1/15/14 6:37 PM

ConLracL Law ollcy

redlcLablllLy - encourages people Lo enLer lnLo conLracLs secure ln Lhe knowledge
LhaL Lhose conLracLs wlll be enforced
lreedom of ConLracL - promoLes Lhe assumpLlon by emphaslzlng LhaL we have Lhe
freedom Lo make whaLever conLracLs we choose Lo make
lalrness - when parLles belleve Lhe legal sysLem wlll LreaL Lhem falrly, Lhey are more
llkely Lo enLer conLracLs
Lfflclency - promoLes our markeL economy by encouraglng conLracLual exchange
uCC - governs sale of goods
Common Law - resLaLemenLs (non goods)
ConLracL lormaLlon
MuLual AssenL
o 1he formaLlon of a conLracL requlres a bargaln ln whlch Lhere ls a
manlfesLaLlon of muLual assenL.and a conslderaLlon." 8.2d 17
!"#$ &' ()*+),
o 8uLL: lf hls words and acLs, [udged by a reasonable sLandard, manlfesL an
lnLenLlon Lo agree, lL ls lmmaLerlal whaL may be Lhe real, buL unexpressed,
sLaLe of mlnd.
Cffer
An offer ls Lhe manlfesLaLlon of wllllngness Lo enLer lnLo a bargaln so made as Lo
[usLlfy anoLher person ln undersLandlng LhaL hls assenL Lo a bargaln ls lnvlLed and
wlll conclude lL." 8.2d 24
8equlremenLs of an Cffer
CommunlcaLed
ueslre Lo enLer lnLo a blndlng agreemenL
ulrecLed aL some person or group (dlfferenL from ads, clrculars, mallers)
lnvlLlng accepLance
CreaLlng Lhe reasonable undersLandlng LhaL upon accepLance a conLracL wlll form
CerLalnLy of Lerms
C: CuanLlLy
1: 1lme for performance
ConLracLs CuLllne - rofessor lranklln
2

: arLles Lo Lhe conLracL
: rlce
: lace for performance
S: Sub[ecL maLLer

8.2d 33 - Lhe facL LhaL one or more Lerms of a proposed bargaln are lefL open or
uncerLaln may show LhaL a manlfesLaLlon of lnLenLlon ls noL lnLended Lo be
undersLood as an offer or as an accepLance."
uCC 2-204

!)-./0123 &' 4,)52 6177)58/91: ;",89": ;2/,)
o 8uLL: Where Lhe offer ls clear, deflnlLe, and expllclL, and leaves noLhlng
open for negoLlaLlon, lL consLlLuLes an offer, accepLance of whlch wlll
compleLe Lhe conLracL."

Ads, Clrculars - lnvlLaLlons for offers - nelLher a speclflc offer nor speclflc quanLlLy -
Lhey lack Lhe requlslLe cerLalnLy of Lerms
CuoLes - anybody could come ln and accepL lL unless lL's made Lo a large group and
Lherefore ls noL an offer (rlsk every Llme you glve quoLe)
LeLLers of lnLenL - a documenL, Lyplcally slgned by boLh parLles, LhaL purporLs Lo
communlcaLe Lhe parLles' parLlal compleLlon of (progress Lowards) a conLracL (;2/,)
<,/8),21): &' =)59)
o arLles are seeklng Lo blnd each oLher, yeL keep Lhemselves free Lo wlLhdraw.
8ecomes a conLracL when ln dolng so Lhe parLles cross Lhe llne.
negllgence (rellmlnary negoLlaLlons) - a manlfesLaLlon of wllllngness Lo enLer lnLo a
bargaln ls noL an offer lf Lhe person Lo whom lL ls addressed knows or has reason Lo
know LhaL Lhe person maklng lL does noL lnLend Lo conclude a bargaln unLll he has
Lhus made a furLher manlfesLaLlon of assenL. 8.2d 26
8equesLs for 8lds - general conLracL seeks blds from subconLracLors, Lhe Ceneral
ConLracLor's requesL for blds ls an lnvlLaLlon for offers. 1he subconLracLors' blds are
consldered offers.
ConLracLs CuLllne - rofessor lranklln
3

AccepLance
AccepLance of an offer ls a manlfesLaLlon of assenL Lo Lhe Lerms Lhereof made by
Lhe offeree ln a manner lnvlLed or requlred by Lhe offer." 8.2d 30(1)
8equlremenLs of AccepLance
ManlfesLaLlon
1o Lhe Lerms of Lhe offer
8y Lhe offeree
ln a manner lnvlLed or requlred by Lhe offer

Cfferor ls Lhe MasLer of Lhe Cffer - (>"3+):.": &' <1#."8 6/2/, ?/')

