Professor Lisa Lerman
Outline based on Problems in Contract Law
Knapp & Crystal, Third Edition
A. An Introduction to
Identify what contract(s) are
What features make it a
Consent = Mutual + Voluntary
Exchange of Services
Exchange of Property or Goods
Good Faith – Express or Implied
Rules of Contract Law changes as
Society’s values change.
Respect for one’s own autonomy.
Respect for privacy and freedom
Protecting rights of those
targets of fraud.
Allows people to plan
C. “She refused to go out
Monge v. Beeb Rubber Co.
What are the relevant
facts? Often depends on the
Application of law depends on
facts of the case.
Question the facts.
Be curious and attentive
Monge was the first Employment at
Will contract where there was a Bad Faith discharge.
Implied term in contract.
Why was Monge placed first in
the Case Book?
Classical v. Modern law
Importance of Facts
Limitations of Contract Law
Follow Law v. Precedent &
reaching conclusion beneficial to both parties
Contract Law & Tort Law
Contract Law policies move
towards Tort Law
Idea of “Good Faith”
II. Chapter 2: The
Classical System of Contract Law
Assent and Bargained-for-Exchange
What is the necessary minimal
commitment to have Courts consider it legally binding?
Previously contracts required a
wax seal to be official.
Agreement must be given with
Christopher Columbus Langdell
of Harvard Law
Contracts were based on predictable rules
benefits from economic activities.
Courts interfere it would deter commerce.
the bar HIGH for contractual arguments.
obligation and consideration requires clarification
over last 100
Mirror Image Rule – Acceptance
of a contract must be based on all elements of contract.
rarely applies today.
formal rules began developing exceptions.
Theory of Contract – Idea of Model
Theory of Contracts
The “hatchet and saw” builders
Ray v. William G. Eurice & Bros., Inc.
“Meeting of the
minds” points to subjective assessment.
contract is allowed; but you risk Liability
Grounds for mistake difficult to
prove unless both parties make mistake
RULE: Assent to a
contract is assessed OBJECTIVELY.
Subjective Determination- speak
with parties; but parties may change story.
“An illiterate, French-speaking Negro”
Landry Loan Co. v. Avie
St. Landry – Appellant
Avie – son-in-law, Appellee,
Must find party you want to sue.
Reed, representing St. Landry,
acts oddly, like signs ‘X’ for co-signer Skinner.
What kind of ‘X’ was signed?
Assent to Contract – based on outward comments.
Acceptance: Bilateral Contracts
Identify Objective Criteria
Each case lays out several
different rules. CATCH THE
note on the Restatement (Second) of Contracts, in Rules of Contract Law
American Law Institute –
Private Club of Law Professors
Becomes law IF & When
state’s Supreme Court Adopts as law.
(Very) Persuasive Authority
RULE: Ask what questions
Rule asks to satisfy.
Making of offer confers upon
offeree ability of assent.
Offer – specific, definite,
lasts for ‘reasonable’ period of time.
2d of Contracts
Sections 24, 26, 36, 40, 43,
50, 59, 60, 63
Section 36. Methods of Termination of the Power
Lapse of time, or
Death or incapacity
acres… need cash”
Trial Ct. rules there was no “Meeting
of the Minds?”, therefore no contract.
Appeals Ct. rules no firm
offer, therefore no contract.
Is announcement sent to a mass of people?
If so, then it
is not an offer.
Ambiguous facts lead to conclusions.
Arguments – facts, rules – case law, statutes, forum/remedy,
parties, conflict, counter arguments, policy
in Kirkenhead at 3:50 PM”
“The Mailbox Rule” – Acceptance of offer is effective
WHEN IT IS MAILED.
Revocation is effective ONLY
when offeree receives notice.
Offeror is Master of
Offer – May revoke at any time before it is accepted.
Is there a contract in this
case? – YES
Two Types of Legal Rules
Mandatory – can’t work around. Must work in Good Faith.
2. Default – Gaps in contracts where
general rule applies.
UCC – “Any Reasonable Manner”
snooze, you lose”
Changes proposed in offer
constitutes a Counter-Offer.
may not have provided a complete story to offerees.
Acceptance: Unilateral Contracts
Bilateral Contract – Offer
Promise for Promise
Unilateral Contract – Offer
Promise contingent on Performance
Completed Performance creates the
Offer doesn’t initiate promise
Offer is revocable
Performance is Completed
To determine Bilateral or
Unilateral – Look for offeror’s request.
Brooklyn Bridge Hypothesis
uses language that appears to be seeking
decline to offer party option to revoke
1 Party promise another to enter
Classical view – Unilateral
contract not complete until performance rendered. Failure to complete performance allows offeror to nullify
contract at any time. Completion
Modern view – Offeree can be compensated
for amount of work completed.
Ability to perform.
have come to pay off the mortgage”
Was there a contract at the
Was there a Promise (bilateral)
“The bond has been sold” – does
this constitute a revocation?
Revocation can occur if offeree
receives information of inconsistent action. NOTICE MUST BE TRANSMITTED.
Restatement Section 45
2-1: The proposed licensing
for plastic products.
Objective Standard – Are both
parties bound? NOT YET.
There was no ORAL CONTRACT.
Can Dietrich back out of
Restatement Section 24 – Offer
Defined – Legal Hook
Practical legal options
Comment: Remedies for Breach of Contract
B. Enforcing Exchange Transactions: The Doctrine of Consideration
Sections 71, 73, 74, 77, 79, 81
boy who gave up drinking and smoking
Hamer v. Sidway
Uncle promises nephew $5K if
nephew refrains from smoking & drinking.
Nephew sells debt. Debt resold again. 3rd owner sues to collect.
Issue – Is there consideration
through waiver of rights?
Consideration – Pre-classical view
Benefit to Promissor or Detriment to
Unilateral contract – Uncle
Bilateral contract – both
Identify who made the promise –
Ct. Rules there was a detriment
to the nephew, who sacrificed a fun lifestyle
Consideration – minimum
performance to prove contract.
is given in consideration to promise?
Pre Classical analysis – Benefit/Detriment Analysis
Classical Analysis - Bargained for Exchange Analysis
Know how to Apply Both Analyses!!!
3. Comment: History of the Consideration Doctrine
promised to pay nephew $3,000 - “value received”
– No Consideration – Aunt’s offer was a gift.
Received” – Must identify clearly.
to make a gift not contract/valid consideration.
to make gift not consideration.
Look for Bargained for Exchange.
payments not sufficient.
payments not sufficient.
consideration a SOMETHING or NOTHING?
5. Comment: The Laywer’s Role in Counseling for
leased filling stations
Baehr v. Penn-O-Tex Oil Corp.
Jury ruled for Plaintiff
Judge granted Defendant’s motion
for Judgment Notwithstanding & ordered a new trial.
Penn. Only held liable if there
is a contract with Baehr.
Is there a contract?
& Consideration establish contract.
only does not support contract.
commitment. Must be definite.
Restatement § 71. Requirement of Exchange; Types of
speaker has control – intent/promise
speaker doesn’t have control – prediction
degree of speech.
to change mind at any point.
arguments that may be made.
all possible arguments
all possible arguments
Benefit v. Detriment
To Promissor from
Facts don’t add up.
promise not to sue.
Want of Consideration.
worth nothing. Therefore no
of Consideration – no Contract.
Appeals Ct – must identify
mistakes made in the trial Ct.
Defendant – Exceptions Want of
Ct. – bad contracts still
If nominal – lacking in value –
then not consideration.
Does it look like a “something
Recital of Consideration not
Must demonstrate some value of
Tension: Desire to allow bargaining concern to
Plowman v. Indian Refining Co.
Assume promise to pay 50%
Picking up checks.
Corp. promised to pay employees
Is picking up checks sought by
Past service – was sought? When?
Pension promised after services
rendered, not before.
Employees argue moral obligation
of Employer is sometimes a substitute for consideration.
RULE: Generally a Moral
Obligation is not enough to establish consideration.
RULE: Motivation can’t
Condition + Consideration =
Condition not enough for
Consideration must be bargained
Possible items of consideration,
but none were.
9. Comment: Power of Agents to Bind Their
Principals and Note
Many contracts have Agency
DON’T WRITE Agency answer for
Exam in Contracts
2-3: The Cantonville Library
What are the legal questions?
What was the offer?
Is there an acceptance?
What method of acceptance is the
power on other party to bind obligation
be accepted without other side acting
a Mirror Image of Offer
performance of $1 million deposit
& Money fundraising
city council not permitted to withdraw offer.
Promise Seeking Promise
can constitute acceptance
City Council’s rescinding action
to City OR
for Exchange Test
Look for all items that can be consideration including winning and
commitment to stay.
commitment to keep church.
3: Obligation in the Absence of Exchange:
and Promissory Estoppel
Independent claims for Recovery
What promises will Courts
2: Courts enforce promises
supported by consideration
3: Courts – Must satisfy
& Promissory Estoppel
broken, then enforce obligation
Contract law awards limited to
Restitution & PE – May not
need to prove consideration.
for Benefits Received
Ill Gotten Gains”
the Absence of a Promise
Ct. – Request for service
creates obligation for service to be done.
Restatement – not contract law
Money – polluter of good intentions
People expect payment for
not unexpected services.
rendered to an unconscious patient”
re estate of Crisan
Contract implied in law
Restatement – No
Acceptance - No Consideration,
BUT Court Intended
Finding contractual obligation
when there is none because it is the correct thing to do.
years of “nonmarital cohabitation”
Plaintiff uses several theories
Express or Implied Warranty
Services to Defendant implies
§71 Bargained for Exchange?
Was there bargaining – Not Really
Is bargaining required for
Lacks explicit terms of
Ct. rules §71 contract can be
Judgment reversed &
remanded to Trial Ct.
Plaintiff Claims for
Woman conferred benefits on man.
Unfair for man to retain benefits.
