CONTRACTS OUTLINE

CONSIDERATION
CONSIDERATION Value given by one party in exchange for performance or promise to perform by another party legal detriment suffered by the promisee in exchange for the promisors promise Gratuitous promises w/no reliance or consideration unenforcea le !DeLeo" E#ception for c$arities !Alle%$en& Colle%e" 'or earance of a le%al ri%$t !detriment" (irrelevant whether promisee benefits) can ser(e as (alid consideration !)amer (* Sidwa&"

NO+INAL CONSIDERATION
+ere inade,uac& of consideration will not (oid a contract !-atsa.is" Martin v. Little Brown & Co. (471) Implied In Fact Contract !greement legitimately inferred from parties intentions evidenced by circumstances" course of dealing # common understanding$ Must render services in circumstances promisor can entertain reasonable expectation of payment by party benefited$ No ar%ained/for/e#c$an%e 0 no consideration & promisee 1 not enou%$ to esta lis$ e#istence of implied contract Implied In Law Contract 2,uasi/contract3 4 o li%ation created & law for reasons of 5ustice 6unatum meruit %i(en in cases of un5ust enric$ment REST* 7d 8 9:!7" % &!'(!)* +,-)*).)/*0
! performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise$

-ar%ain Element -or a promise to be supported by consideration" the promisees detriment must have been bargained1for by the promisor (see definition for bargain)$

;AST CONSIDERATION
;romises unsupported & consideration< not done at D=s re,uest< 0 for ser(ices recei(ed in t$e past are %enerall& $eld unenforcea le !+ills (* >&man"

Webb v. McGowin (234) Unre,uested rescue created moral dut& to ;< since D recei(ed directed enefit* D affirmed & offerin% compensation* 1

5here promisee cares for" improves" # preserves promisors property" though done w6o re7uest sufficient consideration for subse7uent agreement to pay for service b6c of material benefit received >$ere enefit of ser(ices to promisor !and/or pro(ider cost" su stantial< courts will most li.el& $old ? enforcea le REST* 7d* 8 @A 1 ;romise for -enefit Recei(ed
(1) (2) ! promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent in8ustice ! promise is not binding under 9ubsection (1)0 (a) if the promisor conferred the benefit as a gift or for other reasons the promisor has not been un8ustly enriched: or (b) to the extent that its value is disproportionate to the benefit$

E#ceptional Situations 1 'easonable ;ayment ,xpectation is essential element of a claim for restitution 1 <ompensation 8ustified where person acting in course of profession 1 ;urely humanitarian or otherwise non1professional voluntary acts of small value not entitled to compensation and contractual obligation (snotty law student trying to receive compensation for volunteering) Ot$er cases binding without consideration % 9/=" ban>ruptcy" minor contracts 9tatute of =imitation 1 Most states re7uire promise to pay debt be in signed writing 1 9ometimes promise to repay implied from debtors actions Voluntary ac>nowledgement of debt Voluntary transfer of money" etc$ 9tatement that 9/= wont be pled as defense &an>ruptcy 1 Most states re7uire promise to pay debt be in a signed writing 1 <ourts enforce express promise # wont infer promise from debtors actions

;RE/EBISTING LEGAL DUTC RULE

<6= 'e7uirement of additional consideration for modification to be enforceable 1 E#ceptions o Unforeseen Circumstances o Statute ;ro(ision o Detrimental Reliance !material c$an%e in position /c of mod" UCC 8 7/7DE (abolishes ;+') Modification" 'escission and 5aiver 1 /nly a good faith re7uirement" no consideration necessary 1 Modifications bringing ? w6in 9/- must be in writing 1 !lthough @*o /ral1Modification <lauseA % may be waived o Moon case" foreman waived by re7uesting addl wor> REST* 7d< 8 9F
;erformance of a legal duty owed to a promisor which is neither doubtful nor the sub8ect of

honest dispute is not consideration

REST* 7d< 8 @E % ;romises +odif&in% Contracts

! promise modifying a duty under a contract not fully performed on either side is binding (a) if the modification is fair and e7uitable in view of circumstances not anticipated by the parties when the contract was made: or (b) to the extent provided by statute: or (c) to the extent that 8ustice re7uires enforcement in view of material change of position in reliance on the promise

;arty cannot claim estoppel based on his own wrong" where the promise is simply a repetition of a subsisting legal promise >$en part& merel& does w$at alread& o li%ated to do< $e can=t e#tort more mone& !Alas.a ;ac.ers Ass=n / GAE" Alas.a ;ac.ers 1 fis$erman were %i(en insufficient nets< t$us fewer fis$ and less compensation ;arties can rescind contract by mutual consent # then ma>e new ? where their mutual promises are consideration for each other !Sc$wartHreic$ 1 G97"

Gra& Area 1 parties a%ree to mutual rescission and t$en si%n new contract +an& ar%ue t$e aim of rule is etter left to duress doctrine Brian Construction v. Brighenti (B73) (1C7D) 5hen party agrees to perform obligation already owed" although for lesser money" 2nd agreement invalid however" new # distinct agreement imposing additional burdens supported by consideration is valid$ Unforeseen< urdensome circumstances !additional o li%ation" in(ol(in% %reater consideration constitute separate contract Universal Builders v. Moon Motor Lodge (BDE) (1C4D) UCC 8 7/7DE!I"!G" % ? can be modified orally even if has no oral modification clause may waive provision % )f oral agreement or permission given while performance of condition possible # in reliance on agreement6permission" while it is un!revo"ed" promisee materiall& c$an%es $is position enforceable

;romissor& Estoppel
REST* 7d< 8 ED 1 ;romise Reasona l& Inducin% Action or 'or earance
(1) ;romise which promisor should reasonably expect to induce action or forbearance on part of promisee or third person # which does induce such action or forbearance is binding if in8ustice can be avoided only by enforcement of promise$ 'emedy granted for breach may be limited as 8ustice re7uires$ (2) ! charitable subscription or marriage settlement is binding under subsection (1) w6o proof that the promise induced action or forbearance */., % Fsually limited to reliance damages" but modern courts have leaned towards expectation damages (in alliance w6norms of contract law)

T)REE ;ART TEST

(1) ;romise which promisor should reasonabl# expect to induce action or forbearance of a definite # substantial characterG (2) ;romise induced such action or forbearanceG (3) )n8ustice avoided onl# b# enforcement of the promiseG $ic"etts v. %cothorn (24B) >$ere a %ift induces detrimental reliance< t$e donee ma& collect on t$e promise under t$e doctrine of promissor& estoppel NOTE -or intra1family gifts upon which there is reliance" damage award is typically limited to @out1of1poc>etA losses" not expectation interest$

Goodman v. &ic"er (27D) (1C4D) >$ere reasona le reliance is incurred in furt$erance of oral promise< e,uita le reliance dama%es are appropriate to ser(e t$e ends of 5ustice Reliance on ne%otiations ma& e enforcea le t$rou%$ doctrine of ;E (Hoffman v$ 'ed /wl) 1 ,xpands ;, doctrine even though no actual offer existed (8ust promises)

'lleghen# College v. Chautau(ua Ban" (2B1) Posthumous remembrance = consideration to make K enforceable

NOTE +odern courts t&picall& DO NOT impose detrimental reliance re,uirement in cases of c$arita le su scription (only applicable w6written promises) % Rest< 7d 8 ED!7"

RELIANCE 0 STATUTE O' 'RAUDS

;ART ;ER'OR+ANCE (remedy against 9/-)0 E 7AE Specific ;erformance remedy in ;art ;erformance cases (involving only land) .o compel 9;" reliance must not be ade7uately compensable in money <ritical enforceability element actual possession by promisee w6promisors ac7uiescence % varying forms in different states o )n some0 possession o )n others0 possession I partial (or whole) payment o )n others0 possession I permanent improvements REST* 7d* 8 :FE 1 ;art ;erformance
(1) ;romise which promisor should reasonably expect to induce action or forbearance on part of promisee or third person # which does induce the action or forbearance is enforcea le notwit$standin% t$e SO' if in5ustice can e a(oided onl& & enforcement of t$e promise* T$e remed& %ranted for reac$ is to e limited as 5ustice re,uires$ )n determining whether in8ustice can be avoided only by enforcement of the promise" the following circumstances are significant0

(2)

a$ b$ c$ d$ e$

!vailability # ade7uacy of other remedies" particularly cancellation # restitution: .he definite # substantial character of action or forbearance in relation to remedy sought: .he extent to which action or forbearance corroborates evidence of ma>ing # terms of promise" or ma>ing # terms are otherwise established by clear # convincing evidence: .he reasonableness of the action or forbearance: .he extent to which the action or forbearance was foreseeable by the promisor

%eave# v. &ra"e (244) (1DD2) ,xpenditure in money # labor (in e7uity) consideration for promise # will be enforced >$ere SO' ma& e#empt for lac. of written contract or memo< e,uit& mandates t$at t$ere e an e#ception to rule w$en part performance/reliance $as ta.en place E6UITA-LE 0 ;RO+ISSORC ESTO;;EL o Ma8ority expansion of ;; desirable (beyond land cases) o )(uitable )stoppel deals w6past wrongs # *romissor# )stoppel deals w6reliance on future promises and damages resulting from the reliance

LI+ITED ;RO+ISES
)==F9/'J ;'/M)9,0 9tatement which appears to be promising something" but which in fact does not commit promisor to anything at all REST* 7d< 8 99 1 Illusor& 0 Alternati(e ;romises
! promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performances unless (a) ,ach of alternative performances would have been consideration if it alone had been bargained for: or (b) /ne of the alternative performances would have been consideration and there is or appears to the parties to be a substantial possibility that before the promisor exercises his choice events may eliminate the alternatives which would not have been consideration

>$ere promise reser(es complete discretion to t$e promisor to act as $e c$ooses< promise is illusor& 0 unenforcea le 1 in effect< promisor fulfills $is promise $owe(er $e acts (&avis v. General +oods Corp. % 1C37) *at *al 9ervice 9tations v 5olf % neither party was bound to any obligation due to the indefiniteness of the time period$ ,ach sale constituted a separate contract" thus the wholesaler was not obligated to give the discount$ !=.,'*!.)V, ;'/M)9,90 ! promise which reserves to promisor several alternative performances

(enerally enforceable if each alternative performance would have been consideration if it had been bargained for alone (Rest* 7d< 8 99!a""

 <onsideration where one alternative would be consideration # substantial possibility that" before promisor ma"es choice" events will eliminate others ;!'.J +)9<',.)/* )f one partys performance left completely to his discretion" so that he may choose not to perform at all" he has not furnished consideration for the other part#,s promise

+UTUALITC O' O-LIGATION

;romise consideration if performance promised" either act6forbearance" would be consideration if it alone were bargained for (bilateral contract context) ,ach party must ma>e promises that somehow ind them at some period of time (urfein % parties are bound since there was a time when seller could have shipped and buyer was obligated to pay" even though buyer had the right to cancel before shipment .he fact that a rule of law renders a promise voidable or unenforceable does not prevent it from being consideration ('est$ 2d" K 7D) % allows purchaser who was defrauded option to still ma>e purchase

I+;LIED ;RO+ISES
Wood v. Lad# &uff Gordon (2CC) Implied promise to use 2%ood fait$ efforts3 to mar.et D=s desi%ns 4 sufficient detriment to ; to constitute consideration for D=s counter/promise of e#clusi(it& % understood that there was a circumstantially # textually implied @instinct of obligationA REST* 7d< 8 7DG 1 Good 'ait$
,very contract imposes upon each party duty of good faith # fair dealing in performance # enforcement

(ood -aith ,mphasiLes faithfulness to agreed common purpose # consistency with 8ustified expectations of other party &ad -aith (1) ,vasion of spirit of bargain" (2) lac> of diligence6slac>ing off" (3) willful rendering of imperfect performance" (4) abuse of power to specify terms" # (B) interference with or failure to cooperate in other partys performance

RE6UIRE+ENTS 0 OUT;UT CONTRACTS

*on1F<< re7uirements # output contracts usually valid if buyer (re7uirements contract) implicitl# promises -best efforts. to sell goods and6or seller (output contract) implicitl# promises attempt to maintain production at reasonable level

UCC 8 7/FDA 1 Output Re,uirements 0 E#clusi(e Dealin%s

(1) .erm which measures 7uantity by output of seller or re7uirements of buyer means actual output or re7uirements as may occur in good faith except no 7uantity unreasonably disproportionate to any stated estimate or in absence of stated estimate to any normal or otherwise comparable prior output or re7uirements may be tendered or demanded (2) ! lawful agreement by either the seller or the buyer for e#clusi(e dealin% in the >ind of goods concerned imposes unless ot$erwise a%reed an o li%ation & seller to use est efforts to suppl& %oods and & u&er to use est efforts to promote t$eir sale

1 1

E#clusi(it& of dealin%s implied (buyer6seller buys everything from other) +oes not lac> for mutuality of obligation % @best effortsA 7ualifies

+eld v. /enr# %. Lev# & %ons (31E) % &read <rumbs 9hort of cancellation provided for in ?" + expected to continue to perform in good faith # could cease production only in good faith$ Good fait$ re,uired continued production until cancellation< e(en if no profit (good faith cessation mightve been o>) Output ?s don=t lac. mutual o li%ation 0 not unenforcea le /c of term indefiniteness* ;art& to determine ,ualit&/,uantit& re,uired to act in %ood fait$ 0 produce in %ood fait$ accordin% to reasonable commercial standards <orenswet % termination of contract not a violation of good faith if there is a clause allowing termination without reason 'aises separate issue of whether unilateral termination w6o cause violates unconscionability clause