Mode of AccepLance where noL speclfled ln offer: lf Lhe offer does 7/2 :8)#1-$ Lhe
mode of accepLance, Lhe accepLance may be glven 17 57$ +577), @$ 57$ +)A1"+
,)5:/75@9) 17 2*) #1,#"+:257#):." 8.2d 30(2)
lf offer does noL make clear wheLher accepLance ls Lo occur Lhrough a promlse or
Lhrough performance, Lhe offer ls lnLerpreLed as lnvlLlng Lhe offeree Lo accepL
)12*), by promlslng Lo perform whaL Lhe offer requesLs or by renderlng
performance, as Lhe offeree chooses." 8.2d 32
Manner of AccepLance:
o knowledge - unless Cfferor manlfesLs a conLrary lnLenLlon, an offeree who
learns of an offer afLer he has rendered parL of performance requesLed may
accepL by compleLlng Lhe requesLed performance. 8.2d 31
o unllaLeral - AccepLance ln form of performance. 8.2d 33 (unllaLeral offer
43)
! lf accepLed by performance, Lhe offeree +":2 B1&) 2*) /--),/, 7/21#)
LhaL he has performed (noL LhaL he's golng Lo perform), unless Lhe
offeror has reason Lo know of Lhe performance. 8.2d 34, uCC 2-
206(2)
" ollcy: 1hls noLlce requlremenL proLecLs Lhe offeror from
belng bound lndeflnlLely by an accepLance of whlch he ls
unaware.
ConLracLs CuLllne - rofessor lranklln
4

o 8llaLeral - AccepLance ln form of promlse. 8.2d 30 (C5&1: &' D5#/@$)
o Sllence - see 8.2d 69(1)(b) - where Lhe offeror has glven Lhe offeree ,)5:/7
2/ "7A),:257A 2*52 :19)7#) 0199 #/7:212"2) 5##)8257#), Lhe sllence or lnacLlon
of Lhe offeree wlll operaLe as an accepLance 1- he sub[ecLlvely lnLends Lo be
bound
! 8ules:
" lf offer ls sllenL / suggesLs a manner - elLher promlse or
performance wlll sufflce
" lf offer requlres manner - mlrror lmage rule" - AccepLance
musL correspond )E5#29$ wlLh Lhe (requlred) Lerms of Lhe offer
" lf Lhe offeree even sllghLly modlfles or adds a Lerm Lo Lhe
offer, lL ls noL an accepLance, buL raLher a re[ecLlon and
counLer-offer

uCC vlew on 1erms: prevenLs parLles ln commerclal LransacLlons from sllpplng ouL
of conLracLs under mlrror lmage rule" and denles unwarranLed advanLage Lo parLy
flrlng lasL shoL" ln baLLle forms. uCC 2-207
8ole of uCC 2-207: (1) Lo deLermlne wheLher a conLracL has been formed aL all by
Lhe exchange of documenLs, and (2) lf a conLracL has been formed, Lo deLermlne
whaL Lhe Lerms of LhaL conLracL are
1ermlnaLlon of Lhe ower Lo AccepL
o ueaLh of lncapaclLy - 8.2d 48
o 8e[ecLlon - 8.2d 38 - offer ls re[ecLed unless Lhe offeree manlfesLs an
lnLenLlon Lo Lake lL under furLher advlsemenL
o Lapse - 8.2d 41 - offer explres when accepLance ls noL made wlLhln a
reasonable Llme. lace-Lo-face rule: Lhe offer ls only good unLll Lhe end of Lhe
conversaLlon unless a conLrary lnLenLlon ls expressed and Lhere ls someLhlng
Lo lndlcaLe LhaL lL does noL lapse
! AccepLance afLer Llme has lapsed ls noL valld accepLance, buL lL ls an
offer whlch Lhe orlglnal offeror can accepL lf he wlshes
ConLracLs CuLllne - rofessor lranklln
3

! ulrecL negoLlaLlons: when parLles are bargalnlng face-Lo-face or over
Lhe phone, power of accepLance conLlnues /79$ A",17B 2*)
#/7&),:521/7, unless Lhe parLles' words or acLlons lndlcaLe Lhey lnLend
power of accepLance Lo conLlnue
o 8evocaLlon
! ulrecL: 8.2d 42 - offeree recelves from offeror a clear
manlfesLaLlon of lnLenLlon noL Lo enLer lnLo a conLracL
! lndlrecL: 8.2d 43 - offeror Lakes deflnlLe acLlon lnconslsLenL wlLh an
lnLenLlon noL Lo enLer lnLo a conLracL and offeree acqulres rellable
lnformaLlon Lo LhaL effecL (<)22),:/7 &' <522@),B, C1#.17:/7 &' C/AA:)
" lf Lhe offeree merely hears rumors LhaL Lhe offeror has / wlll
Lake acLlon lnconslsLenL wlLh Lhe offer buL does noL
reasonably belleve Lhem Lo be Lrue Lhen Lhe offer ls noL
revoked
o lrrevocable Cffers
! 8llaLeral Cffers
" llrm Cffer" - uCC 2-203 - lrrevocable for reasonable Llme
buL may noL exceed 3 monLhs
lrrevocable "#: (1) ln a !"#$%& ()"*"$#, and (2) lL glves
%+,-"."* /!!0)/$.% LhaL Lhe offer wlll be held open
" CpLlon conLracLs: slmply a conLracL ln whlch buyer and seller
exchange money for Llme. 8.2d 43
An opLlon conLracL does noL need Lo be supporLed by
acLual conslderaLlon [8.2d 87(1)(a)], buL an opLlon
conLracL musL say LhaL conslderaLlon of $xx wlll be
pald" (even lf lL never ls) ln order noL Lo be graLulLous
lf an opLlon conLracL ls ln place, an offeree's aLLempL Lo
counLer-offer for beLLer Lerms cannoL LermlnaLe Lhe
conLracL because lL ls lrrevocable
! unllaLeral Cffers
ConLracLs CuLllne - rofessor lranklln
6