Breach of Contract – Fair split of
Restitution – Hourly wage
Sections 82, 83, 86
to an ailing son
State Supreme Court
Not enforceable promise
Moral Obligation not Enforceable
Service provided before promise
Plaintiff fails to recover
Moral obligation not sufficient
Extraordinary Remedies – Know
doctrine’s twists & turns
falling pine block
Damage from falling pine block.
Defendant died before
Plaintiff suing to continue
Moral obligation with material
Big v. Small
Alabama Ct. uses different rule
of law than
Mass. Ct. in Mills v. Wyman
When can moral obligation
substitute for consideration?
Rule in Mills v. Wyman
Rule in Webb v. McGowin
Is it “Unjust”? – be creative
& persuasive; use facts
Facts don’t fit model of §86 –
Promise for benefit received.
v. Taylor, p 176-7 Note 6
Hand cut in attack.
Promise to pay for injuries.
“reconcile” – general principle
to harmonize conflicting results
Small Payment made
Responsible for potential injury
Working – intent to change
2 cases with similar facts and
Check to see if they are
applying different issues.
No Promises or Promises after
Separate Issues & Arguments/Independent
bases for Claims
B. Promissory Estoppel: Protection of Unbargained-for
Reliance = Promissory Estoppel
Put injured person in corrected
3 Types of Cases
you will come down and see me…”
Plaintiff argues contract
Ct. rules “No Contract”.
Detriment to Promissee > Benefit to
Bargained for Exchange? Consortium?
Benefit from Promissor –
Not Benefit from Promissor –
Determining Factor – Was there
Produces unfair result.
She relied on money to quit
Was quitting job Bargained for Exchange?
Estate attempting to Estopp
Common factor – Reliance on
action/promise by another person.
Act, Omission, Conduct
Equitable Estoppel – one party makes a misstatement of fact and
another party relies on that statement.
Promissory Estoppel –
promise which promissor should reasonably expect to induce action or
forbearance and does.
overlap area Consideration
Recovery on Reliance – Greater
Reliance & Consideration
The Mary Yates Johnson memorial
Allegheny College v. National
Chautauqua County Bank
Promise of gift for $5K in
exchange for scholarship fund establishment.
Yates changes mind before death.
as Promissory Estoppel? YES
Consideration – Posthumous
remembrance with scholarship fund.
Counter argument – Could be
viewed as gift.
Not contract – Gift
No detrimental reliance
But this gift must be viewed as
serious, contractual promise, or any donor making an offer could revoke and
cause problems for fundraisers.
Restatement § 90 Promise
Reasonably Inducing Action or Forbearance.
Promises in a
Katz v. Danny Dare, Inc.
Promise in commercial context
Promissory Estoppel in
13 months of time from offer to
Issue: Is Promise enforceable under
Promissory Estoppel? YES
Could Katz have sued for Breach
of Contract? YES
Bargained for Exchange? §71( 2)
Pension exchanged for past performance?
Pension exchanged for $10K +
No unemployment compensation
Plaintiff cites Feinberg case –
promise of pension
Appeals Court’s 3 Elements to
Injustice avoided only by Enforcement (Sympathy Counts)
Restatement §90 – Detrimental
Reliance, objective, foreseeable
Appeals Ct. cites Trexler –
similar to Katz case.
When should a Ct. order someone to uphold promise?
Charity Organization: Clear Promise made
and Problem 302: The injured
§86 Promise for Benefit
Detrimental Reliance – Then
can’t use disability
Promissory Estoppel – is it justified
to break promise?
Unclear about Promise
1. Breach of Contract Weak;
2. Promissory Restitution Strong
3. Promissory Estoppel Detrimental
obligation substitute for consideration?
Webb Test: Material benefit to Promissor? YES
for compensation if injured.
implied promise may be reason for not ejecting.
on Promissory Restitution
Promise for Benefit Received
117 Restatement of Restitutions
= Promise leading to Services
Types of Contracts Requirements
1. Contract Consideration
3. Restitution Unjust
Exchange – More Important
4: Obligation in the Absence of Complete Agreement
Claims for PE within reason
If General Contractor gives bid,
then Plaintiff receives offer
Offeror’s Power to Revoke
Estoppel: The Effect of
James Baird Co. v. Gimbel Bros., Inc.
Gimbel - supplier trying to
Baird – General Contractor
Baird wants Gimbel to cover
Baird tries to recover on
Detrimental Reliance – fails
Ct. – Offer only, no promise
Finds no promise in offer
Judge Learned Hand
elementary school parking lot
Drennan v. Star Paving Co.
Trial Court – Drennan
Appeals Ct. – Affirms Decision
St. Supreme Ct. – Affirms
Restatement §90 Promise
Reasonably Inducing Action or Forbearance.
FINDS Promise in Offer
Rejects Baird decision in
Implied subsidiary notice
Implied promise not to revoke
§45 Option Contract Created by
Part Performance or Tender
Unilateral contract partly
delivered requires commitment; binds offer.
Star wants Drennan to rely on
Holding – Widely Accepted
Holding in Baird – Gone
§ 87 Option Contract
Offer by contractor creates
Promissory Estoppel due to reliance.
No signal Direct Support
– not directly relevant,
to lend support
Justice Traynor in Drennan case:
Doesn’t mention reversing
Legal mistake citing Learned Hand’s
d. Comment: Contract Law and Business Practice
own Red Owl store
Hoffman v. Red Owl Stores, Inc.
Red Owl kept upping requirements on
Hoffmans to point where deal collapsed.
Preliminary Negotiations led to
What is the promise(s)?
Numerous Implied Promises
No direct or Implicit Promises
Hoffmans: Commitment made
Red Owl: Promise not made YET
Red Owl: Assurance with encouragement. Encouraged more and more reliance to
level of BAD FAITH.
Promise v. offer v. assurances
Hoffman case somewhere
in-between Promise v. offer.
“Bar to Recovery” lowered to
Ct: Reasonable, foreseeable, detrimental reliance.
Know how to analyze facts to identify promise/offer/assurance.
Analysis: Show Strengths
& Weaknesses of
Make arguments supporting and attacking points.
Statute: The “Firm Offer”
note on the UCC in Rules of Contract Law
Statutes on Commercial Law
1840’s – Justice Story proposed
commercial law standards.
1900’s – Need to codify law
grows with industrialization.
Contract Law – State Law – 50
sets of rules
1940’s - NCCUSL & ALI join
to draft UCC.
1968 – UCC draft adopted by all
states except for Louisiana.
Passed by 49 state legislatures
Many commerce areas have
Bring Contract Law closer to Business Law.
Focus on Party Agreements, Less on written content. Greater
focus on intent.
View contracts as viewed/performed in Good Faith.
Sections 1-102, 1-103, 2-102, 2-104(1), 2-105, 2-205, 2-306
Know what it applies to using
any set of facts.
UCC – Contracts on sale of
Does Not Cover “Things” such as
Services, Real Property,
Intangibles, Intellectual Property...
Article 2 applies to all
contracts to sales of goods or things.
Mandatory Rule – State
Legislatures decided all contracts must be in Good Faith.
Default Rule – Contracts
interpreted in certain way to provide fair outcome. “Gap Fillers”
pounds of pork products per week
Mid-South Packers, Inc. v. Shoney’s Inc.
Long Term Relationship
No formal agreement, but
Requirements Contract –
Quantity & contract determined and agreed to.
Ct. rules not a Requirements
Contract. No promise to purchase
quantity form Mid-South. Not
exclusive dealing arrangement.
UCC doesn’t precluded
Promissory Estoppel or Restitution.
Mid-South presented “proposal”
to Shoney’s in 1982.
Price list – 45 days notice for
change in prices.
No specifics, no real contract,
only a Price List.
Orders in writing, by phone, billing
July 1982 – Price increase
negotiated at $0.07 per pound
Federal Ct. hears case, but
uses state’s contract laws & regulations.
Shoney’s admitted extra amount
deducted wrong, therefore amount in controversy decreased.
Is there a Requirements Contract?
Is the “Proposal” a binding
Shoney’s argues there is an
Requirements Contract with a min. 45 days required to change prices.
Ct – Not a Requirements
Contract. Each transaction was a
UCC § 2-205 Firm Offers –
Consists of 5 Questions
1. Is there an offer?
2. Is the offer by a Merchant?
3. Is the offer to buy or sell
4. Is the offer in writing?
5. Does the offer assure terms?
Legal acceptance doesn’t match reality.
Acceptance by silence.
Ct. – Weak analysis; arguably correct.
Preponderance of evidence –
Shoney’s agreed to pay higher price
Acceptance: The “Battle of
Contractual relationship where
written communications are inconsistent.
Boiler Plate – Anything in
contract not specifically negotiated. Form language, not specifically negotiated.
Is there an agreement?
Are all terms agreed to?
Common Law Rule – Mirror Image
Rule – Offer form must be mirror of acceptance form, or isn’t acceptance.
UCC – More flexible than Mirror
Twelve tons of rubber
Poel v. Brunswick-Balke-Collender Co.
April 2, 1910 – Letter from Poel
Ct. – not offer; no legal
April 14, 1910 – 2 Letters
Ct. – Not contract; only signed
by 1 party; no acceptance; only offer.
April 6, 1910 – No acceptance;
only alleged; no Mirror Image; Counter Offer that was never accepted.
January 7, 1911 – Brunswick
sends last letter trying to establish ground rules of contract.
Price of Rubber dropped – buyer
wants to cancel order.
Mirror Image Rule not strictly
applied. See Note 4 Page 278.
1. “de minimis
non curat lex” – trivial difference, not important.
2. Term added
by acceptance was implicitly included in offer.
Problem 4-3: 5,000
feet of patent leather
Is there a contract? NO
Does it specify in Paragraph 7?
Any hesitation is not an offer
Ambiguous information – Assume
both possibilities and then analyze each.