+UTUAL ASSENT
MF.F!= !99,*.0 -or contract to be formed" parties must both intend to contract # must agree on at least the main terms of the deal )rrelevant whether parties to ? sub0ectivel# intended to be bound: intentions measured by what reasonable person in position of other part# would have thought 1st part# intended +ic>ey v$ Hurd % if one party is aware of the other partys ambiguity of term" they must inform them )mbr# v. /argadine Mc ittric" &r# Goods Co. (32B) =aw imputes intention corresponding to reasonable meaning of words # deeds % 8udges intention by outward expressions # excludes all 7uestions in regard to unexpressed intention$ )f outward expression and6or acts manifest intention" immaterial what may have been real" but unexpressed" state of promisors mind on sub8ect of agreement abil &evelopments v. Mignot (32C) % Helicopter 9ervices 2b0ective theor# of contracts ob8ective test doesnt preclude admission of Msub8ective testimony concerning whether party felt he was entering into contractual agreement 7

>$en dispute concerns unwritten a%reement< conclusion of mutual assent constructed from e(idence of ne%otiations/ot$er past conduct */.,0 )f parties actions ma>e clear intention to be bound even b6f legal document" courts will almost alwa#s find enforceable (regardless of document) )f neither party intends the meaning of the contract" then not bound to it (*ew Jor> .rust <o$ v$ )sland /il # .ransport <orp$ 1C2C) REST< 7d 8 7:
*either real nor apparent intention that promise be legally binding is essential to the formation of a contract" but a manifestation of intention that a promise shall not affect le%al relations may prevent the formation of a contract

Moulton v. ershaw % 9alt !dvertisement Generall&< ad(ertisements not considered offersJ $owe(er< if offer clear< definite 0 e#plicit< lea(in% not$in% open for ne%otiation< ma& e enforcea le as offer in(itin% acceptance (e$g$ wording expressing commitment % particular number of units or particular manner % are more li>ely to be considered offers) )mpro Mfg. Co. v. Ball!Co Mfg.3 4nc. (1CDC) % !greement in principle ;arties may have agreement in principle" but if material terms left for future negotiations unenforceable ;reliminar& a%reements t&picall& not indin%< those that are fall into 2 categories0 +ull# binding preliminar# agreement % parties agree on all parts but agree to memorialiLe agreement in formal document Binding preliminar# agreement % parties agree on certain ma8or terms" but leave others open for further negotiation" only re7uired to have good faith in negotiations UCC 8 7/FDG 1 Open ;rice Term
.he parties" if they so intend" can conclude a contract for the sale even though the price is not settled$ )n such a case the price is a reasonable price at the time for delivery if0 (b) nothing is said as to price: or (c) the price is left to be agreed by the parties and they fail to agree: or (d) the price is to be fixed in terms of some agreed mar>et or other standard as set or recorded by a third person or agency and it is not so set or recorded

UCC 8 7/FDG % Open ;rice Term 1 ;rice is a reasonable price at the time set for delivery 1 ;rice term to be fixed in good faith 1 5here price term not fixed by fault of one party" other may cancel or fix the term at a reasonable price UCC 8 7/FDE % Time for S$ipment Unspecified 1 'easonable time after contracting

.ermination by one party (except on happening of agreed event) re,uires reasona le notification 0 an a%reement dispensin% t$erewit$ is in(alid if would e unconsciona le

O''ER 0 ACCE;TANCE
REST* 7d 8 7I 1 Offer
.he (ob8ective) manifestation of willingness to enter into a bargain so made as to 8ustify another person in understanding that his assent to that bargain is invited and will conclude Nthe bargainO

O''ER % <reates immediate power of acceptance in offeree In(itation to Deal (* Offer 1 <ommunication advising interested parties that something is for sale for @a price not below xA merely establishes basis for auction # does not constitute offer (unless perhaps on basis of prior dealings) o -id Solicitations % asis for preliminar& ne%otiations % whether solicitee would reasonably believe a bid is a solicitation or offer )f containing words of commitment" may become offer (i$e$ highest bidder by certain date) o ;rice 6uotations % implies reservation of right on suppliers part to accept or re8ect customers orders <an be considered as an offer if language dictates @for immediate acceptanceA No offer if reser(in% power to close deal w/proposer o Retail Ad(ertisements % usually 8ust invitations to deal <an be offers if sufficiently definite # explicit" inviting particular performance ;articular number of units or sale in particular manner

INDE'INITENESS
REST< 7d* 8 FF 1 Certaint&/Indefiniteness
(1) (2) (3) ,ven though manifestation of intention meant to be understood as an offer" it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain .he terms of contract reasonably certain if they provide basis for determining existence of a breach and for giving an appropriate remedy .he fact one or more terms of proposed bargain are left open or uncertain may show manifestation of intention is not intended to be understood as offer or as an acceptance

.erms of a contract are sufficiently definite (1) if the# provide basis for determining existence of breach and (2) basis of appropriate remed# ,ven if terms are initially too indefinite" subse7uent performance may cure the indefiniteness

Essential Elements of A%reement 1 1 ;arties to the contract C

1 1 1

9ub8ect matter of the contract .ime for performance # ;rice

UCC 8 7/7DI 1 'ormation in General

(1) ! contract for sale of goods may be made in an& manner sufficient to s$ow a%reement< includin% conduct & ot$ parties w$ic$ reco%niHes e#istence of suc$ a contract (2) !n agreement sufficient to constitute a contract for sale may be found even though the moment of its ma>ing is undetermined (3) ,ven though one or more terms are left open" ? for sale does not fail for indefiniteness if the parties have intended to ma>e a contract" and there is a reasonably certain basis for giving an appropriate remedy

Comment0 .he more terms the parties leave open" the less li>ely it is that they have intended to
conclude a binding agreement" but their actions may be fre7uently conclusive on the matter despite the omissions

If intent to ? e(ident< Court supplies missin% terms 1 UCC 8 :/FDFK 1 .rade Fsage (general standards in the field) 1 <ourse of +ealing (previous dealings b6w parties to ?) 1 <ourse of ;erformance (conduct after entering ?) )mpro Mfg. Co. v. Ball Co Mfg. (1CDC) % =/)6sub8ect to approval LOI test is w$et$er parties intended to be bound !o 5ecti(e t$eor&" est wa& of tellin% is t$rou%$ t$e actual words of LOI p$rases suc$ as 2su 5ect to3 indicate t$at LOI not intended to e indin%

+ISUNDERSTANDING 1 ;re(ents ? from E(er E#istin%

REST* 7d< 8 7D 1 Effect of +isunderstandin%
(1) .here is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations: and a$ *either party >nows or has reason to >now the meaning attached by the other: or b$ ,ach party >nows or has reason to >now the meaning attached by the other (2) .he manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if: a$ .hat party does not >now of any different meaning attached by the other" and the other >nows the meaning attached by the first party: or b$ .hat party has no reason to >now of any different meaning attached by the other" and the other has reason to >now the meaning attached by the first party

(,*,'!= 'F=,0

)f misunderstanding concerns material term # neither party >nows" or has reason to >now" of misunderstanding" no contract

)f offeree is ne%li%ent in misunderstanding the terms of the offer" he is generally bound by the ? terms as stated

$affles v. Wichelhaus (;eerless) (3BC)

1E

*o @meeting of the mindsA # @latent ambiguityA as to what terms of agreement actually signified % no consensus If misunderstandin% concerns material term 0 no meeting of the minds< t$ere is no contract REST* 7d 8 GD 1 Acceptance
/fferees (ob8ective) manifestation of assent to terms of the offer" made in a manner invited by the offer

Cobaugh v. lic" Lewis3 4nc. (343) (1CDC) % Hole!in!one Offer 4 manifestation of willingness to enter bargain w6understanding that acceptance of another party to enter terms of bargain will conclude it$ +anifested< o 5ecti(e intent of offeror< not su 5ecti(e intent< determines w$et$er offer is in(itation for assent 0 acceptance accordin% to its terms (where no specified time1limit on offer" it remains open for a reasonable time % unless revo>ed) */., <laimant must "now of offer when giving desired information or performance: otherwise" mere public service or accidental action (reporting crime" etc) % impossible to assent w6o >nowledge of existence

DURATION O' ;O>ER O' ACCE;TANCE

REST* 7d< 8 FA % +et$ods of Termination of ;ower of Acceptance
(1) !n offerees power of acceptance may be terminated by (a) re8ection or counter1offer by the offeree" or (b) lapse of time" or (c) revocation by the offeror" or (d) death or incapacity of the offeror or offeree )n addition" an offerees power of acceptance is terminated by the nonoccurrence of any condition of acceptance under the terms of the offer$

(2)

Re5ection 1 terminates offer unless5 1 .he offeror indicates the offer still stands in spite of re8ection or 1 .he offeree states that" although not presently accepting" wishes to consider Lapse of Time 1 )f no time limit explicitly set on offer" expiration after @reasonable timeA 1 /fferor may treat a late acceptance as valid if he so chooses Counter/Offer % terminates offer unless5 1 /fferor indicates otherwise 1 /riginal offer was irrevocable (option ?) 1 <ounter in7uiry (still has power to accept) distinguished from counter1offer Deat$ or Incapacit& Non/occurrence of Condition of Acceptance UCC< 8 7/7DA Offer and Acceptance in 'ormation of Contract
(1) Fnless otherwise unam i%uousl& indicated by language or circumstances (a) an offer to ma>e a contract shall be construed as in(itin% acceptance in an& manner and & an& medium reasona le in t$e circumstances (2) >$ere e%innin% a re,uested performance is a reasona le mode of acceptance an offeror w$o is not notified of acceptance wit$in a reasona le time ma& treat t$e offer as $a(in% lapsed efore acceptance

11

RULE0 )f mechanism or medium of acceptance unspecified" offeree may complete acceptance through the medium of his choice (but if performing" must notify offeror of acceptance within a reasonable time) REST* 7d 8 F7 1 In(itation of ;romise or ;erformance
)n case of doubt an offer is interpreted as inviting the offeree to accept either by promising to perform what the offer re7uests or by rendering the performance as the offeree chooses

REST< 7d 8 1 Effect of ;erformance In(itin% Eit$er ;erformances or Acceptance

(1) 5here offer invites offeree to choose between acceptance by promise and acceptance by performance # offers beginning of invited performance or a tender of a beginning of it is an acceptance by performance$ (2) 9uch an acceptance operates as a promise to render complete performance$

'llied %teel v. +ord (34C) (1C4E) )f offeror prescribes exclusive manner of acceptance" attempt by offeree to accept offer in different manner does not bind offeror in absence of meeting of minds on altered type of acceptance 5here offer unclear as to acceptance by promise or performance" offeree may accept by either (Rest* 7d 8 F7) # beginning performance )9 acceptance of full performance contract (Rest* 7d 8 A7) &avis v. 6acob# (372) % /ld man6wife needed help6promised to come 5here doubt as to whether offer invites acceptance by performance or promise (unilateral6bilateral)" offeree may choose his method % presumption towards construing ambiguity as bilateral contracts

O;TION CONTRACTS
REST* 7d 8 IG 1 Option Contracts Created & ;art ;erformance or Tender
(1) 5here an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance" an option contract is created w$en t$e offeree tenders or e%ins t$e in(ited performance or tenders a beginning of it (2) .he offerors duty of performance under any option of contract so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer$

5here offer clearly unilateral (inviting performance)" beginning of performance creates temporary irrevocability % option contract !Rest* 7d 8 IG!:"" 1 )M;/'.!*. =)M).!.)/* % temporary irrevocability ta>es place onl# once performance begun 1 ;reparation insufficient to 7ualify (exception % see Rest* 8 @9!7""

UCC 8 7/7DG 1 'irm Offers

!n offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not re(oca le< for lac. of consideration< durin% t$e time stated or if no time is stated for a reasonable time" but in no event may such period of irrevocability exceed 3 monthsP

12

/ Non/+erc$ants are not ound & %ratuitous 2firm offers3 ;rinciple of Indirect Communication 1 5here offeree learns of inconsistent behavior by offeror w6offer (i$e$ selling to someone else)" the offer has been revo>ed 1 ?nowledge of negotiations w6third party or mere rumor of inconsistent activity on part of offeror not enough to constitute revocation *etterson v. *attberg (37D) (1C2D) +s offer withdrawn b6f binding no ?$ )f offeror says" @) revo>e"A b6f offeree accepts" ? is non1binding +ere preparations for performance !i*e* %ettin% mone& to pa&" not enou%$ to ma.e offer irre(oca le */., Modern courts li>ely to allow recovery to the extent necessary to avoid in8ustice % @reliance damagesA !Rest* 7d< 8 @9!7""
!n offer is binding as an option contract if it0 a$ )s in writing and signed by the offeror" recites a purported consideration for the ma>ing of the offer" and proposes an exchange on fair terms within a reasonable time: or b$ )s made irrevocable by statute !n offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid in8ustice

REST* 7d< 8 @9 % Option Contract

(1)

(2)

7homas v. Bescher (3C2) % /ption ? under seal6Q1 consideration6not paid >$ere an option contract recites purported consideration t$e option is enforcea le< e(en t$ou%$ t$e consideration is ne(er actuall& paid */., ;revailing view of sealed options is option agreement under seal valid in 8urisdiction where <6= significance of seal remains" even though no consideration given (purported consideration) &rennan v. %tar *aving (3CC) (1CBD) % 9ub bid6(eneral relied6Mista>e + had reason to expect bid" if lowest" would be used: once part of re7uested performance begun" offeror cant revo>e his offer (Rest* 7d 8 IG)

