Contracts, Hadfield, Spring 2012 visiting at Harvard From USC Textbook: pstein, !

arkel, "onoroff Selections on Contracts

Contract basics c#ecklist

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Was a contract formed? )as a legall$*enforceable contract formed+ ,ntent to be bo-nd Consideration S-fficient definiteness )as t#ere an$ problem at t#e time of formation t#at makes t#e contract voidable+ !istake !isrepresentation.Fra-d /-ress Unconscionabilit$ Assuming that a contract was formed, what are the consequences? )#at obligations did t#e contract create+ )as t#ere a 0breac#1+ ,nterpretation ,mplied terms ,s an ostensibl$ breac#ed obligation exc-sed+ Conditions )aiver !aterial 2reac# ,mpossibilit$, Fr-stration Okay, the contract was breached and is actionable. Now what? ,f t#e contract is breac#ed, 3#at remed$+ Specific performance /amages o xpectation 4p-t promisee in position as if contract performed5 67 o 7eliance 4p-t promisee in position as if contract never made5 67 o 7estit-tion 4compensate promisee for an$ benefits conferred on promisor5 )#at limits on damages+ o Certaint$ o Foreseeabilit$ o !itigation

"-blic "olic$, ,llegalit$

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Hanks v Powder Ridge Restaurant

Ski resort made customers sign waiver of rights to claim damages, even for negligence. Court ruled that on public policy grounds, that was not enforceable, since it was an adhesion contract, the resort controlled the safety, and they did not explain in their advertising that the waiver would be required. Verdict: Contract is voidable; Rule: Contracts that are against public policy are not binding. R.R. v. M.H. Parties contracted to have woman carry baby carrier ! real father"s baby# and they would pay her costs. $oman wanted to void contract and possibly keep baby. Court found that this arrangement was too close to the types of transactions that were forbidden under adoption and human trafficking laws. Verdict: Contract is voidable% Rule: Contracts that are against the law are not binding. Valley Medical Specialists v. Farber &arber, a doctor, signed a non'compete with the practice. (ater, he wanted to compete. )he lower court ruled that the non'compete was too broad and tried to impose their own terms based on severing some aspects of the non'compete. *ppeals court said that the terms were too broad to even have terms imposed and voided the contract. Verdict: Contract is voidable% Rule: +on' competes are often against public policy, especially for doctors. $hile sometimes, a clause can be severable, if it is still to restrictive, the court can void the whole damn thing. 1 . !egal capacity to contract: ,#Partial capacity is possible and dependent on the circumstances, -# People have the capacity to contract unless they are under guardianship, infants, mentally defective, or intoxicated. 1". Persons #$$ected %y &uardians'ip: of property for an ad.udication of mental illness or defect. Seems to be completely null rather than voidable. /ut not sure how that would work if both parties are happy with it 0 1 guess the guardian would have to seek to void it rather than the mentally ill person, likely within reasonable time.# 1(. )n$ants: 2ntil ,3, people can only form voidable contracts. )his means comment# that he can refuse to perform, and if he"s already received the consideration it goes back. 1f he"s spent it, nothing can be done. 1*. Mental +e$ect: such people can only incur voidable contractual duties he is unable to understand the nature not smart# of the transaction, or he is unable to act reasonably 4C5 shoe buyer6# in relation to the transaction when the other person has reason to know this. 1f the other person has no reason to know and the contract is fair, the voidability is limited to the parts that have not yet been performed, and parts where voidance would be un.ust. 1n such cases, courts should grant relief in equity. 1,. )nto-ication: voidable where other party 'as reason to know that he"s intoxicated hah, what if it"s by email6# and can"t understand the transaction or act reasonably towards it. 1./. Public policy: unenforceable voidable# when it contradicts legislation, or public policy clearly weighs against it. 1n weighing the interests of enforcing, account is taken of parties" expectations, forfeiture, public interest in enforcement. 1n weighing the interests against enforcement, account is taken of strength of legislation or .udgment against it, likelihood that enforcement will encroach on the policy, seriousness of misconduct involved, and connection between misconduct and the term. 1.0. Public policy de$ined: (egislation, and public interest like restraint of trade, impairment of family relations, interference with protected interests 7anks v. Powder 8idge 0 negligence is a protected interest6#

1/,. Restraint o$ trade: 1122nreasonable restraint of trade is not enforceable. -# 2nreasonable restraint includes stifling competition, and restraining someone from seeking employment. 9alley :edical Specialists# 1/.. Restraint o$ co3petition de$ined: * promise to refrain from competition is restraint of trade unless it is ancillary to an otherwise valid transaction. 1//. #ncillary restraints on co3petition: ;ven if a non'compete is ancillary, it is unreasonably in restrain if the restraint is greater than needed to protect the promisee"s interest, or the promisor"s hardship outweighs the promisee"s interest. ;xamples of ancillary agreements include promises not to compete by sellers to buyers, employees to employers, and partners to partnerships. 101. Pro3ise a$$ecting custody: +ot valid unless it"s in the best interests of the child. 1RR v. MH2

,ntent to Contract
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%lack letter contract law: 4'ere are t'ree t'ings t'at it takes to create a contract: )ntent5 consideration5 and su$$icient de$initeness. 4'e ne-t two classes are on intent and consideration5 and t'en a$ter a bunc' o$ tec'nical $or3ation stu$$5 we 3ove on to de$initeness. !ucy v 6e'3er (ucy said that he had bought the land, <ehmer said that he had been .oking. Verdict: /inding contract. Rule: 4b.ectively manifested intent is what mattered, not the hidden intent. =ives rise to prof"s constant question >$as it reasonable for (ucy to believe that <ehmer intended to be bound6? !eonard v Pepsi Pepsi advertised in a way that might have given the impression that they were willing to give away a plane. (eonard sued them for his plane. )he court ruled that a reasonable person would not have thought that there was intent to be bound to award an airplane. Verdict: +o binding contract% Rule: $hen there is clearly no intent to be bound, there is no contract. Restate3ents 1. # contract is: a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recogni@es as a duty. . Pro3ise5 pro3isor5 pro3ise5 bene$iciary: Pro3ise manifests intention to act, made to .ustify understanding that commitment has been made. Pro3isor is maker of promise, pro3isee is addressed by it5 bene$iciary is third party who is supposed to benefit. (. How a pro3ise 3ay be 3ade: 4ral, written, or implied wholly or in part by actions 1. )ntent to be bound: 1t is not necessary to have or to show intent to be bound, however, if you manifest intent not to be bound, may prevent formation of a contract. 1 think the early part refers to people who mean to agree, but don"t think it"s binding 0 but it is. 4r the opposite 0 a mock contract that people think is theoretically binding but won"t be enforced in a play6 * game6# actually isn"t binding at all. ,. Preli3inary negotiations: :anifestation of willingness to enter into a bargain is not an offer if the recipient should have known that the offeror does not intend to conclude the agreement

without further assent. ;.g. advertisements, invitation for bids. +ote that further language like >first come first served? and >lowest bid before )uesday at A gets the deal? might make it an offer.# 788 91: : Scope; 8ertain Security and ;t'er 4ransactions <-cluded Fro3 4'is #rticle: 5oesn"t apply to sales that are intended to operate as securities. *lso does not affect statutes that apply to specific buyers, sellers, and transactions. 91:*: +e$initions: 4rans$erability; =&oods>; =Future> &oods; =!ot>; =8o33ercial 7nit>. &oods ? things, including unborn animals, crops, investment securities. :ust be existing and identified before they can be sold, otherwise they are $uture goods. 2nidentified share of bulk fungible goods is goods. !ot means parcel or article, co33ercial unit means a single whole by a particular commercial usage. 91:,: +e$inition o$ contract: *greement for sale or future sale of goods. Sale is exchange of stuff for money. 9 :(:For3ation: 112 :ay be made in any manner sufficient to show agreement, including conduct. 1 2 :oment of formation need not be determined. 1"2 ;ven if some terms are left open, a contract doesn"t fail for indefiniteness if there is a reasonable basis for giving a remedy. So this is somewhat different from the contract to renew that a court found indefinite, although obviously the 2CC would not have applied there anyway.#

Consideration
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8onsideration Ha3er v Sidway 2ncle promised nephew that if he withheld from drinking, smoking, and chasing women, uncle would give him BCDDD. +ephew did so. 2ncle died and estate claimed no consideration. Eudge ruled that consideration is either giving something of value to the promisee, or giving up a right that the promisor was entitled to. Verdict: /inding contract% Rule: Consideration is either giving something of value to other person, or giving up a right that you had. @irksey v @irksey :rs. Firksey was on her own out west, and :r. Firksey, her /1(, the brother of her deceased husband, told her to come live near him. She was hesitant, because she had a farm that she was maintaining, and didn"t want to give it up. /ut she left because he promised to support her. )hen he changed his mind later and she sued. Verdict: +o contract% Rule: *n action that is necessary to claim benefit from a promise is not necessarily consideration. ;.g. if you come here, 1"ll give you a dollar 0 you are not giving the dollar in exchange for Gcoming here". +ote: Prof said that this came before there was a widely adopted doctrine of promissory estoppel, or she would have had an estoppel claim.# Hooters v P'illips 7ooters instituted a new policy that their employees would have to submit to arbitration agreements. Phillips signed the agreement and later wanted to sue them in regular court. )he

court said that since 7ooters had maintained the right to change the format of the arbitration, there was no real consideration. Verdict: +o contract% Rule: 1llusory consideration is not consideration. +ote: *nother case that has this angle is the (ady Something one, where there was no explicit promise to sell the clothes.# Restatement 1.. ReAuire3ent o$ a bargain: ,. )here is usually a requirement for a bargain that results in the exchange of the promise for the consideration. /ut -. 1f there is no bargain, a contract may still be formed under 8estatement 3-'HI. .1. ReAuire3ents o$ e-c'ange5 types o$ e-c'ange: 4'e e-c'ange 3ust be bargained $or5 w'ic' 3eans t'at it 3ust be soug't and given in e-c'ange $or t'e pro3ise. Performance may consist of an act, a forebearance% the creation, modification, or destruction of a legal relation. )he performance may be given to the opposite party, or to another person. .". Per$or3ance o$ a legal duty is not consideration, but a slight modification to that performance might be, if it reflects a real bargained for change. .(. Forbearance o$ clai3s t'at are invalid is not valid consideration unless there is some doubt as to the facts or the law, or the forbearing party believes that it"s valid. 4'e e-ecution o$ an instru3ent surrendering a claim or defense is consideration, even if the claim or defense has not been asserted, and the forbearer doesn"t believe it exists. ... )llusory or alternative pro3ises: * promise that leaves the promisor alternatives is an illusory promise, and thus, not consideration, unless both alternatives would suffice for consideration, or there is a substantial likelihood that before the promise comes due, intervening circumstances will bind the promisor to the alternative that is consideration. .0. #deAuacy o$ consideration: if consideration has been met, there is no requirement that it be detriment to the one offering it, or a gain to the opposite party. 4ne or the other is enough 0 7amer v. Sidway# equal exchange, or >mutuality of obligation.? /ased on the comments it seems that that means equally binding obligations on both sides.# /1. 8onsideration as t'e 3otivation or inducing cause: 1t doesn"t have to be the sole motivating cause. +or does the promise have to be the sole motivating cause of the consideration.

"romissor$ stoppel.7estit-tion
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Pro3issory <stoppel Ricketts v Scot'orn 8icketts was promised by her grandfather that he would give her a large gift so that she wouldn"t have to work. She quit her .ob, briefly, but he never got around to giving it to her, though, aside from a few interest payments, and then he died. )he estate argued that there was no consideration, since she hadn"t done anything except quit her .ob, and that wasn"t a bargained for exchange for the gift 0 in fact, her grandfather hadn"t minded that she later worked. Verdict: promissory estoppel, so promise binding. Rule: )here is a concept of promissory estoppel, which means that when someone makes a promise that is: 8easonably expected to induce reliance%

5oes induce reliance% and Eustice requires enforcement, it is enforceable to the extent .ustice demands. Pro3issory Restitution =enerally, past consideration is not consideration. )he one exception to that is promissory restitution. Bebb v Mc&owin $ebb was cleaning out second floor, and he was able to stop from dropping heavy load onto :c=owin only by putting himself in danger. 7e was badly in.ured, and :c=owin promised to support him. *fter :c=owin died, the estate claimed no consideration. Verdict: Promissory restitution% Rule: * Promise, made in understanding of a material benefit previously received, is binding to the extent necessary to prevent un.ust enrichment.
Restatement

0:. Pro3ise reasonably inducing reliance 1Pro3issory <stoppel2: Promise, intended to induce reliance, that induces reliance, and .ustice demands enforcement, is enforceable insofar as .ustice demands. /,. Pro3ise 3ade in e-c'ange $or bene$it previously received 1pro3issory restitution2: is binding to the extent necessary to avoid in.ustice. /ut not if the original benefit was a gift, and not in a way that is disproportionate.# +ote that the benefit must be material. Prof gave the example of saving someone"s cow as opposed to saving their kid.#

"reexisting d-t$.!odification
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Pre9e-isting +uty #laska Packers v +o3enico So these fishermen were hired to go to *laska and fish, and when they got there, it turned out to be more work than they expected, on account of the low quality nets. So they went on strike. )he company couldn"t get new workers, so they struck a new bargain 0 they would up the pay in exchange for the fishermen returning to work. *fter the season, *laska Packers refused to pay the higher amount, reasoning that there was no consideration for the new agreement, since the fishermen were already bound by contract to perform. Verdict: Cew agree3ent not binding; Rule: $hen the only consideration is something that you had to do anyway, that"s not consideration. Preexisting duty#. #ngel v Murray So this guy had the contract to collect all the garbage from +ewport, 81. 7e had a five year contract with the understanding that there would be some new construction. )hen there was a huge amount of construction that no one, not even the city, had foreseen. So they negotiated a new contract, and paid him an extra B,D,DDD a year for the remaining few years. Someone sued the city, saying that they couldn"t pay him, since he was already bound and had not given any new consideration to the city. Verdict: +ew contract modification# binding. Rule: 1t is possible to have a modification when neither party is finished performing, the intervening event is unforeseen by either party, and the modification is reasonable to both sides under the circumstances.

Restate3ent .". 1entered in consideration tab2 Per$or3ance o$ a legal duty is not consideration, but a slight modification to that performance might be, if it reflects a real bargained for change. /0. Modi$ication o$ e-ecutory contract: can be binding when it has not been fully performed by either side, if it"s fair and equitable, in light of circumstances not anticipated. 4r, to the extent required by statute, or to the extent that .ustice requires enforcement based on material change of position in reliance on the promise.Jlooks like a promissory estoppel rationale in modificationK# 788 9 :0: Modi$ication5 rescission5 waiver: ,# :odification in general works unlike restatement#. -# 1f the agreement requires modifications in writing, then they need to be in writing. L# Statute of &rauds applies to modification I# ;ven if it doesn"t work under subsection - or L, it can be a waiver. C#$aiver can be retracted by reasonable notification, unless the other party has materially changed their position and it would be un.ust. 5ynamic v. :achine#. )n s'ort: 3odi$ication is 3uc' easier on sale o$ goods t'an on regular contract w'ic' is regulated by t'e restate3ent. 4'e 788 si3ply reAuires no consideration $or 3odi$ication.