Acknowledgement form is not
acceptance in this case – it is a counter offer.
Then is there acceptance leading
to contract? YES
UCC Section 2-207
UCC drafters decided to overturn
“Mirror Image Rule”; which
reward the last “Form Sender”
Provides that an acceptance of
an offer creates a contract, even if there are minor difference in terms.
Helps to identify what terms are
legally binding and what terms are not.
Always start with §2-207(1) –
Then proceed to §2-207(2) &
(3) – Sections 2 & 3
§2-207(1) – Identifies whether
or not there is a contract.
Asks for acceptance
Implies offer has been made
Test to identify contract in UCC
same as test in Common Law
“Acceptance” used twice in one
Is there a definite and
seasonable expression of assent?
Enough agreement to constitute
Or a written confirmation?
Sent within reasonable time?
Look for: But may not
of Oral Commitments: OR
Unless – In the acceptance,
language expressly stating offer will not be accepted UNLESS additional terms
from offeree accepted by offeror.
Two types of Contracts:
Rules to each type of contract
are the same.
If there is a valid ORAL
contract, additional options cannot change the contract.
Section 1 à Oral
Sounds independent of §2-207(1)
Different terms v. Additional
Additional terms are proposals
for additions to contract.
If both parties are merchants
then exceptions are available
If one/both parties are not merchants,
then exceptions DO NOT APPLY.
“Materially Alters” – Will it
result in surprise or hardship if incorporated without express awareness of
See Note 4, p. 29 – R2d
“Notification of Objection” –
Blanket of specific objection
Diatom v. Pennwalt p.305
Ct. evaluates other Ct.
interpretations of §2-207(2)
– Terms not meant to be added.
different terms like additional terms.
Out Rule – Remove Conflicting terms.
Used in the Diatom Case.
Methods 1 & 2 go back to the
Mirror Image Rule.
Requires – No Contract in
Based on parties “Conduct”
How do you identify terms in a
contract if it is only based on actions?
Apply §2-207(3) ONLY
Just like the “Knock Out Rule” –
but differs because it is based on conduct, and some writings.
The Cool Whip bowl machine
Brown Machine, Inc. v. Hercules, Inc.
Hercules employee injured. Sues Brown Machine. Settles for $150 K.
Hercules limited to paying
Brown sues Hercules to recover
$150K, based on indemnification clause.
Court Examines docs to evaluate
application of §2-207.
Is Browns’s Acknowledgement form
an acceptance? §2-207(1)
Contains Indemnification clause.
Express Language – Ct. says NONE
Ct. - §2-207(2) –
Indemnification clause is not added to contract; material change. Trial Ct rules in favor of Hercules.
Appeals Ct. reverses decision.
The defective spandrel glass
Dale R. Horning Co. v. Falconer Glass Industries, Inc.
Does clause in contract materially
Is it possible to collect
incidental and consequential damages?
Consequential – In consequence
Incidental – To keep damages
Ct applies §2-207 – skips
§2-207(a) & (c)
Oral agreement with written
confirmation which includes different terms.
Is it material?
Surprise/Hardship analysis –
finds adding of clause causes a hardship.
5,000 feet of patent leather redux
Confirmation limits late
Is there an offer? MAYBE
Then assume offer and Analyze.
And assume no offer and Analyze.
Is reply acceptance?
Definite & Seasonable?
Written & sent in reasonable
amount of time?
§2-207(a) & (c) don’t apply.
Will this materially alter
Will it impose surprise or
Allowing seller to cancel if
buyer doesn’t pay on time?
Causes beyond control?
Conclusion – Contract exists;
Paragraph 7 out OR
Assume contract based on conduct
– same result.
* * * END FALL 1998 SEMESTER NOTES * * *
Answer the Question
Focus on the Analysis
Don’t provide a Fact List!!!
Don’t write the rules
IRAC – Focus on Analysis
Present arguments on both sides
Conclusion can be
Winning party may be “unclear”
Read FACTS with EXTREME care!
3 Contract Areas
– Sale of Goods
Law - Services, Land
Keep track of time.
Use conversational style
Skip lines – write on one side of
What are the issues?
there more than one potential claim?
one claim at a time.
issues from non-issues.
– Facts not in dispute. No
List claims; then Issues; then
Three methods to identify issues:
conversation with parties
Association Method – Virginia Woolf – Relate to Case Book.
List Potential Issue Items
Weigh Important issues
Reread question if confused.
Articulate how each party would
apply the law to facts
Use Declaratives: WHY;
BECAUSE; THE REASON FOR
What kinds of arguments could be
Bring in facts compelling
Analyze & Distinguish Cases –
Compare Facts in cases
Bargaining: The "Agreement
2. Walker v. Keith
Renewable 10 Year Lease
Lease for Exploration
Vague, Ambiguous, Indefinite
"Implied Terms" -
Court Becoming Intrusive
How far should CT. reach?
What extent should CTs. take?
How far should contract reach,
Did parties intend to make
So - CT. should uphold
- Seek grounds to find agreement
Chapter 5: The Statute of Frauds
Statute of Frauds
Certain Types of K may not be
enforceable unless they are in writing.
Applies to some K and not others.
Body of Doctrine - Common Law,
England - Too Harsh, repealed in
U.S. - Adopted English version of
SOF; Enforced by St. CTs.
Types of K that Can't be
Performed within a year (unless breached)
• Oral K of Employment
• Agreements in
consideration of marriage; unless mutual
• K for sale of land or
interest in land
• K not to be performed
until after life of promisor.
2-201 - Requires written K for goods where price $500 or more
"a contract for the sale of goods for the price of $500 or more
is not enforceable by way of action or defense unless there is some writing
sufficient to indicate that a K for the sale has been made..."
131, 132, 139
R2d 125 - A promise to transfer
or buy land requires written agreement
Leases - Most states allow oral
lease for less than 1 yr.
R2d 130 - If a promise contained
in a K can't be performed within one year, after making the K, the K must be
in writing. Time runs from
execution of the K.
UCC 2-201(3)(a) No writing is
required if the goods are to be specially manufactured
R2d 131 - Memorandum of the
• Reasonably identifies
the subject of the K
• Indicates that a K
has been made between the parties
• States with
reasonable certainty the essential terms
• signed by or on
behalf of the party to be charged
P may introduce oral evidence to
aid in the interpretation of the memo, if ambiguous. But may not introduce evidence to supplement
C. Crabtree v. Elizabeth Arden Sales Corp
employment contract with Miss Arden
2 yr. K
2 Salary Increases
of Conversation on Telephone Order Blank
Chargecard - Not Signed; Raises Q
Payroll Chargecard - Raise Refused
Crabtree quits & sues
Arden Denies 2 Yr. K
TC - Rules for Crabtree $14K
AC - Affirms
SC - Are SOF writing requirements Applicable?
in under 1 Yr.?
- 2 Yr. Employment K
§131 - General Req. for SOF
Q - Can Docs be linked
Why can docs be linked together?
No reference linking documents
§132 Clearly indicates relation
CT - Language is ambiguous
outside written K
1 Doc must be signed
Comes out of/refers to some
Does not have to refer to linked
Identify General Req. for SOF
D. Cohn v. Fisher
30-foot auxiliary sloop
Fisher agreed to purchase Cohn's
Fisher argues boat needed
inspection prior to sale
CT - Judge by "agreed to" terms, not
Agreement can be made which
requires action prior to formal agreement
Fisher fails to satisfy this
2-201 - K greater than or equal
to $500 in value require written K.
1. Sale between
parties? YES - Notes
2. Signed by party
against enforcement sought? YES
3. Quantity of
NJ's adoption of UCC allows claim
Check not req. to validate K
Assent is critical issue.
Chapter 6: The Meaning of Agreement: Principles of Interpretation and the
Parol Evidence Rule
Parol Evidence Rule
Law of Interpretation &
Limited in past.
Lots of different terminology
Series of steps in analysis
Restrictive rules & Analysis,
Learn UCC & Common Law
What type of situations does
Parole Evidence Apply to?
________________K________________After Written Agreement
§209 - Integrated Agreement
"Is it integrated?" -
Total Expression of Agreement
Classical - 4 Corners of K
Modern - Facts &
§210 - Partial Integration
§215 - Contradiction of
§216 - Consistent Add'l Terms
Progression of Arguments
Possible ways of Characterizing
Always multiple possible
Better Arguments more tailored to
Parol Evidence results in barring
from the fact finder's consideration all evidence of certain preliminary
agreements that are not contained in the final writing, even though this
evidence might persuasively establish that the preliminary agreement did in
fact take place and that the parties intended it to remain part of their deal
despite its absence from the writing.
When the latter agreement is in
writing, it generally supersedes the previous agreements. If the later agreement is oral, the
Jury decides the intent. If the
later agreement is written, the Judge decides the intent.
Parole Evidence Rule - Rule of
Substantive Law; operates to exclude evidence; may be rejected by the trier of
Integration - Final expression of
Total Integration - Includes all
parties' details of agreement.
No evidence of prior of
contemporaneous agreements or negations may be admitted which would either
contradict or add to the writing
Partial Integration - Doesn't
include all parties details of agreement.
No evidence of prior agreements
or negotiations may be admitted if the evidence would contradict a term of
R2d 213 - Evidence of prior
agreement may never be admitted to contradict an integrated writing, and may
not even supplement an integration which is intended to be complete.
Subsequent Agreements - Parol
Evidence NEVER BARS consideration of subsequent oral agreements. Written K may be modified after
execution by oral agreement.
UCC 2-209(2) & (4) - Waiver
to "No Oral Modification" clause - must show reliance, or
materially changed position in reliance upon waiver.
Judge - determines true
integration; then total or partial integration.
Merger Clause - The sole
agreement between the parties. Examine writing itself.
If no merger clause, examine rest
of writing as a whole.
