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by: Lexi Runte


Lexi Runte
GPA 3.9

Gerry Bridgeman

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Gerry Bridgeman
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This 28 page Class Notes was uploaded by Lexi Runte on Thursday September 17, 2015. The Class Notes belongs to LAW 5000 at Florida State University taught by Gerry Bridgeman in Fall. Since its upload, it has received 67 views. For similar materials see /class/205616/law-5000-florida-state-university in Law at Florida State University.


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Date Created: 09/17/15
Contracts Outline Table of Contents 1 Remedies for a Breach of Promise 2 Goals of Contract Damages 2 Types of Damages 2 Expectation Damages 2 Limitations on Expectation Damages 3 Duty to Mitigate 4 UCC Buyers 8 Sellers Damages 5 Categories of Damages 5 Damages must be foreseeable Hadley v Baxendale 6 Alternative Interests 7 Reliance and Restitution 6 Statute of Frauds 7 Types of Breaches 7 Damage recovery for nonbreaching Party 7 Damage recovery for Breaching Party 8 Contractual Controls on the Damage Remedy 8 Liquidated Damages 8 UCC 239ILI Look at Liquidated Damages 9 Enforcement in Equity 9 Speci c Performance 9 Injunctions 10 Noncompete Covenants 10 2 Grounds for Enforcing Promises 10 Formality 10 Consideration 10 Exchange Through Bargain 10 Adequacy of Consideration ll Implied in Fact Implied in Law Contracts 11 Promises Grounded in the Past past consideration l2 Rst S 86 Promises Where Bene t Received in Past 12 Reliance on a Promise l2 Promissory Estoppel Rst S 90 12 Gifts amp Charitable Gifts 12 Gratuitous Bailments l3 Equitable Estoppel 13 Part Performance Seavey v Drake 13 Employment amp Promissory Estoppel 14 Contract Adjustments 14 Exceptions to the Statute of Frauds reliance UCC l4 Promises of Limited Commitment 15 Unilateral amp Bilateral Contracts 15 Conditional Promises 15 Illusory Contracts 16 Output amp Req ts Contracts 16 3 The Making of Agreements 17 Intent to Contract 17 Mutual Assent Offer Objective Theory 17 Letters of Intent l7 Acceptance Essential Terms 18 UCC Open Price Tenns Misunderstanding Ambiguity Control Over Contract Formation Termination of Power of Acceptance R 2d S 36 Time Limit for Acceptance Means of Acceptance R 2d S 32 Acceptance of Unilateral Contracts Acceptance of Bilateral Contracts Power to Revoke R 2d S 45 Precontractual Obligations Reinforcement Through Options R 2d S 87 Firm Offers vs Option Contracts Reinforcement Through Reliance Contracts bw Subs amp Generals Conduct Concluding a Bargain Counteroffers Battle of the Forms UCC 2207 Forms and the public Silent Acceptance Standardized Forms Adhesion Contracts R 2d S 211 Temis ofContract Waivers of Liability Notice of Change Exculpatory Clauses 18 19 19 19 19 20 20 21 21 22 23 23 24 25 25 26 26 26 4 MAIN QUESTIONS IN CONTRACT LAW 1 Was there a contract a Offer b Acceptance c Consideration 2 What are the terms of the contract a Unilateral Bilateral andor Optional 3 Was the contract breached a Minor Material or Total 4 What is the appropriate remedy for breach a Type b Duty to mitigate Chapter 1 Remedies for Breach of Contract Section 1 The Goals of Contract Damages Types of Damages m 39 u quot 1 0 standard remedy because its good for the economy if you can rely on what other people say Usuall hiher than reliance o A court may award expectation reliance restitution or nominal damages these are general damages 0 There are no punitive damages damage to punish someone for contract breach except in extreme cases 0 4 reasons we enforce contracts 0 Economic 7 promotes market 0 Morality 0 Social Cohesion 7 promotes good working order 0 To deter Vigilante Justice 7 people who want to do the job themselves Cases Giving Reliance Damages 0 Give reliance damages when expectation is too difficult to measure not easily found O Sullivan v O Connor nosejob case suing for value ofperfect nose 9 receives only reliance because it is too difficult to measure what a different nose would be too difficult to put P in position if performance had been completed Cases giving Expectation Damages o Hawkins V McGee 7 Hairy Hand 7 Operation on hand to x scar tissue goes very wrong Doctors says I will guarantee to make the hand 100 or a perfect hand sued over express warranty and court held a contractual obligation Expectation damages calculated by the difference bw the value of a perfect hand and his hand now 0 Strict liability for a breach of contract does not matter about good faith or care 0 Damages is intended as compensation for a breach measured in terms of the contract 0 Purpose of the law is to put P in as good a position as he would have been in had D kept his contract Measure of recovery is based upon what D should have given P not what P has given D or otherwise expended 2 I Exa His hand post operation 5 I Perfect hand promised woth 100 I Hand as before woth 20 I Pain from operation 5 Under expectation he should get 95 because 1005 9500 Groves v Wunder Co 7 D agrees to remove coal but doesn t nish and does not x land 0 Both D amp P want expectation damages but use different interpretations of expectation damages I Cost of Completion P argues that the damages should be the cost to restore the land 60000 Diminution of Market Value D argues that damages should be what the property would be worth if he had nished the job and leveled land 12000 0 Court gives P the 60000 0 Today most consider this case s majority opinion wrong The dissent gives the answer and reasoning that is most accepted today Should have followed the diminution of market value rule which would be the difference between the market value of the land unrestored and what it would be if it had been restored ie ifD had erformed H 39HllU H39jnu quot i llij ft ll 19m Lt ij39wmw 3an 60K he gt on the land 7 d 777 7A i s 7 W 7 quotitquotl39C as it would have in Groves 7 P s not gomg to go spend the the land isn t worth that much General rule is expectation damages 0 Debate is cost of completion v diminution of market value 0 Two different ways of determining damages but most of the time they come out the same If they are different P usually ets a choice bw cost of comletion or dim one is reatl more ex ensive TM 39 inution of value but if ule u39l Lt m39i MD 3911 Louise Caroline Nursing H ome Inc v Dix Constr Corp 7 Construction co did not nish building nursing home Auditor found the nursing home suffered no compensable damages from D s breach bc cost to complete nursing home was within the r it in 39 39 i If it takes more and th Contracts for the Sale of Goods Acme Mills Co v Johnson 7 P contracted to buy 2000 bushels of wheat from D at 103 D doesn t deliver bc he had sold the wheat to another purchaser for 116 before original K date By the time it becomes original date the market price has dropped to 097 P sues for damages and the value of 1000 sacks he had provided D Court determined that P CANNOT collect damages for breach of contract rice that P would have rice on the da of delive ll 1 I od up ahead when the contract aid exceeds the market 1 39 1 bene ted by K breach so when how it happened is irrelevant b c he still w Missouri Reasonable Efforts To mitigate damages not supposed to create harm to yourself or enter into dubious contracts or incur considerable expense or inconvenience The builder isn t required to take additional business risks bc of the owner s breach 9 if you re building something and contract is cancelled all you have to do to mitigate is stop building Rockingham County v Luten Bridge Co 1929 7 P continued to construct bridge after told contract was invalid P couldn t et dam s for work he did I 7 u I Not truly a du y to mitigate but you will only get damages before the repudiation Can t get damages for overhead costs which you would have had regardless of breach Damages should only be reduced by P s actual savings and not by proposed or theoretical savings Kearsarge Computer v Acme Staple Wrongfully discharged employee s duty to mitigate damages Where the employer breaches the employee is generally entitled to recover the full contract price subject only to her duty to mitigate damages If the employer breaches the employee is under an affirmative duty to exercise reasonable efforts to locate and accept a position of the same rank type of work etc in the same locale but not necessarily at the same pay scale the burden is on the employer to know other jobs were available The more unique the employee s trade and experience the more difficult it will be for employer to show that comparable employment was difficult Parker v Twentieth Century Fox Film Corp 1970 7 P Shirley McLaine was scheduled to star in a musical then the movie was scrapped she was offered another job western let the offer lapse and sued for breach of K Was awarded expectation damages A wrongfully discharged employee doesn t have a duty to accept available inferior employment Limitations Under UCC Buyer s Damages for Cover under installment Contract Old Rule Pre UCC When a seller breaches an installment sales contract the buyer cannot recover damages based on the increased expense of a substitute installment Breacher only has to pay price