Stat-te of fra-ds
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11:. Statute o$ Frauds: )he following contracts are sub.ect to the statute of frauds: contract in execution of estate, contract to answer for duty of another surety#, contract in consideration of marriage, contract for land, contract for period beyond a year. )he following are now under 2CC statute of frauds: Sale of more than BCDD -'-D,#, sale of securities 3'L,H#, personal property over BC,DDD ,'-DA#, security signed by debtor for claims in his personal property. 4ther common ones include waiver of statute of limitations, state by state requirements as necessary. 1"0. Pro3issory estoppel in statute o$ $rauds cases: Promise which should reasonably be expected to induce reliance, and did, is enforceable notwithstanding statute of frauds requirements, if it"s necessary to avoid in.ustice. 8emedy is limited as .ustice requires. -# 1n determining whether .ustice demands enforcement, the circumstances to be weighed are other possible remedies, particularly cancelation and restitution% definite and substantial character of the action in relation to the remedy sought% extent to which the reliance corroborates the making and terms of the contract or the general establishment of the evidence for the promise% the reasonableness of the reliance% and the extent to which it was foreseeable to the promisor. 788 9 :1. Statute of &rauds: 8equires writing down sales of more than BCDD, or else there is no contract. *lso must be signed by the party against whom enforcement is sought. /etween merchants, it is sufficient if the writing comes within a reasonable time, unless it is ob.ected to within ten days. 1"2 ;ven if it doesn"t meet the statute of frauds, it may still be valid if the requirements of this section are met. )he first one is if the goods are tailored specifically for the buyer and the seller has begun manufacturing them, but it seems complicated. (ook it up.# 4ne of them is if the party admits that he signed, another is if payment has been made and accepted, or delivery of goods has been made and accepted See -'-DA#.

Formation 1 4;egotiation5
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Restate3ent ,. 1also under intent to contract2 Preli3inary negotiations: :anifestation of willingness to enter into a bargain is not an offer if the recipient should have known that the offeror does not intend to conclude the agreement without further assent. ;.g. advertisements, invitation for bids. +ote that further language like >first come first served? and >lowest bid before )uesday at A gets the deal? might make it an offer.# See (onergan v. Scolnick# .. ;ral agree3ent w'ere written contract is conte3plated: )hat parties intend to create a written contract does not preclude a contract being formed orally, but it is evidence that the discussion was intended as negotiation rather than agreement.

6ff.%cc 1 Carlill, <onergan, 7estatement

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8arlill v 8arbolic S3oke %all Company advertised that they would pay anyone who took their remedy for two weeks and still got the flu. Someone did, and sought payment. )he company offered various defenses, one of which was that even if it was an offer, she didn"t accept. Verdict: /inding% Rule: 1n the manner that the offer was presented, notification of claim was sufficient for notification of acceptance. !onergan v Scolnick Scolnick advertised his land for sale, and he and (onergan exchanged several letters afterward. )he first letter was an inquiry about the location, which Scolnick answered, and noted that it was a form letter. (onergan"s second letter was more about the location, and some questions about the payment arrangement. Scolnick responded that the location was correct, that the payment suggestion would hypothetically be fine, but that (onergan should move fast, because Scolnick was planning to sell the land within a week. /y the time (onergan managed to respond, which was as soon as he got the letter, the land had been sold. 7e sued. )he lower court ruled that while Scolnick"s second letter was an offer, the acceptance wasn"t fast enough for the terms of the offer. )he appeals court upheld on different grounds, saying that it was not an offer at all. Verdict: +o binding contract% Rule: +ot every expression of willingness to sell is an offer. 1n this case, it was .ust a discussionMnegotiation, not an offer. . Mode o$ assent: ;$$er and acceptance: +ormally, the mode of assent is by one party offering and the other accepting. /ut it is possible to mutually assent to an agreement without a specifically identifiable offer and acceptance or moment of concurrence. (. ;$$er de$ined: *n offer is a manifestation of willingness to enter into a bargain, so made as to .ustify another person in understanding that his assent is invited and will complete the bargain. ,. 1also under ot'er 'eadings2 Preli3inary negotiations: :anifestation of willingness to enter into a bargain is not an offer if the recipient should have known that the offeror does not intend to conclude the agreement without further assent. ;.g. advertisements, invitation for bids. +ote that further language like >first come first served? and >lowest bid before )uesday at A gets the deal? might make it an offer.#

" . )nvitation o$ pro3ise or per$or3ance: =1n case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer requests or by rendering the performance, as the offeree chooses.? /asically codifies the presumption of bilateral contract, except it gives offeree the choice. *:. #cceptance de$ined; by per$or3ance and by pro3ise: *cceptance is manifesting assent to the terms of the offer, in a manner invited or required by the offer. *cceptance by performance means that it needs to be done by performing or beginning to. *cceptance by promise meansN acceptance by promise. */. #cceptance 3ust co3ply wit' ter3s o$ o$$er: )he acceptance must comply in performance or in promise with what the offer laid out. )his is different, it seems, from manner of acceptance.# ,". B'en acceptance takes e$$ect: *s soon as the expression of acceptance has left the offeree, it is valid. )he exception is in option contracts, in which case it needs to get to the promisor. ,0. #cceptance by silence or by e-ercise o$ do3inion: Silence is sufficient for acceptance when the offer is expressed by giving over something, and the understanding is that if one accepts it, one that is the purchase and requires payment% or if silence is expressed as a method of acceptance and the offeree intends to accept with silence, or where prior dealings show that that is how they do things. ;xercise of dominion also works as acceptance. )he example that 8estatement gives is if someone mails a product and says if you want it, forward payment, otherwise, 1"ll send postage for you to send it back, and the recipient doesn"t pay but he does give the book as a gift. )hat"s acceptance and he must pay.

6.% 2 /odds, /avis, Hot=ler, 7, U, C,S>

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+ickinson v +odds 1Revocation5 ;ption contract2 5odds offered to sell a piece of land to 5ickinson, and promised to hold the offer open until &riday. /y )hursday, 5ickinson heard that 5odds was talking to someone else about buying the land, so he rushed to get an acceptance to 5odds, although he only succeeded in getting it to 5odds"s mother in law. &riday morning, he rushed to meet 5odds, but that land had already been sold. 5ickinson sued for breach of the promise to hold the offer open. )he question of whether the offer was revoked was whether there was a binding contract to keep the offer open 0 was there intent to be bound, and was there consideration6 Verdict: +o binding offer; Rule: *s long as no consideration is given, the offer is sub.ect to withdrawal at any time. 1n this case, 5ickinson knew that the land was being sold to someone else, so he had notice that the offer was withdrawn. +avis v Dacoby 17nilateral v. %ilateral2 :r. $hitehead and his wife were going through difficult times. )hey were getting old, and they were not well. :r. $hitehead called their niece, Caro 5avis, and told her that if she and her husband would come take care of them, he would will his property to her. Caro and her husband agreed to come, but needed some time before they could leave. 5uring that time, :r. $hitehead first agoni@ed over whether they should come, then killed himself. )he 5avises found out that he had died, and immediately set out. )hey followed through with the promise and took care of his wife until she died a few months later. 1t turned out that $hitehead had not changed his will, and

the 5avises had to sue for it. )he estate claimed that the offer was unilateral 0 that they could accept it only by performance, and since he was dead before they performed, there was no contract. Verdict: /inding Contract% Rule: )here is a presumption for bilateral contracts rather than unilateral ones. Cites 8estatement, then also looks at some evidence, because restatement wasn"t binding law in that state.# &resser v HotEler 1Mirror i3age rule2 =resser and 7ot@ler were discussing the purchase of a property. )hey had exchanged a number of offers and counteroffers which also function as re.ections# for a few weeks. *s the closing date that they had been discussing approached, =resser returned a proposed contract that they"d given him and he had signed, but because the closing date was so close, and they would need to have an inspection done, he changed the closing date to a later time. *long with the contract, he sent a deposit. )he 7ot@lers did not sign that contract, and thereafter sold the land to someone else. =resser sued them for breach, saying that he"d signed their contract, and therefore it was binding. *lthough the term was changed, he didn"t care if they signed earlier, he was .ust proposing a change that he thought would work for them. *lternatively, he claimed that the changes weren"t material anyway, so the acceptance should be valid. 7e also made other claims, like that the agent had assured him that they would agree, although he knew the agent wasn"t authori@ed.# )hey countered that he had changed a term, and therefore it wasn"t an acceptance, rather it was a re.ection and counteroffer, since it violated the 3irror i3age rule. Verdict: +o contract% Rule: 1t is the ob.ectively manifested intent that matters, not the thought inside =resser"s head that he only meant the change to the contract as a suggestion. &urthermore, the mirror image rule applies with the sole exception of very minor changes to the contract. )his was not a very minor change. ",. 4er3ination o$ t'e power o$ acceptance: 8e.ection, lapse of time Jnote that lapse of time means specified deadline, or if there wasnOt one, it means reasonable time, which is a question of fact according to 8est. I, which was not assigned. Cite Carlill6#K revocation, death or incapacitation of offeror act as revocation. *lso, a non'occurrence of a condition of acceptance. (". )ndirect co33unication o$ revocation: *n action that the offeror takes that is inconsistent with intention to keep the offer open, that the offeree finds out about, terminates the offer. (*. ;ption contract created by part per$or3ance or tender: $hen an offeree begins performance on a unilateral contract, that creates an option contract which means that the offeror is bound to perform if the contract is completed. /.. ;ption contract: *n offer is binding as an option contract if it is in writing and signed by the offeror, recites a purported consideration, and proposes an exchange on fair terms within a reasonable amount of time. 1t can also be binding if it is made binding by statute. 1t can also be binding with a promissory estoppel rationale, if it was reasonably expected to induce reliance, and did in fact induce reliance. 1n such instances, it"s enforceable to the extent necessary to avoid in.ustice. 788 9 :(: 1also in ot'er sections2 For3ation: 112 :ay be made in any manner sufficient to show agreement, including conduct. 1 2 :oment of formation need not be determined. 1"2 ;ven if some terms are left open, a contract doesn"t fail for indefiniteness if there is a reasonable basis for giving a remedy. So this is somewhat different from the contract to renew that a court found indefinite, although obviously the 2CC would not have applied there anyway.#

9 :*: Fir3 o$$ers: 12nlike restatement, doesn"t require consideration2 * signed writing with the promise that the offer will be held open is not revocable until the stated time, but it is limited to three months. 9 :,: ;$$er and acceptance: 2nless there is some clear indication otherwise, an offer to make a contract invites acceptance in any manner reasonable. 8)S&: 1*. ;$$er: effective on reaching offeree% always revocable before or concurrent with reception of offer even if offer itself is irrevocable, it can be revoked before reception.# 1,. ;$$ers can be revoked before acceptance, unless they are irrevocable by explicit term, or implication that is reasonable for promisee to rely on and promisee has relied. 1.. ;$$ers5 even irrevocable ones5 are terminated upon re.ection reaching offeror. 5ifferent from 8estatement AL, in which acceptance needs to leave promisee.# 1/. #cceptance: Statement or conduct indicating assent is acceptance. Silence or inactivity is not. *cceptance is valid upon reac'ing t'e o$$eror unlike 8est. AL#. 4ral offers require immediate acceptance. 1f the offer itself, or course of practice has indicated that acceptance by performance is possible, beginning performance is sufficient.

6.% UCC 2*208

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+orton v 8ollins F #ik3an Complicated because -'-DP is complicated. 5orton bought carpet from Collins and *ikman for years. ;ventually, he reali@ed that they"d been cheating him, and he sued them. )hey claimed that there was an arbitration agreement, since the sales documents that they sent out all had arbitration agreements on them. )he lower court applied -'-DP, and .umped to -'-DP L#, which assumes that there was no offer and acceptance, and the acceptance of the goods is what made the contract, and its terms are the ones that match, together with 2CC defaults. 7owever, the lower court was mistaken. )he appeals court looked at the story and determined that the offer was likely usually during the conversations with Collins and *ikman employees, and the acceptance therefore was the sales form. )herefore, the first thing to find out on remand is whether there was any mention of the arbitration in the sales discussion, such that there would be no battle of the forms to begin with. )hen, assuming that there was no such arbitration condition mentioned and the sales form was introducing a >different or additional term?, the appeals court continued figuring out if acceptance was expressly conditioned on those terms. 1f it was, the contract is dead until course of conduct sends us back into -'-DP L#. 1f acceptance was not expressly conditioned on the new or additional terms, they are proposals for additional terms that become binding between merchants, if they are not material. )he court concluded that the acceptance was not expressly conditioned on these terms using interpretive tools# and therefore, remanded the case to determine if proposed additional terms altered the contract in any way. 1f they materially altered the contract, then they are not binding, if they didn"t, then they are binding. Verdict: 8emanded to determine Rule: 2tili@ation of 2CC -'-DP. 1s the acceptance introducing new terms6 1f it is, the court concludes that the answer to the next question 0 is acceptance expressly conditional on those terms6 is no. /ut then the following question is remanded 0 is the change, i.e. the arbitration clause, a material change6 1f it is, the changes are

not included. 1f it isn"t material, then the changes are included, unless there was an explicit ob.ection, which there doesn"t seem to have been. @locek v. &ateway; Hill v. &ateway: Sa3e case5 di$$erent circuits @locek v. &ateway: Flocek bought a computer from =ateway, and wanted to complain about it, but the return period had expired. So he went to court. =ateway said that there was an arbitration clause in his contract. )he court weighed whether there was one based on the way the contract was formed. *t the outset the court noted that there were wildly divergent approaches, although they seemed to hinge on whether the agreement was formed before the product was shipped. Court notes that in 7ill coming up nextQ# the Seventh Circuit didn"t see this as a battle of the forms and therefore didn"t use 2CC -'-DP. )he Court found this to be a mistake, since -'-DP applies on the one hand even when there was an agreement beforehand, and on the other hand, there is no reason to assume that the offer is the store shipping and the acceptance the customer receiving, which would give the store the right to institute whatever terms they want. /ecause the best interpretation is that the plaintiff offered to buy, and the store accepted that offer, or alternatively, that they agreed to the contract over the phone, and the written document merely confirms that# we apply -'-DP. 2nder -'-DP, since the plaintiff was not a merchant, he needed to expressly assent in order for the >different or new? terms to become part of the agreement. 7e did not do so. )herefore, the arbitration term is not added to the agreement. Verdict: +ew term is not binding% Rule: $hen new or different terms are added to a contract, and one party is not a merchant, the new terms need express assent and without it, they are not part of the agreement. Hill v. &ateway )his was the same case as the one above, except that in this case, Eudge ;asterbrook decided that -'-DP doesn"t apply. Since there was no battle of the forms, there was no -'-DP. 7e saw the offer as being the box arriving in the 7ills" house, and the terms of acceptance were clear 0 hold onto the computer, and you"ve accepted. Since the 7ills conceded that they noticed the statement of terms, they were held to the arbitration agreement. 1t is unclear what ;asterbrook was thinking when he decided that this is not a battle of the forms. 1t seems possible that he was .ustifying the decision to not consider it a battle of the forms because this is the way that sales work 0 you can"t be said to be discussing, offering, or assessing terms when you are buying a product out of a catalog on the phone. )herefore, the parties defer that process to such time as the store makes the terms of the >offer? known when the product is received, and the buyer can make an assessment thereof.# Verdict: /inding arbitration clause% Rule: )here needs to be two forms to invoke -'-DP. 4therwise, it only makes sense for the store to be the master of the offer, and make the terms and method of acceptance known upon receipt of the product. "/. ReGection ends the offer, unless the offeror specified otherwise "0. 8ountero$$er is an offer that is different from the original. 1t is a re.ection, unless the offeror specified otherwise in the offer, or the offeree specifies otherwise in making the counteroffer. *0. Purported acceptance which adds terms and is conditional on those terms, is actually a counteroffer i.e. re.ection# /ut what if it"s not conditional6 1s it seen as a proposal for new terms like -'-DP ,#6# ,:. Manner o$ acceptance: 1f an offer states a time, place, or manner of acceptance, that is binding.