"Four Corners" Approach
- looking exclusively at the document
Standard - Whether reasonable men would have put the terms in the oral
agreement into the final writing, or would have left it out.
Actual intentions of parties
should be evaluated
More emphasis on intent, less on
Emasculates the Parol Evidence
UCC - Corbin-like approach;
consider all evidence; Judge decides integration
Illegality, fraud, duress,
mistake, lack of consideration - evidence to show no valid K exists, or K is
Customs - Course of Performance,
Course of Dealings, Usage of Trade
UCC 2-208(1) - Course of Performance
- Conduct of parties in particular K.
UCC 1-205(1) - Course of Dealings
- Pattern of Performance in past K.
UCC 1-205(2) - Usage of Trade -
Any practice or method of dealing having such regularity of observance in a
place, vocation, or trade as to justify an expectation that it will be
observed with respect to the transaction in question.
UCC 2-202(a) - Customs can be
introduced to help interpret meaning of a writing even a complete
UCC 2-208(2) - Customs MAY NOT be
used to contradict express terms of K.
209, 210, 211, 213, 214, 215, 216, 217
3. Thompson v. Libby
Alleged Oral Warranty
Disagreement of Quality of Logs
Extrinsic Evidence Inadmissible
Parol Evidence Encourages people
to write things down
Is Outcome Fair?
Classical model of Parol Evidence
Integrated K - Review 4 Corners
Extrinsic evidence may be
excluded if document is integrated
Use R2d as road map; Classical
view as Tangential.
4. Hershon v. Gibraltar Bldg and Loan Assn.
DC Condo Dispute
Deeds of Trust - Payment tied to
Agreement August 24, 1984
Payment on 10/1/84
11/1/84 - Gibraltar threatened to
declare a default
11/24/84 - P sues D
11/30/84 - P offers to pay, D
refuses, lacks legal fees
3/25/86 - TC bench opinion issued
TC - holds P liable for
Release - very broad language,
Extrinsic Evidence - Determine
whether term is ambiguous
Maryland - If ambiguous at face,
then no add'l evidence may be introduced.
Release Agreement contains both
ambiguous and specific language
Ejusden generis - Specific words
followed by more general terms
Occurrence of Payment extrinsic
Admiral Builders - cited by all;
shows facial ambiguity
Is this a Q of Law or Fact?
DC CT - Q of Law; provides more
AC - Not ambiguous, extrinsic
evidence should not have been considered
Reverses TC, Remanded for P
Dissent - Ambiguous, Broad v.
Case - Provides debate regarding
use of language & Extrinsic Evidence
Written Language's literal effect
Lawyer's Role - before, during
Gamesmanship becomes absurd
Obligation to be honest
5. Nanakuli Paving & Rock Co. v. Shell
price of asphalt
UCC 2-202 - Parol Evidence Rule
Common Law allows intro of
evidence if ambiguous terms; if agreement integrated
UCC - Explanatory &
R2d §202 & 203 -
Interpretation allows facts & circumstances to help determine true
Dealings___|___Parol Evidence___|___Course of Performance___|
Course of dealings - prior
1963-74 - Nanakuli purchased all
asphalt from Shell
1964 - Price determined by posted
(published) price upon delivery
Price Protection - Is P legally
St. CT. - Removed to Fed. CT.
Jury awards P Verdict
Judge vacates Verdict
Appeals CT. Reinstates Verdict
Seeking adequate evidence to
support jury verdict.
4 Issues p. 479
1. How broad was trade usage?
P seeks broad pattern
D seeks narrow definition; raises
§1-205(3) UCC - Vocation or
Trade...Should be Aware
D should have been aware of P
Trial Judge expanded Parol
Evidence Zone, excluding other evidence.
2. Waivers v. Course of Performance
2 instances demonstrate course of
D - Price Protection inconsistent
with K; therefore should be waiver
CT - Waiver only in ambiguous
Course of Performance &
UCC 2-201(1), 1-205(4)
Weight & Order
Usage - May not involve Parties in suit
When conflict - Shell should win
Holding - buyer sets price
Inaccurate implementation of the
Judge pushes limits of statutes
6-1: A manager's plummeting
Therefore Can't Add or Contradict
Partial Integration; Therefore
can't add contradictory Evidence
R2d § 211
K clause §6 - Inclusion of Add'l
terms already included
Ambiguity - Contradiction in
Chapter 6: Principles of Interpretation
Interpretation - Parties show
meaning of terms contained in a writing; Interpret the meaning of terms in
Williston - Interpret the writing
to determine whether the writing was integrated; a final expression of
If CT found integration, no more
oral testimony on meaning.
If CT found not integration,
testimony providing subjective understanding allowed.
If no integration, and parties
differ on understanding, then no K, because no mutual assent.
If integration, then apply the
Reasonable Person analysis.
Corbin - Oral evidence should be
allowed to determine whether the parties thought the writing was a final
expression of their agreement.
Primary Purpose Rule - Primary
purpose of parties given great weight.
R2d 203 - Reasonable, lawful and
Construction Against Draftsman -
Ambiguous terms construed against draftsman
Negotiated Terms control
Biolerplated standard terms
Handwritten notes have priority
over typewritten notes.
Raffles v. Wiehelhaus aka the
No meeting of the Minds;
Therefore P loses
Williston - Objective Theory -
Reasonable Person Approach
Corbin - Modified Objective
See §201 - Whose Meaning
Assent to K determined
objectively, but does not always apply
What do parties agree to do?
Behavior - Objective; Williston
Interpretation - Modified
201 - 207
3. Joyner v. Adams
Retroactive Rent Escalator Clause
Issue: Development Includes What?
TC - Different Meanings
AC - Analysis not right
Problem Renta - Interpret against drafter; if has advantage
4. Frigaliment Importing v. BNS Int'l.
is a "chicken"?
P claims only wants fryers;
claims Breach of K
Terms in K
Identify Ambiguous Terms
Identify Arguments from Facts
USDA regs are for grading &
inspection, not specifically for K Negotiations
Arguments possible from anywhere,
but important to know how law applies and how to argue.
K Law - State law, not Federal
CT - P behavior indicates larger
understanding of chicken coincides with USDA's objective meaning
D Subjective intent v. Objective
Meaning; Therefore buyer should have know what seller meant.
5. Morin Bldg Prod. v. Baystone
Sub Contractor & Prime Contractor
Judge - Uses Objective Theory;
Jury awards Morin/P
D loses & Appeals
Honest dissatisfaction -
reference to state of mind
Objective - Reasonable Person
Honesty & Fact
R2d §228 - Objective Standard
Trades Standard - Commercial Qual.
Subjective Standard - Aesthetic
CT trend imposing external
standard for terms not negotiated
6. C&J Fertilizer v. Allied Mutual
Insurance Co. denies coverage
No marks of visible burglary on
Doctrine of DUTY TO READ
Inconsistent Doctrines -
Consideration of the facts of the
Identify both parties arguments
Reasonable Expectations Doctrine
§211, 237 - Adhesion K
1. Take it or leave
2. Standardized K
3. Inequality of
Non-negotiated term may be
negotiated; interpreted in reasonable expectations of non-drafting party
non-standard terms explicitly agreed to
Dominant Purpose of Transaction:
- Cover Burglary
- Cover Burglary, not inside job
Chapter 7: Supplementing the Agreement: The Obligation of Good Faith and
Other Implied Terms
Rationale for Implied Terms
Adding terms to K that weren't
Interpreting terms not initially
All K require duty of Good Faith
Implied in Fact - meaning, actual
intentions of parties
Reasons CT's act
1. Necessary to find
that a valid K existed
2. K unfair without
Modern CTs - supply missing
terms; construing what the parties actually meant by the words; usually
issues parties did not address in K.
Duty of Good Faith - see Wood v. Lady Duff Gordon
Duty to Continue Business -
Requirements K - see Eastern Air v.
Substantial Minimum Payment -
Royalties; profit sharing
Termination of Dealership - Many
CTs now require
with Cause Shown
Notice be given
Termination of Employment K -
Most employment at will; Most CTs hold employment may be terminated by either
party for no reason, or even for bad faith. Some CTs require cause and good faith to be shown.
1-203, 2-103(1)(h), 2-0306
2. Wood v. Lucy, Lady Duff-Gordon
Dress Design Deal
K authorizing use of label
Selling right to use label
P claims exclusive use privilege
D moves to dismiss
Wood ---> 1/2 Profits --->
Wood <--- Exclusive <---
To use reasonable efforts - best
efforts clause to market design
Capitalists P & D
Both have expectations of action
EXCLUSIVE USE ---> Specific
UCC §2-306 Best efforts
3. Leibel v. Raynor Manufacturing
Garage Door Seller
<--- Exclusive Rights <--- Raynor
sell in geo. area Manufacturer
P claims reasonable notice prior
to termination of K
D Phantom termination; no
duration specified, Terminable at will by either party
TC - MSJ - D
AC - Reverses - P
Issue - Is case covered by UCC
K - Goods - Doors
- Selling of Doors/Duty
Dealer-Distributory covered in
Article 2 of UCC.
CT applies UCC 2-309 - requires
reasonable notice of termination
Reasonable Amount of Time
1. Time to seek
2. Time to sell inventory
3. Time to recoup
Encyclopedia Britanica Sales
Implied Obligation of Good Faith
UCC 1-203, 2-103
Prospective - Forward Requirement
Good Faith Negotiations? Some Jurisdictions Yes; Some No
2. Eastern Airlines v. Gulf Oil Corp.
Requirements K - Purchase product
from one Company.