of the article at the time it was to be delivered not at the time of breach Missouri Furnace Co v Cochran 1881 7 no longer follow this rule b c UCC says its outdated and unfair P contracted with D to buy coke After some had been delivered D discontinued P made similar contract with another person to cover his need for a much higher price than what he was paying D P wants to recover difference between contract price and price he paid Court decides buyer can t recover damages based on increased expense for the substitute price of coal dropped a lot after he agreed to pay higher price K Price Breach Due Date Price 2 4 3 9 Furnace Rule With the above rule if the price goes down nonbreacher wins BUT if the price goes up the nonbreacher still has to pay for difference Therefore the buyer nonbreacher is helpless OLD RULE compare market price at due date of contract to the contract price Duty of nonrepudiating Party to Mitigate Damages O O If repudiation is in the midst of performance nonrepudiating party owes a duty to stop unless doing so would involve greater damages than completing the tender exa leaving goods half manufactured that would result in waste If the nonrepudiating party is supposed to receive performance he must after a reasonable length of time UCC S 2610 look elsewhere for the performance that was due under the contract 0 If the seller doesn t resell limited to contract price 7 market price UCC 2708 New Rule UCC S 2 712 quotCoverquot 5 Buyer39s Procurement of Substitute Goods This rule allows the buyer to buyer to recover for reasonable cover costs at the time of breach irrespective of the market price on the se arate delive dates under an installment contract as hereinafter defined Section 2715 but less exenses saved in conseence ofthe seller s breach or Re udiation this is when he didn t cover 1 Subject to the provisions of this Article with respect to proof of market price Section 2723 o 2 Market price is to be determined as of the place for tender or in cases of rejection after arrival or revocation of acce tance as of the lace of arrival 39 E 7 7 m 7 Summary of what UCC says to do l l Seller s right to recover39y for buyer s reusal to purchase under contract for sale of goods Once buyer has refused to purchase goods seller has right to resale in a commercially reasonable manner and can recover from the buyer the difference between the contract price and the resale price Nerz39 v Retail Marine Corp 1972 7 Buyer P repudiates contract to buy boat and brings suit to recover deposit Under UCC s 2708 2 P owes the boat dealership profits and incidental damages b c the repudiation cost the boat dealer the chance of selling two boats in the four months This is different from just a person selling one item 0 UCC 2 708 Seller s damages for V 0r quot quot I 1 Subject to subsection 2 and to the provisions of this Article with respect to proof of market price Section 2723 the measure of damages for non acceptance 0r repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages provided in this Article Section 2 710 but less expenses saved in consequence of the buyer39s breach I 2 If the measure of damages provided in subsection 1 is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the pro t including reasonable overhead which the seller would have made from the full performance by the buyer together with any incidental damages provided in this article S 2710 due allowance for costs reasonably incurred and due credit for payments or proceeds of resale 2 Broad Categories of Damages 1 General Damages difference between the contract price and market price this is too narrow if we are going to do expectation damages put us in the position we would have been in had the contract been fulfilled this could include other expenses 2 Special Damages 39 Incidental damages damages that beyond the contract price but still associated directly with the breach itself UCC 2710 does give seller incidental damages 0 Expenses associated with the breach exa storage paid 39 Consequential damages in addition to the standard damages the breaching party is liable for all losses resulting from his breach that the parties should have foreseen at the time the contract was made as likely to result from the breach exa lost pro ts 1 39 quot I on Money Damages39 Damages must be f 39 39 o Hadley v Baxendale 1854 7 VERY FAMOUS CASE Ps mill was stopped by crank shaft breaking The P s servant took broken shaft to shipping co and told the clerk that the mill was stopped and the shaft must be sent immediately Delivery was delayed and P didn t get the shaft for several days so the mill was delayed and they lost profits P sued for damages of lost pro t but didn t get them Court said that it wasn t foreseeable to the sh r coman that the would have been liable to 7 W i H mill fo 391 391 o The court w1ll also award damages as to remote or unusual consequences but only if the defendant had actual notice of the possibility of these consequences Victoria Laundry vNewman 1949 Laundry boiler purchased but late on delivery Can recover for loss of profits bc this loss was actually foreseeable at the time the contract was made this was a s ecial situation 0 Even though mental distress may be foreseeable under the rule of Hadley v Baxendale the general rule denies recovery for mental distress simply because damages would otherwise be recoverable for almost all breaches of contract 0 Valentine v GeneralAmerican Credit Inc 1984 7 P is fired and wants mental suffering for breach of emlo ment contract Claims that contract was ersonal Court sa s no 1 1 1quot m v 1 m quotL I Employment Contracts Normally employment contracts are employment at will you can be fired when employer wants to you can quit when u want to o F reund v Washington Square Press 1974 Agreement to publish P s book then D decided not to K said D could decide not to publish within 60 days otherwise D would publish hard and paperbound and pay P royalties D doesn t publish and doesn t notify within 60 days D wins 0 Damages for breach of K are intended to compensate for injury caused by breach awarding P cost of publication would give P greater advantage than if contract had been completed 0 Court will not award expectation damages where they are too speculative like book royalties I Therefore only nominal damages are appropriate 39 m 1 1 Use this measure where expectation damages cannot be calculated with certainty 2 P is a vendee under a land contract 3 There is no legally enforceable contract 0 Reliance damages usually can t exceed the contract price or the expectation damages Chicago Coliseum v Dempsey 1932 P promoted boxing matches made K w Dempsey to not engage in any matches between time contract signed and time of the match D acted like no K existed and trained for another match P sues to recover lost pro ts 0 Since damages for lost pro ts are not reasonably ascertainable they re not awarded I Exectation too hard to calculate so 0 for reliance m 39u it W1 0 Damages for breach are generally limited to damages that would naturally ow from and are the result of the breach obligations assumed pre contract are speculative risks Reliance on a Void Agreement Boone v Coe 1913 D made an oral contract with P to rent his farm in TX to P s if they left homes and business in KY they would get half pro ts Dwelling would be completed on farm by this time P s brought an action for expenses incurred in reliance on the oral contract 0 Restitution designed to prevent unjust enrichment of the party responsible for a material breach of an enforceable contract the remedy is measured not by the loss suffered by the injured party but by the gain received by the party in breach I Can t recover in restitution for the work one has done in preparing to perform a contract which means you prob can t recover at all since not part of K or restitution 0 Although a loss was sustained they can t recover in restitution because recovery barred due to statue of frauds 9 because K couldn t be performed in 1 year when a K has to be in writin signed by the party who wants to enforce it l a Marriage these days though not in contract because usually family law Promises to answer for the debt default or miscarriage of another ie suretyship or guaranty ManI Breach 7 breaching party has completed substantial performance Breach is so minor that the other side still has to pay exa contractor left the job early the last day of the job Pinches 2 Ordinary every day breach Material breach Signi cant enough that the other party doesn39t have to pay for it because there is not substantial performance a Every total breach is a material breach but not every material breach is a total breach 3 Total breach a breach signi cant enough to warrant cancellation of a contract Damage recove Options available to Nonbreaching parties 0 So long as there is total breach nonbreaching parties can elect either to sue on the K for expectation damages or in restitution unjust enrichment which is not a suit on the K I United States v Algernon Blair Inc Subcontractor US sues contractor D for breach of contract to recover for labor and equipment when D didn t pay 9 P is entitled to restitution in quantum meruit for services rendered because