" lf an offer requesLs accepLance by performance, Lhen Lhe offer
ls lrrevocable once Lhe offeree sLarLs acLual performance. 8.2d
43(1)
" ***lf offer does noL lndlcaLe lf accepLance should be
performance or promlse, Lhen Lhe offer ls lrrevocable once Lhe
offeree beglns Lo perform. (Way more offeree frlendly Lhan lf
LradlLlonal unllaLeral offer). 8.2d 62
o CounLer-offers - 8.2d 39 (re[ecLlon, Lhen offer) - an offer made by an
offeree, relaLlng Lo Lhe same maLLer as orlglnal offer, purporLs a subsLlLuLed
bargaln dlfferlng from Lhe orlglnal bargaln
! uCC 2-207(1) - Lhe offeree's power of accepLance ls LermlnaLed only
when hls response ls a Lrue counLer-offer, raLher Lhan a quallfled
accepLance
! noLe: Lhe usual rule LhaL a counLer-offer LermlnaLes Lhe power of
accepLance does noL apply

o Mallbox 8ule:
! lf Lhe parLles are uslng a means of communlcaLlng ln whlch Lhere ls
any sorL of delay, an offer ls accepLed as soon as Lhe offeree LransmlLs
Lhe accepLance, assumlng:
" 1he means of communlcaLlon was auLhorlzed by Lhe offeror:
Lxpressly
lmplledly
! 1he mallbox rule does noL apply Lo accepLance under opLlon conLracLs
- noL valld accepLance unLll offeror recelves lL

o C: Who may accepL Lhe offer?
! A: 1he offer may only be accepLed by a person ln whom Lhe offeror
lnLended Lo creaLe a power of accepLance (8.2d 29, 8.2d 34)

ulfferences ln MuLual AssenL under Lhe uCC and Common Law
ConLracLs CuLllne - rofessor lranklln
7

Common law dlsfavors conLracL formaLlon
uCC favors conLracL formaLlon even when Lhe Lerms or speclflc offer / accepLance
remaln unclear ( 2-404 and 2-207)
Common law generally requlres mlrror lmage accepLance or response wlll be LreaLed
as counLer-offer
o Powever, uCC 2-207 says conflrmaLlon may equal accepLance even lf lL
proposes somewhaL dlfferenL Lerms
8equlred cerLalnLy of Lerms ls looser under uCC
o Lx] exacL prlce mlghL noL be necessary Lo make a blndlng conLracL under
uCC, buL absence of a sale prlce ls probably sufflclenL lack of cerLalnLy Lo vold
conLracL under Common Law
under uCC, flrm offers" (assurances LhaL an offer wlll be held open made ln a
slgned wrlLlng for sale of goods beLween merchanLs) are an addlLlonal Lype of
lrrevocable offer
llrm offers" remaln open for up Lo 3 monLhs or for Lhe Llme speclfled ln Lhe offer
lLself or for whaLever Llme ls reasonable

ConslderaLlon
1o consLlLuLe conslderaLlon a performance or reLurn promlse musL be bargalned
for.
(geLLlng someLhlng ouL of Lhe deal). 8.2d 71
lorbearance - forbearance ls valuable conslderaLlon. (F5+), &' ;1A05$) - nephew
glves up legal rlghL for $3k, uncle geLs good feellngs knowlng nephew ls good and
healLhy and nephew glves up freedom Lo drlnk/smoke/eLc. because of Lhe promlse
LhaL he would recelve $3k
Adequacy - lf conslderaLlon ls found, courLs wlll noL lnqulre wheLher lL ls adequaLe.
unless conslderaLlon ls nomlnal only (l wlll glve you $1 for $100) whlch ls noL valld
conslderaLlon
asL ConslderaLlon - conslderaLlon musL be bargalned for" and Lherefore pasL
conslderaLlon ls noL valld. 8.2d 86
o ;#*7)99 &' =)99 - pasL conslderaLlon ls lnadequaLe
ConLracLs CuLllne - rofessor lranklln
8

