4LawSchool.com Outlines Bank

Contracts

Prof John Kettle

Fall 2000

Author: Michael A. Paff

> Civil Compensatory Contempt – money fine

> Civil Coercive Contempt – jail time (get out when you agree to comply)

> Criminal Contempt – undisputed jail time

 

In rem – action where the land is

In personam – where the party is

I REMEDIES FOR BREACH OF CONTRACT

 

Expectation = out of pocket at time of breach plus total profits

Restitution = to prevent unjust enrichment

Reliance = out of pocket only

Measure of Damages

 

Expectation or Reliance or Restitution

– benifit of bargain – reinbursement for O/O/P – P gets benifit received by D

(plus profits if applicable) (put back to point before (given over reliance if greater)

entering K) (can exceed K-price)

(usually capped @ K price)

 

 

Usual Quasi Remedy

 

 

A. The Goals of Contract Damages

 

The measure of the vendee’s damages is the difference between the value of the goods and the actual value at the time of the sale, including gains prevented.

Hawkins v. McGee 3

Facts: Removal of scar tissue, doctor told patient he would be in hospital for 3 days and his hand would be perfect. P was in hospital for months and his hand was hairy and disfigured. P wants expectation damages. Verdict for P, D appeals.

Issue: What damages to offer.

Application: It was also erroneous and misleading to submit to the jury as a separate element of damage any change for the worse in the condition of the plaintiff’s hand resulting from the operation.

Conclusion: New Trial

Anticipaatory Repudiation (§2-610) – someone states they plan to breach

n Express

n Implied

n Retraction – party can retract if no action has yet been taken

n Request for Assurance – need to know from breaching party for sure

n UCC Rq’s writing 30 day response time

B. Limitations on Expectation Damages

 

Rockingham County v. Luten Bridge Co. 39

Facts: After town breached, the D continued to build the bridge.

Issue: Whether the TJ erred in instructing the jury.

Rule: A public official has a power to resign if accepted by the proper authority.

The third meeting had not been advertised.

Application: We do not think P could proceed to build the bridge and recover the contract price. After P had had received notice of the breach, it was its duty to do nothing to increase the damages flowing therefrom.

Conclusion: Reversed

 

The measure of recovery by a wrongfully discharged employee is the amount of salary agreed upon for the period of service, less the amount which the employer affirmatively proves the employee has earned or with reasonable effort might have earned from other employment.

Parker v. Twentieth Century Fox Film Corp. 45

Facts: P was to play in D’s production but D backed out and offered P a different role. D appeals from SJ.

Issue: Whether D was successful in mitigating damages.

Application: To prove adequate mitigation, the employer must show that the other employment was comparable. The new movie proposed to eliminate or impair the director and screenplay approvals accorded to P and thus constituted an offer of inferior employment.

Conclusion: Affirmed

 

Pay or Play – Shirley McClaine case, still have to pay if not used

 

Neri v. Retail Marine Corp. 62

Facts: P agreed to buy boat from D and down paid $4,250. P broke K and D later sold boat for same price. P sued for deposit and D counter claimed damages for deposit amount.

Issue: May a seller recover lost profits and incidental damages when the buyer repudiates a sales K and the seller then resells for the same price?

Held: Yes

(i) Damages for retailer = 2-708(2), Lost profit + incidental

(ii) Damages for single sale=2-706; K price – resale price + incidental

(iii) Damages if keep good=2-708(1); K price – market price

(iv) Whether seller completes unfinished product upon repudiation: 2-704(2); (Luten)

 

Foreseeability

 

(i) Shipper is liable for consequential damages resulting from nondelivery if:

a. Resulting damages would naturally occur from br/K

b. Resulting dams. were objectively in parties’ minds when contracted.

(ii) D is liable if special facts were communicated by P.

(iii) Hadley test: tries to limit scope of promisor’s liability. UCC’s “reason to know of" vs. foreseeability.

 

Hadley v. Baxendale 67

Facts: D (shipper) did no realize repair of shaft was crucial to operation of mill. Late delivery of shaft resulted in mill closing.

Issue: Is P entitled to lost profits?

Held: No.

 

Victoria Laundry Ltd. v. Newman Industries Ltd. 69

Facts: D late in delivery of boiler to P (laundry co.)

(i) D liable for dams. resulting from lost use b/c it is foreseeable that the laundry co. would lose volume.

(ii) As UCC case today, buyer goes to 2-715 and rule of mitigation/cover.

 

C. Reliance and Restitution

 

Pinches v. Swedish Evangelical Lutheran Church 117

Facts: P built a church for D’s. The product unintentionally deviated from the plans. D took possession and used it anyway. D refused to pay unless price to rebuild the deviant parts was deducted.

Issue: If builder, in good faith, deviates from K must he be liable for reconstruction cost if building is reasonably adaptable to use and reconstruction would be an unreasonable hardship?

Holding: No, affirmed.

(i) Builder, when good faith deviation and building is still adaptable and rebuild would be great

burden, should get Kprice – diminution in value.

(ii) Builder, to sue in K law must show

D. Specific Performance

– Irreparable injury (inadequate remedy at law)

– Uniqueness – no suitable substitute that $ can buy (ex land, art, people)

– Uncertainty of Value vs Uniqueness Capable of Value

 

Van Wagner Advertising Corp. v. S&M Enterprises 146

Facts: D brought property with P’s leased billboard on building and terminated the lease.

Issue: What type of damages?

Application: Billboard space could be valued and therefor specific performance is not available

Fitzpatrick v. Michael Md 1939

Issue: P wanted specific performance for nursing duties to D who promised a life estate

Holding: SOF problem, specific performance would make it uncomfortable for both D and P

 

E. Frustration of purpose – would be against public policy to enforce the contract

 

F. Liquidated Damages

City of Rye v. Public Service 134

Issue: Can City keep $100K bond as contractual damages when the amount bears no relationship to actual pecuniary damages?

Holding: No

(i) Rstmt 356 pg. 139

(ii) It is a penalty, and thus not upheld.

(iii) Penalty can be upheld if statute provides for it.

 

Fretwell v. Protection Alarm Co. 140

Issue: May a company limit its liability for breach of K to a token dollar amount.

Holding: Yes

(i) “liquidated damages clause" was really attempt to limit liability and is valid as such b/c K established the duty and its lawful provisions can limit the liability.

(ii) D was not an insurer and doesn’t violate pub. policy to limit liability.

Liquidated Damages v. Penalty

n reasonable forecast – excessive

n injury w/b difficult to measure/estimate – disporportionate to K-price

 

Expectation v. Reliance v. Restitution

 

Restitution = bad faith of breacher

 

Liquidated Damages

n reasonable forcast – formula based

n not a penalty

n not excessive

n not disproportionate to K-price

 

 

II GROUNDS FOR ENFORCING PROMISES

A. Consideration

Without consideration there is no agreement.

Congregation Kadimah Toras-Moshe v. Deleo 192

Facts: D made a oral promise to give plaintiff $25,000 when he died. It was never put in writing.

