Contract (K) agreement for future action, RSBL parties would view as legally binding, courts could provide

adequate remedy.
How to we cross the line to having no liability in law to some?
-

Leaves open liability as measured under other law

Why cross the line? How? When?
Agreement- Intent of parties; contract as method of placing weight behind some agreements, but not all
of them.

1.
2.

Bilateral Ks: two promisors and two promises. The K is formed when promises are made.
Unilateral K: Only one promisor and one promise. The K is not formed and the offer has not
been accepted until the offeree completes the performance.
Express K: explicitly manifested in a written or oral agreement
Implied K:
a. Implied in Fact: K inferred from conduct or words. This is a real K based on behavior.
b. Implied in Law: based on unjust enrichment, no promise was ever made or intended.
c. Quantum Meriut: equitable doctrine based on an implied promise that allows recovery for labor
and materials to prevent unjust enrichment.
Elements of an unjust enrichment claim:
a. conferred benefit on the
b. has knowledge of the benefit
c. accepts or retains the benefit
d. it would be inequitable for the to retain the benefit w/o paying fair value

3.
4.

5.

--------------------------------------------------------------------------------------------------------------------------------------------

Offer
Elements of a legally sufficient offer:
1. Intent to be legally bound: Not concerned with subjective intents of the parties, just the objective view of
the reasonable person.
2. Definiteness of terms
a. Circumstances determine sufficient definiteness
b. General: the subject matter, the price, and the quantity involved must be clear.
i. If one or more terms are open, the K does not fail for indefiniteness if the parties have
intended to make a K and there is a RSBLY certain basis for giving an appropriate
remedy.
ii. Curing the omission and UCC Gap Fillers, which state the general principles of
formation where terms are missing.
Duration of Offers:
1. Offers are open for a RSBL amount of time (depends on the circumstances) when expiration date not
specified (and offer is not withdrawn).
a. K expires when Statute of Limitations runs (but not stated in the K and not communicated to the
other party)? NO
i. Can argue no RSBL person would think the offer extended past the statute
ii. Can argue that a RSBL layperson would not know when the statute runs, but what about
the laypersons attorney?
2. Correspondence by mail:
a. Offers made when letter is received, time limits (if any) begin when letter received.
b. Acceptance is effective when sent.
3. Offer is rejected offer extinguishes upon rejection, cannot have a change of heart.
Counter Offers:
1. Common Law Mirror Image Rule: acceptance must exactly match the terms of the offer. If not, the
acceptance is a Counter Offer, which can be accepted by the original offeror and there is no K formed
unless the original offeror accepts.
2. Post Purchase Terms UCC 2-207: Additional terms in Acceptance or Confirmation. Can form K
without a mirror image. Additional terms following acceptance of an offer become part of the K unless.
B/t merchants, such terms become part of the K unless...
a. Ex.
b. The purchaser MUST be aware of the license.
1

c.
d.

K is formed when software is purchased but it is conditional on the acceptance of the license
agreement, which occurs when the purchaser does not return the product.
UCC 2-206: a buyer has accepted goods when, after an opportunity to inspect, he fails to make
an effective rejection under 2-206(1).

Objective Theory
1.
2.
3.
4.

The existence of a contract is determined by the legal significance of the external acts of a party to a
purported agreement, rather than by the actual intent of the parties.
Law imputes to person an intent corresponding to the reasonable meanings of his words and actsit is
immaterial what might be the real but unexpressed state of his mind.
Must be a reasonable basis on which to grant a remedy.
CISG note.

Advertisements are generally invitations to deal ( informational), not offers because:

1. Advertisements are usually indefinite as to quantity and other terms.
2. Sellers ought to be able to choose who they deal with.
3. Advertisements are typically addressed to the general public and the offer may be overaccepted.
4. EXCEPTIONS: If an advertisement is definite in its terms and either
a. the circumstances clearly indicate the intention to make a bargain or
b. the advertisement invites those to whom it is addressed to take a specific action without further
communication or
c. overacceptance is unlikely.
Letters of Intent are generally invitations to negotiate and not offers.
However, words are not conclusive; one must take into consideration the circumstances.
- DOES THE OFFEREE HAVE THE POWER TO ACCEPT? CAN HE SAY YES I ACCEPT AND
FORM A K? IF NOT NO OFFER.
- May not preclude finding of contract
Negotiation; in the bargaining process; when should contractual obligations attach?
- Gentlemans agreement
- Agreement in principle
- Express statement that no contract and not binding
- Contract to negotiate in good faith
- Accepts terms in principle means?
- Negotiation breaks down on guaranty point and perhaps, others
- Is that a breach?
- What would be bad faith?
- Insisting on guarantee not in original proposal on acceptance
- Closed terms idea
- Pull out $ improved?
- Not try to scuttle per se
Price Quotations: offers?
1. Advertisement No offer
2. There may be circumstances where the price quotation is an offer, and it may be made to more than one
person.
Irrevocable Offers:
1. Options Ks (irrevocable offers, for a specified or RSBL time taking into consideration the s and the s
viewpoints): K to keep the offer open for a certain time. Possible nominal consideration, still enforceable.
2. Fed. R. Civ. P. Rule 68 Offer: irrevocable during the 10 day period. The offeree can deny and then accept
within the 10 day period and an enforceable K is formed. 10 days is computed in accordance with Rule 6.
3. Reliance makes the offer irrevocable (PE).
4. (UCC) Firm Offers 2-205: a written offer giving assurance that it will remain open will be irrevocable
for the time stated or for a RSBL time not to exceed 3 months.
5. CISG Firm Offer: An offer cannot be revoked if
a. it indicates a fixed time for acceptance or
b. otherwise that it is irrevocable, or
c. if it was RSBL to rely on the offer as being irrevocable and the offeree has acted in reliance of the
offer.
2

6.

Doctrine of Part Performance: Unilateral K offers irrevocable b/c of part performance

a. Old Rule: Offer is revocable until performance is complete
b. Modern Rule: Offer for a unilateral K is not revocable after performance has begun.
i. Restatement 1st: partial performance creates a K binding on the offeror.
ii. Restatement 2nd: an option K is created when the offeree begins performance, creating a
firm offer and turning it into an option which can be accepted at any time.
1. Performance must be completed within a RSBL time.
2. What about preparation to perform?
a. Ex. A tells B he will pay him $500 to paint his house. B buys paint and
goes to As house. Before B begins to paint, A says he revokes the
offer. What outcome?
b. Restatement 1st: preparation not sufficient to make an offer irrevocable.
c. Restatement 2nd: Preparation may constitute reliance and may make the
offer irrevocable. May be entitled to reliance damages only as opposed
to expectation damages for part performance.
c. Oral K for sale of land (see Statute of Frauds also), performance required to be enforceable under
the doctrine of part performance:
i. Buyer takes possession of the property
ii. Pays the purchase price in part or whole
iii. Improves or changes the property in reliance on the oral agreement.
d. Equitable doctrine, remedy is specific performance.

