatyouwintheconstructionproject;thisoffercanbeacceptedthroughyour
useofmybid
o Noneofthisisrelevantunless:Contractorusesandreliesonsubsbid,hasnttoldsub
this,andthensubtriestorevokeitsoffer
o Keytothecorrectdecisioninthesecasesiswhetherthebidisreasonably
interpretedasawillingnesstobeboundpriortocommunicationofacceptance
Nopromise,onlyrepresentations?Applyequitableestoppelorsueintortifmadewithfalse
assurance.
o

BREACHANDCONSTRUCTIVECONDITION(ANDDAMAGES)
Anythingshortoffullperformanceistermedabreach,evenifthepartyisnotatfaultorthe
defectinperformanceisnotmaterial;Pentitledtodamages(lossinvalue/costofcompletion),
butmuststillperformherendofthebargain,unlessotherwise
Restatement237;Kingston:threetypesofcovenants;timingiskey
o (1)mutualandindependent;eachpartycansuetheotherforbreach,butonepartycannot
citeabreachoftheotherpartyscovenantasanexcuseforitsbreach
Neitherpartyperformed?
o (2)conditionsanddependent;theperformanceofonedependsontheperformanceof
anotherandthedutytoperformdoesnotariseuntilthepriorconditionisperformed
Iagreetopaintyourhouseinexchangefor10K.Youhaveagreedtopaymethis
amountonlyafterIhavecompletedthejob.Ipaintwithaqualityinferiorto
whatwasspecifiedincontract.Cf.Kingston:Iagreetosellmysilkbusinessto
youatadesignatedtimeinexchangeforinstallments,butonlyafteryoudelivera
security.Idontdeliverthesecurity.
Ifmyfailuretocomplywiththecontractisamaterialbreach,youarenot
obligatedtopayformyworkunlessIcureandmydelayinofferingacureif
timeisoftheessence,e.g.entirelydischargesyourdutytoperformunderthe
contract,givingyouclaimfordamagesfortotalbreach
Ifitsmaterial,youllowemerestitution(Britton),butyoullalsohaveaclaim
againstmefordamages
IfIsubstantiallyperformed,youllhavetopaymethefullKP,lessanydamages
frommybreach
o (3)mutualconditions;theconditionsmustbeperformedatthesametimeandthefailure
ofonepartytoperformisgroundsforallegingbreach.R238.
Damages:acourtshouldnotlightlydeterminethatabreachismaterialunlessthepromiseeisat
riskoflosingthebenefitofhisbargain
ThePeevyhousecasesconsiderthefollowingfactorsinthechoicebtwcostofcompletionand
marketbasedvalues:
o Substantialperformancegivenlackofmaterialbreachfavorsmarketbasedvalues.
Jacob&Youngs.
o Willfulness,whichsuggestscostofcompletion.Groves;dictumofJacob;dissentin
Peevyhouse
o Waste(inefficiency)fromperformanceaspromised,disfavorscostofcompletion
damages,seedictuminGroves,Peevyhouse.
o Disproportionalityofcosttocompletiontomarketbaseddamagesdisfavorscostof
completion.Peevyhouse;348;Jacob;dictumanddissentinGroves.
o Incidentalnatureofpromise,whichdisfavorscostofcompletion.Peevyhouse.

Uniquenessorspecialpurpose,whichfavorscostofcompletion,seedissentin
PeevyhouseandGroves;dictuminJacob.
Twothingsmotivatethesefactors(or,whodowebelievemore?):
o 1)couldcostofperformingthecontractbereasonablyapproximatedatthetimeof
negotiation?
o 2)aretherenowconditionsexistingwhichneitherpartycouldreasonablyhave
anticipated?
Absentchangedcircumstances,thecostofcompletionislikelyincorporatedinto
thecontract,andthusreflectsthepromiseesintended,ifidiosyncratic,value
Otherwise,changedcircumstancesorarevealedmistakefavormarketvalue
Ismarketvaluemoreofanimmutablerulethanadefault?Theruleasstateddoesnotinterfere
withthepropertyownersrighttodowhathewillwithhisown,orhisright,ifhechooses,to
contractforimprovementswhichwillactuallyhavetheeffectofreducinghispropertysvalue.
Wheresuchresultisinfactcontemplatedbytheparties,andisamainorprincipalpurposeof
thosecontracting,itwouldseemthatthemeasureofdamagesforbreachofcontractwould
ordinarilybethecostofperformance.
o ApartywishingtocontractaroundPeevyhouseshouldincludethislanguage:
Thepartiesspecificallyintendandcontemplatethatthelesseeshallrestorethe
land,evenifthecostsofperformancearegrosslydisproportionatetothe
diminutioninvaluefromfailingtorestoretheland.Thisisamainandprincipal
purposeofthelease.Inwritingthisprovision,weareexplicitlycontracting
aroundtheholdingofPeevyhousev.GarlandCoal.
o