CONDUCT CONCLUDING -ARGAIN

Livingstone v. )vans (414) % =and offer Q1DEE6counter6response @no lessA +s response was a renewal of original offer (i$e$ @cannot reduce priceA) Counter/ offers ser(e as re5ections !Rest* 7d< 8 FA"J $owe(er< offeror ma& renew offer

13

SILENT ACCE;TANCE
Assent inferred from many things % in some cases" even failure to ob8ect or respond" viewed contextually" may be enough to indicate an implied contract REST< 7d 8 AE % Acceptance & Silence or E#ercise of Dominion
(1) 5here offeree fails to reply to offer" his silence # inaction operate as acceptance in the following cases only0 a$ 5here offeree ta>es benefit of offered services with reasonable opportunity to re8ect them # reason to >now that they were offered with the expectation of compensation b$ 5here offeror has stated or given offeree reason to understand assent may be manifested by silence or inaction" # offeree in remaining silent # inactive intends to accept the offer c$ 5here b6c of previous dealings or otherwise" it is reasonable that the offeree should notify the offeror if he does not intend to accept (2) !n offeree who does any act inconsistent with offerors ownership of offered property is bound in accordance with the offered terms unless they are manifestly unreasonable$ &ut if the act is wrongful as against the offeror it is an acceptance only if ratified by him$

/obbs v. Massasoit Whip Co. (44D) (1DC3) % ,el s>ins6not returned Conduct impl&in% acceptance or assent is acceptance or assent whatever may have been actual state of mind of the party silence< com ined w/retention< amounted to an acceptance 0 indin% contract !pre(ious course of dealin%s< Rest< 7d 8 AE !:"!a"" T)E ;RILILEGE O' SILENCE (,23) 9ilence will not usuall# be acceptance of an offer in absence of duty to spea> E#ceptions 1 1 .a>ing benefit of offered services 1 'eason to understand silence as consent 1 ;rior conduct ma>ing silent acceptance reasonable 1 !cceptance by dominion Additional Terms !dditional" non1material terms become part of ? unless timely notice of ob8ection 9ilence ma>es fair to assume additional terms have been assented to by offeree ,ven where material alteration" prior dealings may provide basis for concluding offeree reasonable in inferring assent from offerors failure to ob8ect to it 'ustin v. Burge 81911: % !s>ed not to send6continued payment Alt$ou%$ o 5ectin% to somet$in%< if one continues to recei(e 0 use item under circumstances w$ere $e $ad no ri%$t to suppose it was a %ratuit& $eld to $a(e a%reed & implication to pa& t$eir (alue

DELIANT ACCE;TANCE (, 24)

UCC 8 7/7DI 1 'ormation in General
(1) ! contract for sale of goods may be made in any manner sufficient to show agreement" including

14

conduct by both parties which recogniLes the existence of such a contract (2) !n agreement sufficient to constitute contract for sale may be found even though the moment of its ma>ing is undetermined

UCC 8 7/7D9 % Additional Terms in Acceptance or Confirmation

(1) ! definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon" unless acceptance is expressly made conditional on assent to the additional or different terms .he additional terms are to be construed as proposals for addition to the contract$ &etween merchants such terms become part of the contract unless0 a$ .he offer expressly limits acceptance to the terms of the offer: b$ .hey materially alter it: or c$ *otification or ob8ection to them has already been given or is given within a reasonable time after notice of them is received <onduct by both parties which recogniLes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract$ )n such cases the terms of the particular contract consists of those terms on which the writings of the parties agree" together with any supplementary terms incorporated under any other provisions of this !ct

(2)

(3)

'/=, /- 212E7 &attle of the -orms (1) .o determine whether contract formed by exchange of documents: (2) what the terms of that contract (if formed) actually are +erc$ants 1 8 UCC 7/7D9!7" 1 lar%el& o(ert$rows C/L 2mirror/ima%e3 rule 1 Additional Terms automaticall& ecome part of ?< unlessM o /ffer expressly limits ? to terms of offer o Material alteration (i$e$ disclaimer of warranty) Material alteration if consent to it cannot be presumed o *otification of ob8ection to additional terms 1 Conflictin% Terms in Documents o @?noc>out 'uleA % F<< gap1filler provision used (if relevant) o <onflict b6w expressly drafted clause # F<< gap1filler (F<< wins) ?noc> each other out" but F<< gap1filler comes bac> in 1 5here the acceptance is expressly conditional on the offerors assent" no ? is formed by the exchange of documents % the @acceptanceA probably becomes a counter1offer which is accepted by performance on the part of the offeror (performing under the ? % @contract by conductA) .erms are those on w$ic$ t$e parties writin%s a%reed " plus supplementary terms from the F<<

+erc$ant 0 Consumer 1 UCC 8 7/7D9!7" 1 !dditional terms do not become part of the ?" unless the offeror explicitly assents to it Confirmation Terms 1 .erms different in a confirmation of an oral agreement will almost never become part of ?" even if receiving party fails to ob8ect (same for Mexpressly conditional confirmation clauses 1B

4daho *ower v. Westinghouse )lectric (422) (1C7C) Lan%ua%e in ac.nowled%ement must (irtuall& trac. lan%ua%e in 7/7D9 in order to e found unenforcea le 1 must s$ow an express unwillingness to proceed apart from assent to variant terms !EFA" *roC& 4nc. v. ;eidenberg (43E) (1CC4) % phone database6shrin>wrap term Vendor may invite acceptance by conduct (UCC 7/7DI) # propose limitations on conduct constituting acceptance % license binding on +: terms are as to contents of pac>age" # buyer may not pic> # choose his terms of choice contract not formed until u&er recei(ed t$e %oods 0 .ept t$em for period e&ond prescri ed return period 1 &ields contract on seller=s terms !acceptance of u&er & performance" */., */., )) .his is the not formed until receipt approach % often criticiLed (;ro<+) (acceptance by performance) /ther approach is formed at time of order approach (?loce>) (a) &uyer typically considered offeror (b) 9eller offeree (terms additional) (c) &uyer usually not merchant a$ >$ere seller is merc$ant 0 u&er is not" the terms do not become part of contract unless bu#er specificall# assents b$ &6w merchants" terms automatically become part of ? if silent on sub8ect

C/L +irror/Ima%e Rule 1 !cceptance must be a precise mirror image of the offer (if containing different terms" it is counter1offer or re8ection) 1 !lternatively to the @Mirror1)mage 'uleA" 'est K BC similar to F<< 212E7 C/L 2Last S$ot3 ;rinciple 1 ;arty sending last written proposal (if other party began performing) got benefit of counter1offer acceptance REST* 7d< 8 GE (similar to F<< K 212E7)
! reply to an offer which purports to accept it but is conditional on the offerors assent to terms additional to or different from those offered is not an acceptance but is a counter offer

/fficial <omment0 +efinite # seasonable expression of acceptance operative despite statement of

additional or different terms if acceptance not made to depend on assent to additional or different terms$

+AIL-OB ACCE;TANCE RULE

Morrison v. 7hoel"e (437) (1C43) %acceptance6b6f arrival called An acceptance is effecti(e upon mailin%< not receipt an un,ualified offer was accepted 0 acceptance made manifest & posta%e 14

E#ceptions % a$ 'ule does not apply if offer stipulates acceptance not effective until receipt b$ 'ule does not apply for option contracts (effective upon receipt) c$ -irst sends re8ection # then sends acceptance" whichever arrives first effective d$ )f offeree sends acceptance and then a re8ection" the acceptance is effective unless the re8ection letter arrives first # the offeror detrimentally relies upon it LERC I+;ORTANT /fferor master of offer /fferor chooses medium of conveyance (i$e$ mail" email" etc) 5hatever medium of conveyance offeror chooses" offeree may respond through .H!. medium or through faster one # rule is +eposit !cceptance )f offeree chooses slower response (email offer6mail acceptance)" the rule is acceptance upon receipt REST< 7d 8 AF % Time >$en Acceptance Ta.es Effect
Fnless the offer provides otherwise" (a) an acceptance made in a manner and by a medium invited by an offer is operative and completes manifestation of mutual assent as soon as put out of the offerees possession" without regard to whether it ever reaches the offeror: but (b) an acceptance under an option contract is not operative until received by the offeror

REST< 7d 8 ID Re5ection 1 Acceptance Upon Receipt 'e8ection or counter1offer by mail or telegram does not terminate power of acceptance until received by offeror" but limits power so that letter or telegram of acceptance started after sending of otherwise effective re8ection or counter1offer only counter1offer unless acceptance received before he receives re8ection or counter1offer

STANDARDINED 'OR+S
!dhesion <ontracts (1) standardiLed form (ta"e it or leave it) # (2) gross disparity in bargaining power" (3) large number of non1negotiated pre1 drafted terms" (4) standardiLed terms complicated" ambiguous # exceptionally favorable to the drafter GENERAL RULE ./ !V/)+ ,*-/'<,M,*. /- !+H,9)/* </*.'!<. (1) .he contract itself is actuall# an adhesion contract and (2) .he contract either P a$ Violates his reasonable expectations: or b$ )s unconscionable (shoc>ingly unfair) UCC 8 7/FD7 1 Unconsciona le Contract Clause 1 !llows courts to police contracts (whether ? at formation was unconscionable) 1 ;rinciple one of prevention of oppression # unfair surprise (not bargaining) REST< 7d 8 7D@ 1 Unconsciona le Contract or Term / 9imilar to F<< (broad latitude) %haron v. Cit# of <ewton (B13) (2EE2) % <heerleading )ndemnity

17

)ndemnity 'elease binding when person of ordinary intelligence reviews a document clearly labeled for purpose of indemnification for childs participation in school activities E#ception baggage chec> or tic>et stubs (pseudo1contracts) are not such that person of ordinary intelligence would understand indemnification unless expressly informed Mund# v. Lumberman,s Mutual (B14) (1CD4) % stolen silver6policy cap C$an%es to standardiHed contract ecome effecti(e once part& recei(es cop& of re(ised contract if c$an%es clearl& descri ed 0 set apart (i$e$ plain ,nglish" visible)

EBCUL;ATORC CLAUSES
/enningsen v. Bloomfield Motors (B2E) (1C4E) % possible 95 defect (eneral 'ule failure to read does not absolve ; of assumption of burden" but + must also s$ow t$at a%reement was understandin%l& made* Disclaimers unfairl& procured< if not rou%$t to u&er=s attention/sufficientl& aware or not clear 0 e#plicit< are in(alid !ine,ualit& of ar%ainin% power as well" UCC 8 7/F:I 1 ! warranty that goods shall be merchantable is implied in contract for their sale if the seller is a merchant with respect to goods of that >ind UCC 8 7/F:G 1 5here seller at time of ? has reason to >now any particular purpose for which goods re7uired # that buyer is relying on sellers s>ill or 8udgment to select6furnish suitable goods" there is unless excluded or modified under next section an implied warranty that goods shall be fit for such purpose UCC 8 7/F:A!7" % (as is) E#clusion or +odification of >arranties $ichards v. $ichards (1CC4) % 5ife indemnity6riding w61D wheeler spouse E#culpator& contracts< t$ou%$ (iewed unfa(ora l&< are not automaticall& (oid court must wei%$ a%ainst pu lic polic& to decide (alidit& o(erl& road 0 %eneral e#culpator& contracts are in(alid .hree -actors to <onsider0 (1) +ocuments purpose not clearly identified (@passenger authoriLationA when actually indemnity agreement) (2) 'elease is extremely broad # all1inclusive % breadth demonstrates one1 sidedness # unreasonably favors drafter (3) 9tandardiLed contract offering little or no negotiability or bargaining ability

1D

;AROL ELIDENCE RULE

;,' (overns the effect of a written agreement on an# prior oral or written agreements b6w parties to suit 9ubse7uent /ral !greement +oes not bar evidence of oral agreements after writing Interpretation +a#ims 1 +oes not bar evidence about meaning parties intended particular contract terms 1 !mbiguous terms usually construed against the draftsman (contra proferentem) 1 <ourse of performance # course of dealing help illuminate (custom) 1 ;rimary purpose of parties in ma>ing ? given great weight 1 .erms given lawful" reasonable # effective meaning when at all possible 1 *egotiated terms ta>e precedence of standard terms T$ree Approac$es to Interpretation 1 -our1<orners (document on its face) 1 ;lain Meaning (evidence about context" but not preliminary negotiations) 1 =iberal 'ule (evidence of prior negotiations admissible) o 5ea>ens ;,' rule significantly REST< 7d 88 7DE/7:A (4711473) 5hether integrated agreement exists determined by court as 7uestion preliminary to determination of interpretation or application of ;,' Mitchill v. Lath (4B7) (1C2D) % ice house removal .o admit oral evidence (1) a%reement must e collateral in formJ !7" must not contradict e#press or implied pro(isions of written a%reementJ !F" must e one t$at parties would not ordinaril& e e#pected to em od& in writin% ;,' ,R<=F+,9 )-P (1) *ot collateral in form (2) )nconsistent w6implied or express terms (3) *aturally included

DIAGRA+
E#cluded ;ermitted Separate/Distinct *atural ;art of <ontract *o separate cons6*ot necessarily 9ep consideration within contract initially

INTEGRATION
)ntegration ;arties intend document to represent final expression of agreement ;artial Inte%ration document not intended by parties to include all agreement details 1C