Sub-contractors and General Contractors

1. No promise by GC to SC, no K.
2. UCC Firm Offer: if firm offer for 30 days, what happens on day 40? Consideration? NO. PE? Possibly.
3. Unilateral K: subcontractors bid was a unilateral offer which was accepted by the general contractors
performance, submitting the bid as part of the general bid.
4. Bilateral K: implied promise to keep the bid open for a RSBL time, PE is consideration. The sub-bid was
the offer and PE replaces acceptance.
a. Promissory Estoppel: promise is binding and enforceable because the promisor can RSBLY
expect the promisee to rely on the offer.
--------------------------------------------------------------------------------------------------------------------------------------------

Acceptance
Analyzing the Acceptance:
1. Manner of acceptance:
a. UCC 2-206: unless otherwise unambiguously indicated by language or circumstances, an
offer invites acceptance by any RSBL manner.
i. Offeror waives condition of acceptance and other party agrees K can be formed some
other way.
b. Common Law: Acceptance can only be made in the manner of the offer
c. Restatement: if a party solicits and receives an order clearly specifying that there is no K until
assent by some officer or representative of the solicitor, the solicitation is NOT an offer, it is
a request for an offer. The order is the offer, NOT an acceptance. The offer can be accepted by a
person who has apparent authority or express authority to bind the offeree.
i. Cashing a down payment check, does this constitute acceptance? Mere acceptance of the
check does not constitute acceptance of the offer.
ii. Conduct of the parties, does it indicate acceptance?
d. Shipment of Non-Conforming Goods: not an acceptance if the seller notifies the buyer that the
shipment is offered only as an accommodation to the buyer.
e. Silence as Acceptance
ii. General Rule: Silence is not an acceptance
iii. Exceptions:
1. Offeree takes benefits of offered services with RSBL opportunity to reject them
and knows they were offered with the expectation of compensation.
2. Offeror has given the offeree reason to understand that silence may = acceptance
and the offeree intends to accept the offer.
3. b/c of previous dealings, it is RSBL that the offeree should notify the offeror if
he does not intend to accept.
2. Counteroffer: Does the acceptance deviate from the offer? If it does deviate, then it is considered a
counteroffer unless
3

a.
b.

3.
4.

It explicitly says that the offer is accepted regardless of the acceptance of the additional terms or
The transaction involves a contract for the sale of goods. The response may be an acceptance even
though it differs from the offer under UCC 2-207. Additional terms following acceptance of an
offer become part of the K unless. B/t merchants, such terms become part of the K unless...
Time of acceptance.
a. Offeror specifies time limit for acceptance or
b. if not specified, acceptance must be made within a reasonable time.
Has the offer been revoked? See irrevocable offers.

Possibilities:
1. Completed Sales Agreement: Fixed K, deal closed.
2. Agreements to Negotiate:
a. Some courts will not enforce
b. Some courts will enforce a K to negotiate in good faith. BUT, what is good faith, how to
calculate damages for breach? The K to negotiate in good faith does not guarantee that a K will be
formed. Courts will enforce if they want to set a good faith standard for negotiations.
3. Agreements to Agree: we have a K but we agree to produce formal documentation, we still have a K if no
documentation. Need very detailed statements.
a. Depends on:
i. Conduct of the parties
ii. Performance
b. Ex. Dynegy and Enron, agreement, $, method of sale
i. Dynegys behavior indicates that there was a K, they made public announcements, etc.
ii. Enron would argue reliance, they stopped negotiations with other companies, they
obtained loans based on the agreement.
4. Agreements based on Conditions: the final K is conditional to agreeing on warranties, etc. If no
agreement NO K.
5. Negotiations only, no enforceable K.
a. Implied-in-Fact: Real K based on behavior, mutual assent is inferred from conduct.
b. Implied-in-Law: Based on unjust enrichment. Fictional implication of a promise to pay for
benefits or services rendered even though no promise was ever made or intended. The remedy of
unjust enrichment is unavailable when an express K governs the dispute (restitution remedy).
c. Quantum Meruit: equitable doctrine, based on an implied promise, allows recovery for labor
and materials without a K so that one party will not be unjustly enriched.
d. Elements of an Unjust Enrichment:
i. The conferred a benefit on the .
ii. The has knowledge of the benefit.
iii. The has accepted or retained the benefit conferred.
iv. It would be inequitable for the to retain the benefit without paying fair value.
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Validation:
1.
2.
3.

Should the offer/acceptance be enforced?

Category (social, donative etc.)

a. Social agreements are not legally binding.
b. Gifts or donative promises are typically unenforceable.
Formalities (seals, Statute of Frauds)
a. Seals: evidence of enforceability only.
b. Seals are inoperative under UCC K for goods
Consideration: must have to enforce K.
a. Consideration is
i. Benefit to promisor or detriment to promisee and
A. Legal Detriment: giving up something which, prior to the promise, you were
privileged to retain.
b. Moral Consideration, not consideration
c. Past Consideration, not consideration
d. Courts do not look into the adequacy of consideration. Exceptions:
i. Equitable remedy of specific performance is sought. Three bases to refuse spec perf:
A. consideration is grossly inadequate or terms are unfair
B. UNRSBL or disproportionate loss to or 3rd party
C. K was induced by sharp practice, misrepresentation, or mistake
4

2.

ii. Exchange of something whose value is exactly fixed (money)

