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o Advertisements: not an offer unlessindicates who can accept (first come first serve)
o Reward offer: promise a bounty inexchange for a specified task.
*Onlyone party (lost dog); or multiple parties (if you buy this and get flu, we’llpay you).
o Auctions - NOT offer: auctioneer is inviting offfers (bids = offers); unlessauction is w/o reserve (then auctioneer ismaking offer to the highest bidder)
(1) Offer not effective until received (must be communicated to offer)
(2) Revocation of offer by mail not effective until received.
(3) Rejection is not effective until received.
(4) *Acceptance is affective upon *dispatch*
Options Contract (Common Law; Services): (1) promised to keep the offer open AND (2) supported by consideration.
(Exam Tip: Careful on language: maybe something is a lapsedate (i.e. “let me know by mar 2.")
Firm Offer (UCC; Goods): (1) up to 3 months if (2) signed, written promise to keep the offer open, by (3) a merchant.
* No consideration needed! (No $, like option)
Detrimental reliance by the offeree that is reasonably foreseeable.
(Not that common: if you forgo an opportunity, then some courts will say, you have an irrevocable offer bc you detrimentally relied).
*Contractors: General rule = "Where a contractor has relied on a subk's bid to formulate his own, an implied option contract is created by promissory estoppel."
Rule: Under the common law, ccceptance must be in the form of the "mirror image" of the offer. Thus, acceptance that adds new terms,terminates the offer and becomes a new offer.
*Exam Tip: Offeror can revive an offer by language (after rejection:“well, think about it.’).
Two occasions where new language doesn't necessarily mean a rejection:
(1) Shipment of non-conforming goods
(2) Battle of forms
a. Death or insanity of either party
b. Destruction of the proposed K’s subject matter or
c. Supervening illegality
Bilateral Offers: (FSPM = all valid.)
Full performance = acceptance (must notify offeror of performance if reason to beliefthat the offeror would not learn of the acceptance.
Start performance = acceptance
Promise to perform = acceptance (failure to perform = breach).
Mailed acceptance = acceptance if (1) delivery made in a manner and by a means invitedand (2) the offeree has not already sent a rejection arrived first
*Mailbox rule: acceptance effective upon dispatch! (K = formed the moment that it’s in mail). [This is the default rule, but remember; offeror is master of offer!]
* Can’t revoke once it’s been dispatched.
* Also, offeror is bound the moment that it’s been dispatched.
* Offerer is bound even if the thing is lost in transit.
*Tip: Mailox rule not applicable to options ks
*Tip: Two responses (rejection then acceptance)? [Mailbox rule not govern if rejection mailed first.]
(1) If new terms are *conditional*, (i.e. "Provided that you agree to X...), there is no acceptance, and *no K*.
(2) If not conditional:
- Merchant v customer: new term =proposal, and can be accepted or rejected
- Merchant v merchant: new term = part of the K,unless LMO (1) offer expressly limitsacceptance to its own terms; (2) it creates material changes (material = warrantydisclaimers; time to make complaints; change past behavior ;(3) offeror objects to change.
Majority (MBE): Different terms areknocked out from contract.
Minority: different terms = proposals foraddition
Unless 2: written promise to pay debt barred by bankruptcy
Unless 3: (“Material benefit test.”) First, promisee conferred benefit onpromisor (not third parties; dad with sick kid); second, benefit is material!
Materials benefitsdoesn’t work if they’ve already been contracted for.
PFAI "Promises Fail and Injure."
(2) Foreseeable reliance (have to be able to foresee that this promisewill make someone rely on it)
(3) Actual reliance
(4) Injustice w/out enforcement (i.e. in order to get justice, have toenforce)
- Willful breach? (Is the breachor really sorry, or intentional?)
- Relative position/equities of the parties
(1) Does the agreement fall w/in SoF?
(2) Is SoF satisfied?
(3) Is there a workaround?
- Promissory estoppel? Quasi-Contract?