Moral ConslderaLlon - [usL because someLhlng ls rlghL does noL make lL legally
blndlng. MorallLy and law are noL always congruenL. Lnforclng promlses based on
pre-exlsLlng equlLable obllgaLlons may be enforced Loo remove an lmpedlmenL
creaLed by law Lo enforce debLs LhaL are due (6199: &' G$+57)
o A promlse Lo pay for pasL servlces may be blndlng lf Lhe son ln 6199: was a
mlnor (and faLher sLlll responslble)
SeLLlemenL of lnvalld Clalms - SeLLlemenL agreemenLs for clalms LhaL subsequenLly
Lurn ouL Lo be lnvalld wlll noneLheless be blndlng on Lhe parLles lf:
o 1he seLLllng lalnLlff had a genulne bellef LhaL Lhe clalm was valld aL Lhe Llme
of Lhe seLLlemenL
o Clalm was , aL worsL, doubL from Lhe perspecLlve of a reasonable person.
8.2d 74
o H1)B) &' I/)*+: SeLLlemenL agreemenLs for clalms LhaL subsequenLly Lurn
ouL Lo be lnvalld wlll noneLheless be blndlng lf:
! lalnLlff asserLs Lhe clalm ln good falLh (sub[ecLlve)
! Clalm has a reasonable basls (ob[ecLlve)
re-LxlsLlng uuLy 8ule - a parLy agreelng only Lo do whaL lL ls already legally
obllgaLed Lo do has noL glven conslderaLlon. 8.2d 73
o J95:.5 <5#.),: &' C/+)71#/ - Salmon flshermen make a conLracL for $30, buL
refuse Lo work unless pald $100. ls a conLracL modlflcaLlon enforceable
wlLhouL new conslderaLlon? no!
o re-exlsLlng duLy rule" does noL apply under uCC -- 2-209(1) provldes LhaL
an agreemenL modlfylng a conLracL wlLhln Lhls arLlcle needs no
conslderaLlon Lo be blndlng." (no separaLe conslderaLlon ls necessary Lo
modlfy conLracL)
lllusory romlse - Lhe speaker has noL bound herself Lo any obllgaLlon. romlsor
appears Lo promlse a performance LhaL would consLlLuLe conslderaLlon, buL doesn'L
acLually do so. 8.2d 77
o A promlse ls lllusory lf:
! lL does noL resLrlcL Lhe promlsor's fuLure rlghL of acLlon, or
ConLracLs CuLllne - rofessor lranklln
9

! lL glves Lhe promlsor unfeLLered dlscreLlon Lo perform or noL Lo
perform, or
! lL does noL resLrlcL Lhe promlsor's auLonomy
o CourLs wlll Lry Lo save Lhese promlses lf Lhey are:
! Made ln good falLh (8.2d 236)
! 8easonable
o 1LS1: 1here musL be some way Lo prove a breach lf Lhe promlsor chooses noL
Lo perform - oLherwlse, promlse ls lllusory.
o (G//A &' !"#$, ;2,/7B &' ;*)--1)9A, K7+1 4,/"8L M7#' &' ;)5229)NH1,:2 =521/759
I57.)
romlssory LsLoppel
o romlssory LsLoppel ls a subsLlLuLe for Lhe conslderaLlon requlremenL. 8.2d
90(1)
o LlemenLs of romlssory LsLoppel:
! 1he promlsee's rellance was reasonably foreseeable Lo Lhe promlsor,
and
! 1he promlsee acLually relled upon Lhe promlse, and
! ln[usLlce can be avold only be enforclng Lhe promlse
o (>1,.:)$ &' >1,.:)$, O1#.)22: &' ;#/2*/,7, P5:2 <,/&1A)7#) ?,)A12 Q71/7 &'
4),)+15)
o uses of romlssory LsLoppel:
! SubsLlLuLe for conslderaLlon
! SubsLlLuLe for wrlLlng requlred by a sLaLuLe of frauds (8.2d 139)
! Mechanlsm for maklng cerLaln offers (blds) lrrevocable (C,)7757 &'
;25, <5&17B ?/')
! A way of pollclng unfalr negoLlaLlon behavlor
o noLe: uamages under romlssory LsLoppel may be llmlLed Lo resLlLuLlon or
damages measured Lo Lhe exLenL of Lhe promlsee's rellance raLher Lhan by
Lhe Lerms of Lhe promlse. 8.2d 90 (commenLs)

ConLracL uefenses - ollcy argumenLs: redlcLablllLy & lreedom of ConLracL
ConLracLs CuLllne - rofessor lranklln
10

uecepLlon
o MlsrepresenLaLlon - an asserLlon noL ln accord wlLh Lhe facLs. 8.2d 139
! LlemenLs of MlsrepresenLaLlon
" A false sLaLemenL
" AbouL a facL maLerlal Lo Lhe conLracL
A facL ls $%&'()"&*+ lf a reasonable person ln Lhe same
clrcumsLances would regard Lhe facL as lmporLanL ln
decldlng wheLher Lo make a conLracL
" Made wlLh Lhe requlslLe (bad) menLal sLaLe
" 8elled on (acLually and [usLlflably) by Lhe oLher parLy, and
A parLy's rellance ls $,-.'"#"&/*(+ lf Lhey had any basls
for bellevlng anoLher parLy's represenLaLlon, even lf a
reasonable person would noL have done so
A parLy's rellance ls $&0'-&*+ lf Lhey acLually rely on Lhe
represenLaLlon and LhaL rellance caused Lhem Lo make
a conLracL
" Causlng Lhe oLher parLy harm
! 1ypes of MlsrepresenLaLlon:
" lnLenLlonal MlsrepresenLaLlon: Lhe speaker knew Lhe
represenLaLlon was noL Lrue
CourLs do noL requlre any showlng of maLerlallLy
vlcLlms are enLlLled Lo punlLlve damages
" negllgenL MlsrepresenLaLlon: speaker unreasonably belleved
Lhe represenLaLlon Lo be Lrue
vlcLlms are noL enLlLled Lo punlLlve damages, buL are
enLlLled Lo oLher damages
" lnnocenL MlsrepresenLaLlon: speaker reasonably belleved Lhe
represenLaLlon Lo be Lrue
vlcLlms are noL enLlLled Lo any damages aL all, buL can
use Lhls defense Lo vold Lhe conLracL
o ?/":17)5" &' G59.),
ConLracLs CuLllne - rofessor lranklln
11