Output K - All output of company
Requirements K - Previously not
allowed; Mutually Exclusive
D - K lacking in mutuality;
indefinite & vague
Mutuality of Obligation ≈
CT - Long Term Relationship
Obligations by Parties' Behavior
by Trade & Dealings
7-2: Captain Donut
Affirmation of Fact or Promise
Statement or Fact of Warranty
Unless excluded, goods
UCC 2-315 Fitness of Purpose
Buyer relies on seller to select
Wiggle room for merchants
Promise then negation - Negation
Javins v. First National
Lease - type of K
Shift in values/focus/attention
from landowners to tenants
People who don't own land have
rights to certain services
2-313-6, 2-314, 2-316
3. Doe v. Travenol Labs
Tort & K claim
Tort - Strict Liability;
K - Breach of Warranty
Blood - service, not sale of
product; to prohibit sale of organs
UCC 2-105 - Things
Is blood a thing?
CT - No breach of warranty BUT
may be liable for negligence
to Exercise Skill & Care
of Fiduciary Care
Chapter 8: Avoiding
Clear, complete meaning
Is there any reason not to
3 Different Types of Unfairness -
1. Status of Parties
- Capacity - Minority/Mental Incapacity
2. Unfairness in
Bargaining Process - Eversion
3. Substance of K
Defenses can be used
and Mental Incapacity
K is voidable at their option for
Infants & Mental Incapacities
Infant may ratify a K after
reaching adulthood in 3 Methods
• Failure to make
• Express Ratification
- writing or orally
• Ratification by
Conduct - Active inducement of performance
Necessaries - Food, clothing,
shelter; infant may not void K
Misrepresentation of Age - K can
be avoided on grounds of fraud
R2d 15(1) - Mental Incompetents;
one of following factors must apply
• Unable to understand
in a reasonable manner the nature and consequences of the transaction. The test of mental capacity is
whether a person is capable of understanding in a reasonable manner the
nature and effect of the act in which the person is engaged. There is a presumption of capacity
which can only be rebutted by clear and convincing proof.
• Unable to act in a
reasonable manner in relation to the transaction AND the other party has
reason to know of his condition.
The person opposing the K must show that 1) the other party know of
the mental condition; and 2) the transaction is not one which a reasonably
competent person might have made.
R2d 15(2) - Right of Avoidance
Where the K is not on fair terms,
or the other party has knowledge of the mental illness or defect, the K can
be disaffirmed at any time until it is complete.
But where the K is made on fair
terms AND the other party has no knowledge of the mental illness or defect,
the power of avoidance terminates to the extent that the K has been so
performed in whole or in part or the circumstances have so changed that
avoidance would be unjust. In
such cases a court may grant relief as justice requires.
R2d 16 - Intoxication
Power of avoidance only if: 1) so intoxicated that he can't
understand the nature of his transaction; and 2) the other party has reason
to know that this is the care.
8-1: The Car Dealer with a
Minors entitled to disaffirm K
prior to 18
Minors can't affirm K prior to
18; UNLESS food, clothing or shelter
2. Dodson v. Shrader
Boy who Bought the Truck
3. Ortelere v. Teacher's Retirement Board
Grace changed retirement option
to get max. payout over lifetime
Cognitive Test - Looking at
person's ability to understand
R2d §15 - Must satisfy either (a)
Voidable v. Void
Outward behavior - what a reasonable
person thinks you are doing
Mental incapacity can't be used
as a defense for the non-Mental Incapacitated party
Law v. Mental Health
Law changes as body of knowledge
Do they lack the ability to
Could they control their
Dose the other party know of the
Judge Breitel compares case with
Should rules be the same in K
& Criminal Law?
K Law - protection of
Dr. D'Angelo - Broad stats &
generalities; lacks specific info; judgment may be based on limited
Frank Orteleres - Simple man
to Frank Orteleres
Is the Judge reaching for an
and Undue Influence
R2d on Duress & Undue
Try to argue precise criteria
"Use of power for
illegitimate ends" - Broad
Duress - Improper Threat
Duress SIMILAR to Undue Influence
R2d 175 - Duress - any wrongful
act or threat which overcomes the free will of the party.
Subjective Standard - used to
determine whether duress has been applied.
Methods of Committing Duress
• Violence - acts or
• Imprisonment - acts
• Wrongful taking or
keeping property; or threats
• Breach of K threats
or other wrongful acts
IF one party threatens another
with a certain act, it is irrelevant that he would have the legal right to
perform that act, if the threat, or ensuing bargain, are abusive or
1. Odorizzi v. Bloomfield School District
P ---> Resigns ---> D
P <--- No Publicity; no firing; no embarrassment <---
Undue Influence Key
(Lack of) Incapacity
Policy Custody for 40 hours
Try applying R2d § 276
Based on arguments, what facts
can be applied?
Undue Influence (CT
Confidential Relationship - one
acts on behalf of other(s)
7 Factors of Undue Influence
listed on p. 619
Requirements for Undue Influence LESS
Requirements for Duress MORE
Duress v. Undue Influence
there a Threat?
No Threat - more likely Undue Influence
Can be basis for rescission or CT
Client buys 5 yr. old boat
Appears to be in good condition
Side collapses, boat sinks
TORT - scienter; deliberate
intent to defraud
RESCISSION - Good Faith, no
Knowledge of Problem
READ R2d §161-169 - NOTE
Enough Evidence of
misrepresentation will void K
§ 164 more relied upon by CT's,
either fraud or material
Similar to §175(2) & §177(3)
§162 Fraudulent or Material
Must have to prove
Statement of Fact - Fraudulent
Misrepresentation has to be Material
READ §161, 168, 169
What is Misrepresentation?
¶168-169 Statement of Opinion
have multiple elements
Characterization of Deception
Possible to make multiple arguments
A claim of misrepresentation can
be used either as a defense against enforcement in a suit brought by the
misrepresenting party, or as a grounds for rescission or damages by the
misrepresented-to party suing as P.
Elements of Proof
R2d 164 - Negligent or even
innocent misrepresentation is sufficient to avoid the K if it goes to
Justifiable Reliance - Party must
show he justifiably relied on misstatement
Must be Misrepresentations of
Facts - not of opinion.
Concealment & Nondisclosure -
There is no general duty to disclose information, but there are special
• Half Truths
• Positive Concealment
• Failure to correct
• Failure to Correct
2. Syester v. Banta
hours of dancing lessons
TORT ACTION because CT awarded
TORT OF INTENTIONAL FRAUD &
Rescission - Release
1. Suit 2. Settles 3. Suit
Releases <--- 1 Rescind
P claims misrepresentation to
Carey promises P she can become a
Position of Trust or Confidence
black lie white
lie puffery truthfulness
§168 - Fraudulent or Material
§164 - If Assertion of Opinion
becomes Assertion of Fact; then use §164
Possible Incapacity Argument -
All Factors Create Arguments
D told P she didn't need lawyer
Waltzes" for you - assertion of untrue feelings
FIND Lies & Deceptions and
CT - Claim of Misrepresentation
evidence of releases show Misrepresentation
"Eight Good Rules for
leading to misrepresentation
Role of Arthur Murray's Lawyer
directing behavior of Client?
share of settlement although he didn't negotiate it, or advise her
on Lawyers' Prof. Ethics
4. Hill v. Jones
Hill - Buyer
Jones - Seller
Why wasn't termite inspector
Buyer is 3rd party beneficiary
Appears inspector concealed
"water damage" to floor
board - §164 - Misrepresentation
CT - Seller had duty to disclose
§161(b) compared with FL Rule
Bad Faith Proof Requirement v. No
Bad Faith Rule
Bad Faith hard to prove
Look for Intentional or Negligent
Was person doing it on purpose?
§162 - Fraud
§164 - Overt Statement
§161 - Withholding
NOTE 1 Laidlaw
v. Organ (1817)
K after war
didn't disclose future price change
Practices - Uncertainty
NOTE 3 Casual
v. Deliberate Investigation
Argument on Investment for Information
RULES ARE COMPLICATED &
If the provisions of a K are so
grossly unfair as to shock the conscience of the court, the judge may decline
to enforce the offending terms, or the entire K.
A K or clause will be found
unconscionable when it is so shockingly unfair that the court decides that it
should not be enforced.
See R2d 211
R2d 208 - Allows a court to
decline to enforce all or part of an unconscionable K.
UCC 2-302(1) - If the CT as a matter
of law finds the K or any clause of the K to have been unconscionable at the
time it was made, the CT may refuse to enforce the K, or it may enforce the
remainder of the K without the unconscionable clause, or it may so limit the application of any
unconscionable clause as to avoid any unconscionable result.
The principle is one of the
prevention of oppression and unfair surprise...and not of disturbance of
allocation of risks because of superior bargaining power.
The Judge decides whether a K is
Procedural Unconscionability -
One party was induced without having any choice.
Substantive Unconscionability -
Unduly unfair and one-sided; excessive price, or an unfair modification of
either parties' remedies.
UCC 2-302(1) - Remedies for
Refusal to Enforce Offending
Clause - striking clause where unconscionable.
Reformation - CT reforms K by
setting reasonable price.
Refusal to Enforce K - Denys
Williams v. Walker - 1965 Test
Was Cross-Collateral segment
"Welfare mother w/ 7
children" selling to poor persons
Persuasive - Aggressive Sales
v. Walker-Thomas Furniture Co.
Stereo, Two Lamps, Three Tables, and a Daveno
DC CT of Appeals functions like
State Supreme CT
2 customers purchased furniture
State sues to obtain furniture
Cross Collateral Clause - Until
last payment on all items paid, seller has option to repossess all items
Unconscionability - p. 663 bottom
Is the K so unfair that
unconscionability should be held?
Looking for bargaining unfairness
Substantive Unconscionability -
content of K unfair
CT declares K unconscionable
adoption & remands case
3. Ahearn v. Knecht
Air Conditioning Repair
K should be invalidated based on
Harder Question - Base invalid on
Or base on bargaining power and
Very few cases ruled
Most covered under Consumer
4. Comment: Consumer Protection Legislation
other State & Federal Statutes
Almost all law based on Public
All law is an expression of
Public Policy - Proposed Solution
Created by CT's, Legislatures,
Bodies of Enterprise
Using ideas of "right' to
Continuum of Development
1. Derico v. Duncan
Builder without a License
Should CT refuse to enforce K?
