Contracts Notes
Contract:
agreement with certain obligations for which some sort of legal enforcement is available if performance is not forthcoming as promised. Can be oral or written agreement between 2 or more persons
Something has to be EXCHANGED- each party has to provide something
a promise is involved
Enforceable
Mutual Assent: Simply agreement by both parties, v. Meeting of the Minds- where both parties had the same things in mind.
Meeting of the minds: Deep understanding of all the terms involved, the actual intention rather than the conduct determines each party's legal obligations.
K not enforceable if: to do sthing illegal, made under duress, or by a minor. (Ks made by minor become enforceable at 18; also enforceable for necessities)
Promises must involve consideration to be enforceable; cannot enforce a promise to make a gift.
Most courts prefer to use mutual assent rather than meeting of minds, b/c it's easier to determine when/how K made.
Intention to be Bound: the Objective Theory of Contract
Ray v. Eurice;
Long complex back and forth contract negotiations; Eurice refused to honour K, Ray sues for breach of K, ct sez; doesn't matter what Eurices THOUGHT they were agreeing to, shoulda read it. Intent doesn't matter.
Offer and Acceptance in Bilateral K: Bilateral: Both parties exchange promises of performance to take place in the future- both parties are both promisors and promisees.
Offer: willingness to enter into K, uses fixed pupose language, requiring no further expression of assent. Offer results in: A) acceptance B) rejection C) if terms are changed, counteroffer D) lapse/revocation
Mailbox rule: acceptance effective as soon as it is dispatched by offeree. Medium of acceptance must be reasonable in circumstances.
Offer/revocation has to be communicated to be effective, but offeror has power over offer to revoke at any time prior to performance.
Offer creates power of acceptance, terminated by: offeree's rejection, revocation by offeror, or death or incapacity.
Lonergan v. Scolnick
Pl alleges that def Scolnick entered into a K agreeing to sell 40 acre tract of land. Def placed ad in paper, lower ct. decided no K. Just an offer. Letters were offer rather than K. Def sold to another person. Ads are invitations to offer, pl made offer, not specific enough to be offer.
Izadi v. Machado Gus Ford Inc.
Pl wanted to buy ford per ad. Was ad a binding offer? Yes, per statute. ct did not like superfine print in ad. Based on what a reasonable person would think, yes, can buy car for that price. If K contradicts itself, then we have to reconcile contradictory terms. Fits into objective theory, would a reasonable person think. Generally advertisements are invitations for offer, not offers.
Normile v. Miller
def miller offered house for sale. Pls Normile completed offer and signed 4 Aug to be completed and signed 5 aug, agent came back with changes to def (which constituted counteroffer) 4 aug. Returned to Pl 4 Aug, did not immediately accept terms. Agent goes to another buyer with similar counteroffer, accepted by def. Pl accepts and returns counteroffer by original deadline
Offeror (def) can change mind and revoke offer at any time. Effective as soon as offeror tells offeree.
Dispatch rule: when did it leave your control (also mailbox rule) then Offer is valid, even if offeror never receives. Telephone messages can be considered deposited acceptance, depending on state.
If you make offer to sell, and several people accept, you have to give other parties notice of revocation. Once you deposit your acceptance, you can't change your mind. Rejection/revocation is effective on receipt so if you call and change your mind, too bad, you've accepted.
Offer and Acceptance in Unilateral K: If offeror offers to exchange promise of future performance for promisee's ACTUAL rendering of performance , unilateral K. Only the promisor is offeror, offeree's rendering of performance is actual acceptance.
Patterson v. Pettberg
Pl was executrix for Patterson, owner of real estate, def held bond executed by pl, (like Mortgage) Def wrote pl, agreed to accept cash for mortgage. BUT def sold mortgage prior to deadline set by def, pl had agreed to sell land, making it necessary to pay off mortgage in full.
Ct sez; unilateral K proposed, gift of promise of reduction of debt in exchange for actual performance of payment in full. But until promisor actually receives payment, can revoke at any time (this was the one where creditor slammed the door in payer's face) Def gave notice to Pl by telling him he had sold the mortgage and therefore offer was withdrawn. So no K made.
Cook v. Coldwell Banker/Frank Lauben Realty
Pl was agent working for Def. Def promised bonus, pl worked very hard to earn bonus, left before bonus awarded. Rule: offeror cannot revoke offer the offeree has accepted by substantial performance- that's the consideration.
True Unilateral Ks
agreement + consideration, meeting of the minds doesn't matter.
Revocation is effective when offeree receives it, can just be reliable information provided by a third party does not have to be direct communication by offeror. Offer has to stay open for a reasonable amount of time, see $36 restatement. Even if K sez offer can't be revoked, it can too.
Other Methods of Reaching Mutual Assent Introduces UCC Article 2-102 transactions in goods.
Harlow & Jones v. Advance Steel
Harlow agreed to sell advance steel 1000 tons steel for shipment Sept-Oct 1974 per phone conversations. Def rejected partially, alleged it didn't come in on time. Was confirmation form sent by Pl an offer accepted by def in mailing back purchase order form? Terms are identical in major particulars. Ct sez; y'all had an oral K as is custom, confirmed by written forms. UCC 2-207 deals with Battle of the Forms
What is Consideration?
Hamer v. Sidway
Uncle promised nevvy $$ if nevvy gave up legal rights to smoking and drinking (bilateral K) Def alleged no consideration, ct sez; that's what uncle wanted and bargained for, was of a detriment to nevvy/asset to uncle, so it's consideration- consideration does not have to be limited to $ or things of tangible value or exchangeable.
Covenant: for breach of K under deed, very formal and official
Action of Debt: formal/informal, must be for specific $
Assumpsit for Breach of Promise (Hairy Hand)
Pennsy Supply v. American Ash Recycling
Pennsy used American Ash's AggRite to pave parking lot, which later collapsed. AggRite is haz. waste, Pennsy must pay $$$ to remove, ask AggRite, which refused. Even though K did not mention Pennsy's removal/disposal of AggRite as consideration, it still is b/c Agg Rite got consideration by not having to remove/dispose of it themselves. This not having to remove/dispose of it was part of the 'Quid pro Quo" of agreement. Also Implied Warranty claims: AggRite gave away this stuff as being suitable for Pennsy's purposes which it turned out not to be.
Bargain theory: I'll do something for you if you do something for me, doesn't have to be express, no negotiation required.
Condition for a gift not consideration, example of if you walk round to store, they will give you overcoat- normal process of acceptance, giftee doesn't give up anything to accept gift.
Applying the Consideration Doctrine
Dougherty v. Salt
Aunt promised boy $3000, ct decided, not a K, no consideration from boy, unenforceable promise of executory gift. Past consideration (because you've done qqch in the past, I'll give you something in the future, is not consideration) Aunt coulda gotten round this by Will, Trust, or Gift Now.
Batsakis v. Demotsis
Pl sued def to recover $2k lent during war. def returned to Pl $25, value now of money lent then. Ct decided, you promised to pay $2000, even if you only received $25, that's what you promised and bargained for. Does not have to be "fair" or "equivalent value" Can't pick and choose terms in K to enforce, either the whole thing's good, or the whole thing's crap. Nominal consideration (I'll sell Mitch Caravan for $1) not true consideration, b/c not bargained for and I don't care if I get $1 or not. Deal not enforceable.
Illusory promise- performance optional with the promisor- makes it difficult to enforce, output K, I'll buy however many you make, is difficult, also requirement K, I'll buy every widget I need from you, difficult. Most common application is at will, promisor reserves the right to terminate w/o notice to promisee.
Plowman v. Indian Refining Co.
Pl sez; they made a K to pay pensions and they didn't. Def sez, no consideration. Ct sez. Sadly, moral obligation is not consideration. Also Agency problem, the person making the K didn't have the authority to make it. Actual authority is communication from principal to agent, apparent Authority is from principal to 3rd party.
Issues in Applying the Concept of Mutual Assent
Limiting the offeror's power to Revoke, the Effect of Pre-Acceptance Reliance
Offer is revocable unless and until accepted by offeree, even if offer states it can't be revoked. Offeree only accepts through full performance. If offeree gives offeror $ to hold offer open, it's an option K and irrevocable.
Promissory Estoppel: perhaps I didn't have a K but I believe in a promise and rely on it in some way to my detriment, I have to do/not do qqch. If injustice can be avoided only by enforcement of the promise, we have promissory estoppel and promise is binding. Damages more limited than in K.
Four elements: There must be a promise
Promisor expects reliance, or should reasonably have expected reliance
Promisee does rely within reason on promise
Detriment
Executory promise: one that runs into the future.
James Baird v. Gimbel bros.
Gimbel makes offer to put linoleum in PA hwy dept for Baird, then discovers error on sheet sent to a bunch of contractors. Tries to revoke but Baird has accepted. Baird relied on Gimbel so that's promissory estoppel. BUT ct sez; well, Baird's not BOUND to use Gimbel, so why should Gimbel be bound to Baird? If pl had repudiated K to build after it had been awarded, def could not sue. There wasn't acceptance, so not really applicable here.
Drennan v. Star Paving
Drennan submitted bid to build school, star paving submitted bid via form, def immediately said wanted twice as much, Pl had to find someone else. Def's bid induced action on part of promisee, so we have promissory estoppel. Def argued honest mistake, ct did not buy, actual harm here shown. (this is more current, cts more likely nowadays to find promissory estoppel)
Star has an obligation to make Drennan whole, so promissory estoppel found.