! 8uLL: numerous cases hold and Lhe 8esLaLemenL provldes LhaL an
lnnocenL mlsrepresenLaLlon may be Lhe basls for resclndlng a conLracL
! 8ecesslon of Lhe ConLracL:
" 8ellance on Lhe lalse SLaLemenLs
Wayne Couslneau was ln Lhe gravel exLracLlon
buslness. 1he appralsal mlghL well reafflrm a buyer's
bellef LhaL gravel exlsLed, slnce lL sLaLed Lhere was a
good gravel base. 1he courL concluded LhaL Couslneau
dld noL rely on Walker's sLaLemenL LhaL Lhere was
gravel on Lhe properLy. lurLher, ln deLermlnlng
wheLher Lo purchase Lhe properLy, Lhey would
cerLalnly have consldered Lhe amounL of hlghway
fronLage Lo be of lmporLance.
" MaLerlallLy of Lhe SLaLemenLs
A mlsrepresenLaLlon may be ground for voldlng a
conLracL lf lL elLher fraudulenL or maLerlal (8.2d 306).
1he rule prevenLs parLles who laLer become
dlsappolnLed aL Lhe ouLcome of Lhelr bargaln from
caplLallzlng on any lnslgnlflcanL dlscrepancy Lo vold Lhe
conLracL. 1he sLaLemenLs regardlng hlghway fronLage
and gravel conLenL were maLerlal. A reasonable person
would be llkely Lo conslder Lhe exlsLence of gravel
deposlLs an lmporLanL conslderaLlon ln developlng a
plece of properLy. ln deLermlnlng wheLher Lo purchase
Lhe properLy Lhey would cerLalnly have consldered Lhe
amounL of hlghway fronLage Lo be of lmporLance.
lurLher, cerLalnLy Lhe amounL of hlghway fronLage on
a commerclal LracL would be consldered lmporLanL.
" !usLlflable 8ellance
1he courL sald LhaL Lhere ls a spllL of auLhorlLy
regardlng a buyer's duLy Lo lnvesLlgaLe a vendor's
ConLracLs CuLllne - rofessor lranklln
12

fraudulenL sLaLemenLs, buL Lhe prevalllng Lrend ls
Loward placlng a mlnlmal duLy on a buyer.
" 1he recenL drafL of Lhe 8esLaLemenL of ConLracLs allows
recesslon of an lnnocenL maLerlal mlsrepresenLaLlon unless a
buyer's faulL was so negllgenL as Lo amounL Lo a fallure Lo acL
ln good falLh and ln accordance wlLh reasonable sLandards of
falr deallng." 1hus, alLhough Couslneau's acLlons may well
have exhlblLed poor [udgmenLs for an experlenced
buslnessman, Lhey were noL so unreasonable or preposLerous
ln vlew of Walker's descrlpLlon of Lhe properLy LhaL recovery
should be denled
" LasLly, wlLh regard Lo Lhe lssue of resLlLuLlon, Couslneau
apparenLly caused exLenslve damage Lo one bulldlng on Lhe
properLy, and he removed 6,000 cublc yards of gravel. Walker
should be allow some recoupmenL for Lhese lLems, plus an
amounL for Lhe falr renLal value of Lhe properLy less
reasonable cosLs of renLal.

o MaLerlal lacL v. !usLlflable 8ellance v. AcLual 8ellance
! 1he maLerlal facL requlremenLs focus on Lhe lmporLance of a facL Lo a
parLy's declslon Lo enLer lnLo a conLracL. 1o analyze Lhls elemenL,
assume LhaL Lhe mlsrepresenLed facL ls Lrue and Lake an ob[ecLlve
perspecLlve.
! 1he [usLlflable rellance requlremenL focuses on Lhe reasonableness of
a parLy's cholce Lo belleve a represenLaLlon. 1o analyze Lhls elemenL,
assume Lhe mlsrepresenLed facL ls false and deLermlne wheLher Lhe
cholce Lo belleve Lhe mlsrepresenLed facL was wholly lrraLlonal from a
mosLly ob[ecLlve perspecLlve.
! 1he acLual rellance elemenL focuses on Lhe causal basls for a parLy's
declslon Lo enLer lnLo a conLracL. 1o analyze Lhls elemenL, assume Lhe
mlsrepresenLed facL ls false and use a sub[ecLlve perspecLlve.
ConLracLs CuLllne - rofessor lranklln
13

MlsLake - a bellef noL ln accord wlLh Lhe facLs (8.2d 131)
o MuLual MlsLake - an error abouL a facL exlsLlng aL Lhe Llme of conLracL
formaLlon LhaL was a shared assumpLlon of Lhe parLles lnvolved
! LlemenLs of MuLual MlsLake
" Lrroneous bellef abouL a maLerlal facL was shared by boLh
parLles,
" 1he erroneous facL was a baslc assumpLlon upon whlch Lhe
conLracL was made,
" 1he erroneous facL had a maLerlal effecL on Lhe agreed-upon
exchange beLween Lhe parLles
o unllaLeral - an error regardlng a facL whlch only one parLy ls responslble for
! ConLracLs predlcaLed on unllaLeral mlsLakes can be resclnded lf Lhe
usual Lhree elemenLs for muLual mlsLakes are meL, and:
" 1he non-mlsLaken parLy knew (or should have known) abouL
Lhe oLher parLy's mlsLake or somehow caused lL, or
" 1he mlsLake renders Lhe conLracL unconsclonable

1".'"20'"32 /('4((2 $5&'()"&*+ &26 $7&."0+ 8&0'.