D bene ted from P s loss 0 They obviously don t want to sue on K because K Price 37000 Costs Saved from breach gt37000 0 0 Use quantum meruit to determine the damages measured by the replacement Oliver v Campbell at the end of trial client res attorney 7 court says attorney can recover K price can t sue for more than that o Damage recove Options available to Breaching Parties 0 Breaching parties who have substantially performed ie those parties whose breach is so minor that the nonbreaching party cannot themselves refuse to perform can sue on the K I They will receive expectation damages minus allowances for the amount of their breach 0 Breaching parties who have not substantially performed ie Those guilty of at least quotmaterialquot breach may not sue on the contract 0 In most jurisdictions breaching parties may sue in restitution so long as they are not guilty of bad faith breach Their damages however will be no more than they would have received in expectation d 1 1 1530 c We don t want the no breaching party m breach I Britton v Turner P agreed to work on D farm for one year but only worked there 95 months D did not want to pay him for his 9 months P sued in quantum meruit to recover the value of his services and wins 0 Before this case the nonbreaching party could not be sued in restitution I Pinches v Swedish Evangelical Lutheran Church P wants to recover for building a church Written contract specified plans but D messed up the dimensions Church must compensate him for services rendered and materials minus the deviation as long as the deviation bc he was in good faith and the church is going to benefit from the work done Amount of the compensation is to depend upon the extent of the benefit conferred Court allowed damages only to the extent of diminution of value to the Ps o If the builder has substantially performed but there are defects then damages are measured by 0 The cost of repair or replacement to bring building to contract specifications or if that cant be done or its not economically feasible then 0 The difference in the value of the building as built and its value if it had been constructed according to the contract specifications 0 Allow breaching party to sue in restitution bc doesn t have option to sue on the contract Doesn t get pure restitution because don t want to injure nonbreaching art b more than what oriinal K would have been if ful lled va whm won quot Section 4 Contractual Controls on the Damage Remedy 0 Contract provisions can limit or fix amount of damages recoverable in the event of a breach 0 Penalty clauses are always unenforceable bc K law is not about penalizing others I This is true no matter the parties intent and what the K language calls the penalty I Threats to prevent a breach are always penalty clauses 1 V r o If invalid serves as a penalty clause and is unenforceable o Pacheco v Scoblionko 7 P sent son to summer camp If he paid tuition early payment reduced K had a liquidated damage clause When P phoned saying kid couldn t go camp refused refund under liquidated damage clause Court decided it was a penalty so not enforceable I Even if you agree to it there can be no penalties in a contract o Czty ofRye v Publzc Servzce Mut Ins Co C1ty wants to recover on surety bond given to secure timely completion of 6 buildings Want 100000 for being late Court held that clause did not re ect a reasonable estimate of monetary harm or damages to the city 0 M uldoon v Lynch 7 P built monument to dead husband but not done on time bc marble couldn t et there She suffered no damages so it s a penalty clause not enforced says reasonable at either K formation or time of breach will be enforced Most jurisdictions go for a first look 7 reasonable at time it was made it will be enforced o Clauses limiting damages below or eliminating liability exculpatory p27 are not liquidated damages 0 F retwell vProtection Alarm third party contract House broken into with alarm system stole 91000 worth of stuff The alarm contract limited damages to 50 cost of 1 months service This is not liquidated damages bc not an attempt to reasonably estimate damages rather it s a limitation on damages Allowed to limit liability but not ratchet up damages Section 5 7 Enforcement in Equity 0 The use of equitable relief is limited to situations where 0 Normal damage remedies are inadequate This could be bc I Damages are too speculative or too difficult to calculate I No substitutes are available eg land 0 Terms are clear and definite o Courts have the ability and willingness to enforce a decree 0 There are 2 types of equitable relief specific performance and when that s not available injunctions amm quot39 J r39 39 39 Hl lnh T 4 en L1 121 A o and sale contracts are the most common reason for specific performance 0 Real estate is generally considered to be unique and often is special to a person 0 Easy for a court to transfer ownership in land 7 only need to transfer deed 0 Buyer has contracted to resell still order specific performance 0 When bu er breaches no need for s ecific erformance 7 award moneta damaes ngl V iiil rlll l i l l J l V 0 Unique good chattel could not be duplicated in the market rare or sentimental I Curtice Bros v Catts farmer did not sell entire tomato harvest to canning factory as the contract stated Then he sells them to someone else Want specific performance Court willing to give specific performance bc can t determine damages bc need the tomatoes to process in order to calculate damages so this is a problem 0 Damages difficult to estimate sometimes even if nonunique chattels involved I Laclede Gas Co vAmoco Oil D7 D agreed to supply P with propane Agreement worked for 2 years then D rationed propane due to shortage of propane P protested D notified P it was cancelling the agreement Court ordered specific performance because finding another supplier would be difficult so damages would be difficult to calculate o Volatile market prices are not sufficient 0 Not available when there s a market price for comparison 0 Van WagnerAalvertising v S amp M Enterprises 7 NYC Building which P leased a wall for advertising Leasor sold building to D who then canceled the lease P wants speci c performance but doesn t get it because there s an available market price for billboards to use to calc damages Not available for personal services 7 could create a hostile environment or indentured servitude Fitzpatrick vMichael 7 D hired P to be personal nurse in exchange for a number of items in his will D changed his mind and P sued for speci c performance Court didn t grant it b c doesn t want to force people to be around others when they don t want to She also can t recover on the contract b c didn t meet statute of frauds ie wasn t written even though it was for a period longer than a year and she hadn t completed performance taken care of him til he died Covenants Not to Compete used in employment Ks bc specific performance not available services 0 Often used to protect customer lists or trade secrets 0 Courts are not in favor of these covenants but in practice most courts enforce if I The duration and geographic scope are reasonable contextually defined The employee has unique skills OR has rec d considerable training from this employer The injunction will leave the person with another reasonable way to make a living 0 What to do if overly broad works for clauses other than just this type I Not enforce I Blue penciling mark out parts that are overly broad and enforce the rest Whittle down until it is reasonable Judges don t like this bc then they are writing the contracts and gives people incentive to write overly broad contracts 0 Dallas Cowboys 7 Football player signed a noncompete clause Trial courts said the football player was not unique perhaps there wasn t someone available on the market 0 Fullerton Lumber Co v Torborg 7 P operated a lumber company and hired D as a manager Noncompete clause said D couldn t work for another lumber company for 10 years within a 15 mile radius of the place of employment D opened his own lumberyard Court determined that the time limit of 10 years was excessive so the restrictive covenant was unreasonable Supreme Court suggested a 3 yr noncompete since that s how long it took D to build Ps business Ch 2 Grounds for F f 39 Promises u i 0 Law doesn t enforce all promises Formalities allow us to distinguish what promises will be 0 The doctrine of consideration does this by guaranteeing there is a bargain for exchange Consideration conveys the seriousness of a K by requiring specific things to be done in order to enforce that agreement the consideration dance I A seal was an early form of consideration because it was a sign of seriousness of purpose 0 Seals are no longer consideration in most states but still are evidence of formality Congregation K aalimah Toras Moshe v DeLeo 7 P visited decedent several times who repeatedly made oral promise to give P 25000 and P was going to name a library after decedent Decedent died intestate P sued D administrator of the estate for the 25K Estate wins bc the court finds no consideration for the promise Sidenote 7 it s a lot easier to sue dead people than living ones 0 Consideration MUST be bargained for No sign