Issues: Whether the decedent’s oral promise is an enforceable contract.

Application: Allocation of $25,000 in its budget for the purpose of renovating a storage room, is insufficient to find reliance or an enforceable obligation.

Conclusion/Holding: In this case, there is no injustice in declining to enforce the decedent’s promise. This promise would be against public policy. Judgment affirmed.

 

NOTES:

Enforceable unless proven otherwise in modern law.

Legal detriment when you give up something.

Promissory estoppel as a defense to non-enforceability.

In general, a waiver of any legal right at the request of another party is a sufficient consideration for a promise.

Hamer v. Sidway 205

Facts: An uncle promised his nephew that if he refrained from drinking, using tobacco, swearing, and playing cards or billiards for money until he was 21 years old, he would pay him $5000. The uncle died and the P sued the estate. TC found in favor for the P and the court of appeals reversed.

Issues: Whether a contract was made

Application: The nephew gave up the legal right to drink and use tobacco for the opportunity to earn $5000 thus making consideration.

Conclusion/Holding: The appeal is reversed.

Substantive consideration is needed to make a contract.

 

Fischer v. Union Trust Co. 211

Facts: D gave two plots of land for one dollar to his incompetent daughter with the promise to pay the two mortgages when they come due. The father died and the daughter brought suit against the estate to pay the mortgages.

Issues: Whether there was a delivery and, if so, was the claimant in position to enforce the executory contract, or to recover damages at law for nonperformance.

Application: A dollar for a land deed is not sufficient consideration. It was only a gift.

Conclusion/Holding: Judgment reversed

Mere inadequacy of consideration will not void a contract.

Batsakis v. Demotsis 216

Facts: P sued D to recover from a agreement that stated the plaintiff would give the defendant $2000 at a later date in return for 500,000 drachmae (the equivalent of $25) today.

Issues: Whether the contract was valid based on inadequate compensation.

Application: Because the defendant has property in the U.S., she should have been aware of the cost of the transaction. The inadequate consideration does not apply in a reasonable situation.

Conclusion/Holding: The court should have rendered judgment in favor of plaintiff against defendant for the principal sum of $2000. Judgment affirmed and amended.

The settlement based on a contract which is against public policy, or which is illegal cannot form the basis of consideration for a valid compromise settlement.

Duncan v. Black 221

Facts: D agreed to sell 359 acres of farmland to the P with a 65 acre cotton allotment. The following year, P expected the cotton but was refused. When the plaintiff threatened suit, the defendant gave him $1500 as a settlement.

Issues: Whether the defendant breached the contract and it was a legal settlement for said breach..

Application: The plaintiff’s claim of the purchase of some nonexistent future allotment stretching perhaps into eternity was baseless, and did not rise to the dignity of consideration.

Conclusion/Holding: Judgment affirmed.

An implied contract is an agreement which legitimately can be inferred from the intention of the parties as evidenced by the circumstances and “the ordinary course of dealing and the common understanding of men."

Martin v. Little, Brown &Co. 225

Facts: P notified D of plagiarism. P demanded one-third of the settlement and the D gave him a check for $200. P sued demanding compensation for his services.

Issues: Whether there was an implied contract.

Whether the defendant was unjustly enriched by the plaintiff’s action.

Whether the defendant caused the plaintiff mental distress.

Application: The facts alleged in the complaint are insufficient to establish a contractual relationship between the parties.

Conclusion/Holding: A contract was not made. Judgment affirmed

 

C. Past Consideration

A mere verbal promise, without any consideration, cannot be enforced by action

Mills v. Wyman 231

Facts: The son of D was taken up while sick by P. After his death, D wrote a letter stating he would pay P all of the incurred expenses. TC directed a non-suit.

Issues: Whether there was a contract between the parties or just a promise.

Application: The promise appears to have no consideration.

Conclusion/Holding: Affirmed

A moral obligation is a sufficient consideration to support a subsequent promise to pay where the promisor has received a material benefit, although there was no original duty of liability resting on the promisor.

Webb v. McGowin 236

Facts: P sacrificed his body to save D from falling block. In consideration, D agreed to pay him $15 every two weeks for the remainder of the P’s life. When D died, the payments stopped.

Issues: Whether the promise by the defendant was a contract.

Application: When P saved D from harm and was being paid, it became an enforceable contract. The promisor received a material benefit constituting a valid consideration for his promise.

Conclusion/Holding: Judgment reversed.

 

D. Reliance on a Promise

 

Kirksey v. Kirksey 246

Facts: D invited P to stay on his land. She abandoned her property. The defendant gave her land for two years then asked her to leave the property. Plaintiff argues they had a contract.

Issues: Whether there was consideration.

Application: The promise on the part of the defendant was mere gratuity.

Conclusion/Holding: Judgment reversed.

Dissent: The loss and inconvenience of abandoning her home and moving was sufficient consideration.

Promissory Estoppel is when the act of reliance by the promisee to his detriment provided a substitute for consideration.

East Providence Credit Union v. Geremia 261

Facts: D borrowed money from P and held their car as collateral. When P received notification that insurance payment was overdue, P stated they would pay the premiums and add it to the loan. The car was totaled in a accident and there was no insurance. P filed a civil action to collect on the promissory note and the defendants filed a counterclaim. The TC found for P. D appealed.

Issues: Whether or not the plaintiff is precluded from recovering on its loan contract by reason of its failure to fulfill a promise to defendants to pay the overdue insurance premium.

Rule: 1. Was there a promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee?

2. Did the promise induce such action or forbearance?

3. Can injustice be avoided only by enforcement of the promise?

Application: P made more than a mere gratuitous or unrecompensed promise. We believe that the promise by the P to pay the insurance premium on D car was one made in exchange for valid consideration.

Conclusion/Holding: Judgment affirmed

 

Forrer v. Sears, Roebuck & Co., 272

Facts: P sold his farm at a loss on the promise of permanent employment by D. P was hired and a few months later fired. P brings action on a claim of promissory estoppel.

Issue: Does detriment taken on by P to accept perm. employment from D constitute consideration additional to services of employment that makes the employee unfireable w/out cause? Holding: No.

(ii) Offer of permanent employment is offer to provide employment terminable at will.

(iii) For an action, P must prove benefit to D in addition to his own detriment. i.e. if the P had contributed capital to the enterprise.

The statue of frauds for real estate transactions and anything over one year to be in writing.

Seavey v. Drake 266.

Facts: P had a note against his father estate which he gave to the testator and he received a plot of land. He placed a house and other improvements on the land. D moved to dismiss the bill because it had no consideration.

Application: The expenditure in money or labor in the improvement of the land induced by the donor’s promise to give the land to the party making the expenditure, constitutes, in equity, a consideration for the promise and the promise will be enforced.

Conclusion/Holding: Contract was in force.

An employee cannot avoid the Statute of Frauds b/c of his detrimental reliance on an employer’s oral promise of continued employment.