,". 1also in ot'er sections2 B'en acceptance takes e$$ect: *s soon as the expression of acceptance has left the offeree, it is valid. )he exception is in option contracts, in which case it needs to get to the promisor. 788 9 :,: 1also in ot'er sections2 ;$$er and acceptance: 2nless there is some clear indication otherwise, an offer to make a contract invites acceptance in any manner reasonable. 9 :.: %attle o$ t'e $or3s 1CotH2: 1f there is an original offer or oral agreement#, and this written# acceptance contains different or additional terms, the following analysis commences wit' t'e 'elp o$ 'andy $lowc'artsH2: 1f the acceptance is conditional on the new terms, it dies here in -'-DP ,#. 1f the acceptance is not expressly conditional on the new terms, then the acceptance is valid and the contract goes into force. )hen we using -'-DP -## need to think about whether the new terms are included. /etween merchants, the new terms are included if they are not material, and are not ob.ected to, and if the original offer did not limit acceptance to the terms of the offer. 1f one of those three things happened, the contract is binding without the new terms. /etween non'merchants, the contract is binding without the new terms unless there is a clear acceptance of the new terms. 1f the contract or term died in -'-DP ,#, but the parties continued doing bidness as though there was an agreement, the agreement is valid insofar as the terms agree, and the parts they don"t agree on are filled in by the 2CC defaults.

Flo3c#art
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,ndefiniteness
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Cote: 1ncompleteness can also show that there was no intent to be bound by agreement. See 8estatement LL L#. Eudges can deal with incompleteness in different ways. )hey can say that this contract is too indefinite to remain standing, or they can say the contract stands, and fill in the terms with i3plied reasonable ter3s5 ter3s interpreted into t'e contract5 or de$ault gap $illers. Common law said that they wouldnOt enforce indefinite contracts $alker v. Feith#, but there is some movement the other way, like the 2CC, :oolenar, and the lower court in $alker. Varney v +it3ars 9arney worked for 5itmars. *t one point, 5itmars said that he wanted 9arney to take on extra responsibility, and if he would, 5itmars would pay him a bit more per week, and a bonus >share of the profits? at the end of the year. 1n the interim, 9arney did something that made 5itmars upset, and he also got sick and stopped showing up to work. 7e got fired. 7e sued for the BID per week salary that he was getting, from the time he stopped working till the end of the year, and also for a fair share of the profits that he was promised. )he court said that he didn"t work after he got sick, so he obviously wasn"t entitled to that. )he share of the profits was not sufficiently defined to have any meaning, so he had no claim on that. )he court cited another case where the claim was based on a promise that >1"ll make sure you get a satisfactory amount,? and that was deemed indefinite. 1n this case, the court noted that if he actually did extra work in pursuit of that unspecified bonus, he should get paid for that in equity, it seems 0 an un.ust enrichment type claim.# +issent: )he terms are not per se indefinite because they are not specified. Perhaps there is some data that can show how the damages should reasonably be computed. &urthermore, he should be entitled to the salary until the end of the year, since that was the promise 0 that he"d be there till the end of the year. Verdict: +o binding contract% Rule: $hen someone makes a general promise without specifying what the details are, it may be insufficiently definite to be binding. )nco3pletenessIinde$initeness 8o33unity +esign v. #ntonell *ntonell worked for Community 5esign. )hey had a pro.ect they"d been working on, and the boss made an announcement that he would give a bonus to anyone who was still on the pro.ect if it got done before Christmas. *ntonell and his coworkers finished their draft before Christmas, and the pro.ect dragged along for another few years. ;ventually, *ntonell wondered where his bonus was, and he sued. C5C said that the contract was unenforceable since it was indefinite. )here was no agreement on the amount of the bonus, the degree of completion, and the division among employees. Court says that uncertainty and indefiniteness is not a great outcome, especially when one party has benefitted from the agreement. 1n this case, there was some uncertainty, but some things were clear 0 the general pool, the number of employees that could possibly get the bonus, and that :rs. $ooster would make recommendations for amounts. )hat recipe was enough to make the damages sufficiently definite. Verdict: /inding agreement% Rule: $hen an agreement especially one in which one party has already benefitted# is

somewhat indefinite, but has a recipe to determine the terms, that is sufficiently definite to be enforced. Balker v @eit'% (essor was given an option to renew his land at the end of ten years at a rate >to be agreed upon?. )hey could not agree. )he lower court figured out what they thought was a reasonable rent, and assigned it to the renewal contract. )he defendant lessor appealed, claiming that an agreement to agree is to indefinite to be binding. )he court noted that it is simple to set a criteria for agreement, and it should generally be done to avoid uncertainty. &urthermore, the agreement to agree was in fact indefinite. Court notes that other courts have disagreed, assigning reasonable terms as the lower court did, to substitute for the indefinite terms. 7owever, this Court felt the indefiniteness is a black or white preposition 0 and if it"s not definite, it"s void and you can"t assign reasonable terms. ;ven if the contract specified they"d agree on reasonable terms, that wouldn"t be enough, since all numbers are hypothetically reasonable. Verdict: +o contract% Rule: $hen parties agree to later reach an agreement, without specifying terms, or a >recipe?, the contract is indefinite, and the court cannot validate an invalid contract by inserting reasonable terms. Moolenaar v 8o9%uild /asically the same case as the one before. )he lessee had a renewal agreement on terms that they would >agree on?. 1n the interim, the land was @oned for industrial use, and the lessor wanted about twenty times the rent that the lessee had been paying. )he question was if there was a contract at all, since the term might have been indefinite, and the second question was, if there was a contract, what were the terms6 )he .udge ruled that there was an enforceable renewal clause, that required the lessor to renew at a >reasonable? rate. 4n the second question, the .udge ruled that the >reasonable? rate was one that was reasonable for goat husbandry 0 the use that it was put to when the contract was signed, which was a few dollars more than the old rent, and a tiny fraction of what the land was currently worth. Verdict: binding renewal agreement% Rule: 4pposite of $alker v. Feith 0 an agreement to agree means an agreement to agree reasonably, which in this case the court interpreted as a reasonable rent for a goat farmer. +ote: )his is a terrible verdict. )he .udge looks at the case from the eyes of the farmer, and determines what is reasonable. /ut maybe the whole point of the agreement is that they will agree on something that is reasonable at the time which covers the contingency that the land is worth a lot. 1f this verdict is defensible, it might be because of risk allocation and economic analysis of the renewal term 0 if the .udge gave all the risk of the land going up in price to the farmer, meaning that if goat'farm rent is unreasonable after ten years, the farmer is S4(, then he has no options 0 he needs to relocate with no money. /ut if the risk is allocated to the landowner, i.e. if the rent is unreasonable for a goat farm, then the lessee still has the right to renew, then the owner can still get the rent he wants, he .ust has to pay the farmer enough to make him agree to leave.# Restate3ent "". 8ertainty: 112*n offer can"t be accepted unless the terms are reasonably certain. -#)erms are certain if they give a basis for determining existence of breach, and the appropriate remedy. L#1f one or more terms are left open, that may show that the intention wasn"t meant to be an offer or acceptance. 788 9 :(: 1also in ot'er sections2 For3ation: 112 :ay be made in any manner sufficient to show agreement, including conduct. 1 2 :oment of formation need not be determined. 1"2 ;ven if so3e ter3s are left open5 a contract doesnJt $ail $or inde$initeness if there is a reasonable

basis for giving a remedy. So this is somewhat different from the contract to renew that a court found indefinite, although obviously the 2CC would not have applied there anyway.# 9":*: Price not decided: 112* contract can be concluded if the price hasn"t been set, and the price will then be >reasonable price at time of delivery? if nothing was said about price, or they fail to agree, or it was set to be recorded by a market or third person, but wasn"t. 1 2 >Price to be fixed? means to be fixed in good faith. L# $hen deal called for agreement and they can"t agree because of the fault of one, other can treat the contract as cancelled, or fix himself a reasonable price can"t see that one going wrongN# I# 1f the parties intend to be bound only upon agreeing on a price, and they never do, there is no contract. Shipped goods must be returned if possible, and if not, paid for reasonably, and payment on account must be refunded.

,nterpretation
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Frigali3ent v %CS &rigaliment ordered chickens from /+S, and they had some disagreement about the meaning of the word >chicken?. &rigaliment said that it meant higher quality chicken, and /+S said lower quality. )he court said that since it was a3biguous5 the $irst step is to look at the contract for clues to interpretation. Ce-t the court looks at the negotiations leading to the contract. Plaintiffs contended that they used the ;nglish rather than the =erman since both parties knew that they were talking about young chickens higher quality# and the =erman word meant both. /ut that is unconvincing, since they did also say >7uhn? at least once and specified also >any kind of chicken. Plaintiff then claimed that in the trade, the word Chicken meant young chicken. 5efendant countered that they were .ust starting out, and therefore, the common law puts the burden on the other party to show that he knew. 1t was also debatable in the trade what the word meant. *nalysis then turns to >meaning of the word? evidence. 5efendant claimed that 5ept. of *griculture regulations called all chicken chicken, and the contract included reference to the regulations. &urthermore, the price showed that it must have referred to lower quality chicken. )he debate continues, and here"s the Verdict: Chicken means any chicken% Rule: $hen a party uses a word according to the regular ob.ective use, the other party bears the burden of showing that the intended definition was actually something else. Rando3 House v Rosetta %ooks 8osetta /ooks was a publisher of ebooks. )hey bought the rights to publish ebooks from people who had already sold the rights to publish the actual books, and license them, and gain from them, to 8andom 7ouse. 8osetta claimed that the rights to ebooks had never been sold. 8andom 7ouse sued, and said that they owned all the rights to publishing, and ebooks was one of those. Court cited Bartsch, which said that the intent of the parties was beyond reach, and it was left to the language of the contract, which indicated that rights to display and license a movie also included the rights to show it on )9. 1n Boosey the court said something similar. 1n this case, the court said, the language indicates that there was a perception of difference between publication rights and other rights. )his is based on the fact that the authors reserved some rights for themselves, and saw the >book? as the paper copy, separate from other editions, and reprints and

/raille editions. )herefore, the language is not ambiguous, and it does not include ebooks. /ecause it"s not ambiguous, it doesn"t get to a fact finder 0 ebooks are not in the contract as a matter of law. Restate3ent : . )nterpretation: 112$ords and other conduct are interpreted in light of all the circumstances, and the principal purpose, if ascertainable, is given great weight. -# * writing is interpreted as a whole, and all documents from a transaction are interpreted together. L# 2nless it"s clear otherwise, a# (anguage is assumed to have its general meaning, and b# technical terms and terms of art are interpreted with their technical meaning, if the transaction was in that field. :". Pre$erence in interpretation: 1n interpreting a contract preference is given to interpretations that a# give a reasonable, lawful, effective meaning, over an interpretation that leaves something unreasonable, unlawful, or of no effect. b# <-press ter3s are weightier than course of performance, course of dealing, and usage of trade, and course o$ dealing is given greater weight than usage of trade. c# Specific and exact terms are given weight over general language, and d# negotiated terms are given more weight than standardi@ed terms. :,. )nterpretation against t'e dra$ts3an: 1n choosing among reasonable meanings, it is preferable to choose a meaning that goes against the one who put that term in the contract or the writing that it"s from. 1"ll try a weird example 0 an no subletting clause that tenant says has a reasonability requirement from the landlord. Since the landlord supplied the term, it is better if we go against him, since he was looking out for himself, and if he didn"t mean this, he would have specified further. 7onestly, 1 don"t see this coming up, but maybe it will be a bonus.# :.. )nterpretation $avoring t'e public: should be chosen. ;xample: a contract is ambiguous about the rights it gives an inventor vs. his former employer. &inding in favor of the inventor encourages innovation and should be chosen.# 10. 7sage: 1s habitual or customary practice :. Interpretation by usage: *greements are interpreted by usage, if each party knew of the usage, and neither knew that the other intended it differently. See &rigaliment#. $hen the meaning attached by one party accorded with relevant usage, and the other knew of that usage, the other is treated as having known the meaning that the first party intended. 1. 7sage supplementing agree3ent: 8easonable usage can also add terms that were not clear into the contract. 1 think that"s what it means.# ;.g., if there is no specification, and this is the way things are done in the industry, this is the term. 1t"s different from interpretation, since it doesn"t reflect on words in the contract, it reflects what missing terms are. . 7sage o$ trade: Customs of an industry that are expected to be observed with this agreement. )he existence and scope of such usages is a question of fact, unless there"s a code for the industry, in which case it is an issue of law. Such usages can be used for interpretation or supplementation of an agreement. See --D and --,# ". 8ourse o$ dealing: is the sequence of conduct between the parties which establishes a common basis of understanding the terms. 1t can be used to interpret or supplement an agreement. )he way we"ve always done business6# 788 19 :*: Reasonableness5 seasonableness: )ime frames are .udged by reasonableness, depending on nature, purpose, and circumstances. Seasonableness is within the time specified by agreement, or, if there"s no specification, by reasonableness. 9 :/: 8ourse o$ per$or3ance5 practical construction: 112$hen the parties do business regularly, and this is what they"ve been doing without protest by either party, that can be used to

determine the meaning of the agreement. -# $hen the different interpretive tools don"t agree, e-press ter3s trump course o$ per$or3ance, and course of performance trumps course o$ dealing and usage o$ trade. L# Baiver can be shown by course of performance.

,nterpretation slides
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Here are t#e slides from interpretation, incl-ded beca-se t#e 7estatement is convol-ted and t#is is simple@ )#en -sing, t#o-g#, find a so-rce in t#e 7estatement for eac# tool@ Inter retation! "etermining the content #terms$ of agreement %rinci les&considerations 7easonableness ,n lig#t of all circ-mstances "rincipal p-rpose given great 3eig#t ,nterpret agreement as a 3#ole %void s-rpl-sage 4all terms reasonable, effective5 Consistenc$ across doc-ments, so-rces

%references >oal is to get as close as possible to intent of these parties in this contract Specific 3eig#ed more #eavil$ t#an general ;egotiated 3eig#ed more #eavil$ t#an standardi=ed Hierarc#$: o xpress terms o Co-rse of performance o Co-rse of dealing o Trade -sage

'ources of e(idence of meaning of a term xpress lang-age of term Aerbal )ritten 6t#er terms Context.p-rposes Co-rse of performance 6n this contract, t#ese parties Co-rse of dealing ,n re(ious contracts, t#ese parties Trade -sage ,n similar contracts, parties in t#e BtradeC.ind-str$

"arol evidence
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2:01 "!