that D had bargained for the name of the library I P received no detriment D received no benefit so no consideration 0 If promise had been in writing it would have likely been a stronger claim Section 2 Exchan e Throu Bar ain 0 General rule a bargain constitutes consideration a bargained for promise is enforceable 0 Test for distinguishing bargains from conditions ask whether the occurrence of the condition is of bene t to the romisor DJ M quot W C 0 Nominal consideration 7 exa Promise to buy nephew a car when he turns 16 and you give him 1 you re really giving him a car you re making a gift as opposed to bargaining for a car I So when courts say nominal consideration won t count it really has to be a bargain I Courts are not interested in enforcing gift promises and just because you dress up a gift in the language of consideration doesn t mean its not a gift I Nominal consideration is OK for option Ks 0 Some conditional gifts can be enforced where the promise undergoes a detriment Can have a bargain wo economic bene ts Consideration for a promise may consist of among other things the abandonment of a legal right 0 H amer v Sialway Uncle promised nephew 5000 on his 2151 birthday if he could refrain from drinking smoking swearing playing cards or billiards for money Consideration existed I Used old Law to decide Benefit Detriment Test 1 the promise somehow has a detriment through this promise 2 the promisor has benefited from making this promise 0 New law defines consideration as a bargainedfor exchange 0 ie a promise is supported by consideration if it was given in exchange for something else 9 it iven in order to induce some action often siml 39 the other side i W liw39n ml ru 0 That is the bargain consideration does not have to be equal for a valid K Batsakis vDemotsis 7 during WWII P loaned D 25 D said in written note he would repay 2000 P sued on the note and court anted 2K o Restraint from suing may constitute legal consideration if o The lawsuit that is to be settled was brought in good faith ie P didn t bring a bogus lawsuit 0 The claim has some kind of basis in reality 0 Duncan vBlack D Contracted to sell acreage and this land comes with a 65 acre cotton allotment contracted D transferred his allotment of 154 acres for adjoining land to give him the full 65 acres of cotton in the crop year Following year P requested same arrangement but D refused To settle D gave P the 1500 note sued on in this action D never paid note so P sued to recover value of the note Court refused to force D to pay bc contract and settlement were illegal so couldn t be enforced The allotment wasn t his to give 0 Volunteers generally have no right to restitution Similar to a gift of service 0 Some exceptions exa doctor providing emergency services c If you voluntary perform a service for someone then theres no bargaining for it I Martin vLittle Brown and Co P advised Bantam Books that a portion of its publication How to Buy Stocks had been partially plagiarized and volunteered to send his copy to show them And later asked for money They sent him a check which he kept but did not cash and demanded 13 of D s eventual recovery P sued but was given no damages since he volunteered o The difference between an implied in fact and an implied in law contract 0 Implied in fact contract is one that the parties seem to have intended to make I Exa when you go to buy coffee its implied that after you sit down and someone comes to bring you coffee you will pay for it what P argued in Martin v Little Brown Bag C o o Implied in law imply one on your behalf as a matter of justice we have decided that you have implied a promise but this is not necessarily by your actions I Exa doctor case you pass out on the oor and the doctor comes up and treats you I You get in a car accident and are taken by ambulance to the hospital this is then an implied in law promise that you will pay the for the ambulance 0 Legal duty rule A promise to do something that you are required to do by law isn t consideration Section 3 7 Promises Grounded in the Past Past consideration is not sufficient to make a contract Moral obligation alone won t count 0 A promise is made in return for a detriment previously suffered by the promise when the detriment is suffered before the promise made it is not bargained for Mills v Wyman son ofD became ill and P took care of him now wants compensation D sent P a promising to pay and did not pay Court determined there was no consideration b c event had already taken place and the father did not receive a bene t it was just a moral obligation Exceptions A moral obligation may only form consideration for an express promise in three cases 1 Debts barred by the statute of limitations you will be considered to have renewed the promise by saying it or partially paying it even after the statue of limitations has run 2 Debts incurred by infants once old enough and reaffirm promise then you have to pay 3 Debts 0f bankrupts then make a promise but it has to be express promise in writing or a partial payment will restart statute of limitations Exception When the promisor receives a material benefit avoidance of injury and the promisee suffers a material detriment permanent disablement moral obligation is sufficient consideration C Webb v McGowin 7 Webb s was to drop a 75 pound block from the top oor to bottom ofa lumber mill when he saw the owner standing below so held onto block when threw it to save the man from being killed He was crippled but he saved owners life so owner promised to pay him every two weeks for the rest of P s life When owner died payments stopped Court held contract valid and it is not void under the statute of frauds I Differs from Mills b c the dad didn t receive the direct benefit whereas the owner did If new romise is less than the moral obli ation amount that can be recovered is capped at that amount Section 4 7 Reliance on a Promise Promissory estoppel Reliance on a promise to one s detriment may operate as a substitute for consideration thereby making a promise enforceable that would not be otherwise 0 Traditional View wo mutual benefit you can t get consideration and damages This winds up being unfair and is replaced by promissory estoppel o Kirksey vKirksey Woman s husband died and the brother offered her land and a house on his property so she left her residence moved there then after two years he told her to leave No consideration b c thou h she ave u her house he didn t et an benefit of her living with him Gift Promises and Promissory Estoppel o Ricketts v Scothorn Grandfather induced granddaughter to give up working after giving her a promissory note then he died and they did not want to pay her Promise should be enforced as the granddaughter relied on the promise and quit her job which altered her position for the worse and it would be ineuitable to not a her this is an euitable esto l Him 3911 39 o Allegheny College vNational Chautauqua County Bank Estate pledge of 5000 30 days after her death on the condition that it be named after her 1000 was paid while she was still alive Then she repudiated her promise Judgment for the college the money must be given to them as there was consideration though it was implied her previous 1K gift created reliance Using the doctrine of promissory estoppel to enforce charitable promises But this is not how he decides case just dictum Salsbury vNorthwestern Bell Tel Co 7 D made pledge to a college which later failed D did not pay pledge found a charitable subscription or a marriage settlement is binding wo proof that the promise induced action or forbearance where a subscription is unequivocal the pledgor should be made to keep his word Gratuitous bailments and agencies and Promissory Estoppel 0 Traditionally found a gratuitous bailee liable if they 0 Begin to perform the bailment o Gratuitously promise to act as anothers agent could be held liable Courts have been reluctant to uses promissory estoppel in insurance procurement cases bc of the enormous liability Siegel v Spear Bailee under an obligation to procure insurance for furniture he was storing b c P might have gotten other insurance and it was only after the promise that he brought the furniture to storehouse There was consideration here as he depended on the promise to his detriment East Providence Credit Union v Geremia P loaned D money for a vehicle with 2 conditions 1 must have insurance 2 if D stops paying insurance P will purchase it and add it to the loan D stops paying but P doesn t pay insurance D gets into car accident P sues on the note Promissory estoppel applied Court determined that there was consideration b c P collected interest on the loan it gave D Also D relied to his detriment so that could be promissory estoppel and consideration wouldn t even be necessary then 0 The warning in this case is not to over exert promissory estoppel bc consideration was able to be found so look for that first 1 It cant be that you said it it just has to be that its unfair to allow you to assert that in court today Exa Home owners had been selling tickets to their house for a while on the basis that it was a haunted house Decide to sell their house and remove all the haunted house signs so that they