FAILUREOFABASICASSUMPTION
Mutualmistake:atthetimeofcontracting,wasthereabasicassumptiononwhichthecontract
wasmadethatturnedouttohaveamaterialeffectontheagreedexchangeofperformances?
o Ifso,thentheinjuredpartyhasarighttoavoidthecontractsolongashedoesntbearthe
riskofmistake
o Todetermineifthepartybearstheriskofmistake:
(a)istheriskallocatedtohimbyagreement?
(b)didhetreathislimitedknowledgeassufficient?
(c)wouldthecourtthinkitsreasonableinthecircumstances?
o Illustration:Afertilecowisnotthesamethingasaninfertilecow;sellercankeephis
fertilecow.Sherwood.Thisisnonsense:abettertest:despitethepartiessilenceastoa
condition(infertility),didthebuyerimplicitlyagreetocanceliftheconditionwasnot
met(fertility)?
Noconditiondefault:youdidntexpresslymakeaclauseforittoughluck
Guessthebargain:theconsciousgamblesuggestsnocondition
o Illustration:pineforsawlogs,turnsoutonlyhalfofitturnsouttobesoundwood;ct.
findsnomistakeb/cbothpartieshadthemeanstofindoutthetruthandtheytreatedtheir
limitedknowledgeassufficient;therewasnowarranty;thenegotiationswerelengthyand
thepurposeofwhichwastodeterminethequalityandyield;andthatNestertooktherisk
o N.B.Agambleimpliestherewasnomistake;thesellerwouldbedeniedanexcuseunder
RK154.Hetreatedhislimitedknowledgeassufficient.
o Fullyexecutedcontract?SeeWoodv.Boynton(topazordiamond).
Acourt,ifitseesthetransactionasunfair,rescinditandorderrestitution(or
perhapsreliance)
Subsequentevents(RK261,265;UCC2613,2615):
o Difficultperformance/superveningimpracticabilityTaylor,thefireburnstheconcert
halltotheground.UnderLCAanalysis,thelessorwouldhavebeenliablebecausehe
wasinthebestpositiontoavoidthefire;however,notetheindustrystandardexcuse,

whichsupportsthecontraryholding,evenwhilethecourtnarrowlyreliedon
impossibility
o Lessvaluableperformance(frustrationofpurpose)theflipsideofimpossibility.
o Leastcostavoider:whois/wastheleastcostavoider?Helpsdeterminethecontractual
termsthatprovidethepartiesincentivestomaximizejointwelfare,whichinturnwould
bewhattheylikelyagreedto
Unilateralmistake:
o (1)Onlyonepartyismistakenaboutabasicassumption
o (2)Mistakehasanadversematerialeffectontheexchange
o (3)Voidableifhedoesnotbeartherisk
o (4)Andenforcementwouldbeunconscionable
o (5)Ortheotherpartyhadreasontoknowoftheotherpartysfaultthatcausedthe
mistake
o Laidlaw:Aslongastheresnofraudormisrepresentation,andwhileagentsmust
generallydisclosefactstotheirsuperiors[RK161(d)],thoseinarmslengthrelationships
donothavetodisclose
Notexactlytheparadigmcase,buttheinformationwasachievedthrough
superiordiligenceandalertness
Thelawhasnoreasontoallowexploitationbasedondumbluck,butarulethat
requireddisclosureofhardearnedinformationcouldlimittheprofitabilityofthat
informationandinefficientlyreducetheincentivetogenerateit
Fairnessandfosteringeconomicproductivity

OPTIONS
Apromisewhichconstitutesanoptioncontractmaybecontainedintheofferitself(e.g.Iofferto
sellyou500pinsatfivecentsapin,andIpromisetokeepthisofferopenforonemonth)
Anoptioncontractmayalsobemadeinacollateraloffertokeepthemainofferopen
Optionisalsousedtorefertoanycontinuingoffer
Anoptionbyitselfisrevocable,evenifstatedasfirm(R42),becauseoffersmustbesupportedby
consideration
Thus,considerationmakesanoptionirrevocableandthisrequirementmaybemetby:
o Payment
o Performancebytheoffereeorpromiseofsuchperformance
o Detrimentalreliancetotheextentofinvokingpromissoryestoppel
UnlesstherelianceissufficienttoinvokePE,themerefactthananofferee
expendstimeandmoneyconsideringandinvestigatinganofferisnotsufficient
tomakeitirrevocable;thedetrimentincurredwasnotrequestedasthe
considerationfortheofferorspromise
Inotherwords,preparingforperformanceisnotnecessarilythesameas
beginningperformance:contextmatters.Considertheextenttowhichthe
offereesconductisclearlyreferabletotheoffer;thedefiniteandsubstantial
characterofthatconduct;theextenttowhichitisofactualandsubstantial
benefittotheofferorratherthantheofferee;thetermsofcommunication
betweentheparties;thepriorcourseofdealing;relevantusagesoftrade
Imakeawrittenpromisetoahospitaltogivethem$5000forhumanitarianaid.
Relyingonthispromiseandothers,thehospitalbeginstoexpendlargesumsof

