I.

II.

Introduction: Contract Expectations

Hawkins: Expectation damages: value between perfect hand and hand
delivered.
Formation
a. Mutual Assent: Meeting of the minds
Objective Theory
R.2d 17 Requirement of a Bargain:
(1) Bargain with manifestation of mutual assent and
consideration
R.2d 18 Manifestation of Mutual Assent
Each party must make promise or begin performance
R.2d 19 Conduct as Manifestation of Assent
(1) Writing, spoken word, or conduct all assent
(2) Conduct only if one intends to engage in conduct and
knows/has reason to know other may infer assent
(3) Conduct can assent without actual assent. Invalidating
cause could negate
Objective Theory Paradox: Only objective evidence, no
subjective evidence. Some unintended Ks
b. Offer
Definition of an Offer
Nebraska Seed, Pepsico: Invitation to offer not offer.
R.2d 22 Offer and Acceptance
(1) Mutual assent usually offer then acceptance
(2) Assent can occur w/o either and even w/o
determinable moment of formation
R.2d 24 Offer Defined
Manifestation of willingness enough that other would
understand his assent to the bargain will conclude it
R.2d 26 Preliminary Negotiations
Not offer if other party knows or has reason to know
bargain not concluded w/o more assent
R.2d 29 To Whom an Offer is Addressed
(1) Manifested intention determines who has power of
acceptance
(2) Anyone specified, who makes specified promise, or
renders specified performance
R.2d 33 Certainty
(1) Without reasonably certain terms, offer cannot be
accepted
(2) Terms certain if provide basis for determining breach
and remedy
(3) Leaving open terms may evidence lack of assent to
offer or acceptance
UCC 1-103: UCC Purposes, Supplementing SO
IMPORTANT TO APPLY COMMON LAW (FRAUD AND THE
LIKE) TO UCC IF DOESNT DISPLACE
UCC 2-104: Defn Merchant, Between Merchants,
Financing Agency

UCC 2-105: Defn Goods, Future Goods, Lot, Commercial

Unit
UCC 2-205 Firm Offer: Offer in signed writing written as open
is irrevocable, for lack of consideration, for time
stated/reasonable time less than 3 months. Form supplied by
offeree must be signed by offeror
Revocation of an Offer: Dickinson v Dodds: explicit or
acquired knowledge of revocation removes consideration and no
offer to be accepted
c. Acceptance: Rejection then Acceptance is new offer. Inquiry: nothing
happens
Mirror Image Rule: Common Law (bars Shrinkwrap)
R.2d 61 Acceptance Which Requests Change of Terms
Acceptance with change or addition to terms invalidated if
made to depend on assent to said terms
Last Shot Rule: If parties act like they have a contract, it is
created with terms consistent with last shot form sent
(common law, mitigates mirror image rule)
Mailbox Rule
R.2d 63 Time When Acceptance Takes Effect
Unless offer provides otherwise
(1) As soon as offer leaves offeree, manifestation of mutual
assent completed
(2) Option acceptance not valid until received
R.2d 64 Acceptance by Telephone or Teletype
Instantaneous two-way communication, acceptance as if
parties present
R.2d 65 Reasonableness of Medium of Acceptance
Medium acceptable if used by offeror or customary in
similar transactions (E.g. if mailed offer, text acceptance
maybe not valid)
R.2d 66 Acceptance Must Be Properly Dispatched
Properly addressed and normal precautions to insure
transmission of similar messages necessary for mailbox
rule
Unilateral Contracts
R.2d 54 Acceptance by Performance; Necessity of
Notification to Offeror
(1) If offer invites acceptance by performance, no
notification necessary unless requested
(2) If performer has reason to know offeror wouldnt learn
of performance, no duty of offeror unless
(a) Offeree reasonably diligently notifies
(b) Offeror learns of performance in reasonable
time
(c) Offer indicates notification not required
R.2d 30 Form of Acceptance Invited

d. Form

(1) Offer can invite acceptance by affirmative answer in

words, performance or refraining from performing
specified act (may allow terms of acceptance Hamer)
(2) Unless otherwise noted, offer invites acceptance in
any manner and medium reasonable in circumstances
R.2d 32 Invitation of Promise or Performance
In case of doubt, offeree can choose between promising to
perform or performing
R.2d 45 Option Contract Created by Part Performance or
Tender
(1) When offer invites acceptance by performance, option
contract created when tender or performance begins or
beginning of performance is tendered
(2) Offerors duty is conditional on completion or tender
R.2d 62 Effect of Performance by Offeree Where Offer
Invites Either Performance or Promise
(1) Tender or Beginning of performance is acceptance
(2) Operates as promise to render complete performance
Acceptance by Silence
R.2d 69 Acceptance by Silence or Exercise of Dominion
(1) Silence is acceptance if
(a) Offeree takes benefit of offered services with
reasonable offer to reject and reason to know they
were offered with expectation of compensation
(b) When offeror stated or gave reason to know
that silence was manifestation, and offeree
intended acceptance with silence
(c) Where by previous dealing offeree should
reasonably notify if not accepting
(2) If offeree acts inconsistent with offerors ownership,
bound by offered terms. If wrongful act, offeror must ratify
Contracts
Click-Wrap/Browse-Wrap Contract
Browse-Wrap: No notification of or need to read agreement
before download. Duty to Read: signing is manifestation of intent
even if didnt read REASONABLY CONSPICUOUS. Netscape
Contracts of Adhesion
Could argue additional terms on ticket are counter offer. Carnival
Cruise
Can be objective assent without subjective assent.
Spann hates these. Seems like equity in terms of fairness
R.2d 211 Standardized Agreements
(1) Signing or manifesting to writing one has reason to
believe is standard for type of agreement, adopts it as
integrated agreement of terms in writing
(2) Treats alike all those similarly situated when
reasonable