A. Ex. exchange $1 for $100. The court will NOT look into the adequacy of
consideration if the parties are $80 now for $100 to be paid back later.
B. RSBL person test and if both parties know that the consideration is pretense,
then no consideration.
iii. Unconscionabilty
A. Parties are of unequal bargaining power.
B. Absence of meaningful choice (can the party purchase the product elsewhere?).
C. Terms are unreasonably favorable to the other party.
D. Definition: Unusually harsh and shocking to the conscience; that which is so
grossly unfair that a court will proscribe it.
E. A factor in Zapatha v. Dairy Mart; Zapatha claimed the termination-at-will
clause was unconscionable (the court held that it was not, in fact.)
General Rule: bargain = consideration, so bargained for promises are enforceable.
a. Promises to forbear: A bargained-for promise to forbear from asserting a claim that is RSBL
and in good faith constitutes consideration. The claim can be wholly ill-founded. The does not
have to believe that his suit can be won.
b. Exceptions to the General Rule: bargains consideration
i. Illusory Promise: one party can terminate at any time with no liability neither party is
bound, no consideration.
A. General Rule: mutuality of obligation required to enforce a bilateral K.
B. Forbearance (Creditor promising to forebear the debt): No consideration on
either side b/c the promise to forebear is unenforceable and the promissor was
already legally obligated.
a. Possibly enforceable based on promissory estoppel, but there must be
some reason to expect reliance.
C. Gasoline Sales Case: both parties benefited but one could terminate at will
no consideration. Nimmer thinks sound common law principles but not good
for commercial settings.
D. EXCEPTIONS:
a. Notice required before termination sufficient consideration.
b. When the party not bound performs and the other party receives the
benefit bargained for other party is estopped from refusing
performance based on the original invalidity.
c. Conditional Promises: performance required when a specified
condition occurs (even when not bound to perform condition) valid
consideration.
ii. Voidable (NOT void) promises:
1. No legal capacity to incur contractual duties cannot be bound by a K. The
party that cannot be bound can still enforce the K, but the K cannot be enforced
against him.
2. Statutes of Fraud: K cannot be enforced unless in writing and signed.
a. Rationale:
i. definition of agreement
ii. no unintended Ks
iii. prevents perjury, cannot say we had a 20 year K (but who is
lying?)
iv. clear to the seller that agreement is legally binding.
b. RE Statute of Frauds: K for the sale of land must be in writing and
signed.
i. Exception: See irrevocable offers based on part performance.
Once performance goes far enough no longer within the
SoF. The buyer must:
A. Paid all or part of the purchase price.
B. Taken possession of the land.
C. Made improvements on the land.
ii. Part performance equitable remedy only, NO money
damages!
c. K not performable within 1 year from formation (must be expressly
stated): must be in writing.

i. Exception: An oral K that does not expressly say that

performance beyond 1 yr = a K of indefinite duration and is
enforceable.
d. UCC 2-201 Statute of Frauds for Goods:
i. K for the sale of goods > $500 not enforceable unless:
A. In writing and
B. Signed by the party against whom enforcement is
sought.
ii. Writing is not insufficient if it omits or wrongly states a term
but the K is not enforceable beyond the quantity of goods in
the writing.
iii. B/t merchants, writing in confirmation of and oral K
satisfies SoF if:
A. In RSBL time
B. Receiving party has reason to know of its contents.
C. No written notice of objection within 10 days from
receipt of confirmation.
iv. EXCEPTIONS: Ks enforceable even if no writing
A. special manufacture,
B. admission that K was made, not enforceable beyond
the quantity of goods admitted, or
C. performance: goods for which payments have been
made or accepted or goods that have been received or
accepted.
e. UCC 2A-201 Statue of Frauds for Leases: requires a more explicit
writing. Differences b/t goods and leases?
i. Term of the lease reqd
ii. Description of goods
iii. No merchant rule
iv. No validation by payment, requires delivery of goods.
3. Validation for Electronic Records and Writing Requirements:
a. Federal E-sign:
i. Scope: 101(a). transactions in interstate commerce.
A. Transaction action(s) relating to the conduct of
business activities.
ii. 103 Specific Exceptions: electronic notices not valid for ...
iii. 102(a) state law may supersede 101 if
A. state law is UETA
B. state law is consistent with UETA (cannot make it
harder to use electronic records or signatures, but can
make it easier).
b. UETA:
i. Scope:
electronic records or signatures relating to a
transaction.
ii. Exceptions 3(b) and (c).
iii. 5(b) Parties must agree to conduct transactions by electronic
means (determined by circumstances and conduct of the
parties).
iv. If the parties do not agree UCC applies. Then must ask if
electronic records and signatures writings under UCC?
c. To analyze:
i. Is there a transaction in interstate commerce?
ii. Does the transaction fall within 103 exemptions?
iii. If no, then did UETA supercede E-sign?
A. If no E-sign.
B. If yes UETA
iii. Pre-existing duty Common Law Rule and Restatement: the performance of a pre-existing
duty, already legally obliged to do, is not sufficient consideration. If a new duty is
created sufficient consideration, enforceable.
1. NIMMER thinks: Common Law vs. Commercial Reality. In actuality, offers to
settle debt (pre-existing duty to pay) should be enforceable. Rationale:
a. want efficient breach, least harmful remedy.
6

c.

b. Commercial reality: might not collect anything, even if court renders

judgment
c. New offer and acceptance, did not have to accept the settlement.
2. Exceptions:
a. Restatement: Unexpected difficulties. Modifications are enforceable
w/o consideration if
i. the modification is fair and equitable
ii. the parties agreed voluntarily
iii. the modification was made before full performance by either
party
iv. unanticipated circumstances prompted modification
b. UCC: modification of K for the sale of goods does not need
consideration
i. Statute of frauds must be satisfied
ii. Agreement must be made in good faith
c. Common Law: settlement of a bona fide controversy
3. Methods to discharge contractual obligation:
a. Substitute K: agreement is made before the maturity or breach of the
original K. Old K is discharged upon the formation of a new K, limited
to action on the new K.
b. Accord and Satisfaction: agreement is made after the maturity or
breach of the original K. The 1 st K will not be discharged until the 2 nd
is completed. Can bring action on the 1st K if the 2nd is not performed.
iv. Requirements K UCC 2-306: A agrees to buy all he requires from B (Output: A
agrees to sell all of his output to B and B agrees to buy that amount from A).
1. Good faith applies when the buyer takes less than the stated estimate (can go to
zero)
2. Good faith and quantity unreasonably disproportionate applies to buyers who
take more than the stated estimate.
3. Traditional View: illusory and not enforceable b/c A not obligated to have any
requirements or A not obligated to output anything.
a. Exception: established businesses
4. Modern View: enforceable b/c the parties are limited. Must buy from or sell to
one party. Also, parties must conduct business in good faith according to
commercial standards of fair dealing.
Terminable at will employment: terminable by either party without liability to the other. An
agreement for permanent employment is an indefinite general hiring, terminable at will.
i. General Rule: employment relationships are presumed to be at will
ii. Exceptions:
1. Violations of well recognized and defined public policy of the state.
a. Cannot fire employees for prohibited reasons, ex. racial discrimination.
2. Discharges in violation of employee handbooks that meet the requirements for a
unilateral K:
a. Sufficiently definite terms to create an offer
b. Communicated to and accepted by employee
i. Standardized agreement is interpreted, when RSBL, as treating
alike all those similarly situated, without regard to their
knowledge (doesnt matter if employee did not read the
manual).
ii. K accepted when employee accepts the handbook, not
dependent on whether or not he reads it.
c. Employee provides consideration in addition to the rendering of
services incident to employment (leaving other job is not enough).
d. Unless there is a disclaimer: must be clear and the coverage
unambiguous

If Contract
1. offer/acceptance
2. consideration
No Contract
7

1.