don t mess up the value if there had been termites they prob had a duty to disclose What about ghosts The buyers think that they should have been told because everyone knew this house was haunted Judge says that they have been out there telling everyone that the house is haunted driving down the value Judge says that as a matter of law the house is haunted 0 Point is when you are out in the world asserting things as fact it would be unfair to let you come in and assert something differently in court a gift of the donor s own note may be sustained if the donee in reliance on the note has expended money or incurred liabilities which will by legal necessity cause loss or injury to the donee if note isn t paid o Seavey v Drake 7 P wants specific performance of agreement for land supposedly given to P by testator father P accepted and took possession of land then 7 had a promissory note against his father upon which there was due about 200 which he then gave up to him and father gave him more adjoining land P has occupied and still occupies the land and has paid all taxes on it He s spent 3000 making improvements 0 There was part performance old name for promissory estoppel 9 the son had relied on dads word and made improvements 0 Father working on house demonstrated he knew about kid and improvements so he would ve been estopped in the same way these people were estopped from saying there was no ghost Most obvious and direct part performance of an ordinary land contract will be part payment of the purchase price but it is agreed everywhere that mere payment of the price in full or in part will not make specific performance available Promissory Estoppel and At Will Employment 0 Promise of at will job no promissory estoppel when the person has been working unless can prove fraud 0 BUT promissory estoppel can be applied when the employee has given consideration additional to the services of employment in return for the K of employment The contract for employment would continue while the employee remains in business and has work for the employee Also can be applied when P can prove fraud has been used and the employee relied on the promise and quit their job then was not hired as promised I Hunter v Hayes P was offered an employment contract so quit her job D repudiated before P began employment This was a breach bc there was no job when a job was promised If P was fired after one day of employment she would have been atwill so no cause of action 0 F orrer v Sears Roebuck amp Co 7 P worked for D for 18 years then bought a farm D offered P permanent employmen so P sold farm in reliance of that offer D fired him P claimed promissory estoppel Permanent employment still means atwill so promissory estoppel can t be invoked Must have an additional consideration or benefit to the employer for there to be a breach The detriment of giving up the farm is not 391 J an T 39 39J quot Stearns v Emery Waterhouse Co P got job offer that gave specific terms such as 5 yr employment length etc but didn t get in writing RULE Must get specific terms in writing in employment contracts or they re not enforceable for policy reasons rationale would be too easy for disgruntled employees to sue on the basis of promissory estoppel Can t get around the statute of frauds in employment cases By entering into negotiations with another party a person may be found to have promised either explicitly or implicitly that he will make a good faith effort to reach agreement with the other party 0 Goodman v Dicker P applied for a franchise D represented there was a K P sued on promissory estoppel for the goods purchased in reliance of the K D claimed it was atwill Reliance damages can be awarded in franchise K disputes under the doctrine of promissory estoppel However expectation damages were too speculative in this case lost pro ts I When youre relying on precontractual investments assertions that lead to investments pre contract then you re probably going to lose Goodman is rare not the norm Contract Ad 39ustments and Modi cations JCT mm 1 Fried VF isher 7 2 guys in the ower business 1 wants to start a restaurant and leaves after getting permission from ower partner Flower guy falls behind on his payments Landlord sues both of them Courts say that estoppel should apply here bc restaurant guy relied on promise M ahban VMGM Grand Hotels Lease for space for shop and there was a re and by the contract either party could then break the lease but instead the Hotel sent shop owner notice saying When he could begin reconstruction and that plans must be submitted to hotel P Thus incurred expenses then the hotel cancelled the lease Court holds that D waived their right to that term of the contract as the letter constituted reliance By the P and there was a detriment incurred and injustice can not be prevented by Not awarding damages Levine v Blumenthal D rented a commercial property with tiered rent D threatened to breach the lease bc couldn t pay the higher rent P lowered the rent D left early anyway P sued for missing rent and difference in missed rent D won Court found that a modified lease had been made but was not supported by consideration so its ineffective If P wanted to enforce the new agreement he should have offered something in exchange such as merchandise a new term on the lease etc 23 Qu39elgii tm M Vif uy nquot 2 r In some situations reliance on apromise is enough for recovery even hough the Statute of Fruds uld normally bar it Part Performance o Promissory Estoppel 7 court disagree on the extent of this exception though 0 Many jurisdictions will not allow this exception at all 0 Some will limit to Restatement lst l78 requirement I Must be either a misrepresentation that there was a writing same as ordinary estoppel I Or must be a promise to make a writing in the future 0 Some jurisdictions follow Restatement 2d l39 which allows more general reasonable reliance I Doesn t limit it just to promises of the fact of a writing 0 Even among those jurisdictions that follow the more expansive Restatement 2d l39 there is much disagreement as to how the exception applies I Courts disagree as to what counts as reasonable reliance eg some say quitting one job for another counts while other courts disagree 0 Some courts require unjust enrichment 0 Some courts limit damages to reliance or in other ways as justice requires 0 l 397 I These are oods that are somethin s ecial that no one else can use I Normally when we say something has to be in writing it has to be signed by the party against whom we re trying to enforce the K If the buyer doesn t respond to that memo then that confirming memo even though it wasn t signed by the buyer can still be used to form the contract against the buyer Section 5 Promises of Limited Commitment quot2m um 91 lime CHQLle D m e Obering v Swain Roach Lumber O and S make a deal where S would buy land sell it to O for 8000 and harvest all the trees within four years This is a bilateral contract initially looks illusory S buys land but 0 refuses to follow through Court orders speci c performance saying that a contingent contract is not enforceable BUT once the contingency occurs both parties are equally bound Omni Group Inc v Seattle First Nat l Bank Omni contracted to buy land from the Clarks who backed out alleging Omni s could back out at any time and thus its promise was illusory The court held the promise was valid since Omni had to perform an evaluation of the ro ert in ood faith and its purchase was premised on a satisfactory evaluation 39 Conditions that cannot occur even if outside of their control a conditional promise is not consideration if the promisor knows at the time the promise is made that the condition cannot occur Promisee s Discretion If one party s performance is left completely to his discretions so that he may choose not to perform at all he has not furnished consideration for the other party s promise See illusory promises Hi i w 39 When a party makes an illusory promise in exchange for a real promise neither party is bound bc doesn t meet mutuality NOT same as conditional promise Paul v Rosen 7 D agrees to sell liquor store amp stock to P who wants to run it in same location P says will buy so long as he can get the lease P can t get the lease Court says contract is void for lack of mutuality The P had complete control of the situation and could decide whether to obtain the lease or not so this is an illusory promise Right to terminate Agreement 0 Public policy sometimes prevents the exercising of right to terminate 0 Sheets v Teddy s Frosted Foods P reported D for mislabeled foods D red P P sued for wrongful discharge b c whistleblower P sued on the employment contract on the basis that there was an implied contract not to re P for certain things Where termination is possible after partial performance if the complete act done by itself would constitute consideration if completed then the promise is not illusory Termination based upon party s inability to perform will not render the contract void Unfettered right to terminate may mean no consideration I If there is a dut to ive reasonable notice then there is consideration quot1 vmltm wild MW 3m iii r r 7quot H m 777 r Wood v Lucy Du