Contracts Generally Implied in Fact Black Letter Law restatements, UCC, or common law norms UCC covers contracts

s for goods (movable property, includes lumber, unborn children, timber) Money due at time of title transfer UCC is statutory once its adopted UCC asks if goods predominate the contract Buying software is a good, having it designed is a service Look at: taxes, billing, degree of labor, what does contract call itself?, skill of the parties, Paid per item, for design, if you take one out what happens?, etc. Defenses Statute of Frauds 2-201 certain types of contracts must be in writing, created by England in 1677 Can be used to refute truthful testimony Courts dont like it, construed narrowly Must be signed by Defendant MY LEGS contracts made in consideration of marriage Contracts that cant be completed within a year (from moment of formation) For an interest in land (or lease over 1 year) By the executor of a will to pay the estates debts Goods over a certain value ($500) If you are guaranteeing anothers debt (you act as a surety) Writing (confirmation terms must be exactly the same (CL) makes oral contract written) Must be signed (could be letterhead, email, seal, somehow authenticated) Must provide the quantity, and the contract can only be enforced up to that Doesnt need the price Must indicate a contract has taken place Must state with reasonable certainty the unperformed essential terms Writing doesnt have to exist, there can just be affidavit to its effect It could multiple writings that satisfy above conditions Misrepresentation, Concealment, and non-disclosure Misrepresentation An assertion not in accord with the facts If reckless or known this is fraudulent misrepresentation Fraudulent must be intended to mislead If person relies they can recover, doesnt have to be material Must be reasonable to rely, a reasonable person would rely. Now the contract is voidable If innocent ask if the assertion was material If no, no probem. If yes, you can recover. Recovery court can void the contract, in tort law you can get damages, but the misrepresentation must be fraudulent and material. The assertion can be design, photos, plans, writing, half-truths, statements that becomes false (duty to correct)

Concealment An affirmative act which prevents a person from knowing or investigating something Painting over cracks, hiding defects. Non-disclosure you have to disclose when the information would correct as basic assumption about the contract. More likely to have to disclose something bad (termites) Contracts are adversarial, so in many cases you dont have to disclose information. If theres a relationship of trust and confidence that the person is relying on, you may have a duty to tell them whats up. Impracticality / Impossibility when it becomes exceedingly difficult to complete the terms of a contract performance is made exceedingly possible or impossible without fault of either party. Death, change in govt regulation, destruction, acts of god UCC doesnt extend to ordinary fluctuations Custom may put the loss on one party Doesnt extend to things parties normally contract for Seller must notify delay, partially perform if possible Seller must equitably distribute goods in times of shortage Seller may have to perform at a loss Seller has to take reasonable steps to find an alternative Frustration of Purpose The reason for the contract evaporates This is true for UCC and common law, voids the contract Mutual Mistake (rare) 1. A shared mistaken assumption 2. Mistake must material enough to void the contract If the risk is assigned to a party its not voidable When someone knows they have limited knowledge of the facts but treats it as sufficient, they dont have a remedy from mutual mistake Parties protected from making a contract nobody knew they were making But not protected from making bad deals Act of God Clause could assign risk for unforeseeable events *If both parties are mistaken they each can seek restitution/power to rescind *Mistaken party may rescind/seek restitution if: Other party knew/should have known the partys mistake Mistake is a basic assumption and burden on mistaken party is greater Unconscionability the court thinks it would be insane to enforce the agreement Minority kids cant contract, they can disaffirm at any time, except for necessities Kids have a duty to repay whatever is possible. Mental Capacity the person was not mentally capable of making a agreement You can ratify the contract once you have majority/capacity etc. Duress If the other party has no other option but to join the contract