2.

Promissory estoppel in lieu of consideration: Promisee relies on the promisors performance

enforceable even though the promisor is receiving nothing of value for his performance. If there is no
reason to expect reliance not enforceable based on promissory estoppel
a. Elements:
i. Promise
ii. intent to induce reliance, reliance must be foreseeable
iii. reliance occurred, detriment
iv. promise must be enforced to prevent injustice
b. Restatement 2nd: The remedy may be limited as justice requires.
Remedy? Damages for reliance, expectation interests...may be limited as justice requires. Remedy is
tailored to the transaction.

Approach to problems concerning the Statute of Frauds:

1. Is there a SoF or some other writing and signature requirement?
a. Common Law SoF
b. Article 2 SoF
i. Sales of goods >$500
ii. RE
iii. Leases
iv. K no performable within 1 year
c. Regulatory Rules
2. Is there an exception under the statute or common law, the K is out of the SoF?
a. Can be performed within 1 yr or does not explicitly say duration greater than 1 yr.
b. Part performance for a RE K.
3. If there are no exceptions
a. Federal State (Fed. E-sign): National law
i. INTERSTATE commerce
1. Emails bounce around, therefore, by definition interstate commerce.
ii. Cannot discriminate against electronic writings.
iii. Defers to UETA if enacted in the state or to any state law that is consistent with UETA.
b. UETA or equivalent state law:
i. Parties must AGREE to conduct business electronically.
ii. Cannot discriminate against electronic writings.
iii. What constitutes agreement?
iv. Signature: adopting a symbol with the intent to sign or doing something with the intent
to sign (can be a process like hitting the send button on an email).
Adequacy of Consideration
1. Questions:
a. Under what circumstances should we enforce the promise?
b. A promise is made, when is it legally binding?
2. NO, promise should not be enforced as a matter of policy
a. Ex. Dr promises that the operation will cure the patient.
b. Compare with plumbers promise to fix pipes, enforceable.
c. No unified theory as to what is or is not enforceable.
3. Pure Donative Promise:
a. Rule: NOT enforceable
b. Exceptions:
i. Reliance
ii. Reciprocal Conditional Promise
A. Ex. Donation of $100MM, gets a glass statue in return. The promise is
supported by consideration and is enforceable. In general, the courts do not look
into the adequacy of consideration.
a. Benefit to the Promisor: getting the glass statue.
b. Detriment to the Promisee: giving up the glass statue.
Unilateral K
1. Ex. will pay $1MM if you walk across the bridge. Performance is acceptance, NOT a promise to perform.
Before performance, NO K, even if relied upon.
8

2.

Part Performance, can the offeror withdraw the offer:

a. Traditional: can cancel before full performance, no K.
b. Reliance
c. PE
d. Retaining right
e. Option K
f. UCC firm offer
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Remedies
The law protects:
1. Expectation Interests: places the injured party in the position they would be in had the K been performed.
The damages are measured by the value (of performance) to the , i.e. what would the party have gotten if
the other party performed?
a. In terrorem clauses unenforceable
b. Cover Remedy- the buyer can cover through any RSBL substitute purchase. The buyer must act
in good faith, the cover does not have to be the most RSBL cover.
2. Reliance Interests: actual loss suffered
3. Restitution Interests: unjust enrichment
4. Consequential Damages- foreseeable losses resulting from breach that could not be prevented by cover.
5. Limitations on Recovery:
a. NO punitive damages for breach of K
i. Exception: when there is proof of an independent, willful tort, beyond mere breach of
contractual duty. Intentional breach is NOT a tort.
ii. Rationale: We want efficient breach, which occurs when occurs when the breaching
party will still profit after compensating the other party for its expectation interest.
1. Parties have the option to breach a K and pay damages if it is more efficient to
do so.
2. Result: increased production of goods and services at a lower cost to society.
3. Specific performance would preclude efficient breach.
b. Hadley v. Baxendale:
i. General Damages: arise naturally from the breach can always recover.
ii. Special: not within common experience, resulting from the buyers particular
circumstances. Can only be recovered if at the time the K was made, the seller has
reason to foresee that the damages were the probable result of the breach, special
circumstances must be communicated to the .
c. Restatement 2nd:
i. Damages are not recoverable if the breaching party did not have reason to foresee
damages as a probable result of the breach when the K was made.
ii. Loss may be foreseeable as a probable result of a breach b/c it flows from the breach
1. in the ordinary course of events, or
2. as a result of special circumstances, beyond the ordinary course of events, that
the party in breach has reason to know.
iii. A court may limit damages for foreseeable loss as justice requires to avoid
disproportionate compensation.
d. When parties enter into a K providing the time for performance to be set at a later date, the
knowledge of the consequences of failure to perform is imputed to the defaulting party at the time
the parties agree on the date of performance.
e. New Business Rule:
i. Foreseeability: breaching party is liable for damages, including lost profits, which may
RSBLy been within the contemplation of the parties at the time the K was made as a
probable result of breach.
ii. Lost profits must be established with RSBL certainty.
1. yardstick method: compares profits of similar businesses
2. Comparison with profit history of s successor
3. Comparison of similar businesses owned by the
4. Use of economic and financial data and expert testimony
f. Employment and Mitigation of Damages:
i. General Rule: An employer is entitled to a reduction in the amount of the recoverable
wage loss of a wrongfully discharged employee if the evidence establishes that the
employee made no RSBL effort to seek or accept similar employment.
1. Need not accept employment of a different or inferior kind, or in a different
locality.
9

2. Burden of proof on the party who claims mitigation of damages as a defense.

3. No legal duty to mitigate, but limits damages that may be recovered.
g. Article 2 and 2A distinguishes between buyers and sellers (common law does not)
6. Liquidated Damages Clauses: stipulation in the K stating that the promisor shall pay specified amount of
damages if he breaches
a. damage resulting from breach was uncertain in amount or difficult to prove (if the damages are
readily ascertainable no need for LDC),
b. intent of the parties to liquidate damages in advance, and
c. amount RSBL, not greatly disproportionate to the presumable loss.
d. Possible Purposes:
i. In terrorem, penalty to induce performance.
ii. Convenient method of determining amount paid in case of breach, possible honest
forecast.
iii. Limits the amount of loss to less than probable actual loss suffered if breach occurs.
7. Lost Volume Seller: can recover lost profits b/c depriving him of the sale to a new buyer. Seller must
establish
a. It possessed the capacity to make an additional sale
b. Additional sale would have been profitable
c. Probably would have made an additional sale absent the buyers breach.
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Miscellaneous

Uniform Commercial Code = U.C.C.