(3) If party knew other would not assent if they knew of a

term, said term is not part of the agreement
Shrink-Wrap Contracts: Battle of the Forms
UCC 2-207 Additional Terms in Acceptance or
Confirmation (GOES WITH 2-209) Cmt. 4 immaterial variation
if over 90%
Parties have contract?
Oral agreement followed by written confirmation; or
Traditional exchange of offer and acceptance; or
By conduct
What are the terms?
Oral or Traditional route: 2-207(2) to check additional and
different terms
Conduct: 2-207(3)
Knockout Clause: Confirming forms disagree, knock each other
out
Fluid Acceptance
UCC 2-204 Formation in General: NEED REMEDY
e. Partial Agreements
Preliminary Agreements
Industry standards MAY have effect on good faith
Money changing hands may affect reliance/bind
Spann: Letter of intent may contract to BARGAIN in good faith,
and a breach of this could lead to reliance damages
R.2d 27 Existence of Contract Where Written Memorial
is Contemplated
Contract may exist even if there was intent to make a
later written memorial (unless shown to be preliminary
negotiations). Must have objective mutual assent
(Empro/Ball-Co)
Agreements to Agree
Too many open terms may be agreements to agree: No contract
(CARDOZO). Can terms be closed in a way to form mutual
assent? Sun Printing
Indefinite Agreements
R.2d 34 Certainty and Choice of Terms; Effect of
Performance or Reliance
(1) Terms can be certain even if party(ies) have power of
term selection in course of performance
(2) Part performance may remove uncertainty and
establish enforceable contract
(3) Action in reliance may merit remedy even with
uncertainty
R.2d 204 Supplying an Omitted Essential Term
When bargain sufficiently defined to be contract, but
essential term is missing, court can insert one reasonable
in circumstances.
Gap Fillers

III.

UCC 2-204(3): Open terms dont make contract indefinite if

basis for remedy
UCC 2-305 Open Price Term: Generally reasonable
UCC 2-306 Output, Requirements and Exclusive Dealings
Cmt 2: Shutdown for lack of order ok, shutdown to curtail losses
not.
UCC 2-307 Delivery in Single Lot or Several Lots: Unless
otherwise apportioned, single lot and payment on tender
UCC 2-308 Absence of Specified Place for Delivery:
Generally sellers place of business
UCC 2-309 Absence of Specific Time Provisions; Notice
of Termination: Generally reasonable time
UCC 2-310 Open Time for Payment or Running of Credit;
Authority to Ship Under Reservation: Generally time and
place of buyer reception
UCC 2-311 Options and Cooperation Respecting
Performance
ALSO USE 1-303, 2-703, 2-711!
Enforceability
a. Consideration
Historical Development
R.2d 95 Requirements for Sealed Contract or Written
Contract or Instrument
(1) Binding without consideration if
(a) In writing and sealed AND
(b) Document containing promise delivered AND
(c) Promisor and Promisee named in document or
identifiable upon delivery
UCC 2-203 Seals Inoperative
Bargained-For Exchange: Not simply gratuitous promise
Gift revocable until delivery.
If/Then form evidence of consideration
Spann thinks ALL promises should be enforced
General Focus on Detriment to Promisee over benefit to
promisor (MUST BE BARGAINED FOR Mills
Mechanical Test:
Promise involves detriment to promisee AND
Detriment was bargained for AND
Promise was bargained for
1. Adequacy: Cannot be nominal consideration, but if real
consideration, need not second guess adequacy
(Peppercorn Theory)
R.2d 79 Adequacy of Consideration; Mutuality of
Obligation
If consideration met, no requirement of:
(a) gain, advantage, or benefit to promisor or a loss,
disadvantage or detriment to the promise
(b) Equivalence in the values exchanged
(c) mutuality of obligation

R.2d 364 Effect of Unfairness

Injunction refused if unfair because exchange
grossly inadequate or terms otherwise unfair
Invalid law claim can be consideration if in good faith
2. Nominal Consideration
R.2d 71 Requirement of Exchange; Types of
Exchange
Pretense of bargain not enough. Must be real not
nominal (no donative intent covered by tiny
consideration)
R.2d 87 Option Contract
(1) Offer binding option contract if in writing and
signed by offeror, recites consideration, and
proposes exchange on fair terms within reasonable
time
3. Recited Consideration: Enough for option contract
Modification
1. Pre-Existing Duty Rule: Detriment to plaintiff used up
in first contract.
Prevents extorted modifications.
Creates stability of capitalism.
Can be manipulated if you can find new consideration.
Alaska Packers
2. Unanticipated Difficulties
R.2d 89 Modification of Executory Contract
Promise modifying not fully performed duty binding
(a) If fair and equitable in view of unanticipated
circumstances by parties when contract made
(b) As provided by statute
(c) As justice requires in view of material change in
reliance
3. Good Faith Modifications
UCC 2-209 Modification, Rescission and Waiver
(GOES WITH 2-207)
Voluntary Mutual Rescission frees consideration for
modified contract
b. Reliance
Promissory Estoppel (On Contract)
Three Pronged Test
Reliance: Needs be detrimental
Foreseeable
Avoidance of Injustice
Defn: Estopped from denying promise and enforceability,
especially when relied on
Reliance on an Offer: Promissory Estoppel extends reliance
R.2d 90 Promise Reasonably Inducing Action or
Forbearance
(1) Promise which promisor should reasonably expect to
induce action or forbearance by promise or third person