LlemenL of WhaL
Clalm
Pow ueflned by CourLs locus of Analysls
MaLerlal lacL MlsrepresenLaLlon A facL LhaL a reasonable person
would conslder lmporLanL ln
evaluaLlng Lhe LransacLlons
ls Lhls a facL a prudenL
person would wanL Lo know?
8aslc lacL MlsLake A facL LhaL goes Lo Lhe essence of
Lhe conLracL
ls Lhls a facL LhaL ls cenLral Lo
Lhe whole deal?
o ;*),0//A &' G59.),
! lSSuL: 1hls case ponders Lhe quesLlon of wheLher Lwo parLles should
be held Lo an agreemenL regardlng a Lhlng, lf Lhe naLure of Lhe Lhlng
changes enLlrely.
! PLLu: 1he courL found LhaL Lhe parLles' mlsapprehenslon regardlng
Lhe barren naLure of Lhe cow wenL Lo Lhe subsLance of Lhe
ConLracLs CuLllne - rofessor lranklln
14

agreemenL. As such, Lhe agreemenL was vold, due Lo lLs pregnancy,
Lhe cow ceased Lo be Lhe anlmal LhaL lL was orlglnally deemed Lo be.
! When parLles Lo a conLracL agree upon an ob[ecL, Laklng for granLed
LhaL lL wlll noL change, a change ln Lhe naLure of Lhe ob[ecL could vold
Lhe conLracL.

o 3 SlLuaLlons ln whlch a parLy may be found Lo have assumed a rlsk:
! A conLracL allocaLes rlsk Lo one parLy,
! Cne parLy knows she has llmlLed knowledge, buL noneLheless LreaLs
LhaL llmlLed knowledge as sufflclenL, or
! A courL belleves lL ls [usL Lo allocaLe a rlsk Lo one parLy
o WhaL, exacLly, was Lhe mlsLake here?
! 8oLh parLles assumed Lhe cow was barren. Powever, Lhey were boLh
wrong.
o Why does Lhe courL go lnLo deLall abouL how Lhe cow was prlced?
! A cow ls worLh a whole loL more lf lL ls noL barren. A barren cow and a
non-barren cow are quallLaLlvely dlfferenL measuremenLs and
quallLaLlvely dlfferenL elemenLs. 1he mlsLake affecLed Lhe subsLance
of Lhe whole conslderaLlon, and lL musL be consldered LhaL Lhere was
no conLracL Lo sell or sale of Lhe cow as she acLually was.
uuress / undue lnfluence
o LlemenLs of uuress
! Cne parLy makes an overL or lmpllclL LhreaL, and
! 1he LhreaL lnduces assenL (l.e., Lhe oLher parLy has no reasonable
alLernaLlve buL Lo agree) - 8.2d 174 & 173
o May be elLher LradlLlonal duress (vlolenL) or economlc duress
o J":217 M7:2,"+)72 &' !/,59 ?/,8
! Common law musL be applled wlLh Lhls sale of goods because a
conLracL musL acL ln good falLh
! uCC 2-209(1) - modlflcaLlon of acLlng ln bad falLh ls a way of
showlng duress
ConLracLs CuLllne - rofessor lranklln
13

o uuress / re-exlsLlng uuLy 8ule: uefense of economlc duress frequenLly
arlses as an alLernaLlve Lo Lhe argumenL LhaL conLracL law has vlolaLed pre-
exlsLlng duLy rule.

lllegallLy - ConLracLs made agalnsL publlc pollcy (lllegal conLracLs are always null and
vold, Lhe conLracL never exlsLed ln Lhe flrsL place)
o CovenanLs noL Lo CompeLe
! 1wo pronged analysls of Lhese sorLs of agreemenLs:
" 1he covenanL musL be necessary Lo proLecL a leglLlmaLe
employer lnLeresL (l.e., Lrade secreLs, confldenLlal cusLomer
llsLs, lnvesLmenL ln Lralnlng), and
" 1he covenanL musL be reasonable as Lo geography, Llme, and
work resLrlcLed (G//A &' 65$)
! lf Lhe non-compeLe agreemenLs do noL meeL boLh crlLerla, Lhe courLs
may:
" 8efuse Lo enforce Lhe agreemenL alLogeLher,
" 8lue encll" 8ule: enforce lL only lf lmproper porLlons of Lhe
agreemenL can be deleLed, or
" 8evlse Lhe conLracL Lo make lL reasonable
! G//A &' 65$ - Lhe enLlre conLracL dld noL need Lo be Lhrown ouL buL
Lhe case wenL back Lo Lhe lower courLs Lo deLermlne whaL was
reasonable for Llme and dlsLance on Lhe covenanL noL Lo compeLe
secLlon of Lhe conLracL
lncapaclLy - Lhe lack of a legal ablllLy / rlghL Lo be bound ln conLracL due Lo:
o MlnorlLy (<18) - 8.2d 14
o MenLal lllness or dlsablllLy - 8.2d 13
o lnLoxlcaLlon - 8.2d 16

o 1here ls a brlghL-llne rule LhaL sLaLes Lhe aforemenLloned Lerms of lncapaclLy
should be upheld. AlLhough lL may noL be sympaLheLlc Lo one of Lhe parLles,
ConLracLs CuLllne - rofessor lranklln
16