Uniform Computer Information Transactions Act = UCITA
U.C.C. covers sale of goods only.
Licensing can only concern intangible goods i.e. intellectual property, so not governed by U.C.C.
Goods: Things movable at time of contract and existing & identifiable -- UCC.
A communication may be:
Invitation to bid.
Offer
Revocation
Acceptance
Inquiry
Conditional Acceptance
Counter offer
Rejection
Unilateral Contract: Promise in exchange for performance. Acceptance occurs by completing
performance.
Bilateral Contract: Promise in exchange for promise.
Quasi Contract/Quantum Meruit/Implied-in-law:
Theres no explicit contract, but there should be one.
Effectively this means that there was either promissory estoppel or unjust enrichment.
Cant have implied-in-law contract when theres an express contract.
Promissory Estoppel (Lucy v. Zehmer): If promisor should reasonably expect promisee to rely on promise
and promisee does rely, promise is binding if its only way to avoid injustice. 4 things:
1. Must be a promise.
2. Must expect reliance.
3. Must be reliance.
4. Must be a detriment to promisee.
Remedy for promissory estoppel is actions taken for reliance not breach (theres no contract).
Unjust Enrichment: Requires 3 things:
must have retained a benefit
must know of the benefit.
Retention must be unjust (e.g. hasnt paid for benefit).
Canceling a contract only cancels future obligations.
In general, the seller assumes the risk.
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Duty to read: Common law -- if consumer has read the contract, he has agreed to all terms.
If consumer has signed contract, he has read it he agrees to all terms (barring reasonable
expectations, unconscionability etc.).
Which law applies ?
UCC or Common law ?
Look to predominant purpose of contract:
If goods dominate, then UCC.
If services/information, then Common law.
If computer, then UCITA.

Was a Contract formed ?

For a contract to be formed, must be mutual assent.

If theres objective intent that the parties wish to be legally bound, then theres a contract.
The making of a contract depends not on the agreement of two minds in one intention, but on the
agreement of two sets of external signs not on the parties having meant the same thing, but on
their having said the same thing. -- Holmes
U.C.C. 2-204:
Conduct of parties is enough to demonstrate theres a contract.
Contract may exist even if time of formation uncertain.
If indefinite terms, may still be contract if objective intent and basis for remedy (same as
UCITA).
Cant have contract without communication e.g. of terms (Netscape).
Statute of Frauds: When must a contract be in writing:
- Not a statute to prohibit fraud, but one that works to prevent fraud
Contract for sale of land must be written to be enforceable.
Unwritten contract may be enforced unless states statute of frauds as defense.
Exception: If in partial performance, title passes, then even if contract for land isnt
written, its enforceable.
Contracts whose performance can only be completed in more than 1 year must be in writing.
Must expressly state it will take longer if theres a chance can complete in a year, no
writing required.
Contracts for goods over $500 must be in writing.
Contract must be signed by person being sued.
Statute of frauds doesnt apply to part of contract already performed whats already been done is
enforceable.

Offer

Objective Offer: Offer valid only if reasonable person would think so.
Doctor cannot offer warranty to cure patient:
Not a true offer but physician cant terrify patient.
Definiteness: Offer must be clear, definite and explicit and leave nothing open for negotiation. The
following must be closed terms:
Subject matter: What is being bought.
Quantity: How many.
Price: must be certain or ascertainable.
Time: When (not always necessary).
If vague:
Cant Objectively manifest intent.
Difficult to find a remedy if breach.
Offeror is master of the offer.
Can specify manner of acceptance.
Can specify time that offer is open.
UCC & common law -- If no specified time, offer is good for a reasonable time (which
depends on the circumstances).
Offer expires once rejected cannot accept after rejecting.
Option contract is irrevocable promisee pays (consideration) for irrevocability.
Firm/irrevocable Offer: If no time stated, valid for reasonable time not exceeding 3 months UCC.
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Acceptance

Objective Assent: Reasonable person must think theres acceptance.

Mirror Image Rule: Acceptance must match terms of offer exactly (Common law).
UCC Acceptance: If acceptance is definite, additional and different terms dont nullify acceptance, unless
acceptance is expressly conditional on those terms.
Can have acceptance even if material terms differ.
Must be clear that offeree accepts offer and communicates acceptance to offeror.
Time for acceptance runs from when offer is received not when sent (risk goes to offeror).
Received means when offer comes to attention of offeree.
Rejections and revocations only effective when received.
Mailbox Rule: Acceptances effective when sent (offeror assumes the risk coz hes the master of the offer
common law).
Medium and manner of acceptance must be reasonable (under the circumstances) -- UCC.
Common law: manner of acceptance must match manner of offer.
Acceptance may be inferred from acts/conduct.
Silence as acceptance: Common law silence isnt acceptance unless:
Offeree takes the benefit with reasonable opportunity to reject and knows benefit was offered in
expectance of compensation.
Offeror states that silence is acceptance and offeree is silent and intends to accept.
From previous dealings, its reasonable that offeree must notify if wishes to reject.
Conditional or changed acceptance isnt acceptance its a counter-offer.
Acceptance with conditions only valid if acceptance is clearly independent of conditions.
Counter-offer takes original offer off the table (unless explicitly states that it doesnt).
Acceptance for a unilateral contract is completion of performance.
A unilateral contract can be revoked any time until performance is completed (walk across
bridge).
Promissor can have no role in performance i.e. promisee must not have to rely on promissor to
complete performance.
UCITA
1. To assent, must have opportunity to review term, and engage in conduct that indicates acceptance
term.
2. Opportunity to review: 2 things required:
a) Term made available in manner that calls it to attention of reasonable person,
b) Must have a right to return if person rejects term.
Consideration
Consideration is 2 things:
1. Benefit to promisor and detriment to promisee
2. The benefits & detriments must be bargained for the one must be the reason for/induce the other
i.e. consideration must induce promise and promise must induce consideration.
Consideration (for a promise) is Restatement:
1. Act or forbearance, or
2. Creation, modification or destruction of legal relation, or
3. Return promise
bargained for and given in exchange for the promise.
Contract must have consideration to be enforceable.
Offeror must get something in exchange for promise.
Pluses and minuses on both sides must even out.
Court must not look to the value of the benefit/detriment any benefit/detriment is sufficient for
consideration.
Pretence: No consideration if bargain/detriment is a pretence e.g. cant trade money for money.
A gratuitous promise isnt binding, coz theres no consideration (no detriment to promisee & no exchange).
Empty Promises: If a promisor promises, but allows for a change of mind, he has promised nothing.
There is no consideration, so the contracts not binding.
Either party can terminate contract at any time.
Exception: If has to give notice, theres consideration.
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Contract can be conditioned on event which depends on the will of a party. (even though the party has the
choice whether to do the condition or not).
Input/Output Contracts: UCC:
Good faith contracts to buy/supply as much as can produce/sell.
Good faith that neither side will buy/supply amount unreasonably disproportionate to estimate
e.g. course of dealings.
UCC: Good faith means honesty in fact and the observance of reasonable commercial standards
of fair dealing.
Consideration is offer to buy/supply for offer to produce/sell.
Common law: seller assumes the risk of all variations.
Employer-Employee Contracts:
Mutual consideration: If both parties have equal power to terminate, then theres consideration.
At-Will contract: Common law if no explicit contract, either party may terminate without
consequence.
These are unilateral contracts coz accepted by performance.
Promise lacks consideration if theres a pre-existing duty to perform.
Only if promise changes/adds to duty (even if change is miniscule), is there consideration.
Unenforceable Elements
Penalty: There can be no penalty for breach of contract. If there is, term not enforceable.
Double Recovery: A party cannot recover twice for the same wrong imposes a penalty for breach.
Cannot enforce contract/promise if economically better to breach. Cannot hold promisor in terrorem.
Modification
UCC Modification:
doesnt require consideration to be binding.
Modification must be made in good faith.
Modification only enforceable if 4 things (garbage collection case):
1. Parties agree voluntarily.
2. Modification made before completion of performance by either party.
3. Modification made because of unanticipated circumstances.
4. Modification is fair and equitable.
Modification is a substitute contract for original, and discharges original contract.
If modification occurs after performance, called an accord and satisfaction original contract is postponed
until accord is satisfied.
Mistake
Mutual mistake: Theres no contract if:
1. Both parties (mutual) make mistake of fact.
2. Mistake is of material fact i.e. basis of contract.
3. Because of mistake, each party does what neither intended
Unilateral mistake i.e. only one party makes mistake, doesnt avoid contract.
Unless other party caused mistake or had reason to know of mistake. (Then theres no contract).
Party assumes risk of mistake if:
1. Contract allocates risk to him.
2. He knows he only has partial knowledge, but treats it as sufficient.
3. Court finds it reasonable.
4. Relies unreasonably on certain representations cannot recover for want of due diligence (dredge
digger didnt do).
Mistake in offer:
If offer raises presumption of error, offeree has duty to inquire.
Offeree cannot snap up offer thats too good to be true not enforceable i.e. offer not valid.
Non-disclosure by offeror may be misrepresentation.
Only care about mistake in subject matter not price (uncut diamond stone).
Which Terms Apply
Battle of Forms:
Last Shot Rule: Common law
Buyer sends offer to buy.
Seller sends acceptance (different)
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 Buyer accepts goods.

