Fall 2010 Contracts I Professor C.

Paul Rogers

Bases for Enforcing Promises I. Enforceable Promises an Introduction A. Hawkins v. McGee 1. Harry hand case, language used in K should be taken at face value B. Bayliner Marine Corp. v. Crow 1. Boat wasnt fast enough for deep sea fishing 2. Statement of sellers opinion of the goods doesnt create a warranty Remedying Breach A. US Naval v. Charter 1. Shipment of paperbacks before agreed upon date 2. UCC Article 2 is only for the sale of movable goods, not the copyrights B. The Purpose of Remedies 1. Expectation Benefit of the Bargain to put the promise in as good a position as he would have been in had the contract been performed a) How to calculate - the bargained for benefit (1) Expected outcome original status = expectation damages 2. Reliance put non-breaching party back in original position, reimbursing for loss caused in reliance a) How to calculate the loss incurred by relying on the promise (1) Original status current status = reliance damages 3. Restitution unjust enrichment of the breaching party a) How to calculate Undo any benefit conferred upon breaching party C. Sullivan v. OConnor 1. Plastic surgery on nose goes wrong, and nose ends up worse 2. Damages a) Expectation a good nose, definitely dont want specific performance Promised nose original nose = expectation damages b) Reliance relied on promise of a good nose, had several operations (Original nose current nose) + expenses incurred for extra operations = reliance damages c) Restitution unjust enrichment of the doctor Doctors fees = restitution damages D. The Economics of Remedies 1. Efficient breach hypothesis

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a) There is a point where breach may be viewed as economically efficient but that doesnt take into account the intangible aspects of doing business E. Punitive Damages 1. White v. Benkowski a) Shut the water off because they used too much, b) Punitive damages are not recoverable in breach of contract action c) Some cases are better fit for mediation, petty-ness is not for court F. Remedies in Practice 1. Attorneys fees are not recoverable from the losing party 2. Arbitration, mediation, small claims court are all cheaper forms of dispute resolution Consideration as a Basis for Enforcement A. Fundamentals of Consideration (benefit to promisor or detriment to the promise) 1. Typical Categories of Agreements a) 5 categories contracts for sale of goods, real estate transactions, construction contracts, employment agreements, family contracts 2. Hamer v. Sidway a) Uncle promises $5K if Nephew doesnt drink/smoke b) Forbearance of a legal right is sufficient consideration for a promise c) More than a gratuitous promise, Promisor benefit detriment promisee 3. Fiege v. Boehm a) Contract to pay child support, but DNA test says it is not his kid b) Good faith is required to be sufficient consideration for a K c) She could have entered into K with 2 different men, as long as both were in good faith B. The Requirement of Exchange: Action in the Past 1. Feinberg v. Pfeiffer a) Pension given to woman for working for 40 years b) Past consideration is not sufficient because it is not bargained for 2. Moral Obligation a) Mills v. Wyman (1) Mills cared for son, Wyman promised to pay, but didnt (2) Moral obligation is highly subjective, courts rarely attempt to uphold moral obligation (3) No bargain, the benefit and/or detriment must be bargained for (4) A benefit conferred before the promise is not in exchange for the promise b) Webb v. McGowin (1) Webb saves McGowin in lumber yard, cripples himself (2) When the promise cares for, improves and preserves the property of the promisor, even without request, it is sufficient