Parol <vidence Parol evidence rule, or extrinsic evidence rules, apply when there is a written docu3ent that is intended as an expression of at least some of# the terms in the agreement. /ecause it"s been reduced to writing, that writing is now privileged over other expressions of the agreement. Parol evidence rule has traditionally been strict. *s other formalities have weakened, this has too, somewhat. <-trinsic evidence means things like purpose of the contract, verbal agreements, course of dealing, course of performance, etc. )here are two instances when you might want to use extrinsic evidence. )o interpret a term that is in the writing, or )o introduce a term that is not in the writing. 7ere are the details of those two employments for parol evidence: )o interpret a term that is in the writing, Rou may only introduce parol evidence for interpretation purposes when the written terms are ambiguous. California lets you use extrinsic evidence to show that it"s ambiguous in the first place See )rident Center#. 4ther states do not See ;lway, 8andom 7ouse#. 788 9 : allows the introduction of Course of performance, course of dealing, and trade usage to show ambiguity in the first place. 4nce that ambiguity is shown, other extrinsic evidence can be used. 2nclear if the 2CC believes in complete integration.# )o introduce a term that is not in the writing. )erms that are not in the writing are not en$orceable i$ )he writing is fully integrated, or )he term contradicts something in the writing even if the writing is only partially integrated.# <-ceptions: Can always introduce extrinsic evidence to prove misrepresentation, fraud, duress, lack of agreement, lack of consideration and in some .urisdictions# integration. )ntegrated means reducing a term to writing. Fully integrated means reducing the whole agreement to writing and limiting the agreement to this writing. >)his shall constitute the whole agreement,? etc. Celson v <lway Eohn ;lway bought a car dealership. 1n the contract, it said nothing about future payments to the seller, but the seller claimed that they"d agreed to make the payments. )here were previous writings that were assembled but never signed that had a payment of BCD per vehicle from ;lway to the original owner. ;ventually, they signed a buy'sell agreement that had an integration clause, and they also signed a sales agreement for the real estate. )he buy'sell agreement had a merger clause. )he seller sued for the payment per car, claiming that it was part of the agreement. Verdict: +othing outside the integrated contract admitted% Rule: Straightforward parol evidence rule 0 there was an integration clause, and this was not in the agreement, so it couldn"t be introduced. +issent: 1t"s not so straightforward. 1n fact, there were many documents signed, even though there was a merger clause. )he court should not give summary .udgment, it should allow the parties to at least present evidence. 4rident 8enter v 8onnecticut

)rident had a deal with Connecticut =eneral to borrow BCAm to construct an office building. )he contract had clear merger clauses, and clear clauses that said that the loan was not under any circumstances to be paid before ,- years. )hen interest rates went down, and )rident wanted to refinance. )hey claimed that the contract was ambiguous on its face, and also that even if it wasn"t, under California law, they could bring evidence to show that the clear language was actually not the agreement. )he court denied )rident"s claim that the acceleration clause that allowed the bank to call the loan in case of default made the contract ambiguous, since that was a tool for Connecticut, not for )rident to pay early. /ut the court was forced to agree that under California law, )rident was allowed to at least show evidence that the words of the contract were not in fact what the agreement was. Verdict: Parol evidence admissible even to contradict the clear terms in an integrated contract% Rule: 1n California, there is no parol evidence rule, after Pacific Gas. Since the contract flows from the agreement of the parties rather than the words, you can"t stop them from showing evidence of the agreement. Restate3ent: :0. )ntegrated agree3ent de$inition: $riting constituting expression of oneMmore of terms. $hether there is integration is a threshold question for the parol evidence rule. * writing that appears to incorporate the entire agreement is taken to be integrated unless there is contrary evidence. 1s any parol evidence of a conflicting term per se contrary to the presumption6# 1:. 8o3plete and partial integration de$ined: 11t is possible that it"s completely integrated even without a written clause.# *nd whether an agreement is fully or partially integrated is also a threshold question relating to the parol evidence rule. 11. StandardiEed agree3ents: Signing a standardi@ed agreement is integration for the terms in the contract. 1t includes all of the terms that are written, unless the party who proffered it knew that the other party wouldn"t have signed if he knew all the terms. 1 . )nterpretation o$ integrated agree3ent: is based on the meaning of the writings, in light of the circumstances. 1f it depends on credibility or inferences of extrinsic evidence, it become a question of fact. 4therwise, it is a question of law. 1". <vidence o$ integrated agree3ent on prior agree3ents: 1parol evidence rule2 * binding integrated agreement discharges prior agreements on the same issue more or fewer terms6#, and if they are inconsistent changed terms#. *n integrated agreement that is voidable or not binding does not discharge other prior agreements. /ut it might be able to change the terms. 1(. <vidence o$ prior or conte3poraneous agree3entsInegotiations: can be used to show that a writing is not integrated or that it"s partially integrated 8eally6 See ;lway.#% the meaning of the words, illegality, fraud, duress, mistake, etc. or grounds for granting rescission, reformation, specific performance, etc. 1*. 8ontradicting integrated ter3s: parol evidence may not contradict integrated terms, even partially integrated only. 1,. 8onsistent additional ter3s: can be added to partially integrated agreements but not completely integrated ones. *n agreement is not completely integrated if it is missing an agreed consistent additional term. Second part is unclear, check if necessary# 1.. )ntegrated agree3ent subGect to oral condition: 1s not integrated with respect to that condition. 788 9 : 1also in ot'er sections2 allows the introduction of specifically course of performance, course of dealing, and trade usage to show ambiguity in the first place. 4nce that ambiguity is

shown, other extrinsic evidence can be used. 2nclear if the 2CC believes in complete integration.#

,mplied terms
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)3plied 4er3s Bood v !ucy $ood promised to sell clothes for (ucy she was a designer# and if he sold them, he would give her a percentage of the profits. 1n exchange, she would only sell exclusively to him. ;ventually, she wanted to sell to others, and she claimed that that there was no consideration, since he could always not sell if he wanted to not sell. )herefore the consideration was illusory. Cardo@o ruled that it would have made no sense to have a deal without a commitment to sell the clothes. Verdict: )here was consideration because% Rule: Rou can imply a term into a contract, and in this case, the term was only reasonable. !ocke v Barner (ocke was an actress and director who had a deal with $arner /ros. that she would develop scripts and they would consider them. )he problem was that she was the ex of Clint ;astwood, and they were not going to develop her pictures and upset him. She had evidence that they had no intention of ever developing them, so she sued. )hey countered that they never promised to produce them, so she could have no claim. Verdict: breach% Rule: ;ven though they had no obligation to produce the scripts, they did have an obligation to examine them in good faith. Hobin v 8oldwell 7obin was a real estate agent, and he wanted to become a Coldwell /anker agent. 7e was worried about the competition and he wanted them to reassure him that they wouldn"t let another office open. )hey refused to contract to that term, and in fact the contract said that they reserve the right to open offices nearby, but they said verbally that their protocols wouldn"t allow it. *s it turned out, another agent moved in, and since he was a prior agent for them, their protocols didn"t block it in that instance. 7obin claimed that they had breached the covenant of good faith and fair dealing. )hey countered that the contract allowed it. Verdict: +o breach, Rule: $hen the contract specifically allows something, you cannot claim that it is against the good faith and fair dealing. :(: $hen parties have agreed in a way that"s sufficient to be a contract, and there is some of it missing, the court supplies the term using reasonableness. :*: ;very contract imposes on the parties a duty of good faith and fair dealing. )3plied ter3s can be 1mplied'in9$act 1ntended by the parties but not expressed 1mplied'in9law ;xternally imposed, not derived from parties" intent de$ault can contract out# 3andatory cannot contract out# Sources o$ i3plied9in9law ter3s

Statute, e.g., 2CC ,'-DL good faith# 2CC -'LDC reasonable price# 2CC -'LDA best efforts in exclusive dealing contracts# 2CC -'L,I merchantability# 2CC -'L,C fitness for particular purpose# Partnership statutes Corporate law Consumer protection regulation Common law 4mitted essential term otherwise sufficiently definite 8est -DI# =ood faith 8est -DC# =ood faith: Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement (Rest 205) +ot an independent obligation *ttaches to the exercise of discretion in carrying out contractual obligation Cannot be used to generate obligation in conflict with express terms including express absence of obligation# $hat is good faith6 ;xercising discretion in per$or3ance so as not to deprive other of opportunity to reap the benefits of the bargain Choosing how to per$or3 in a 3anner that remain faithful to intended and agreed expectations &utility is not required. )@u'shtell from !uttinger v. Rosen5 where court said that since his lawyer told him other banks wouldnOt give the loan, it was enough that he only applied to the one that might. ;xamples of bad faith bad reasonsMmotivation#: (ying to contracting partner a$ter F formed# 5eliberately acting under contract to harm contracting partner =ood faith in the 2CC: 2CC ,'-DL Every contract or duty within this Act imposes an obligation of good faith in its performance or enforcement 2CC ,'-D, ,H# Good faith means honesty in fact in the conduct or transaction concerned 2CC -'-DL ,# b# Good faith in the case of a merchant means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade

2CC ,'-DL, ,'-D, ,H#, -',DL ,# b#, -'LDA, -'LDC, -'L,I, -'L,C

!is-nderstanding, !istake

T-esda$, !a$ 01, 2012 10:00 "!

Ra$$les v Bic'el'aus Plaintiffs were to sell cotton that arrived on the ship Peerless to defendants. )hen they arrived, and defendant refused the cotton. 5efendants claimed that they were only willing to take the cotton from the Peerless that sailed in 4ctober, not the one that sailed in 5ecember. Plaintiff didn"t offer the one in 4ctober, only the one in 5ecember. )he court ruled that there was a mutual mistake and therefore no binding contract. Since there was no binding contract, the defendant could not be forced to take his cotton. Verdict: +o contract Rule: $hen they think there"s an agreement but there really isn"t, there"s no agreement and therefore no contract. S'erwood v Balker $alker had this cow which he sold on the understanding that she was barren. )he price was that of a meat cow. 7owever, he was mistaken, and the cow was with calf. $hen he found that out, he refused to deliver the cow at the agreed on price of B3D, wanting instead to sell her or keep her at a higher value. Sherwood sued. Court looks at difference between essential aspects of the contract and other aspects of the contract, and concludes that the fertility of the cow is enough to make this whole thing a mutual mistake, and therefore there was no contract. Verdict: no binding contract% Rule: $hen there is a mutual mistake as to the essential nature of the article in question, the contract is void. +issent: )he purpose of this agreement was not undermined by this mistake. )rue, the defendant thought that the cow wouldn"t breed, but all along, the reason that the plaintiff was buying or, actually, had bought# the cow was because he believed that it would breed. 1t was a gamble on his part, and that is why he was doing the deal. 7is .udgment turned out to be correct, and the defendant"s .udgment wasn"t and that was why they were refusing to turn over the cow. =ives example of a horse that the owner thought was slower, and sold him for a certain amount, and then the buyer succeeded in making the horse go faster, that would obviously not allow the seller to go back and claim mutual mistake. Misunderstanding Celson v Rice 8ice bought an expensive painting from +elson without knowing that it was an expensive painting. )hen he had it appraised and made a million bucks on it. +elson sued. 8ules: when there"s a mutual mistake about the basic assumption upon which the parties made the contract% it has to have such a material effect as to upset the basis on which the contract was made. Section 1*(b in Restate3ent: when someone has a limited basis of knowledge, but deems that limited base of knowledge sufficient, he bears the risk of mistake. >in such a situation there is not any mistake, there is an awareness of uncertainty and conscious ignorance of the future.? $ash. supreme court# Comment in restatement 0 if he knew that his knowledge was limited but chose anyway to perform in the face of that uncertainty, he bears the risk of mistake. Since seller knew knew that there was a chance of some amount of art, and they chose to rely on their appraiser, even though they knew that she was not an expert on fine art. )herefore they chose to live with the risk. +otes that the risk acceptance doesn"t apply when the buyer doesn"t know about something because that doesn"t allocate risk among the parties.

)he court can allocate responsibility 2nder 8estatement ,CI C, and in this case, seller had ample opportunity to determine what the painting was worth, therefore it is reasonable to allocate the responsibility to them. 2nconscionability is not an issue here because there was no bargaining, they .ust named a price and the buyer paid it. 9erdict: Contract valid, and therefore no compensation to estate sellers 8ule: 1t is not a mutual mistake if a party knew about the vulnerability and chose to ignore it. *lso, the court can allocate responsibility for knowing the state of things among the parties. Misunderstanding and Mistake are $or3ation de$ense Problems at formation that allow one to avoid obligation of otherwise validly formed contract Problems of consent goes to legitimacy of enforcement# Re3edy is rescission So don"t use if you want damages.# 9oiding contract Cannot sue for relianceMexpectation damages ;ither party can claim restitution non'contract claim# Misunderstanding &ailure of mutual assent: parties did not intend to agree to the same deal :odern# ob.ective theory: both have ob.ectively reasonable basis for believing that other intends the same thing 8estatement -D. <$$ect ;$ Misunderstanding ,# )here is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and a# neither party knows or has reason to know the meaning attached by the other% or b# each party knows or each party has reason to know the meaning attached by the other. B'en t'e two parties 'ave di$$erent 3eanings5 and one know or s'ould know about it: :1. B'ose Meaning Prevails6 -# $here the parties have attached different meanings to a promise or agreement or a term thereof, it is interpreted in accordance with the meaning attached by one of them if at the time the agreement was made a# that party did not know of any different meaning attached by the other, and the other knew the meaning attached by the first party% or b# that party had no reason to know of any different meaning attached by the other, and the other had reason to know the meaning attached by the first party. Mistake v. Misunderstanding: Misunderstanding doctrine concerns errors about what other intends in termsMcontent of deal, while Mistake doctrine concerns errors in beliefs about facts in existence at time of contracting 8,C,# :istake is not errors in predictions or opinions K 1* . %ilateral Mistake ,# $here a 3istake of bot' parties at the time a contract was made as to a basic assu3ption on which the contract was made has a 3aterial e$$ect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless 'e bears t'e risk of the mistake under the rule stated in S ,CI.

K 1*". 7nilateral Mistake 1one party knew about the fact, and the other didn"t2 $here a 3istake of one party at the time a contract was made as to a basic assu3ption on which he made the contract has a 3aterial e$$ect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear t'e risk of the mistake under the rule stated in S ,CI, and a# the effect of the mistake is such that enforcement of the contract would be unconscionable, or b# the other party had reason to know of the mistake or his $ault caused the mistake. 1*(. B'en # Party %ears 4'e Risk ;$ # Mistake * party bears the risk of a mistake when a# the risk is allocated to him by agreement of the parties, or b# he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or c# the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so. )hereOs also restatement ,CP: ;ffect of party at fault seeking relief ' he can void, as long as his fault was not in bad faith.

Fra-d, misrepresentation
T-esda$, !a$ 01, 2012 10:28 "!