Sellers terms apply. Sellers acceptance was a counter-offer. Buyer accepted goods thereby accepting counteroffer. Seller fired last.
First Shot Rule: UCC Buyers terms apply (basically):
1. If sellers acceptance is expressly conditional on additional/diff. terms, then no contract
and go to 3.
2. Else, terms are merely proposals. But, if between merchants, then ADDITIONAL terms
included, unless:
a) Offer expressly limits terms to those contained
in offer.
b) Terms differ materially.
c) Terms are objected to in a reasonable time.
3. If conduct of parties establishes contract, but writing doesnt, then:
o Terms are those on which parties writings agree (i.e. chuck out
different/additional terms -- knockout rule ).
o UCCs gap-fillers form rest of contract.
Different Terms: Can have contract even if material terms differ -- 3 approaches:
1. Treat diff. terms as additional terms i.e. go to 2 and discard them coz materially different
(by definition).
2. Diff. terms simply fall away coz 2 only deals with additional terms.
3. Knockout rule: Drop all conflicting terms and include gap-fillers from UCC + course
of dealing etc.
Material Change: Change which significantly increases price or reduces performance.
Course of Dealing:
4. Previous conduct of parties to an agreement.
5. Gives meaning to/supplements contract.
6. May become part of contract or help court supply omitted term.
Parol Evidence Rule:
Written contract intended to be integrated/complete cannot be modified by parol evidence that
adds to, varies or contradicts the writing.
If term is integrated, cannot be modified by prior occurrences.
Should term be included ?
1. Is it normal/natural to include term (trade usage).
2. Is document/term complete/integrated.
o Does external/extrinsic/parol evidence modify/contradict/add to term.
3. Was term intended to be complete ?
If term missing or not integrated can modify/add term with parol evidence e.g. trade usage.
Was term intended to be integrated ?
1. Naturally/Normally included test: Would term usually appear in contract ? (trade
usage; course of dealing)
2. Speaks for itself test: 4-corners if language used appears complete, then it is.
3. Wigmore test: Look at language & context/circumstances (conduct).
4. Writing omission test: If matter mentioned in contract, then meant to be integrated. If
not, then evidence is allowed.
Merger/Integration Clause: Clause stating no other terms apply i.e. contract is integrated.
If contract requires conditional performance, contract is not integrated or only partially
integrated (i.e. some terms are integrated) until condition occurs.
UCC order of importance:
1. Course of performance: Stuff already done for this contract.
2. Course of dealings: What the parties have done in past dealings.
3. Trade usage: Industry standard what rest of profession does.
UCC favors including above 3 things as evidence.
Common law favors excluding them.
Can exclude trade usage by expressly excluding it or using a merger (integration) clause.

UCC -- Course of performance and dealings can always be included (even if integrated).
Except if they contradict an integrated term.
Parol evidence rule doesnt apply:
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To subsequent modifications of a contract.

If it contradicts terms of an integrated written contract.
Ambiguity: If a contract is susceptible to more than one interpretation, it is ambiguous.
Contract need not be ambiguous to allow course of dealings etc. into evidence.
3 approaches to evidence dealing with ambiguity:
1. Court decides meaning from its own experience (4 corners) hears no
evidence.
2. Court first hears evidence, then decides if jury should hear it.
3. Jury hears all evidence.
3 approaches to resolving ambiguity:
1. Surrounding Circumstances.
2. Purpose of the parties.
3. Construe meaning against the maker/drafter.
If you dont follow trade usage, you cant argue that trade usage interpretation applies.
If the ambiguity destroys the meeting of the minds, theres no contract (Peerless ship
case).
Parol evidence may be used to explain all ambiguities.

