1 1 IS THERE A CONTRACT? MANIFESTATION OF MUTUAL ASSENT: There must be an bjective manifestatin f mutual assent t a K. Judged by what a reasnable persn wuld understand the parties actins t mean. - At stake is the general issue f freedm frm cntract. Individuals can refuse t deal r negtiate withut liability. - There has t lk like there is a meeting f the minds t an bjective, reasnable persn. - OBJECTIVE TEST (easier than prving subjective intent leads t greater stability). Subjective assent is irrelevant, assent is judged by bjective manifestatins f intent (i.e. what yu say, d, sign yur name t). If a reasnable persn wuldn t understand that yur assent t the cntract was just a jke, then yu re bund by yur actins. (Lucy v. Zehmer) Mutual assent has t be at the time f the cntract; desn t matter if that changes later n. There must be mutual assent n all the essential terms f the K (parties, subject matter, time fr perfrmance, (price)). Valid Offer? THE OFFER: Creatin f the pwer f acceptance - At stake is the general issue f freedm frm cntract. Individuals can refuse t deal r negtiate withut liability. - RST 24: Offer is a prpsal by ne party t the ther manifesting a willingness t enter int a bargain made in such a way (by wrds r cnduct) that the ther party is justified in believing that his assent will create a binding cntract. - Elements f an ffer: Manifestatin f present cntractual intent Wuld a reasnable persn understand it as an ffer? Lk t the wrds used, circumstances, clarity f terms, made t individual? r grup? written K cntemplated? Certain & Definite Terms expressly stated r implied includes parties t K, subject, time, price If the price is ambiguus, n K. If the price is mitted, then FMV. Cmmunicatin f such t the fferee - Withut clear and definite terms, there is n ffer. A request t get an ffer is nt itself an ffer. When yu knw that a lt f peple are being slicited, yu knw the ffer is nt being made t yu.
2 2 - Advertisements can be binding when there is clarity as t wh is being slicited and perfrmance is definitely prmised fr smething particularly requested in the ad. Lk fr specific terms and cmmitments. (Lefkwitz v. Great MN Surplus Stre) - Manifestatin f intent t make an ffer is cntrlling; nt whether the wrd ffer is used. Preliminary negtiatins, price qutes and slicitatin f bids are NOT ffers. Careful, hard t distinguish. These can nt be accepted, the respnse is usually the ffer. Valid Acceptance? - Elements f acceptance: Only the fferee may accept (r an agent f the fferee) Mirrr image rule: acceptance must be fr exactly what was fferedunequivcal & unqualified UCC Differs : MODIFYING TERMS: Generally the UCC will find a cntract, unless the expressin f acceptance is made cnditinal n the acceptance f the new terms prpsed (in ther wrds, the nly times that it will be cnsidered a killer f the riginal ffer is if it says smething like unwilling t prceed with the transactin unless terms are accepted). ADDITIONAL TERMS: If ne party is a nn-merchant, then they must expressly agree t the new term. shipment f gds with additinal terms shuld be cnsidered an ffer if it includes pprtunity t review and return. (cmputer cases) If bth are DIGOTEKs, then the additinal term is in unless it s a (1) material alteratin r (2) the fferr des nt bject within a reasnable perid f time. CONFLICTING TERMS Term is eliminated and filled in with a UCC gap filler if necessary. Bilateral Ks: wuld a reasnable persn see a prmise fr a prmise? ffer can be revked befre fferee sends acceptance reply. (prmise fr a prmise) Unilateral Ks: beginning perfrmance = acceptance; ffer can be revked prir t beginning f perfrmance. (prmise fr perfrmance; acceptance when fully perfrmed, but ffer held pen when perfrmance begins)
3 3 When perfrmance can be acceptance, ntice f acceptance need nt be given. Just begin perfrmance. - Where an ffer requires written acceptance and executin by specific parties, n ther methd f acceptance will be enfrced. Offerr is the master f the ffer and has cmplete cntrl ver the rules. (One signatry didn t sign K- n K.) - An fferr can revke an ffer up until the acceptance has been mailed (mailbx rule). An uncmmunicated intentin t accept is nt an enfrceable acceptance. (Hendricks v. Behee- tld agent that ffer was revked befre agent culd tell him that they had accepted). - Order frms are ffers, t be accepted by the seller. Cmputer cnfirmatins are nt acceptances. - UCC 2-206(b): Seller may accept by prmising t ship r by actually shipping. Partial shipment/part perfrmance is nt an acceptance if the seller ntifies the buyer that the partial shipment is nly an accmmdatin (cnsider a cunter-ffer) - When an advertisement makes a clear and definite ffer with express terms fr acceptance by perfrmance, perfrmance is enugh t accept. (Carblic Smke Ball) An advertisement that makes an ffer t which perfrmance can be acceptance is bund nce perfrmance ccurs. It is irrelevant that the advertisement wasn t the nly reasn fr the perfrmance. (Brker wh gt cmpanies tgether). - Hwever, yu can nt purprt t accept an ffer which yu did nt knw abut at the time yu perfrmed. (Jewish War veterans advertisement). - rule: An ffer is valid upn receipt by the fferee. Acceptance is valid nce it is sent t the fferr, unless fferr specifies therwise. Once an acceptance has been mailed, neither party can revke withut breach.(fr bilateral prmises) Once an acceptance has been mailed the parties are bund, the fferee can t fedex a rejectin and hpe it ll stick. Acceptances under an ptin cntract is valid upn receipt. Cunter-ffers are valid upn receipt. Revcatins f ffers are valid upn receipt. - Acceptance can be silent nly when (a) benefited party accepts services with an pprtunity t reject, and reasn t knw cmpensatin was expected, (b) fferr has stated r given the fferee reasn t understand silence will be manifestatin f intent. when parties have instituted a pattern f silent acceptance, and the fferee has given the fferr reasn t understand silence as acceptance, there is acceptance unless there is an affirmative rejectin f the ffer. An implied cntract can arise ut f a regular curse f dealing between DIGOTEKs.