Stearms v. Emery-Waterhouse Co., 276

Facts: P was given oral K by D to work at $85k/yr for 5 yrs. 2 yrs. later he was cut to $68K/yr at a different position. 6 mths. later P was fired.

(i) If P can prove D had an intent to commit fraud, P may avoid the SoF.

(ii) The ct. must focus on the employer’s conduct, not the employee’s reliance. There was no fraudulent conduct by D.

(iii) Ct. outlines exceptions to SoF 1.Restitution 2.Part performance 3.Reliance 4.Tort

 

Goodman v. Dicker, 279

Facts: P hired salesmen and received orders for radios b/c of D’s promise that a radio franchise would be granted and radios delivered. Franchise was not granted.

Issue: Was P’s reliance on D’s representations sufficient to estoppel D from denying a K?

Holding: Yes. Affirmed judgment for P’s expenses but reversed for lost profits.

(i) P wins b/c D did not keep promise to even let P start and thus could have never fired at will.

In franchises you must have time to recoup your investment before you can be terminated at will (Missouri doctrine,313).

– Franchisee has a better claim than an employee.

– Could sue in equitable estoppel b/c of misrepresentation of facts

– Could sue for neg. misrep. (fraud) Must show at time of promise, D had no intent of keeping promise. In some States only liable if you do that job for a living.

 

An agreement to alter the terms of a lease is not enforceable if no additional consideration is given?

Levine v. Blumenthal 289

Facts: P is suing for back rent. D made an oral agreement with P to keep paying $175/month even though the K called for an increase to $200/month. D skipped out on the last mnth’s rent.

(i) There was no consideration for the oral agreement, thus it is not legally enforceable.

(ii) The preexisting legal duty rule does not apply where there is a bona fide dispute that the parties agree to settle, but there was no such dispute in this case.

E. Conditional Promises

Solving the Mutuality Problem (Use when one party has power to cancel K)

1. Imply limitation of that power: i.e. Wood, b/c P must use reasonable efforts.

2. Alternative Consideration: i.e. Petroleum Refractionating Corp.

3. Declare any impediment on that power to be consideration: i.e. Gerfein

4. Abolish requirement of consideration for options.

5. Alternative theories – Restitution, Reliance, Unilateral K

 

Davis v. General Foods, 292 (Compare to Martin, 228)

Facts: P claimed D used her recipe and did not pay her for it.

Ct. says – no promise or K because D reserved all rights. A court might imply an obligation from silence, but no obligation when one party says no. In Martin it was unconscionable for D to benefit w/out paying P. In this case however the D explicitly reserved all rights and thus no restitution claim. FYI- Once a trade secret is exposed, it is available for use by all and is not considered anyone’s “property”.

 

Nat Nal Service Stations, Inc. v. Wolf, 295 (Stat. o’ Frauds case)

Facts: D promised P rebate on gas if purchased through them.

Ct. says: This case is outside the SOF b/c it could have been terminated within a year. Therefore the K is enforceable although not in writing.

The fact that a promise is conditional upon a future event does not invalidate the agreement for lack of mutuality

Obering v. Swain-Roach Lumber Co., 296

*Contingent Ks: Once contingency has occurred, both parties are bound.

Facts: P (Swain) had a K with D (Obering). P was going to buy a tract of land and then sell it to D for $8,000 but reserve the timber rights for four years. P bought the land but D refused to then purchase it from P. Lower Ct. ordered spec. perf.

 

Contingent contracts not enforceable by either party prior to the occurrence of the contingency. However, once contingency occurs, both parties equally bound.

 

Wood v. Lucy, Lady Duff-Gordon, 299

*Promise to use reasonable efforts is implied. Now in UCC 2-306(2).

Facts: Exclusive agreement btwn. P and D for D’s endorsement of clothing and D would get 1/2 profits. D endorsed other clothing and kept profits w/out telling P.

Issue: Where P did not specifically promise to use reasonable efforts to promote D’s goods, and D’s compensation was to come from such promotion, is there a valid K?

Holding: Yes, judgment reversed.

UCC s2-306(2) imposes the implied duty used by the court. Now called “best efforts”.

 

A party cannot create an enforceable contract by waiving the condition which renders his promise illusory.

 

Omni Group, Inc. v. Seattle-First Nat’l Bank 302

Facts: D sold real estate to P. P wanted Ds to procure a engineer and architect’s report and notify them of the report was OK. P sent a notice to D stating that they forgo the report. D backed out stating the report was not done. Judgment for defendants. Plaintiff appeals.

Application: Because the condition was for its benefit, the plaintiff could waive the condition and enforce the agreement as written.

Conclusion/Holding: Reversed.

 

A general duty of good faith

A seller under an output K has a good faith duty to produce for the K term even if no production level was specified

 

Feld v. Henry S. Levy & Sons, Inc., 307

*Seller must act in good faith to satisfy output K’s. UCC 2-306.

Facts: D had a K w/ P to supply all bread crumbs it produced w/ a 6 mth. notice required to cancel. P refused to pay 7 cents/ton instead of 6. D dismantled the crumb machines and sold them, thus breaking K. D claims no liability b/c K only called for it to sell the crumbs that it made.

(i) Seller must act in good faith to satisfy the K. UCC 2-306

(a)Not good faith if D shuts down when profits are less than expected.

(b)Good faith if production is stopped b/c it imperils insolvency.

(c)Good faith if D shuts down for more than trivial losses. (Question of fact)

 

Corenswet, Inc. v. Amana Refrigeration, Inc., 311

Facts: P (Corenswet) was a franchise distributor of Amana. The K was terminable by either party “at any time for any reason” w/ten days notice. Amana terminated the franchise. P seeks to enjoin termination b/c it was arbitrary and capricious.

Issue: Was the termination permissible?

Holding: Yes

“Good Faith” requirement of UCC is overridden by UCC 2-309(2) which allows termination at any time by either party.

 

-Franchisees have a strong good faith argument under UCC

(i) 1-203 Every K has a duty of good faith

(ii) 2-103(1)(b) For merchants good faith is reasonable commercial standards of fair dealing.

 

Discharges in violation of public policy

 

Sheets v. Teddy’s Frosted Foods , Inc., 315

Facts: P was fired for trying to get his employer to obey food quality standards set out by law.

Issue: May an employee hired for an indefinite term be fired for pointing out possible criminal violations by the employer.? Holding: No

(i) Public policy places limits on rt. of employer to fire at will i.e. can’t fire for pointing out criminal violations of employer.

(ii) Public policy claims that are valid for action against a firing:

(a) Statutes that prohibit firing an employee for filing a workers comp claim.

(b) An employer that fires an employee for refusal to commit perjury.

(c) TX: Only allows action when employee is fired for not committing a crime or for refusing to do what the law forbids. Argument must be grounded in statute and judge decides whether it is sufficient for a claim.