moneyinvestinginhumanitarianprojects.Performancebythehospitalhas
begun,somyofferisirrevocable
37:terminationofpowerofacceptanceunderoptioncontract
o Ileaselandtoyou,andgiveyouanoptiontobuythelandincashfor10Kduringthe
courseofthelease.Youmisunderstandtheoptionandtendera10Kmortgage.Irefuse
toaccept.Youroption,however,stillexistsandduringtheremainingtermofthelease
youcanperformcorrectly.
o Samefacts.ButthistimeIreceiveanofferfromathirdpartywishingtobuytheland
andIinformyouofthis.Iconveythelandtothethirdparty.Youroptionisexpired.
45:partperformance(unilateralcontracts)
o Areservationtorevokeafterperformancehasbegunmeansthereisyetnopromiseand
nooffer(i.e.itspreliminarynegotiations,R26)
BowesA5,000.Itismeanttobepaidoverfiveyears.Asaysyoucanpayme
4500withinamonth,butIwithholdtherighttorefuseanysuchpayment.Under
45,thereisnopromiseandnooffer,justpreliminarynegotiations.IfBtenders
4500withinamonthtoA,however,Bstenderactsasanoffer.
o Aproposaltoreceiveapaymentof$$$oradeliveryofgoodsisanofferonlyif
acceptancecanbecompletedwithoutthefurthercooperationoftheofferor.Ifthereisan
offer,itfollowsthatacceptancemustbecompleteatthelatestwhenperformanceis
tendered.Atenderofperformance,sobargainedforandgiveninexchangeoftheoffer,
ordinarilyfurnishesconsideration.Thereisacontract.
ApromisesBtosellhimaspecifiedchattelfor$5,statingthatBisnottobe
bounduntilhepaysthemoney.Btenders$5withinareasonabletime,butA
refusestoacceptthetender.Thereisabreachofcontract.

GOODFAITHPERFORMANCE
AccordingtoBurton,theproblemofgoodfaithperformanceariseswhenacontractgivesonepartya
degreeofdiscretioninperforming,andthisdiscretionisthenusedbythatpartytorecaptureanopportunity
foregoneatcontractformation
o Identifyanopportunityobjectivelyforegone
o Identifyasubjectiveintentiontorecaptureit
GFquestionoftenarisesb/caKisanexchangeexpressedimperfectlyorprojectedintoanuncertainfuture.
SeeIronWorks.
Whenwethinkofacontractandtheactofcontractingbetweenspecificparties,itrepresentsanopportunity
foregonethenextbestopportunity.Byhypothesis,thecontractbetweenAandBrepresentsthebest
bargaineachcouldmakeatthetime.AsimplebreachbyBisnothingmorethanthedesiretorecapturea
foregoneopportunitythatforwhateverreasonbecamemoreattractiveafterthetimeofcontractbutbefore
performance.
Afailuretoperformingoodfaithissimilaranddissimilartoabreachofcontract.Fromthecost
perspective,itissimilarinthatanalyticallyitisaboutapartyattemptingtorecaptureforegone
opportunities.
Itisdissimilarinthatanobservercannotknowwhetherapartyactedtorecaptureforegoneopportunitiesby
determiningthattheotherpartydidnotreceivetheproperty,services,ormoneytobetransferredunderthe
contract.Inotherwords,goodfaithisaboutthediscretionanditsabuse.
Discretioninperformancearisesintwoways(andonlyinsuchcasesdocourts,explicitly,raise
questionsofgoodfaithandfairdealing):
o (1)Thepartiesmayfindittotheirmutualadvantageatformationtodeferdecisiononaparticular
termandtoconferdecisionmakingauthorityastothattermononeofthem
Deferreddecisionsastoquantity:requirementsandoutputcontracts
Defermenttoprice:generallyunenforceableatcommonlaw,thoughanexceptionfor
appraisals
Defermenttotime:timeofperformance,timeoftermination
Conditions:whenaconditioniswithinonepartyseffectivecontrole.g.apartywhose
performanceisconditionedongovernmentalapprovalofitsplansthatpartymustactin
goodfaithtosecurethefulfillmentofthecondition;similarly,apartybenefitingfroma

conditionmustactatleastingoodfaithinclaimthatitisdissatisfiedwiththeproffered
performance
GFthusprotectstheweaker(intermsofdiscretion)fromthestronger(thepartywith
greaterdiscretion)
o (2)Discretioncanarisefromalackofclarityoranomissionintheexpresscontract
Legitimatev.illegitimateusesofdiscretion?
o Whatreasonssupporttheexerciseofdiscretion?
o Thatthedependentpartylosessomeorallofitsanticipatedbenefitsisnotdispositive:thecase
lawcarriesitfurtherbyestablishingthestateofmindofthediscretionexercisingparty;its
aboutthepurposeofthediscretionexercisingparty
o Afewcourtshavesoughttoarticulatethisintermsofreasonablecontemplationoftheparties;this
ishelpful,buttooamorphous
o Costperspectiveoncontractbreachisbetterb/citmakesitpossibletoidentifytherelevant
expectationsandmotivesthathavebeenheldtoconstitutebadfaith
Examinethesubsetoffacts(1)atformation,bearingontheexpectedcoststoa
discretionexercisingpromisor
(2)atperformance,bearingonwhetherthepromisorexerciseditsdiscretionin
performancetorecaptureaforegoneopportunity
o JOINTWELFAREoftheparties