Berryman v. Kmoch
Kmoch wanted to buy land from Berryman, came up w/option K, but never activated option or provided consideration for option. Kmoch alleges, other valuable consideration for time & expenses to survey it or something. Ct sez, to hell with you and your other valuable consideration, it is NOT.
Pop's Cones v. Resorts International Hotel
Resorts promised Pop's Cones they could move in, then lent premises to another, Pop's Cones sues and wins. They lost the business from '94-'96, can get that. Much more difficult to prove what they would have gained from moving into promised spot (expectation damages)- some cts allow, some don't. Previous cts required "clear and definite promise" this ct abolishes that. Expression of intent does not equal promise. Cts also look at sophistication of the parties involved.
Irrevocability by Statute: The "Firm Offer"
Qualified Acceptance: The "battle of Forms"
Is it a UCC (goods) K?
Are the terms add'l- one party has added qqch or are they different- one party sez red other party sez blue?
What are the documents? Offer, counteroffer, acceptance, confirmation? Are both of the parties merchants? Is something expressly conditional? Is there a material alteration?
How do you tell if it's an offer or acceptance? an offer is typically on the buyer's form, an acceptance is typically on the seller's form.
If: additional terms in acceptance- if merchants, go through 2-207-2, if not, add'l terms drop out.
Add'l terms in confirmation? If merchants, go through 2-207-2, if not, add'l terms drop out
Add'l terms in offer? Offeror wins (last shot) Acceptance acts as acceptance of all terms unless the offeree expressly objects
Different terms in confirmations, different terms drop out under Comment 6 "knockout rule"
Different terms in acceptance, cts/jurisdictions differ. Some think both terms drop out unter comment 6, some think offeror wins under 2-207-1b/c comment 6 is for confirmations, not acceptances, Or both may drop out under 2-207-2c and comment 3
If the terms are so different that 2nd form is not an acceptance but a counteroffer, no K. If the parties perform, 2-207-3 determines the terms. The UCC provisions on Usage of trade, course of dealing, etc, are applicable.
Expressly conditional offer- 2-207-2-a
Offer sez; my terms 1, 2, and 3 and no others
Acceptance adds term 4
There are two possibilities, K is formed but additional term drops out under 2-207-2-a and C, or, No K if first form precludes acceptance w/ suggested add'l terms. Can't have an expressly conditional confirmation- an oral K has already been formed, and it can't be unilaterally modified
Expressly conditional counteroffer - 2-207-1
Offer, my terms 1, 2, and 3
Acceptance all of the above and expressly conditional on term 4 as well.
No K unless offeror expressly consents. Conduct may form a K but is generally not sufficient to imply acceptance of the add'l terms. If there is performance use 2-207-3
Princess Cruises v. General Electric
K btw. Princess Cruises and GE for repair (not goods= not UCC) of a ship. Pl made purchase order to have ship serviced as an offer, can be accepted through acknowledgment or performance, GE to provide warranty. GE returned erroneous/incomplete price quotation, then revised (now a counteroffer), rejected terms and conditions in Princess' PO. Princess accepted by telephone, now it's a K. Problems after GE does maintenance, Princess sues GE for $$$ including time ship was out of commission. This is admiralty law about services and falls out of UCC. Ct sez: Princess accepted GE's counteroffer including terms limiting liability so damages are limited. An acceptance that varies the terms of an offer is a counteroffer which rejects the original offer. Manifestation can be express or implied by non-action, here Princess did not act in response.
Last shot rule, person (typically seller) who sends last shot-last form- dictates terms of accepted K under common law. (old, superseded by UCC as applicable)
Mirror Image Rule: if it sez it's an acceptance but contains changes, it's a counter offer. (old, superseded by UCC as applicable)
If you write back and accept, you accept original terms even if you make changes, unless acceptance is conditioned on those different terms
Brown Machine v. Hercules, Inc
Brown sold Hercules a machine for making Cool Whip bowls, part of k sez; buyer will pay on behalf of Brown all injury claims arising from machine (indemnification clause)
Hercules returns P.O. with their own terms, seller accepts these terms by 2nd machine order, therefore leaving out the indemnification clause. Brown's original submission was a price quotation and an offer to enter into negotiations. Per Brown's language, Brown has to receive offer and accept. Brown's original offer wasn't accepted in timely manner, either. Hercules' P.O. is offer and accepted by Brown.
UCC 2-207: rejects strict "mirror image" rule, a definite and seasonable expression of acceptance is an acceptance even though it states terms add'l to or different from those offered.
2-207 (2) Add'l terms will be added to K btw merchants
Unless offer expressly limits acceptance to offer terms
Unless it's materially altered- and nearly everything materially alters it- look at comments 4 and 5 under 2-207 to see.
Cts can look at usage of trade, does this cause "surprise and hardship"
Notification of objection has been given or is given w/in a reasonable time after notice is received
Conduct is sufficient to establish K.
Offeree's response to an offer constitutes valid acceptance even if different terms.
Postponed Bargaining, the Agreement to Agree
Sometimes parties agree on certain key terms and leave some out to agree on them later or there may be an unresolved conflict btw. terms.
Walker v. Keith
Walkers leased land to Keiths for 10 years at 100/mo. Option to renew, parties could not agree on rent, lower ct decided on amount, this ct sez, too vague, there's no way to determine the rent, An agreement to agree is not a binding K. They didn't agree on essential term, so no K.
Quake Construction Inc v. American Airlines, Inc.
American hired another contractor who in turn hired Quake, Jones sent quake a letter confirming a K was to be sent with specifics, included price and some details
Was letter of intent an enforceable K? Depends on parties' intent. b/c work was to start shortly after letter, they intended to be bound. There was a cancellation clause. We need to remand to find what parties intended exactly.
Agreement to agree, we've decided on ABC now we consider how to get to DEF.
Formal contract- contemplated execution of formal written K.
Electronic Contracting
Shrinkwrap terms: purchaser orders product, wrapped in contract terms, use of product constitutes your agreement with those terms. If you don't accept must return product within X days.
Clickwrap terms: before completing purchase, purchaser must scroll through terms of sale and click I agree.
Browsewrap terms: available on site but you don't have to click to agree; you agree merely by browsing the site.
Brower v. Gateway 2000 Inc.
Sued Gateway after Gateway did not provide guaranteed support. There was an arbitration clause in the agreement, Inconvenient and impossible to do. Ct sez; arbitration clause not material alteration of K, just one part. K acceptance happened when customers kept it beyond 30 days. Doesn't count as adhesion K because consumer could buy alternate product. But because arbitration may not be feasible/sensible, we will decide to take it to U.S.
In cases like this purchaser does not make offer, vendor does by shipping product. (not always the rule; sometimes buyer is offeror depending on jurisd) see UCC 2-314
Unconscionable- could be procedurally- buried in fine print, hidden from notice or unavoidable
or substantively- unreasonably favours one party- going to Chicago not enough, but excessive costs are.
Register. com Inc v. Verio
Register issues domain names to people through ICANN agreement, Verio accessed Register's public domain info for marketing purposes. Icann sez; we should handle this internally, Verio sez; Register can't prevent us from accessing this public info, that's a breach of K with Icann. Register had browsewrap K that you wouldn't reuse this information for sales/mkting. Verio received K terms after accessing data and sez, we shouldn't be bound, but ct sez, you did it too many times and too frequently. It is not necessary to click I agree to agree.
Other theories of restitution: Promissory Estoppel and restitution
Promissory Estoppel: perhaps I didn't have a K but I believe in a promise and rely on it in some way to my detriment, I have to do/not do qqch. If injustice can be avoided only by enforcement of the promise, we have promissory estoppel and promise is binding. Damages more limited than in K.
Four elements: There must be a promise
Promisor expects reliance, or should reasonably have expected reliance
Promisee does rely within reason on promise
Detriment
Promises within the Family
Kirksey v. Kirksey
Pl def's sister in law. Def invited Pl to live w/him after brother dies. She left her land and moved to house of def, who put her up and then wanted her to move away and then leave. Verdict from lower ct for pl. Inconvenience pl endured not considered to be consideration.
Greiner v. Greiner
Pl (at behest of evil son) seeks to reclaim land from one son. Frank moves from wherever he is back to Mom's land at her behest, she moves house onto land, her statement of intention that I'm going to give you the house can be considered K b/c there was consideration in Frank's moving. and Frank had possession.
Wright v. Newman
Newman sued for child support against Wright, who was not the father of her children, but promised to pay, so this somehow stopped Newman from seeking the actual father of her children- court invokes Promissory estoppel. & makes him pay
Charitable Subscriptions
King v. Trustees of Boston University
King wants papers back after Dr had made a charitable pledge of these papers to University. Charitable pledge is not a K. there's no exchange or consideration. A bailment was established with King as bailor and BU as bailee. Promises of gifts, again, not enforceable
Promises in a Commercial Context
Katz v. Danny Dare, Inc.
Pl wanted pention payments from Danny Dare. B/c of injury he was strongly suggested to retire. there was a promise of a pension, was there detrimental reliance? He gave up his earnings. Injustice can only be avoided by enforcement- yes, so if you've relied on the promise, they must pay.
Shoemaker v. Commonwealth Bank
Mortgagor, obligated by a mortgage to obtain insurance can establish a cause of action in promissory estoppel, yes.