4 Cnsideratin? 4 When an fferee accepts gds and keeps them. BARGAIN REQUIREMENT: An assumptin is that the individual bargainers will define their wants in a ratinal way & seek t satisfy them thrugh vluntary exchange. - Cnsideratin is a way f ensuring that peple vluntarily enter int the K A prmise is supprted by cnsideratin if: (1) detriment t the fferee (gives up smething f value r circumscribes his liberty); r (2) there is a bargained-fr exchange. A gratuitus gift will nt be enfrced; must be sme detriment t the recipient r benefit t the prmisr. (brther-in-law wh kicked his sister t the curb) Business situatins where ne party has nt really prmised t d anything r give up anything will nt be enfrced. - Frebearance frm ding smething can be cnsideratin (i.e. prmise nt t wrk fr a cmpetitr) - The cnsideratin must be bargained fr, there must be a bargained exchange (guy wh tricked his wife int signing away his debt t her). SUFFICIENCY OF EXCHANGE - Cnsideratin need nly be sufficient t cnstitute an bligatin that didn t exist befre the bargain; nt necessarily adequate. (dead husband leaves huse t wife if n remarriage and pay $1/year). Hwever, nminal cnsideratin, that is, in name nly with n true intentin t hand it ver r an extreme disparity in value is nt acceptable. There must be sme real cnsideratin a peppercrn at least; as lng as it s bargained fr and is a true benefit t the prmisr.. (Whre wh gt paid and had huse bught fr her claimed she gave cnsideratin). The fact that nminal cnsideratin is evidence f n real bargain but it is nt cnclusive. If the prmisr essentially made a gift, as ppsed t a prmise that s part f a bargain, then the bargain requirement is nt met and there is n K. - Sufficiency means either benefit t ne party r detriment t anther; usually it s dual cnsideratin. Detriment includes frging a legal right t d smething. (uncle prmised $5K if nephew wuld stp drinking) - Ideas: nvelty is nt necessary t derive value frm cnsideratin. Cnsideratin must be valuable t the ther party at the time f the agreement; it is irrelevant if it turns ut t be less valuable. (Prudential cmputer system idea). - Inadequacy f cnsideratin is never a bar t the frmatin f the cntract unless it is a grss inadequacy resulting frm a bargain that takes advantage f unequal bargaining pwer. An extreme disparity in value is evidence that the cnsideratin was nt bargained fr; Uncnscinable Ks lack cnsideratin. (really expensive fridge sld t pr guy).
5 5 - A prmise t withhld a claim is sufficient cnsideratin if it is valid r believed t be in gd faith. (bastard child claim let g f). Hwever, if the prmisr knws the claim t be invalid, it is insufficient cnsideratin. - Wrds f cnditin in a charitable dnatin is cnsideratin because it benefits the prmisr. (Allegheny cllege case). A cnditinal prmise is sufficient cnsideratin as lng as the cnditin des nt give the fferr the alternative f canceling the bligatin. Mral bligatins are nt sufficient cnsideratin (lve fr brther, guy wh saved yur friend s life ). There must be sme direct ecnmic benefit t the prmisr. Illusry prmises where the K can be terminated by ne party at will withut ntice are nt supprted by cnsideratin and are unenfrceable. They d nt cmmit the prmisr at all. - An implied prmise t use reasnable r best effrts in an emplyment situatin is sufficient cnsideratin. (Lady Duff case). - Prmise t perfrm a preexisting duty is nt sufficient cnsideratin. PREEXISTING DUTY RULE: lk ut fr this in cnstructin cases. - UCC 2-209(1): Perfrmance r prmise t perfrm a preexisting duty des nt cnstitute cnsideratin; unless therwise expressly prvided. BUT: Under the UCC, mdificatins t a preexisting cntract can be made thugh withut further cnsideratin, DIFFERS frm CL a little bit. - RST2d 89: Prmise mdifying a duty under a K is binding if (a) mdificatin is fair & equitable in view f circumstances nt anticipated by the parties when the K was made. A prmise t d what ne is already legally bund t d is nt sufficient cnsideratin. Additinal cnsideratin is needed fr mdificatin f a K. (lessees g bankrupt, mdify lease, L sues fr back rent). A creditr s prmise nt t require payment in full is unenfrceable fr debt already wed. A prmise t give a reward r bnus t d what ne has already cntracted t d is nt enfrceable. An agreement t render the exact same services as riginally agreed t is nt sufficient cnsideratin. There is n enfrcement f the mdificatin when ne party takes unjustifiable advantage f the ther party t get mre cnsideratin. (Alaska Packers case) Hwever, when cnditins change unexpectedly & mdificatin is made vluntarily (nn-mdifying party has ther available alternatives t chse frm), then K mdificatins can be made fr n further cnsideratin. (Garbage guy, mre hmes in area). MUTUALITY OF OBLIGATION - UCC 2-204(1): a K fr the sale f gds may be in any manner sufficient t shw agreement, including bth parties cnduct which recgnizes the existence f such a K.