*o evidence of prior or contemporaneous agreements or negotiations (oral or written) may be admitted if contradicts term of written agreement

Total Inte%ration document intended by parties to include all details of agreement 1 *o evidence of prior or contemporaneous agreements or negotiations (oral6written) admitted if contradictory or additional to written agreement RULE SU++ARC (1) ,vidence may never be allowed which contradicts integrated writings (2) May never supplement an integration intended to be complete /atle# v. %tafford (1C7D) % 5heat6buyout Q7E acre6buyout in pea> season *resumption towards complete integration % presume writing intended to be complete" when complete on face # should admit evidence of consistent additional terms onl# if substantial evidence that parties did not intend writing to embody entire agreement Two Liewpoints / ;ER (1) SF9. loo> at ? itself to decide whether it appears to be integrated # then decide whether to admit evidence of oral agreement (four1corners rule) (2) <onsider all evidence to decide whether admittable under ;,' to 8ury for consideration of facts to see if it really existed # was enforceable oral agreement Additional Terms */ Completel# 4ntegrated 'greement TTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTTT M!J&, *artiall# 4ntegrated 'greement ()s term @naturallyA sort of thing to be incl$) */ Inconsistent Additional */

UCC 8 7/7D7 'inal >ritten E#pressionM ;arol or E#trinsic E(idence !greement may be supplemented by course of dealing6trade usage (112EB" 112ED) *o inconsistent terms ever allowed U(uestions of law for a 0udge to decideU May not supplement (even w6consistent terms) a totally integrated agreement RULE <onsistent" collateral # unnatural (not li>ely to be included in contract) terms should be allowed consideration within partially integrated agreements .H',9H/=+ ;artially )ntegrated or <ompletely )ntegrated *,R. =,V,= <onsistent or )nconsistent *,R. =,V,= Fnnatural or *atural

'RAUD EBCE;TION TO ;ER !E :@:"

2E

,ven if writing completely integrated" ;,' alwa#s allows evidence of earlier oral agreements to show illegalit#3 fraud3 duress3 mista"e or lac" of consideration

Lipsit v. Leonard (4DB) (1C74) ;,' no bar in actions in tort for money damages based upon oral fraudulent promises inducing written agreements 'raud Dama%es out of poc"et rule B2' v. *endergrass (1C3B) % promissory note6payable on demand ;ER not admissi le w$ere< as $ere< it would pro(e a promise directl& at (ariance wit$ t$e promise of t$e writin% &irect =ariance $ule La+a>ia v. /owe (4CE) (1CCE) % *ew restaurant6bad tax returns6bought 'raud (itiates all contracts< EBCE;T w$ere e#press specific disclaimer or 2mer%er clause3 loc.s fraud action (specificity touchstone issue for deciding whether valid) +er%er Clause a clause indicating writing constitutes sole agreement b6w the parties 1 5here clause is broad # boilerplate" it does not bloc> oral evidence 1 5here specific concerning representations that have not been made" the ma8ority of courts will not allow t$e oral e(idence

'OUR/CORNERS RULE
*acific Gas & )lec. v. 7homas &ra#age & $igging (BE4) (1C4D) 'our/Corners Rule (belief in potency # meaning of words) .est for admissibility of extrinsic evidence whether offered evidence relevant to prove meaning to which language of instrument is reasonably susceptible <ourt must determine intent by loo>ing at words contextually$ )f court decides" after loo>ing at agreement contextually" that evidence is susceptible to one interpretation" parol evidence is inadmissible +ederal &ep. 4ns. Corp. v. W.$. Grace & Co. (1CDC) -our1<orners 'ule not ridiculous language not ta>en lightly$ )f language clear b6c 8udge doesnt >now commercial context % Mextrinsic ambiguity % challenging party should present ob8ective evidence (not say1so) that ? doesnt mean what it plainly says$ %paulding v. Morse (BED) (1C47) E(er& written a%reement interpreted w/(iew to material circumstances of parties at time of e#ecution< in li%$t of pertinent facts wit$in t$eir .nowled%e< 0 in suc$ manner as to %i(e effect to main end desi%ned to e accomplis$ed REST< 7d 8 7:7 % Interpretation 0 Inte%rated A%reement

21

(2) ! 7uestion of interpretation of integrated agreement determined by trier of fact if depends on credibility of extrinsic evidence or on choice among reasonable inferences to be drawn from extrinsic evidence$ /therwise" 7uestion of interpretation of integrated agreement determined as 7uestion of law

Cmt0 Historically" 7uestions of interpretation of written documents treated as 7uestions of law in the sense that they are decided by the trial 8udge rather than by the 8ury$

;OLICING T)E -ARGAIN

<hapter 4

CO+;ETENCC TO CONTRACT
Infanc& Doctrine Minors absolute right to void any contracts for non1necessary items / 'ight to disaffirm only survives for a reasonable time after ma8ority Doctrine of Necessities )f the purchased item is necessary" minor liable for contract /albman v. Lem"e (B43) (1CDE) % Minor disaffirms vehicle ? Infanc& Doctrine !C/L" absolute right of minor to disaffirm ? for purchase of non1 necessary items (enerally" minor entitled to recover all consideration proffered relating to transaction # give in return as much of original purchase as left to other contracting party (however3 disaffirmance permitted even where such return impossible)

UNDUE IN'LUENCE
2dori>>i v. Bloomfield %chool (BB7) (1C44) % .eacher gay6arrested6fired Undue Influence coercive persuasion % overcoming will w6o convincing 8udgment # ta>ing unfair advantage of anothers wea>ness of mind or ta>ing grossly oppressive # unfair advantage of anothers necessities or distress <ombination of ,lements ;roves F) undue susceptibility I excessive pressure undue influence$ =on /a"e v. 7homas (B4E) (1CDB) ! confidential relationship Nwhere one party" having gained trust # confidence of another" exercises extraordinary influence over anotherO is a prere7uisite to proving constructive fraud law does not assume that ones will has been overborne by another

'INALINING DIS;UTES SETTLE+ENT AGREE+ENTS

DURESS
/ac"le# v. /eadle# (BD4) (1DD1)

22

Duress unlawful act inducing party to perform some act under circumstances which deprive him of free will )owe(er< w$ere part& does not t$reaten an&t$in% w$ic$ $e does not $a(e le%al ri%$t to perform no duress NOTE Su 5ecti(e to ; % irrelevant if person of average firmness would have yielded Capps v. *acific (BDC) (1C4C) % <ommission payment6;art paid &etter rule allows statement of a duress cause or defense such as ; has pleaded here to be tried on its facts (personal difficulties) % more recent cases different view from /ac"le# General Rule 1 /ac"le# approach still most popular financial difficult& & itself will not 5ustif& settin% aside a settlement RELISIONS O' CONTRACTUAL DUTC 'ustin 4nstrument v. Loral Corp. (B42) (1C71) <ontract voidable under duress when established that party ma>ing claim forced to agree by means of wrongful threat precluding free will economic duress/compulsion demonstrated by (1) immediate possession of needful goods threatened" (2) breachee unable to obtain goods sought elsewhere" # (3) ordinary remedies for &/< inade7uate Wolf v. Marlton Corp$ (B44) (1CBC) +uress is tested" not by nature of threats" but rather by state of mind induced in victim 9F&S,<.)V, .,9. */., ,xertion of legally permissible right wont always escape 8udicial scrutiny % must determine whether @rightfulA exercise of legal right +ISTA?E< +ISRE;RESENTATION< >ARRANTC 0 NONDISCLOSURE Constructi(e 'raud &reach of legal or e7uitable duty which law declares fraudulent b6c of tendency to deceive others" to violate public # private confidence" or to in8ure public interest$ *either actual dishonesty of purpose nor intent to deceive is essential element of constructive fraud (relationship dependent)

6ac"son v. %e#mour (4E1) (1CB2) 9ister sells to brother6trees cut6value up *either party aware land value (mutual mista>e) where inade7uacy of price shoc>s conscience" e7uity seiLes slightest circumstance indicative of fraud" either actual or constructive 'IDUCIARC DUTIES Mere inade7uacy or 7uality isnt per se grounds for avoiding enforcement 23

o However" may be such unconscionableness or inade7uacy of a bargain so as to demonstrate gross imposition or undue influence o )n such cases" <ourts of ,7uity interfere on satisfactory (round of -raud 9hould @shoc> conscienceA <onstructive -raud .wo 'elationship (roups o 'iduciar& 'elationship re7uiring high degree of candor # reliability b6w parties (i$e$ trustee6beneficiary: principal6agent: attorney6client) ?ey ascendancy of one party over another % achieved through placing of trust # confidence of one # assumption by the other o Confidential =ess the product of legal status than result of unusual trust or confidence reposed in fact (i$e$ blood relationship" marriage" physician6patient" minister6parishioner) !ll that is re7uired is parties dont deal on e7ual terms # high degree of confidence placed in honesty # good faith of other party

+UTUAL +ISTA?E
Mista>e 'efers onl# to mista>en belief about existing fact" not an erroneous belief about what will happen in the future

REST< 7d 8 :G7 'e7uirements for !voiding ,nforceability Fnder Mutual Mista>e (1) &asic !ssumption must concern basic assumption on which contract was made (2) Material ,ffect material effect on -agreed exchange of performances (3) 'is> of Mista>e adversely1affected party must not bear ris" of mista>e a$ Means of !llocation of 'is> i$ &y agreement of parties ii$ !ware at formation of only limited >nowledge but treats such >nowledge as sufficient iii$ !llocated ris> by court on ground that it is reasonable in circumstances to do so %herwood v. Wal"er (4E4) (1DD7) % &arren6fertile cow6? rescinded 5here mista>e affects substance of the contract" it must be considered that there was no contract to sell item as it actually was % mista>e as to very nature of item (cow) mista>e onl# as to (ualit# of item not enough (remedy rescission of whole ?) RE;LELIN action or writ for receipt of what one owns (title has passed to person) Beachcomber Coins 4nc. v. Bos"ett (1C7C) % <oin mista>e 5here parties >now doubt exists as to certain matter # contract on that assumption ? not rendered voidable b6c one is disappointed however" parties must be conscious of the uncertaint# of the pertinent fact 24

UNILATERAL +ISTA?E
REST< 7d 8 :GF % T$ree -asic Re,uirements for Unilateral +ista.e A(oidance (1) 9ame criteria must be met as for bilateral mista"e? and (2) )ither of the following must be the case a$ Mista>e is such that enforcement would be unconscionable: or b$ /ther party had reason to "now of mista"e or his fault caused mista"e )lsinore )lementar# v. astorff (414) (1C4E) 5here honest clerical error in bid # +s subse7uent prompt rescission" he is not obliged to execute contract bargain too sharp # no reliance by + (other party >new or had reason to >now of mista>e in bid) %.7.%. 7ransport v. =olvo (1CDB) (7th <ircuit) )f mista>e results from economic climate miscalculation (enforceable) problem solved b# excluding miscalculations of 0udgment Nas opposed to miscalculations of factO courts will %enerall& %rant relief for errors w$ic$ are Oclerical or mat$ematical= &istinction b@w errors of 0udgment 8enforceable: & errors of fact 8not enforceable:

>ARRANTC ALTERNATILE
,R;',99 5!''!*.J ,xplicit promise or guaranty by seller that goods will have certain 7ualities UCC 8 7/F:F 1 E#press >arranties & Affirmation< ;romise< Description< Sample
(1) ,xpress 5arranties by 9eller <reated as -ollows0 a$ !ny affirmation of fact or promise made by seller to buyer which relates to goods # becomes part of basis of bargain creates an express warranty that goods shall conform to affirmation or promise b$ !ny description of goods made part of basis of bargain creates an express warranty that goods shall conform to the description c$ !ny sample or model made part of basis of bargain creates express warranty that the whole of the goods shall conform to the sample or model *ot necessary to creation of express warranty that seller use formal words such as @warrantA or @guaranteeA or that he have specific intention to ma>e warranty" ut an affirmation merel& of (alue of %oods or statement purportin% to e merel& t$e seller=s opinion or commendation of t$e %oods does not create a warranty

(2)

1 )f disclaimer of express warranty # express warranty not consonant" disclaimer invalid 7ribe v. *eterson (42B) (1CCD) % @*o &uc>A Horse E#press >arrant& created by any affirmation of fact made by seller to buyer relating to the goods # becoming part of the basis of the bargain must be a positive # 2B

une7uivocal statement concerning thing sold which is relied upon by the buyer which is understood to be an assertion concerning items sold & not opinion I+;LIED >ARRANTC O' +ERC)ANTI-ILITC UCC 8 7/F:I 1 +isclaimer must mention @merchantabilityA # (if writ) must be conspicuous 1 <ant be buried in fine print 1 )mplied limitations % @as isA @with all faultsA etc (UCC 8 7/F:A) 1 )mplied warranty can also be excluded by prior course of dealing >ARRANTC O' 'ITNESS 'OR A ;ARTICULAR ;UR;OSE UCC 8 7/F:G 1 ,xpress disclaimer must be in writing # conspicuous Conditions -u&er +ust ;ro(e for Reco(er& 1 UCC 8 7/F:G (1) 9eller had reason to >now buyers purpose (2) 9eller had reason to >now that buyer was relying on sellers s>ill or 8udgment to furnish suitable goods: and (3) &uyer did in fact rely on the sellers s>ill or 8udgment