*Note: Doesn't need to be signed by both parties if you have a series of documents; just the one that you're trying to enforce against. (See "Multiple Documents Slide.")
SoF for multiple documents rather than a single doc signed by both parties?
SoF has been meet if: OSCCA
o (1) Must be at least one signed document.
o (2) All docs must pertain to the same subject.
o (3) Must be *clear and convincing* evidence of *acquiescence* to unsigneddocuments by the party against whom this is being enforced.
(1) Land Contracts: Need TWO out of THREE of:
(a) payment of all or part of price
(c) making substantial improvements to property
(2) One year contract: if full performance= valid contract, and can sue for breach, even if it wasn’t all in writing.
--> When one party bestows benefits on another in connection with oral K,even if K is barred by statute of frauds, the aggrieved party can recover valueof benefits conferred.
Promissory Estoppel: This may be available.
--> Easy case: Party promisesthe other party that he will create asigned writing. (And other party relies).
--> Hard case: the reliance is on the underyling oral contract --> must be strong evidence ofreliance
(a) Two merchants
(b) Oral deal, but where one sends written confirmation
*confirmation must be "sufficient against the sender" = signed w/ quantity description and reasonable time
(c) recipient fails to object w/in 10 days.
Goods for which payment hasbeen made and accepted; OR, goodswhich have been received and accepted
(1) divisible goods? (only accountable for the portion delivered)
(2) indivisible goods? (partial payment renders K fully enforceable – have to deliver the whole boat; not chop it inhalf)
*Implied warranty to title: Have rightful transfer to goods; no liens are attached to goods
*Implied warranty of merchantibility: Goods fits for ordinary purpose to be used (Only merchants.)
*Implied warranty of fitness for particular purpose: applies where seller has reason to know: (1) purpose for which thegoods are being acquired; (2) buyer is relying on seller’s skill or judgment.
*Express warranty: Warrants that it will conform to standards articulated. (Puffing doesn't count.)
*If K contains satisfaction clause: must exercise good faith. (I.e. will buy this if you meet these standards to my satisfaction).
- Missing price? Reasonable price at time of delivery
- Missing time frame for delivery? Reasonable time.
- Missing place of delivery? Seller’s place of delivery.
o Missing price? Reasonable value.
o Missing duration term? Employment at will rule.
First: Objective meaning trumps subjective meaning
Second: In case of doubt, construedagainst drafter
Third: Doctrine of reasonable expectations
*Sometimes boiler plate terms aren’t in line with reasonable expectations(insurance co’s).
Fourth: Trade usage (industry standard)
*Can also be used for filling in gaps.
Fifth: Course of dealing: what two parties did in past
Sixth: Course of performance – what two parties are doing right now (in this K)
Hierarchy = trade usage, course of dealing, express terms in contract, course of performance
E.g. (industry standard is immediate; but these parties always do 30 days; but in this K we’ve said, seven days; but even though we said 7 days, under this K we’ve really been doing 20 days – that last one triumphs!)
LANGUAGE: “If parties express agreement in finalwriting, other written or oral expressions, made prior to or at the same timeas the writing, are inadmissible to vary the terms of the K.”
Evidence is okay if used to:
* always allowed
(2) to supplement
** unless completely integrated
** for UCC, always allowed to introduce trade usage
ShipmentK: Contract where seller promises to turn goods over to carrier.
*Risk of loss passesto buyer when deliver to carrier.(Just give them to UPS!)
- Destination K: Contractwhere seller promises to tender delivery at a particular destination point.
* Risk of loss passesto buyer at the destination point(risk stays with seller the whole way.)
*ExamTip:* if K is silent, then it’s a shipmentK!
- If not merchant, risk of loss passes to buyer upon tender of delivery (setting them aside for buyer).
- If merchant, then risk of loss is on buyer only when physicallyin buyer’s possession.
Governed by *Pre-existing duty rule*: Promise toincrease compensation already owed under existing K = unenforceable (NO consideration!) [Alaska Fishers]
Exception 1: Mutual modifications =enforceable if both agree to different performance from that in original K; anddifference is not mere pretense.