6 6 - A K can nly be enfrced when bth parties are bund by the cntract (i.e. K fr buy as much as I want t buy is nt binding n ne party, s it is nt binding n bth and thus is nnenfrceable). Hwever utput (yu ll take everything I ve gt) and requirements cntracts (everything I need I ll get frm yu) are binding n bth sides and are thus enfrceable. One party has restricted their chice t g elsewhere. Hwever, anything less than everything is unenfrceable because it is an illusry prmise. - An implied prmise t use gd faith is enugh t shw mutuality f bligatin (fashin design guy, requirements/utput cntracts) UCC 2-306(2): can be implied that seller uses best effrts t supply and buyer uses best effrts t prmte the sale. MORAL OBLIGATION = PROMISE + ANTECEDENT BENEFIT - One wh vluntarily perfrms withut expectatin f getting paid cannt sue fr payment. (deadbeat dad prmised t pay sn s caretaker after he died, but then didn t). - A bare prmise is nly mral bligatin and is unenfrceable; gratuitus benefits are unenfrceable as Ks. (prmise t pay back a friend fr mney he has spent n cws). - A humanitarian act which leads t a ral bligatin is nt sufficient cnsideratin (wman tk an axe fr a wife-beater). Minrity view: a mral bligatin supprted by a material detriment t ne, and a material benefit t anther is sufficient cnsideratin. (ne guy saved the ther frm death; was severely injured). - A quasi-cntract is an bligatin impsed by law because f the cnduct f the parties r sme special relatinship between them r because ne f them wuld therwise be unjustly enriched. It s an implied-in-law cntract that allws the π t recver fr a benefit cnferred n. - cmes up a lt when K des nt satisfy the SOF r sme ther reasn that makes it vid and ne party has already partially perfrmed r detrimentally relied n it. - Elements f quasi-cntract recvery: cnferred benefit t expected t be paid nt a vlunteer avid unjust enrichment t there can be n implied-in-fact K when the parties did nt intend t frm a K; there can be n implied-in-law cntract (quasi-k) when the party acts vluntarily. (Bailey v. West) Is there a quasi-k? Can plaintiff claim prmissry estppel? *exceptins t the cnsideratin requirement:* mdified cntracts under the UCC, ptin cntracts (recital nly necessary), prmissry estppel. PROMISSORY ESTOPPEL: Prmise + Unbargained fr Reliance
7 7 - RST 90: Prmise is enfrceable withut cnsideratin if prmisee freseeably and actually relied n the prmise t his detriment. - Can substitute fr bargained-fr cnsideratin if: reliance is freseeable reliance ccurs reliance was reasnable prmisee suffered a detriment enfrcement necessary t prevent injustice. Often applied t gifts, charitable subscriptins, subcntractr bids made temprarily irrevcable, negtiatins made in bad faith, reliance n illusry prmises; prmises t pay pensins - Reliance n an illusry prmise is nt sufficient t frm a K, but it is enugh t frm a prmissry estppel claim. (guy wh was suppsed t be hired, quit his jb and then the emplyer failed t hire him). - When smene relies n a clear & definite prmise t his wn detriment and prmisr s induced reliance n the prmise, it wuld be unjust nt t assert prmissry estppel. (Cwles Media C.- gave up their annymus surce). - Usually π will nly get the amunt that the reliance cst him, reliance and restitutin damages, nt expectatin. Puts π back where he was befre the bargain. WHAT ARE THE TERMS OF THE K? D the terms f the acceptance vary frm the ffer? TERMINATION OF THE OFFER: Destructin f the Pwer f Acceptance - RST 35: Terminatin is (1) rejectin r cunterffer by the fferee; (2) lapse f reasnably lng time; (3) revcatin by the fferr; (4) death r incapacity f the fferr r fferee. COUNTEROFFER: Killer f the Original Offer Death f an ffer = actins f parties; rejectin by the fferee; cunterffer by the fferee (cmmn law; nt necessarily under UCC). Additinal cnditins supplied by the fferee which are implied in the riginal ffer r if the fferee has a legal right t the cnditin, it is nt cnsidered a cunterffer. - A prpsal t accept an ffer n mdified terms kills the ffer. Nw, the riginal fferr has t accept fr their t be a K. - The fferee can nt then accept the terms f the riginal ffer nce he has killed it. - Yu want t expressly state that yu are nt accepting r rejecting yur prpsal if yu want t give an independent prpsal.
8 8 - In a K fr the sale f gds, when the bjective manifestatins f the K express intent t be bund there is a K even if the writings dn t agree n all the terms. The curt will lk at what was agreed n and fill in the rest. UCC Battle f the Frms: UCC- 207 See page 2. UCC Gap Fillers: UCC- 207 The UCC will fill in gaps in price, place, time, and warranty. It will nt fill in a gap in subject matter r quantity. Failure t agree n these latter tw terms will result in the K being deemed unenfrceable. Price: reasnable price at the time f delivery. Place f delivery: seller s place f business Payment: Due n delivery REVOCATION OF THE OFFER Revcatin f the ffer can be made by a 3 rd party r by circumstances which wuld lead a reasnable persn t believe there was a revcatin. If fferr behaves in a way incnsistent with an intentin t enter int the K & the fferee learns indirectly that the fferr has taken such actin, there is a revcatin. Hwever, mere negtiatins with a third party even thugh an ffer has been made is nt sufficient t cnstitute a revcatin. IRREVOCABLE OFFERS - General rule: an ffer is revcable even if the fferr expressly prmises nt t revke r gives a definite time perid fr acceptance. - Exceptins: Firm ffers under the UCC, a signed, written ffer t buy r sell gds which states explicit assurance as t the time perid fr acceptance (3 mnths max withut cnsideratin), is nt revcable (UCC 2-205). UCC requires n cnsideratin nr recital f. When it s the fferee s frm, the frm must be signed by the fferr. Cmmn Law: If the fferee gives cnsideratin fr ffer t stay pen = ptin cntract. Offer is then nt revcable fr the perid f time bargained fr. (Mdern trend is that recital f cnsideratin is enugh). Prmissry Estppel: An ffer which the fferr reasnably shuld expect t induce actin r frbearance and which des s induce is irrevcable where necessary t prevent injustice. Where substantial perfrmance has already begun the ffer must remain pen as lng as the fferee cntinues t diligently perfrm. Preparatins t perfrm are nt sufficient. - An ptin is itself a cntract, there is n mre pen ffer. Any new prpsed terms, rejectin, further negtiatin is all independent. and des nt repudiate the cntract being bargained fr.