Halpert v Rosent'al 8osenthal was going to buy a house from 7alpert, and while they were negotiating, he asked several times whether there were termites. 7alpert said that there were not. )hey entered into a contract to buy the house, and then afterward, the inspection turned up termites. 5efendant notified plaintiff that he was not going to buy the house, and didn"t show up for the closing date. Plaintiff sued for performance or monetary damages. 5efendant counterclaimed for his deposit. *fter .ury returned verdict for defendant, plaintiff appealed. Plaintiff, seller# claimed that there was no fraud because he didn"t know that there were termites. Court weighed whether honest mistake was fraud. Court said yes. /ut it should be referred to as misrepresentation rather than fraud. Verdict: 9oidable on grounds of misrepresentation% Rule: * contract can be voided on grounds of 3isrepresentation even when the statement by the misrepresenting party is made in good faith and to the best of her knowledge. Swinton v B'itinsville Swinton bought a house from $hitinsville Savings /ank, which neglected to tell him that the house was infested with termites. Swinton sued for damages. )he court ruled that .ust because bank knew about the termites, they were not obligated to inform the buyer. )hey didn"t stop him from performing an inspection, they didn"t lie about it, they .ust didn"t tell him, etc. 1f we were to render the seller liable, we would be forcing sellers all over to relate any non'apparent defect to buyers. )hat is bad. )here was also no duty for the bank such that they had to volunteer the information. Verdict: no

,. -. L. I.

remedy% Rule: sellers are not required to inform buyers of defects that are not apparent and that the buyers did not ask about. this is not the rule anymore.# Beintraub v @robatsc' $eintraub owned a house that Frobatsch was looking to buy. )hey put down a deposit in escrow of I,-CD which was a ,DT portion of the sales price. *fter they did so, they went to inspect the house. )his time, they came into a dark house and turned on the lights. $hen that happened, they noticed that the house was infested with roaches. )hey sought to rescind the contract of sale. :rs. $eintraub refused to accept the rescission, and sued them for the amount of deposit that was in escrow. *ttorney for Frobatsch claimed that it was impossible to live in such a house and not know that there was such an infestation. 1t would be evident every time the lights were turned on. )hey claimed that they were entitled to a trial on the question of whether there was a fraudulent concealment or nondisclosure. $eintraub relied on the above case, Swinton v. B'itinsville, which showed that there was no duty to disclose. )he court addressed that and discarded it, saying that that was then and this is now, and there is some expectation that the seller disclose information like that. )he trial court should therefore examine whether the concealment was of such a significant nature as to allow for rescission. 9erdict: Possible rescission, remanded to see if concealment was intentional. Rule: Concealment of a material fact by nondisclosure can be fraud. )here may be equitable grounds for rescission if the concealment was significant. )here needs to be a failure to disclose, a non'apparent defect, where good faith requires disclosure. Prof says that more than .ust overturning Swinton, it is instituting a rule, and also finding that this is a case where good faith requires disclosure.# Fraud can involve )ort action for fraudMdeceit Uentitlement to tort da3ages Contract action for rescission Lno @ da3ages Restate3ent 1,(: B'en # Misrepresentation Makes # 8ontract Voidable: 1f a partyOs manifestation of assent is induced by either a $raudulent or a 3aterial misrepresentation by the other party upon w'ic' t'e recipient is Gusti$ied in relying, the contract is voidable by the recipient. <le3ents o$ 3isrepresentation 1(2: *ssertion not in accord with facts &raudulent 48 material 8eliance in fact 8eliance .ustified ;valuating reliance: 8eliance in fact *ssertion in fact substantially contributed to decision to assent Eustifiable Can"t be obviously false or in .est +ot necessarily obligated to take steps to discover facts 8eliance on opinion not .ustified unless 1R 1,02 8elation of trust and confidence 8easonable belief that maker has special skill, .udgment

>Special reason? for susceptibility 4'e ele3ents o$ 3isrepresentation are in R 1*091,(5 1,/5 1,0 1*0: Misrepresentation de$ined as assertion not in accord with facts 1,:. 8onceal3ent: $hen an action is equivalent to an assertion: $hen it"s likely to prevent another from learning a fact. 1,1. B'en non disclosure is eAual to assertion: 1, . B'en 3isrepresentation is $raudulent or 3aterial: 1f he knows it"s not true, he doesn"t know what he claims to know, or he knows that he doesn"t have the basis that he states. 1t"s Material if he knows that it"s likely to induce assent. 1,": B'en 3isrepresentation prevents contract $or3ation: 1f it was about the character or essential terms and it induces conduct by someone who doesn"t know or have reason to know about it, the assent is not effective as manifestation of assent. 1,(: B'en 3isrepresentation 3akes a contract voidable: 1f assent was induced by fraudulent or material misrepresentation, by other party on w'o3 'e was Gusti$ied see ,AH# in relying, it"s voidable 1,0: Reliance on opinion not Gusti$ied unless 8elation of trust and confidence% 8easonable belief that maker has special skill, .udgment% >Special reason? for susceptibility

/-ress, Und-e infl-ence

T-esda$, !a$ 01, 2012 10:'( "!

2ndue influence vs. 5uress: 2sually, 5uress involves threats, especially illicit ones. /ut 2ndue influence is pressure to get into something. Sign now, don"t consult a lawyer 0 even if there"s no threat or the threat is valid, it can be undue influence. Prof says that duress is creating bad alternatives, undue influence is exploiting bad alternatives. /ut it does seem that it would be possible to unduly influence without threats at all# 4ote3 v #lyeska )otem and *lyeska contracted to have materials shipped from 7ouston to *laska. :any things went wrong, which began with *lyeska misleading )otem about the shipment. (ater, *lyeska terminated the contract, and they settled with )otem for a fraction of the amount that was agreed to. )otem later wanted to void the settlement, and enforce the earlier amount, which was about BLDD,DDD. )he basis of their claim was economic duress 0 they had to assent in order to stay in business, but they really didn"t want to. )his is shades of *ngel v. :urray and *laska Packers#. )he test the court set out was ,. 1nvoluntary acceptance, -. +o alternatives, and L. Circumstances resulted from coercive or wrongful acts of party. 9erdict: +o settlement contract on grounds of duress% 8ule: $hen a party is forced to accept something involuntarily, had no alternatives, and it was caused by opposing party, the agreement is voidable. 7ndue )n$luence ;doriEEi v %loo3$ield &acts: Plaintiff P# was and elementary school teacher and he was arrested for homosexual activities. 5istrict superintendent and school principal visited P"s house and told him that he should resign or otherwise he will be dismissed and his arrest will be made public. )he

,. -. L. I. C. A. P.

charges against P were dismissed and now P wants to rescind his resignation by arguing that it was obtained by duress and undue influence. 1ssue: $as the resignation attained by ,. duress6 -. 2ndue 1nfluence6 7olding: ,. +o -. Res 8ationale: )he court ruled that there was no duress because the school"s threat to dismiss was >not only their legal right but their positive duty.? /ut P does have a case under undue influence. > )he representatives of the school board undertook to achieve their ob.ective by overpersuasion and imposition to secure plaintiff"s signature but not his consent to his resignation through a high pressure carrort'and'stick techniqueN? P was left no time to seek legal advice and excessive pressure was placed on the P to make the hasty decision. 9erdict: no contract because of undue influence 8ule: 2ndue influence usually involves several of the following P elements: discussion of the transaction at an unusual or inappropriate time consummation of the transaction in an unusual place insistent demand that the business be finished at once extreme emphasis on untoward consequences of delay the use of multiple persuaders by the dominant side against a single servient party absence of third party advisers to the servient party statements that there is no time to consult financial advisers or attorneys 1.(. P'ysical co3pulsion is not assent. 1.*. +uress by t'reat: 9oidable if it leaves the party no alternative. 1f it was induced by a third party, it"s voidable unless the other party didn"t know, and has already relied on the contract. 1.,. 4'reat is i3proper w'en it"s a crime or tort, if it"s the threat of criminal prosecution, if it"s a threat to make bad faith use of the .ustice system, breach of good faith and fair dealing. 4'ese t'reats are only i3proper w'en t'e resulting e-c'ange is i3proper: 7arm to the recipient without benefit to threatening party even if the damage is not high, 1 guess6#% if the effectiveness is increased by prior unfair dealing, or it"s the use of power for illegitimate ends. 1... 7ndue in$luence: ;ither someone under domination or someone who trusts party. Such contract is voidable. 1f it"s a third party, it"s voidable unless the contracting party already relied on it, and wasn"t aware of the undue influence.

Unconscionabilit$
)ednesda$, !a$ 02, 2012 ::&1 %!

2nconscionability Billia3s v Balker94'o3as $illiams was a poor woman subsisting on welfare. She bought things from $alker')homas which was like a 8ent a Center place. )hey had a clause in the contract that said that each time you bought something form them, the previous debt .oined the current purchase, and it was all backed by all the things that youOd bought. So if you bought ,,DDD worth of stuff over ten years, and you owed ten bucks at the end on the last pot, you could have all the stuff sei@ed. $illiams sued on Vmeeting of the minds theory, but the lower court ruled that she supposedly read the

contract, so that was not a viable claim. Court noted that selling expensive )9 to woman who had no reported income was bad but not actionable. *ppeals court said that this specific case might be new, but thereOs a concept of unconscionability 9 absence o$ 3eaning$ul choice by one party and that depends on the totality of the circumstances, including education and relative position of the parties. Verdict: 9oidable contract Rule: an absence of meaningful choice by one party, based on the totality of the circumstances, can void a contract. %rower v &ateway *s we know, =ateway had these arbitration clauses. 1n this one, the arbitration was to be conducted in Chicago using the 1CC rules. Plaintiff claimed -'-DP, but was struck down, as this was +ew Rork, the site of the Flocek decision. Plaintiff also claimed unconscionability because the required forum was in Chicago and cost a huge amount of money. Court notes that there is usually a requirement for substantive and procedural unconscionability, but in this case, although there was no procedural unconscionability, the substance of the contract was so unconscionable that it was enough to make this contract problematic. +ow the question arises what to do about the unconscionable clause. Should they void the term entirely6 &ind another arbitration body with better prices6 )he court decided in favor of remanding to the lower court to determine whether an alternate arbitration body was better. Verdict: )erm is problematic because of unconscionability. Rule: $hen a term is really unconscionable, it cannot be enforced, even if there was no procedural unconscionability. )he court can void it, or substitute its own term. o 7nconscionability notes: 8equires absence o$ 3eaning$ul c'oice. o 2sually requires both substantive and procedural unconscionability /rower v. =ateway# o 8elated to undue in$luence and restatement ,PP.
)*+. 7nconscionability: 1f a term is unconscionable, a court may refuse to enforce the contract entirely voidable# enforce the remainder without this clause, or limit the term so that itOs reasonable.

788 9": . 7nconscionable contract or clause: part ,# is almost verbatim the restatement. -# Parties can show evidence as to the termOs commercial setting, purpose, and effect to help the court determine.

Condition precedent
)ednesda$, !a$ 02, 2012 ::9( %!

!uttinger v Rosen;
(uttinger made a deal to buy land from 8osen on the condition that he could get a loan at less than 3.CT from a bank. 7is lawyer told him that the only chance was /ank of +ew 7aven. )hey ended up offering only 3.PCT and (uttinger wanted to back out of the deal. 8osen offered to make up the difference out of his pocket, but (uttinger said that that was not meeting the condition of getting a loan. 8osen also claimed that he had not acted in good faith, since he only tried that one bank. Verdict: +o obligation on (uttinger% Rule: 1f a condition precedent has not been met, then the following terms to not come into effect. 1n this case, the condition wasnOt met by 8osen offering to fill in the gap. *lso, there was no breach of good faith, since he had no duty to attempt futile things .ust to look like he was trying.

Peacock v Modern Peacock was a construction company that hired :odern to do some work on one of their pro.ects. )he contract said that :odern would get paid upon approval and when Peacock has been paid by the customer. Peacock had trouble getting paid at all, and :odern sued for their

payment. )he question was whether the requirement that Peacock get paid was a condition precedent, or simply a time frame. Verdict: Peacock must pay% Rule: /ecause of the nature of the transaction between contractors and subcontractors, the default rule is that when thereOs a clause that says the contractor must be paid, it should be interpreted as a time frame, not as a condition precedent. )herefore, if the time becomes unreasonable, contractor has to pay even if he hasnOt gotten paid yet. Cotes on condition: Some are e-press: )he ones in these cases% force ma.eure clauses that are common, etc. o Some are i3plied in $act, if the parties intended a conditional obligation, and the obligation is conditional. o )3plied in law: payment in local currency, impossibility, frustration. apparently they work with the same mechanism as condition.# o )hings can be conditions without being terms, or terms without being conditions, or both a term and condition. (. 8ondition de$ined: Something that must occur in order for performance under the contract to come due. *. <$$ects o$ t'e non9occurrence o$ a condition: Performance cannot become due without the condition being met or its occurrence is excused. 1f it is not possible to occur anymore, the conditional duty is discharged. +on'occurrence of the condition is not a breach, unless the contract specifies performance of the condition. ,. How an event 3ay be 3ade a condition: /y agreement of the parties, or by a term supplied by the court. 0. <-cuse o$ a condition to avoid $or$eiture: )o the extent that the non'occurrence of the condition causes disproportionate forfeiture, the court may excuse the non'performance, as long as it is not a material part of the agreement. $hat is a material part6 7ow would it relate to not getting paid for installing a swimming pool on a roof6#

)aiver 4v@ !odification5

)ednesda$, !a$ 02, 2012 10:19 %!

Baiver is a performance excuse. Can defeat condition as performance excuse. V1 didnOt build the house because you didnOt get me the materials as promisedV V4h yeah6 $ell you said that you would get them yourself, so you waived that conditionQV 8an be e-press or i3plied.

8an be retracted if it wasnOt relied on. -'-DH C# Compare and contrast to modification: :odification is changing the contract. 1t is a contract theory claim. $aiver is not ' it is an equity issue claim. 1n 5ynamic, the two are similar, but often, they wonOt be. 1n :ay v. Paris, youOd have a harder time saying that the course of dealing modified the contract. +yna3ic v Mac'ine F <lectrical 5ynamic ordered a machine from :achine, and they had certain requirements for delivery and when it would be operational. )he deadlines kept getting pushed back, and eventually, 5ynamicOs C;4 sent an email to :achine saying that he would agree to one last drop dead date

and at that point, he would call in the troops and end the deal if it wasnOt ready yet. )hen he got information that indicated there was no way that theyOd even be done by that extended date. So he called back immediately, and rescinded his extension. )hat led to a suit for breach, which :achine defended by saying that they didnOt have time, to which 5ynamic claimed they missed the deadline, to which :achine said that they waived, to which 5ynamic claimed that they rescinded the waiver. )he debate hinged on whether this was a modification or a waiver. 1f it was a waiver, it was reversible, if it was a modification it wasnOt. Since there was a question of fact, the court ruled that it should go to a .ury to decide. Verdict: $aiver not enforceable, but modification enforceable. Rule: 1f you waive, and the other party has not relied on the waiver to put himself in a worse position 1 9 :01*2, then you can retract the waiver with notice. /ut if you modify, then it is binding. So you often need to determine whether something is a waiver or modification. May v Paris Paris was a shop that rented a storefront from :ay. )he owners of Paris were the co'signers on the (oan that Paris took out. 1f they paid the rent for two year on time, then they were no longer guarantors, but if they were in default at the end of two years, then the guaranty would be extended. )he story is obvious from here on out: )hey paid rent late'ish for two years, and shortly after their two year anniversary started to get even more sporadic. ;ventually they went into default and closed. )he business alone wasnOt enough to pay :ay. :ay claimed that they were in default at the end of two years, and therefore were personally responsible for the debt. )he court determined that the due date for the rent meant that Paris was not in default, but even if they had missed the date, they were no longer in default as of the end of two years, since their rent check had been accepted without a disclaimer, and when you accept performance that is somewhat different from that ordered without protest, then the duty is discharged. Verdict: +o guaranty invoked, because default was in any case waived. Rule: $hen you accept a different performance than the required one without protest, the other partyOs duty to perform the particular term is discharged. 9 :0: Modi$ication5 rescission5 waiver: ,# :odification in general works unlike restatement#. -# 1f the agreement requires modifications in writing, then they need to be in writing. L# Statute of &rauds applies to modification I# ;ven if it doesn"t work under subsection - or L, it can be a waiver. C#$aiver can be retracted by reasonable notification, unless the other party has materially changed their position and it would be un.ust. 5ynamic v. :achine#. F !"# !$

!aterial 2reac# 4election of remedies5

)ednesda$, !a$ 02, 2012 10:&2 %!