Which violates consumer
Statute requires license to lend
Criminal Statute with penalties
CT - Regulatory Statute designed
to protect consumers
Statute alone provides no relief
Looks to see if statute protects
v. Revenue Raising Statute
Protection v. Revenue Raising Statute
DC - unlicensed home improvement
contractor can't get paid until after business complete
K - void; money ordered returned
2. Comment: The Baby M Case
1. Is there a
Regulatory Statute that violates issue, as opposed to a revenue-making
2. Common Law Rule
3. Undue Influence
4. Servitude -
Find law to apply, protecting
CLASS OF PEOPLE
Review: Problem 8-4: She wants her baby back
Ambiguous Statute - Look at
Minors can have voidable K's
R2d §161-164 - Misrepresentation
she read K?
Most cases won on the facts
Find out what really happened
is telling the truth
comments are accurate
Compare to Syester - Arthur
Intentional Misrepresentation -
Meeting of the Minds
Public Policy - Custody
Criminal Statute - kidnapping
Chapter 9: Justification for
Nonperformance: Mistake, Changed
Circumstances, and the Contractual Modification
Reasons CT decline enforceability of K due to change or
discover after K is made
Tends to be overused
Hard to Prove
K - Made to allocate risks; made
for future time
Most changes in circumstances DO
NOT warrant reversal of K
§151 Mistake - belief not in
accord with facts
Mistake must be based on
erroneous beliefs at time K was made
Erroneous predictions about
future NOT ALLOWED
Mistake must involve basic
assumption of K
Basic Assumption - Central to K
Assumptions That DON'T Apply
Party's financial ability to Pay
Creates Narrow Application
becomes more advantageous to Other Party
PARTY SEEKING RELIEF DIDN'T KNOW
OF MISTAKE PREVIOUSLY
Unilateral Mistake - made by one
party; No relief granted
Mutual Mistake - shared by both parties;
no K was formed; or K subject to rescission, cancellation or reformation.
A mistake refers only to a
mistaken belief about an existing fact, not an erroneous belief about what
will happen in the future.
Common law - a "mistake of
law" could not furnish grounds for avoidance of K. "Ignorance of the law is no
Modern Law - R2d 151 allows a
mistake of law to serve as the basis for avoiding a K if the other
requirements for the mistake doctrine are met.
R2d 152 - Requirements - all
• Basic Assumption - on
which K was made;
• Material Affect - on
the "agreed exchange of performances"; and
• Risk of Mistake -
adversely affected party must bear risk of mistake
Basic Assumption Test- One must
search the facts for unexpected, unbargained-for gain on the one hand and
unexpected, unbargained-for loss on the other.
NOT Basic Assumptions
Existence of Subject Matter -
i.e. K to buy land with trees.
Quality of Subject Matter - i.e.
the Barren Cow; mistake went to the very nature of the thing. See Sherwood v. Walker.
Releases - Party may agree to
release another form all claims arising out of certain transaction; usually
in a negotiated settlement. CTs
less inclined to allow releases for mistake in commercial transactions; more
inclined to allow personal injury releases.
The general rule of freedom of K
includes freedom to make bad bargains.
R2d 152(1) - Material Effect -
Must also show the mistake has a "material effect on the agreed exchange
of performances." Must show
"that the resulting imbalance in the agreed exchange is so severe that
he cannot fairly be required to carry it out.
UCC 2-315 - Buyer does not rely
on Seller's skill and judgment so that there is no warranty of fitness for a particular
Other types of relief apart from
rescission are available in material effect claims.; such as reforming the K
or ordering restitution.
R2d 154 - Disadvantaged party
will still not be able to avoid the K if the risk of that mistake is allocated
to him, even if the mistake is a basic assumption and materially alters the
agreed exchange of performances.
Risk allocated to parties by
• Agreement of the
Parties - Sold "as is"
• Aware at the time of
the K that he only has limited knowledge - conscious ignorance - purchasing a
stone without knowing the true type of stone.
• Risk allocated by the
CT on grounds of reasonable in circumstances
UCC 2-714(2) - Breach of Warranty
- The buyer under a breach of warranty claim is entitled to the "benefit
of his bargain." Buyer
entitled to be compensated for the difference between the worth of the goods
and the worth if warranted.
Contrast to Mutual Mistake -
Buyer gets money back and returns goods. Not entitled to "benefit of the bargain".
Misunderstanding - Subject
understanding about ambiguous terms.
General Rule is no K because no meeting of the minds; assuming terms
R2d 153 Unilateral Mistake
Traditional Rule -
"avoidance of K will more clearly disappoint the expectations of the other
party than if he too was mistaken.
Only allowed when non-mistaken party know or had reason t know of the
mistake at time K made.
Modern View - More willing to
Modern View Requirements
3 basics; and either one of following
• Mistake is such that
enforcement of K would be unconscionable; OR
• Other party had
reason to know of the mistake, or his fault caused mistake.
Contractor must show mistake
represents a significant portion of the overall bid.
If the other party knows,
Unconscionability doesn't apply.
CTs - less willing to allow
rescission where the error is a mistake in business judgment rather than a
Negligence usually not a Defense
when Party's own negligence causes mistake
R2d 157 - Good Faith - Parties
must act in good faith with reasonable standards of fair dealing.
R2d 157 Failure to Read Writing -
One who assents to a writing is presumed to know its contents and cannot
escape being bound by its terms merely by contending that he did not read
them; his assent is deemed to cover unknown as well as known terms. But if there has been prior oral
agreement, which written agreement doesn't match, possible remedy.
Avoidance - Rescission. CT views K never existed; return
parties to their original position.
Restitution - Each party returns
2. Lenawee County Board of Health v. Messerly
Seeping Sewage Problem
Doctrine of Mistake
- Seeking Rescission
TC - Messerly's foreclosure
AC - Pickles; Mutual Mistake
v. Walker - Barren Cow Case
Mistake based on nature
Nature of the thing sold not the Quality or Value
Rescission based on value would destablize contracting
whole, therefore to get around value, thing has to be proven different
Overruling" now only applies to cows
Mistake by both parties - Rental
Who bears Risk?
Who is At Fault?
MI ruling encourages sellers to
Consider stability of
transactions in land
Encourages boilerplate K language
i.e. "as is"
Risk allocation assumes winners
Mediation may provide a split
CT's normally grant a one-sided
v. Metro Sanitary District
Subcontractor's $150K error
Wil-Fred - Unilateral Mistake
Reason to Know
Wil-Fred is protecting
Sanitary Commission - K Mistake
should not be excused
CT - Mixed mistake of fact &
judgment; Difference in bids should have been noticed
Impracticability, and Frustration
Strict Liability - if you are
negligent/liable, not excuse will let you out.
If performance impossible - won't
be held to K
If performance impracticable -
won't be held to K
Occurrence makes performance impracticable
without fault of one seeking relief
- Basic assumption of K
or circumstances indicate otherwise
Very high standard
Vague Language - Mushy
Often answer usually NO
R2d §262, 263
Mistake - fact at time K was made
Fact after K was made
Frustration of Purpose - Does not
Require Impossibility; requires something that destroys purpose of K
R2d §265 - Frustration Elements
Has exchange in K lost all value?
Lie ---> Misrepresentation
Mistake of fact at time of K
Undesirable change after K
---> Impossibility, Impracticability, Frustration
Parties may be discharged from
performing the K if:
1) Performance is impossible;
2) Because of new events, the
fundamental purpose of one of the parties has been frustrated.
3) Performance is not impossible but
much more burdensome than was originally expected - Impracticable.
If a party is discharged from
performing he is not liable for breach of K
2. Karl Wendt Farm Eqpt. Co. v. Int'l
Abandoned Farm Equipment Franchise
Dealer - Impracticability;
Frustration of Purpose
Jury ---> P
JNOV ---> D
D tries every conceivable
argument, foresee ability - Not Helpful here
Event making performance of K
CT - trying to limit K exclusions
to extreme situations;
D - Int'l Harvester sold division
to Case; therefore no longer liable
Who should bear the loss? Equity
Impossibility - Performance can't
happen no matter what
Impracticability - Performance
Frustration - Something happens
with principal purpose of K
D - Frustration §265
CT - Mutual Profit NOT KEY;
DEALERSHIP key to K
Frustrating" not established
Who should have purchased
Who should be assigned
Foresee ability - not useful in
Common Law - Modification of K
that only benefits one party is unenforceable for lack of consideration.
UCC 2-209 - removes the
consideration requirement for modifications of existing Ks; "An
agreement modifying a K within this article needs no consideration to be
UCC 2-209(2) - No Oral
Modification Clause - K may not be modified except in writing.
UCC 1-203 - Obligation of Good
Faith and Performance
UCC 2-302 - CT can refuse to
enforce unconscionable K's.
Substitute Agreement often
Referred to as Modification Agreement.
9-3 - Contractor & Flooring Job
When is an agreement to modify a
K binds parties to future
performance with given terms
& Contest Later
with new protest; then contest
to Cancel & Sue
Does UCC cover this case? MAYBE
Goods & Services
overall focus to sell goods?
Supplier of Tile
look at % of K for Goods v. Services
- Look at both options
UCC 2-209(1) - even a 1 sided
modification; doesn't care
UCC 2-209(3) - Statute of Frauds
Threat to breach v. explanation
of difficulty in performance
Bad Faith to Threaten another
Contractor - Commercial
Was there an attempt to coerce an
Was there a threat to breach? NO
Assume UCC doesn't apply - use
Prove Reliance to Enforce
Kind of Reliance?
if Reliance is previously agreed to basis?