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consideration for a subsequent promise because of the material benefit received. The Requirement of Bargain 1. Kirksey v. Kirksey a) Brother in law offers to put her up, two years later kicks her out b) No bargain consideration has to flow both ways c) Tiffanys Hypo conditional gift 2. Employment Agreements 3. Lake Land Employment v. Columber a) Columber breached a non-compete agreement b) In at-will employment, subsequent employment is consideration 4. Rewards a) Acceptance of the reward is recoverable by anyone who knows of the offer before performance is complete b) Catch the outlaw, then learn of reward, turn him in = reward c) Catch the outlaw, turn him in, then learn of reward = no reward Promises as Consideration 1. What Constitutes a Promise a) Bilateral K promise for a promise b) Unilateral K promise for a performance c) Conditional promises promise is binding, an event must occur before promisor must perform its promise d) Express conditions ex. Insurance companies promise to pay if house is burned down 2. Strong v. Sheffield a) Uncle makes promise to not seek payment for promissory note until he wants it illusory K because there was no specific amount of time to forebear 3. Contracts for the Sale of Real Estate a) Closing on a house is not the K, the performance of payment is the K 4. Mattei v. Hopper a) Agreement to buy property if Hopper could obtain leases for a satisfactory number of units b) satisfactory clauses are highly subjective, dissatisfaction cannot be claimed arbitrarily or unreasonably c) A promise conditional on the promisors satisfaction is not illusory because dissatisfaction must come from the performance of the conditions, not of the K itself, and the dissatisfaction must be genuine. 5. Contracts for the Sale of Goods a) All contracts for the sale of movable goods is governed by Article 2. 6. Eastern Air Lines v. Gulf Oil Corp. a) Requirements contracts (1) Lacking mutuality of obligation without Article 2

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(2) A requirements K could be binding where the purchaser had an operating business and the court could determine the volume of goods provided referenced to the volume of goods required to operate. (3) The essential test is good faith 7. Wood v. Lucy, Lady Duff-Gordon a) Designer hires marketer, in return for his services she had to give up half of all profits and revenues from the contracts he might make b) Ps compensation was based entirely upon profits resulting from his efforts, P promises to account for all $ received and take out patents necessary c) Licensing K not governed by UCC because not a K for sale of goods d) Reasonable effort standard even though there is no duty to do the work, the intention of the parties gives the promise a value e) In all reality, the intent of the promise was to use reasonable efforts to bring profits and revenues into existence. 8. Termination Clauses a) Generally, the promise is held to be illusory b) Exception if termination clause is read as requiring notice be given a set period of time before the termination becomes effective, or be given in writing, or in some other way restricts the right of termination, the promise is not illusory. c) UCC 2-309(3) requires reasonable notification for termination 9. Substitutes for Consideration a) A few states have statutes that make gratuitous promises binding by recognizing some form of writing as a substitution for consideration. Reliance as a Basis of Enforcement A. Ricketts v. Scothorn 1. Grandfather promises to pay granddaughter. In effect he suggested, but not required, that she quit her job and rely on the money he promised. 2. Intentionally influencing one to alter their position for the worse on the faith of the note, it would be inequitable to permit the promisor to not pay based on the ground that the promise was without consideration. B. Doctrine of Promissory Estoppel 1. Reliance as a basis for enforcing promises 2. Limited to reliance damages, because the whole thing is based on reliance a) Exception when reliance is difficult to calculate and expectation interest if fairly easy 3. 4 categories a) Family promises (1) Ex. Promise to leave the family farm to a son b) Promises to convey land (1) Ex. The recipient of the promise relies on it by moving onto the land and making improvements.