9 9 - RST 87: An ffer is binding as an ptin K if it is (a) in writing, (b) requires cnsideratin, and (c) prpses an exchange n fair terms within a reasnable perid f time. - An ffer f a unilateral K can be revked at any time prir t perfrmance n matter hw shrt the time is between the tw. - If π accepts s ffer that cntains a mistake, the burden falls n via prmissry estppel the ffer can nt be revked because f a mistake nce accepted. The terms f the cntract are thse that reach the fferee- a fuck up in the transmissin is the fferr s prblem. (Western Unin case). INDEFINITE, INCOMPLETE AND DEFERRED TERMS DEFECTIVE FORMULATION AND EXPRESSION OF AGREEMENT - There is n meeting f the minds and thus n valid K when each party interprets the same term materially differently withut knwledge f the ther s interpretatin. (Peerless) - N cntract if parties have misunderstanding as t what they re agreeing t, n K if (1) parties each have a subjective belief abut a term, (2) term is a material ne, (3) neither party knws r has reasn t knw f the misunderstanding. Mutual mistake. Hwever, when the fferee desn t understand the terms because he fails t read them he assumes the risk; if terms are misrepresented the cntract terms then favr the fferee. - If ne party s understanding is less reasnable than the ther s, the cntract will be cnstrued t the benefit f the reasnable party, r it may be cnstrued against the fferr wh has an bligatin t make the ffer clear. (surge prtectr case) INDEFINITE AGREEMENTS - Fr a K t be valid, agreement t terms must be certain and explicit. If a K is present, the curt can imply terms frm the circumstances. - An advertisement can nt be cnstrued as an ffer where definite terms are nt included in the ad (Lefkwitz case again- 1 st ad re: cats wrth ver $100 nt specific enugh). INCOMPLETE AND DEFERRED AGREEMENTS - If the parties have simply negtiated but have failed t agree with sufficient certainty n essential terms, there is nt yet a cntract. Hwever, if an agreement has been reached t negtiate in gd faith, that agreement can be enfrceable as evidence f intent t be bund. - If there is an bjective intent t be bund, the curts will fill in the gaps. - UCC 2-304: even thugh ne r mre terms are left pen, a K fr sale des nt fail if the parties intended t make a cntract and there is a reasnably certain basis fr giving an apprpriate remedy. UCC will fill in terms fr price, delivery, time, etc. UCC implies gd faith. - curts can fill in a term as lng as there is an bjective methd t determine the term; can lk t custm f the industry. (MGM K did nt specify start date f filming curts inferred it).
10 10 - Hwever, a mere agreement t agree in which a material term is left ut is t indefinite, and is nt enfrceable when there is n bjective methd t determine the term. Peple are nt bund t accept fair market value. - Curts can impse a reasnable price when the parties have a lngstanding curse f business with each ther and when they have an intentin t be bund. Terms can be implied frm their regular curse f business. (Oglebay Nrtn C.) - TINALEA (this is nt a legally enfrceable agreement) clauses preclude a finding that the parties intended t be bund; n K. Letters f intent merely set the stage fr future negtiatins. - Parties wh rely n incmplete r indefinite agreements can recver fr detrimental reliance n the K. When an agreement t agree induces detrimental reliance by ne party which is reasnably freseeable t the ther, PE applies and reliance damages can be awarded. (Hffman v. Red Owl stres) DUTY OF GOOD FAITH: RESERVED DISCRETION Instead f specifically defining risks r desired perfrmance standards, parties may adpt a general standard f gd faith, leaving it up t ne r bth parties t exercise discretin. i.e. utput and requirements Ks and Ks which adequacy depends n the satisfactin f ne party. - Under the UCC 2-209, a mdificatin is limited nly by the general bligatin f gd faith: 1) was cnduct cnsistent with reasnable cmmercial standards f fair dealing? and 2) were the parties seeking t mdify the cntract by an hnest desire t cmpensate fr cmmercial exigencies? - Emplyment agreements are usually terminated at will but have an implied cvenant f gd faith, and express language f cmpany plicies can be cnsidered. There is an implied cvenant f gd faith in every cntract, can t terminate at whim. (UCC 4-103) (Bank terminates credit line fr n gd reasn) - Output and requirements cntracts requires gd faith that the seller will put ut as much as pssible (breadcrumb case) and that the buyer will require as much as pssible. That s the cnsideratin. - If acceptance is made cnditinal n the buyer s satisfactin, buyer is liable fr damages if he claims dissatisfactin in bad faith and rejects the seller s tender. (Ptat chip case) - Accrd and satisfactin agreements: UCC 2-207: a party wh with explicit reservatin f rights perfrms r prmises perfrmance in a manner demanded by the ther party des nt thereby prejudice the rights demanded. Under the UCC, a creditr can accept partial payment withut implied waiver f debt. CL- can t nly cllect part f debt. Is ne party trying t intrduce evidence t either supplement r cntradict a written cntract? Parle evidence rule: evidence f a prir agreement may never be admitted t cntradict an integrated writing, and may nt even supplement when writing intended t be cmplete. - Generally, where an agreement has been reduced t writing which the parties intend as the final and cmplete expressin f their agreement, evidence f an earlier ral agreement is nt admissible t alter the terms f the K. (the law favrs written cntracts)