Unconscionability:
UCC Court may refuse to enforce contract that was unconscionable at time of making.
Contract is unconscionable if extreme according to business practices of the time and
place.
To be unconscionable, must have 2 things:
1. Procedural Unconscionability: Bargaining didnt proceed as it should e.g.
o Unfair surprise.
o Fine print clauses.
o Mistakes.
o Ignorance of important facts (if understood, wouldnt have consented).
o age, education, intelligence, business knowledge and experience, bargaining
power, who drafted contract, whether terms explained to weaker party,
whether alterations to terms were possible, whether alternative sources to
get goods.
2. Substantive Unconscionability: Unjust or one-sided contract considers fairness of
terms.
Contract of adhesion: When gross inequality of bargaining power between parties.
Typically standard-form contracts by corporations on take-it-or-leave-it basis, with no
opportunity to change contracts terms.
Adhesion contracts are enforceable unless unconscionable. For unconscionability, must
consider:
1. Whether weak party was on notice of harsh term.
2. Whether strong party got agreement by fraud or overreaching.
3. Whether weak party had alternatives.
For unconscionability, one party doesnt have meaningful choice i.e. terms unreasonably
favorable to other party.
Meaningful Choice: Must consider:
1. Surrounding circumstances.
2. Inequality of bargaining power.
3. How contract created:
1. Partys level of sophistication.
2. Opportunity to understand the terms Did party read it?
3. Were terms hidden e.g. in fine print ?
4. Did party have alternatives?
5. Was behavior consistent with trade practice ?
6. Is there a valid business explanation?
Reasonable Expectations Doctrine:
Reasonable expectations of buyers apply to insurance contracts even though contract may negate
expectations.
If insurer creates reasonable expectation of coverage, but contract doesnt cover, expectation
prevails over contract language.
Insurance contracts are construed against insurer.
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Reasonable expectations doctrine applies if any of following:

1. Ambiguous terms.
2. Obscure terms e.g. technical terms (which are misleading).
3. Hidden terms.
Purpose of doctrine is to cause drafter of contract to be forthcoming & not mislead weak party.
Restatements version of reasonable expectations:
If strong party has reason to believe other party wouldnt assent if he knew contract had
particular term, then term is not included.
Restatement requires BOTH:
1. Must prove you wouldnt have signed it.
2. Must prove they knew you wouldnt have signed.
3 Remedies:
1. Nullify contract.
2. Drop clause.
3. Drop part of clause.
Unknown terms in a binding contract are not enforceable if beyond range of reasonable
expectation.
Disclosures/Disclaimers
UCC: Disclosures must be clear & conspicuous.
i.e. written so that reasonable person should notice them refers to presentation NOT to
comprehensiveness.
If not clear & conspicuous, then not enforceable.
4 possibilities for disclosure:
No disclosure.
Give general method which can be done in numerous ways i.e. non-specific disclosure.
Give name of exact method (how to calculate price case).
Full disclosure explaining how method works.
UCC: the name of the method is sufficient.
When express warranty together with warranty disclaimer, express warranty prevails (not the
disclaimer) if cannot be reconciled.
UCC Favors including warranties:
Standardized form contracts are construed against the drafter.
Implied Warranty of merchantability: Product do what its supposed to (what its expected to).
To disclaim warranty of merchantability, disclaimer:
1. Must be in writing.
2. Must specifically mention merchantability.
3. Must be conspicuous.
Common law Must disclose specific functionality not available, coz trade usage cannot
contradict contract.
Warranty:
Warranty: Statement that is basis of contract.
Puffing (opinion, affirmation etc.) warranty.
To determine if puffing consider:
1. Specificity of statements.
2. Written or oral.
Merchantable: Goods pass without objection in trade and fit for ordinary purpose.
For breach of warranty, must be evidence of defect at time of contract.
Implied warranty of fitness for a particular purpose:
3 Requirements:
1. Seller must have reason to know buyers purpose.
2. Seller must have reason to know buyer is relying on sellers skill (to select
appropriate goods).
3. Buyer must rely on sellers skill.
Parties held to a standard of reasonable care (not working result standard) in their trade unless
contract says otherwise (burst water pipe).
Implied Warranty of Habitability:
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Result based considers state of complete structure.

Difficult to waive. Can only be waived if:
1. Disclaimer is clear & unambiguous language AND
2. Builder can prove buyer understood what he was waiving.
Implied Warranty of Workmanship:
Services based considers builders conduct.
Also difficult to waive.
Breach/Performance
To justify rescission of a contract, must be material breach.

Material Breach: Breach so important that brings transaction to an end. Factors to consider:
Detriment of breach to injured party.
Extent to which injured party can be compensated.
Extent of forfeiture to breaching party from rescission.
Probability that breaching party will cure.
Extent to which breaching party acted in good faith.
UCC makes contracts hard to unwind should proceed, not be litigated.
Common law: If other partys breach is material, you can stop performing.
If not material breach, you can sue, but must continue performing.

Conditions:
Condition is event, not certain to occur, which must occur to activate performance.
2 types:

1. Conditional in terms of timing.

2. Conditional on a term of contract.
Non-occurrence of condition is not breach, unless duty to make condition occur (e.g. timing
condition).
Promise v. Condition: If doubt whether term is a promise or condition, its a promise.
Promise is of little value, coz damages for its breach are only nominal e.g. promise to
pay if Im paid.
Not satisfying a condition is serious coz may nullify someones duty to perform.
Condition can be either:
Express:
o Written.
o Conduct implied in fact.
Constructive: Court constructs i.e. default rule implied in law.
Law does not like forfeiture -- favors avoiding forfeiture.
If condition will create a forfeiture or shift the risk and contract doesnt deal with condition,
condition will be considered as a promise.
Condition Precedent v. Subsequent:
Condition Precedent: Condition which activates a duty i.e. an ordinary condition.
Condition Subsequent: Condition which terminates a duty.
The difference is in burden of proof:
o Condition precedent = burden on .
o Condition subsequent = burden on .
If a condition subsequent occurs, obligors duty is discharged.
o Obligors duty is NOT discharged if:
1. The duty is discharged by the obligors breach. OR
2. Condition couldnt be prevented & continuance of duty is not a materially
increased burden. OR
3. Before event occurs, obligor promises to perform even if it occurs and
doesnt revoke before obligee materially relies on this promise.

Waiver:

Waiver must be explicit to be valid.

If non-waiver/anti-waiver clause, unlikely something can be waived.
Contract language more important than behavior (non-paying tenant).