Third theory: Restitution: Liability for Benefits Received; unjust enrichment
Restitution in the Absence of a Promise: not a K at all but legally enforceable obligation. Like if Fulton County gives me extra 0 in check, it's not a K, not promissory estoppel, (there's no promise) but I'm obligated to repay.
Credit Bureau Enterprises, Inc. v. Pelo
Pelo all crazy, gets committed, sez I won't pay 'cos I didn't agree to it. Ct decided he received property or benefits w/o making compensation, so he must pay.
$116
a person who has supplied things or services to another, although acting w/o the other's knowledge or consent, is entitled to restitution therefore from the other if
(a) he acted unofficiously and with intent to charge therefore
(b) the things or services were necessary to prevent the other from suffering serious bodily harm or pain
(c) the person supplying them had no reason to know that the other would not consent to receiving them, if mentally competent
(d) it was impossible for the other to give consent or, because of extreme youth or mental impairment, the other's consent would have been immaterial.
Commerce Partnership 8098 Limited Partnership v. Equity Contracting co.
Commerce owned office building, hired contractor World who hired Equity, Equity didn't get paid by World so sued Commerce- alleging unjust enrichment. commerce had paid World. If Commerce had indeed paid world, Commerce hasn't been unjustly enriched.
Quasi K- Pl conferred benefit on def.
Def has knowledge of benefit
Def has accepted or retained the benefit conferred
it would be inequitable for def to retain the benefit w/o paying fair value.
VERSUS
Contract implied in fact, a person performs services at another ' request, or w/o request but w/knowledge and under presumption that person understood they had to pay.
Promise + consideration+breach=damages=claim for promised benefit/damages
Promise, implied/express + reasonable reliance+ detriment= damages more limited than in K
Restitution Pl conferred benefit on def+ def aware of benefit+ def accepted
Damages based on fair value.
Watts v. Watts
Pl and def cohabited for many years, she wants equitable division of property after separation. There's an express/implied K to share property. unjust enrichment works
Note: family member rendering services for aged, infirm, incapacitated family member all gratuitous. but cts can find exceptions
Promissory Restitution
Mills v. Wyman
Pl cared for def's son, def wrote letter promising to pay. verbal promises cannot be enforced, no consideration.
Webb v. McGowin
Webb drops 75 lb block of wood from upper story, about to drop it on McGowin, webb fell w/block, crippled for life. McGowin agrees to pay Webb $15 biweekly for remainder of Webb's life, does until death. Ct decides this is valid and enforceable K because there was consideration- McGowin's life saved, Webb's detriment injured for life
Material Benefit Rule: if a person receives a material benefit from another, other than gratuitously, a subsequent promise to compensate the person for rendering such benefit is enforceable.
Past consideration doesn't make a K.
Principles of Interpretation and the Parol Evidence Rule
Implied Terms, the Obligation of Good Faith, and Warranties
promise + consideration + failure to comply = not enforceable
Promise + no consideration + compliance = not enforceable.
Statute of Frauds Restatement 110, 137, 133
Promise + no consideration+ compliance= not enforceable
Promise+ consideration+ noncompliance= unenforceable.
Some Ks have to be written down to be enforceable.
UCC 2-201, over $5K,
Contracts for the sale of land or for an interest in land
Contracts that can't be performed within a year, either performance is longer than a year, or- I reserve cabin for Feb 2009, won't happen within a year. If it's POSSIBLE to perform within a year, statute doesn't apply.
Writing must identify the parties and nature of the exchange and must set out all or at least most of the material terms.
2-201-2,
writing can be enforced against non signing party if-
Both parties are merchants
Within a reasonable time of the oral K, one of the parties sends a written confirmation to the other, signed by the sender, satisfies statute against sender
recipient has a reason to know of the contents
And fails to object within 10 days of receipt.
Also Suretyship- that cosigning thing
Executor's agreement to answer for the duty of a decedent
Contract made on consideration of marriage
Does K fall under statute? If no, oral K is enforceable, if yes, is K reflected in a writing that satisfies the statute? If so, then K is enforceable, if not, then does the case fall within one fo the exceptions to the statute that permit enforcement despite non-compliance? (performance or reliance by the plaintiff) if so, K is enforceable, if not, K is unenforceable.
Only party against whom enforcement is sought need have signed it.
UCC provision 2-201 provides that contracts in excess of $5000 be evidenced in writing.
Statute of Frauds requires K be in writing. Remember memoranda etc. can work.
Also does not apply to prior condition on which K performance is contingent- basically, I can introduce evidence that I told Dave, yes, I'll buy house and sign K if I sell my house.
Crabtree v. Elizabeth Arden. offered K w/detailed terms, accepted, they didn't fulfill K. EA sez; can't enforce K 'cos it wasn't in writing. Nuh-uh sez ct, and puts together memoranda to show there was writing to confirm K.
Winternitz v. Summit Hills Joint Venture
sued for breaching K, def said, no K according to statute of frauds- jury gave
Winternitz owned pharmacy, sold to Suhs, Summit Hills refused to honour lease to Suhs. Def sez, you didn't have a K 'cos of statute of frauds, Pl sez, no we partially performed. K exists but is unenforceable- LL didn't sign, so not under statute of frauds. Pl only gets judgment for ll's malicious interference with contract.
If you say you'll put it in writing, but never actually do, that's fraud.
A written denial of contract, if sufficiently detailed, can constitute K.
Is K within statute?
Is there a sufficient writing w/signature (any authenticating mark, can include stationery)
Is there an exception to the statute which will permit enforcement anyway?
Alaska Democratic Party v. Rice
Rice offered oral 2 year K to be Alaska Democratic Party Executive Director. Because she relied on this, promissory estoppel is invoked within Statute of Frauds.
The Sale of Goods Statute of Frauds
Buffaloe v. Hart
Pl rented from defendants orally 5 roanoke barns, then he wanted to buy them, and then resell them. Is check for partial payment sufficient under statute of frauds? Does it 1) contain a writing sufficient to indicate a contract of sale between the parties 2) is signed by the party or his authorised agent against whom enforcement is sought 3) states a quantity. No, Defendants didn't endorse the check. BUT there was partial performance- by buyer, as evidenced by check, so excepted under Statute of frauds.
Principles of Interpretation
Joyner v. Adams
Must finish all development by Sept 1980 or be subject to a retroactive rent increase. sept '80 everything was done except for one parcel, issue here is what "developed" means. Joyner sez; w/buildings, Adams sez; ready for development. See list of terms 358-359 for use on exam.
vague and ambiguous terms in K generally construed against drafter.
If parties attached different meanings to K terms, innocent party prevails.
Ex: I win Lottery, I decide to buy GNX, go in see GNX, when it comes in, it's a GN. Dealer can add the price difference, but I probably asked for the GNX and meant it, 2-313. and should get it. If sample model shown is intended to be representative of eventual purchase, that's what you have to get.
If I call the consignment shop to buy "peter the Kitty" for $250 and go in and then it's a different painting, then there's no agreement so no K.
Frigaliment Importing Co. v. BNS International Sales Co.
What is Chicken? One of them wanted Brathuhn and got Suppenhuhn. K just said chicken. There is a gap in parties' understanding, meaning that pl has to prove that their interpretation is correct. Expert witnesses to establish usage of trade, they say, chicken = chicken and we generally specify what we want.
Objective approach: what the reasonable person would conclude based on reading K.
We look at who drafted the K, and generally resolve terms against drafter. Or, if one party has reason to know or knows what the other party means by certain language and the other party does NOT know or have reason to know of the meaning attached to the disputed language by the first party, the court will enforce the K in accordance with the innocent party's meaning.
1-205, 2-208 course of performance, can establish pattern away from terms and change K. Course of performance is single K with repeated opportunities for performance,
Course of dealings is series of Ks between parties
Usage of trade, how does this industry do things.
2-208 What happens if express terms in K are not in agreement w/usage of trade? K prevails.
Handwritten terms overrule express terms overrule preprinted terms overrule course of performance overrule course of dealing overrule usage of trade.
Consider: language of K, Preliminary negotiations, usage of trade, regulations
C & J Fertilizer v. Allied Mutual Insurance Co.
C & J burglarised, allied said, to pay requires visible marks. (to prevent an inside job)
Ct sez; reasonable expectations lead insured to believe this is covered.
Adhesion K.
The parol Evidence Rule; Restatement 209-218, UCC 2-202
Is document intended to be final expression of parties agreement, or is it only partially integrated?
Only applies to written agreements.
Parol Evidence: If it contradicts written K, add'l evidence not admissible. Four corners approach v. Corbin approach (let judge decide based on evidence presented by both sides what K means, what parties meant, and what K sez to see if its ambiguous- let judge hear whatever evidence necessary to interpret or determine whether K is fully integrated). If it's integrated, it's final and complete, if it's partially integrated, add'l evidence can supplement terms but not contradict. Know exceptions 390-391
Does not apply to evidence explaining meaning of agreement. Does not apply to agreements made after the execution of the writing.
Does not apply to evidence offered to show that effectiveness was subject to an oral condition precedent.
Does not apply if evidence shows that K is not a K b/c of fraud, duress, undue influence- fraud is narrowly interpreted.
fraud in inducement- if I tell you qqch contradicted by written agreement, like you get GNX instead of GN- not always admissible
Doesn't apply to evidence offered to establish an equitable remedy such as reformation of the K- suppose we are negotiating back and fortha nd accidentally a paragraph is left out, that evidence can be admitted.