+ISRE;RESENTATION
.hree .ypes of Misrepresentation )ntentional (@deceitA at <6=) o /riginal @fraudA o )ntent distinguishing characteristic6essential element *egligent o =ac>s scienter (intent) o *egligent if reasonable person in same or similar position would have discovered or communicated )nnocent % sometimes >nown as @e7uitable fraudA 6ohnson v. /eal# (43B) (1C7D) % ,xtending F<< warranty principles to realty cases 5here innocent misrepresentation which he reasonably relied upon to his detriment" ; entitled to choose b6w rescission of contract # damages (9trict =iability)
Man ma>es statement in regard to matter upon which hearer may reasonably suppose he has means of informationPand statement is made part of business transaction" or to induce action from which spea>er expects to gain an advantage" he should be held liable for the conse7uences of reliance upon his misstatement$ 5illiston" <ontracts (1C2E)

Cushman v. irb# (44E) (1CD7) 5hen person has full information # represents as much" but fails to disclose entirely # leads other party to believe that entire representation has been made" guilty of fraud if words & reliance upon them bring about adverse conse(uences Silence alone insufficient to constitute fraud unless a dut# to spea" if facts >nown # accessible" bound to disclose such facts # ma>e them >nown

NONDISCLOSURE 0 CONCEAL+ENT
24

+uty to disclose arises where facts are0 1 Unli"el# to be discovered? or 1 's a result of close relationship +uty rarely arises where parties deal at arms length # info is ordinary Modern View several situations vendor is obliged to disclose0 1$ +isclosure necessary to prevent previous assertion from being misrepresentation or from being fraudulent or material 2$ +isclosure would correct mista>e of other party as to basic assumption on which other party is relying (good faith) 3$ +isclosure would correct mista>e regarding writing 4$ /ther person entitled to >now fact b6c of trust relationship

C)ANGED CIRCU+STANCES PUSTI'CING NON;ER'OR+ANCE

I+;OSSI-ILITC 5hen impracticable # impracticable when can onl#

be done at excessive & unreasonable cost REST 7d 8 7A: % Impossi ilit&
5here after a contract is made a partys performance is made impracticable w6o his fault by occurrence of an event the non1occurrence of which was a basic assumption on which the contract was made" his duty to render performance is disc$ar%ed unless lan%ua%e or t$e circumstances indicate contrary

Summar& (1) ,vent must have occurred after the contract was made (2) *on1occurring event must have been a basic assumption of contract (3) ,vent was not the fault of the party see>ing discharge (4) Language or circumstances dont dictate discharge should be denied (i$e$ b6c of allocated ris>) 7a#lor v. Caldwell (1D43) % Music Hall &urning +own 5here person or @thingA necessary to contract fulfillment (music hall)" destruction excuses vendor from obligation if performance becomes impossible b6c of perished thing" impossibility (if not arising from vendor,s fault: excuses vendor from liability Carroll v. Bowersoc" (4B4) (1C17) % *ew flooring6fire destroy + liability" must have benefited from ;s wor> something benefit once attached to +s realty >$ere enefit accrued to (endee !incorporated realt&"< $e is responsi le for pa&in% dama%esJ ot$erwise< (endor is lia le 0 assumes ris. !i*e* construction" Lincoln Welding Wor"s v. $amire> (4BD) (1CD2) % 5or> flood damage <ourt will enforce the terms of the contract if it says that one party will bear the ris> of the loss (<an contract out of the default rule) RIS? 0 INSURANCE IN LAND ;URC)ASES +a5orit& Liew doctrine of e7uitable conversion 27

o ;laces ris> on vendee for fortuitous casualties after entry into contract of sale # prior to closing o Vendees right to specific performance means that contract amounts to e(uitable ownership in vendee o Vuestion as to what happens in instance where vendor has insured property but it hasnt actually passed to vendee Most 8urisdictions posit that vendee may have specific performance w6price abatement (e$g$ to unpaid price) +inorit& Liew vendor bears liability until either title has been transferred or vendee has ta>en constructive possession of premises o !bsent change in title or possession" loss remains where it falls (on the propertys owner)" not to be shifted to another person

I+;RACTICA-ILITC
REST* 7d 8 7AI % ;re(ention & Go(ernment Re%ulation or Order
)f the performance of a duty is made impracticable by having to comply with a domestic or foreign governmental regulation or order" that regulation or order is an event the non1occurrence of which was a basic assumption on which the contract was made$

Louisville & <ashville $.$. Co. v. Crowe (442) (1C13) <ontract lawful when made terminated by later governmental regulation rendering performance unlawful &F. party who received performance under such agreement should not retain it w6o payment (damages) 'merican 7rading v. %hell 4nternational Marine (44C) (1C72) )ssue0 5hether + obliged to pay extra expenses ; incurred in going alternate route whether %ue> Canal was exclusive method of performance

)mpracticability not applicable b6c the mere increase in cost alone is insufficient must be extreme and unreasonable expense Maple +arms v. Cit# %chool &istrict (472) (1C74) ,xcept in most exceptional circumstances" party claiming discharge of an obligation b6c of adverse financial circumstances is unli>ely to get relief UCC 8 7/A:G 1 E#cuse & 'ailure of ;resupposed Conditions
+elay or non1delivery by seller (who notifies # allocates production reasonably # fairly) is not a breach of duty if performance has been made impracticable by the occurrence of a contingency" the non1 occurrence of which was a basic assumption of the ? or by compliance in good faith w6applicable government regulation Comment0 )ncreased price alone insufficient to 7ualify" unless it is the result of unforeseen circumstances altering the essential nature of the contract

2D

Mishara Construction v. 7ransit (473) (1C74) Circumstances drasticall& increasin% difficult& 0 e#pense of performance ma& e wit$in compass of impossi ilit& (not usually a successful argument" though) SU++ARC O' I+;OSSI-ILITC @)ncorporationA into structure # benefit >ey o REST* 7d 8 797 recovery in impossibility # frustration may go beyond mere restitution # include elements of reliance by claimant even though they have not benefited other party

'RUSTRATION O' ;UR;OSE

'actors of Consideration 1 -oreseeability of supervening event 1 'is> allocation 1 .he extent of the damage (i$e$ completely6partially thwarting purpose) 1 5hether party see>ing discharge was at fault (or failed to guard against) rell v. /enr# (47B) (1CE3) % 5indow renting6royal procession watching <oronation procession was foundation of ? # non1event prevented performance of ? Llo#d v. Murph# (4DE) (1C44) Doctrine of 'rustration performance remains possible but expected value destro#ed b# fortuitous event which supervenes to cause failure of consideration supervening frustrating event must have been (1) not reasona l& foreseea le 0 !7" a near complete destruction of t$e a ilit& to perform as contemplated

UNCONSCIONA-LE INE6UALITC
UCC 8 7/FD7 1 Unconsciona le Contracts (Rest< 7d 8 7D@ % same)
(1) )f the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract (2) or it may enforce the remainder of the contract w6o unconscionable clause (3) or it may so limit the application of any unconscionable clause as to avoid any unconscionable result

6uestions for Consideration 1 5as it unconscionable to include the term at the time of the contract 1 5ould the person have agreed to terms at time of the ?" if fully understood Woollums v. /orsle# (4DD) (1DC2) 5here ? substantively unconscionable # un8ust enforcement" the ? is unenforceable 2C

Waters v. Min Ltd. (4CB) (1CC2) 5here ? obtained under adverse circumstances # totality of circumstances (including price disparity) indicate too hard a bargain (or no bargain)" court will not enforce the ? Williams v. Wal"er 7homas +urniture (4CC) (1C4B) C/L unconsciona ilit& absence of meaningful choice (procedural unconscionability) to%et$er w6contract terms which unreasonably favor other party (substantive unconscionability) % in determining reasonableness or fairness" primar& concern must e contract terms in conte#t of circumstances in w$ic$ t$e& were made Brower v. Gatewa# (7E1) (1CCD) % (ateway !rbitration <lause 5here party meddled w6remedies to ma>e them prohibitively expensive or unreasonable (leaving a party w6o remedy) ? ma& e unenforcea le solel& on su stanti(e %rounds Gianni %port v. Gantos (7EC) (1CD4) 5here a clause is substantively unreasonable" court may hold that it is unconscionable (VF!=)-),+ H/=+)*( % court reluctant to endorse)

EB;RESS CONDITIONS
CONDITION an operative fact subse7uent to acceptance # prior to discharge

Rest 7d 8 77I 1 Condition Defined

! condition is an event not certain to occur which must occur unless its non1occurrence is excused before performance under a contract becomes due$

-act can be made to operate as a condition only by0 o !greement of both parties (e#press % written out or implied by actions) o <onstruction of the law (constructi(e % imposed by courts for fairness) <on!occurrence of a condition will prevent existence of a dut# in other part# Classification of Condition o ;recedent <onditions any event" other than lapse of time" which must occur before performance under a contract is due o 9ubse7uent <onditions event operating by agreement of parties to discharge a duty of performance after it has become absolute *o substantive difference b6w two" but procedural distinction important o -or conditions precedent % burden of proof is on ; o -or conditions subse7uent % burden of proof is on +

/oward v. +C4C (714) (1C74) (4th <ircuit) % <rops cut6b6f inspection 3E

=egal policy opposed to forfeitures % policies t&picall& construed in insureds= fa(or when doubtful whether promise or condition precedent exists" words construed as promise insertion of clause concerning destruction of stal>s inserted for convenience (not precedent condition) in evaluating damages ;re(ention Doctrine 1 ! party who prevents fulfillment of a condition of his own obligation cannot rely on such condition to defeat his liability an express promise to perform on the happening of an event warrants implication of a promise to refrain from activity impeding its happening" and breach of the implied promise is legally as serious as the breach of the express (.raynor)$ REST* 7d 8 779 % Standards of ;reference wit$ Re%ard to Conditions
(1) )n resolving doubts as to whether event is made a condition of an obligors duty and as to the nature of such an event an interpretation is preferred that will reduce the obligees ris> of forfeiture unless the event is within the obligees control or the circumstances indicate that he has assumed the ris>

)llustration0

! (general contractor) contracts w6& (sub1contractor) for plumbing wor> on construction pro8ect$ & to receive Q1EE"EEE" no part of which shall be due until five days after /wner shall have paid ! therefore$ & does plumbing" but owner becomes insolvent # fails to pay ! under duty to pay & after a reasonable time ((eneral 'ule of <onstruction) % obligee (&) did not assume the ris> of forfeiture$

Schuler- aas v! "etna no express language to contrary in document (# no extrinsic evidence)" where payment stipulated to occur on event" occurrence of event fixes only time for payment not a su stanti(e condition of le%al responsi ilit& to pa&

Clar" v. West (7B3) (1CED) <; may be waived (reliance upon waiver assurance) either by implication % words # acts % or expressly (newer rule waivers may be revo>ed if no detrimental reliance on them) REST* 7d 8 77E % E#cuse of a Condition to A(oid 'orfeiture
.o the extent that the non1occurrence of condition would cause disproportionate forfeiture may excuse non1 occurrence of condition unless its occurrence was a material part of t$e a%reed e#c$an%e

'etna Cas. & %uret# Co. v. Murph# (74E) (1CDD) )ssue0 5hether insured who gives belated notice of claim can still recover on insurance ? by rebutting presumption that his delay has been pre8udicial to insurance carrier )f insurer suffered no material pre8udice from delay or non1occurrence" it may be excused b6c not material part of agreed exchange )f occurrence of condition re7uired by

31

agreement of parties (express)" rather than matter of law (constructive)" strict compliance$ Rule rela#ed so failure to perform ,< excused to avoid disproportionate forfeiture !lthough many cases apply literal enforcement" there may be instances of disproportionate forfeiture occasioned by such enforcement (i$e$ where bargaining une7ual" unfair forfeiture # lac> of pre8udice towards obligor) 6acob & Aoungs v. ent (D33) (1C21) 5hile full performance still standard of duty" when omissions both trivial # innocent" may sometimes be atoned for by allowance of resulting damage # not always be found to be breach of condition followed by disproportionate forfeiture (substantial performance)

</*+).)/*9 /- 9!.)9-!<.)/*
EBCUSE 'OR I+;RACTICA-ILITC
Grenier v. Compratt Construction Co. (744) (1CD3) 5here condition isnt material to agreed exchange # impracticable due to circumstances unforeseen at time of inception" contract may be enforceable w6condition being excused (full performance of ?) %econd <at,l Ban" v. *an 'merican Bridge (77E) (1C1E) <ertification may not be excused merely b6c it was unreasonably # unfairly withheld % must have been done in bad faith

SU-STANTIAL ;ER'OR+ANCE
REST* 7d 8 77@ 1 Su stantial ;erformance
)f it is practicable to determine whether a reasonable person in the position of the obligor would be satisfied an interpretation is preferred under which the condition Nthat the obligor be satisfied with the obligees performanceO occurs if such reasonable person in the position of obligor would be satisfied

<olan v. Whitne# (771) (1DD2) 5here performance substantial (doesn,t have to be literal & exact in all cases ) (given circumstances # evaluation) unreasonable refusal of certification dispenses with its necessity (condition) =an 4derstine v. Barnet (772) (1C24) 9; limited to construction contracts b6c un8ust enrichment (benefit appropriated w6o payment): in other cases" certificate of approval must be withheld in bad faith for ; to recover (unreasonable doesnt get you there)

32

NOTE *on1occurrence doesnt apply where benefit hasnt un8ustly accrued to + +ursmidt v. /otel 'bb# (773) (1C4E) % ;ersonal -ancy ? $easonable person standard (ob8ective evaluation) applies when the contract concerns operative utility satisfaction: and a standard of good faith is employed when the contract involves personal aesthetics or fanc#