11 11 - Hw can the judge tell if the K is final and cmplete (ttal integratin): face f the agreement any relevant evidence merger clause this is a final and cmplete agreement - Exceptins t the general rule: Evidence f an ral cllateral agreement will be received if it des nt cntradict terms f the written K and must be f the nature t rdinarily be left ut f the written K. It has t be a ttally separate deal. (Ice huse case- Mitchell v. Lath) Cllateral agreements are subsequent ral agreements supprted by the same cnsideratin r prir agreements supprted by new cnsideratin. RST 240-1(b): Prf f a cllateral agreement is permitted if it is such that an agreement as might naturally be made as a separate agreement by parties situated as were the parties t the written K. UCC 202: Terms which certainly wuld have been included in the written agreement must be kept frm the trier f fact. (Fllws the cmmn law rule). The prpnent f parle evidence may claim that the written agreement was partially integrated, i.e. that the parties intended the agreement t be definite nly n the subjects therein. Therefre parle evidence shuld be heard n subjects nt included. when the K is silent as t a subject r term, there are tw views: 1) that it was left ut n purpse, s parle evidence wuld cntradict, r 2) it s nt there, s parle evidence can t cntradict it. The mre incnsistent the parle evidence is with the K, the mre likely it wuld have been included in the written agreement. A written agreement may be cnditined n an ral cnditin precedent, s unless the cnditin cntradicts the written agreement, evidence f a cnditin precedent is admissible. (Williams v. Jhnsn- written K fr hme imprvements cnditined n prir cnditin f getting funding). Parle evidence cncerning the validity f the K (mistake, duress, illegality) will always be admissible. Is there an issue with the interpretatin f the K? - If an agreement is ambiguus n its face r becmes s in perfrmance, parle evidence will be admitted t clarify the party s intent, unless the ambiguity is s fundamental that there is n way t figure ut intent f the parties. Mdern trend is t allw mre parle evidence. Prblem: if curts are t liberal with this they will pen up the pssibility f varying the true intent f the parties at the time f the K. - Am ambiguus term will generally be cnstrued against the drafter.
12 12 - If the parle evidence claims an incnsistency which is nt a reasnable interpretatin f the language used in the K, it can nt be admitted. (A. Kemp Fisheries sld bat that didn t freeze fish, ral agreement t have wrking freezer was nt included in K). - If the curt is unable t determine the intent f the parties by examinatin f K s terms, may lk t standard industry practice and custm. Curts can lk t curse f dealing, curse f perfrmance, and usage f trade. (Stewing/Fryer chicken case) - Terms written in t the written cntract trump pre-printed terms. - An exclusinary clause hidden in an adhesin K must be made plain and clear and will be judged in light f the reasnable expectatins f the signer. D the facts invlve any warranties? T disclaim a warranty: 1) must be in cnspicuus writing; 2) there has been a full examinatin (there is n implied warranty as t defects reasnably discverable upn examinatin). Express - UCC 2-313: ways in which a seller creates an express warranty: (1) an affirmatin f fact r prmise which becmes basis f the bargain; (2) descriptin f the gds which is made part f the basis f the bargain; (3) sample r mdel f the gds which becmes part f the basis f the bargain. - Representatins r affirmatins f fact create express warranties that thse representatins are true. Seller s pinin r affirmatin f value is nt a warranty. Implied - Tw implied warranties: Implied warranty f merchantability: applies t DIGOTEKs- It ll wrk fr the rdinary purpses fr which such gds are used. Implied warranty f fitness fr a particular purpse: when seller has reasn t knw specific purpse gd is t be used fr and knws that the buyer wuld be relying n his pinin, and buyer relies n seller s judgment. - A warranty will be implied even when waived when it wuld therwise be cntrary t public plicy. (Henningsn v. Blmfield Mtrs- car was a piece f crap, π signed waiver f warranty f merchantability). - Where a limited warranty fails its essential purpse the limitatin will nt be enfrced. Des the K invlve mre than tw parties? assignment: transfers rights t anther party. - the mtives f the assignee are irrelevant. - while the default rule is assignability f K is allwed, a K will nt be enfrced if assigned in the face f express language t the cntrary; unless the assignee has already fully perfrmed r the right t sue fr damages has been assigned (can always be assigned).
13 13 - When there is payment f cnsideratin fr an assignment, it can nt be revked. - If it is a gratuitus assignment it can be revked by (1) death f the assignr; (2) revcatin by the assignr; (3) subsequent assignment by the assignr. - Once the payr receives actual ntice f assignment f debt, payr will be liable fr payments subsequently paid t the debtr (creditr beneficiary situatin). (Cntinued t pay pr Mrs. Prter) delegatin: transfers duties t anther party. - UCC 2-210: a party may perfrm his duty thrugh a delegate unless therwise specified r unless the party has a substantial interest in having the riginal prmisr perfrm r cntrl the acts required by K. N delegatin relieves the riginal party fr breach. Under UCC an delegatin may nt be made t a cmpetitr withut express agreement. Cntracts which call fr the perfrmance f special skills are nrmally nt delegable. Cnstructin cntracts are usually delegable. 3pbs - Persn whm the prmisee in a K intends t benefit - A third party wh is a member f a class fr whse benefit a K was made can enfrce the K while it remains unrescinded. (tenants can sue fr L s vilatin f gvernment standard; accident victim can sue insurer). Hwever, where ne party prmises fr cnsideratin t pay a 3 rd persn, the law autmatically establishes a privity between that party and the 3 rd persn regardless f the 3 rd persn s knwledge r acceptance f the benefit. In that case, the prmisr can nt rescind the K withut the 3 rd persn s cnsent. In ther wrds, riginal parties pwer t mdify r discharge terminates when the 3b rights vest (1) changes psitin in reliance; (2) brings suit. (3) manifests assent t the K. (Tweedale v. Tweedale) - An intended third party beneficiary can sue fr breach f prmise t perfrm prfessinal services that wuld have made him the beneficiary. An incidental beneficiary can nt sue. Des the Statute f Frauds apply? CAN THE K BE ENFORCED? Anything within MY LEGS has t be in writing (acceptable: printed receipt f sale, integratin f writings which refer t each ther) A memrandum satisfies the SOF rule if: (1) reasnably IDs the subject matter; indicates that a K has been made; (3) states with reasnable certainty the essential terms; (4) signed by party t be charged. Nn cmpliance with the SOF makes the K vidable, nt vid.