Does not apply to evidence introduced to establish a collateral agreement btw. the parties.
Reliance is not a good exception to Parol Evidence, it's unreasonable to rely on promise contradicted by writing.
Thompson v. Libby
Libby buys logs per written agreement, later claims they are not high enough quality per oral agreement outside of written K, ct sez, can't bring that stuff in, this is complete on its face. Parol evidence doesn't exclude evidence of matters collateral to the subject of written agreement, so this could be collateral, but normally a warranty of quality isn't collateral.
Parol evidence doesn't apply to: If evidence shows that the K is not valid because of fraud, duress, undue influence, incapacity, mistake, or illegality. - mistake, if both I and Ron think it's a turbo 6 but it's an 8. Fraud does not include fraud in inducement, as in, we'll write agreement for term x but orally agree to y. (like we'll write this for tax purposes but orally agree to another price)
Doesn't apply to agreements, oral or written, made AFTER the execution of the writing.
Doesn't apply to evidence offered to show that effectiveness of the agreement was subject to an oral condition precedent- (Dave I'll buy the Biltmore if I can sell my house first)
Parol Evidence rule does not apply to evidence offered to establish an equitable remedy such as reformation of the K.
If we're negotiating back and forth and the secretary accidentally leaves out an important paragraph, we can admit into evidence
Does not apply to evidence introduced to establish a "collateral" agreement btw. the parties (an agreement alongside 1st agreement)
Reliance is Not a good exception to Parol Evidence. It's unreasonable to rely on promise contradicted by writing.
Taylor v. State Farm Ins. Bad Faith claim.
Taylor signed a release agreeing to $15K of uninsured motorist coverage, after car accident he owed $2.5 mil. Ct decided that language of release was ambiguous and used Corbin approach. We can interpret it but not contradict it.
Ct decided: Release language IS subject to differing interpretations.
Extrinsic Evidence DOES support Taylor's claim/interpretation.
Was release a K? Yes, there are promises as well as consideration. Release is valid, but doesn't work against bad faith failure to pay. Release Might be a final, fully integrated K.
Is evidence related to matters that occured at or before K's signing?
Does K contain merger clause?
Does K appear to be complete on its face? (If 4 corners jurisdiction, add'l evidence thrown out)
Does the evidence contradict the writing?
Does it supplement the writing?
Does evidence explain or help interpret the writing, is K ambiguous on its face?
Does your evidence suggest that the writing accidentally failed to state your deal?
Does evidence show that K only effective subject to a condition precedent?
Does evidence indicate that written doc is invalid for some reason?
Does evidence indicate that after K executed there were some changes negotiated?
Sherrod v. Morrison Knudsen: Sherrod claims that Morrison Knudsen hired them to move whatever earth was needed to be moved, much more than K'd for, they promised to work qqch out, and didn't parol evidence rule disallows all evidence of fraud, etc. b/c directly contradicts terms of K.
Nanakuli Paving & Rock v. Shell Oil Co.
Nanakuli filed breach of K against Shell for raising price of asphalt. nanakuli points to other suppliers protecting price, that's custom. Jury ruled for Nanakuli, then judgment n.o.v. for shell, now overturned (for Nanakuli).
Nanakuli argues for custom, so it was assumed to be in there; contract is for market price as written. Previously, Shell had protected Nantakuli from price increases.
2nd theory: Shell obligated to price protect Nantakuli 'cos how business is done - makes it a good faith requirement.
Shell sez: can't bring in suppliers of materials other than asphalt for evidence of custom.
Other instances were waivers of terms of K.
Actual written terms in K control, not these other things.
Ct sez: shell acted out of step with trade usage and commercially reasonable practices and previous agreement/treatment of Nantakuli.
We need to look at :breadth of trade, was it the hawaiian paving trade or just purchase/sale of asphalt.
Were price protections waivers or course of performance of K?
3rd thing:
4th did good faith oblige Shell to at least give advance notice of price increase?
UCC in Hawaii sez usages of trade extend to how it's done in Oahu, not just for asphalt suppliers.
Sherrod v. Morrison Knudsen
Parol Evidence rule disallows this case; Sherrod claims fraud cos MK wanted it to move "all dirt needed" for price X, estimated at Y, turned out to be three times as much, so then MK said, we'll work it out and they didn't so Sherrod took them to ct. There's a merger clause in K. Can't talk about fraud b/c doesn't directly relate to terms of K.
Supplementing the K: Implied Terms, the Obligation of Good Faith, and Warranties
Implied in fact: not stated but implied by the parties themselves.
Implied in law: agreed to through rules of law although not in agreement. Can come from: statute, common law, or ct decision.
Wood v. Lucy, Lady Duff-Gordon
Lady Duff-gordon's special term motion for s. J granted. Wood appealed.
She is fashion designer, he contracted w/her exclusively to produce/market her fashions as well as place her endorsement on the designs of others. Implicit term is that of his exclusive use of her approval, but she broadcast her favours rather widely - - - def sez; not a K; he doesn't bind himself to anything. But this promise to act on her behalf and market her designs, etc. implied. If he doesn't do the work, she don't get no $. etc.
Leibel v. Raynor Manufacturing Co.
Appellee (Raynor) agreed to sell appellant exclusive dealer-distributorship for its garage doors, hardware, etc. at this price. Mutually exclusive. Raynor cancelled after a couple of years and switched distributorships to Helton Overhead Garage doors, and now appellant would have to buy from them. Appellee sez; we can terminate it at any time; appellant sez; we need reasonable notice. Lower ct decided UCC did not apply in this case + "reasonable" notice not required. This ct sez; nuh uh, we need reasonable notice + the case they used was Buttorff! They shoulda Buttorffed! (b/c that was actually a salesman for cameras etc.) Sales from Manuf. to retailer are sales of goods and fall under UCC. Even w/o formal written agreements, we need a requirement for good faith and fair play to avoid this terminating at will. Ct cites several cases of reasonable notice.
UCC 2-306- qqch about output.
UCC 2-309 Time for shipment if not agreed upon may be a reasonable time, K is for reasonable time, can be terminated at any time, reasonable notification has to be provided for unilateral termination.
Problem 5-2 P435
City condemned parking garage, to pay owner $2.5 mil. Owner had leased ppty to parking garage operator/owner/builder, owner sez; you get zippo. Lease sez; any reference to termination of lease includes by expiration, default, or otherwise,
There was a list of latin terms showing that if you have a list of items, they are interpreted in a similar manner, so otherwise may not apply here. Did the parties include condemnation in their agreement. Parol evidence rule could make it inadmissable.
Interpretation: must show ambiguity. In Corbin J, can present evidence to judge. In Willistonian (4 corners J) judge looks at K on face. If it appears complete on its face, to heck with you and your evidence.
Was it an adhesion K? Did the owner have the oppty to impose terms- look at other leases. Who has more bargaining power?
Could we bring in Promissory Estoppel? 30 year lease- so there may have been reasonable reliance, particularly if garage improved property. (perhaps it was already built, we dunno)
This is not a UCC K, it's not for the sale of goods. Trade usage evidence might be admissable.
Do we have another term of K which deals with destruction of ppty by other means, fire, etc.
Do other people's K's include condemnation clauses, then we might say these people deliberately left it out.
Not all form Ks are adhesion Ks.
IMPLIED OBLIGATION OF GOOD FAITH: one party claims to be acting in accordance w/K but other party sez; Nuh uh.
Not just honesty but general fair dealing, no sneakiness! So: no concealing defect in what you're selling, no failing to perform in full, no abusing bargaining power to get increase in K price, no hiring a broker and then preventing from completing deal, have to mitigate other party's damages, just terminating K for no good reason, harassing other party, etc. Like if I tell someone I'm single- technically true but not true for purposes of dating.
Seidenberg v. Summit Bank.
Pls sold companies to Summit bank and placed shares in escrow to take care of remaining liabilities. Pls agreed to work for Summit as executives of brokerage firms. Pls then alleged that Summit did not work cooperatively with them. They didn't get salary increases, terminated from positions.
Lower ct said: this wasn't a good faith claim; they were seeking enforcement of an oral agreement beyond four corners of written agreement, violating parol evidence rule. AND these folks were no dummies. They coulda had everything written down that they wanted/needed.
This ct sez; well, they shoulda known what they were doing, but that's not determinative. And parol evidence doesn't come into play here 'cos doesn't apply to good faith.
Good faith has three ways:
permits inclusion of terms and conditions not in written contract.
Allows for redress of bad faith even if no express term breached
permits inquiry into a party's exercise of discretion expressly granted by a contract's terms.
We can't override express terms in K w/ good faith
Long boring discussion.
Reversed and remanded to trier of fact
agreement with certain obligations for which some sort of legal enforcement is available if performance is not forthcoming as promised. Can be oral or written agreement between 2 or more persons
Something has to be EXCHANGED- each party has to provide something
a promise is involved
Enforceable
Mutual Assent: Simply agreement by both parties, v. Meeting of the Minds- where both parties had the same things in mind.
Meeting of the minds: Deep understanding of all the terms involved, the actual intention rather than the conduct determines each party's legal obligations.
K not enforceable if: to do sthing illegal, made under duress, or by a minor. (Ks made by minor become enforceable at 18; also enforceable for necessities)
Promises must involve consideration to be enforceable; cannot enforce a promise to make a gift.