and induces it is binding if injustice can be avoided by

enforcement of the promise.
(2) Charitable subscription or marriage settlement binding
w/o proof that promise induced action.
To make an irrevocable offer? OPTION: For me to consider
your bid, make it an option
R.2d 87 Option Contract
(2) Offer which expected and does induce action or
forbearance is binding as option contract to extent
necessary to avoid injustice.
Reliance on Negotiations: Can negotiation promises be relied
on? If so, are we trying to protect the little guy in an inequitable
way? Red Owl Stores
Charitable Contributions
Allegheny: Charitable subscription does not need reliance, just
foreseeability. Most would think consideration as GIFT. Naming of
fund enough consideration?
c. Unjust Enrichment
Past Consideration
Detriment not bargained for. Cannot be consideration for future
promise. Exchange just a bet (clairvoyant) Moore.
Moral Obligation: Nothing to do with gains of trade, generally
not enforceable unless some other pre-existing obligation.
Promising to make good on legally unenforceable past obligation
becomes an enforceable promise again.
Material Benefit
R.2d 86 Promise for Benefit (Material) Received
(1) Promise made in recognition of benefit previously
received by promisor from promise binding to extent
necessary to prevent injustice
(2) Promise not binding
(a) if promisee conferred benefit as gift or promisor
not unjustly enriched
(b) to the extent that its value is disproportionate to
the benefit
Restitution: Prevent unjust enrichment
Enrichment
Injustice
Effect of a Contract
Quasi contract: Restitution for services performed in good faith
to helpless
d. Statute of Frauds
Scope
R.2d 110 Classes of Contracts Covered
(1) Enforcement forbidden unless written memorandum or
applicable exception:
(a) Executor or administrator to answer for a duty
of decedent

(b) Answer for duty of another (Surety)

(c) Consideration of Marriage
(d) Sale of an interest in land
(e) Not to be performed w/in 1 year
(2) UCC governs
(a) Sale of goods $500 or more (2-201)
(b) Sale of securities (8-319)
(c) Sale of personal property not covered, $5,000 in
amount or value of remedy (1-206)
(3) UCC: writing signed by debtor required to create
security interest in personal property or fixtures not in
possession of secured party
(4) Cannot take case out of operation of statute of
limitation unless made in signed writing, but no effect on
payment of principal or interest
(5) Other classes in many states
NOTE: CAN STILL GET OFF CONTRACTS REMEDIES.
Can get restitution and if you want reliance make it offcontract.
R.2d 125 Contract to Transfer, Buy, or Pay for an Interest
in Land
(1) Promise to transfer interest in land w/in SoF
(2) Promise to buy interest in land w/in SoF, irrespective of
person whom transfer is to be made
(3) Promise to pay price, if w/in SoF, ceases to be w/in it
unless the promised price is in whole or part an interest in
land
(4) Short term leases less than 1 year usually excepted
R.2d 129 Action in Reliance; Specific Performance
In transfer of interest of land, reliance allows specific
performance notwithstanding SoF if reasonable and w/
continuing assent of other, and injustice avoided only by
enforcement
R.2d 130 Contract Not to be Performed Within a Year
(1) Contract not FULLY performable w/in year, all promises
w/in SoF until one party complete his performance
(2) When one party completes performance, SoF does not
prevent enforcement of other partys promises
Exceptions
R.2d 139 Enforcement by Virtue of Action in Reliance
(1) Promise reasonably expected to cause and causing
action can be enforced notwithstanding SoF if justice
requires
(2) Significant circumstances
(a) Availability and adequacy of other remedies
(cancellation, restitution)
(b) Definite and substantial character of action in
relation to remedy sought

(c) Extent that action corroborates evidence of

making and terms of promise (or making and terms
established by evidence)
(d) Reasonableness of action
(e) Extent to which action was foreseeable by
promisor
R.2d 143 Unenforceable Contract as Evidence
SoF does not make an unenforceable contract
inadmissible in evidence for any purpose other than its
enforcement in violation of Statute
UCC 2-201 Formal Requirements; Statute of Frauds:
Minimal writing MUST include QUANTITY. Seller need not sign
under (b) w/in 10 days
1-201 com 37 for signed by execution of symbal (e.g. phone
number, email address) with intent to adopt or accept writing
PART PERFORMANCE can give cause of action for damages for
that piece of performance.
Writing
R.2d 131 General Requisites of a Memorandum
SoF contracts enforceable if evidenced by any writing,
signed by or on behalf of party to be charged, which
(a) Identifies subject matter of contract
(b) is sufficient to indicate contract made or offered by
signor
(c) states essential terms of unperformed promises in
contract
R.2d 133 Memorandum Not Made as Such
Except for writing evidencing contract upon consideration
of marriage, Statute may be satisfied by signed writing
not made as a memorandum of contract. CAN PIECE
TOGETHER SIGNED WRITINGS TO MAKE A FULL
CONTRACT.
Signature
E-sign 101 General Rule of Validity
Electronic Signature does not deny legal effect, validity or
enforceability
IV.

Terms
a. Parol Evidence Rule: Bars from admissibility extrinsic evidence from
prior or contemporaneous contract
Does allow modifications
INTERPRETS contract (SoF determines enforceability)
COLLATERAL AGREEMENT EXCEPTION: Would naturally be included
in separate agreement
Total Integration
Four Corners Rule: On face looks complete (especially with
merger clause), totally integrated and can never be contradicted
or supplemented

Merger Clause: Unenforceable via form contracts/adhesion

contracts principals if outside buyers expectation and
unfair/unjust.
Partial Integration
R.2d 209 Integrated Agreements
(1) Writing constituting final expression of term(s) of
agreement
(2) Determined by COURT as question preliminary to
interpretation or application of PE Rule
(3) If appears complete and specific enough, integrated
unless established by evidence that not meant to be final
expression
R.2d 210 Completely and Partially Integrated
Agreements
(1) Completely: Complete and exclusive statement of
terms
(2) Partial: Any integrated agreement not completely
integrated
(3) Determined by court before interpretation or
application of PE Rule
R.2d 213 Parol Evidence Rule
(1) Binding integrated agreement discharges prior
agreements to extent of inconsistency
(2) Binding COMPLETELY integrated agreement discharges
prior agreements to extent of its scope
(3) Integrated agreement not binding or that is voidable
and avoided does NOT discharge prior agreement. Can
render inoperative a term which would have been a part
of agreement had it not been integrated
R.2d 214 Evidence of Prior or Contemporaneous
Agreements and Negotiations
Agreements and Negotiations prior to or
contemporaneous with the adoption of writing admissible
in evidence to establish
(a) Writing is or is not integrated
(b) Integrated agreement is completely or partially
(c) Meaning of writing
(d) Illegality fraud, duress, mistake, lack of consideration,
other invalidating clauses
(e) Ground for granting or denying rescission, reformation,
specific performance, other remedy
R.2d 216 Consistent Additional Terms
(1) Evidence admissible to supplement partially
integrated agreement
(2) Not completely integrated if omits a consistent
additional agreed term which is
(a) Agreed to for separate consideration, OR