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Promises couples with Gratuitous Bailments (1) Ex. d) Charitable Subscriptions (1) Ex. Promise to fund a scholarship C. Restatement First, 90 1. If a promise is likely to induce action or forbearance on the promisee and does actually induce said action/forbearance, then it is binding if injustice can be avoided only by enforcement of the promise. 2. The detrimental reliance has to be foreseeable from the perspective of the promisor. D. Feinberg v. Pfeiffer Co. 1. Pension is promised to worker after 40 years of service 2. Court holds that there is no contract, but Feinberg relied on that promise when she retired from a job she would not be able to attain elsewhere. 3. The promise itself has to influence the detrimental action taken a) Ex. A promise for pension after man has already decided to retire does not meet qualifications of promissory estoppel because there was no reliance. E. Restatement Second 90 1. Promise reasonably inducing action or forbearance 2. The remedy granted for breach may be limited as justice requires. 3. A charitable subscription or marriage settlement is binding without proof of inducement of action or forbearance. 4. Reliance interest is calculated by putting the parties back to original status F. Cohen v. Cowles Media 1. P was newspapers informant, Paper breaking promise of confidentiality 2. The test is not whether the promise should be enforced to do justice, but rather should the promise be enforced to prevent an injustice. 3. The line between a conditional promise and a conditional gift is in the bargain G. D & G Stout v. Bacardi 1. Bacardi promises to continue business with P, P refrains from selling out, Bacardi breaches promise, P is forced to sell out at significant reduction 2. Reliance costs are limited to out-of-pocket losses and opportunity costs 3. Loss of future expected income is not recoverable on a theory of promissory estoppel Restitution as an Alternative Basis for Recovery A. Prevention of unjust enrichment (quantum meruit or restitution) 1. Underlying premise gains produced through anothers loss are unjust and should be restored B. Cotnam v. Wisdom 1. Doctor performs surgery on D, but cant save his life, sues the estate 2. Quasi-Contract or Implied Contract 3. Good semaritan rule says you cant recover when you do someone a favor

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a) exception is for doctors because that is their livelihood b) exception 2 is when there is extraordinary aid 4. It is practical application for doctors and nurses who render aid to infants, insane people and drunks to sustain recovery. Callano v. Oakwood Park Homes 1. P planted shrubs on property for 3rd party, 3rd party died, D sold property (including the shrubs), P sues D on the theory of quasi-contract 2. In cases of quasi-contracts, the duty defines the contract. The doctrine rests on the principle that a person shall not be allowed to enrich himself unjustly at the expense of another, and on the principle of whatsoever it is certain a man ought to do, that the law supposes him to have promised to do. 3. Quasi-contract cases involve either some direct relationship between the parties or a mistake on the part of the person conferring the benefit. D. Mechanics Liens 1. Protects laborers, materialmen, contractors who make improvements upon property. Under the thinking of Callano, a sub wouldnt have the right to restitution from the owner since there was no direct relationship. Legislature has addressed this with statutes called mechanics liens. E. Pyeatte v. Pyeatte 1. Wife agrees to put husband through law school and in return husband would put wife through graduate school after his graduation. 2. Usual and incidental activities of the marital relationship, upon dissolution ther can be no restitution for performance of these activities. 3. But, if the facts demonstrate an agreement with unilateral effort by one spouse which is solely to the benefit of the other by the time of dissolution, the remedy of restitution is appropriate. 4. Marital relationship is a gratuitous relationship generally 5. Maybe there is a contract, but it would be too indefinite to enforce a) But wife does have a restitution claim (1) Restitution would be the value of law school education (a) Easiest way to measure cost of tuition, room & board (b) Harder way to measure new earning power Creating Contractual Obligations I. The Nature of Assent A. 2 theories of contracts i. Actual intent theory meeting of the minds ii. Objective theory no way to prove what each party was thinking, people change their mind when they dont like the outcome. So, we look at objective outward actions. iii. Freedom of contracts no one has to approve a contract C.