Threat would harm the recipient/not help the maker If a crime or tort is threatened If criminal prosecution is threatened If they threaten to use civil process in bad faith If you violate good faith and fair dealing it could be duress Using a legal right in an oppressive way Company threatens to fire employee unless they sell stock back to company UCC: maybe have to show a reason for a modification Undue Influence Someone with a lot of influence over you has you do something and you rely on it Strategic behavior contracts must be played straight up Drop dead date date past which certain consequences definitely follow Cant watch your watch hoping for the moment of breach Dissecting a Contracts Dispute Agreement Objective theory of contracts outward manifestation, not undisclosed motives Parties subsequent conduct can be read into their manifestation, also context This applies to acceptance and offering Offer Is this an offer? It is if it Expressed intent to be bound. Must be sufficiently definite - States clear terms Makes acceptance possible who can accept (offeror determines this) how the contract may be accepted If an offer isnt sufficiently clear, it can just be construed as an invitation for offers Advertisements typically just viewed as an offer to enter into negotiations Advertiser can modify before an offer-ad is accepted, but not after An Ad may be an offer if: It is clear and explicit and leaves nothing up for negotiation Something promised in positive terms in return for something required Includes some language of commitment, or some invitation to take action without further communication Identified who may accept Counter-offer if you make one it will nullify the original offer, just asks for better terms Mere Inquiry a question that does not change the material terms of the contract Acceptance - you have to accept within a reasonable time, or the offer can lapse You can lose the power to accept if: lapse, counter-offer, revoked, destruction of subject matter offeror can die, rejection, intervening illegality Did offeror specify mode of acceptance? (if so , his method, if not read on) Mirror Image Rule - Offer must be accepted in the exact language of the offer

If not it is a counter-offer, this is viewed as too strict, leads to battle of forms This is a common law rule, replaced for good by UCC If offeror does not specify then the offer can be accepted by any reasonable means Could be words or actions, email, telegram etc. Acceptance can be inferred by law, if person is unable to manifest acceptance, but would. Unilateral if you can accept by performance only Can only accept by completed performance and notification Performing is voluntary offeree is not bound to do anything Offeree can begin performance and walk away Offer is irrevocable for a reasonable period of time after performance begins You have to notify of completed performance Bilateral promise must be an option for acceptance If the offeror cant find out about performance, they must be informed If a bilateral contract is accepted by performance, its still bilateral Battle of the forms (2-207) an acceptance with extra terms a contract is formed unless the offer is conditional on no new terms. Material alteration voids the new terms Offeror has a reasonable time to reject the additional terms This is only if both parties are merchants If not, offeror has to explicitly agree to new terms. UCC telling the seller of acceptance (payment alone doesnt count) Fails to reject (after reasonable time to inspect) Acts inconsistently with sellers ownership Revocability An offer may be revoked up until the offer of acceptance A promise expressed about the time is not binding for want of consideration Option Contract - a party negotiates for the irrevocability of an offer for a period of time Formation - Contracts can be formed even if exact moment of formation cannot be found firm offer if offeror is a merchant, transaction is for goods, and there is a signed writing, the offer can stay open for 3 months, and then seller just gets power to revoke back. Mailbox Rule An acceptance is valid when it is delivered to the post office In an options contract the acceptance must reach the offeror to be valid If not offeror is forced to leave the offer open longer than the option A rejection is valid when it reaches the offeror If rejection is received after the acceptance is sent, it is just an offer to rescind acceptance. If acceptance is sent it becomes valid, even if a rejection arrives earlier If offeree finds out that the offeror has rescinded the offer they can no longer accept Rescinding the offer takes affect when that communication is received by the offeree Consideration or substitute Consideration (bargain theory)

It is anything of value, promised to another when making a contract. It can take the form of money, physical objects, services, promised actions, or even abstinence from a future action The law has to decide which promises to enforce (consideration is a dividing line) A small amount of consideration can legitimate a large bargain Sham Consideration only done to create the appearance of a contractual bargain The preexisting duty rule you cant promise to do something you were going to do anyway. you cannot promise not to do something that is illegal Substitutes Moral Obligation (promise for benefit conferred) if there is a material benefit conferred before a promise by the receiver, and then the promisor promises, there is a moral obligation. After this promise is made the only question whether the promise is considered/partperformed, serious, relationship of the parties etc, or if the benefactor relies (Promise +) If you help someone in an unsolicited way, you cant expect payment usually. Formality of promise Probability of reliance Nature of benefit received (big) Quantum Meruit/Quasi-contract only made to avoid unjust enrichment Contract implied in law (like the doctor case) Encourages services where any reasonable person would want them. A person can be compensated for giving services assuredly wanted. Volunteering services does not entitle you (guerilla house painters) Promissory Estoppel (reliance) Promises reliance must be actual, reasonable, foreseeable, involves detriment. A substantial and unjust detriment You can stop a promisor from taking a promise back. Estoppels is an equitable bar, that stops people from breaking a promise Must be used to avoid an injustice Doctrine of mistake - if parties enter into an agreement and one party makes a mistake, If the party makes a mistake, and the other detrimentally relies on it, they can be held responsible for the difference, this is promissory estoppel. Consider relationship of the parties Gifts are usually not enforceable unless Promisor demands specific conduct from promisee in order to receive it. Giving is intended, the gift is delivered, the gift is accepted. Interpretation Knockout Rule later terms in negotiations knock out Implied Terms when the law provides terms that arent specified First Shot Rule the first offer rules, mirror image rule Last Shot Rule Party a responds to offer with different terms. Party B just performs, the last terms ok. Warrnaties and disclaimers As-Is