Lhe rule was made Lo proLecL Lhe youLh, menLally lll, and lnLoxlcaLed persons
of our socleLy from comlng lnLo lrresponslble conLracLs.
ConLracLs of Adheslon:
o SLandardlzed conLracL form offered Lo consumers of goods and servlces on
essenLlally 'Lake lL or leave lL' basls wlLhouL affordlng consumer reallsLlc
opporLunlLy Lo bargaln." (8lack's Law ulcLlonary)
unconsclonablllLy
o An unconsclonable conLracL Lerm, or conLracL as a whole, may be volded and
deemed unenforceable by a courL (8.2d 208)
o CbllgaLlons of good falLh and reasonableness by boLh parLles may noL be
dlsclalmed ln a conLracL for Lhe sale of goods (uCC 1-302(b)
o LlemenLs of unconsclonablllLy
! rocedural unconsclonablllLy
" Absence of a meanlngful opporLunlLy Lo bargaln
" CpporLunlLy Lo undersLand Lerms,
" use of flne prlnL and legalese,
" uecepLlve sales pracLlces (Wllllams v. Walker-1homas
lurnlLure Co.)
" 1ake-lL- or Leave-lL, or
" Cross lnequallLy or bargalnlng power (conslder wealLh,
experLlse, educaLlon, access Lo legal counsel, eLc.)
! SubsLanLlve unconsclonablllLy
" 1erms LhaL shock Lhe consclence" (conslder markeLplace,
parLles' respecLlve rlsks, compeLlLlon)
o G19915+: &' G59.),NR*/+5: H",712",) ?/'
! 8uLL: lf unconsclonablllLy ls presenL aL Lhe Llme a conLracL ls formed,
Lhe courL can choose noL Lo enforce Lhe conLracL
! 8LASCnlnC: ln oLher [urlsdlcLlons, lL has been held as a maLLer of
common law LhaL unconsclonable conLracLs are noL enforceable
ConLracLs CuLllne - rofessor lranklln
17

o Congress has enacLed Lhe uCC. uCC 2-302 provldes LhaL Lhe courL may
refuse Lo enforce a conLracL LhaL lL flnds Lo be unconsclonable aL Lhe Llme lL
was made
o When a parLy of llLLle bargalnlng power, and hence llLLle real cholce, slgns a
commerclally unreasonable conLracL wlLh llLLle or no knowledge of lLs Lerms,
lL ls hardly llkely LhaL consenL was ever glven Lo all Lhe Lerms
o nC1LS: unconsclonablllLy lnvolves Lhe evaluaLlon of four facLors.
! 1he relaLlve harshness of Lhe Lerm ln quesLlon, lncludlng Lhe
lmporLance of Lhe legal rlghL LhaL ls affecLed
! 1he manner of presenLaLlon of Lhe Lerm ln Lhe agreemenL
! 1he relaLlve bargalnlng power of Lhe parLy agalnsL whom Lhe Lerm ls
asserLed
! 1he commerclal [urlsdlcLlon for Lhe Lerm
;252") /- H,5"A:
o 1radlLlonal rule: a conLracL wlLhln Lhe sLaLuLe of frauds may noL be enforced
unless a memorandum of Lhe agreemenL ls wrlLLen and slgned by Lhe parLy
Lo be charged. noLe LhaL Lhe conLracL lLself does noL always have Lo be
enLlrely ln wrlLlng. 1here musL slmply be some exLanL wrlLLen
memorlallzaLlon of Lhe agreemenL's essenLlal Lerms. Compare 8.2d 131 and
uCC 2-201
o AgreemenLs LhaL musL by Lhelr Lerms meeL Lhe requlremenLs of Lhe sLaLuLe
of frauds may noL be enforceable as conLracLs lf Lhey are noL (adequaLely)
wrlLLen, buL promlses +5$ 7/7)2*)9):: @) )7-/,#)5@9) under equlLable
docLrlnes
o ollcy CuesLlons:
! WhaL ls Lhe raLlonale for requlrlng land sale conLracLs Lo be ln
wrlLlng? Why lnclude conLracLs LhaL cannoL be performed wlLhln a
year? under uCC, almosL all sales of goods over $300?
" Why would we wanL lL ln wrlLlng? - make sure conLracL ls
enforced
uamages
ConLracLs CuLllne - rofessor lranklln
18