Gordon D agreed to endorse products exclusively for P and P would half the pro ts D started endorsing products on her own D alleged that the contract was unenforceable because reasonable efforts was an illusory promise Asked the question did P make good faith efforts D is liable for breach of contract The promise that P will use best efforts may be implied from the entire context of the contract Alternative Promises a promise which reserves to the promisor several alternative performances is generally consideration only if each of the alternative performances would have been consideration if it had been bargained for alone 16 You can state minimum and maximums in requirement and output contracts OLD Earlier approaches said no consideration in output and requirement contracts and were invalid as well as they were inde nite TODAY Courts enforce requirements and output agreements since parties have limited their options F eld v Henry S Levy and Sons P enters into a contract with D which is for a year term and is renewable D promises P all breadcrumbs which are specially manufactured D stopped producing crumbs because it was making him bankrupt Output contracts are enforceable The pleadings did not show whether cessation was in good faith so the motion for summary judgment was denied 0 Good faith and reasonable diligence in light of the commercial background is the standard that must be read into every output contract if not otherwise expressly stated Good faith cessation of roduction terminates an further obligations of output contracts 7 i 39 H w H 9 w d 139 w w 1 xplicitly validates requirement and output contracts need good faith and no unreasonably disproportionate quantity to any stated estimate Chapter 3 The Making of Agreements Offer and Acceptance l LL El ii 39 Jump r 0 Objective not subjective agreement it does not have to be in their head rather it means that each party must act in such a ways as to lead the other to reasonably believe that an agreement has been reached 0 Agreement required only to major terms gj M m 39 391 m a p Embry v H argadz39ne M cKz39tm39ck Dry Goods P had a renewable employment contract Oral confirmation from D that it was renewed P was fired D claimed that P misunderstood him so there was no contract Court said it was stated in a situation in which P would have reasonably interpreted it to be a contract RULE mutual subjective intent on not required for a contract 9Not about the meeting of the minds Kabz39l Developments Corp v M ignot P alleged oral agreement that Helicopters owned by D would provide services for P s construction job D said that their agent would have to examine and approve the job site for before accepting the job After inspection agent told D site was bad D did not perform and P obtained helicopter services elsewhere at a higher cost P says led to believe K was formed RULE Subjective information about K formation was admissible in trial as evidence to properly use the objective standard M cDonald v Mobil Employee handbook dispute P fired for alleged sexual harassment and thinks that handbook regarding employment should have stopped at will employment Court says 0 O 17 that using objective standard D did create contract through P not to re him Shows that D s INTENTION not to make K IS IRRELEVANT Claim about promissory esto el a ain The point is that P reasonably believed the handbook was a K and relied on it 39 v M x w Empro Mfg Co v Ball Ca P sent a letter of intent to D after D was oating its assets D sold its assets to somebody else The letter of the intent had the magic words subject to all over the place P s subjective intent is not as important as the objective circumstances of the agreement RULE A document does not depend upon a party s intent to be bound you use an objective standard 0 When agreement is subject to a later de nitive agreement intent not to be bound is manifest If you have a letter of intent it needs to be something really signi cant for the court to let you get out of it the detail that you back out on because of better be an important detail 0 In Empro the security is a really big deal 0 Letters of intent can be dangerous bc they can give you liability o Invitations to negotiate are not enough not offers 39 M oulton v Kershaw 7 D salt dealer sent letter to w price and shipping terms and asked for order from P P responded w an order the following day Next day D withdrew offer P sued court said letter didn t constitute an offer bc it was an invitation to negotiate 0 Ads to the public are often considered to be mere invitations Acceptance must be unequivocal and unquali ed to be valid Offer may be accepted ONLY by the person to whom its made Terms of the offer must be suf ciently clear and complete so that the court can determine what the parties were intending and can X damages in the event of nonperformance 0 Essential terms Parties to the contract sub39ect matter time for erformance and rice 0 0 Joseph Martin Jr Delicatessen v Schumacher P had lease with D that had an open price of rent clause 7 the rent would be agreed upon at the time of renewal D offered 900 P countered with less D refused to extend the lease P sued for speci c performance of rent court said no K bc ssent39al term was left 0 n I in 7 7 H 0 YOU ALWAYS NEED TO SUPPLY A QUANTITY IN A GOODS CASE 39 The court will not supply a quantity for you 39 The more that s left unspeci ed the less likely the court is to nd a contract anyways but just because its left vague doesn t mean its not enforceable Reliance on an unenforceable promise When a party acts to his detriment in reasonable reliance on an otherwise unenforceable promise and is injured that party may have a claim for breach 0 Wheeler v White P wanted to build a new building and D said he would build it and secure him a loan if he did not then he would loan him the money himself P relied on his promises and destroyed the existing structures which had a market value Although the elements weren t fixed when a promisee acts to his detriment in reasonable reliance on an unenforceable promise the promise can recover damages Limited to getting Reliance damages under Promissory Estoppel bc there was no K 39 Re ex v Wichelhaus Several ships named Peerless that sailed at different times P and D were talking about two different ships called Peerless but didn t realize it The time the ship left was important because they were speculating on the price of cotton otherwise the product was the same on both ships Court said it wasn t a valid K bc there was no mutuality of agreement it was a 5 d I HIH LLW 1 2 m r quot1 39 39 When both parties have identical subjective understandings this will not matter 39 If a term in the offer or acceptance is ambiguous and one party knows that she has a different understanding of the meaning than does the other party a contract will be formed on the term as understood by the other unknowing innocent party 39 Where one party has reason to know of ambiguity but does not know about it the unknowing party s who has no way of knowing understanding is the K terms 39 Fault system comparative fault system if both are at fault then No fault or if only one then the others understanding will be enforced 39 If the term is a minor term the court will try to choose the more reasonable interpretation Time period of offer usually begins to run from the date of the receipt of the offer 0 But if there was a delay in the receipt of the offer and the offeree either know or should have known the offer was delayed the period begins to run from the date it would have ordinarily reached the offeree wo the delay 0 The distinction between a unilateral and bilateral contract is important with regards to the mode of acceptance that is permissible Additionally distinction is important with regards to revocation Allied contract U i U v wi i u brim Steel amp Conveyors Inc v Ford Motor Co Ford D bought machinery from Allied Allied started installing machinery before they sent back acceptance and an employee was hurt as a result ofa Ford employee s negligence Employee P sued D who brought Allied in as 3rd party Allied says no acceptance bc form wasn t sent in If a certain manner of acceptance wasn t prescribed but merely suggested other methods of acceptance may meet up with an offer to make a contract Court says allied accepted K by performing it even if they didn t use the method of acceptance that Ford had stated RULE Offeror is the master of the offer and can choose the manner of acceptance However other methods of acceptance ARE NOT precluded unless it s expressly stated in the Bridgeman says courts today follow UCC2d Restatement rules Even if they don t they outcomes will rarely be different and cases needing such a choice are rare to begin w 39 H quoti H o Cobaugh v Klick Lewis P played in a golftoumament and got a hole in one There was a sign that offered a free car to people who get a hole in one It was actually for a different tournament but the sign didn t specify P wanted his car D claimed there was no offer because no meeting of the minds HELD This was a standard unilateral contract an offer for performance This used the objective standard 7 a reasonable person would have thought that the offer