2. Alaska Packers Assn. v. Domenico
for the Season
Pre-Existing Duty Rule
of Doctrine of Consideration
to do something legally obligating
perform, then no consideration for extra compensation
Example of treatment of new K's
Workers held coercive monopoly
Additional duties may have held K
Old K could have been destroyed,
replaced with new K
Supervisors K Authority - Agency
v. Implied Authority
Only discuss Agency issue briefly
IF ON EXAM
R2d §73 &89 in conflict
Recommend §73 first, then §89
3. Schwartzreich v. Bauman-Basch, Inc.
Coat Designer's New Contract
Coat & Wraps Manufacturer
Modification Agreement found
Original K rescinded before new K
Deliberative intent to end old K
and honor new one
No threat to breach, sharing of
information with performance
What if 2 K's, made at same time,
then one canceled? Could make
4. U.S. ex rel Crane Co. v. Progressive
Purchase of a Cast Iron DeAerator
Progressive failed to object to new
price; hence waiver to objection
Chapter 10: Justification for
Conditions, Material Breach, and Anticipatory Repudiation
Assume D in Breach of K case
• Never a K - No Offer,
• No Claim for
Promissory Estoppel, Restitution
• Perhaps K, but no
• Term improperly
• Acknowledge K,
Unfairness in Bargaining; consent to K invalid
• Duties excused due to
mistake or circumstances
• Chapter 10
to Perform Never Arose
Identify which party's behavior
If there is a breach, what are
Little Breach v. Big Breach
Evaluate Breach Chronologically
B's duty conditional on A's
Big breach kills B's duty of
Express v. Constructive
Express - Unless x happens, then
entitlement to be paid expires.
Constructive - Prompt Deliver;
Not expressly/explicitly language
Promise to pay $300/week for 1 yr
Only pays $100 w/ $200 coming
Is babysitter required to
continue working? Yes because it
is a small breach
Condition Precedent - event must
occur before duty arises; i.e. car accident before insurance payment
Condition Subsequent - Condition
R2d 225 - Strict compliance with
an express condition is ordinarily necessary.
R2d 227(1) - Avoidance of
Forfeiture. Party may avoid
express condition if strict compliance with condition will cause him to fail
to receive the expected benefits of the deal. Party must show he has relied on the bargain by
R2d 229 - CT may excuse express
condition where extreme forfeiture will occur.
Language which appears to impasse
an express condition is always interpreted in the light of the parties'
2. Inman v. Clyde Hall Drilling Co.
Started My Claim within 30 Days"
AK/SC - Inman didn't comply with
express condition in K
R2d §224 - Condition Precedent
Inman claims filing lawsuit is
notice; CT disagrees
What is D Duty? UNCLEAR
Employer not obliged to respond
to suit unless P follows conditions
P didn't understand terms
K - Stipulates duty of employee
continues after leaving
Inman ---> comply --->
Clyde Hall Inman
---> work ---> Clyde Hall
Inman <--- hires <--- Clyde
<--- pays <--- Clyde Hall
Boilerplate language causes
Inman's lawyer argues
anticipatory breach - WRONG
Failure of performance of Express
Condition STRICTLY ENFORCED
Most CT's will only apply strict
enforcement to material issues
See R2d §225
Is condition material to K?
3. Jones Assoc. v. Eastside Properties
Rejected Short Plat
Plat - divides land into lots
Promise or Condition?
Eastside - Express duty to pay
Breach of Promise - Small breach
Breach of Condition - Other
Party's duty discharged
CT - finds promise, not condition
Promises favored because less
chance of forfeiture
Any breach of K gives rise to
Outside of Control
Promise v. Condition
Study - Note 4 p. 820
- Eastside didn't cancel K
Should be promise, not condition
But promise to do what?
Express Condition - Person's duty
to perform may waive duty & get condition anyway
Only if material waived not a
material part of exchange
Breach of K Questions
1. Does injured party
still have duty to perform?
Option to treat duties as over?
2. Is party entitled
If K over - Possible claim for
If K continues - may be entitled
to small damages
Partial ---> Material --->
Material Breach - One party may
Total Breach - Material breach
not been cured; sufficient time elapsed to sue for damages
1. Express Condition
2. Material Breach
Should language be
considered/interpreted to be a promise or condition for express condition
Forfeiture - work completed to
large extent and not paid; CT's dislike
Waiver - only by Owner
Excused - Only by Contractor; not
material to K; breach not big enough
Breach of Duty
& Time ---> Total Breach
Difficult to characterize partial
v. material breach
R2d 241 Material Breach Factors
1) Deprivation of expected benefit - The extent to which the
non-breaching party is deprived of the benefit which he reasonably expected. The essence or principal reason for
which the K was made must be examined.
2) Adequacy of Compensation for Loss - Damages
3) Part Performance - The greater the part of the performance
which as been rendered by the breaching party, the less likely it is that a
breach will be deemed material.
4) Likelihood of cure of breach -
If the breaching party seems likely to be able to and willing to cure the
breach, the breach is less likely to be deemed material.
5) Willfulness of Breach - Usually found when the breaching
party abandons the K, deliberately substitutes inferior materials, or
otherwise acts in Bad Faith.
6) Delay in Performance - If delay significantly deprives the
other party of the benefit of the K.
The presumption is time is NOT of the essence, unless K says so.
As long as K does not involve
installments, unless otherwise agreed, if the goods fail in any respect to
conform to the K, the buyer may
1) Reject the whole; or
2) Accept the whole; or
3) Accept any commercial unit or units and reject the
Generally CT's only allow
rejection if defect is SUBSTANTIAL.
Trade Usage, Course of Dealings,
Course of Performance
Buyer may fail to follow code to reject
Seller has right to cure defect.
Rejection of goods must e within
a reasonable time after delivery or tender.
Buyer may cancel entire K if
defect is grave enough.
Buyer may revoke acceptance; same
as never accepting goods.
1. Sackett v. Spindler
K to sell newspaper
$85K - original selling price
$20,680 - final sales prices
P claims D rejected K first
CT find no breach by D because P
failed to perform
P actions are material breach maturing
to total breach
CT - P actions negligent or
Each breach must be separately
Each breach may be partial or
Note 5, p 856 - Breaches from
Waiver - can be applied to
conditions, clauses; can also be retracted
2. Jacobs & Young v. Kent
TC rules for D; Full Performance
NY SC Breach of Constructive
Express Condition - not found,
not linked to duty to pay
Constructive Condition - linkage
not stated; duty
Express Condition - If you do X;
I'll do Y
Constructive Condition - You do
X; I'll do Y
CT finds Constructive Condition -
finds small breach
Constructive Condition synonymous
with material breach
substantial performance ≈ partial
Cardozo on Substitute Performance
does K obligate?
does each party know/assume?
meaning prevails? R2d § 201
How do you measure damages for
defect in construction?
of replacing defective item UNLESS
of replacement grossly out of proportion;
look at value of work with/without defect
R2d §240 - Agreed Equivalents;
Which duties are conditional on
which other duties?
3. Comment: The Doctrine of Constructive
When a party makes it
unmistakably clear he does not intend to perform. Such repudiation allows the other party to suspend and
perhaps cancel performance.
R2d 250 - Categories of
1) A statement by promisor that he intends not to perform
2) An action by the promisor making performance impossible
3) An indication by promisor that he will be unable to
Vague comments are not enough to
There must be an absolute and
unequivocal refusal to perform or a distinct and positive statement of
inability to do so.
Bankruptcy is generally
Insolvency is not considered AR;
but may provide "reasonable grounds for insecurity"
1. Harrell v. Sea Colony
Canceled Sea Colony Contract
P - $5,000 deposit
Financial situation worsens
Tries to transfer rights to
Requests rescission w/ refund of
7/17 - Harrell asks to cancel
8/18 - Sold to 3rd party; Harrell
can treat K as over, Sea Colony Breached
8/23 - Letter to Harrell
11/12 - Lawsuit
12/31 - Delivery date
R2d §250 2 Choices
Breach before Performance due
Claim Voluntary Act
A definite and unequivocal
manifestation of intention not to perform.
Must be statement or act or
failure of performance great enough to justify total breach.
Equivalent to Total Breach
What kind of facts would give
rise to this situation?
1. Pittsburgh-Des Moines Steel Co. v.
Brookhaven Manor Water Co.
Water Tower Contract
UCC 2-609 - Right to adequate assurance
1 party concerned that another
party won't perform
Law - Right to ask for assurances
PDM - New, Post K, Setting
Conditions for performance
PDM wants to install the tank
Brookhaven wants to delay the
PDM had no justification to
request escrow deposit
Why does UCC apply? Good & Services in K
Similar to building a house; but
house not a thing; tank is a thing
Some transfer & delivery of
Primary reason for goods, not
CT - finds goods; UCC applies
No reasonable grounds to question
Must be based on objective facts;
ex - Brookhaven becomes insolvent
If there were reasonable grounds,
PDM could have asked for assurances
Concurrence Opinion - PDM had reasonable
grounds for insecurity BUT demand for assurances were too great
Note 5 - Permissive Doctrine, not
Review: Problem 10-3 &
4: Blood, Gore and More
Understand Criteria, Outcome not
Did NBS breach the K?
Did NBS breach to Express
Ambiguous language; Interpret
Promise or Condition?
NBS already paid $500K
Failure of condition should be
Maybe Mason waived condition -
August 24 meeting
Better argument - Constructive
Mason ---> Material Breach by
NBS; possibly blowing up to total breach
SEE R2d §241 - Material Breach
Sacket v. Spindler
Jacobs & Young v. Kent
Can Argue 1 or all
Most Significant Factors
1. What extent will Mason be deprived?
2. What extent can he be compensated?
3. What is the extent of the forfeiture?
4. What cure?
5. Good Faith?
If material, then NBS would want
to know how to retain rights to K
Use R2d §240 - Doctrine of
Argue Advance was payment for
Remainder for future services
Mason - Would argue K not
NBS - §374 - Restitution in favor
of party in Breach
which doctrines respond to Question.