Cote: %reac' need not be material to claim damages. Material breach is only relevant as a performance defense. Risks in'erent in 3aterial breac' analysis: Rou are basically telling your client that they can now proceed to breach, so you better be right about it. 1f you say to keep performing because

itOs not material, you can be waiving, potentially. So you have to keep them informed of all the risks. Dacob F Moungs v. @ent Plaintiff built a house for defendant, and installed pipes that were not made in the factory that the contract specified. 5efendant, after living in the house for about ten months, learned that the pipes did not meet his specifications. 7e demanded that Plaintiff replace the pipes, but plaintiff did not want to do that, since it would have meant wrecking a good portion of the work that had been done, and re'doing it. Plaintiff then sued for the remaining payment, which defendant had refused. Cardo@o notes that the omission was not willful or fraudulent. 1t was an oversight by the subcontractor. Plaintiff showed evidence that the pipes were of the same quality, and the trial court did not allow the evidence. )he appeals court overturned and remanded. Cardo@o for the ma.ority wrote that sometimes it doesn"t make sense to look at particular things as significant and in this case, since it would be un.ust to make the guy rebuild the whole house in order to install piping of the same quality, it should not be looked at as an unperformed contract, but as a breach that causes damage 0 and the value of the damage is nothing. 9erdict: &or Plaintiff 0 breach was not material, substantial performance was enough, damages would have been insignificant. =enerally such questions are for the .ury. 8ule: 1unno, see restatement -I,. Factors circu3stances analysis, not elements to be checked off# a. <-tent in.ured deprived of benefit reasonably expected e.g. in Eacob W Roungs the homeowner wouldn"t lose much# b. <-tent in.ured can be compensated )here are different ways to calculate this, you can argue whether the difference in value should be paid in cash, or if you should tear down the house to replace the pipe.# c. <-tent breaching party will suffer forfeiture i.e. how much is the builder losing by not getting paid for the pipe 0 it was BL,CDD and the damage was not that large# d. !ikeli'ood breaching party will cure if it can still be fixed, it is less material of a breach. )he pipes were not getting fixed.# e. <-tent breaching party acted with good faith and fair dealing e.g. in the pipe case, the builder did not act in bad faith.# <SPC v %aseball ;SP+ signed a deal with /aseball that would allow them to broadcast Sunday and $ednesday games. )hey promised to broadcast the games, and would only preempt them with the approval of /aseball and only up to ten games a year. /aseball would approve requests within reason. * few years later, ;SP+ bought the rights to Sunday +ight &ootball. )hey wanted to preempt baseball on three nights in September. /aseball denied them the request, and denied them the rights to broadcast the preempted games on ;SP+ -. ;SP+ simply didn"t broadcast the games, and then repeated the same thing a year later. )he following year, /aseball sought to terminate the contract, saying that it had been materially breached by ;SP+. ;SP+ sued in response, saying that /aseball had materially breached by not allowing them to preempt, not allowing them to broadcast the games on ;SP+ -, and terminating the contract. /aseball countersued, saying that ;SP+ breached

by entering into conflicting agreements with +&(, preempting games without approval, and using too much highlight film. /aseball sought election of remedies. )hat meant that they could either choose to terminate the contract and get damages, or they could choose to keep the contract running and claim damages for the breach. ;SP+ countered that they had already kept the contract going, and they couldn"t now terminate it for those breaches. /aseball counters that there was a >no waiver? provision in the contract. Court discusses the principles of >no waiver? and common law election of remedies. $aiver means that if there is a provision in the contract that one side doesn"t fulfill, the other side can protest it or waive it. $aiving it means they will not pursue it further, and the contract continues. Court says that election of remedies does not compete with waiver. 1f /aseball wanted to complain about the material breach, they could do so. *ll that election of remedies says is that once they choose to react to the breach, they can either keep the contract going, or end it, in enforcement of their complaint. Rule: $aiver and election of remedies operate in different ways. $aiver is that once youOve accepted a performance, or said that you wonOt require it, the other party has discharged its obligation. ;lection of remedies is that when you are claiming breach, you can choose to keep the performing and ask for damages, or you can choose to end the contract and sue for damages. 1 guess that election of remedies only kicks in once you havenOt waived.
Restate3ent "*: Per$or3ance and breac': performing discharges obligation. &ailure to perform is breach. ",. 8lai3 $or da3ages $or breac': 1s the value of the remaining missing performance. See damages, though# ".: Material breac': &ailure to render material performance is an implied condition, which means that the other party can breach. See above in Eacobs W Roung case #$ter breac'5 at w'at point is t'e ot'er personNs duty disc'arged 6 )he factors that are relevant are those in -I,, and also look at the extent to which waiting around can cause loss, and the extent to which timely performance was necessary for the contract. 4'is could be a big AuestionH#

,mpossibilit$.Fr-stration
)ednesda$, !a$ 02, 2012 11:02 %!

)3possibility: Performing obligation impossible or very expensiveMburdensome 8elated to risk allocation issue. 1f it has not been contracted around, there is a condition i3plied in law that this undertaking needs to be possible in order for the parties to be bound. Can obviously be contracted around. Frustration: /enefit from contract eliminated or very reduced.

4aylor v. 8aldwell

So these people planned to >rent? a venue for four evenings for the purpose of holding a series of >fetes? and concerts. 2nfortunately, the place burned down before the events could happen. )he question was basically who would be responsible for the losses to the >lessee? because of the unavailability. )he court said that obviously, someone who was supposed to make sure that something happened, and didn"t come through, would bear the damages for it not happening. )hat was the case in a >positive contract?. /ut in this case, they were asking for the use of the facility, and the implied assumption was that it would be usable. Since it wasn"t, through the fault of neither of them, it was like if someone guarantees personally to perform some act, and then dies, in which case the executors are not responsible for the losses. )his developed the doctrine of impossibility, an excuse for performance. Verdict: /reach is defensible Rule: /ecause it was impossible to perform an inherent assumption under which the contract was made. Bisc. <lectric v 7nion Paci$ic )his case has nothing to do with impossibility. 1t is about an agreement in which if 2nion Pacific couldnOt fill up the cars going back, $isconsin ;lectric would pay more going forth. &or some reason, Posner discusses impossibility. 1mpossibility is when something happens, the non'happening of which was a basic assumption of the contract. o 1tOs better to understand this as what the parties would have agreed on had they thought of it, rather than a contingency for lack of foresight. o )herefore, the correct question is whether the partyOs non'performance should be excused, because if they had thought of this, they would have assigned the risk of this event, it would have been borne by the promisee. )he implication is that there is no impossibility if they would have assigned the risk to the promisor.# o ;ssentially, it is choosing the promisee as the one that bears the risk of this occurrence. o 1tOs like a limit on the Vinsurance coverageV that breachers are required to offer. o Can be contracted around 9erdict: in case you care# )he railroad was allowed to raise the rates. 8ule: 5iscussion of impossibility is whatOs important. Frustration Mel Frank 4ool v +i98'e3
5i'Chem entered into a three'year agreement with :el &rank to lease a storageand distribution facility. 8oughly one year into the lease, the fire chief, for the City of Council /luffs, inspected the property and informed 5i'Chem that it was in violation of a city ordinance prohibiting the storage of ha@ardous materials. /ecause 5i'Chem was a chemical company, 5i'Chem felt the ordinance which was enacted after the signing of the lease# frustrated its business needs for the facility, and vacated the premises. :el&rank brought suit for breach of lease and property damage, which 5i'Chem answered, asserting several defenses including mutual mistake, illegal contract, failure to mitigate damages, fraud in inducement and impossibility. )he court found that :el &rank could not have known that the chemicals were classified as ha@ardous, and found for Plaintiff. 5efendant appealed. )ssue.

1s a contract sub.ect to rescission, under the rationality of frustration of purpose, when only part of the contractual performance is made unlikely by a supervening cause6 Held. +o. *ffirmed. ,. 1n upholding the lower courtOs .udgment the 1owa Supreme Court found that the doctrines of impossibility and frustration both stand on the premise that a contract was made with a specific purpose in mind. -. 1n this case, a lease was made for the storage of chemicals% however, the purpose to store ha@ardous chemicals was never discussed between t'e parties. )he Court based its holding on the fact that non'ha@ardous chemicals could still be stored on the premises and held for the Plaintiff. +iscussion. $hen a party asserts the defense of frustration of purpose, they must also be able to prove that their particular purpose was encompassed in the making of the agreement 8estatement Rest -A,. 1)3possibility2 +isc'arge by Supervening )3practicability: $here, after a contract is made, a party"s performance is made impracticable without his fault by the occurrence of an event the non'occurrence of which was a basic assumption on which the contract was made, his duty to render that performance is discharged, unless the language or the circumstances indicate the contrary -A-. +eat': of a person who was necessary for the performance of a contract undermines the basic assumption under which the contract was made. -AL. +estruction5 deterioration5 or $ailure to co3e into e-istence of something necessary for the contract, undermines the basic assumption under which the contract was made. -AI. =overnment regulation: if something is forbidden by new government regulation, that undermines the basic assumption, yada yada. -AC. Supervening $rustration: $hen after the contract is made, something happens that undermines the underlying purpose of the contract, the remaining duties are discharged unless the contract states otherwise.

7ep-diation.ass-rances
)ednesda$, !a$ 02, 2012 11:&& %!

Repudiation is a state3ent5 an action 1or series o$ actions25 or a $ailure to provide assurances5 w'ic' Gusti$ies t'e ot'er person in believing t'at you are in breac'. Must be clear and uneAuivocal evidence o$ intent not to per$or3 #nticipated breac' 3ust be 3aterial Repudiation 3ay be retracted unless ot'er 'as 3aterially c'anged position or ot'erwise indicated repudiation is $inal =Must> stop per$or3ing i$ clear breac' by repudiation 13itigation o$ da3ages2

Repudiation v. %reac': repudiation doesnNt really give you election o$ re3edies5 since you know 'e wonNt per$or3. 4'ere$ore5 you proceed straig't to 3itigation o$ da3ages. Repudiation 'as risks like 3aterial breac'5 t'oug'. )$ you were wrong w'en you said itNs repudiation5 your client will be in breac'. )$ you were wrong w'en you said t'at it wasnJt5 your client will be liable $or not 3itigating da3ages. Hoc'ster v +e la 4our Plainti$$ was 'ired as a courier $or t'ree 3ont's to begin on Dune 1st. +e$endant wrote in May to cancel t'e contract and s'ortly t'erea$ter plainti$$ sued. Plainti$$ also got anot'er Gob t'at started on Duly $ourt'. Plainti$$s t'eory was t'at t'e repudiation was i33ediate5 and t'ere$ore 'e could bot' look $or anot'er Gob and sue $or da3ages in t'e 3eanti3e5 and be entitled to t'e 3ont' O o$ da3ages. +e$endant would argue t'at all 'e did was talk5 and t'ere$ore 'e couldnJt be in breac' until Dune 1 w'en t'ey were supposed to leave. 8ourt ruled t'at since i$ so3eone contracts to so3eone to lease t'e3 land5 and t'en t'ey lease it to so3eone else5 t'e breac' o$ t'e $irst contract is i33ediate5 and i$ so3eone is contracted to 3arry one person and t'ey 3arry anot'er t'e breac' is i33ediate5 so too 'ere5 w'ere t'e +e !a 4our said t'at 'eJs not going to per$or3 'is part o$ t'e contract5 t'e contract is repudiated and +e !a 4our was liable $or t'e da3ages until Duly $ourt'. Verdict: +e$endant repudiated contract5 and t'ere$ore plainti$$ correctly soug't to 3itigate da3ages and sue $or da3ages. Rule: B'en so3eone repudiates a contract verbally5 it is Gust like i$ 'e did so3et'ing t'at would 3ake per$or3ance i3possible. ;t'er party can t'en begin to 3itigate da3ages and sue $or breac'. Corcon Power v Ciagara Mo'awk Corcon 'ad a deal t'at t'ey would supply Mo'awk wit' energy5 and Mo'awk would pay a certain rate. 7nder certain circu3stances5 t'ey would pay 3ore t'an t'ey actually were supposed to5 and t'at e-tra 3oney would build up and be subtracted $ro3 t'eir liability in a later stage o$ t'e contract. 4'ey overpaid so 3uc' t'at t'ey were worried t'at Corcon would not be able to 3eet t'eir liabilities w'en t'e ne-t stage o$ t'e contract would co3e around. So t'ey sued $or adeAuate assurance t'at t'ey would be paid. 4'e court weig'ed t'e Auestion o$ w'et'er to adopt t'is new doctrine5 w'ic' was in t'e restate3ent and 7885 $or non9sales o$ goods transactions. 4'ey discussed assurances in cases o$ long ter35 corporate entities5 co33ercial5 co3ple-5 not susceptible to ot'er security $eatures. 4'ey were sop'isticated parties w'o could 'ave put in a escrow clause or so3et'ing. Verdict: Mes5 parties 3ay seek assurances. Rule: <ven in non9788 contracts5 parties 3ay seek assurances5 and i$ t'ey are not provided5 t'en t'e ot'er party is 'eld to 'ave repudiated t'e contract5 and t'us was in breac' $irst. Restate3ent -CD. Repudiation is statement or affirmative voluntary action indicating that obligor will breach totally.