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iv. Freedom from contract we dont want the law to hold us to contracts we didnt intend to be bound to. v. Is there a difference in a bluff and a joke? yes, a bluff has a serious intent. B. Lucy v. Zehmer a. Zehmer jokingly agrees to sell farm to Lucy, but there was no reason to believe that he was joking, K was written on back of receipt, signed by all parties & wife, etc. b. Validity of a K is based upon actions, not mental assent c. The law imputes an intention corresponding to the reasonable meaning of words and actions. If words and actions, judged by a reasonable standard, manifest an intention to agree, it is immaterial what may be the unexpressed state of mind. d. Harrier Jet hypo not reasonable that a Harrier Jet would sell for $700K i. Judge by a reasonable standard ii. Mere peppercorn wouldnt qualify as reasonable C. Intent to be bound a. Not every agreement results in a binding, legally enforceable K. b. Freedom from contract reasonableness of intent to be bound must be measured D. Gentlemans Agreements a. Letter of intent not legally binding, but still gives assurance to parties b. Freedom from contract again it specifically states no liability then we know the intent of each of the parties E. Formal Contract Contemplated a. Two widely accepted common-law principles to determine intent i. Absent an expressed intent that no contract shall exist, mutual assent between the parties, even though oral or informal, to exchange acts or promises is sufficient to create a binding contract ii. That to avoid the obligation of a binding contract, at least one of the parties must express and intention not to be bound until a writing is executed. b. Factors to determine whether parties intended to be bound without a document i. Whether there has been an express reservation of the right not to be bound in the absence of a writing ii. Whether there has been partial performance of the contract iii. Whether all of the terms of the alleged contract have been agreed upon iv. Whether the agreement at issue is the type of contract usually in writing The Offer A. What is an offer? a. An offer is an act whereby one person confers upon another the power to create contractual relations between them. It must be an act that leads the offeree reasonably to believe that a power to create a contract is conferred upon him. It is on this ground that we must exclude invitations to deal or acts of mere preliminary negotiation, and acts evidently done in jest or without the intent to create legal relations. All these are acts that do not lead others reasonably to believe that they are empowered to close the contract. B. Owen v. Tunison

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Clear example of Freedom from Contract Anti-formation bias when there is reasonable doubt of intent, then there is no K Language must be unequivocally show assent When the language is general, like an advertisement, it is not an offer that may be accepted by any or all people addressed. Invitation to negotiate

C. Harvey v. Facey a. Not a contract because the statement of the lowest price does not imply a contract to sell at that price to the people making inquiry. It only binds him to the lowest price. D. Fairmont Glass v. Crunden-Martin a. Quantity is a necessary requirement of an offer, quantity can be implied from previous negotiations and/or quotations b. A quotation is not an offer c. There must be definiteness in the language or it will be unenforceable E. Advertisements as Offers a. General Rule Advertisements are not offers b. Auctions the bidder is the offeror, the seller chooses to accept bidders offer c. Ebay Example in class the bid is irrevocable only because of Ebays terms and rules F. Lefkowitz v. Minneapolis Surplus Store a. The $1 mink scarf case advertisement in paper was clear, definite and explicit leaving nothing open for negotiation making it an offer, where acceptance will complete the contract. (first come, first served wording made the offer definite) b. An advertiser has the right to modify his offer before acceptance, but cannot impose new conditions not contained in the published offer. G. Construction Contracts a. Offer and acceptance in construction contracts typically consists of a bidding process H. Mistaken Bids a. Knowledge of mistake all courts agree that if the offeree knows of the offerors mistake at the time of acceptance then the offeror is no bound. b. Courts have distinguished between mistakes that are clerical or computational from judgment mistakes. Clerical or computational errors will typically have papers and surrounding circumstances demonstrating the error. I. Elsinore Union Elementary v. Karstoff a. Contractor submits a bid to school that has been computed incorrectly. There is a clause that disallows revoking the offer for 45 days. Contractor calls to revoke after finding mistake, but school refused, and accepted days later. b. If not for the clause denying revocation, this would have been withdrawn no problem c. Since contractor couldnt revoke, had to show that school knew of mistake and that it was an honest and excusable mistake. d. Knowledge by one party that the other is acting under a mistake is treated as equivalent to mutual mistake for purposes of recission.

e. Rescission may be had for mistake of fact if the mistake is material to the contract and was not the result of neglect of a legal duty, if the enforcement of the contract as made would be unconscionable, and if the other party can be placed in status quo. f. Additionally, prompt notice to rescind must be given and mistaken party must restore or offer to restore everything it has received under the contract.