14 14 - RST 208: May cnsist f several writings (a) if they refer t each ther; (b) they are physically annexed; (c) they appear t refer t each ther. Marriage, cntracts that can t cnceivably be cmpleted within ne Year, Land, Executry authrizatin, Gds ver $500, Surety MORE THAN ONE YEAR - If it is at all pssible fr the K t be cmpleted within a year, even if it is unlikely, n written K is necessary. - It is the pssibility f perfrmance, nt the pssibility f discharge that rules. - If K has a chice f perfrmances, K is nt within the SOF if any can be perfrmed within a year. - The K has t expressly state that the term f the cntract is t span ver ne year s time. GOODS OVER $500 - UCC 2-201: Exceptins t the SOF rule: (a) When buyer receives & accepts gds; (b) partial payment has been made (cntract is enfrced as t what has been partially paid fr; (c) specially manufactured gds which the seller has began making; (d) dealings between DIGOTEKs (dealers in gds f the kind) withut written bjectin; (e) admissin t the frmatin f a K. - Under the UCC rule, writing just has t shw there was a K fr sale frmed and is signed by the party against whm enfrcement is being sught. Terms need nt be definite. - UCC definitin: all things mveable at the time f sale (things that are nt affixed t realty) ther than mney, securities and things in actin. - Ks which cmbine gds and services d nt fall int the SOF rule unless the value f the gds is clearly ver $500. Services nt included. EXCEPTIONS TO THE SOF RULE: - When ne party has fully perfrmed n the ral agreement, SOF is nt an issue. Perfrmance is enugh evidence f a K. - When GOODS are specially manufactured fr a buyer and they can nt be resld, SOF is nt required. - When there is an admissin by the parties that a K had been made. - When payment has already been made and accepted. Is there any reasn the K wuld be vid r vidable? Capacity? - A prpsed K with ne party that is legally incapacitated is vid r vidable; legally capacitated is bund by the K, incapacitated is nt.
15 15 - Ratifies (n lnger vidable) when capacity cnditin changes. - Incapacitated are always liable fr reasnable value f necessaries (fd, shelter, etc.) r else peple wuld never sell t them. INFANCY (usually less than 18): - K is vidable at the ptin f the minr; minr can enfrce a cntract against an adult. - Minr can rescind a K any time befre he turns adult age, des nt have t return the ther party t the status qu. MENTAL INCOMPETENCE: - Defined as unable t understand the nature and cnsequences f a K; ther persn must have reasn t knw f the cnditin. - K is vidable by the mental persn. - Where K is made n fair terms and ther party has n knwledge f the mental cnditin, pwer f avidance terminates t the extent the K has been perfrmed and avidance wuld be unjust. - Presumptin f cmpetency must be vercme with by clear and cnvincing evidence (i.e. prir/subsequent cnditin, physical cnditin; prvidency f transactin; relatin f trust between parties). Lucid intervals are enfrced. Duress? - Any wrngful act r threat by ne party which cmpels r induces the ther party thrugh fear t enter int a K against his will makes the K vidable due t duress. - The fact that ne party is in desperate ecnmic need f that which the ther has t sell is in itself nt duress, hwever, it may be when the ne party puts the ther in that desperate ecnmic situatin. - Threatening t breach a K where the threat des nt leave the ther party with any ther reasnable ptins and where expectatin damages wuld nt have been enugh, there is duress because the threatened party was deprived f its free will. (Alaska Packers; Lral- navy cntracts) - A threat t discntinue future business is nt sufficient t shw ecnmic duress. (Machinery Hauling v. Steel) Illegality/Cntrary t Public Plicy? - A prmise r term f an agreement is unenfrceable n grunds f pub pl if legislatin says its unenfrceable. Neither party may enfrce it, unless they did nt knw f illegality and detrimentally relied n it. - A curt will nt knwingly aid the furtherance f an illegal K but will leave the parties where it finds them. A curt will nt knwingly aid the parties t a K wh are trying t circumvent federal law by cntracting arund paying taxes. - Even if the K lks legal n its face, evidence as t its illegality will be admissible. (Hmami v. Iranzadi) - The curt shuld chse t reasnably alter the K where pssible t make it enfrceable (nn-cmpete clause can nt be verly brad); but nly if it believes it was drafted in gd faith. Nncmpeting clauses will nly be enfrced when they are necessary t safeguard emplyer s trade secrets r custmer list, nt t brad r lng.