CONSTRUCTILE CONDITIONSM ORDER O' ;ER'OR+ANCE

<onstructive <onditions % (1) <onditions not agreed upon by the parties" but which are (2) supplied by courts for fairness # (3) only substantial compliance w6constructive conditions is generally re7uired ingston v. *reston (7DE) ?& (1773) 5here apparent that bargained1for part of ? is a <; to performance (constructive condition)" non1occurrence of condition absolves the non1breaching party from liability REST* 7d 8 7FI % Order of ;erformances
5here all or part of performances to be exchanged under exchange of promises can be rendered simultaneously they are to that extent due simultaneously unless language@ circumstances indicate contrar# <mt0 !pplies where (1) same time fixed for performance of each party: (2) where time is fixed for the performance of one and not the other: (3) where no time is fixed for either: (4) where same period is fixed within which each party is to perform

REST* 7d 8 7F@ % Effect on Ot$er ;art&=s Duties of a 'ailure to Offer ;erformance

5here all or part of the performances to be exchanged under an exchange of promises are due simultaneously it is a condition of each partys duties to render such performance that the other party either render or with manifested present ability to do so offer performance of his part of the simultaneous exchange (.,*+,')

*rice v. =an Lint (7D3) (1C41) General Rule */. construe promises as independent unless nature indicates intention to be construed as such (a%reed e#c$an%e of promises 1 presumption towards simultaneit& in e#c$an%e< unless contract indicates ot$erwise ) 5here performance for one party may arrive b6f performance of other" ? of independent promises %tewart v. <ewbur# (DED) (1C17) 5here contract to perform wor> # no agreement as to payment made" wor> must be substantiall# completed b6f payment can be demanded 'ules of <onstruction0 5here one partys promise re7uires a substantial amount of time for performance o ;art& w$ose performance re,uires time e#tends credit to t$e latter ell# Construction v. /ac"ensac" Bric" (D11) (1C1D) 33

5here no payment time specified in contract # sale for specified 7uantity of goods" contract is @entireA # failure to pay by buyer when part delivery has been made doesnt absolve seller from obligation to complete delivery UCC 7/FD9 1 Deli(er& in Sin%le Lot or Se(eral Lots
Fnless otherwise agreed all goods called for by a contract for sale must be tendered in a single delivery and payment is due only on such tender but where the circumstances give either party the right to ma>e or demand delivery in lots the price if it can be apportioned may be demanded for each lot <mt$ 40 5here the circumstances indicate that the seller is entitled to deliver in lots" the price may be demanded for each lot if it is apportionable

REST< 7d< 8 7FF (gist of F<< K 213E7) 7ipton v. +eitner (D12) (1DBC) % divisible contracts .wo deliveries didnt constitute @entireA contract (different prices" delivery # bargaining) # delivery # payment concurrent for dressed hogs % probable reading that payment was meant upon delivery separately for live # dressed hogs <ourt treats two parts of contract li>e independent promises 1 &uyer breached on 1st contract (damages for 9eller) 1 9eller breached on 2nd contract (reduction in damages reclaimed on 1st breach for failure to fulfill contract w6&uyer) REST* 7d 8 7ID % ;art ;erformances as A%reed E,ui(alents
)f the performances to be exchanged under an exchange of promises can be apportioned into corresponding pairs of part performances so that the parts of each pair are properly regarded as agreed e7uivalents a partys performance of $is part of suc$ a pair $as t$e same effect on t$e ot$er=s duties to render performance of t$e a%reed e,ui(alent as it would $a(e if onl& t$at pair of performances $ad een promised <mt0 5hen it is proper to regard parts of pairs of corresponding performances under a contract as agreed e7uivalents" the contract is loosely referred to as @divisibleA or @severableA

7rap"us v. )dstrom,s 4nc. (DB2) (1CD4) !bsent clear expression of divisibility" presumption to treat terms of contract as interdependent (<;): further" contracts calling for installment performance aren,t necessaril# divisible contracts depends on intention" fair construction of terms # provisions of the contract itself NOTE Doctrine of Conditions substantial performance of one part of divisible contract has same effect on corresponding part as substantial performance of an indivisible duty has on entire contract

E#press Conditions !2I'3 clause" 9trict <ompliance E#ceptions o ,xcuse of <ondition

34

o )mpracticability6)mpossibility o 5aivers of <onditions o +isproportionate -orfeiture Constructi(e Conditions ()mplied in =aw) 9ubstantial ;erformance enough ;ayment <ondition % party w6performance time extends credit to other party o <6= rule is payment !-.,' substantial performance (or full) o However" if apportionable" thats sensible application of <6= 'ule

;ROTECTING T)E EBC)ANGE ON -REAC)

+)9.)*<.)/* </F'.9 M!?, Two t&pes of reac$ (1) <omplete" ma8or # material typically made @conditionsA by courts (2) ;artial" minor # immaterial typically treated as ); (non1conditions) 2shins"# v. Lorraine Mfg. Co. (D1B) (1C11) 5here time specified" terms clear # precise" # delivery time material to ?" failure to deliver per ? absolves non1breaching party of duty to accept Bec" & *auli Lithographing v. Colorado Milling & )levator Co$ (D17) 5here manufactured goods such that prohibit resale (or at substantial loss) # delivery time isnt material condition (or late delivery doesnt pre8udice buyer)" refusal to accept over @trifling delayA not 8ustified 9</;, /- F<< @(oodsA # @9ervicesA UCC 8 7/GD@ 1 Cure & Seller of Improper Tender or Deli(er& UCC 8 7/G:D 1 Effect of -reac$ on Ris. of Loss 1 )f tender non1conforming" ris> loss remains w6seller until cure6acceptance UCC 8 7/AD: % -u&er=s Ri%$ts on Improper Deli(er& 1 'e8ect whole 1 !ccept the whole 1 !ccept part # re8ect rest UCC 8 7/AD7 % +anner 0 Effect of Ri%$tful Re5ection 1 5ithin reasonable time after delivery or tender UCC 8 7/ADG % >ai(er of -u&er=s O 5ections & 'ailure to ;articulariHe 1 -ailure to particulariLe defect precludes buyer from relying on the unstated defect if (a) the seller could have cured or (b) seller ma>es a re7uest for full # final written statement of defects buyer relies upon for re8ection UCC 8 7/ADA % >$at Constitutes Acceptance of Goods UCC 8 7/AD9 % ,ffect of !cceptance: *otice of &reach: ,stablishing & !fter !cceptance UCC 8 7/AD@ % Re(ocation of Acceptance in >$ole or In ;art 1 Must occur within reasonable time after acceptance UCC 8 7/ADE % Ri%$t to Ade,uate Assurance of ;erformance 3B

*late( Corp. v. Machlett Labs (D24) (1CD3) !<<,;.!*<, UCC 8 7/ADA!:" acceptance of goods occurs when bu#er 8a: after reasonable opportunit# to inspect goods signifies to seller that he will ta"e them in spite of non!conformit#? or 8b: fails to ma"e effective re0ectionA ',S,<.)/* + failed to re8ect as provided by 8 7/ADA # 8 7/ADG also provides that buyer precluded from relying on un1particulariLed defects in re8ection notice if defects could have been cured (w6seasonable notice) by ma>ing a substituted" conforming tender ;/9.1!<<,;.!*<, UCC 8 7/AD9" buyer must pay ? rate after acceptance # bears burden of establishing non1conformity of goods: UCC 8 7/AD@!:" further re7uires non1 conformity of goods have substantially impaired value to buyer

<=!99 +)!('!M UCC ',S,<.)/* (contract off) !<<,;.!*<, (contract on)

',V/<!.)/* (off) ) 9ub$ )mpairment

+ortin v. 2x!Bow Marina3 4nc. (D2D) (1CCE) % ;roblems w6&oat <ombination of factors (even if minor individually) may constitute substantial impairment (UCC 7/AD@)" necessitating return of good # restitution of purchase price

>ILL'UL DE'AULTER
(eneral 'ule willful breach defeats a claim of substantial performance /arden v. Consolidated )dison Co. of <A (D34) (1C74) 5illfulness one of several factors in considering whether 9; conduct may be material breach" but if essence of ? fulfilled" 9; may still be found # obligation still exist in non1 breaching party to pay for enrichment Worcester /eritage %ociet# v. 7russell (D37) (1CC1) historic 5here breaching partys actions not (1) fraudulent" (2) do not go to essence of contract" # (3) have not repudiated contract" non1breaching party may not maintain action for rescission of the contract

DELAC
;resumption that time is not the essence of the contract" unless contract states that it is or the circumstances indicate that the need for promptness is apparent

34

ANTICI;ATORC RE;UDIATION
REST* 7d< 8 7GD 1 Anticipator& Repudiation
! definite # une7uivocal manifestation of intention on the part of the repudiator that he will not render the promised performance when the time fixed for it in the contract arrives Nreasona le certaint& importantO

-REAC) -C ANTICI;ATORC RE;UDIATION UCC 8 7/A:D

!nticipatory &reach occurs on clear repudiation of partys contractual duties b6f time has come for performance (may be oral # indicated by actions) 9uit can be brought at once for anticipatory repudiation occurring b6f performance date is due (up to ; as to when he wants to sue b6f or after)

Wholesale %and & Gravel v. &ec"er (D4E) (1CC3) % +riveway ;roblem Anticipator& Repudiation (!') intent may be communicated through actions6words actions6words must be definite3 une(uivocal3 & absolute$ & G Construction Co. v. /arris (D41) (1C4E) 5hether promises dependent or independent (intention # circumstances controlling factor) presumption towards dependent construction in bilateral contracts GENERAL RULE w$ere total price for wor. is fi#ed & ? t$e wor. is not rendered di(isi le & pro%ress pa&ments !in8ured party can treat total breach as partial) */., )f performing party stops performing or performs badly" paying party can suspend payment (generally spea>ing) Retraction of Repudiation (UCC 8 7/A::" % permissible until other partyP (1) materially and reasonably relies on repudiation (changes position) (2) other party sues for breach (3) other party states that repudiation is final

;OTTO> DIAGRA+
Non/Su stantial -reac$ <ontract /* partial breach -reac$ +aterialit& 'actors 1 +eprivation of expected benefit (non1breaching party) 1 ;art performance % greater amount rendered" less li>ely material breach 1 =i>eliness or willingness to cure 1 5illful (more li>ely to be regarded as material) 1 +elay % usually considered insubstantial ;artial/+aterial -reac$ 9uspension (payments can be withheld) <ontract status G Total !comp*" -reac$ <ontract /-- 1 unless non1breaching party treats as

37

ADE6UATE ASSURANCE
UCC 8 7/ADE % Ri%$t to Ade,uate Assurance of ;erformance !Self/$elp remed&"
(1) ! contract for sale imposes an obligation on each party that the others expectation of receiving due performance will not be impaired$ 5hen reasonable grounds for insecurity arise with respect to the performance of either party the other may in writing demand ade7uate assurance of due performance and until he receives such assurance ma& if commerciall& reasona le suspend an& performance for w$ic$ $e $as not alread& recei(ed t$e a%reed return

7urntables 4nc. v. Gestetner (D4C) (1C74) 9eller may suspend performance until he receives buyers !! of due performance$ ,ven if sellers suspicion buyer insolvent inaccurate" seller entitled to protection of UCC 7/ADE if acting in good faith # reasonable grounds for insecurity w6respect to buyers payment REST* 7d< 8 7G: 1 >$en 'ailure to Gi(e Assurance +a& e Treated as Repudiation
(1) 5here reasonable grounds arise to believe that the obligor will commit a breach by non1performance that would of itself give the obligee a claim for damages for total breach" the obligee may demand ade7uate assurance of due performance and may" if reasonable" suspend any performance for which he has not already received the agreed exchange until he receives such assurance .he obligee may treat as a repudiation the obligors failure to provide within a reasonable time such assurance of due performance as is ade7uate in the circumstances of the particular case

(2)

INSTALL+ENT CONTRACTS
UCC 7/A:7 % @)nstallment <ontractA &reach (;erfect .ender rule) 1 &uyer must accept under (2) an installment delivery if the non1conformity is curable # the seller gives ade7uate assurance of the cure 1 Fnder (3)" if the non1conformity substantially impairs the value of the whole ?" there is a breach of the whole ? # buyer may treat as such REST* 7d 8 7GF 1 Effect of Repudiation
(1) 5here obligor repudiates duty before committing breach by non1performance # before receiving all of agreed exchange" his repudiation alone gives rise to a claim for damages for total breach (2) 5here performances are to be exchanged under exchange of promises one partys repudiation of a duty to render performance discharges the others remaining duties to render performance

Cherwell!$alli3 4nc. v. $#tman Grain Co$ (DB4) (1CDE) % &uyer late6wanted !! )f reasonable doubt as to buyers default is substantial" seller (;) may suspend until it can ascertain whether buyer able to offer ade7uate assurance of future payments however" buyers conduct % if sufficientl# egregious % can by itself constitute substantial impairment of value of whole contract # present breach of entire contract seller then allowed under UCC 8 7/9DF to cancel remainder of contract

DA+AGE RE+EDIES
3D

,xpectation +amages !ttempt to put ; in position he would have been had & performed ; awarded (1) out1of1poc>et costs # (2) profit he would have made had contract been completed 'eliance +amages !ttempt to put ; in as good a position as she was in prior to ma"ing contract ; awarded out1of1poc>et expenditures incurred in performing contract ;revent un0ust enrichment of + by returning to ; who has partially performed the value of the performance rendered to & 'estitution # 'eliance awarded in suits where recovery on contract is unavailable (1) unenforceable contracts # (2) @material breachA by ;