(b) Such a term as in circumstances might

naturally be omitted from writing (included in
collateral agreement), can hear PE.
UCC 2-202 Final Written Expression: Parol or Extrinsic
Evidence: CERTAINLY be omitted, cant hear evidence,
otherwise can.
Ambiguity
Crabtree Principle: Use PE Rule to glue together papers to
make integrated writing
International Sale of Goods
PE Rule doesnt apply. PE Rule inconsistent with freedom of
contract.
Loser pays attorneys fees.
b. Interpretation
Modified Objective Theory
NO PREVALATION BY 201, NO CONTRACT (Oswald)
R.2d 200 Interpretation of Promise or Agreement
Interpretation is the ascertainment of meaning
R.2d 201 Whose Meaning Prevails
(1) Where parties attached same meaning to
promise/agreement/term, interpreted as that meaning
(2) Where parties attached different meanings to
promise/agreement/term, interpreted in accordance with
meaning attached by one if at time agreement made
(a) That party didnt know of different meaning
attached by other, and other knew of meaning
attached by first; OR
(b) That party had no reason to know of any
different meaning by other, and other had reason
to know of firsts meaning
(c) Except as stated, neither party bound by others
meaning, even if this destroys mutual assent
R.2d 202 Rules in Aid of Interpretation
(1) Words and conduct interpreted under all
circumstances, principal purpose of parties given great
weight
(2) Writing interpreted as whole, all writings of transaction
interpreted together
(3) Unless different intention manifested
(a) Prevailing meaning of language is interpreted
meaning
(b) Technical terms/words of art given technical
meaning when used in transaction in their technical
field
(4) Agreements with repeated occasions for performance
with opportunity to object, any course of performance
accepted w/o objection given great weight

V.

(5) Manifestations of intention of parties interpreted as

consistent with each other and any relevant course of
performance, dealing, or usage of trade
Context: Interpreting Ambiguous Terms
UCC 1-303 Course of Performance, Course of Dealing,
Usage of Trade
Course of Performance>Course of Dealing>Usage of Trade CAN
BE USED WITH GAP FILLERS!
Good Faith
1. Illusory Contracts
UCC 2-306 Output, Requirements an Exclusive
Dealings
(1) Requirements Definite Enough
(2) Duty to supply and use best efforts to promote
2. Meaning of Good Faith
R.2d 205 Duty of Good Faith and Fair Dealing
UCC 1-304 Obligation of Good Faith
UCC 1-201(20) Defn Good Faith
UCC 1-302(b) Variation by Agreement: Good faith
cannot be disclaimed, but standard of measure can be
agreed
c. Warranties
Implied Warranties
UCC 2-314 Implied Warranty: Merchantability; Usage of
Trade
Second hand sellers only express warranties (Com. 4)
IMPORTANT
UCC 2-315 Implied Warranty: Fitness for Particular
Purpose
Express Warranties
UCC 2-313 Express Warranties by Affirmation, Promise,
Description, Sample: BASIS OF THE BARGAIN. Affirmation of
value, opinions, commendations all not warranties (puffing).
Does this mean need reliance?
(1)(c) Sample becomes warranty (E.g. video preview clip)
Post contractual affirmations can be modifications (Com. 7)
Buyers doubts do not disclaim warranty (may actually prove
reliance) CBS v. Zif
Disclaimers
UCC 2-316 Exclusion or Modification of Warranties
If buyer examines, no Caveat Emptor (Com. 8)
Buyer specification can exclude warranties (Com. 9)
Defenses
a. Misconduct
Fraud
Three Elements:
Misrepresentation (of fact)
Scienter (guilty knowledge)

Materiality
(Like promissory estoppel w/ scienter)
R.2d 159 Misrepresentation Defined
An assertion not in accord with the facts
R.2d 162 When a Misrepresentation is Fraudulent or
Material
(1) Fraudulent if maker intends to induce assent and make
(a) Knows or believes assertion is not in accord with
facts
(b) Does not have confidence stated or implied in
truth of assertion
(2) Material if likely to induce reasonable person to
manifest assent, or maker knows likely to induce assent
from recipient
R.2d 164 When a Misrepresentation Makes a Contract
Voidable
(1) Assent induced by fraudulent or material
misrepresentation of other party that recipient justified in
relying on, voidable
(2) Assent induced by fraud/material misrepresentation of
THIRD party that recipient justified in relying on, voidable,
UNLESS other party in good faith and without reason to
know of misrepresentation gives value or relies materially
on transaction
R.2d 167 When a Misrepresentation is an Inducing
Cause
Induces partys manifestation of assent if substantially
contributes to decision to manifest
R.2d 168 Reliance on Assertions of Opinion
(1) Assertion is opinion if expresses belief, w/o certainty,
of fact or expresses judgment as to quality, value,
authenticity or similar matters
(2) Recipient of opinion as to facts not disclosed or known
may be interpreted as assertion
(a) That facts known to that person are not
incompatible with opinion OR
(b) That he knows facts to justify it
R.2d 169 When Reliance on Assertion of Opinion is not
Justified
Not justified in relying on opinion unless recipient
(a) Has trust and confidence to person whose opinion it is
that they could reasonably rely on it
(b) Reasonably believes that he with opinion has special skill,
judgment or objectivity with respect to subject matter
(c) Is for some other reason particularly susceptible to
misrepresentation of type involved
Nondisclosure
Caveat Emptor: Let the buyer beware
Baseball Card Problem