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The Acceptance 1. An acceptance is a voluntary act of the offeree whereby he exercises the power conferred upon him by the offer, and thereby creates the set of legal relations called a contract. 2. The offeror has, in the beginning, full power to determine the acts that are to constitute acceptance. A. International Filter v. Conroe Gin, Ice & Light Co. a. Offer contained no requirement of notice. Offer was accepted and became a binding contract at the instant offeree signed OK. b. The court cannot restate the offer to make a contract when approval is communicated to offerer. Since it isnt in the language, notice of approval is optional. c. The form of notice may be very different from the acceptance itself. B. White v. Corlies & Tift a. Difference between preparation and actually commencing performance b. When an offer is made to one party by another, when they are not together, the acceptance of it must be manifested by some appropriate act. It does not need to be that the acceptance comes to the knowledge of the offeror before he is bound. But the offeror is not bound if manifestation is not in the usual course of events and in some reasonable amount of time. c. Reasonable time is determined by the mode of the proposal. Proposal by mail acceptance by mail (or faster) d. A mental determination not indicated by speech, or put in course of indication by act to the other party is not an acceptance that will be binding. C. Ever-Tite Roofing v. Green a. No time limit was given within the offer was to be accepted or work begun. Since not time was specified, a reasonable time must be allowed under the facts and circumstances and the evident intention of the parties. b. Greens hired another company but didnt notify Ever-tite of revocation of offer c. Commencement began with loading of trucks for this specific job. d. Since actual commencement began before any notice of dissent, performance is acceptance and the agreement is a contract. e. Preparation purchasing of general materials, etc. Anything up to the point of commencement of performance f. Commencement once the specifics of the K have begun, not the purchase of materials that could be generally used but the driving to the worksite is specific enough D. Notification of Acceptance in Unilateral Contracts

E. Carhill v. Carbolic Smoke Ball Co. a. Advertisement paying $100 to anyone getting the flu when using the product correctly b. Notification of acceptance is for the benefit of the offeror, he may choose not to include those terms c. If the person making the offer, expressly or impliedly intimate in his offer that it will be sufficient to act on the proposal without communicating acceptance of it to himself, performance of the condition is a sufficient acceptance without notification. d. Conditional promise like insurance coverage performance becomes due only if a specified event occurs. F. Allied Steel v. Ford Motor Co. a. If the offeror prescribes an exclusive manner of acceptance, an attempt on the part of the offeree to accept the offer in a different manner does not bind the offeror in the absence of a meeting of the minds on the altered type of acceptance. b. If an offeror merely suggests a permitted method of acceptance, other methods of acceptance are not precluded. c. Partial performance in accordance with the terms of the offer is sufficient to complete the contract. d. Time when acceptance takes effect an acceptance made in a manner and by a medium invited by the offer completes the manifestation of mutual assent as soon as it leaves the offerees possession (Mailbox Rule), regardless of whether it ever reaches the offeror. e. Option Contract an acceptance under an option contract is not operative until it is received by the offeror. G. Shipment of Goods as Acceptance a. UCC 2-206(1)(b) an order for prompt shipment is considered as inviting acceptance either by a promise to ship or by shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer. H. Corinthean v. Lederle a. Corinthean gets word of a future price increase and attempts to purchase 10x normal quantity through the computer system, tracking number is not an acceptance, Lederle ships 1/20th of order as an accommodation, with a letter stating they would send the rest of the order for the new price if Corinthean still wanted them. b. Shipping goods is acceptance unless they are non-conforming (conforming when they meet all obligations under the contract) and there is seasonable notice that the shipment is an accommodation. I. The offer is always based upon all of the language between parties. a. A party must follow the terms of its own language when those terms are accepted. b. Medical School didnt evaluate based upon the criteria laid out in terms of agreement J. Silence Not Ordinarily Acceptance