Most courts prefer to use mutual assent rather than meeting of minds, b/c it's easier to determine when/how K made.
Intention to be Bound: the Objective Theory of Contract
Ray v. Eurice;
Long complex back and forth contract negotiations; Eurice refused to honour K, Ray sues for breach of K, ct sez; doesn't matter what Eurices THOUGHT they were agreeing to, shoulda read it. Intent doesn't matter.
Offer and Acceptance in Bilateral K: Bilateral: Both parties exchange promises of performance to take place in the future- both parties are both promisors and promisees.
Offer: willingness to enter into K, uses fixed pupose language, requiring no further expression of assent. Offer results in: A) acceptance B) rejection C) if terms are changed, counteroffer D) lapse/revocation
Mailbox rule: acceptance effective as soon as it is dispatched by offeree. Medium of acceptance must be reasonable in circumstances.
Offer/revocation has to be communicated to be effective, but offeror has power over offer to revoke at any time prior to performance.
Offer creates power of acceptance, terminated by: offeree's rejection, revocation by offeror, or death or incapacity.
Lonergan v. Scolnick
Pl alleges that def Scolnick entered into a K agreeing to sell 40 acre tract of land. Def placed ad in paper, lower ct. decided no K. Just an offer. Letters were offer rather than K. Def sold to another person. Ads are invitations to offer, pl made offer, not specific enough to be offer.
Izadi v. Machado Gus Ford Inc.
Pl wanted to buy ford per ad. Was ad a binding offer? Yes, per statute. ct did not like superfine print in ad. Based on what a reasonable person would think, yes, can buy car for that price. If K contradicts itself, then we have to reconcile contradictory terms. Fits into objective theory, would a reasonable person think. Generally advertisements are invitations for offer, not offers.
Normile v. Miller
def miller offered house for sale. Pls Normile completed offer and signed 4 Aug to be completed and signed 5 aug, agent came back with changes to def (which constituted counteroffer) 4 aug. Returned to Pl 4 Aug, did not immediately accept terms. Agent goes to another buyer with similar counteroffer, accepted by def. Pl accepts and returns counteroffer by original deadline
Offeror (def) can change mind and revoke offer at any time. Effective as soon as offeror tells offeree.
Dispatch rule: when did it leave your control (also mailbox rule) then Offer is valid, even if offeror never receives. Telephone messages can be considered deposited acceptance, depending on state.
If you make offer to sell, and several people accept, you have to give other parties notice of revocation. Once you deposit your acceptance, you can't change your mind. Rejection/revocation is effective on receipt so if you call and change your mind, too bad, you've accepted.
Offer and Acceptance in Unilateral K: If offeror offers to exchange promise of future performance for promisee's ACTUAL rendering of performance , unilateral K. Only the promisor is offeror, offeree's rendering of performance is actual acceptance.
Patterson v. Pettberg
Pl was executrix for Patterson, owner of real estate, def held bond executed by pl, (like Mortgage) Def wrote pl, agreed to accept cash for mortgage. BUT def sold mortgage prior to deadline set by def, pl had agreed to sell land, making it necessary to pay off mortgage in full.
Ct sez; unilateral K proposed, gift of promise of reduction of debt in exchange for actual performance of payment in full. But until promisor actually receives payment, can revoke at any time (this was the one where creditor slammed the door in payer's face) Def gave notice to Pl by telling him he had sold the mortgage and therefore offer was withdrawn. So no K made.
Cook v. Coldwell Banker/Frank Lauben Realty
Pl was agent working for Def. Def promised bonus, pl worked very hard to earn bonus, left before bonus awarded. Rule: offeror cannot revoke offer the offeree has accepted by substantial performance- that's the consideration.
True Unilateral Ks
agreement + consideration, meeting of the minds doesn't matter.
Revocation is effective when offeree receives it, can just be reliable information provided by a third party does not have to be direct communication by offeror. Offer has to stay open for a reasonable amount of time, see $36 restatement. Even if K sez offer can't be revoked, it can too.
Other Methods of Reaching Mutual Assent Introduces UCC Article 2-102 transactions in goods.
Harlow & Jones v. Advance Steel
Harlow agreed to sell advance steel 1000 tons steel for shipment Sept-Oct 1974 per phone conversations. Def rejected partially, alleged it didn't come in on time. Was confirmation form sent by Pl an offer accepted by def in mailing back purchase order form? Terms are identical in major particulars. Ct sez; y'all had an oral K as is custom, confirmed by written forms. UCC 2-207 deals with Battle of the Forms
What is Consideration?
Hamer v. Sidway
Uncle promised nevvy $$ if nevvy gave up legal rights to smoking and drinking (bilateral K) Def alleged no consideration, ct sez; that's what uncle wanted and bargained for, was of a detriment to nevvy/asset to uncle, so it's consideration- consideration does not have to be limited to $ or things of tangible value or exchangeable.
Covenant: for breach of K under deed, very formal and official
Action of Debt: formal/informal, must be for specific $
Assumpsit for Breach of Promise (Hairy Hand)
Pennsy Supply v. American Ash Recycling
Pennsy used American Ash's AggRite to pave parking lot, which later collapsed. AggRite is haz. waste, Pennsy must pay $$$ to remove, ask AggRite, which refused. Even though K did not mention Pennsy's removal/disposal of AggRite as consideration, it still is b/c Agg Rite got consideration by not having to remove/dispose of it themselves. This not having to remove/dispose of it was part of the 'Quid pro Quo" of agreement. Also Implied Warranty claims: AggRite gave away this stuff as being suitable for Pennsy's purposes which it turned out not to be.
Bargain theory: I'll do something for you if you do something for me, doesn't have to be express, no negotiation required.
Condition for a gift not consideration, example of if you walk round to store, they will give you overcoat- normal process of acceptance, giftee doesn't give up anything to accept gift.
Applying the Consideration Doctrine
Dougherty v. Salt
Aunt promised boy $3000, ct decided, not a K, no consideration from boy, unenforceable promise of executory gift. Past consideration (because you've done qqch in the past, I'll give you something in the future, is not consideration) Aunt coulda gotten round this by Will, Trust, or Gift Now.
Batsakis v. Demotsis
Pl sued def to recover $2k lent during war. def returned to Pl $25, value now of money lent then. Ct decided, you promised to pay $2000, even if you only received $25, that's what you promised and bargained for. Does not have to be "fair" or "equivalent value" Can't pick and choose terms in K to enforce, either the whole thing's good, or the whole thing's crap. Nominal consideration (I'll sell Mitch Caravan for $1) not true consideration, b/c not bargained for and I don't care if I get $1 or not. Deal not enforceable.
Illusory promise- performance optional with the promisor- makes it difficult to enforce, output K, I'll buy however many you make, is difficult, also requirement K, I'll buy every widget I need from you, difficult. Most common application is at will, promisor reserves the right to terminate w/o notice to promisee.
Plowman v. Indian Refining Co.
Pl sez; they made a K to pay pensions and they didn't. Def sez, no consideration. Ct sez. Sadly, moral obligation is not consideration. Also Agency problem, the person making the K didn't have the authority to make it. Actual authority is communication from principal to agent, apparent Authority is from principal to 3rd party.
Issues in Applying the Concept of Mutual Assent
Limiting the offeror's power to Revoke, the Effect of Pre-Acceptance Reliance
Offer is revocable unless and until accepted by offeree, even if offer states it can't be revoked. Offeree only accepts through full performance. If offeree gives offeror $ to hold offer open, it's an option K and irrevocable.
Promissory Estoppel: perhaps I didn't have a K but I believe in a promise and rely on it in some way to my detriment, I have to do/not do qqch. If injustice can be avoided only by enforcement of the promise, we have promissory estoppel and promise is binding. Damages more limited than in K.
Four elements: There must be a promise
Promisor expects reliance, or should reasonably have expected reliance
Promisee does rely within reason on promise
Detriment
Executory promise: one that runs into the future.
James Baird v. Gimbel bros.
Gimbel makes offer to put linoleum in PA hwy dept for Baird, then discovers error on sheet sent to a bunch of contractors. Tries to revoke but Baird has accepted. Baird relied on Gimbel so that's promissory estoppel. BUT ct sez; well, Baird's not BOUND to use Gimbel, so why should Gimbel be bound to Baird? If pl had repudiated K to build after it had been awarded, def could not sue. There wasn't acceptance, so not really applicable here.
Drennan v. Star Paving
Drennan submitted bid to build school, star paving submitted bid via form, def immediately said wanted twice as much, Pl had to find someone else. Def's bid induced action on part of promisee, so we have promissory estoppel. Def argued honest mistake, ct did not buy, actual harm here shown. (this is more current, cts more likely nowadays to find promissory estoppel)
Star has an obligation to make Drennan whole, so promissory estoppel found.
Berryman v. Kmoch
Kmoch wanted to buy land from Berryman, came up w/option K, but never activated option or provided consideration for option. Kmoch alleges, other valuable consideration for time & expenses to survey it or something. Ct sez, to hell with you and your other valuable consideration, it is NOT.
Pop's Cones v. Resorts International Hotel
Resorts promised Pop's Cones they could move in, then lent premises to another, Pop's Cones sues and wins. They lost the business from '94-'96, can get that. Much more difficult to prove what they would have gained from moving into promised spot (expectation damages)- some cts allow, some don't. Previous cts required "clear and definite promise" this ct abolishes that. Expression of intent does not equal promise. Cts also look at sophistication of the parties involved.