Look to Bargaining Sphere: Inside Sphere, know what you

need to know. Outside sphere, law may intervene
R.2d 160 When Action is Equivalent to an Assertion
(Concealment)
Action intended or known to be likely to prevent another
from learning a fact is equivalent to assertion that that
fact does not exist
R.2d 161 When Non-Disclosure is Equivalent to an
Assertion that fact does not exist
(a) Where he knows disclosure necessary to prevent
previous assertion from being a misrepresentation or
fraudulent or material
(b) Where he knows disclosure would correct mistake of
other party as to basic assumption on which theyre
making contract and if non-disclosure amounts to failure
to act in good faith/fair dealing
(c) Where he knows disclosure would correct mistake of
other party as to contents or effect of writing, evidencing
or embodying agreement in part or whole
(d) Where other person entitled to know fact because of
relation of trust and confidence between them
Duress (Wrongful Threat, No Meaningful Alternative)
Requires scienter. Must be loss of free will.
R.2d 175 When Duress by Threat Makes a Contract
Voidable
(1) If assent induced by improper threat by other party
leaving victim no reasonable alternative, contract
voidable by victim
(2) If assent induced by improper threat by third party,
contract voidable unless other party in good faith and w/o
reason to know of duress gave value/relies materially
R.2d 176 When a Threat is Improper
(1) Improper if
(a) Threat is crime or tort or would be if resulted in
obtaining property
(b) Threat is criminal prosecution
(c) Threat is use of civil process and made in bad
faith
(d) Threat is breach of duty of good faith and fair
dealing under contract w/ recipient
(2) Improper if resulting exchange not on fair terms, and
(a) Threatened act would harm recipient and not
significantly harm threatening party
(b) Effectiveness of threat in inducing assent
significantly increased by prior unfair dealing by
party making threat
(c) What is threatened is otherwise a use of power
for illegitimate ends

 Undue Influence
Pattern Usually Involves: Odd time, Odd place, Insistence on
immediate transaction, Emphasis on consequences, Multiple
persuaders, Stating no time for consulting advisers
R.2d 177 When Undue Influence Makes a Contract
Voidable
(1) Undue Influence is unfair persuasion of party under
domination of persuader or who by virtue of relation
between them is justified in assuming that person will not
act inconsistent with his welfare
(2) If assent induced by undue influence of other party,
voidable
(3) If assent induce by undue influence of third party,
voidable unless other party in good faith and w/o reason
to know of undue influence gives value or relies materially
Unconscionability
Two Prongs:
Lack of meaningful choice by one party (Procedural)
Unreasonably favorable terms to other party (Substantive)
R.2d 208 Unconscionable Contract or Term
If contract or term unconscionable, court may refuse to
enforce, or may enforce remainder w/o unconscionable
term, or may limit application of it to avoid
unconscionable result
Evidenced By: Gross Disparity in values exchanged,
Gross inequality of bargaining power coupled with
unreasonably favorable terms to stronger party, SEE
NOTES FOR UNCONSCIONABLE BARGAINING
UCC 2-302 Unconscionable Contract or Clause
Broad judicial discretion
Direct policing of bargaining (Com. 1)
One-sided at time of making (Com. 1)
Prevention of oppression and unfair surprise, NOT disturbing
risk allocation due to superior bargaining power (Com. 1)
May also look to PUBLIC POLICY
b. Mistake: NO SCIENTER
Mutual Mistake Sherwood (Cow)
R.2d 151 Mistake Defined: Quality vs. Different Goods
A belief not in accord with the facts (at time of formation)
R.2d 152 When Mistake of Both Parties Makes a
Contract Voidable
(1) Mutual mistake at time of formation as to basic
assumption that has material efect on exchange of
performances, voidable by adversely affected party
unless he bears the risk under 154
(2) To determine materiality, examine reformation,
restitution, etc.
R.2d 154 When a Party Bears the Risk of a Mistake

(a) When allocated to him by agreement of parties

(b) He is aware at time of formation that he has limited
knowledge w.r.t. the fact to which mistake relates but
treats his knowledge as sufficient (conscious uncertainty)
(c) Allocated to him by court on ground that it is
reasonable in circumstances
R.2d 157 Effect of Fault of Party Seeking Relief
Mistaken partys fault in failing to know facts does not bar
him from avoidance or reformation unless his fault
amounts to failure of good faith or reasonable standards
of fair dealing.
R.2d 158 Relief Including Restitution
(1) Any party may have relief including restitution
(2) Court may grant relief as justice requires including
reliance protection
Unilateral Mistake
Reliance on mistake by other party, contract not voidable
Drennan v. Star Paving
R.2d 153 When Mistake of One Party Makes a Contract
Voidable
Mistake of one party to fact he assumed at time of
formation which had an adverse material effect on the
agreed to exchange of performances, contract voidable if
he does not bear the risk of the mistake under 154 and
(a) Effect of mistake is such that enforcement would be
unconscionable OR
(b) Other party had reason to know of mistake or his fault
caused mistake
Constructive Fraud by Nondisclosure (Palpable Unilateral
Mistake): Youre mistaken, I know it, Im not going to say
anything.
Mistake Based Unilateral Mistake
c. Changed Circumstances: Wont enforce contract if we think parties
had no agreement in terms of that risk and its allocation
Impossibility: Must be OBJECTIVELY impossible
R.2d 261 Discharge by Supervening Impracticability
Where partys performance made impracticable by
occurrence of event which non-occurrence was a basic
assumption of contract (risk not allocated), his duty
to render that performance is discharged, unless
language or circumstances indicate the contrary
R.2d 263 Destruction, Deterioration or Failure to Come
into Existence of Thing Necessary for Performance
If existence of specific thing necessary for performance,
its failure to come into existence, destruction, or such
deterioration as makes performance impracticable is an
event whose non-occurrence was basic assumption of
contract

VI.