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a. General Rule silence alone is not acceptance. Something along the lines of - Unless I hear from you within 2 days, you will be deemed to have accepted the offer, cannot hold the offeree who fails to reject. Restatement 69 b. Exception to the general rule - silence coupled with acceptance of the benefit, even though a K may not exist, and holding that benefit for an unreasonable time may give jury reason to warrant the plaintiffs assuming acceptance. - Regular practice of fulfilling orders without confirmation would create a binding contract without notice of rejection, leading the party placing the order to believe production and acceptance had begun Termination of the Power of Acceptance Lapse of offer, revocation of offer, death of offeror, rejection A. Lapse of an Offer a. If no period of time is specified in the offer, it lapses after a reasonable time. A reasonable time depends on the circumstances. Perishable fruit will lapse sooner than an offer to buy wood. b. Ordinarily, an offer made by one to another in a face to face conversation is deemed to continue only to the close of their conversation, and cannot be accepted thereafter. c. The purpose of the offer could also be taken into effect. An offer for a reward for catching a certain criminal may expire when the urgency has passed, or forgotten by most of the officers and citizens of the community. B. Revocation of Offers Anti-formation bias makes it difficult to make an offer, but easy to revoke. Ensures that offeror intended to enter into a contract. a. Option Contracts i. Option contracts are irrevocable. There are 3 ways an option K can be created: 1. Consideration 2. Firm offers under the UCC 3. Reliance by the offeree b. Dickinson v. Dodds i. Dickinson had till Friday morning to accept, decided to accept on Thurs. morning but didnt attempt to notify Dodds until he discovered Dodds had changed his mind. The promise to keep offer open until Friday morning was unenforceable because there was no consideration given, therefore Dodds could revoke at any point before complete acceptance by Dickinson. c. Firm Offers under Article 2 i. An offer by a merchant to buy or sell goods in a signed writing that gives assurance it will be held open is irrevocable, without consideration, for a reasonable time not to exceed 3 months. UCC 2-205 d. Ragosta v. Wilder

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i. Unilateral K to buy property by showing up at the bank on certain date with cash; Ragosta didnt show on date but sued claiming he had begun performance by obtaining financing; but, what is begun must be part of actual performance invited. ii. Obtaining the financing was not part of the actual performance but rather preparation for performance Death of an Offeror a. Offerees power of acceptance is revoked upon the death or incapacity of the offeror. b. Death or incapacity does not terminate the offerees power of acceptance under an option contract. c. Example Grandmothers promise to give $5K if grandson attend funeral. K is formed if it is a bilateral K, bargaining for a promise to attend funeral, but if it is a unilateral K then the grandson cannot accept because the offer would have lapsed with gms death Rejection and the Mirror Image Rule a. The offeror is master of the offer and enjoys freedom from contract except on the offerors own terms. b. Common law says that an acceptance must mirror the offer. If there are any material differences then that response is considered a counter-offer. c. Under common law, the last message before performance began usually prevails. Last shot fired rule. d. Courts often said any additional terms to an acceptance were to be treated as precatory language, suggesting or begging for a modification The Mailbox Rule: Contracts by Correspondence a. The mailbox rule is only applicable if the acceptance is made in the manner and by a medium invited by the offeror. An acceptance by a different manner would be effective only on receipt. b. Mailbox rules apply only to acceptance, revocations or rejections are effective only upon receipt. If acceptance was effective on receipt, then offeror would be able to revoke during transit (would not be good). c. Mailbox rule does not apply to performance, only to contract formation. d. Acceptance of an option contract is not operative until received by offeror. e. Tardy acceptance acts as a counter-offer The Battle of the Forms and the UCC Acceptance Varying Offer: The Traditional View a. Standard Forms and Battle of the Forms b. Generally the offeree is the seller and the offeror is the buyer because the seller is able to accept on its own terms this way. c. Everyone want the contract to be on their terms, their form, therefore we have the battle of the forms d. UCC has different approach to the mirror image rule one of few places where UCC strays from the common law Transcending the Mirror Image Rule: UCC 2-207 a. Dorton v. Collins & Aikman