Irrevocability by Statute: The "Firm Offer"
Qualified Acceptance: The "battle of Forms"
Is it a UCC (goods) K?
Are the terms add'l- one party has added qqch or are they different- one party sez red other party sez blue?
What are the documents? Offer, counteroffer, acceptance, confirmation? Are both of the parties merchants? Is something expressly conditional? Is there a material alteration?
How do you tell if it's an offer or acceptance? an offer is typically on the buyer's form, an acceptance is typically on the seller's form.
If: additional terms in acceptance- if merchants, go through 2-207-2, if not, add'l terms drop out.
Add'l terms in confirmation? If merchants, go through 2-207-2, if not, add'l terms drop out
Add'l terms in offer? Offeror wins (last shot) Acceptance acts as acceptance of all terms unless the offeree expressly objects
Different terms in confirmations, different terms drop out under Comment 6 "knockout rule"
Different terms in acceptance, cts/jurisdictions differ. Some think both terms drop out unter comment 6, some think offeror wins under 2-207-1b/c comment 6 is for confirmations, not acceptances, Or both may drop out under 2-207-2c and comment 3
If the terms are so different that 2nd form is not an acceptance but a counteroffer, no K. If the parties perform, 2-207-3 determines the terms. The UCC provisions on Usage of trade, course of dealing, etc, are applicable.
Expressly conditional offer- 2-207-2-a
Offer sez; my terms 1, 2, and 3 and no others
Acceptance adds term 4
There are two possibilities, K is formed but additional term drops out under 2-207-2-a and C, or, No K if first form precludes acceptance w/ suggested add'l terms. Can't have an expressly conditional confirmation- an oral K has already been formed, and it can't be unilaterally modified
Expressly conditional counteroffer - 2-207-1
Offer, my terms 1, 2, and 3
Acceptance all of the above and expressly conditional on term 4 as well.
No K unless offeror expressly consents. Conduct may form a K but is generally not sufficient to imply acceptance of the add'l terms. If there is performance use 2-207-3
Princess Cruises v. General Electric
K btw. Princess Cruises and GE for repair (not goods= not UCC) of a ship. Pl made purchase order to have ship serviced as an offer, can be accepted through acknowledgment or performance, GE to provide warranty. GE returned erroneous/incomplete price quotation, then revised (now a counteroffer), rejected terms and conditions in Princess' PO. Princess accepted by telephone, now it's a K. Problems after GE does maintenance, Princess sues GE for $$$ including time ship was out of commission. This is admiralty law about services and falls out of UCC. Ct sez: Princess accepted GE's counteroffer including terms limiting liability so damages are limited. An acceptance that varies the terms of an offer is a counteroffer which rejects the original offer. Manifestation can be express or implied by non-action, here Princess did not act in response.
Last shot rule, person (typically seller) who sends last shot-last form- dictates terms of accepted K under common law. (old, superseded by UCC as applicable)
Mirror Image Rule: if it sez it's an acceptance but contains changes, it's a counter offer. (old, superseded by UCC as applicable)
If you write back and accept, you accept original terms even if you make changes, unless acceptance is conditioned on those different terms
Brown Machine v. Hercules, Inc
Brown sold Hercules a machine for making Cool Whip bowls, part of k sez; buyer will pay on behalf of Brown all injury claims arising from machine (indemnification clause)
Hercules returns P.O. with their own terms, seller accepts these terms by 2nd machine order, therefore leaving out the indemnification clause. Brown's original submission was a price quotation and an offer to enter into negotiations. Per Brown's language, Brown has to receive offer and accept. Brown's original offer wasn't accepted in timely manner, either. Hercules' P.O. is offer and accepted by Brown.
UCC 2-207: rejects strict "mirror image" rule, a definite and seasonable expression of acceptance is an acceptance even though it states terms add'l to or different from those offered.
2-207 (2) Add'l terms will be added to K btw merchants
Unless offer expressly limits acceptance to offer terms
Unless it's materially altered- and nearly everything materially alters it- look at comments 4 and 5 under 2-207 to see.
Cts can look at usage of trade, does this cause "surprise and hardship"
Notification of objection has been given or is given w/in a reasonable time after notice is received
Conduct is sufficient to establish K.
Offeree's response to an offer constitutes valid acceptance even if different terms.
Postponed Bargaining, the Agreement to Agree
Sometimes parties agree on certain key terms and leave some out to agree on them later or there may be an unresolved conflict btw. terms.
Walker v. Keith
Walkers leased land to Keiths for 10 years at 100/mo. Option to renew, parties could not agree on rent, lower ct decided on amount, this ct sez, too vague, there's no way to determine the rent, An agreement to agree is not a binding K. They didn't agree on essential term, so no K.
Quake Construction Inc v. American Airlines, Inc.
American hired another contractor who in turn hired Quake, Jones sent quake a letter confirming a K was to be sent with specifics, included price and some details
Was letter of intent an enforceable K? Depends on parties' intent. b/c work was to start shortly after letter, they intended to be bound. There was a cancellation clause. We need to remand to find what parties intended exactly.
Agreement to agree, we've decided on ABC now we consider how to get to DEF.
Formal contract- contemplated execution of formal written K.
Electronic Contracting
Shrinkwrap terms: purchaser orders product, wrapped in contract terms, use of product constitutes your agreement with those terms. If you don't accept must return product within X days.
Clickwrap terms: before completing purchase, purchaser must scroll through terms of sale and click I agree.
Browsewrap terms: available on site but you don't have to click to agree; you agree merely by browsing the site.
Brower v. Gateway 2000 Inc.
Sued Gateway after Gateway did not provide guaranteed support. There was an arbitration clause in the agreement, Inconvenient and impossible to do. Ct sez; arbitration clause not material alteration of K, just one part. K acceptance happened when customers kept it beyond 30 days. Doesn't count as adhesion K because consumer could buy alternate product. But because arbitration may not be feasible/sensible, we will decide to take it to U.S.
In cases like this purchaser does not make offer, vendor does by shipping product. (not always the rule; sometimes buyer is offeror depending on jurisd) see UCC 2-314
Unconscionable- could be procedurally- buried in fine print, hidden from notice or unavoidable
or substantively- unreasonably favours one party- going to Chicago not enough, but excessive costs are.
Register. com Inc v. Verio
Register issues domain names to people through ICANN agreement, Verio accessed Register's public domain info for marketing purposes. Icann sez; we should handle this internally, Verio sez; Register can't prevent us from accessing this public info, that's a breach of K with Icann. Register had browsewrap K that you wouldn't reuse this information for sales/mkting. Verio received K terms after accessing data and sez, we shouldn't be bound, but ct sez, you did it too many times and too frequently. It is not necessary to click I agree to agree.
Other theories of restitution: Promissory Estoppel and restitution
Promissory Estoppel: perhaps I didn't have a K but I believe in a promise and rely on it in some way to my detriment, I have to do/not do qqch. If injustice can be avoided only by enforcement of the promise, we have promissory estoppel and promise is binding. Damages more limited than in K.
Four elements: There must be a promise
Promisor expects reliance, or should reasonably have expected reliance
Promisee does rely within reason on promise
Detriment
Promises within the Family
Kirksey v. Kirksey
Pl def's sister in law. Def invited Pl to live w/him after brother dies. She left her land and moved to house of def, who put her up and then wanted her to move away and then leave. Verdict from lower ct for pl. Inconvenience pl endured not considered to be consideration.
Greiner v. Greiner
Pl (at behest of evil son) seeks to reclaim land from one son. Frank moves from wherever he is back to Mom's land at her behest, she moves house onto land, her statement of intention that I'm going to give you the house can be considered K b/c there was consideration in Frank's moving. and Frank had possession.
Wright v. Newman
Newman sued for child support against Wright, who was not the father of her children, but promised to pay, so this somehow stopped Newman from seeking the actual father of her children- court invokes Promissory estoppel. & makes him pay
Charitable Subscriptions
King v. Trustees of Boston University
King wants papers back after Dr had made a charitable pledge of these papers to University. Charitable pledge is not a K. there's no exchange or consideration. A bailment was established with King as bailor and BU as bailee. Promises of gifts, again, not enforceable
Promises in a Commercial Context
Katz v. Danny Dare, Inc.
Pl wanted pention payments from Danny Dare. B/c of injury he was strongly suggested to retire. there was a promise of a pension, was there detrimental reliance? He gave up his earnings. Injustice can only be avoided by enforcement- yes, so if you've relied on the promise, they must pay.
Shoemaker v. Commonwealth Bank
Mortgagor, obligated by a mortgage to obtain insurance can establish a cause of action in promissory estoppel, yes.
Third theory: Restitution: Liability for Benefits Received; unjust enrichment
Restitution in the Absence of a Promise: not a K at all but legally enforceable obligation. Like if Fulton County gives me extra 0 in check, it's not a K, not promissory estoppel, (there's no promise) but I'm obligated to repay.
Credit Bureau Enterprises, Inc. v. Pelo
Pelo all crazy, gets committed, sez I won't pay 'cos I didn't agree to it. Ct decided he received property or benefits w/o making compensation, so he must pay.