UCC 2-613 Casualty to Identified Goods

UCC 2-614 Substituted Performance: Commercially
reasonable substitute must be used and accepted if it exists
Frustration: Decrease of value to promisee Krell v. Henry
(Coronation)
R.2d 265 Discharge by Supervening Frustration
If partys principal purpose is substantially frustrated w/o
his fault by occurrence of event whose non-occurrence
was basic assumption of contract, remaining duties to
render performance discharged, unless language or
circumstances indicate the contrary
Look for destruction of value of performance.
Commercial Impracticability (Wont enforce contract if we
think party had no agreement in terms of that risk and its
allocation).
UCC 2-615 Excuse by Failure of Presupposed Conditions:
Allocate among customers producible goods COM 5 OF 2-207
NO UNREASONABLE SURPRISE
UCC 2-616 Procedure on Notice Claiming Excuse: Buyer
can terminate or modify (30 DAYS)
Conditions: WHAT RISK IS BEING ALLOCATED? SO IMPORTANT
a. Express Conditions: Contract says is condition
Condition Precedent: Condition whose satisfaction is necessary for duty
to arise
Concurrent Condition: Two things have to happen at same time (usually
precedent of each other)
Subsequent Condition: Condition whose satisfaction discharges duty
that has already arisen (defendant has burden of proof)
Strict Enforcement
Express conditions are strictly enforced (Inman v. Clyde Hall
Drilling)
Promise v Condition
R.2d 261 Interpretation of Doubtful Words as Promise or
Condition
Where doubtful whether words create promise or express
condition, interpreted as promise; but MAY mean that one
party promises performance and other partys promise
conditional on that performance
R.2d 227 Standards of Preference with Regard to
Conditions
(1) Interpretation preferred that will reduce obligees risk
of forfeiture, unless event is w/in obligees control or he
has assumed risk
(2) Unless contract is type where only one party generally
undertakes duties, when it is doubtful whether
(a) A duty is imposed on oblige that an event occur
OR (promise: damages, but no discharge of
duty)

(b) The event is made a condition of the obligors

duty OR (condition)
(c) The event is made a condition of obligors duty
and duty is imposed on the oblige that the event
occur (promissory condition)
First interpretation preferred if event is w/in the obligees
control
Waiver (APPLIES ONLY TO NON-MATERIAL CONDITIONS) &
Estoppel
R.2d 84 Promise to Perform a Duty in Spite of NonOccurrence of a Condition
(1) Promise to perform all or part of a conditional duty in
spite of non-occurrence of condition is BINDING, whether
made before or after time for condition to occur, UNLESS
(a) Occurrence of condition was material part of
agreed exchange for performance of duty and
promisee was under no duty that it occur (e.g. Fire
needs to happen to collect insurance) OR
(b) Uncertainty of occurrence of condition was an
element of risk assumed by promisor
(2) If promise made before time for occurrence of
condition has expired and condition w/in control of
promisee or a beneficiary, promisor can make his duty
again subject to the condition by notifying promise or
beneficiary of his intention to do so if
(a) Notification received with reasonable time to
cause condition to occur AND
(b) Reinstatement of requirement of condition not
unjust because of RELIANCE (estoppel protects) of
promisee or beneficiary AND
(c) Promise is not binding apart from the rule stated
in (1)
Excuse
R.2d 229 Excuse of a Condition to Avoid Forfeiture
To extent that non-occurrence of condition would cause
disproportionate forfeiture, court may excuse the nonoccurrence UNLESS MATERIAL
b. Constructive Conditions: Condition that exists where the covenants
are dependent.
Substantial Performance Jacob & Youngs v Kent
Constructive Conditions can be satisfied by Substantial
Performance (to prevent forfeiture CARDOZO)
Treat substantial performance as condition satisfaction,
and then get remedy for contract breach
MUST UNDERSTAND WHAT RISKS THE PARTIES
WERE ALLOCATING (E.g. If Reading Pipe wanted for
quality, substantial performance, but if wanted for other
brand specific reason, maybe not)

Doctrine of Substantial Performance unavailable after

WILLFUL breach
Mitigating harshness of contracts
o Interpret as not a condition
o Use estoppel or forfeiture to make it less harsh
o Use Substantial Performance
Material Breach B&B Equipment Co. v Bowen
If breach of contract is also breach of a condition, Material
Breach
Substantial Performance means no material breach and
vice versa
Effect of Material Breach: Non-breaching party has option
to either treat material breach as non-occurrence of
condition and rescind/proceed off-contract, or treat it as a
breach of contract and sue for on-contract damages.
Rescission-> All parties get restitution
Only MATERIAL breach can absolve duty to perform
Partial v Total Breach: Lane Enterprises v I.B. Foster (Bridge
coating. Tiny money withholding while asking for adequate
assurance NOT material, failure to give adequate assurance WAS
material).
Partial Breach: Continue on-contract then sue for damages for
breach
Total Breach: Non-breaching party can get on-contract recovery,
but can also terminate and hire a substitute. ONLY AVAILABLE
FOR MATERIAL BREACH
R.2d 241 Materiality Circumstances
(a) Extent of deprivation of benefit reasonably expected
(b) Extent injured party can be adequately compensated
for part of benefit he will be deprived of
(c) Extent that party failing to perform or offer
performance will suffer forfeiture
(d) Likelihood that party failing to perform or offer
performance will cure his failure, taking account of all
circumstances and reasonable assurances
(e) Extent which behavior of failing party comports with
standards of good faith and fair dealing
UCC Perfect Tender Rule
Ramirez v. Autosport: EXCELLENT application of PTR AND
of gap filler provisions
UCC 2-601 Buyers Rights on Improper Delivery:
ALL breaches material, so buyer has a LOT of rescission
power
UCC 2-602 Manner and Effect of Rightful Rejection:
MUST NOTIFY
UCC 2-605 Waiver of Buyers Objections by Failure
to Particularize

1.
2.

3.