16 16 - Unmarried chabitants are nt precluded frm asserting prperty and cntract claims against the ther. Pub Pl des nt preclude an unmarried chabitant s lng as claim exists independently f the sexual relatinship and is supprted by valid cnsideratin. (Watts v. Watts) Fraud r Misrepresentatin? - Fraud: intentinal misrepresentatin f fact that is relied upn t the detriment f the disadvantaged party. - Elements f prf: (1) Desn t have t be an intentinal misrepresentatin; (2) must be a material fact; (3) justifiable reliance n the misrepresentatin. - π can nly claim misrepresentatin when he had relied n the misrepresentatin. There is n undue influence withut shwing that they had cnfidence repsed in the ther party. - There is n duty t infrm when access t the infrmatin is equally available t bth parties. (Tbacc buyer was silent as t price increase) - A statement f pinin by a party with superir knwledge may be regarded as a statement f fact, althugh if the parties are n equal terms, misrepresentatin f pinin is nt a defense. (Arthur Miller dance classes) - Usually nly affirmative statements f fact can serve as a misrepresentatin, a failure t disclse generally des nt serve as ne. Hwever, a seller has a duty t disclse material facts if (a) necessary t prevent a previus assertin frm being fraudulent r a misrepresentatin; (b) wuld crrect a mistake as t a basic assumptin f the K, and failure t disclse wuld be a failure t act in gd faith and fair dealing, (c) crrect mistake f a writing r (d) entitled t knw because f relatinship f trust (fiduciary duty) (sellers f a huse fail t disclse termite prblem= bad sellers!) Mistake? - Mutual Mistake: A K can be rescinded when bth parties make a mistake abut a basic assumptin n which the K was frmed; when that mistake has a material effect n the agreed exchange; and n ne assumed the risk f mistake. - When there is a Unilateral Mistake (i.e. nly ne party is mistaken), the mistaken party must als shw that enfrcement f the cntract wuld be therwise uncnscinable, OR that the ther party had reasn t knw f the mistake r ther party s fault caused the mistake. - Mistake ccurs when ne r bth parties state clearly what they mean in the K but they make a mistake re: ne f the essential terms. - When a mistake is nt made intentinally r grssly negligently and the mistake was material t the K and the mistakemaker gives ntice t the ther party f the mistake and enfrcement wuld be uncnscinable, the cntract can be rescinded due t the mistake. - Mistake has t effect the subject matter f the K, nt the value f the K. - Even when all f thse elements are satisfied, a curt must enfrce the agreement if there if ne party assumes the risk f mistake (i.e. signing an as-is clause). (Septic tank discvered after signed as-is clause t bad buyer). - An inncent receiver is nt liable fr relying n a fucked up telegram ffer if he believes it t be crrect in gd faith. If receiver accepts thse terms, there is an agreement and the fferr has t perfrm. The fferr then has t seek redress frm the telegram cmpany; sender assumes the risk. (Western Unin case)
17 Uncnscinability? 17 - If the curt finds a K t be s unfair t ne party t be uncnscinable the curt may decline t enfrce the K in part r in whle. Prcedural uncnscinability- ne party induced the ther party t enter the K withut meaningful chice. Substantive uncnscinability- the clause r K itself is unfair (excessive price, remedy waiver, waiver f warranty) Usually nly enfrced fr cnsumers cncern is that cnsumers and sellers have unequal bargaining pwer that sellers can take advantage f. - adhesin Ks: usually a preprinted dcument cntaining nn-bargained fr clauses disguised in fine print, exceptinally favrable t the drafter and ffered t the ther party n a take-it-r-leave-it basis. - a waiver f remedy must be made clear and explicit in the cntract. When a K is expressed in clear and explicit terms, the small type nt easily seen nt in the bdy f the instrument and nt referred t in it is nt necessarily t be cnsidered part f the K. - A K will be enfrced if the party didn t knw f the clause because they didn t read the K befre signing. Hwever, where there is a disparity in bargaining pwer which is taken advantage f with cmmercially unreasnable terms with absence f meaningful chice t the disadvantaged party, the K can be held unenfrceable because f uncnscinability. (Williams v. Walker Thmas Furniture) - Grss inadequacy f cnsideratin as seen in an excessive price situatin is an uncnscinable term which the curts can refuse t enfrce. Curts set reasnable value based n FMV. Price alne is nt a great UCS argument, cmplex clauses which seek t take advantage f thse with less bargaining pwer is better. (Jnes v. Star Credit Crp.) - A party which uses an adhesin cntract has a respnsibility t make clear unusual r UCS terms within. Burden n t shw π had knwledge, understanding & meeting f the minds where π has significantly less bargaining pwer. (Weaver v. American Oil) When a party shws that the K was in fact UCS due t prdigius amunt f bargaining pwer n behalf f ne party which is used t that party s advantage and is unknwn t the ther party causing him great risk and hardship, the K prvisin r the entire K shuld nt be enfrceable n grunds f public plicy. - On the ther hand, where the parties have equal barg pwer as they tend t in cmmercial transactins, a K prvisin if signed will nt be fund UCS if the disappinted party had an pprtunity t understand the clauses therein but neglects t d s. (Zapatha v. Dairy Mart) Is a party discharged frm the duty t perfrm? If a party is discharged fr any f the fllwing reasns he is nt liable fr breach, as lng as n ne allcated the risk. Parties may be discharged frm the K if perfrmance is 1) impssible; 2) because f changed circumstances the fundamental purpse has been frustrated; r 3) perfrmance is nt impssible but wuld be s financially burdensme that it is impracticable. Impssibility/Impracticability?
18 18 3 types f impssibility: (1) destructin f the subject matter (must be essential t the purpse f the K), (2) failure f the agreed-upn means f perfrmance, (3) death r incapacity f a party. - Existing Impracticability When a subject is said t exist, but in fact it des at an excessive and unreasnable cst t ne party which it had nt bargained fr nr reasnably expected, the duties will be discharged. In legal cntemplatin, impracticability is impssibility, cst must be extreme difference. (Gravel underwater) - Supervening Impracticability (smething happens after the frmatin f the K t make K perfrmance impracticable). In every K there is an implied cnditin that the subject exists when the subject matter ceases t exist thrugh n fault f the parties invlved, the duties are discharged. (Music hall burning dwn). When the curt believes that ne party culd have reasnably freseen and cntrlled the risk, the curt will assign the risk t that party. Impracticability due t a third party is nt an excuse if ne party had cntrl ver the risk that 3 rd party wuld bear n the K. (mlasses distributr) When a party is claiming impracticability, it must shw that 1) event made perfrmance impracticable; 2) nnccurrence f that event was a basic assumptin f the K frmatin; 3) the ccurrence f the event was thrugh n fault f the parties invlved; and 4) n party assumed the risk. UCC 2-615a (fllws CL): seller s nn-delivery will be excused if perfrmance has been made impracticable by the ccurrence f an event which nnccurrence was a basic assumptin f the K. - When ne party assumes the risk, he alne will shulder the burden f impracticability; Wh is the least cst avider? Wh culd have reasnably anticipated the risk? Take-r-pay cntracts inherently assign the risk t the buyer. (Kaiser-Francis Oil) Frustratin f Purpse? Where the fundamental purpse f the K is destryed by supervening events mst curts will discharge the perfrmance. Unlike impssibility, the issue is nt an inability t perfrm, but that it makes n sense t because she will nt get the bargained fr valuable cnsideratin. - There are tw basic cnsideratins here; the party claiming frustratin f purpse will be mre successful if she can prve that the ccurrence f the event was unfreseeable and that it ttally destryed the fundamental purpse f the K. - Elements f frustratin f purpse: Supervening act r event Which was unfreseeable at the time f the K frmatin Avwed purpse was recgnized by bth parties at the time they cntracted. (Krell v. Henry- King crnatin htel rm; WA State Hps Prducers, Inc.)