 

 

III THE MAKING OF AGREEMENTS

General Rules:

 

1. Terms of offer that specifies it is made to several offerees means “invitation"

2. Form Letters “invitation"

3. Price quotes not equal offer (except per U.C.C)

4. First 10 customers……. Offer

5. Offer time period starts when received unless otherwise stated

6. Except for option K’s – revocation anytime before acceptance

7. Options terminate –

n after time specified (or reasonable time if not stated)

n destruction of subject matter

n intervening illegality

n death of essential person to offer

8. Consideration not required if “firm offer" (UCC)

9. Rejection by offeree

n express – counter offer (not mere injury)

 

A. Mutual Asset – Meeting of the Minds

 

A meeting of the minds may not be literally or universally true.

 

Embry v. Hargadine – McKittrick Dry Goods Co. 325

Facts: P was an employee of D. When asking about a new contract, president told him, “Go ahead, you’re all right, don’t let that worry you." Two months later, he was discharged

Issues: Whether the court erred in giving the wrong jury instructions by stating there had to be intent by both sides.

Application: We think no reasonable man would construe the defendant’s answer to mean anything but that the plaintiff would be employed for another year.

Conclusion/Holding: The court erred in making the formation of a contract depend on a finding that both parties intended to make one. Judgment reversed.

Using objective theory, a contract has, strictly speaking, nothing to do with the personal, or individual, intent of the parties.

 

Kabil Developments Corp. v. Mignot 329

Facts: Oral agreement that Ds would provide helicopter service to P. Ds denied that there was a contract because the site was not deemed safe or economical. Decision for the P, D appeals.

Issues: Whether the trial court’s ruling on certain testimony and instructions permitted the jury erroneously to find a contract on the basis of subjective intentions and expectations rather than on the objective manifestations of mutual assent.

Application: The witness was permitted to testify that he did, indeed, act in the belief that he was making a contract.

Conclusion/Holding: Affirmed.

 

An employee handbook that has employment guidelines, and also says that employment is terminable at will by either party, modify an at-will employment.

McDonald v. Mobil Coal Producing, Inc., 335

Facts: P was forced to resign from D’s Co. after rumors of P sexually harassing another employee. P claimed D breached its K as set forth in employee handbook.

(i) The disclaimer must be conspicuous and it was not.

(ii) Objective standard is used and all manifestations by D suggested an intent to make legally binding promises.

 

Kari v. General Motors Corp., 341

Facts: P brought suit to recover separation pay allegedly guaranteed by D’s handbook.

Issue: Is there a K? Holding: No

(i) D wins b/c disclaimer is clear and conspicuous. No intent to be bound is obvious.

Pine River State Bank v. Mettille, 342

(i) When new or changed conditions are made in a handbook this may become contractual and is accepted by the employee if he stays on the job. By staying, while free to leave, the employee has given the necessary acceptance to make a K.

 

Ad vs. Offer

 

A letter stating that certain goods are available for sale at a specified price does not constitute an offer

 

Moulton v. Kershaw 343

Facts: D, a salt dealer, wrote to P that they could offer full car loads (80-95 barrels) of salt at 85 cents/barrel. P sent a wire the next day and ordered 2,000 barrels. The following day the D withdrew their offer. P sued for $800 dams. and D’s demurrer to the complaint was refused.

(i) D’s letter does not indicate a quantity and thus would be difficult to interpret.

-Today, UCC 2-201 would be used to fill in the terms. Under 2-201 K is not enforceable beyond quantity shown in writing.

(ii) The letter was simply a notification to salt dealers that D had salt available for order.

(iii)Cannot look to P’s writing to fill in quantity for a stat. o’ frauds defense.

 

A mere agreement to agree, in which a material term is left for future negotiations, is enforceable; however, a bald agreement to agree on a future rental was unenforceable for uncertainty as a matter of law.

 

Joseph Martin, Jr. Delicatessen v. Schumacher 347.

Facts: Lease stated that, “the tenant may renew this lease for an additional period of five years at a rate to be agreed upon." At renewal, D stated rent of $900 a month for a $545 building. The tenant filed suit for specific performance to extend the lease at the appraised value. for P

Application: The renewal clause leaves no room for legal construction or resolution of ambiguity.

Conclusion/Holding: Reversed with costs.

Intent in contract law is objective rather than subjective.

Empro Mfg. Co. v. Ball-Co Mfg., Inc. .352.

Facts: The two parties reached a agreement in principal or “letter of intent." The defendant’s purchase of the plaintiff’s company was subject to certain conditions. While the two parties were sorting out their indifferences, the plaintiff discovered the defendant was dealing with someone else and they filed suit. The district judge dismissed the compliant for failure to state a claim. Plaintiff appeals.

Issues: Whether the binding effect of a document depends on the parties’ intent.

Application: The defendant’s actions did not indicate an objective intent to bind itself to a contract.

Conclusion/Holding: Affirmed

Raffles v. Wichelhaus 359

Facts: The plaintiffs agreed to sell 125 bales of cotton to the defendant. The plaintiff said the cotton would come in October on the ship “Peerless"; instead, the cotton came in December on another ship. The defendant refused to buy and the plaintiff sued.

Issues: Whether there was a contract when the delivery date was two months late.

Application: It does not appear that the plaintiff had any goods on the earlier ship. The difference in time was minimal and the time of sailing is no part of the contract.

Conclusion/Holding: There was no consensus as idem, and therefore no binding contract.

 

Where a promisee acts to his detriment in reasonable reliance upon an otherwise unenforceable promise, courts in other jurisdictions have recognized that the disappointed party may have a substantial and compelling claim for relief.

Wheeler v. White 355

Facts: P alleged that D had breached a contract to secure a loan or furnish the money to finance the construction of improvements upon land owned by the P. The D pleaded the contract was insufficient to establish any grounds of recovery. The TC dismissed the case and the P appealed.

Issues: Whether promissory estoppel is a remedy for the plaintiff.

Application: D assured P that the money would be available and urged him to proceed with the necessary task of demolishing the buildings presently on the site so as to make way for construction of the new building.

Conclusion/Holding: Judgment reversed.

 

B. Control Over Offer

Cobaugh v. Klick-Lewis, Inc. 363

Facts: P made a hole in one. D had a new car displayed w/a sign that said to win it you had to make a hole in one. D refused to give it up b/c the car was for a tournament two days before.

Issue: Was there a valid offer? Yes

(i) Promoter’s offer remains open until it is withdrawn and any person who acts upon it binds the promoter to perform his promise.

– General rule:Can’t accept an offer after specified time in offer has expired. If no spec. time specified use “reasonable" time standard. (Rstmt. 2d Sec. 40)

 

When an offeree fails to comply with the suggested method of acceptance, but instead begins performance, a K is formed

 

Allied Steel & Conveyors, Inc. v. Ford Motor Co. 368

Facts: D (Allied) got a purchase order from Ford that also had an indemnity clause in it. D did not accept the K as suggested in the PO but began performance anyway. D’s employee was injured by P’s employee and D’s employee sued P who counterclaimed D through the indemnity clause. D claimed that it didn’t formally accept the K as suggested, thus no K, thus no indemnity.

 

(i) Intent to accept a K is manifested by beginning performance with knowledge of offeror and in accordance with material terms of K

(ii) General rule:Acceptance must be by a means authorized by the offeror.