Exception 2: Promise of increased comp isgiven in exchange for a promise of performance that is more burdensome.
** Modification must satisfy SoF if contract, AS modified, triggers SoF.
** But, otherwise, oral modifications are OKAY.
** UNless contains a "no oral modifications" Clause.
Voidableif: (1) mistaken about material facts; (2) mistake made by both parties; (3) disadvantagedparty did not bear risk of mistake under party’s agreement
(1) Requirement One:Must be objective impossibility (becomes impossiblefor anyone bc of circumstances beyondcontrol of parties). This is met in 3 circumstances:
(1)when subject matter of K is destroyed.
(2)personal service K and performing party dies
(3)supervening law makes it illegal
(2) Requirement Two: Occurrence of contingency must not have been known to either party before hand.
Three requirements: (1) party’s principal purpose for K is frustrated;(2) frustration = substantial; (3) must have assumed that this event (whichcreated the problem) wasn’t going to happen.
*Look for clause waiving this risk expressly.o Case: Was going to be a new king, and so rented flat to view parade. K was all signed, but king gets sick and parade canceled
Both parties are midperformance, and both parties let each other off the hook.
*SoF doesn't require recession in writing unless for land!
Parties, in the middle ofperformance, agree to some kind of different performance to complete K.
Accord = new agreement; Satisfactionis the completion of new agreement.
Must be VALID accord: (1) consideration must be sufficient if new performance differs significantly or performance isdoubtful; (2) partialpayment = okay IF good faith or bonafied dispute about amount owed.
(1) Party’s definitive statement indicating that it will breach K.
(2) Party’s voluntary act that renders party unable to perform. (Sells car to someone else in advance.)
If reasonable grounds for insecurity aboutwhether or not other party will perform, can make demand for adequate assuranceof performance in WRITING:
*Law*Failure to provide assurance = repudiation
(1) Haveto respond in time: (*UCC* = 30 days)
(2) Haveto provide assurance: if not a sufficient explanation, then repudiation
(3) Canretract repudiation unless too late:(too late = other party has acted in reliance; has already accepted repudiationby signaling;; brings suit)
(1) Cancancel K and have no further obligations under it
(2) Canbring action for damages or specific performance
(3) Orcan ignore repudiation and continue under K
If you fail to meet an express condition, party doesn’t haveto perform! (Obligation is “discharged”)
(1) Can waive right to discharge and perform anyway (Like the deal anyway and want to continue).
(2) Badfaith conduct: if one party acts in bad faith. (I.e. hinge it on getting financing, but never apply.)
(3) Gross forfeiture: If fulfiling the condition will lead to a huge loss for the party, will excuse
If breach = serious (*material breach*),then aggrieved party is discharged from performance
If breach = less serious (courts willtreat it as close enough), that’s *substantial performance*, and other party is note discharged.
(1) Extent to which aggrieved party will be deprived of the benefit.
(2) Can aggrieved party be adequately compensated?
Howbad is breach?
(3) Willbreaching party suffer forfeiture? (E.g. tearing down a whole house to replacepipe).
(4) Canthey cure?
(5) Wasbreach willful/bad faith?
(1) Divisibility? K = “Easily apportioned into agreed equivalents” (Onemonths’ cleaning for one month’s pay)
(2) Quantum meruit? Person who failed condition can recover the reasonable value of benefits conferred.
Buyer can reject goods: (1) notify seller of rejection within (2) reasonable time. (Right to cure on seller).
*But, if he does not reject in that time, he accepts!
Right to cure: If time for performance under the Kremains, then seller can substitute performing goods: (1) seller must givebuyer notice of intention to cure; (2) must make conforming delivery beforedeadline in K.
(1) States to seller that goods *conform* toK
(2) Taking goods despite non-conformance
(3) Fail to make effective rejection
(4) Taking any action inconsistent withseller’s ownership of goods (I.e. putting goods on display in showroom, or using them.)