'estitution +amages Vuasi1<ontract

'dvanced 4nc. v. Wil"s (1CDB) Cost of ;erformance/cost of repair in uni7ue" special instances land6property particularly suited for thing @cost of performance6repairA applicable$ 5here land solely for investment purposes it may be appropriate to apply mar>et value diminution analysis E#pectation Interest Mar>et +iminution (;eevyhouse) Value of +s promised performance (usually contract price) minus the enefits (if any) ; received from not having to complete performance <ost of ;erformance cost of completing contract (usually construction cases)

Louise Caroline <ursing /ome v. &ix Construction )n cases involving failure to complete construction contracts damage measure calculated on cost of performance standard" thus @ma>ing wholeA or attaining initial expectancy of the contract$

LI+ITATIONS ON EB;ECTATION O' DA+AGES

$oc"ingham Count# v. Luten Bridge Co. (41) (1C2C) (4th <ircuit) +uty to mitigate damages upon notice of breach damage measurement materials 0 la or e#pended 0 future lost profit resultin% from failure to specificall& perform ; only interested in profits resulting from ? e7ually advantageous to sue for expectation damages (profit) L- 'OR+ULA +istinguishes b6w fixed costs (overhead) # variable costs Leingang v. Cit# of Mandan Weed Board (44) (1CC1)

3C

Anticipated ;rofits constant @overhead expensesA not included as </; b6c ; must pay whether or not ? breached ; compensated by recovering ? price reduced onl# b# expenses saved b@c contract wasn,t performed earsarge Computer 4nc. v. 'cme %taple Co. (4B) (1C74) (eneral 'ule ;rofits on ?s after breach do not mitigate damages unless first ? re7uired services to extent that concurrent performance would have been impossible *ar"er v. BCth Centur# +ox (47) (1C7E) 9hirley Mac=aine General Rule recovery measure for wrongfully discharged employee salary agreed upon for service period" less amount employer proves employee earned or w6 reasonable effort mightve earned elsewhere b6f pro8ected earnings from other employment accounted for" employer must show other employment was comparable or substantiall# similar to that which employee was deprived of % re8ection of inferior or different employment not be used to mitigate damages reasonableness isnt re7uirement of employees decision to re8ect or fail to see> different or inferior employment1

DA+AGES UNDER T)E UCC

UCC 8 7/9:F 5hat does time when bu#er learned of the breach meanG (,*,'!= 'F=, 5hen seller repudiates" buyers damages calculated by mar>et price at expiration of commerciall# reasonable time after bu#er learned of repudiation </MM/* =!5 5hen seller repudiates" buyers damages calculated by use of mar>et price at time of performance (Missouri -urnace <o$ v$ <ochran) -UCER 7/9:: (<over or damages) 7/9:F (+amage formula) 7/9:7 (<over remedy) 7/9:G ()nc$ # cons damages) 7/9:A (9pecific ;erformance) 7/9:I (+amage for breach of accepted goods) SELLER 7/9DF (=ist of things) 7/9D@ (+amages formula) 7/9DA ('esale remedy6cover) 7/9:D ()ncidental damages) 7/9DE (!ction for price)

<eri v. $etail Marine Corp. (44) (1C72) % =ost volume seller +s right to recover under 8 7/9:@ offset to extent + proves right to recover damages under another article of F<< 8 7/9D@ damage measure difference b6w mar>et price at tender # contract price unless inade(uate to place seller in as good a position as he would,ve been w@sale$ 5here seller is dealer # buyer breaches sale" seller damaged even though he resells article for same price breach depletes dealers profit
1

'easonableness of efforts in see>ing employment is a consideration: not the choice to accept or re8ect

4E

6ualification of Lost/Lolume Seller 1 9hould not focus on sellers capacity to supply breached units 1 9eller must establish not only that it had capacity to produce breached unit in addition to re1sold unit but also that it would have been profitable to do so Commonwealth )dison Co. v. &ec"er Coal (4D) (1CD7) K 217ED remedies onl# available to seller not entitled to contract price under K 217EC K 217ED fallbac" position for sellers not entitled to recover under 217EC (see 217EC(3)) /adle# v. Baxendale (4C) (1DB4) RULE damages such as may be (1) fairl# & reasonabl# considered to have naturall# arisen from breach of contract itself or (2) such as ma# reasonabl# be supposed to have been in contemplation of both parties at time of entering into contract as probable result of breach of contract Tacit A%reement Test (1) li>ely to be within promsiors contemplation # (2) whether it is or not should be wor>ed out on terms which it fairly may be presumed he would have assented to if the# had been presented to his mind (re8ected by F<< K 2171B) timU Laundr# v. <ewman 4ndus (73) (1C4C) Reasona l& 'oreseea le (1) imputed >nowledge ordinar# person >nowledge of li>ely loss from &/<: (2) actual >nowledge whether breachor possesses >nowledge of special circumstances outside Mordinary course of things which would ma>e a breach cause additional loss onl# necessary that breachor" if he had considered (uestion" would as reasonable man have concluded that the loss in 7uestion was liable to result (tacit agreement test)

'ORESEEA-ILITC TODAC
REST< 7d 8 FG: % Unforeseea ilit& 0 Related Limitations on Dama%es
(1) +amages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made (2) =oss may be foreseeable as a probable result of a breach b6c it follows from the breach a$ )n the ordinary course of events" or b$ !s a result of special circumstances" beyond the ordinary course of events" that a party in breach had reason to >now (3) ! court may limit damages for foreseeable loss by excluding recovery for loss of profits" by allowing recovery only for loss incurred in reliance" or otherwise if it concludes that in the circumstances 8ustice so re7uires in order to avoid disproportionate compensation

=alentine v. General 'merican Credit (77) (1CD4) mental distress ; May not recover mental distress damages for breach of employment contract *!''/5 ,R<,;.)/* whether ? has (1) elements of personality # (2) whether damage suffered capable of ade7uate compensation by reference to terms of ? mental 41

distress dama%es for -OC $a(e not een awarded w$ere t$ere is a mar.et standard & w$ic$ dama%es can e ade,uatel& determined$ /ancoc" v. <orthcutt (DE) (1CC1) -or mental distress damage award" emotional tran(uilit# must be the contract,s essence REST< 7d 8 FGF % Emotional Distur ance
'ecovery for emotional disturbance excluded unless breach also caused bodily harm or contract or breach is of a >ind that serious emotional disturbance was a li>ely result

+reund v. Washington %(uare *ress 4nc. (D2) (1C74) <ollege ;rof6&oo>6'oyalty Measuring damages by awarding cost of publication would un8ustly enrich ; at +s expense # place him in better position than hed have been in had the ? been fulfilled the royalties expected from sales fails for uncertainty damages not measured b# cost saved b# & in breaching but by *;< of breach to the plaintiff$ +era v. =illage *la>a (DB) (1C74) *ew &usiness 9peculative ;rofits 'eluctance to award damages based on untried business profits should not be read as per se prohibiting ever# new business from recovering such damages problem not w6damages themselves but with proving w6reasonabl# certaint# those damages where in8ury to some degree is found" recovery is not precluded for lac> of precise proof REST< 7d 8 FG7 % ;roof of ;rofits
+ifficulty lies in establishing basis for new business damages o +amages may be established w6reasonable certainty w6aid of expert testimony" economic # financial data" mar>et surveys" etc$ )f well established business" damages based on past expectations # profits

ALTERNATILE INTERESTSM RELIANCE 0 RESTITUTION

REST 7d 8 FIE 1 Dama%es -ased on Reliance Interest
!s an alternative to the Nexpectation interest measure of damages the in8ured party has a right to damages based on his reliance measure of interest including expenditures made in preparation for performance or in performance less any loss that the party in breach can prove w6reasonable certainty the in8ured party would have suffered had the contract been performed

Chicago Coliseum Club v. &empse# (DC) (1C32) &oxing <ase 5here speculative profits" (1) damages must be proved w6a reasonable degree of certaint# in order to be compensated # (2) any obligations assumed prior to contract w@& are not chargeable to & # (3) reliance damages pursuant to contract b6w date of contract signing # actual breach (notice from +) are recoverable to the extent that they were pursuant to # in furtherance of the contractual agreement$

42

'nglia 7elevision v. $eed (C4) (1C71) 5here lost profit cant be proved" ; entitled to recover wasted expenditure # not necessarily limited to that incurred after contract made D must=(e .nown dama%e would result from reac$ 0 s$ould ear conse,uences

6UANTU+ +ERUIT
Boone v. Coe (1EE) (1C13) Duantum Meruit General Rule damages not recoverable for violation of 9/-1barred contract VM becomes issue (7uasi1contract) # >ey 7uestion whether damage incurred by ; was (1) accepted by + # (2) benefited him" thereby implying promise to pay contract U.%. v. 'lgernon Blair 4nc. (1E3) !ccepted ;rinciple promisee upon breach has right to forego suit on contract # claim only reasonable value of performance ; may 8oin claim for VM w6claim for damages under &/< recovery reasonable value of performance 9.!*+!'+ for measuring reasonable value is amount for w$ic$ suc$ ser(ices could $a(e een purc$ased from one in ;=s position at t$e time 0 place t$e ser(ices were rendered earns v. 'ndree (1EB) (1C2D) &enefit not re7uiredP 5hen contract is wholly unenforceable # ; cannot bring an action on the contract for some reason other than his default is permitted recovery for reasonable value of services" w6o regard to whether those services have benefited the other party if wor> done to adapt to +s desires # under terms of oral agreement for sale of premises" in good faith" # in honest belief of definiteness # enforceability" ; is entitled to compensation 2liver v. Campbell (1EC) (1CB4) % +ivorce proceeding virtually complete 'estitution is not available to one who has full# performedP if only part of the agreed exchange for such performance not been rendered by + is the sum of money constituting a li7uidated debt Britton v. 7urner (11B) (1D34) % C W month laborer67uit6sued for VM Hired laborer compensated for service actuall# performed" though not continuing for contract term # such contracts presumed to be made w6reference to that understanding unless express stipulation shows contrar# if + receives benefit be#ond damage occasioned b# failure to complete" + must pay ; reasonable value of services (minus damage to +) (may not recover damages over contract price) +a5orit& Liew <ontract which fails to satisfy test of substantial performance may recover in 7uasi1contract for the wor> done (less the others damages) 43

>ILL'UL -REAC) +odern Liew ,ven intentional departure from contract specs will not necessaril# defeat recover#" but may be considered as factor in determining whether VM recovery =ines v. 2rchard /ills 4nc. (12B) (1CDE) ;urchaser whose breach is not willful has a restitutionary claim to recover money paid that un8ustly enriches seller re7uires ; to prove that + has been un0ustl# enriched (show imbalance in damages)

)e CLAUSE
+amage <lauses /nly ,nforceablePTwo ;art Test (1) )f the damages are @difficultA to measure (2) )f the amount fixed is a reasonable forecast of what is re7uired to 0ustl# compensate in8ured party Cit# of $#e v. *ublic %ervice Mut. 4ns. (133) (1C74) % 1EE> surety bond General Rule )f agreement provides for a penalty or forfeiture w6o statutory authority" it is unenforceable$ 5here damages difficult to ascertain" provision fixing damages in advance upheld if amount is reasonable measure of anticipated probable harm NOTE =i7uidated +amage <lauses Aoc"e# v. /orn (13B) 7th <ircuit (1CDC) 5here li7uidated damages clause is reasonable either at the time of contracting or at the time of in0ur# (providing there are actual damages)" the contract is enforceable$ Muldoon v. L#nch (134) (1DDB) )f on its face the ? was intended by parties as a penalty" the clause is unenforceable" especially when the result would be a sum disproportionate to any actual damage$ REST< 7d 8 FGA % Li,uidated Dama%es 0 ;enalties
+amages for breach by either party may be li7uidated in agreement but only at amount reasonable in the light of the anticipated or actual loss caused by the breach # the difficulties of proof of loss$ ! term fixing unreasonably large li7uidated damages is unenforceable on grounds of public policy as a penalty <omments0 .wo factors (1) anticipated or actual loss caused by breach # (2) difficulty of proof of loss % the greater the difficult either of proving that loss has occurred or of establishing its amount w6re7uisite certainty" the easier it is to show that the amount fixed is reasonable

meta/contracts (about the contract itself)

44

 Rest< 7d embraces the anticipated or actual loss (hindsight) approach (see F<< 2171D) Wilt v. Waterfield (141) (1CB4) Undifferentiated Clauses ;resumption of In(alidit& +amage formulas invariant of the gravit# of the breach (applying to a variety of breaches of varying degrees of importance) are not a reasonable effort to estimate damages especially true when fixed sum greatly exceeds losses li>ely to flow form minor breaches UCC 8 7/9:E 1 Contractual +odification or Limitation of Remed& +retwell v. *rotection 'larm Co (144) (1CDD) % !larm co$ limits damages to QBE )ssue(s)0 5hether the clause of the contract is enforceable which limits damages to QBE and (3) whether the indemnity clause of the contract is enforceable

5here damage clause ma>es no effort to reasonably forecast 8ust compensation for harm caused by breach" it is clearly an attempt to limit damages provisions limiting liability under burglary alarm services generally upheld (+ not an insurer) finally" indemnity provision of agreement is enforceable if intention to do indemnify in ? is une7uivocally clear from the agreement