-C,. Failure to give assurance: $here reasonable grounds exist to suspect total breach, obligee may demand assurances and suspend performance until assurance is received. &ailure to provide assurance is also repudiation. -CL. 8epudiation gives rise to claim for total breach damages, and discharges obligations by other party. -CI. Retraction o$ repudiation: can happen if other party has not found out, or has not materially relied on the repudiation, or has not indicated that he considers the repudiation final. #ction based repudiation is wit'drawn if the circumstances that indicated repudiation have changed before the finding out, reliance, or indication. 788 9,:0: Rig't to seek assurances: B'en reasonable grounds $or insecurity arise. #ssurance is Gudged based on co33ercial standards. #cceptance o$ i3proper delivery or pay3ent doesnNt take away rig't to seek assurances. #ssurances 3ust be provided wit'in reasonable ti3e5 not to e-ceed t'irty days. 9,1:: #nticipatory repudiation: )n response to repudiation5 a party 3ay continue to await per$or3ance $or a reasonable ti3e5 or resort to any re3edy $or breac' 1even i$ 'eNs noti$ied t'e ot'er party t'at 'e would await per$or3ance5 and 'as urged retraction2 and suspend 'is own per$or3ance. 9,11: Retraction o$ repudiation: is possible 1be$ore breac'2 unless t'e ot'er party 'as 3aterially relied on t'e repudiation5 or said t'at 'e considers it $inal. Retraction can be any way o$ indication5 but 3ust contain assurances as de3anded. Retraction reinstates t'e contract5 wit' reasonable e-cuse to t'e ot'er party $or delay5 etc. as a result o$ t'e te3porary repudiation.

Specific "erformance
S-nda$, !a$ 0(, 2012 11:29 %!

Van Bagner v. S F M Van Bagner 'ad boug't t'e rig'ts to advertise on t'is wall t'at directly $aced t'e Midtown 4unnel. 4'ey t'en leased out t'e space to anot'er co3pany at a set rate $or seven years. S'ortly t'erea$ter5 t'e building was sold5 and t'e new owners didnNt want t'e contract to continue 9 t'ey wanted to knock t'e building down. 4'ey wanted to give da3ages only $or si-ty days5 since at t'at ti3e5 Van Bagner could 'ave ended t'e lease5 so da3ages beyond t'at point were conGectural. 4'e lower court ad3itted t'at t'e property was uniAue5 and t'e only way to get t'e $ull value o$ t'e da3ages was by speci$ic per$or3ance5 'owever5 t'e court re$used to award speci$ic per$or3ance o$ relatively little value at suc' a 'uge e-pense to S F M. )nstead5 t'e court said t'at t'e actual da3ages were esti3able enoug'5 and t'e a3ount was t'e a3ount o$ t'e contract t'at t'eyNd 'ave to breac' 9 t'e lease $or t'e advertising space. 4'e appeals court said t'at t'e court 'ad a lot o$ discretion5 and t'at t'ey c'ose wisely in t'is case5 noting t'at i$ S F M 'ad been correct t'at t'e da3ages were vague5 t'e court would 'ave 'ad no c'oice but to award speci$ic per$or3ance. Verdict: Co speci$ic per$or3ance5 Rule: <ven w'en t'e contested per$or3ance is uniAue5 t'e court 'as discretion to not en$orce it at too 'eavy a cost to t'e party in breac'. Factors t'at weig' in $avor o$ speci$ic per$or3ance include 'ard to esti3ate da3ages5 and da3ages t'at cannot be recouped wit' 3onetary pay3ents because t'e per$or3ance is uniAue. Factors t'at weig'

against speci$ic per$or3ance are 'ards'ip5 easily esti3able 3onetary da3ages5 and easy to replace breac'es. BalgreenNs v Sara 8reek Sara 8reek 1S'opping 8enter2 'ad a contract wit' BalgreenNs t'at t'ey would not allow anyone to rent property w'o would be in co3petition wit' BalgreenNs. 4'en5 Sara 8reek lost t'eir anc'or tenant5 and wanted to rent to so3eone w'o would co3pete partially wit' BalgreenNs. BalgreenNs protested5 and sued $or an inGunction to stop t'e3 9 essentially5 speci$ic per$or3ance. 4'e Gudge weig'ed w'et'er to listen to Sara 8reekNs clai3 t'at t'ey could 'ave e-perts decide w'at t'e actual da3ages were5 or w'et'er to listen to BalgreenNs and award speci$ic per$or3ance. )n t'e end5 'e ruled t'at t'ere was a risk o$ e-perts 3aking a 3istake5 and t'at it was ine$$icient to esti3ate t'e da3ages t'at way5 since awarding speci$ic per$or3ance was guaranteed to $igure out e-actly 'ow 3uc' t'e clause was wort'5 w'en Sara 8reek ca3e and atte3pted to buy out t'at provision. Verdict: Speci$ic per$or3ance; Rule: B'en speci$ic per$or3ance can be used as a tool to 3ore accurately $igure out w'at da3ages s'ould be5 speci$ic per$or3ance can be warranted. 1#lso 3ay contain so3e t'ings about de$erence to lower courts.2 Restate3ent:

R "((9"(,5 "**9",0
LII. 4'e purpose o$ re3edies: ;xpectation interest, reliance interest, restitution interest LIC. Re3edies available: :oney due under contract, or as damages, specific performance or non' performance, restoration of a specific thing to prevent un.ust enrichment#, awarding a sum of money to avoid un.ust enrichment#, declaring the rights of the parties, and enforcing an arbitration award. LIA. +a3ages: 1n.ured party has a right to claim damages for any breach, unless performance has been suspended or discharged. -# 1f the breach caused no loss, or if the amount is not proved, a small sum will be awarded as nominal damages. LCC. Punitive da3ages: +ot available in contract, unless itOs through a tort claim. LCA. !iAuidated da3ages: 112 :ust be reasonable in the light of anticipate or actual loss, and the difficulty of proving the actual damages. -# * term in a bond providing for an amount of money as a penalty is unenforceable if the amount exceeds the damage. LCP. Speci$ic per$or3ance: available at the discretion of the court. not sure about part two. Seems to .ust say that in.unction can be given to stop breach of a contract#. LC3. Speci$ic per$or3ance: drawn so as to best effect the purpose of the contract. +eed not be absolute, and need not be identical to contract. -# Can be granted on part of the contract, L# Specific performance and damages can be awarded for the same contract, and also indemnification against future harm. LCH. Speci$ic per$or3ance guidelines: $ill not be awarded where damages are sufficient to protect expectation interest of parties. -# adequacy of damages for one part of the contract doesnOt mean that there canOt be specific performance on the rest of it. L# Specific performance will not be denied merely because there is a remedy for breach other than damages. Court has discretion. LAD. +eter3ining adeAuacy o$ da3ages: )he following things help determine whether particular monetary damages are adequate: 5ifficulty of proving the proper amount, difficulty of procuring substitute performance, likeli'ood t'at da3ages would not be able to be collected. LA,. Speci$ic per$or3ance may be granted even if there is a liAuidated da3ages clause. LA-. Speci$ic per$or3ance will not be granted unless the contract is su$$iciently certain to provide a basis for that order. LAL. Speci$ic per$or3ance may be denied if the agreed upon e-c'ange is unperformed and performance is not guaranteed to the satisfaction of the court. LAI. Speci$ic per$or3ance and un$airness: Specific performance will be denied if it would be unfair because of mistake, because relief would cause unreasonable hardship or loss 9an $agner#,

exchange is grossly inadequate. -# /ut it will be granted in spite of that, if it would otherwise cause unreasonable hardship to the party seeking relief or third persons#. LAC. Speci$ic per$or3ance will not be granted if itOs contrary to public policy. LAA. Speci$ic per$or3ance will not be granted if enforcing it will cause hardship to the court disproportionate to the gains of the order and the hardship of its denial. LAP. Speci$ic per$or3ance o$ personal services: Promise to render personal services will not be specifically enforced. -# Seems like non'compete clause rule: 1t will not be enforced if it will compel personal relationship which is undesirable, or if it would deprive the party of a chance to earn a livelihood. LA3. Speci$ic per$or3ance and t'e power o$ ter3ination : Specific performance will not be granted in cases where the party in breach had the right of termination which will in effect nullify the order of specific performance. 7owever, -# it will also not be denied simply because he has that power, unless it could be used in spite of the order to deprive the other party of reasonable security for the agreed upon exchange. LAH. Specific performance may be granted even if the party seeking it is also in breach, unless the breach was serious enough to discharge the other partyOs remaining duty of performance.

<iD-idated damages
S-nda$, !a$ 0(, 2012 11:&? %!

;J%rian v !angley; ;J%rian wanted to back out o$ a co33it3ent to send t'eir c'ild to t'e !angley Sc'ool. 4'e sc'ool noti$ied t'e3 t'at according to t'e contract t'ey 'ad signed5 t'ey 'ad to pay $ull tuition $or t'e year. 4'e ;J%rians re$used. 4'e lower court ruled t'at t'ey did 'ave to pay t'e tuition alt'oug' !angley 'ad not s'own evidence t'at t'ey tried to $ind anot'er kid. 4'is was because it was a liAuidation clause da3ages clai3 rat'er t'an e-pectation da3ages. 4'e ;J%rians were assessed $ull tuition plus legal costs. 4'e appeals court said t'at Gust because t'ere is a liAuidation clause5 doesnJt 3ean t'at t'ere is not'ing to discuss. !iAuidation da3ages can be Gudged as un$air5 and t'e lower court Gudge didnJt even allow evidence to s'ow t'at t'ey were un$air. 4'ere$ore5 t'e case s'ould be re3anded to deter3ine w'et'er t'e da3ages were grossly in e-cess o$ t'e actual da3ages 1and t'e ot'er Auestion ? w'et'er t'e da3age is susceptible to accurate 3easure3ent2 4'e ;J%rians bear t'e burden o$ proving it5 but i$ t'ey do prove it5 t'en t'e sc'ool 3ust prove its actual da3ages. Verdict: 4'e trial court incorrectly e-cluded evidence t'at it was grossly in e-cess o$ actual da3ages. Rule: !iAuidation da3ages can be en$orced5 but de$endants can contest w'et'er it is grossly in e-cess o$ actual da3ages5 since it is susceptible to actual da3ages.
LCA. !iAuidated da3ages: 112 :ust be reasonable in the light of anticipate or actual loss, and the difficulty of proving the actual damages. -# * term in a bond providing for an amount of money as a penalty is unenforceable if the amount exceeds the damage. 788 !iAuidated da3ages 1 9.1/2

!i3ited to a3ount reasonable in lig't o$ #ctual or anticipated 'ar3 +i$$iculty o$ proo$ +i$$iculty o$ obtaining adeAuate re3edy ot'erwise 8ontractual 3odi$icationIli3itation 1 9.102 8an contract out o$ 788 $or3ulas and principles 8onseAuential da3ages can be li3ited or e-cluded only i$ not unconscionable o !i3iting conseAuential da3ages $or inGury to person in consu3er goods in pri3a $acie unconscionable
o o o

xpectation damages
S-nda$, !a$ 0(, 2012 12:20 "!

Hawkins v Mc&ee; )t see3s t'at w'at 'appened was t'at Mc&ee wanted to give Hawkins skin gra$ting on 'is 'and5 and t'ere$ore pro3ised 'i3 t'at t'e results would be guaranteed. 4'e surgery didnJt work out5 and 'is 'and was rendered worse t'an it 'ad been. 4'e essential con$lict $or our purposes was t'at t'e court awarded da3ages a$ter a Gury instruction t'at said t'at 'e could get da3ages $or pain and su$$ering as well as $or positive da3age on t'e 'and t'at 3ade it worse t'an it 'ad been be$ore. 4'e court ruled t'at 'e could not get pain and su$$ering da3ages5 because t'e undertaking o$ t'e surgery was part o$ t'e deal5 and 'e was t'ere$ore li3ited to t'e warranty in t'e contract w'ic' was a per$ect 'and5 so t'at s'ould 'ave been t'e Gury instruction. Verdict: Re3anded Rule: <-pectation da3ages award t'e party seeking relie$ da3ages to t'e point t'at 'e would 'ave ended up 'ad t'e contract succeeded. 4'ere is no pain and su$$ering da3ages in contract. 8ontract da3ages are li3ited to co3pensation $or a breac'. 1#lt'oug' i$ t'ere was 3ore pain and su$$ering because o$ a breac'5 t'ere 3ay be roo3 $or a clai3 t'at wayP2 Panora3a v &olden Rule Panora3a 'ired &olden Rule to install roo$s in t'eir association buildings. &olden Rule pro3ised t'e3 warranties5 and a certain Auality o$ roo$ing. 4'ey did not provide t'e warranties5 and t'e installation was de$ective. ;n t'e issue o$ da3ages5 t'e lower court assessed t'e3 t'e 1prorated2 cost o$ replacing t'e roo$s. &olden Rule appealed. )t see3s t'at t'e issue was t'at &olden Rule wanted to si3ply repair t'e roo$s t'e way t'at t'ey were. 4'e court said t'at i$ per$or3ance is de$ective as opposed to inco3plete5 it is better t'at t'e da3aged party be entitled to slig'tly 3ore da3ages5 1even i$ itJs a 3inor wind$all2 rat'er t'an being $aced wit' a di3inution in value to t'eir property. 4'is is true so long as t'ere is not a disproportionate di$$erence between t'e da3age to t'e da3agee and t'e cost to repair it. )n t'is case5 Panora3a s'owed t'at t'e cost to repair t'e da3age was QM6 and &olden Rule did not contest

it wit' a 'ugely lower di3inution in value. 4'ere$ore5 t'e rule in restate3ent "(/ is binding and t'e da3ages s'ould be t'e repair cost. Verdict: Hig'er da3ages to co3pletely $i- roo$s a$$ir3ed. Rule: B'en t'e a3ount it would take to $i- a de$ect is not wildly disproportionate wit' t'e di3inution in value to t'e property5 t'e da3agee is entitled to suc' da3ages5 even i$ t'eyJre 'ig'er. B'en t'e da3agee s'ows 'ow 3uc' t'e cost to 3eet e-pectations is5 t'e da3ager t'en 'as to contest it by s'owing t'at itJs disproportionate. Restate3ent LIP. <-pectation da3ages: 1n.ured party has the right to expectation damages, which consist of the loss in value to him of the other partyOs breach, added incidental or consequential losses, 3inus costs or losses that he did not incur because he doesn"t have to perform anymore. LI3. ;t'er ways to deter3ine e-pectation value lost: 5elay in use of property which is not provable with reasonable certainty may be claimed as loss of fair market rent for that period of delay. 5efective or unfinished construction may be estimated by diminution in market value, or the reasonable cost of completing performance, if itOs not completely disproportionate to the probable loss in value to him. Eacobs W Roung% Panorama#. /reach of conditional obligation that may never have come to fruition is based on the value of the conditional promise at the time of the breach. LIH. Reliance da3ages: *s an alternative to expectation damages, the in.ured party has a right to damages based on reliance interest, including expenditures made in preparation for performance, or in performance, minus whatever loss he would have incurred had the contract been performed.

!itigation of damages
S-nda$, !a$ 0(, 2012 1:1& "!