Chapter 11: Expectation Damages: Principles and Limitations
Usual Measure of damages for Breach
CT attempts to put the P in the
position he would have been in had the K been performed.
of Pocket Costs
he would have made on the K
R2d 347 - Damages = Contract
Price - Benefits from non-completion.
R2d 352 - P may only recover for
losses which he establishes with reasonable certainty.
P must show he had losses AND
amount of losses.
UCC 2-715 - allows buyer to
recover consequential damages.
UCC 1-106(1) - The aggrieved
party may be put in as good a position as if the other party had fully
the Value of Expectation Damages
Introduction and Computing the Value of Plaintiff's Expectations
Previously figured out Which
party is in breach
Now figure out:
much is the other person getting in damages (more common)
for specific performance
Fuller & Perdue
When does a commitment rise to a
level of enforceable commitment?
How does CT decide damages?
If K is breached, injured party should
get benefit of bargain, including profits; for any kind of breach
at this point
§347, 355, 356
in Value (to injured party)
Consequential Damages - beyond
loss in value for consequence of breach
Incidental Damages - subset,
damages incurred by other party to avoid loss
Costs Avoided - Amount injured
party had to spend because of K broken
Loss Avoided - Loss avoided by
Price of House $200K
Cost to Builder $180K
K canceled by Owner
Paid at Cancellation $70K
Builder - 50% complete; $90K
spent; $10K remaining materials
in Value $200K
- $70K = $130K
Builder Owed $30K
What would have been builder's
net Profit? $20K
Unreimbursed Expenses $10K
Gives builder profits on work and
2 year Employment K
Employment at Will
At 6 months; fired/wrongfully
Annual pay rate $50K
Paid out $25K
6 month unemployed $45K
Sue firm for wrongful discharge
Loss in Value $100K
- $25K = $75K
Cost Avoided $0
Loss Avoided $45K
Total ($75K + $1K) - $45K = $31K
Other Damages Possible
from time of Judgment
How Much loss is there?
What was lost from breach?
2 yr law firm K
6 Months, quit firm, similar
numbers to previous problem
$150K billable hours/yr
$10K on benefits
6 months to find replacement at
What is difference in value to firm
to your work and benefit received if didn't leave?
Loss in Value $300K
- $75K = $225K
Other Loss $0
Loss (Recruitment costs)
Cost Avoided $25K
+ $5K = $30K
Loss Avoided $150K
- ($30K + $150K) = $45K
2. Kemp v. Gannett
House that Didn't Sell
Builder v. Seller
K listing period where seller
would buy house if didn't sell
Eventually house sold for less
than original price; 1 yr later
CT Rule - K Price - Market Price
on Breach Date
Another method of figuring loss
Builder Kemp Awarded
for 1st 90 Days
When calculating Damages - list
items ONCE ONLY!!!
3. Handicapped Children's Education Board v.
Teacher leaves school job twice
School hires replacement
School sues for damages
Rule: When employee breaches K, employer must seek substitute
services at reasonable costs.
Reasonable costs in this case are
Case rests on breach of K, not on
medical health issue
Consequential Damages = New
Employee - Old Employee Price
on Recover of Expectation Damages:
Foreseeability, Certainty, and Causation R2d §347 - Know!!!
- Aviodability - Mitigation
19th Century - Judges began to
give jury instructions regarding damages
Damages must either:
1) Direct or General Damages - Arise
naturally, according to the usual course of things from the breach of K; or
2) Special or Consequential Damages -
Arise from the special circumstances under which the K was made if these
circumstances were communicated BY THE P TO THE D.
Foreseeability relates to whether
the possibility of the damages was sufficiently likely at the time the K was made.
Certainty - relates to how clear
it is at the time of suit that the alleged losses occurred, and that they
were caused by the D's breach.
UCC 20715(2) - Allows buyer to
recover consequential damages resulting from the seller's breach.
1. Hadley v. Baxendale
Fractured Crank Shaft
Mill wash shut down 5 days longer
BUT FOR the delay of delivery service
Lower CT - £50 for Mill
Higher CT - Rule Nisi - New trial
ordered - Jury Instructions Inadequate
Circumstances - Prior Arrangement
CT - Cannot collect any damages
EXCEPT those foreseeable from breach
Any causal connection to breach
is arguable IF foreseeable
Hadley - Pure Consequential
Damages; indirectly occurred because of breach
Judge's comments don't match
facts in beginning of case
R2d §351 - Codification of Hadley
Relationship between K and damage
Consequential Damages - Must be
Holding - Loss of profits was not
a consequence which in the usual course of things flows from a delay in the
shipment of the shaft.
on Recover of Expectation Damages:
Mitigation of Damages
R2d 350 - If P doesn't avoid his
avoidable damages, he loses his ability to recover.
1. Rockingham County v. Luten Bridge Co.
Bridge to Nowhere
Canceled-----Work Continues----Bridge Completed
What if K illegally canceled?
If work stops, then Luten
letter of Assurance; if not provided, then entitled to stop work
Can't collect damages that could
have been avoided through reasonable efforts
Doctrine of Mitigation AKA
Doctrine of Avoidability - Better
No duty to mitigate; merely can't
collect damages avoidable through reasonable efforts
Holding: A P cannot hold a D liable for
damages which need not have been incurred.
2. Stewart v. Board of Education of Ritenour
Mitigation Case - $108K award
Board has burden to prove other
means of employment
Employer has BOP; has
1) Opportunity available in same area at least as convenient
as previous job.
2) Employee had no other attempt to apply to other jobs.
3) If applied, that employee would have gotten another job.
Rule on Mitigation of Damages in
Non-Comparable Job - Not required
Comparability - Should person be
entitled to exactly what they want?
If person doesn't take same type
of job, but suffers no adverse affects; offset damages.
If person takes lesser job, don't
If new job at different hours;
possible to work 2 jobs; offset damages
11-1: A Canceled Concert
Planned Parenthood of East Carolina
K with Willie Nicholson for
Canceled due to security concerns
If PPEC sues for breach, would
Look for K
Nicholson made a definite and
unequivocal statement canceling appearance
PPEC asked for assurances, none
Big breach of K; Total Breach
Material Breach - No expected
benefit gotten. R2d 240
of event gone
allow time to cure
more time will cure K.
PPEC - No Performance or Payment
necessary due to Breach of K damages
Nicholson - Impracticability; Non
occurrence based on assumptions made.
Defenses -Implied term in K -
Safe Environment; Limited Facts supporting
Mutual Mistake - Concert Safety;
But must be mistake at time K made
Who should bear risk of mistake?
Did/should Nicholson have know?
SPRING 1999 SEMESTER
* * * * * * * * * *
* * * * * ** * * * * * * * * * * * * * * * * * * * * * * * * * *
UCC - Covers goods; Tangible Items
Intangible Property are not Things, Not Goods
* * * * * * * * NOT ON EXAM * * * * * * *
Damages: Items Commonly Excluded
for Plaintiff's Damages for Breach of Contract
1. Bunnett v. Smallwood
Agreement Not To Sue
2. Gagliardi v. Denny's Restaurants
Performance at Market Value
Give PPEC Benefit of the Bargain
Out of Ticket
Distinguish between Cost Avoided
v. Cost Incurred
Avoided - Not Paid Yet; Unless
Incurred - Paid before breach
Explain numbers and how figured.
Use legal hooks to prove/match up
in Value $50,000 Nicholson's
Performance at Market
Loss $110,000 Tickets
$9,190 Tee Shirts
Avoided $25,000 Payment
Total $149,690 Total
Performance & Breach
Determine which obligations
haven't been met yet.
Who didn't perform first?
ex) -----K-----Anticipatory Breach by A ----- A Partial
Delivery ----- B Doesn't Pay ---
Is there an express condition on
the 1st party's performance?
Is it a promise?
Normally express conditions are
strictly enforced. Therefore in example, 2nd party can view the K as over.
Some express conditions not
strictly enforced and performance excused - one party may waive or condition
may not be material to K.
If definitely not express condition,
B's performance may be constructively conditioned on A's performance.
What is the impact of the breach?
Was there a material breach? - Is
A's breach BAD enough to become a Total Breach?
Sackett v. Spinder
Jacobs & Young v. Kent
Rule of Substantial Performance -
If defect in performance is small, it doesn't end K/duty. Can be applied outside construction
Material Breach Found
Has K become total breach?
R2d 242 Total Breach
Time elapsed sufficient?
How important is timeliness?
How significant is substantial
performance? How bad is delay?
If breach is not material, it is
still a breach.
If B's performance discharged,
then B has no breach.
Otherwise, evaluate B's
Did B breach an express
Did B make/break a promise?
Did B breach a constructive
Could be Promise
Could be Promise & Condition
If commitment interpreted as
forfeiture; move likely a promise than condition.
Express Condition is higher level
than Constructive Condition.
R2d 163 -164 Verbs - Action Provisions
164(1) - What's Required &
When to Use Another Provision
1) ...misrepresentation... - incorrect statement of
fact. What's the lie?
2) If find misrepresentation
Then Fraudulent or Material
Then GOTO R2d 162
3) Was other's consent induced by it?
4) Was other recipient justified in relying?
If 164(1) parts 1-4 met; then K
is voidable by recipient
If misrepresentation by 3rd
party, then evaluate using R2d 164(2).
Overt Misstatement omission
Find the Lie - misleading
statement, omission, nondisclosure
R2d 162 - 164 - For direct false
R2d 161 For inaction,
Opinion v. Misstatement of Fact
Opinion - quality, value,
After R2d 164 GOTO 169
Deception complicated cause may
Adhesion K - See Page 451
Casebook, Note 4
Standardized K of superior
bargaining power. Strength with
unequal bargaining power.
A standard-form K prepared by one
party, to be signed by the party in a weaker position, usually consumer, who
has little choice about the terms.
a.k.a. - take-it-or-leave-it K.