$116
a person who has supplied things or services to another, although acting w/o the other's knowledge or consent, is entitled to restitution therefore from the other if
(a) he acted unofficiously and with intent to charge therefore
(b) the things or services were necessary to prevent the other from suffering serious bodily harm or pain
(c) the person supplying them had no reason to know that the other would not consent to receiving them, if mentally competent
(d) it was impossible for the other to give consent or, because of extreme youth or mental impairment, the other's consent would have been immaterial.
Commerce Partnership 8098 Limited Partnership v. Equity Contracting co.
Commerce owned office building, hired contractor World who hired Equity, Equity didn't get paid by World so sued Commerce- alleging unjust enrichment. commerce had paid World. If Commerce had indeed paid world, Commerce hasn't been unjustly enriched.
Quasi K- Pl conferred benefit on def.
Def has knowledge of benefit
Def has accepted or retained the benefit conferred
it would be inequitable for def to retain the benefit w/o paying fair value.
VERSUS
Contract implied in fact, a person performs services at another ' request, or w/o request but w/knowledge and under presumption that person understood they had to pay.
Promise + consideration+breach=damages=claim for promised benefit/damages
Promise, implied/express + reasonable reliance+ detriment= damages more limited than in K
Restitution Pl conferred benefit on def+ def aware of benefit+ def accepted
Damages based on fair value.
Watts v. Watts
Pl and def cohabited for many years, she wants equitable division of property after separation. There's an express/implied K to share property. unjust enrichment works
Note: family member rendering services for aged, infirm, incapacitated family member all gratuitous. but cts can find exceptions
Promissory Restitution
Mills v. Wyman
Pl cared for def's son, def wrote letter promising to pay. verbal promises cannot be enforced, no consideration.
Webb v. McGowin
Webb drops 75 lb block of wood from upper story, about to drop it on McGowin, webb fell w/block, crippled for life. McGowin agrees to pay Webb $15 biweekly for remainder of Webb's life, does until death. Ct decides this is valid and enforceable K because there was consideration- McGowin's life saved, Webb's detriment injured for life
Material Benefit Rule: if a person receives a material benefit from another, other than gratuitously, a subsequent promise to compensate the person for rendering such benefit is enforceable.
Past consideration doesn't make a K.
Principles of Interpretation and the Parol Evidence Rule
Implied Terms, the Obligation of Good Faith, and Warranties
promise + consideration + failure to comply = not enforceable
Promise + no consideration + compliance = not enforceable.
Statute of Frauds Restatement 110, 137, 133
Promise + no consideration+ compliance= not enforceable
Promise+ consideration+ noncompliance= unenforceable.
Some Ks have to be written down to be enforceable.
UCC 2-201, over $5K,
Contracts for the sale of land or for an interest in land
Contracts that can't be performed within a year, either performance is longer than a year, or- I reserve cabin for Feb 2009, won't happen within a year. If it's POSSIBLE to perform within a year, statute doesn't apply.
Writing must identify the parties and nature of the exchange and must set out all or at least most of the material terms.
2-201-2,
writing can be enforced against non signing party if-
Both parties are merchants
Within a reasonable time of the oral K, one of the parties sends a written confirmation to the other, signed by the sender, satisfies statute against sender
recipient has a reason to know of the contents
And fails to object within 10 days of receipt.
Also Suretyship- that cosigning thing
Executor's agreement to answer for the duty of a decedent
Contract made on consideration of marriage
Does K fall under statute? If no, oral K is enforceable, if yes, is K reflected in a writing that satisfies the statute? If so, then K is enforceable, if not, then does the case fall within one fo the exceptions to the statute that permit enforcement despite non-compliance? (performance or reliance by the plaintiff) if so, K is enforceable, if not, K is unenforceable.
Only party against whom enforcement is sought need have signed it.
UCC provision 2-201 provides that contracts in excess of $5000 be evidenced in writing.
Statute of Frauds requires K be in writing. Remember memoranda etc. can work.
Also does not apply to prior condition on which K performance is contingent- basically, I can introduce evidence that I told Dave, yes, I'll buy house and sign K if I sell my house.
Crabtree v. Elizabeth Arden. offered K w/detailed terms, accepted, they didn't fulfill K. EA sez; can't enforce K 'cos it wasn't in writing. Nuh-uh sez ct, and puts together memoranda to show there was writing to confirm K.
Winternitz v. Summit Hills Joint Venture
sued for breaching K, def said, no K according to statute of frauds- jury gave
Winternitz owned pharmacy, sold to Suhs, Summit Hills refused to honour lease to Suhs. Def sez, you didn't have a K 'cos of statute of frauds, Pl sez, no we partially performed. K exists but is unenforceable- LL didn't sign, so not under statute of frauds. Pl only gets judgment for ll's malicious interference with contract.
If you say you'll put it in writing, but never actually do, that's fraud.
A written denial of contract, if sufficiently detailed, can constitute K.
Is K within statute?
Is there a sufficient writing w/signature (any authenticating mark, can include stationery)
Is there an exception to the statute which will permit enforcement anyway?
Alaska Democratic Party v. Rice
Rice offered oral 2 year K to be Alaska Democratic Party Executive Director. Because she relied on this, promissory estoppel is invoked within Statute of Frauds.
The Sale of Goods Statute of Frauds
Buffaloe v. Hart
Pl rented from defendants orally 5 roanoke barns, then he wanted to buy them, and then resell them. Is check for partial payment sufficient under statute of frauds? Does it 1) contain a writing sufficient to indicate a contract of sale between the parties 2) is signed by the party or his authorised agent against whom enforcement is sought 3) states a quantity. No, Defendants didn't endorse the check. BUT there was partial performance- by buyer, as evidenced by check, so excepted under Statute of frauds.
Principles of Interpretation
Joyner v. Adams
Must finish all development by Sept 1980 or be subject to a retroactive rent increase. sept '80 everything was done except for one parcel, issue here is what "developed" means. Joyner sez; w/buildings, Adams sez; ready for development. See list of terms 358-359 for use on exam.
vague and ambiguous terms in K generally construed against drafter.
If parties attached different meanings to K terms, innocent party prevails.
Ex: I win Lottery, I decide to buy GNX, go in see GNX, when it comes in, it's a GN. Dealer can add the price difference, but I probably asked for the GNX and meant it, 2-313. and should get it. If sample model shown is intended to be representative of eventual purchase, that's what you have to get.
If I call the consignment shop to buy "peter the Kitty" for $250 and go in and then it's a different painting, then there's no agreement so no K.
Frigaliment Importing Co. v. BNS International Sales Co.
What is Chicken? One of them wanted Brathuhn and got Suppenhuhn. K just said chicken. There is a gap in parties' understanding, meaning that pl has to prove that their interpretation is correct. Expert witnesses to establish usage of trade, they say, chicken = chicken and we generally specify what we want.
Objective approach: what the reasonable person would conclude based on reading K.
We look at who drafted the K, and generally resolve terms against drafter. Or, if one party has reason to know or knows what the other party means by certain language and the other party does NOT know or have reason to know of the meaning attached to the disputed language by the first party, the court will enforce the K in accordance with the innocent party's meaning.
1-205, 2-208 course of performance, can establish pattern away from terms and change K. Course of performance is single K with repeated opportunities for performance,
Course of dealings is series of Ks between parties
Usage of trade, how does this industry do things.
2-208 What happens if express terms in K are not in agreement w/usage of trade? K prevails.
Handwritten terms overrule express terms overrule preprinted terms overrule course of performance overrule course of dealing overrule usage of trade.
Consider: language of K, Preliminary negotiations, usage of trade, regulations
C & J Fertilizer v. Allied Mutual Insurance Co.
C & J burglarised, allied said, to pay requires visible marks. (to prevent an inside job)
Ct sez; reasonable expectations lead insured to believe this is covered.
Adhesion K.
The parol Evidence Rule; Restatement 209-218, UCC 2-202
Is document intended to be final expression of parties agreement, or is it only partially integrated?
Only applies to written agreements.
Parol Evidence: If it contradicts written K, add'l evidence not admissible. Four corners approach v. Corbin approach (let judge decide based on evidence presented by both sides what K means, what parties meant, and what K sez to see if its ambiguous- let judge hear whatever evidence necessary to interpret or determine whether K is fully integrated). If it's integrated, it's final and complete, if it's partially integrated, add'l evidence can supplement terms but not contradict. Know exceptions 390-391
Does not apply to evidence explaining meaning of agreement. Does not apply to agreements made after the execution of the writing.
Does not apply to evidence offered to show that effectiveness was subject to an oral condition precedent.
Does not apply if evidence shows that K is not a K b/c of fraud, duress, undue influence- fraud is narrowly interpreted.
fraud in inducement- if I tell you qqch contradicted by written agreement, like you get GNX instead of GN- not always admissible
Doesn't apply to evidence offered to establish an equitable remedy such as reformation of the K- suppose we are negotiating back and fortha nd accidentally a paragraph is left out, that evidence can be admitted.
Does not apply to evidence introduced to establish a collateral agreement btw. the parties.
Reliance is not a good exception to Parol Evidence, it's unreasonable to rely on promise contradicted by writing.
Thompson v. Libby
Libby buys logs per written agreement, later claims they are not high enough quality per oral agreement outside of written K, ct sez, can't bring that stuff in, this is complete on its face. Parol evidence doesn't exclude evidence of matters collateral to the subject of written agreement, so this could be collateral, but normally a warranty of quality isn't collateral.