4.
VII.

UCC 2-606 What Constitutes Acceptance of Goods

UCC 2-607 Effect of Acceptance; Notice of Breach;
Burden of Establishing Breach After Acceptance;
Notice of Claim or Litigation to Person Answerable
Over
Cure
UCC 2-508 Cure by Seller of Improper Tender or
Delivery; Replacement
Revocation of Acceptance
UCC 2-608 Revocation of Acceptance in Whole or
in Part: SUBSTANTIALLY IMPAIRED VALUE. EFFECTIVE ON
NOTIFICATION
Anticipatory Repudiation: Substantial Impairment Rule
Can bring suit IMMEDIATELY! We dont want to waste
human capital. Present breaches. Hochster v. De La Tour
UCC 2-609 Right to Adequate Assurance of
Performance
Reasonable grounds, IN WRITING, May suspend while
pending
UCC 2-610 Anticipatory Repudiation
UCC 2-611 Retraction of Anticipatory Repudiation
Request for Mutual Rescission NOT Anticipatory
Repudiation (Harrell v Sea Colony)
Installment Contracts
UCC 2-612 Installment Contract; Breach

Remedies
a. Expectation Interest: Put promisee in position had promise been
performed (Approximate Performance)
Expectation Damages
Care about COMPENSATION not PUNISHMENT
Subjective values differ (not just monetary value)
Need to determine what plaintiff bargained for (money or
specific product?): E.g. $60k to regrade land only worth $15k. If
P thinks regrading is worth $60k, those should be his damages.
But if he doesnt, the $15k is adequate. Depends on the worth of
the land to him (HIS UTILITY)
Pareto Efficient Breach: When somebody could be made
better off without making anyone worse off. If breach creates
more utility, breach should occur! E.g. Spann sell widget to me
$100, I resell for $115. He should breach to sell to other for
$125, I still get $15 expectation, Spann gets $10 more.
EFFICIENT MEANS PERSON WITH HIGHEST UTILITY GETS GOODS.
Kaldor-Hicks Efficiency: Doesnt matter that nobody be made
worse off. As long as surplus covers injury, dont need to actually
compensate (no heed of distributional problems)
R.2d 348 Alternatives to Loss in Value of Performance

(2) If breach results in defective or unfinished construction

and loss in value not proved with sufficient certainty, may
recover damages based on
(a) Diminution in market price of property caused
by breach (ONLY WHEN COST OF COMPLETION
UNFAIRLY OUT OF PROPORTION)
(b) Reasonable cost of completing performance
or remedying defects if that cost is not clearly
disproportionate to probable loss of value to him
1. Consequential Damages
a. Foreseeability
Hadley Rule: Damages of broken contract are
those fairly and reasonably considered either
arising naturally or such as may reasonably be
supposed to have been in contemplation of both
parties AT TIME OF FORMATION (foreseeable)
R.2d 351 Unforeseeability and Related
Limitations on Damages
(1) Damages not recoverable for loss that
breaching party did not have reason to
foresee as probable result of breach WHEN
CONTRACT MADE
(2) Loss may be foreseeable because it
follows from the breach
(a) In the ordinary course of events OR
(b) As a result of special
circumstances that party in breach
had reason to know
(3) Court may limit damages by excluding
lost profits, by allowing recovery only for
reliance damages, or as justice requires to
avoid disproportionate compensation
UCC 2-710 Sellers Incidental Damages
Hadley Rule for sellers. Incidental damages after
buyers breach (naturally arising damages)
UCC 2-715 Buyers Incidental and
Consequential Damages
Hadley Rule for buyers. Consequential damages
w/in contemplation (AND NOTICE RECEIVED) ONLY
FOR BUYERS. Consequential includes personal
injury.
b. Certainty
Even if contemplated (Hadley), if not certain, no
recovery (Dempsey)
R.2d 346 Availability of Damages
(1) Right to damages for any breach by a
party against whom contract enforceable
unless claim suspended or discharged

(2) No loss or unprovable amount of loss,

nominal damages
R.2d 349 Damages Based on Reliance
Interest
Reliance interest damages recoverable
minus loss that party in breach can prove w/
reasonable certainty would have been
suffered had contract been performed
R.2d 352 Uncertainty as a Limitation on
Damages
Damages not recoverable of loss beyond
evidentiary establishment of certainty
2. Mitigation
a. Common Law (See bar chart)
Duty to not pile up damages Rockinham
(Bridge building)
Duty to minimize damages (e.g. discharged
employee Parker). Employer has burden of
proof that other employment substantially
similar. Jury decides what was reasonably
sufficient similar employment
Does duty to mitigate warrant Efficient
Breach?
Must mitigate variable costs, not fixed costs
Pareto Inefficient when denying nonmonetary
compensation
Must make reasonable effort to find
comparable performance.
R.2d 350 Avoidability as a Limitation of
Damages
(1) Damages not recoverable for loss that
injured party could have avoided w/out
undue risk, burden or humiliation
(2) Not precluded when making reasonable
(question for jury) but unsuccessful efforts to
avoid loss
b. Lost Volume Sellers
UCC 2-718 Liquidation or Limitation of
Damages, Deposits
Inexhaustible supply sellers can recover lost profits
c. UCC 1-305 Remedies to be Liberally
Administrated
i. Sellers
UCC 2-703 Sellers Remedies in
General:
Index: Includes cancellation (i.e. perfect
tender for sellers)

UCC 2-706 Sellers Resale Including

Contract for Resale:
Preferred Remedy: Resale (built in duty to
mitigate)
UCC 2-708 Sellers Damages for NonAcceptance or Repudiation:
(1) Not reselling, get difference between
contract and market prices (forced resale
profit)
(2) Lost Volume Sellers: Get lost profit plus
incidental damages
UCC 2-709 Action for the Price
2-709(1)(b) unable to resell for reasonable
price or effort would be unavailing (e.g.
custom wand), can get price recovered
(includes profit)
UCC 2-710 Sellers Incidental Damages
ii. Buyers
UCC 2-711 Buyers Remedies in
General; Buyers Security Interest in
Rejected Goods:
Index
UCC 2-712 Cover; Buyers
Procurement of Substitute Goods:
Preferred Remedy: Cover (buying substitute
goods)
UCC 2-713 Buyers Damages for NonDelivery or Repudiation:
Forced cover difference for damages
UCC 2-714 Buyers Damages for Breach
in Regard to Accepted Goods:
Breach of Warranty Provision: Nonconformity
damages (treated as non-material breach)
Can recover all of 2-715 as allowed
UCC 2-715 Buyers Incidental and
Consequential Damages DO 2(a) AND
(b) for consequential
UCC 2-716 Buyers Right to Specific
Performance or Replevin: REASONABLE
effort to recover otherwise must first be
made. (E.g. HIV test cant recover otherwise
but by specific performance)
Specific Performance
1. Equity
Specific Performance Injunction compels defendant to
perform his contract with the plaintiff
2. Land
o Land is presumed unique