was for THAT tournament 0 If you have already performed without knowledge of the offer there is no acceptance 0 Exa if P had gotten the hole in 1 but not seen sign he wouldn t have gotten car assent must be implied the conduct will only be acceptance if it reasonably appears to the offeror that this what the offeree has intended O 0 Choose bi over uni bc a bilateral contract affords immediate rights and complete protection to both parties since a contract arises as soon as the offeree promises to perform whereas an olTer for a unilateral contract is not a binding contract until the performance is actually rendered Davis v Jacoby P s uncle D is the estate there of asked P to move in and help him with his and his wife s illness P wrote and promised to come bilateral Decedent received letter but before Ps came committed suicide Ps still came to care for wife until her death upholding their end of the bargain Unclear whether this was a bilateral or unilateral contract Court said its bilateral that Ps accepted B c of close family relationship hes asking for assurance not performance from Ps RULE If the offeror is interested in the promise then it s a bilateral contract If the offeror is interested in performance only unilateral contract and it terminated at death of the offeror 20 r r ve upon rece1pt revocation does not become effectrve until 1t 1s rece1ved by the offeree If revocation is lost then it never becomes effective 39 Revocation is received when it comes into the offeree possession or someone authorized to receive it or his mailbox 39 If offeree learns indirectly that the K has been revoked there is still a valid revocation o Exa where offeree learns of offer made to third party 0 Revocation of offer for unilateral contract after Part performance 0 Ordinarily a unilateral offer can be revoked at any time prior to the offeree s completion of act of acceptance But problem is when the act requested will take a long time and offeror attempts to revoke after the offeree has started performance Petterson v Pattberg D offered P opportunity to pay off mortgage with l lump sum if he paid wi a specified time frame P showed up at D s house with payment D refused to accept payment and revoked before P had an opportunity to accept When the performance requested is payment the offeror may revoke even AFTER the offeree tenders payment BECAUSE PAYMENT is CONTINGENT UPON THE OFFEROR S ACCEPTANCE quot mg l l V l O Effectr O ll l Some courts have said that when an offeree renders substantial performance it would be inequitable to allow the offeror to revoke so the offeror is estopped from revoking Exa Brookl n Bridge 7 you can t revoke when he s half way across 0 The restatement s view is that when the act called for will take some time to complete there is an implicit and subordinate promise in the offer not to revoke once the offeree has substantiall erformed rovided that erformance is comleted on time The obligation created by part performance is now called an option K not a unilateral K Brackenbury v Hodgkin 7 D promised Ps daughter amp son in law that if they cared for her during life she d give them farm on death Unilateral K Ps moved but problems arose and D asked Ps to leave D executed a deed to her son who knew of the contract offer made by D to Ps P sued to get property Held that if an offeror offers to convey property when an act is performed a contract is formed when the offeree begins performance so D breached K The P s move from M0 to ME was substantial performance Like the Fitzpatrick Anna Nicole Case that courts won t enforce specific performance 39 Bridgman didn t like this case 7 bc even if we apply S 45 they ll have the option to perform but the court won t make D accept their performance 0 Section 3 Precontractual Obligation Reinforcin 1 O 39 0 An option is a completed contract in which the offeror has bound himself not to revoke the offer which effectively destroys both his right and power to do so An option contract is not terminated by the death of the offeror Counteroffer does not terminate power of acceptance this is an exception to the usual rule where the counter offer ends the ori inal offer 0 Hypo If you make an offer that says hey lets do this one thing ill give you 10 and you sign this document Then the 10 is never paid Is the contract still enforceable I YES S 87 says that an offer is binding as an option contract if its in writing and signed by the offeror recites purported consideration for the making of the offer and proposes an exchange on fair terms within a reasonable time The restatement doesn t require that consideration be paid and allows for nominal consideration Contract under seal is outdated I Thomason v Bescher D gave P an option under seal to buy a tract of timber P won specific performance Old Rule When an offer to hold a contract open is under seal it is not revocable The seal would probably not be sufficient today there would have to be some kind of consideration 0 Part performance or detrimental reliance by the offeree may render the offer temporarily irrevocable O Reinforcing Contracts through Reliance Contracts bw General amp Sub Contractors 0 Old Rule reliance does not serve as a substitute for consideration 0 James Baird Co v Gimbel Brothers 7 D estimated to do cost of linoleum Send letter to 30 contracts w proposed price P used D s price in making its bid Same day D learned of mistake in its calculation and sent letter to P withdrawing offer 2 days later P s bid was accepted and several days later P accepted D s original bid D refused to perform P sued for breach Reliance does not act as a substitute for consideration to make an offer revocable Court holds for D no K O This is not exactly like the Brooklyn bridge example because although he has relied the erformance has not be il l i o Drennan v Star Pavmg Co p 399 P was a contractor who was looking for a subcontractor to do paving D put in an unusually low bid Based on bid P made low bid for a construction contract After this D said they had made a mistake and revoked its bid P found a new sub for 3817 more and sued D for difference Court found for P bc his reliance was reasonable and foreseeable by D and P relied to its detriment That reliance is foreseeable that s why a general contractor takes bids from subs Exception to Drennan Most courts won t hold sub to a bid if they can establish that the general was bid shopping 0 Neither one of the results in Baird and Drennan look good 0 Baird general bears cost of sub39s mistake o Drennan even though the general did not bargain for an option contract he gets the option to accept the bid or not whereas sub cant take his bid back whereas normally either both people are bound to a deal or no one is bound 0 Neither of these results is very palatable 22 I Even so most 39urisdictions follow Drennan today amp so does Restatement I Action or forbearance reliance 0 Publication is not acceptance of an offer ie when General publishes his bid and lists sub unless he has talked to sub its not a promise its a statement that this is who you used when you calculated the bid 0 Doesn t apply to inquiri y the offeree concerning the offer The test is whether a reasonable person in the offeror s person would think the communication from the offeree was itself an offer that could be accepted 0 Livingstone v Evans 416 D offered to sell land for 1800 P wired back with a counteroffer for 1600 or lowest price D wired back that price couldn t be lowered P wired an acceptance but in the mean time D sold the property to somebody else P got specific performance because when D responded the court ruled that D revived the offer The original offer may be renewed if the offeror intimates that it is still open to the offeree The objective standard applies to determine if that offer still stands 0 Solution to contradicting terms 0 lst shot 7 you use whoever sent the first form I Bridgman says this one makes the most sense b c since this is the original offer and to have a K you need to have the terms of the original offer it makes sense to stick to this 0 Last shot 7 whoever sent the last form I Common law used this principle b c with common law if anything was different it was a counteroffer so u go by the last stage of the negotiations o Knock out 7 when the contradictions knock each other out of the contract I Most common in the courts 0 Role of determines whether a contract has been formed at all by the exchange of documents if one has formed what are the terms of the contract 0 Idaho Power Co v Westinghouse Electric Corp 422 P sent an inquiry to D about buying a voltage regulator D sent back a quote with some terms and conditions on the back including a limitation of liability P sent a purchase order for the regulator with extra language about shipping but nothing related to liability and saying that acceptance of the order trumped all previous agreements D shipped P installed the regulator and it broke Court says there is a K bc P s response was an acceptance even though additional terms were added P didn t come out and say that the weren t acce t39 23 I Instead a deviant acceptance is still treated as an acceptance as long as it is not conditional on new and different terms