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i. Carpet sales, not a conditional acceptance, both parties are merchants ii. Following the 2-207 roadmap, we get to materiality, whether an arbitration clause materially alters the agreement iii. If arbitration materially alters then it will be considered a proposal for addition, if not then it is part of the contract. iv. Terms may be found to materially alter if their inclusion would result in surprise or hardship if incorporated without express awareness by the other party or the element of unreasonable surprise. v. Arbitration clauses (in industry that it is not customary), clauses negating warranties, clause requiring complaints be made in a time much shorter than customary, etc. are examples of clauses that would materially alter C. Itoh & Co. v. Jordan Intl i. Acknowledgment form states expressly conditional on buyers assent to additional terms if these terms are not acceptable, buyer should notify seller at once. But this does not make it conditional unless seller doesnt perform until it has buyers assent. ii. Seller delivers steel, buyer paid for it, then brought suit for defective product iii. Arbitration clause is it part of the contract? iv. Since there was not a definite and seasonable acceptance we go to 2-207(3) v. Arbitration is obviously not an agreed upon term, so is it a supplementary term vi. While a Seller may take advantage of an expressly conditional clause under Subsection (1) when he elects not to perform he must accept the potential risk under Subsection (3) of not getting additional terms when he proceeds with performance without buyers assent to those terms. Northrop Corp. v. Lithronic Industries i. Both parties have included a warranty in their terms, but they are drastically different seller 90 day/buyer unlimited warranty ii. Knockout Doctrine discrepant terms fall out and are replaced by a gap-filler iii. Under the knockout doctrine, if the offeree tries to spring a surprise then the parties move to neutral ground Contract First, Terms Later: UCC 2-207 or a New Method of Contract Formation i. Box-top warranties ii. Terms encoded on disks iii. Terms enclosed in boxes containing purchased goods Step Saver Data Systems v. Wyse Technology i. Box top license was not part of the agreement because it must be clearly expressed that it is unwilling to proceed with the transaction without the additional terms (wasnt) and repeatedly sending copies doesnt result in adoption of the terms ii. When parties act like a K exists, common terms and gap-fillers are used ProCD v. Zeidenberg

i. Transactions where the exchange of money precedes the communication of detailed terms are common. See purchase of insurance. ii. A notice on the outside, terms on the inside, and a right to return the software for a refund if the terms are unacceptable may be a valuable way to do business iii. 2-207 cannot apply if there isnt 2 forms It is the battle of the forms iv. If parties act like there is a contract, then a contract exists. A party accepts goods under 2-26(1)(b) when it has an opportunity to inspect and fails to make an effective rejection under 2-602(1). g. Hill v. Gateway 2000, Inc. C. Precontractual Liability a. Brooklyn Bridge example - A offers $100 to B for walking across bridge - B gets halfway, A revokes offer - Restatement 45 when bargaining for acceptance by performance, an option contract is created when the offeree begins the invited performance b. Drennan v. Star Paving Co. c. Liability When Negotiations Fail d. Hoffman v. Red Owl Stores e. Cyberchon Corp. v. Calldata Systems Development f. Preliminary binding agreements/Preliminary Binding Commitments D. The Requirement of Definteness a. Toys, Inc. v. F. M. Burlington Company b. Flexible Pricing

Validity A. Void Contract A void contract is one that is totally without legal effect from the beginning (an agreement to commit a crime). It cannot be enforced by either party. B. Voidable Contract A voidable contract is one that one or both parties may elect to avoid (by raising a defense that makes it voidable, such as infancy or mental illness). C. Unenforceable Contract An unenforceable contract is an agreement that is otherwise valid but which may not be enforceable due to various defenses extraneous to contract information, such as the statute of limitations or Statute of Frauds.

Battle of the Forms Road Map to UCC 2-207

2-207(1) there has been a definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time, even though it states additional or different terms from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms. 2-207(2) Additional terms are to be construed as proposals for addition to contract. Between merchants such terms become part of the contract unless: (a) The offer expressly limits acceptance to the terms of the offer; (b) They materially alter it; or (c) Notification of objection to them has already been given or is given within a reasonable time after notice of them is received.

2-207(3) Conduct by both parties which recognize the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such

case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.