 

Terminating an offer

 

Davis v. Jacoby 371

Facts: P seeks spec. performance to get the inheritance of a close friend. P’s contend that the decedent promised to will them all of their property if they come to help them. The will did not reflect this but the evidence did.

Issue: Was there a bilateral K that will justify spec. perf.?

Holding: Yes, reversed.

(i) When difficult to determine whether unilateral or bilateral, the presumption is for bilateral K.

Unilateral K- requires actual performance to bind offeror.

Bilateral K – acceptance of offer or performance binds offeror.

(ii) Death revokes any unilateral offer. Jordan v. Dobbins 383

 

An offer of a unilateral K may be revoked at any time prior to performance, even if the offeror knows that the offeree intends to perform

 

Petterson v. Pattberg 377

Facts: P claims a loss of $780. D accepted a mortgage from P and paid him cash. D offered to deduct $780 if P paid off the principal before May 31. Before that date, P went to pay cash for the balance but before he could give the money, D told him he had sold the mortgage.

 

(i)The offer of a unilateral K may be revoked at any time prior to performance of the act required as acceptance.

(ii) Modern rule: When there is substantial performance, unilateral offer can’t be revoked by offeror.

Rstmt. 2d Sec. 45 (390)

(iii) Also, w/out condition in K negating such need, offeree must know of revocation for offer to be void.

 

Where D offers to convey property when an act is performed, a K formed when the offeree begins performance of the act

 

Brackenbury v. Hodgkin 384

Facts: D promised to give her daughter and son in law the farm when she died if they would move to her and take care of her. D later wanted them to leave so she deeded the land to her son and he evicted P’s. P’s want the land reconveyed to D, D’s son enjoined, and a ruling that there is a trust in favor of P’s.

(i) Where the offer calls for an act as acceptance and the offeree makes a substantial beginning of performance, a K is formed.

(ii) UCC 2-206: bilateral K can be accepted by performance instead of a promise to perform.

 

C. Option Contracts (UCC 2-205)

 

An option under seal, given without consideration, becomes enforceable upon notification of acceptance by the optionee

 

Thomason v. Bescher 391

Facts: D gave an option under seal to P to buy a tract of timber if he tendered $6,000 w/in 60 days. P, a few days later, said he would take the tract and would pay the money the following week. D withdrew the option.

(i) At common law, instruments under seal do not require consideration. (Seals only enforced if covering options)

(ii) Acceptance of the option under seal created a bilateral K, which is legally and equitably enforceable.

 

Marsh v. Lott 393

(i) Court enforced the option even though only 25 cents was given for the option and says any money is enough for consideration on options.

(ii) Both this case and Thomason use different theories to enforce options. They are accepting formalities (seal and nominal consideration) to enforce options.

 

Smith v. Wheeler 394

(i) Even thought the written consideration of $1 was not paid, the ct. says the promise to pay was binding. Thus, there is consideration that makes the option enforceable.

(ii) Rstmt 2d Sec. 87 (Option Contract) pg. 401- reflected by all 3 cases above.

 

Reliance on offers

When a general contracter relies on a sub-contracter’s bid, the K is vaild

 

Drennan v. Star Paving Co. 398 (Modern view)

Facts: P sued for breach of K. D was awarded a K to build a school. D used P’s bid to pave the school w/in his bid for the whole K. When P was awarded the K he went to tell D who refused to perform and wanted more money.

(i) Sec. 90 of Rstmt. promissory estoppel. used to enforce offer of sub.

(ii) P’s reliance was reasonable and foreseeable to D, and P relied to his detriment.

 

E.A. Coronis Associates v. M. Gordon Constr. Co. 402

Facts: D a general contractor, solicited bids from subcontractors. P offered to supply and erect the structural steel. P then telegraphed a revocation of its offer and P rejected it. Summary judgment for P.

Holding: Reversed for promissory estoppel.

 

Reliance on negotiations

 

If a D can forsee that the P will rely on the promise to his detriment, P can recover damages.

 

Hoffman v. Red Owl Stores, Inc. 408

Facts: D promised P a grocery store franchise in the fall for $18K. P sold his bakery and bought a small grocery store to get experience. P later sold the small store at a loss of $500, at the behest of D. D kept raising the price to get a franchise and P finally broke off negotiations.

(i) Rstmt. Sec. 90 (promissory estoppel) applies.

(ii)There was no offer, only negotiations. This case implies that parties must bargain in good faith; when they don’t and there is detrimental reliance, promissory estoppel will apply and dams. will be awarded to prevent injustice.

 

D. Conduct of Acceptance

Rest 2d: §§22, 59(Counter Offer)

n preliminary negotiations vs. K

n offer / counteroffer / qualified-conditional acceptance / inquiry

n rejection

n deviant acceptance = qualified acceptance = c/o

n grumbling acceptance vs counteroffer

n absolute acceptance

A counteroffer rejects an offer and terminates it.

Livingstone v. Evans 415

Facts: D wrote P and offered to sell land for $1800. P wired D and offered $1600 cash or if not accepted to send lowest cash price. D wired “Cannot reduce price." P immediately wrote back accepting the offer. In the interim, D had sold the property to someone else.

(i) The telegram acted as renewal of the original offer.

(ii) “Mirror image rule" -if acceptance varies from offer in any way, it is a counter offer.

 

Battle of the forms under the UCC

(i) UCC 2-207: additional terms in an acceptance are only proposals for additions to the K unless the acceptance is expressly made conditional on assent to the additional terms

(ii) Knockout Rule; Southern Idaho Pipe 430- conflicting terms in a K cancel out. Ct. says P’s form did not contest D’s limitation of liability and thus could not cancel it.

(iii) UCC 2-207 rejects mirror image rule.

 

 

Idaho Power Co. v. Westinghouse Electric Corp. 421*

Facts: Idaho is suing West. for dams. under warranty, neg., and strict liability. Idaho ordered a voltage regulator that caused a fire. West. paid to fix the problem but Idaho still sued in tort. West. claimed that liability was limited by its terms on the back of its price quote sheet. Dist. ct. granted sum. jud. for West.

 

Roto-Lith, Ltd. v. F.P. Bartlett Co. 425

Facts: Buyer orders emulsion and seller ships w/disclaimer of warranties.

Timing of acceptance – MAILBOX RULE

 

Morrison v. Thoelke 429*

Facts: Appelle mailed a letter of acceptance to appellants to sell some land. Before the letter was received appellees called appellants and repudiated the letter. Appellants filed the land papers anyway and sought spec. perf. from the court.

(i)Acceptance is effective on dispatch, “mailbox rule". Adams v. Lindsell

(ii) All other communications (offers, revocations, rejections) are effective upon receipt.

(iii)Exception: if rejection is dispatched before acceptance whichever arrives first controls.