EN'ORCE+ENT IN E6UITC
S;ECI'IC ;ER'OR+ANCE
(,*,'!= 'F=, 9; reserved for situations where aggrieved party can show that money18udgment remedy would be inade(uate remedy LI+ITATIONS ON E6UITA-LE RE+EDIES !S; 0 INPUNCTIONS" 1 ,7uity granted only if the ?s terms are definite enough to frame an order 1 *o relief where enforcement6supervision would be difficult (ser(ice ?s) 1 <ontracts for sale of land specifically enforced (inherent parcel uni7ueness) 1 ;ersonal service contracts rarely (almost never) awarded 9; =an Wagner 'dvertising v. % & M )nterprises (1B1) % &illboard =ease 9; imposed as remedy for breach of real property contracts # available (in appropriate circumstances) for real property leases$ ;oint at which 9; granted is whether uncertaint# valuing it (volume" refinement # reliability of available info about substitutes) )f damages con8ectural # incalculable w6reasonable certainty" + compelled to 9; e7uitable remedy must not itself wor> ine7uity # 9; should not be undue hardship$ REST< 7d 8 FAD 1 'actors Affectin% Ade,uac& of Dama%es
)n determining whether the remedy in damages would be ade7uate Nto protect the expectation interest of in8ured partyO" the following circumstances are significant (a) the difficulty of proving damages w6reasonable certainty

4B

(b) the difficulty of procuring a suitable substitute performance by means of money awarded as damages" # (c) the li>elihood that an award of damages could not be collected

UCC 8 7/9:A!:" 9pecific performance may be decreed where the goods are uni,ue or in other proper circumstances (although liberaliLed" still extraordinary remedy) +it>patric" v. Michael (17E) (1C3C) % =ifetime careta>er6interest in estate 5here ? is one for personal services" ; is not entitled to 9;" although breach of legally enforceable ? service contracts are of personal # confidential nature such they cant be specifically enforced w6any success

EN'ORCING NON/CO+;ETITION ;LEDGES

TEST ,xpress anti1competitive covenant rigorously examined # specifically enforced only if satisfies certain re7uirements no 9; unless necessary to protect trade secrets" customers lists" good will of employers business or employer exposed to specific harm b6c of uni7ue nature of ,s service$ 9FMM!'J ,nforceable only if the restrictions imposed are reasonably necessary for the protection of the employer or principal$ !ny such agreement imposing unreasonable restraint is illegal" void # unenforceable even as to so much of covenant or performance as would be reasonable restraint &ata Management v. Greene (17C) (1CDD) % computer services )f overbroad covenant can be reasonabl# altered to render enforceable3 court shall do so unless it determines covenant not drafted in good faith$

')(H.9 # +F.),9 /- */*1;!'.),9

T)IRD ;ARTC -ENE'ICIARIES
Lawrence v. +ox (D4C) (1DBC) % H Q3EE loan to + (for ;): + not give to ; !ny person for whose direct benefit a contract was intended can sue on it NOLATION *ew contract substituted for # displacing old one Two Cate%ories of -eneficiar& +onee &eneficiary (contract conferred for benefit of performance) <reditor &eneficiary (pre1existing obligation) REST< 7d 8 FD7 % Intended 0 Incidental -eneficiaries
(1) Fnless otherwise agreed b6w promisor # promisee" beneficiary of promise is intended beneficiary if recognition of right to performance in beneficiary appropriate to effectuate parties intent and either

44

.he performance of the promise will satisfy an obligation of the promise to pay money to the beneficiary Ncreditor beneficiaryO b$ .he circumstances indicate that the promise intends to give the beneficiary the benefit of the promised performance Ndonee beneficiaryO (2) !n incidental beneficiary is a beneficiary who is not an intended beneficiary INCIDENTAL -ENE'ICIARIES ARE NELER ENTITLED TO RECOLERC */., .he right to performance in a 3rd party beneficiary is determined both by (1) intention of the contract parties # (2) by the intention of one of them to benefit the 3rd party

a$

*ierce v. <emours +oundation (DD1) (1CDD) )ntent to confer 3rd party beneficiary benefit determined by ? language in context in which written typical owner insulated from subs during course of construction # during pursuit of recovery in event of default (buffer Lone) INTENTION TO -ENE'IT 1 T)E ASSU+ING GRANTEE O' LAND 5hen identifying intended &" intention usually turns on promisee=s intention .wo choices vendee where mortgaged land sold two options o "ssume existing mortgage =awrence v$ -ox (-ox principal debtor) Holly secondarily liable to =awrence (surety) =awrence subrogated to Hollys claim as surety against grantee o !ccept land sub#ect to mortgage (rantee buying @e7uity of redemptionA margin of value left above balance due on mortgage debt +ebt payment falls on grantee (must be done in order to preserve grantees investment) )f land value increases" grantee has incentive to >eep payments up to date (small liability for grantor) )n this instance" grantee is not liable to neither the mortgagee or grantor no promise to pay has been made 'nderson v. +ox /ill =illage /omeowners (DDB) (1CC7) 'etirement6)ce ; must show she was intended beneficiar# # lessor intended to give her the benefit of the promised performance (language # circumstances for intention) )ntent MF9. be clear # definite (; incidental beneficiary) /.$. Moch v. $ensselaer Water Co. (DD7) (1C2D) % Hydrant liability *o action against + unless intention appears + answerable to individual members of public as well as to city (privity) for loss ensuing from failure to fulfill ? MF9. be primary" individual duty to beneficiary (immediacy) (public incidental beneficiary) REST< 7d 8 F:F % Go(ernment Contracts
(1) .he rules Non contract beneficiariesO apply to contracts with a government or governmental agency except to the extent that application would contravene the policy of the law authoriLing contract or prescribing remedies for its breach

47

(2) )n particular" a promisor who contracts with a government or governmental agency to do an act for or render a service to the public is not sub8ect to contractual liability to a member of the public for conse7uential damages resulting from performance or failure to perform unless a$ .he terms of the promise provide for such liability: or b$ .he promisee (government) is sub8ect to liability to the member of the public for the damages # a direct action against the promisor is consistent with the terms of the ? # with the policy of the law authoriLing the ? # prescribing remedies for its breach

$obson v. $obson (DC7) (1CD1) % 5ife6donee beneficiary6divorce +istinction b6w &onee Beneficiar# & Creditor Beneficiar# +& no vested right rd (gratuitous promise)" whereas <& has pre1existing obligation to 3 party no right to discharge <& contract (pre1existing duty) % vested rights as soon as ? executed (reliance presumed): +& can be revo>ed unless beneficiary has reasonably relied upon ? REST< 7d 8 F:: % Lariation of Dut& to -eneficiar& !no distinction /w D- 0 C-"
(1) +ischarge or modification of duty to intended beneficiary by conduct of promise or by subse7uent agreement b6w promisor # promisee is ineffective if a term of the promise creating the duty so provides (2) )n absence of such a term" promisor # promisee retain power to discharge or modify the duty by subse7uent agreement (3) 9uch a power terminates when beneficiary" before he receives notification of the discharge or modification" materially changes NrelianceO his position in 8ustifiable reliance on the promise or brings suit on it or manifests assent to it at the re7uest of the promisor or promisee (4) )f the promisee receives consideration for an attempted discharge or modification of the promisors duty which is ineffective against the beneficiary" the beneficiary can assert a right to the consideration so received$ .he promisors duty is discharged to the extent of the amount received by the beneficiary

ASSIGN+ENT 0 DELEGATION
Assi%n ri%$ts 0 Dele%ate duties Assi%nment !ct or manifestation by owner of right (assignor) indicating his intent to transfer that right to another person (assignee) !ll rights may be assigned" F*=,99 P 1 materially changes the duty of the obligor o Most commonly happens in personal service ? 1 Materially increases burden of ris> 1 )mpairs obligors chance of obtaining return performance 1 Materially reduces value of return performance to obligor 1 =aw restricts assignability of specific right involved Langel v. Bet> (CE7) (1C2D) !ssignment of ?" unless specifying to contrary" is not an assignment of duties of assignee" but only rights to ?" but assignee may expressl# or impliedl# bind himself to perform the assignors duties by contract w6the assignor or w6the other party$ Must as> whether party dealings indicate implied intent for assignee to assume assignors duties REST< 7d 8 F7@ / Interpretation of Assi%nmentJ Effect of Acceptance/Assi%nment 4D

(1) Fnless the language or the circumstances indicate the contrary" as in an assignment for security" an assignment of @the contractA or of @all my rights under the contractA or an assignment in similar general terms is an assignment of assignors rights and a delegation of his unperformed duties under the contract (2) Fnless the language or the circumstances indicate the contrary" the acceptance by an assignee of such an assignment operates as a promise to the assignor to perform the assignors unperformed duties"# the obligor of assigned rights is an intended beneficiary of the promise Ca(eat0 'estatement offers no opinion whether the rule in subsection (2) applies to an assignment by purchaser of his rights under a contract for the sale of land (Lan%el (* -etH)

/er>og v. 4race (C1E) (1CC1) % S accident6assigned proceeds doctor !ssignor must ma>e intent clear to relin7uish right to assignee # must not retain an# control over the right assigned or an# power of revocation $ )f" after receiving notice of assignment" obligor (+) does not pay amount to assignee (;) or pays to other creditors (i$e$ client # other expenses)" obligor does so at own ris> b6c assignee may enforce rights against obligor directly */., !ssignments may be gratuitous or valuable no specific wording needed for assignment" but intent to vest in assignee right in thing assigned manifested by some oral or written word or by conduct signifying relin7uishment of control # appropriation to assignee REST< 7d 8 FF7 % Re(oca ilit& of Gratuitous Assi%nments
(1) Fnless contrary intention manifested" a %ratuitous assi%nment is irre(oca le if a$ .he assignment is in a writing either signed or under seal that is delivered by assignor: or b$ .he assignment is accompanied by delivery of a writing of a type customarily accepted as a symbol or as evidence of the right assigned (2) ,xcept as stated in this section" a gratuitous assignment is revocable # the right of the assignee is terminated by the assignors death or incapacity" by a subse7uent assignment by the assignor" or by notification from the assignor received by the assignee or by the obligor (3) ! gratuitous assignment ceases to be revocable to the extent that before the assignees right is terminated he obtains a$ ;ayment or satisfaction of the obligation" or b$ Sudgment against the obligor" or c$ ! new contract of the obligor by novation (4) ! gratuitous assignment is irrevocable to the extent necessary to avoid in8ustice where the assignor should reasonably expect the assignment to induce action or forbearance by the assignee or a sub1assignee # the assignment does induce such action or forbearance

Cochran v. 7a#lor (C14) (1C37) % /ption ?6Q1 consideration6assigned opt .hough Q1 consideration never paid" option ? valid (evidence of consideration): option ? not necessarily personal in nature (ma>ing assignment to another a material change) # no ? terms contrary to assignment ; accepted offer w6in time period # + declined to perform General Rule <annot assign credit w6o creditors approval (materially changes oblig) *@7 Ltd v. +riendl# Mobile /ome (C17) (1CDC)

4C

F<< holds (contrary to <6=) that duties 0 ri%$ts pass under assignment unless circumstances or language to contrary UCC 8 7/7:D!I" Mac"e Co. v. *i>>a of Gaithersburg (C17) (1C7E) % vending machines (enerally" duties may be assigned or delegated E#ception duties under personal services ? may never be delegated" nor rights be assigned under ? where personality element is ingredient of bargain *othing re7uiring speciality" genius or extraordinary s>ill in stoc>ing vending machines # no material change in performance of obligations 8ustifying refusal of + to recogniLe the assignment

DELEGATION UNDER UCC

UCC 8 7/7:D May treat any assignment which delegates performance as creating reasonable grounds for insecurity # may w6o pre8udice demand assurances from assignee (K214EC) */., <ode sanctions delegation" except where delegated performance would be unsatisfactory to obligee REST< 7d 8 F:@ Fnless otherwise agreed" promise re7uires performance by a particular person only to extent that obligee has substantial interest in having that person perform or control the acts promised /omer v. %haw (C3D) (1C12) ;arties" while unable to modif# to assignees pre8udice ? terms w6o consent (assignee)" or by secret fraudulent arrangement deprive him of benefit of assignment" were not precluded from entering new agreement if performance b# assignor had become impossible from unforeseen circumstances (assignee no enforceable claim on new ?)

STATUTE O' 'RAUDS

Cear % ;romises incapable of being performed within one year after ma>ing ? are unenforceable if not in writing (performance within 1 year must be impossible) E#ception generally ?s for more than one year" but which provide for discharge in a shorter time" not performable in a #ear 1 1 Sale of Goods cases !UCC" fall under t$e SO' one &ear pro(ision e(en if t$e& don=t re,uire writin% under t$e UCC T$e ,uestion is w$et$er t$e principal purpose of t$e contract $as een fulfilled (discharge w6in a year usually doesnt 7ualify)

BE

Land 1

;romise to transfer or buy an# interest in land is within the 9/- # unenforceable unless in writing F<< K 212E1 <ontract for sale of goods of QBEE or more not enforceable unless there is some writing sufficient to indicate contract for sale has been made E#ception 4 specially manufactured goods parties admit to contract party accepted and paid for goods

Goods 1

+E+O RE6UIRE+ENTS 1 'easonably identifies the sub8ect 1 )ndicates that contract has been made b6w parties 1 9tates w6reasonable certainty the essential terms of the contract 1 9igned (can be electronic) by or on behalf of party charged

B1