* Must pay price of goods, but can seek damages for nonconformity if notified seller of nonconformity
Because non-conforming form of tender will probably happen in a single installment, here are options:
(1) If non-conforming tender substantiallyimpairs the WHOLE contract, then breach of whole K.
(2) If just one installment messed up, buyer canreject installment but can’t cancelthe entire K. (But buyer must allow seller to cure nonconformity w/in reasonable time).
a. Under 18, can’t contract
b. Minors can enter into K, but voidable atoption of minor
* Onceminors turn 18, may expressly or impliedly bind themselves to K’s that theyotherwise would have disaffirmed.
*Necessaries? (Food, clothing, shelter,medical care) Voidable,but merchant has a quasi K right to recover reasonable value of purchases.
Canbe: (1) oral or written lie; (2) fraudulent conduct (concealment); (3) halftruth
** Examtip: not broken promises; not opinions/guesses (unless professional opinion).
(1) Fraudulent misrep
(2) Negligent misrep
(3) Fraudulent nondisclosure
(1) Assertion not consistent with facts:
(2) Scienter/intent to mislead: know thatit’s false or knowing that you don’t have any idea if it’s true or false.
(3) Materiality of misrepresentation: (party making assertion had reason to know it would induce this person; or is likely to induce reasonable person.)
(4) Reasonable reliance on misrepresentation:
(2)Don’t need scienter or intent tomislead.
- Negligent misrep: D would have known assertion was false hadhe excercised reasonable care.
- Innocent misrepresentation: weren’t evennegligent; just made a comment that wasn’t in accord with existing facts.
(3)Materiality of misrepresentation:
(4)Reasonable reliance on misrepresentation:
(1) Material to contract.
(2) Reasonable reliance on the non disclosure
(3) A duty of disclosure and failure tofulfill it (fiduciary, or good faith)
(1) Must be a threat: manifestation to inflict harm
(2) Threat must be wrongful in nature:
(3) No reasonable choice but to succumb to threat
(1) Unfairpersuasion used.
(2) Other party was vulnerable to such persuasion
(1) Procedural unconscionability:bargaining process created absence of meaningful choice for aggrieved party
(2) Substantiveunconscionability: terms “unreasonably favorable” to one party in thecontract
*Remember: courts don’t weighconsideration for the most part, unless it’s a terrible (unconscionable) deal!
GIST: Courts should not enforce K because to do so would run contrary to public policy.
(1) Ks are banned by law(prostitution; bribery)
(2) Where K is formed for purpose of committing a crime
(3) Where K would constitute a tort
(4) Where K performance would violate values/freedoms
Default award (aggrieved party = restoresparty to position had K been fullyperformed)
§ (1)cost of performance greatly exceeds mktvalue
§ (2)cannot be calculated w/ reasonablecertainty [i.e. new biz w/ no profithistory.]
§ (3)damages are unforeseeable?
· Look for terms: “unbeknownst, etc.”
§ (4) Damages must be mitigated
Have to be reasonable about tyring tomitigate.
Restore aggrieved party to position hewas in prior to the K.)
Gist: Whenare reliance damages available? When expectation are not available (i.e. when expectation damages are too uncertain tocalculate – new biz example)
Puts benefitting party back in position they were before the time that the K took place.
§ Howto measure:
(1) Reasonable value or cost of benefitconferred
(2) **Extent to which other party’sproperty has increased in value bc of service rendered .
**Most likely to happy in context of losingK.
*Notavailable when aggrieved party has fully performed; only available in case where aggrieved party has partly performed.
Provide for damages of their own choosingin the event of a breach
* Enforceable if designed to compensate rather than punish!
(1)Did parties intend for clause to operate as liquidated damages clause or as apenalty?
(2)Was clause reasonable at time of K in relation to anticipated harm?
(3)Was clause reasonable in relation to harm and losses that actually occurred?
(1) Goods deliveredand accepted by the buyer: remedy = contract price. (easy)
(2) Buyer breach?
(A) If seller resoldgoods, then remedy = diff btwn contract price and price he resold them for.