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If duty to perform is dependent on other partys performance, can waive dependence i.e. can
make duty independent.
Can retract waiver until other has materially relied unless waiver is binding promise.
If duty depends on material performance, waiver of dependence requires new contract.
Equitable Estoppel: Partys conduct induces other party to believe incorrect facts and to act on
them to his detriment.
To claim equitable estoppel, must show:
1. Exercised due diligence to know truth AND
2. Didnt know truth AND
3. Lacked reasonable means of knowing truth.
Impossibility
Non-performance not breach if made impractical by event which parties assumed wouldnt
happen.
If performance is impossible, performance is excused.
If performance depends on existence of a thing which perishes (through no fault of the
parties), then performance is excused (fire burnt hall).
UCC: Performance need not be impossible need only be impractical to be excused.
Impractical means unreasonable cost.
3 requirements for impossibility:
1. Something unexpected must occur.
2. Risk of unexpected occurrence not allocated in contract.
3. Performance commercially impracticable because of occurrence.
If performance impossible, but reasonable substitute available, must accept substitute (ship round
Africa).
Tender:
If no express order of performance, parties must perform simultaneously.
For a party to claim breach, it must first have tendered its own performance (otherwise the other
guy hasnt breached).
Whichever partys performance takes longer, is due first, unless contract says otherwise.
Doctrine of Substantial Performance: If party performs essential part of contract in good faith
but performance not perfect, performance considered complete.
Perfect tender: Common law & UCC Goods must comply exactly or seller is at fault.
Before acceptance, buyer can reject goods for any non-conformity -- UCC.
But seller has unconditional right to cure until performance due.
After acceptance, buyer may reject only if non-conformity material -- UCC.
Common law: Can only reject for material non-conformity.
To determine if non-conformity is material consider:
1. Express term, saying its a non-conformity.
2. Trade usage.
If seller doesnt cure in reasonable time, can cancel contract.
Accord:
Contract where obligee promises to accept substituted performance.
If obligor breaches accord, can enforce either original duty or accord duty.
Provided obligors breach is material.
Repudiation
Repudiation = Breach
Doctrine of Anticipatory Repudiation: requires clear manifestation of intent not to perform on
due date.
Retraction of Anticipatory Repudiation:
UCC: Party can retract anticipatory repudiation until performance is due. Cannot retract
if:
1. Other party cancelled OR
2. Other party materially relied OR
3. Other party indicated that he considers repudiation final.
A partys expectation of receiving performance may not be impaired -- UCC.
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If reasonable grounds for insecurity, can demand assurance that other will perform and
if reasonable, can suspend performance not already due until assurance received.
Must provide assurance in reasonable time within 30 days.
Assumption of Risk:
If goods damaged (without fault of parties) before risk of loss passes to buyer:
1. If total loss, contract cancelled.
2. If partial loss, buyer chooses:
a) Nullify contract.
b) Accept goods with right against seller.
If seller need not deliver goods to buyer at particular destination, risk of loss passes to buyer
when carrier receives goods.
Remedies
Cost/Reliance:
loss for relying on promise i.e. actual loss.
Return party to previous position i.e. past.
Restitution:
Return/restore to rightful owner; prevent unjust enrichment.
Return party to previous position i.e. past.
Can receive restitution if cover for breach in any manner reasonable at time, as long as in good
faith (regardless of hindsight).
Recovery only denied if cover unreasonable or in bad faith.
Expectation:
what guy expects; seeks to make the party whole.
Put party in position it would have been in if performance had occurred i.e. future.
Damages not measured according to cost to measured by value to .
Damages must be foreseeable at time of contracting can only recover for whats expected.
Punitive damages: Not recoverable for breach cannot impose penalty for breach.
Consequential Damages: (UCC) Loss reasonably considered as consequence for breach at time of
contract.
Includes loss which cannot be prevented by cover or otherwise.
What losses are recoverable for breach (Common law)?
1. Losses caused by breach.
2. Foreseeable losses (at time of contract).
To be foreseeable, must be:
1. Ordinary: happen in ordinary course.
2. Special/Specific losses: foreseeable if party had reason to know.
If time of performance to be decided later, damages for breach foreseeable at time when performance date
is decided are recoverable.
Buyers damages for breach with cover (UCC):
Contract price +
Incidental damages (e.g. fly somewhere to buy) +
Consequential damages
Amount made from cover.
Buyers damages for breach -- NO cover (UCC):
Market price -- Contract price +
Incidental damages +
Consequential damages.
If buyer accepts goods, owes full price but:
1. Can get damages for non-conformity +
2. Incidental + consequential.
Sellers damages for breach with cover if cover in good faith and reasonable (UCC):
1. Contract price Resale price +
2. Incidental damages.
Sellers damages for breach NO cover (UCC):
A. Either:
1. Contract price Market price +

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2. Incidental damages.
B. OR if above is inadequate:
1. Profit +
2. Incidental Damages.
To recover for lost profits, must be proved with reasonable certainty.
To estimate profits, can consider:
1. Compare to businesses of similar size, nature & location.
2. Profit history.
3. Compare to persons similar businesses.
4. Economic & financial data & expert testimony.
Seller cannot get consequential damages.
Can disclaim consequential damages (if not unconscionable).
Avoidable consequences: Cannot recover for foreseeable harm that can be avoided without undue risk,
expense or humiliation.
Lost Volume Seller: If buyer breaches and seller makes independent sale, can recover for full breach if
unlimited capacity. Must show:
1. Seller had capacity to make another sale.
2. Profitable to make another sale.
3. Would have made additional sale absent buyers breach.

Advent Case
1. A to modify software and hardware and icense U to sell systems with them
A. U to purchase systems for marketing
B. A provides services
C. Substantive issue is whether UCC 2 stature of frauds applies
i. Is this a goods contract?
2. Trial Court- this is not a transaction in goods, but primarily in services; APP Ct disagrees
A. Advent argument
B. What does software mean to APP court?
i. Program transposed onto medium
ii. Policy basis
3. Computer programs are the product of an intellectual process, but once implanted in a medium are widely
distributed to computer owners. An analogy can be drawn to compact disc recording off an orchestral
rendition. The music is produced by the artistry of musicians and in itself is not a good, but when
transferred to a laser-readable disc becomes a readily merchantable commodity. Similarly, when a professor
delivers a lecture, it is not a good, but, when transcribed as a book, it becomes a good.
4. Is the overall transaction goods?
A. What to look at:
1. Cost
2. Language
3. Compensation Structure
B. What gave U the right to sell copies of As software?
Archetectronics
1. Agreement involves 2 licenses
2. One is to use, copy for development
a. Is this a transaction in goods
b. Not a bargain to install delicered copies
c. Second: to make and distribute copies.
Arbitron
- License to use data- single station A can increase if additional stations.
- Indefinite term?
- T gets new stations, but no notice to A; When A discovers, it multiplies by number of new stations and does
discount.
- T pays old fee and then stops paying; A sues
- Ts defense? LC holds?
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- The escalation clause is not an agreement to agree, but a mechanism for objectively setting material terms in
the future without further negotiations
- Standard for enforceability?
- Is this an article 2 case? Good faith means?
- Would clause be enforceable if it said parties would agree on new price?

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