 

Rest.2d §§40; 63; 69

n deposited acceptance rule (Adams v. Lindsell)

n European Rule – when received

n Implied K

n Quasi K

 

When a party requests work additional to that specified in a written K, an implied agreement arises to pay for the reasonable value of all the labor and materials furnished

 

H.B. Toms Tree Surgery, Inc. v. Brant 439*

Facts: P had been doing landscaping for D. P had submitted an estimate for $10K. However, D kept instructing P’s crew to do a lot of extra work and indicated he would pay for it. The K required any additional work to be separately valued and itemized as extras.

(i) General rule is that express K excludes inconsistent implied K obligations, but in this case the parties did not intend to be bound to the express K.

(ii) D realized what was going on and told P to proceed. This created an implied K.

(iii) Rstmt. 2d Sec. 69

 

Silence is sometimes deemed acceptance.

 

Hobbs v. Massasoit Whip Co. 442

Facts: P sent eel skins to D who dept. them for several months until they were destroyed. There was no K, but P had sent eel skins to D 4 or 5 times before w/out a K and they had been paid for.

Issue: Did the parties silence constitute acceptance? Yes

(i)Normally, silence does not constitute acceptance.

(ii) In this case a pattern of dealing (prior business relations and practices) had been established and D therefore had a duty to act when it received the eel skins. D’s silence and retention of the skins for an unreasonable time constitute acceptance.

 

Austin v. Burge 445

Facts: D got a subscription to a paper from father in law and subsequently paid it twice but said no more. D kept taking it w/out paying and P sued for subscription price.

* P wins b/c even if D didn’t order the paper he continued to use it, under circs. where he knew it wasn’t a gratuity, and he thus agreed by implication to pay for it.

 

Domestic Duties

 

Morone v. Morone 446

Facts: Woman performed domestic and business services to her live-in man. She asserts an implied contract for compensation from these services. There was also an express oral agreement for support. Special term dismissed complaint and appellant affirmed.

Issue: Whether the express and implied contracts of an unmarried couple is enforceable.

Conclusion: The cause for action in the express agreement is sustained.

 

E. The Effects of Adopting a Writing

A. Parol evidence Rule (Rstmnt 213)

1. A binding integrated agreement discharges prior agreements to the extent that it is inconsistent with them.

2. A binding completely integrated agreement discharges prior agreements to the extent that they are within its scope.

3. An integrated agreement that is not binding or that is voidable and avoided does not discharge a prior agreement. But an integrated agreement, even though not binding, may be effective to render inoperative a term which would have been part of the agreement if it has not been integrated.

4. Comment: Whether a binding agreement is completely or partially integrated, it supersedes inconsistent terms of prior agreements.

 

B. Integrated agreements (Rstmnt 209, p.471)

1. An integrated agreement is a writing or writings constituting a final expression of one or more terms of an agreement.

2. Whether there is an integrated agreement is to be determined by the court as a question preliminary to determination of a question of interpretation or to application of the parole evidence rule.

3. Where the parties reduce an agreement to a writing which in view of its completeness and specificity reasonably appears to be a complete agreement unless it is established by other evidence that the writing did not constitute a final expression.

 

Mitchill v. Lath 451

Facts: D orally promised to remove an icehouse if P bought farm. P bought but D did not move icehouse. The movement was not in the written contract.

Issue: May a ct. enforce an oral agmt. that induced the promisee to enter into a closely related written agreement? No

 

(i) UCC 2-202: Integrated agreement may not be contradicted by prior agreements or contemporaneous oral agreements. See note 3; certainly included standard..

(ii) The oral agreement is not allowed b/c the terms would ordinarily and naturally have been included in the original K and the oral agmt. contradicts the terms of the written K.

 

Evidence for deciding integration

1. Williston; 4 corners; look at face of agreement itself and whether looks complete.

2. Corbin (majority); look at entire facts and background circumstances including evidence of prior agreements.

3. The shorter the writing the greater the possibility it is not completely integrated.

Hatley v. Stafford 458

Facts: P leased 52 acres from D. K said D could buy out P for his cost, but no more than $70 an acre. D took possession of property and cut down wheat crop. P said they had orally agreed buyout provision only good for 30-60 days. P wants $400 an acre, the value of the wheat.

Issue: May evidence of oral agreements be introduced so long as it is not inconsistent with the K and might naturally have been made as a separate agreement? Yes

For parol evidence to be inconsistent it must contradict an express provision in the K.

 

Interform Co. v. Mitchell 466

1. In deciding complete integration, subjective standards vs. objective reasonable person standard.

 

Luria Bros.& Co. v. Pielet Bros. Scrap Iron. 469

Facts: Parties had oral deal over phone. Afterwards confirming memos sent both ways. Neither signed the others memos. Seller later said dealer contingent on his supplier coming through and that was not in either memo.

(i) Evidence inadmissible under UCC 2-202 because the parol evidence was implicitly inconsistent with the contract. “absence of reasonable harmony"

 

Parol evidence can be introduced to establish the existence of the conditional delivery of a signed instrument

Long Island Trust Co. v. International Inst. 470

Facts: P lent money to Intl. Inst. w/ five guarantors signing. P again lent money to Intl. Inst. and the two Ds claim they only signed after they were told by P that the other co-gurantors would have to sign before their guaranty became effective. The money was not repaid and P brought action against the four who signed the second note. P got SJ and Ps appealed.

(i) UCC and C/L recognize defense of conditional delivery, so that if the conditional is not complied with the instrument is unenforceable. UCC 3-305, 3-306.

(ii) M.O.: Parol evidence not expressly inconsistent and thus is admissible

 

Parol evidence be introduced to show fraud relating to a written agreement

Lipsit v. Leonard 477 (To show Fraud)

Facts: P worked for D for 8 years. D orally promised to give P part of the co. if he kept working. No binding promise in writing and P was terminated. P sues for br/K and wants 10% of business value in cash plus reasonable damages.

(i) Parol evidence to show fraud is not barred by the parol evidence rule, even though the rule bars parol evidence concerning br/K.

 

 

If K clearly says seller makes no warranties or representations, the buyer may not later sue the seller for misreps. allegedly made before the K was entered

LaFazia v. Howe 483

Facts: P sued for breach of a promissory note. D counterclaimed P’s misrepresented to induce D to enter into K. D’s bought a sandwich shop from P and lost big time. P had told them it was profitable but included a very detailed set of merger clauses in the K.

Parol evidence is admissible in equity to vary the terms of a written instrument in cases of mutual mistake

Hoffman v. Chapman 488

Facts: D bought a parcel of land from P. The deed gave D more land than both parties had agreed to. P got a decree reforming the deed to the original agreement.

 

A party may offer parol evidence to show the meaning of terms of a K where the language of the K is susceptible to the interpretation argued for by that party

 

Pacific Gas & Electric Co. v. G.W. Thomas Drayage & Rigging Co. 494

Facts: P sought to recover costs to repair dams. caused by D while doing a contracting job for P. P claims the indemnity clause in the K requires payment. D claims the clause applies only to third party dams. Lower Ct. gave judgment for P.

(i) Evidence as to the meaning of a term of a K must be admitted if the language of the K is reasonably susceptible to the meaning argued for by the evidence.