By themselves do no protect the seller from fraud This refers to what has thus far be state/represented If very explicit, (dont assume this house is habitable), it can be binding Parol Evidence Rule gives finality but allows for accuracy if applied Must have writing, writing must be final Integrated = final but maybe not with respect to all terms Total integration = final with respect to all terms Timing contemporaneous if another writing is signed at the same time, viewed as part of final writing oral can come in can be used to add to the agreement Prior terms out if they disagree with the final agreements terms in if they augment/explain subsequent fuck that shit! (viewed as a modification) Comparison to present terms Consistent terms are allowed in Additional /explaining terms always come in Evidence that it was a final writing comes in Conflicting terms never come in If its a term the parties definitely should have put in, it comes in. If complete and exclusive you cant add parol evidence Evidence that may invalidate a contract Fraud/misrep/concealment evidence must be allowed in Condition based evidence not allowed shouldve been in the K UCC course of dealing/performance/custom always come in (common law too) Merger a clause that says this is the only interpretive tool, no other evidence matters Sometimes courts dont enforce these Only enforceable as to the terms specified Canons of interpretation Look to who is contracting for the risk (insolvent homeowner/contractor/plumber prob) Purpose of the contract interpret in good faith Against drafting party who is responsible for breach Plaintiff has burden of proof to prove their meaning Choose a reasonable meaning over an unreasonable meaning Try to make no term superfluous Interpret the contract as a whole Course of dealing / Course of performance / usage of trade Use generally accepted meanings of terms

Courts want to enforce it to avoid forfeiture 1. 4 Corners 2. Plain Meaning/Willistonian Rule judges discretion; if he thinks its clear, no new evidence 3. Corbinian allows all relevant and extrinsic evidence to come in UCC +restatement is Corbinian / common law courts can be all over the place Focus on the subjective meaning of the parties. Forfeiture A substantial loss that is too harsh for the circumstances When terms dont meet the party thats not in a position to know the meaning doesnt suffer Misunderstanding You cannot exploit another partys misunderstanding of a term. If they fail to clarify they can be responsible for the breach. If you have two reasonable meanings and they know yours but you dont know theirs, yours prevails Breach/performance Warranties and Guaranties always look to purpose / against drafter if multiple meanings Express Implied UCC: Merchantability (only applies to merchants, is sb holding out as merchant?) Holding outness determined by objective reasonable buyer standard To get out if it: must be written, conspicuous, and say merchantability Fitness for a particular purpose (UCC) Substantial performance this is a mitigating doctrine. If this happened the party has to compensate the substantially performing party But only so far as the contract was performed. When making it a breach would cause a forfeiture Look at injured partys deprivation, ability to compensate Look at the purpose of the contract Non-breaching party is still compensated for the consequences of minor breach In an express condition is violated, it cannot just be a minor breach Express condition if it doesnt happen the whole contract is void Vs. mere promise, which if breached doesnt breach whole contract Must arise for the contract to happen. If dodgers win superbowl Ill give you a fish Satisfaction guaranteed Good faith lack of satisfaction is sufficient to void the contract Patent and latent defects Latent defects, when discovered, can allow voiding of the contract Patent defects need to be found and rejected at the time Once right to inspection is waived, buyer cant recover for patent defects Perfect Tender Rule (UCC)