exressl Take care to read official comments in book p 3233 as w all UCC sections Problem with statute is that it s designed to take care of too many things at once Forms and the Public Acceptance of Offer for Bilateral Contract ProCD Inc v Zeialenberg 430 P sold a software product for different prices for consumer and commercial use D resells P s product on the web claiming he didn t agree to the terms because they were INSIDE the box Judge Easterbrook didn t apply this case to battle of the forms because there was just one form 7 inside the box that said it was effective as soon as shrink wrap was opened shrinkwrap license The better argument is that the offeror is the master of the offer Offer is Take me to the counter and purchase me Look at m terms referenced on the outside of the box If ou don t like me return me i l 39 7 quot u men we u i l m miss NW 139 l L 0 Normally a deal is concluded upon purchase 0 But Judge Easterbrook says Acceptance didn t happen until the buyer read the terms Hill v Gateway 435 P bought a computer didn t know about the terms inside the box opened the box read the terms and was unhappy The computer was returnable within 30 days but they failed to read the terms within that period Held P should have tried to find out what the terms were and if they were not agreeable the could have 1 not bouht the com uter or 2 returned the comuter within 30 days RULE F m E l quotFL i l r r 436 0 Problems with this ruling Consumers have no choice 7 all of the vendors copy the same terms Problems with contracts of adhesion Mailbox rule general rule is that the acceptance of an offer for a bilateral contract is effective when properly dispatched by an authorized means of communication This used to be really important but not so much now that eole don t use snail mail an more l HUI 39 a lr L 7 L M o Implied in fact contract 7 If the offeree having opportunity to reject has taken the benefit of services or goods offered by the offeror under circumstances such that a reasonable person would have understood that the goods were offered with ex ectation of ayment if they were accepted an implied in fact contract is created d see Morone 24 O 0 Understanding of the parties 7 If the offeror gives the offeree reason to understand that assent may be manifested by silence or inaction and the offeree intends to accept by remaining silent and inactive a contract arises Course of Dealings 7 If previous dealings between the parties show that its reasonable the offeree should notify the offeror if she does not accept a contract may be created by silence o Hobbs vMassasoz39t Whip Co 7 P Sells eel skins to the D for a long time D did not respond to accept which was usual but D claims that there is no acceptance Holmes says silence can be acceptance here because based on their prior course of dealing he s no longer a passive recipient so silence now becomes acceptance Under the circumstances that silence is an action that implies a promise Common Law Rule basically that silence is not consent S 69lc Restatement where the offeror has given the offeree reason to understand that silence will constitute acceptance the silence or inaction of the offeree will operate as an acceptance that she sub39ectivel intends to be bound Acceptance by performance 0 M orone v M orone No common law marriage or implied contracts here P raises children and does housewife stuff and business stuff at D s request P claims parties verbally agreed D would support P and money made would equally benefrt P amp D When they split D refuses P s demand for accounting of all their property together P sues Court holds that unmarried persons can enter into a contract for financial support just like anyone else but domestic services bw 2 will not be presumed to form a contractual bond Implied in fact contract 7 D knew that P expected to be compensated and taken care of for her work P tried to sue for both express and implied K bc she had the express K from their verbal agreement but no proof and the implied is easier to prove but harder to convince the court to enforce Section 6 Standardized Forms 0 When you sign something that is an objective manifestation of assent You re on the hook o Adhesion Contracts Take it or leave it Document containing nonbargained clauses that are in ne print complicated and or exceptionally favorable to the drafter Found where there is little bargaining power take it or leave it basis 0 O Standardized agreements or form K used b c efficient in avoiding difficulty of repeated negotiations of individual agreements Such Ks where parties are of unequal bargaining strength often called adhesion K because the weaker party must adhere to the stronger party s terms or there will be no agreement Normally a ticket such as valet ticket baggage claim etc is not thought of as a contract 25 0 Agricultural Ins Co v Constantinei ladies car stolen after leaving it w valet Valet had given her a ticket which said they weren t responsible for it She had parked her car there for 56 years so had seen the ticket many times Ticket was a mere token for identi cation and the terms limiting liability didn t become part of the bailment K bc there was no evidence of her assent Could have been different IF D CALLED HER ATTENTION TO PRINTED TERMS o Broemmer v Abortion Services of Phoenix P is 21 year old unmarried and pregnant Gets abortion from D expects to receive counseling but instead told to complete forms P lls out forms but none are explained to her One form was an agreement to arbitrate any dispute bw parties During abortion procedure P s uteris is punctured P sues for malpractice but D moves to dismiss because P hadn t sought arbitration Court held that the adhesion contract was not enforceable because it was outside the reasonable expectations of the adhering party 0 An adhesion contract may be fully enforceable so long as it is within the reasonable expectations of the adherin art and is not unconscionable I If a term would be surprising to a party to a standard form K it isn t actually part of K 0 Waiver of liability Need to make sure that waivers are clear direct and conscionable to be enforced 0 Sharon v City of Newton 7 16 yr old hurt during cheerleading practice Could not sue bc father had signed consent form and successfully waived liability and couldn t sue city for injuries arising out of participating in cheerleading 0 Notice of Changes to a Standardized Contract 0 Mundy vLumberman s Mut Cos Co P renewed his insurance policy with D D included additional new terms on a separate sheet of paper and also inside the policy The most important stipulation turned out to be a limitation on liabilit for silverware B not ob39ecting P assented M 11 59 234 mammal l 1 i39ur rv o The P s had a duty to read 0 What is the rule for notice There is no brightline test You want to give notice when the changes are surprising or the terms are surprising Very facts sensitive Exculpatory Clauses o Intentional Wrongs an exculpatory clause relieving a party from liability for his own intentional wrons is usuall held violative of ublic 39 d illeal 39m 1x eller that the v 1 1 0 Express Wa certain ualities r i ll Hi n m wwl39 i 1lli 4l 4 I The seller is basically free to disclaim express warranties as long as he does so in a clear and reasonable manner 0 Implied Warranty 0f Merchantability 7 Part of the promise is that the product is good for that which it is designed If not you get all the damages that ow from the breach of that promise These are expectation damages which include consequential damages I Disclaimers of two implied warranties merchantability and fitness for a particular u ose are tihtl limited 7 H 0 Just because someone says they re not liable doesn t mean that they aren39t 26 o H ermingsen v Bloom eld Motors P bought a car from D K for car contained an express warranty that said manufacturer warranted vehicle free from defects in material or workmanship P s wife was injured while driving car so P sued for breach of implied breach of warranty merchantability when there was an express 90 day warranty which sucked by D and also a limit on liability That express warranty was buried in ne print I Additional terms may not disclaim the implied warranty of merchantability nor can they eliminate all liability for public policy reasons I Disclaimer was insufficient to indicate to a reasonable person that he was letting go of personal injury claims from the car if it was defective The parties were of unequal bargaining positions so Ps couldn t go to a competitor since all other car dealers had the same rovisions i 1 i i 0 An exculpatory Clause that is broad and all encompassing is void I Richards v Richards P was injured in a truck that her husband drove for D company P signed a waiver of liability but sued anyway Held for P The release had three problems that rendered it unenforceable when considered in their totality 7 l The form was labeled authorization but should have been labeled authorization and release from liability 2 Release was extremely broad and allinclusive 3 It s a standardized agreement so there an exculpatory clause that is broad and allencompassing is void 27


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