UCC 2-202 comment 1: Rejects 4 corners rule by denying that judges can determine meaning without looking at the commercial context and also by rejecting the rule itself b/c the commercial evidence must be used to show that the term is ambiguous. (similar to UCC 2-103 duty of good faith and fair dealing)

 

Integration – total or partial

 

Williston – look to 4 corners of K, use reasonable man analysis

 

Corbin – look to intention of parties

 

Aids in Priority: Interpretation

Express K over

Course of Performance over

Course of Dealings over

Trade usage

 

n merger (ingegration clause)

n consistent additional terms allowed if partial intergration

n fraud, illegality, duress, lack of consideration, mistake – evidence allowed

n post signing – parol allowed

n pre-condition – evidence allowed

n prior oral K – with separate $

 

 

Condition Precedent vs. Subsequent

 

Total and Partial Intergration – exceptions: condition precedent, collateral agreement, and fraud

 

n K of adhesion (“take it or leave it")

n reasonable expectations

n Unconscionability – substantive (fairness of terms) / procedural (fairness of bargaining form)

n unfair surprise (lack of fair notice – P did not know of effect term would have)

n unreasonably favorable terms to drafter

n oppressive terms – produce harsh results

 

F. Standardized forms: assent, unconscionability, and reasonable expectations

 

An attempt by a bailee for hire to relieve itself of liability for its negligence, “in the course of a general dealing with the public," is “contrary to law and against public policy."

 

Agricultural Ins. Co. v. Constantine 502

Facts: Bova parked her car on defendant’s parking lot, left her keys in the ignition and was given a ticket with a not-liable-for-loss provision. It was stolen and recovered in damaged condition. P sued D to recover amount for damages. Trial court ruled for D and reversed by court of appeals.

Application: Since the attendant assumed control, he became a bailee. D should have called P’s attention to the printed terms. Affirmed

NOTES:

Implied warranties:

n Merchantability

n FFPP – seller has to know what intended purpose is

n buyer has to rely on sellers expertise

 

Mundy v. Lumbermans Cas. Co. 503

(i) Insured is bound only if policy is in plain English and in a conspicuous manner.

(ii) Here, insurer met above duty so insured lost.

 

Weisz v. Parke-Bennet Galleries 505

(i) Can’t disclaim an express warranty 2-313(b), but can use PER to block from evidence if not in writing.

(ii) Gergen- Only reps. that become part of the basis of the bargain are warranties. 2-316

 

Weisz v. Parke-Bernet Galleries, Inc.

Facts: At auction, Weisz purchased a painting for $3348. All parties learned that the paintings in question were forgeries. Weisz sued alleging that D’s catalog presentation constituted an express warranty of authenticity. Trial judge ruled the disclaimer of the D ineffective, saying: “Parke-Bernet expected that bidders at its auctions would rely upon the accuracy of its descriptions."

Application: The very fact that D was offering a work of art for sale would inspire confidence that it was genuine. The average reader of this provision would view it as some kind of technicality.

Conclusion: Reversed. Caveat Emptor.

 

Henningsen v. Bloomfield Motors 510

Chrysler steering wheel case

(i) Industry wide form K unconscionable today under 2-719(3).

 

Exculpatory contracts are not favored by the law because they tend to allow conduct below the acceptable standard of care applicable to the activity.

 

Richards v. Richards 516

Facts: D was hired as a truck driver for Monkem and his wife wanted to accompany him on trips. Monkem required that she sign a form entitled “Passenger Authorization. P signed and accompanied D. Truck overturned the P was injured. TC said form was a adequate disclaimer

Issue: Whether such agreements violate public policy

Application: The form appears to have two purposes. First, authorization for the passenger to ride and second, a general release of all claims.

Conclusion: The contract at issue is void as against public policy because the public policy of imposing liability on persons whose conduct creates an unreasonable risk of harm outweighs the public policy of freedom of contract. Reversed.

Three factors in determining public policy v. freedom to contract:

1. The contract serves two purposes, not clearly identified or distinguished

2. The release is extremely broad and all-inclusive.

3. This contract is a standardized agreement on the company’s printed form which offers little or no opportunity for negotiation or free and voluntary bargaining.

 

It is typically a standardized form as a “take it or leave it" offer without a realistic opportunity to bargain and under such conditions that the consumer cannot obtain the desired product or services except by acquiescing in the form contract

 

Broemmer v. Abortion Services of Phoenix 521

Facts: P, undergoing a abortion, did not receive information or counseling on alternatives or the nature of the operation. She was asked to complete three forms on which stated any dispute would be settled by ob/gyn doctors as arbitrators. P was injured and filed a complaint. D was granted SJ.

Issue: Is an Agreement to Arbitrate" signed prior to undergoing an abortion enforceable?

Application: The contract was not negotiated but was, instead, prepared by D and presented to P as a condition of treatment. Waiver of such fundamental rights was beyond the reasonable expectations of P.

Conclusion: The contract fell outside P’s reasonable expectations and is unenforceable. Reversed.

 

IV POLICING THE BARGAIN

A. Competency to Contract

Incapacity – infancy

mental illness or defect

intoxication

guardianship

Exceptions: Misrepresentation

Marriage (most states)

Necessities (most states) – ex. has no other place to live

Ratification @ majority – cannot get out after you turn 18

Fraud

Unconscionability

 

* Remedy Restitution of Item Only or

* Full Restitution Range

Under UCC, third parties are not subject to disaffirmance

 

Unavoidable: Child Support

Bail Bond

Insurance

Bank

NDA-Trade Secrets

 

Halbman v. Lemke 533

Facts: Minor returned damaged car to dealer to disaffirm contract. D refused to take it back and it rotted on the street.

Holding: The minor is expected to return as much of the consideration as possible which he did.

 

B. Revisions of Contractual Duty

 

Pre-existing Duty Rule

R2d/76 A – Slightest Additional Duties

UCC §2-209 No new consideration needed.

 

A promise to pay an increased wage for performance of an established contractual duty will fail if there is no additional consideration

 

Alaska Packers Ass’n v. Domenico 560

Facts: P’s hired on for $50-$60 each + 2cents/fish to work for D as fishermen in Alaska. When P’s got to Alaska they refused to work unless they got $100 + 2cents/fish. D’s superintendent had to agree to keep the operation going.

(i) Consent by supervisor to P’s demands was w/out consideration b/c it was based solely

upon P’s agmnt. to render the exact services they were already under K to render.

(ii) Party who refuses to perform, and thereby coerces other to promise to pay more for doing what he is legally bound to do, takes unjustifiable adv. No consideration for promise of other party and promise cannot be legally enforced, although party has completed K in reliance on it.

(iii) unforeseen difficulties and extra pay would be fair (See Rstmnt 74, p. 227).

 

Schwartzreich v. Bauman-Basch, Inc. 564

(i) Parties to K can rescind through mutual assent. They can then make new K in which their mutual promises are consideration for each other.