Parker v 4wentiet' 8entury Parker5 #@# S'irley Maclaine5 was an actress w'o was to act in a $il3 called %loo3er &irl. 4'ere was a contract signed and everyt'ing. 4'en5 t'e $il3 $ell t'roug'. 4'e studio didnJt want to pay 'er $or not'ing5 and t'ere$ore cast 'er in a di$$erent 3ovie called %ig 8ountry. 4'e contract $or %ig 8ountry was very si3ilar to t'e contract $or %loo3er &irl5 but t'ere were s3all di$$erences5 suc' as t'at it was to be $il3ed in #ustralia rat'er t'an 8ali$ornia5 it was not a dance 3ovie5 and s'e couldnJt c'oose t'e director. S'e didnJt want to be in %ig 8ountry5 and t'ere$ore sued $or 'er contractual $ee and da3ages. 4'e studio countersued5 clai3ing t'at 'er re$usal was unreasonable5 and was t'ere$ore a $ailure to 3itigate da3ages. ParkerIMaclaine 3oved $or su33ary Gudg3ent. 4'e court considered w'et'er t'ere was a triable issue o$ 3aterial $act t'at was yet to be deter3ined. Rule: Measure o$ recovery is t'e a3ount o$ salary agreed upon $or t'e service5 less t'e a3ount t'at t'e e3ployer a$$ir3atively proves t'e e3ployee 'as earned or could 'ave earned wit' reasonable e$$ort 1t'us 3itigating t'e da3ages2. %ut t'e e3ployer

3ust s'ow t'at t'e alternative e3ploy3ent was substantially si3ilar and not di$$erent or in$erior in kind. )n later analysis5 t'e court adds t'at t'ere is no reAuire3ent t'at t'e re$usal to take a particular alternative be reasonable. #pplying it ? since in t'is case5 t'ere was no clai3 t'at s'e $ailed to seek $urt'er e3ploy3ent5 t'e entire de$ense is based on t'e clai3 t'at s'e s'ould 'ave taken %ig 8ountry. %ig 8ountry was not si3ilar $or a $e3ale lead to t'e role in %loo3er &irl5 since it was produced in #ustralia5 was a dra3a rat'er t'an a 3usical5 etc. #lso5 t'e alternative contract took away certain rig'ts t'at Parker 'ad under t'e original contract. 4'ere$ore5 t'e alternative role was $or in$erior e3ploy3ent. R Verdict: Cot a $ailure to 3itigate da3ages5 t'ere$ore Studio was liable. See rule above. +issent: 4'ere is a reasonableness reAuire3ent5 and t'at is a $actual issue w'ic' s'ould 'ave gone to a Gury. &enerally5 t'e standards o$ $airness dictate t'at t'ere be a reasonableness standard. 4'e 3ere e-istence o$ di$$erences does not give t'e e3ployee an e-cuse to re$use alternative e3ploy3ent. +eciding w'et'er t'e di$$erence was substantial is w'at s'ould reAuire a trial. R.R. +onnelley v Vanguard +onnelly was a printer w'o 'ad been 'ired to do broc'ures $or MacyJs. 4'ey 'ired Vanguard5 a trucking co3pany5 to deliver t'e broc'ures. Vanguard blew it5 and +onnelly sued t'e3 $or t'e cost o$ t'e broc'ures5 w'ic' were useless a$ter t'e ti3e o$ t'e pro3otion 'ad passed. Vanguard contended t'at +onnelly $ailed to 3itigate da3ages. Failure to 3itigate is an a$$ir3ative de$ense5 $or w'ic' Vanguard 'as t'e burden o$ proo$. &enerally5 t'e plainti$$ s'ould act to 3itigate t'e da3ages5 but +onnelly clai3ed t'at de$endant acted to assuage t'e plainti$$Js appre'ension5 and t'ereby led to t'e plainti$$ not 3itigating5 so de$endant can still be liable. %ut court said t'at plainti$$ cannot rely inde$initely on assu3ptions. #t so3e point5 'e needs to realiEe t'at itJs Gust not 'appening. )n t'is case5 w'en Vanguard said on t'e 3orning o$ t'e drop dead date t'at t'ey would atte3pt delivery5 +onnelly s'ould 'ave realiEed t'at it was ti3e to take 3atters into t'eir own 'ands. 4'ere$ore5 rat'er t'an talking about 'ow easy it was $or Vanguard to 3ake alternate arrange3ents5 +onnelly s'ould 'ave been 3aking t'ose sa3e alternate arrange3ents. Verdict: $ailure to 3itigate5 da3ages t'ere$ore lowered. Rule: B'en a party sees t'at t'e ot'er party is probably going to be in breac'5 t'ey 'ave t'e duty to 3itigate da3ages5 reassurances notwit'standing. Restate3ent LCD. Mitigation o$ da3ages: 5amages are not recoverable for loss that the in.ured party could have avoided without undue risk, burden, or humiliation. -# /ut if the in.ured party has made reasonable efforts, he does not lose damages, even if the efforts are unsuccessful.

Foreseeabilit$ in damages
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Hadley v %a-endale Hadley was a 3iller w'o 'ad so3e sort o$ da3age to a 3otor. He was to send t'e part to a 3ac'inist $or duplication. 4'e $i-er93an said t'at i$ 'e would send it in be$ore noon5 it would be done t'at day. <ventually5 t'e part was delivered5 but because t'e delivery guy was delayed due to neglect5 t'e 3ill lost days o$ pro$its. 4'ey sued t'e delivery guy $or all t'e 3oney t'at t'ey lost because o$ t'e delay. 1)t does not 3atter w'et'er it was neglect5 since contract is strict liability2. 4'ese da3ages are =conseAuential da3ages>5 as opposed to direct da3ages. 4'e court said t'at plainti$$ was not entitled to da3ages t'at were not reasonably supposed to be in t'e conte3plation o$ bot' parties at t'e ti3e o$ contracting. 4'e great 3ultitude o$ cases w'ere 3illers send a-les to repair3en would not involve suc' da3age5 and t'ere$ore t'ese da3ages were not $airly and reasonably considered as arising naturally . 4'ere$ore5 t'ey could not recover t'e conseAuential da3ages 'ere. Cote: t'e case incorrectly says in t'e beginning t'at t'e 3iller told t'e carrier t'at 'e was desperate $or it to be $i-ed. )n $act5 t'e 3iller 'ad not told t'at to t'e carrier. )$ 'e 'ad5 t'at would 'ave been a =known special circu3stance> at t'e ti3e o$ $or3ation w'ic' would 'ave 3ade t'e carrier liable. Verdict: not entitled to conseAuential da3ages Rule: Plainti$$ is only entitled to da3ages t'at are reasonably $oreseeable at t'e ti3e o$ contracting. Restate3ent LC,. 7n$oreseeability and related li3itation on da3ages: damages are not recoverable when the party in breach had no reason to foresee them at the time the contract was signed. -# (oss may be foreseeable when it follows as a probable result of the breach in the ordinary course of events, or as a result of special circumstances that the party in breach had reason to know about. L# * court may limit damages for foreseeable loss by excluding loss of profits, by limiting damages to reliance, or as .ustice requires to avoid disproportionate compensation. LC-. 7ncertainty: 5amages are not available for loss beyond an amount that can be proved with reasonable certainty.

Certaint$ in damages
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;SP+ v /aseball p.PPP# +ow they"re arguing about damages. )he damages were for ;SP+"s breach for preempting the baseball games without approval. *t this point, it had already been determined that they were in breach, so the question was .ust how much the damage was. /aseball claimed that the amount should exceed millions of dollars. ;SP+ filed a motion in limine, to stop the .ury from hearing baseball"s claims, since the claims were vague and uncertain.

,. -. ,. -.

)he question was whether baseball set forth specific facts to show that their damages were reasonably certain. )hey alleged that they lost national )9 exposure, promotional opportunities, damage to the value of the Sunday night )9 package, prestige, potential sponsorship, future value of all // )9 packaging. )he court said that t'e rule is t'at )he factual loss needs to be certain, *mount needs to be certain +ot merely possible, speculative, or imaginative Susceptible of ascertainment in a manner other than guesswork or con.ecture. Since baseball had not shown either the fact of damages or the amount of damages, and continually refused to do anything more than speculate about the amount of damages, they were not entitled to ask for damages in a particular amount. )he .udge did note that if they proved that there were some damages, they could have gotten nominal damages. +ote 0 this would have been a good place to enforce the specific performance, which was actually written into the contract. *nother option would have been liquidated damages in the contract, since this was inherently not the type of damages that were given to estimate.# Restate3ent LC-. 7ncertainty: 5amages are not available for loss beyond an amount that can be proved with reasonable certainty.

UCC remedies 4compendi-m5

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Manouc'e'ri v Hei3 :anouchehri contracted to buy an X ray machine from 7eim, with a particular strength. 7eim deliberately sold him one that was weaker, without telling him. )he price was B,HDD. :anouchehri sued for breach of contract, and was awarded BIIDD dollars by the lower court. )he appeals court reviewed the damages claim. )he B,HDD was for cost of direct damages ' the difference between the item as promised and the item as delivered. )he claim was that direct damages could be estimated as the cost of repair, since that would make the item as delivered the same as the item promised. 1n this case, the machine was inherently different, so it couldnOt be repaired. +evertheless, the court upheld that part of the damages. )he court said that the machine was not worth much as it was, and if :anouchehri could get anything for it, that would .ust cover his cost of getting it off his property. )herefore, the B,HDD was warranted as the direct damages. )he next part of the claim was an additional B-CDD in consequential damages. :anouchehri claimed that he lost that amount since he didnOt have an X ray machine that he could use to give the X 8ays that he wanted to give, and he lost that much money by not being able to give all those x rays. 7eim claimed that he hadnOt presented any evidence of that, and he also hadnOt attempted to mitigate his damages. :anouchehri claimed that he would have

mitigated damages by getting another machine, except that 7eim kept saying that he would fix this one. 7ah. See 88 5onellyQ#. )he court said that whether it was reasonable for :anouchehri to take his word for it was a question of fact, and it was a reasonable conclusion by the trial court that he had reasonably taken 7eimOs word for it. *lthough his proof wasnOt totally certain, the burden of certainty in a small case such as this one is not the same as the burden in a million dollar case. Verdict: affirmed, damages of BIIDD. Rule: 5irect damages can be estimated by repair cost, but also in other ways. Consequential damages that are foreseeable are allowed. 1t is a question of fact whether party seeking relief reasonably relied on party in breach when waiting to attempt mitigation. Certainty in a small case is not as big a deal as in a larger case. 2CC -'PDL, -'PDA ,#, -'PD3 through -'P,H
,-- )./*0 SellerNs re3edies: when a buyer re.ects or revokes acceptance of goods or fails to make a payment due on time, the seller may withhold delivery, stop delivery, proceed under the next section respecting goods still unindentified to the contract#, resell and recover damages, recover damages for non'acceptance, or in a proper case ' the price, or cancel. 9.:,112 SellerNs resale: Seller may resell goods after a breach, as per -'PDL. $hen the resale is made in good faith and in a commercially reasonable manner, seller may recover the difference between the resale price and the contract price, along with incidental damages, but minus any money he saved by getting out of the contract. 2CC remedies from slides: 788 re3edies: seller $hat happens if...%uyer re$uses to takeIkeep delivery Seller"s options 8esell goods, collect resale damages -'PDA# o Suantity - 18ontract Price ? Resale Price2 O incidentals Claim 3arket price damages -'PD3 ,## Jmaybe resell6K o Suantity - 18ontract Price ? Market Price2 ! incidentals Claim lost volu3e seller damages -'PD3 -## o Suantity - 18ontract Price ? 8osts2 o :ust prove 3arket price da3ages inadeAuate to put seller in same position as performance $hat happens ifN %uyer doesnJt pay Seller"s damages -'PDH#: *ction for the price ' seller can claim in damages 8ontract price times o Yuantity taken by buyer o Yuantity >identified to contract? that the seller is still holding onto, and not reasonably able to resell >1dentified? means Gmarked" or Gset aside" as goods demonstrably intended for this buyer% it"s more complex than that but don"t worry about this 2CC 8emedies ' /uyer $hat happens ifN Seller does not deliver goodsP /uyer"s options cover good faith, no unreasonable delay# and claim damages based on cover 1 9.1 2

Suantity - 18over Price ? 8ontract Price2 ! incidentals ! consequential damages Claim damages based on market price 1 9.1"2 1wit'out actually covering2 o Suantity - 1Market Price ? 8ontract Price2 ! incidentals ! consequential damages
o

$hat happens if N Seller delivers >non'conforming? goods or goods in breach of warranty6 :anouchehri# /uyer can claim damages based on expectation principle -'P,I# 5ifference in value between goods as promised and goods as received 1ncluding incidental ! consequential as appropriate 8onseAuential da3ages -'P,C# /uyers only 6# (imited to losses resulting from general or particular requirements and needs of which seller at ti3e o$ contracting 'ad reason to know and which could not be reasonably prevented by cover 1n.ury to person or property pro-i3ately resulting from breach of warranty !iAuidated da3ages -'P,3# (imited to amount reasonable in light of o *ctual or anticipated harm o 5ifficulty of proof o 5ifficulty of obtaining adequate remedy otherwise Contractual modificationMlimitation -'P,H# Can contract out of 2CC formulas and principles Consequential damages can be limited or excluded only if not unconscionable o (imiting consequential damages for in.ury to person in consumer goods in prima facie unconscionable

2-$er
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@&M Harvesting v Fres' Cetwork So &resh +etwork used to buy lettuce from F=: 7arvesting at H cents a pound. )hen lettuce shot up, and F=: refused to honor the contract. &resh +etwork instead had to go out and find lettuce at a more expensive price. )hey did, and sued for damages under the 2CC. *ccording the to the 2CC, they are allowed to cover and claim the difference in price from the seller in breach. 7owever, in this case, the seller claimed that &resh +etwork did not lose that much, since they had a cost plus agreement with their buyers. /ecause of that, when the price of lettuce rose, they were able to meet the demand at the higher price, and expectation damages were not the entire difference between the agree upon price and the cover price ' expectation damages were .ust the amount of money that they couldnOt make up from their own customers. )he court decided that

that wasnOt a valid defense ' the 2CC remedies was not the same as expectation damages, it was the cover price minus the contract price, no matter what &resh +etwork was able to do to make a profit off the deal later. Verdict: 788 dictates t'at cover price 3inus contract price is valid da3ages w'en seller re$uses to supply agreed upon goods. Rule: #ctually5 t'at was t'e rule. 4'e application o$ t'e rule to cases w'ere t'e seller is not 3ade worse o$$ is t'e point o$ t'is case.

<ost vol-me seller 4EliD-idated damages5

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RodrigueE v !ear Det 8odrigue@ put down a deposit and signed a contract to buy a .et from (ear Eet. )he deposit was B-CD,DDD. (ater, he backed out of the sale. (ear Eet resold the .et for more profit than they would have made off him. 7e wanted his deposit back, and they said that it was damages for breach of the contract. 7e said that although the contract called for liquidated damages, in this case, they were disproportionate, since he hadnOt caused them nearly that much damage ' in fact, they had made more off the replacement buyer. /ut (ear Eet claimed that they were a lost volume seller ' i.e. they would have been able to sell another .et if he hadnOt backed out of the contract, and therefore the damages were not disproportionate. )he court set out the rules for lost volume sellers as the following: ,. )he seller possessed the capacity to make an additional sale -. )hat it would have been profitable to make an additional sale, L. )hat it was probable that it would have made the additional sale, absent the buyerOs breach. 2nder that analysis, the district court had reasonably concluded that (ear Eet was a lost volume seller. &urthermore, even if they hadnOt been, the liquidated damages of -CDDDD on a plane that cost four million was reasonable in light of the damages that were likely to flow from a cancelation.