Parol evidence doesn't apply to: If evidence shows that the K is not valid because of fraud, duress, undue influence, incapacity, mistake, or illegality. - mistake, if both I and Ron think it's a turbo 6 but it's an 8. Fraud does not include fraud in inducement, as in, we'll write agreement for term x but orally agree to y. (like we'll write this for tax purposes but orally agree to another price)
Doesn't apply to agreements, oral or written, made AFTER the execution of the writing.
Doesn't apply to evidence offered to show that effectiveness of the agreement was subject to an oral condition precedent- (Dave I'll buy the Biltmore if I can sell my house first)
Parol Evidence rule does not apply to evidence offered to establish an equitable remedy such as reformation of the K.
If we're negotiating back and forth and the secretary accidentally leaves out an important paragraph, we can admit into evidence
Does not apply to evidence introduced to establish a "collateral" agreement btw. the parties (an agreement alongside 1st agreement)
Reliance is Not a good exception to Parol Evidence. It's unreasonable to rely on promise contradicted by writing.
Taylor v. State Farm Ins. Bad Faith claim.
Taylor signed a release agreeing to $15K of uninsured motorist coverage, after car accident he owed $2.5 mil. Ct decided that language of release was ambiguous and used Corbin approach. We can interpret it but not contradict it.
Ct decided: Release language IS subject to differing interpretations.
Extrinsic Evidence DOES support Taylor's claim/interpretation.
Was release a K? Yes, there are promises as well as consideration. Release is valid, but doesn't work against bad faith failure to pay. Release Might be a final, fully integrated K.
Is evidence related to matters that occured at or before K's signing?
Does K contain merger clause?
Does K appear to be complete on its face? (If 4 corners jurisdiction, add'l evidence thrown out)
Does the evidence contradict the writing?
Does it supplement the writing?
Does evidence explain or help interpret the writing, is K ambiguous on its face?
Does your evidence suggest that the writing accidentally failed to state your deal?
Does evidence show that K only effective subject to a condition precedent?
Does evidence indicate that written doc is invalid for some reason?
Does evidence indicate that after K executed there were some changes negotiated?
Sherrod v. Morrison Knudsen: Sherrod claims that Morrison Knudsen hired them to move whatever earth was needed to be moved, much more than K'd for, they promised to work qqch out, and didn't parol evidence rule disallows all evidence of fraud, etc. b/c directly contradicts terms of K.
Nanakuli Paving & Rock v. Shell Oil Co.
Nanakuli filed breach of K against Shell for raising price of asphalt. nanakuli points to other suppliers protecting price, that's custom. Jury ruled for Nanakuli, then judgment n.o.v. for shell, now overturned (for Nanakuli).
Nanakuli argues for custom, so it was assumed to be in there; contract is for market price as written. Previously, Shell had protected Nantakuli from price increases.
2nd theory: Shell obligated to price protect Nantakuli 'cos how business is done - makes it a good faith requirement.
Shell sez: can't bring in suppliers of materials other than asphalt for evidence of custom.
Other instances were waivers of terms of K.
Actual written terms in K control, not these other things.
Ct sez: shell acted out of step with trade usage and commercially reasonable practices and previous agreement/treatment of Nantakuli.
We need to look at :breadth of trade, was it the hawaiian paving trade or just purchase/sale of asphalt.
Were price protections waivers or course of performance of K?
3rd thing:
4th did good faith oblige Shell to at least give advance notice of price increase?
UCC in Hawaii sez usages of trade extend to how it's done in Oahu, not just for asphalt suppliers.
Sherrod v. Morrison Knudsen
Parol Evidence rule disallows this case; Sherrod claims fraud cos MK wanted it to move "all dirt needed" for price X, estimated at Y, turned out to be three times as much, so then MK said, we'll work it out and they didn't so Sherrod took them to ct. There's a merger clause in K. Can't talk about fraud b/c doesn't directly relate to terms of K.
Supplementing the K: Implied Terms, the Obligation of Good Faith, and Warranties
Implied in fact: not stated but implied by the parties themselves.
Implied in law: agreed to through rules of law although not in agreement. Can come from: statute, common law, or ct decision.
Wood v. Lucy, Lady Duff-Gordon
Lady Duff-gordon's special term motion for s. J granted. Wood appealed.
She is fashion designer, he contracted w/her exclusively to produce/market her fashions as well as place her endorsement on the designs of others. Implicit term is that of his exclusive use of her approval, but she broadcast her favours rather widely - - - def sez; not a K; he doesn't bind himself to anything. But this promise to act on her behalf and market her designs, etc. implied. If he doesn't do the work, she don't get no $. etc.
Leibel v. Raynor Manufacturing Co.
Appellee (Raynor) agreed to sell appellant exclusive dealer-distributorship for its garage doors, hardware, etc. at this price. Mutually exclusive. Raynor cancelled after a couple of years and switched distributorships to Helton Overhead Garage doors, and now appellant would have to buy from them. Appellee sez; we can terminate it at any time; appellant sez; we need reasonable notice. Lower ct decided UCC did not apply in this case + "reasonable" notice not required. This ct sez; nuh uh, we need reasonable notice + the case they used was Buttorff! They shoulda Buttorffed! (b/c that was actually a salesman for cameras etc.) Sales from Manuf. to retailer are sales of goods and fall under UCC. Even w/o formal written agreements, we need a requirement for good faith and fair play to avoid this terminating at will. Ct cites several cases of reasonable notice.
UCC 2-306- qqch about output.
UCC 2-309 Time for shipment if not agreed upon may be a reasonable time, K is for reasonable time, can be terminated at any time, reasonable notification has to be provided for unilateral termination.
Problem 5-2 P435
City condemned parking garage, to pay owner $2.5 mil. Owner had leased ppty to parking garage operator/owner/builder, owner sez; you get zippo. Lease sez; any reference to termination of lease includes by expiration, default, or otherwise,
There was a list of latin terms showing that if you have a list of items, they are interpreted in a similar manner, so otherwise may not apply here. Did the parties include condemnation in their agreement. Parol evidence rule could make it inadmissable.
Interpretation: must show ambiguity. In Corbin J, can present evidence to judge. In Willistonian (4 corners J) judge looks at K on face. If it appears complete on its face, to heck with you and your evidence.
Was it an adhesion K? Did the owner have the oppty to impose terms- look at other leases. Who has more bargaining power?
Could we bring in Promissory Estoppel? 30 year lease- so there may have been reasonable reliance, particularly if garage improved property. (perhaps it was already built, we dunno)
This is not a UCC K, it's not for the sale of goods. Trade usage evidence might be admissable.
Do we have another term of K which deals with destruction of ppty by other means, fire, etc.
Do other people's K's include condemnation clauses, then we might say these people deliberately left it out.
Not all form Ks are adhesion Ks.
IMPLIED OBLIGATION OF GOOD FAITH: one party claims to be acting in accordance w/K but other party sez; Nuh uh.
Not just honesty but general fair dealing, no sneakiness! So: no concealing defect in what you're selling, no failing to perform in full, no abusing bargaining power to get increase in K price, no hiring a broker and then preventing from completing deal, have to mitigate other party's damages, just terminating K for no good reason, harassing other party, etc. Like if I tell someone I'm single- technically true but not true for purposes of dating.
Seidenberg v. Summit Bank.
Pls sold companies to Summit bank and placed shares in escrow to take care of remaining liabilities. Pls agreed to work for Summit as executives of brokerage firms. Pls then alleged that Summit did not work cooperatively with them. They didn't get salary increases, terminated from positions.
Lower ct said: this wasn't a good faith claim; they were seeking enforcement of an oral agreement beyond four corners of written agreement, violating parol evidence rule. AND these folks were no dummies. They coulda had everything written down that they wanted/needed.
This ct sez; well, they shoulda known what they were doing, but that's not determinative. And parol evidence doesn't come into play here 'cos doesn't apply to good faith.
Good faith has three ways:
permits inclusion of terms and conditions not in written contract.
Allows for redress of bad faith even if no express term breached
permits inquiry into a party's exercise of discretion expressly granted by a contract's terms.
We can't override express terms in K w/ good faith
Long boring discussion.
Reversed and remanded to trier of fact
Morin Building v. Baystone Construction
GM hired Baystone hired Morin to build Chevy plant, Morin installed siding that GM found unsatisfactory artistic effect. Morin sued Baystone when not paid, affirmed.
Issue was jury instruction, can we say that satisfaction has to meet an objective standard- not whether the owner WAS satisfied but whether they SHOULD have been satisfied?
Two standards for satisfaction, subjective, only if explicitly mentioned in K, and in this case, artistic effect mentioned as "if w/in terms of K Document" so ct said, nope, they didn't expressly state subjective test, per restatement we prefer to use objective test NEwa. so judgment for Morin affirmed.
Locke v. Warner Bros.
WB writes Locke K to make movies to get her off Eastwood's back. WB won't make her movies. She sues for Good Faith Lower ct sez; WB had artistic discretion for WB, this ct sez; yah but they still could be in bad faith per other execs statements.
Donahue v. FedEx. Donahue discovered much wrongdoing by supervisor, fake invoices, etc, fired. Appeals, citing FedEx's Guaranteeed Fair Treatment Procedure. Ct. sez; good faith applies to K part of employer-employee relationship. D is at will employee, so no K. GFTP expressly states; not a K
Whistle blower firing by private employer A-Ok by us. Additional consideration by employee, moving etc., can overcome at will status, but it's not present here.
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