(ii) Time of rescission (whether moment before or simultaneously as new K) unimportant. Both K’s can take place at same time.

 

Unforeseen Circumstances

– unanticipated

– burdensome conditions

– material change of postion

¨ modification

¨ mutual rescission

¨ novation §280 – gets a party out of all liability while subleasing to another

¨ lack of consideration

¨ pre-existing duty

¨ accord and satisfaction §281

¨ duress of goods

¨ substituted K §279

Waiver (voluntary/implied)

– relinguishment of right (actual or constructive knowledge of right)

– intention to give up right

– no consideration needed

 

When modification puts an additional obligation on the party seeking greater compensation the agreement, supported by consideration, is valid and binding upon both parties.

Brian Constr. & Dev. Co. v. Brighenti 565

Facts: D agreed to do work on P’s construction site. After initial K, it was found further debris would need to be cleared. P agreed to pay more if D would clear, however D later breached secondary agreement.

 

No oral modification clauses and the concept of waiver

 

A K specifying modification only in writing can be modified orally

 

Universal Builders v. Moon Motor Lodge 573

Facts: D orally told P to do extra work on a construction job and said he would pay for it. The original K said that all mods. had to be in writing. A didn’t pay P for the extra work and said there was no writing for extras as required in the original K.

(i) Common Law Rule: can’t bind yourself w/a no oral mod. clause.

 

Duress

 

A K modification executed under threat of economic duress is not enforceable

 

Austin Instrument Co. v. Loral Corp 554

Facts: P is suing for nonpayment of $17,750 and D counterclaims dams of $22,250. P entered into a K with D to produce gears. P bid on 2nd K for P and said that it wanted that entire K plus a price increase that would be retroactive to first K or it would cancel any more gear shipments.

(i) A K is voidable on the ground of duress when one party is forced to agree to the mod. by means of a wrongful threat precluding the exercise of its free will.

(ii) Rstmt 2d says for duress:

a. Must be an improper threat (not what is a legal right to do)

-may be improper if threaten to break K if other party doesn’t modify K

-may be improper b/c the threat makes the outcome disproportional

b. Must be no reasonable alternative

(iii) Duress is alternative to consideration for avoiding a K modification. (note 2-209 displaces need for consideration to validate modifications)

 

Hackley v. Headley 579

Facts: D refused to pay P the full price they probably owed P. P settled w/D b/c he was in severe financial need. P gave D a signed settlement but claims it was given under duress.

Issue: Can the issue of duress be solely dependent on the financial situation of the aggrieved party?

Holding: No, reversed and remanded.

 

Duress of Goods – duress when someone does not want to pay for his goods or services

 

Accord and satisfaction

– if one party cannot fullfill obligation, an agreement for new terms can be met

– until accord is satisfied, the 1st contract is vaild (executory accord)

– if breached during this period, sueing for damages or specific preformance (creditor has choice to

which contract to sue on)

– liquidated – accord and satisfaction

– unliquidated – substituted K

 

Acount stated – if person does not protest invoice, it is considered vaild

 

A payee may not avoid a “paid in full" condition on a check tendered as final payment of a disputed debt by adding the words “not full payment" to the check before cashing it

Holding: No, reversed.

 

Marton Remodeling v. Jensen 585

Facts: Marton remodeled Jensen’s house and billed him for $6,500 but Jensen would only pay $5,000. Jensen sent the check for $5,000 to Marton with a condition of final settlement written on it if it was endorsed and cashed. Marton wrote “not full payment" on the check and cashed it. A jury awarded Marton the difference, plus $1000 and attorney’s fees.

(i) When there is an unliquidated claim or a bona fide dispute over the amount due, a check with “paid in full" on it will be accord and satisfaction if cashed.

(ii) There is assent b/c can’t cash the check while reserving rights. Similar to acceptance by performance Rstmt. Sec. 69.(if you take offered goods or services you accept their offer)

 

School Lines Inc.

(i) Must be a good faith dispute to have consideration

(ii) Tendering a check with no dispute is not consideration

 

– Prexisting Duty

– Reasonableness

– Unconscionable

Unfair Surprise

Oppressive

– Unjust/Ineqitable (S.P. not given)

– Procedural Concerns in K Formation

– fraud

– misrepresentation

– duress

– Deceptive Trade Practice

– Constructive Fraud

 

Jackson v. Seymour Va 597

Facts: Brother (D) bought land from sister (P) dirt cheap and harvested lumber.

Issue: Should P get the land back plus the proceeds from actual fraud.

Application: P is entitled to equitable relief on construtive fraud.

Conclusion: Reversed

 

ASSIGNMENT OF CONTRACTS

Assignment = transfer of rights and duties

Delegation = transfer of duties

vs.

Novation (mutual consent required before effective)

 

Assignment revoked if: death/incapacity

reassignemnt to another

notice of revocation

Not revocable if: symbolized document

written assignment

detrimental reliance

full performance by obligator

 

UCC Art.9 – security interest (right to receive payment only)

Future interest/assets can be assigned

 

K not assignable if: material change to obligator’s duties

personal service K’s

material increase in risk of return performance

against public policy/statute

contract term prohibits assignment

 

Cannot stop an assignment if: material breach occured by

article 9 applies

assignor completed performance

 

3rd party beneficiaries

Q = who may sue

intended beneficiary = yes

incidental beneficiary = no

 

Gratuitous assignment

 

________________________________________________________________________________

 

Fiduciary relationship – one that requires a high degree or candor and reliablity between the participants

Confidential relationship – unusual trust

 

Rejection: w/o reason 2-605

Acceptance: by non-rejection 2-606

Duty to mitigate if the goods are perishable

 

Max time for firm offer is 3 months

 

Forbearence for consideration

 

Forseeability

 

Form contracts (battle of the forms, adhesion, boiler contracts)

 

Frustration of Purpose

 

Integration – brings all the agreements into one

 

Intent to contract (mutual asset, MOM)

 

Jest

 

 

Public Policy

Voids

n penalty clauses

n some exculpatory Ks

n unlicensed professionals

n K to commit crimes

n family member oral Ks

n restraint of trade Ks

 

n Mitigation of Damages

n cover §2-712

n reasonableness Rest 2d §350

 

n Frustration of Purpose

 

n Lost volume seller – hotel had plenty of rooms when you cancel so rebooking your room does not mean that they replaced your reservation and you are in breach

n Collateral Source Rule – D should not benifit from insurance of the P.

 

n Damages – expectation or restitution or reliance

 

Reliance would not be given unless it is more than the cost.

 

 

– Manifestation of Assent

– Consideration and its substitutes

– Statute of Frauds

– Capacities of Parties to Contract

– Illegality, Frauds, Duress

– Mistake

– Impossibilty & Frustration of Purpose

– Enforceability

– Assignment and Delegation

– Parol Evidence

– Conditions

– Risk of Loss – when forming a contract, you want the other party to take a higher risk of loss ex.

FOB destination

– Warrenties

– Third Party Beneficiaries

– Anticipatory Breach

– Remedies / Damages

 

– unforseen circumstances



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