Two Requirements FOR ALL EQUITABLE

REMEDIES (Loveless):
Only allowed equitable remedies if legal
remedies inadequate
Not entitled to equitable remedies as matter
of course. Court balances equities, have right
to CONVINCE court equitable remedy
appropriate
o We dont like ordering people what to do
o Coase Theorem: Market will adjust and produce
efficient outcome. Want to minimize transaction
costs for efficiency.
o FOR EFFICIENCT, PERSON WHO VALUES OBJECT
MOST MUST GET IT
Pareto: No one worse off, Kaldor-Hicks: Highest Value
User (no care about distribution), Coase: Minimum
transaction costs (most efficient, because still highest
value user)
3. Goods
UCC 2-709 Action for the Price
UCC 2-716 Buyers Right to Specific Performance
or Replevin
4. Personal Service
o No specific performance of personal service
contracts. One has right to refuse service
Problem of judicial supervision
Logistics of Compelling Insurmountable
Efficiency concerns (may be efficient breach)
o Negative Injunction: Prevents other performance,
but does not compelled contracted performance
(Wagner singing) (Bars competitors from profiting
from breach).
o WE DONT LIKE COMPELLED ASSOCIATION
Liquidated Damages: Parties specify damages for breach
Wassenaar Reasonableness Test:
Damages or Penalty? (WE DONT DO PENALTIES because
they hurt efficiency)
Injury one incapable of estimation at the time of the
contract?
Stipulated damages a reasonable forecast of harm
caused by the breach?
Couldnt penalties coerce contracts to be honored more?!
R.2d 355 Punitive Damages
Not recoverable for breach unless conduct of breach is also a
tort for which punitive damages are recoverable
R.2d 356 Liquidated Damages and Penalties
o

(1) Damages may be liquidated in agreement only at

amount reasonable in light of anticipated or actual loss
and difficulties of proof of loss. Unreasonable large
liquidated damages unenforceable on grounds of public
policy as penalty
(2) Penalty for non-occurrence of condition of bond
unenforceable for amount exceeding loss caused by nonoccurrence (no penalties as a matter of public policy)
UCC 2-718(1) Liquidation of Damages
UCC 2-719 Contractual Modification or Limitation of
Remedy: Will enforce them unless the remedy is
unconscionable or fails in its intention. Unconscionable if waives
liability for personal injury.
b. Reliance Interest: Put promise in position had promise not been
made
R.2d 349 Damages Based on Reliance Interest
Reliance interest damages recoverable minus loss that party in
breach can prove w/ reasonable certainty would have been
suffered had contract been performed
Reasonably contemplated wasted expenditures (even before
contract formed) can be reliance damages. Anglia TV v. Reed
Risks can be reallocated at time of contract (e.g. reallocating
already sunk costs at time of contraction in Reed).
Plaintiff elects between reliance and expectation damages
(reliance is subset)
Reliance is essentially expectation minus profits.
E.g. Red Owl Stores Pre-contract promissory estoppel reliance.
Breaching party has burden of proof as to amount of loss. But
MUST deduct provable loss (R.2d 349).
EXPECTATION NEED NOT BE MONETARY: Can recover
reliance damages even if no monetary profit (unless defendant
can show e.g. that $100 million dollar painting was worth less
than that, plaintiff can recover $100,000 spent on security
system).
Expectation damages can include opportunity costs. For the
contract price, party is willing to trade expectation for the class
of unknown opportunity costs.
By denying Coase theorem, second transaction makes
inefficiency. BUT maybe cant know expectation until second
transaction. Thus may be necessary for efficient outcome. (Von
Mises)
c. Restitution Interest: Undo unjust enrichment of promisor by
promisee
Quantum Meruit/Quasi Contract: Noncontract restitution (e.g.
restitution to breaching party for part performance). Britton
On contract reliance suing must deduct provable loss. Off
contract restitution need not, because we are not trying to

approximate performance, as it is irrelevant. Restitution subset

of Reliance. SO if you want deduction, call it RELIANCE, if you
dont, call it RESTITUTION
Maybe promissory estoppel is just off-contract reliance?
SEE DIAGRAM
R.2d 371 Measure of Restitution Interest
If sum award to protect partys restitution interest, may be measured:
(a) Reasonable value to other party of what he received in terms of
what it would have cost him to obtain it from person in claimants
position, OR
(b) Extent to which other partys property increased in value or his
other interests advanced
R.2d 373 Restitution When Other Party is in Breach
(1) Subject to (2), breach by non-performance that gives rise to
damages for total breach or repudiation, injured party entitled to
restitution for any benefits he conferred on other by way of part
performance or reliance
(2) Injured party has no right to restitution if he performed, and only
duty of other party is definite sum of money for that performance (IF
contract fully performed, want to continue on contract).
R.2d 374 Restitution in Favor of Party in Breach
(1) Subject to (2), if party justifiably refuses to perform on ground that
others breach discharged his duties, party in breach entitled to
restitution for any benefit he conferred by part performance or reliance
in excess of loss he caused by breach.
(2) To extent under manifested assent, if partys performance retained
in breach, party not entitled to restitution if value of performance as
liquidated damages is reasonable in light of anticipated or actual loss
caused by breach and difficulties of proof of loss.
Doctrine of Divisibility: Divide contract into component parts
for restitution awards (Britton).
UCC 2-711: Buyer can recover price paid (restitution) and may obtain
on contract remedies (reliance). MIGHT be able to do both at same
time. Buyer can cancel and get restitution for what they paid and then
also cover and get on contract remedies as well.