19 19 Are the bligatins under the K subject t cnditins? - Prmisr is bund t perfrm nly after cntingency ccurs (cnditin precedent r cncurrent) r nly until a cntingency ccurs (cnditin subsequent) when there is a cnditinal duty t perfrmance in the K. - When there is a cncurrent r precedent cnditin, there can be n breach f duty until ne party desn t perfrm. Express - Lk at the intent f the cntracting parties and the language used in the K. - Curts will uphld express cnditins. If ne party fails t fulfill the cnditin precedent, the ther party has n duty t perfrm under the K. (Dve v. Rse Acre Farms- mean bnus prgram at wrk) - When a cnditin is expressly included in the K and makes lgical sense, the curt will uphld the cnditin. - A curt may find a cnditin excused where extreme frfeiture wuld ccur and damage t the ther party s expectatins frm nn-ccurrence is relatively minr. When the breach f a cnditin is neither willful nr particularly harmful (i.e. the cnditined party has perfrmed the cnditin substantially), the curt can treat it as a minr breach rather than a breach f the entire K which wuld release the ther side frm their duty. Instead the curt may award diminutin in value. (Reading pipes asked fr and nt used). - When there is an express satisfactin cnditin- the satisfactin must be generally judged bjectively and with gd faith. If acceptance is made cnditinal n the buyer s satisfactin, buyer is liable fr damages if he claims dissatisfactin in bad faith and rejects the seller s tender. (Ptat chip case) Implied/Cnstructive Cnditins: usually in bilateral cntracts Implied-in-fact cnditins: cnditins which parties wuld have agreed t had they thught abut it. Implied-in-law cnditins: sme cnditins may be implied by the curts in the interest f fairness. - Examples: 1) earlier perfrmance cnditin precedent t later perfrmance; 2) simultaneus perfrmance is cncurrent cnditin; 3) perfrmance that takes a while is a cnditin precedent t the ther. - Substantial perfrmance: Where cmplete perfrmance is a cnstructive cnditin t the ther s cunter perfrmance, the cnditin may be excused if the party has rendered substantial perfrmance thus the ther party still has a duty t perfrm (& deduct damages fr breach). Each party s substantial perfrmance is generally a cnstructive cnditin t the ther s perfrmance. In rder t cnstitute substantial perfrmance there must be a gd faith intentin t cmply and the defects r remainder must be unintentinal defects that d nt harm the essence f the cntract. When ne has rendered substantial perfrmance he is entitled t payment fr that perfrmance minus the detriment t the disadvantaged party. (Brittn v. Turner- wrked fr 9 mnths f a 1 year cntract) - UCC Differs! UCC 2-601: Perfect Tender Rule n delay r deviatin frm specificatins in K are permitted. Substantial perfrmance is nt allwed. Unless the K invlves installments, then its divisible.
20 20 - When prmises are cnditinal and dependent, the failure t perfrm the precedent cnditin relieves the ther f his duty t perfrm. - When ne party s perfrmance takes time, the perfrmance that takes time is usually a cnditin precedent t perfrmance f the ther party s duties. - Cvenants are dependent unless therwise specified. Neither party can maintain an actin against the ther withut prving perfrmance n his part, r ready-and-willingness t perfrm his part. - DIVISIBLE CONTRACTS. A cntract is divisible if it is expressly made s, r if a reasnable interpretatin indicates that a failure t perfrm ne part wuld nt cnstitute a failure f the basic cnsideratin bargained fr. (Cntract that lked like ne cntract was actually tw, perfrmance f ne) A divisible cntract is ne in which the parties have divided up their perfrmance int units r installments in such a way that each part s perfrmance is rughly equal t the cmpensatin fr a crrespnding part perfrmance by the ther party. (multiple cntracts that lk like ne) Have the cnditins been satisfied r excused? - Grunds fr excuse f a cnditin: agreement by bth parties cnduct by ne benefited by the cnditin which waives the cnditin When the nn-breaching party f a cnditin cntinues t perfrm his side f the K, he waives the breach f the cnditin by the ther party. (In re Carter) If the wrds and cnduct f ne party reasnably impress n the ther that a cnditin will nt be enfrced it is cnsidered excused. (Clark v. West Publishing) changed circumstances that makes cmpliance impracticable discharge by the curt HAS THERE BEEN A BREACH? Has the cntract been discharged? Have the cnditins been satisfied r excused? Has ne party materially breached r just partially breached the K? - failure t pay amunts t a material breach if 1) nnpayment makes it difficult fr the seller t perfrm; r 2) failure creates such a large risk that the seller shuldn t have t perfrm. (battery lead seller didn t make ne payment). Right t suspend r cancel perfrmance upn prspective inability r breach?