If the goods fail in any respect, the contract is breached Buyer can accept, reject, or accept in part If accepting has to compensate minus adjustments, cant break up marketable units Cant seize on some small defect Custom covers permissible minor deviations in industries Right to Cure Buyer must inform on non-conforming goods If still time seller has a right to cure the non-conformity If no time, but if there is a good faith expectation of conformity, buyer may have to extend deadline to allow cure; allows extra reasonable time. If the non-breaching party knows and doesnt inform, they may be stopped from recovering Damages/Remedy UCC full refund for defective goods, or keep them plus an adjustment for costs Liberally construed in favor of non-breaching party Damages have to be reasonable guessable by a court Public Policy Courts can revoke unreasonable restraints on trade (covenants) Expectation damages must be certain This is the norm, puts the non-breaching party where they expected to be Includes lost profits, estimates of the value of the contracts benefit, minus costs Non-breaching party recovers incidental/additional costs from the breach If a forfeiture would result, expectation damages are not fulfilled (house pipe case) Consequential damages - part of expectation If they were foreseeable/express to the breaching party, non-breacher recovers Examples: injury, property damage, lost profits. Reliance Damages Money lost in reliance of promise (like with promissory estoppel) Can be applied even if theres no contract Restitution A Category of Damages Even if a contract is voidable, law will not let a party retain the benefit received Not about contract remedies, but about unjust enrichment You cant keep the benefit; this can be difficult to compute the cost of when not goods Liquidated Damages these must be formulaic, must forecast actual damages Specified in the contract Only enforceable if the reasonable correlate, if unreasonable, theyre punitive, which are unrecoverable Anticipatory Repudiation say you cant perform, or make yourself unable to perform When a party repudiates it must be unmistakable to avoid confusion It benefits a party to know in advance if the other party cant perform Other party has a duty to mitigate damages Breacher is on the hook for the difference Relying on a repudiation makes it final, even without notification Repudiations can be taken back so long as theyre not declared final

Non-breaching partys options Encourage retraction of repudiation Declare the repudiation final Seek adequate assurances Put off performance If repudiation is a minor breach under common law it doesnt kill the K, does under UCC (PTR) UCC request for adequate assurances must be in writing Repudiation must substantially weaken Ks value to let other party off the hook Specific performance if $ is inadequate, if its land, if the thing is unique, not for services Buyers remedies You can cover, then recover difference in price Covered for incidentals; staff time, phones time, delivery, etc. Sellers remedies Can resell and recoup the difference Can salvage Has a duty to mitigate damages If buyer costs them the sale, has to pay the difference If buyer costs them a sale, pays costs surrounding the alternative sale Doctrine of Avoidability You have a duty to mitigate damages (UCC) If contract has reasonable damages, those take the place of court rules Could be money/injunction/specific performance Injunctions/performance usually only apply to goods (indentured servitude/lame performance, etc.) Misc. Loss Leader is an offer that losses money so they get people in the door to buy other things. Willistons Tramp Hypo The Officious Intermeddler Questions: For parol evidence does contemporaneous verbal evidence come in? Under UCC consistent additional terms almost always come in. (different from common law!)? After retracting a repudiation and given adequate time to perform, can this extend beyond the original drop dead date? Under UCC impracticability you said it doesnt extend to things prudent parties would contract for Does this just mean the court will refuse to void the contract, and apply breach analysis? Is fraud just the larger category. 7510091/6004966c Last day notes: Approach an exam question; 1. For goods? (if so common law and UCC both apply, UCC trumps common law). 2. Offer/acceptance. 3 consideration/substitute? Gratuitous promises are out. Reliance, moral ob. Quasicontract (life savers).

4. Defenses duress, fraud, SOF (UCC) = can enforce an oral contract which has a writing as evidence (needs subject matter, quantity (not necessarily correct), indicate a transaction took place. Dont need price, not signed but authenticated, give some evidence to authenticate the contract). If part performance, maybe no need for writing. 5. interpretation; scope of the contract, Parol evidence (UCC) parties must deem final writing, final at least to included terms. Evidence Can be oral/written Why are they offering the evidence? Contradiction is out Fraud/duress stuff always comes in Clarifications/interpretations askis the meaning already plain? If so, no new evidence if language is open to more than one meaning, let in the other evidence Supplementing if the writing is not complete, this can come in But, even if complete, course of trade/dealing/performance always comes in 6. performance/breach UCC - modified perfect tender rules Common law material breach/sub perf /minor breach any breach can get damages, but unless its material the other party still has to perform. If you guess wrong that other party materially breached, and then you breach, youre liable Express conditions must be performed to enforce the K Constructive conditions must be substantially performed (like rice case deadline) Sometimes which type of condition it is is not clear Look at circumstances/context Parol evidence can come in Modifications preexisting duties dont count as consideration Commercially reasonable good-faith modifications may be enforced w/o consideration UCC encourages productive modifications Are you a Merchant? Do they deal in the same or like good repeatedly? Do they hold themselves out as a merchant?