(B) If has not resold,then remedy = diff between contract price and market price.
- Lost volume seller = supply of goods exceeds demand. (BEST BUY = selling lots of TVs). Permits them to reocever lost profit they would have made on the sale.
Three requirements to recover lost profits:
(1) could have made sale to both breaching buyer and resale buyer
(2) profitable to make both sales
(3) probably would have made additional sale
Gist: Depends on whether buyer has covered(bought new goods).
(1) If buyer has covered, remedy = diff btwncontract price and price he covered for.
* Canget incidental damages for securing cover.(logistical costs to find a buy cover goods)
(2) If buyer accepts nonconforming goods: remedy = Different in value damage: diff betweenvalue of goods K’d for and value of goods received.
extraordinary remedy =affirmative injunction. So rather than pay damages, must perform.
* Specificperformance IS available for (1) unique objects, (2) real property
* Specificperformance NOT available for (1) personal servies, or (2) K’s requiringongoing cooperation between parties.
*If middle of performing? Noncompete applies if employee services unique orextraordinary (singer)
*If after performance? Okay if:
(1) Is there a significant *biz justification* forenforcing post-employment restraints?
(2) Is *scope* of noncompete reasonable interms of duration and geographic reach? (50 yrs not okay; all of the world notokay).
(3) Is there an *express* provision? (Note:courts will not imply a non competefor postemployment relief.)
Damages for PE depend on the JDX:
(1) Some courts = expectation damages
(2) Some courts = reliance damages
(3)Some choose on a case by case basis, and tailor remedy to justice at issue
*E.g. for all three: Uncle promisesnephew, will give you 10k for car; kid relies on this promise to buy a 6k car.(will get 10 under expectation; 6k under reliance; and unknown under final option).
*Okay unless unconscionable, or has failed at essential purpose.
*And, in case of consumer goods, prima facie unconscionable if you try to limit damages to personal injury.
(2) Donee beneficiary:
Creditorbeneficiary: promisee seeks performance from promisor that will satisfyobligation to third party
* E.G. A owes B 100, and enteres into a K with C to pain C's fense in exchange for C's promise to pay B 100. [B = Creditor beneficiary.]
*Can sue promisor AND promisee!
Thirdparty who will benefit from third party as practical matter, but are noteither of the above.
E.g. A promises to build a house on B's land. C leaves next door and the value of his house will increase after the new house is built. C is an incidental beneficiary.
Gist: Beneficiary cannot sue to enforce, until their rights have vested. Before then, can change agreement AND can get rid of beneficiary if want to.
(1) beneficiary brings suit on matter
(2) beneficiary changes position injustifiable reliance on K
(3) beneficiary manifests assent to K atrequest of promisor and promisee (very easy: just have to say, “yes, we wantthe mural.”)
(4) rights of beneficiary vestedunder express K
* Defenses available to promisor against promisee = alsoavailable to third party beneficiary
*I.e. Third party steps into the shoes of promisee!
* I.e. Third party beneficiary gets no more rights than the parties in the K!
(1) If assignment would materially alterrisks to or obligations of the other party
(2) When obligor has personal interest in performance by obligee and not a third party (nanny)
(3) Violate applicable law or publicpolicy (can’t assign salary or wages)
(4) Assignment prohibited by contract
§ Irrevocableif obligor has already performed
§ Tangibleclaim has been delivered
§ Intangibleclaim is put in writing
§ Assigneecan show detrimental reliance.
Methods of revoke:
o Notice to assignee that it’s offer
o If assignor takes performance directly from obligor
o If assignor assigns to someone else
· (1) Assignee steps into shoes of assignorfor purposes of rights/defenses against obligor.
· (2) Exception: Obligor does NOT inheritrights of assignor against the assignee though!
o (1) he will do *nothing to defeat* orimpair the value of the assignment
o (2) right as assigned actually exists andis *not subject to any limitations* or defenses
o (3) that any writing evidencing therights being assigned is *genuine.*
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