1hree SLeps ln uamages Analysls:
o WhaL .17A of breach dld Lhe defendanL commlL (non-performance or
defecLlve performance)?
o 1o whaL damages mlghL Lhe plalnLlff be enLlLled?
! Ceneral
! Speclal
" 8ellance
" ConsequenLlal
! CosL and Losses Avolded
o uo any llmlLaLlons [usLlfy reduclng Lhe lalnLlff's damages recovery?
Means of CalculaLlng uamages
o 8eneflL of Lhe bargaln [general damages]
o lus rellance [speclal damages]
! $ spenL performlng or preparlng Lo perform
! $ spenL ln anLlclpaLlon of oLher parLy's performance
! $ spenL deallng wlLh fallouL from Lhe breach
o lus consequenLlal damages [speclal damages]
! LosL use proflLs
! LosL resale proflLs
! roperLy damage
! ersonal ln[ury
! Mlnus expenses saved

o nC1L: 1hls calculaLes damages only. lL does noL cover any equlLable rellef
LhaL a parLy may be enLlLled Lo such as resLlLuLlon.
Measure of Ceneral uamages for uefecLlve erformance
o 1wo AlLernaLlve Measures:
! CosL of repalr (amounL necessary Lo flx Lhe problem or flnlsh Lhe
work), or, buL only ln excepLlonal clrcumsLances,
! ulmlnuLlon ln value (value of whaL was promlsed less Lhe value of
whaL was recelved)
ConLracLs CuLllne - rofessor lranklln
19

! LxcepLlonal clrcumsLances:
" 8epalr would produce economlc wasLe, or
" CosL of repalr ln grossly dlsproporLlonaLe Lo loss ln value
o =),1 &' O)2519 65,17) ?/,8'
! lSSuL: Can a volume reLall seller of sLandard prlced goods recover losL
proflLs when a buyer defaulLs on a sale conLracL, lf markeL damages
are lnadequaLe Lo puL Lhe seller ln as good a poslLlon as he would
have been had Lhe conLracL been performed?
! PCLulnC/8uLL: ?es. A volume reLaller of sLandard prlced goods may
recover losL proflLs when a buyer defaulLs on a purchase lf markeL
damages are lnadequaLe Lo puL Lhe seller ln as good a poslLlon as he
would have been had Lhe conLracL been performed.
o uCC 2-718 esLabllshes LhaL Lhe buyer's rlghL Lo resLlLuLlon ls sub[ecL Lo
offseL Lo Lhe exLenL LhaL Lhe seller esLabllshes a rlghL Lo recover damages
under Lhe provlslons of Lhls ArLlcle oLher Lhan subsecLlon (1)
o uCC 2-708(2) provldes LhaL lf uCC 2-708(1) ls lnadequaLe Lo puL Lhe seller
ln as good a poslLlon as performance would have done, Lhen Lhe measure of
damages ls Lhe proflL, lncludlng reasonable overhead, whlch Lhe seller would
have made from full performance plus lncldenLal expenses and damages
o ln Lhls case, Lhe buyer's rlghL Lo resLlLuLlon and Lhe seller's rlghLs offseLs
under uCC 2-718 were esLabllshed on Lhe moLlon for summary [udgmenL.
1he measure of damages provldes ln subsecLlon (1) ls lnadequaLe Lo puL Lhe
seller ln as good a poslLlon as full performance. under 2-708(2), Lhe seller ls
enLlLled Lo lLs proflL lnclude reasonable overhead along wlLh lncldenLal
damages, due allowance for cosLs reasonably lncurred and due credlL for
paymenLs or proceeds of resale. uue credlL for paymenLs or proceeds of
resale ls lnappllcable Lo Lhls reLall sale conLracL as Lhls provlslon perLalns Lo
Lhe prlvllege of Lhe seller Lo reallze Lhe [unk value of Lhe lLems lf lL was
manlfesLly useless Lo compleLe Lhe operaLlon of manufacLure. ls Lherefore
enLlLled Lo resLlLuLlon ln Lhe sum of $4,230 less $3,230 for losL proflLs and
lncldenLal expenses
ConLracLs CuLllne - rofessor lranklln
20

o Who sued whom and why?
! nerl sued 8eLall Marlne Corp. Powever, nerl breached Lhe conLracL
o lf you were counsel for uefendanL, whaL damages would you seek, and how
would you [usLlfy each one?
! Loss of proflL on Lhe sale (general)
! SLorage of boaL (speclal)
! MalnLenance for Lhe boaL unLll sold (speclal)
! llnance charges (speclal)
! lnsurance (speclal)
o Pow many dlfferenL ways Lo calculaLe 8eLall Marlne's damages could you
argue for?
! k value - lMv (assumes seller's sold boaL for more Lhan lMv)
! k - resale amounL
! roflL
! LnLlre k prlce, lf unsellable cusLom goods under uCC 2-207(1)(b)
(cusLomlzed)
o nC1L: CourLs wlll apply Lhe one LhaL seems Lhe falresL based on Lhe speclflcs
of Lhe conLracL.
3 1ypes of LlmlLaLlons on uamages:
o AvoldablllLy
! no recovery for damages whlch could reasonably have been avolded
(8.2d 330)
o loreseeablllLy
! 8ecovery only for damages LhaL were reasonably foreseeable as a
resulL of Lhe breach (8.2d 331)
o CerLalnLy
! Can only recover for damages LhaL are reasonably cerLaln (82d 332),
whlch usually means Lhe lalnLlff has Lhe burden Lo prove:
" 1he facL LhaL damages occurred, and
" 1he acLual amounL of damage
ConLracLs CuLllne - rofessor lranklln
21

! *MusL be economlcally falr Lo everyone - Lhe breachlng and non-
breachlng parLles