Contracts Final Exam Cheat Sheet, Study notes of Law

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COVENANT O A promise to do/ not do something / CREATES A DUTY (obligation) that is triggered by something [COVENANT = PROMISE OF ACTION OR NON- ACTION vs. WARRANTY = PROMISE OF A FACT] O Many of the times, will say “may” but if it follows a scheduling provision, inevitable and if u step back and think about it, many of the times it will be a duty even if not “shall” or “must” oO EXAMPLES: “students must vacate”, “university shall offer comparable space”; “shall remove all valuable items and may be required to remove all property”; “must be used only as a private apartment” “only a party signing this lease may use the apt”, “tenant must take good care of apt”; “landlord shall permit the tenant to live “ ; “YOU AGREE THAT YOU WILL NOT USE... “ “NO PORTION OF THIS SERVICE MAY BE REPRODUCED”, “YOU SHALL NOT EXPLOIT” “THIS MEANS YOU CANNOT SUE OR RECOVER’, “you agree to indemnify, hold harmless...” “website will deliver to u” “website wnt charge credit card co. before received in good condition” Oo CONSEQUENCES: damages 2. DISCRETIONARY AUTHORITY O Power or permission to act, but no obligation to (opposite of covenant). Many times, condition what they want by imposing a condition on their DA b/c deprives some1 of something and is self-effectuating oO EXAMPLES: “tenant may install any paneling”, “landlord may at reasonable times enter the apt” , “any merch may be treated as a gift who shall have the right to _,_ or _” ; “you can cancel at anytime”; apple, at its sole discretion, without notice to you, may... terminate, preclude access..etc”; oO CONSEQUENCES: nothing [can do or not do it] 3. DECLARATION oO CREATES A LEGAL TRUTH / LEGAL STATUS, NOT A PHYSICAL FACT. A statement of facts that the parties agree is true / a joint creation!!!! oO EXAMPLES: “for the purpose of this agreement..” , “arbitration and not litigation” “X constitutes a ...”, “I AGREE TO THE TERMS AND CONDITIONS”; “the university assumes no responsibility”; “unordered merch means...”, “mailing unordered merch constitutes an unfair method of competition”; “this means that you cannot sue as a result of its decision or refuse to process any info” aka [you lack the power to sue us and we are not liable] “you accept this agreement by agreeing, opening or activating” “that means your accepting the change oO CONSEQUENCES: nothing [share responsibility for statement and by agreeing make it true] 4. CONDITION =POWERFUL TOOLS FOR INCENTIVIZING PERFORMANCE ! mM ¢ May or may not be true: a fact. That if exists/true/satisfied, triggers either: * Covenant: if condition isn’t satisfied, party with covenant doesn’t need to perform/ isn’t obligated to perform [ex: if the tenant fails to pay, the tenant shall pay penalty] ¢ Discretionary authority: if not satisfied, party w/ discretionary authority isn’t allowed to exercise it [ex: if tenant fails to pay, landlord may...] ¢ Declaration: if not satisfied, declaration isn’t considered true [ex: if premises destroyed, this lease terminates] ¢ EXAMPLES: “in the event that”, “if the tenant has obtained the landlords consent” , “except for _ or _” “if you fail, or apple suspects” , “BY USING THE ITUNES SERVICE” ¢ CONSEQUENCES: isn’t obligated, isn’t allowed or isn’t true; “if you do accept”, “as long as you return”, “if you signed the _”, “unless u cancel within..”; “if you use service” “if we fail to negate changes” 5. WARRANTY: promise of fact in entire string of time @ A promise by one party of fact for past, present or future that a statement of fact is true to other party [if promising action (covenant) but if promising fact outside its control (warranty) // If doesn’t work (condition), we will fix (covenant) but promise it will work (warranty) ] @ EXAMPLES: “this works and will continue to work” “seller owns laptop ur buying” “$tll work for a year” and “manuf by Mac” “Mac owns it now” @ CONSEQUENCES: CONTRACT = damages [or if limited warranty, replace or repair] 6. REPRESENTATION: statement of fact ab past or present ¢ A statement of fact made by one party to induce other party to deal / agree to all or some of contract [SINCE NOT A PROMISE, CANT BE BREACHED] ¢ EXAMPLES: “1 inspected the apartment” “when you accept, your representing that you are at least 18 years... if accepting for orgs, means you are authorized to bind”; “by accepting you are agreeing to every provision of this agreement whether u have read it” “manuf by Mac” “Mac owns it now” ¢ CONSEQUENCES: TORT = avoid contract, have court rescind it [recission]. If fraudulent misrep, can get damages Sources of law: What law is governing that contract or not contract? COMMON LAW: service ¢ Most contract law found in cases [primarily state law] and 2™ restatement shows what majority of states use ¢ No implied warranty anytime u sell a service [favors sellers > but there can be express warranties if state them] ¢ SALE OF LAND, INTELLECTUAL PROPERTY, LOANS !!!!I!! STATUTES UCC [UNIFORM COMMERCIAL CODE]: goods ¢ Article 2 governs sale of goods: §2-102 / §1-105(1)): EVENS UP ANTIES BY GIVING IMPLIED WARRANTIES OF QUALITY INSIDE A CONTRACT (consumer/buyer protections but sellers can protect by adding risk into price or through express limitations or disclaimers on implied warranties ) ® Tangible, moveable property [INCLUDING CROPS, UNBORN YOUNG ANIMALS]. NOT realty. Not investment securities. Not $ in price to be paid MIX OF GOODS AND SERVICES: * In cross-border goods sales that don’t involve American customers, it would be impractical for your client to use the common law or the UCC. Would it be acceptable for American law to govern your client’s transactions with French or German customers? Would those customers tolerate that? * Would it be practical for your client’s employees to follow two sets of practices so your client can comply with two bodies of law — one when dealing with Americans and another when dealing with other customers? This is another reason why CISG exists. * The UCC has many protections for buyers — such as implied warranties. You don’t know whether CISG is more seller-friendly than the UCC, and it would take some research to find out. But you already know enough about the UCC to be cautious about this. Remember: your client is a seller. If you choose the UCC, you’ll need to track down its buyer-friendly provisions and find ways of limiting their effect. You can exclude the implied warranties, using 2-316. But you should be concerned about whether there are other types of provisions scattered through article 2 that you might not know about. + If you choose the UCC or the common law, you’re pretty much locked into using American courts or American arbitrators in a forum selection clause. You can’t count on judges and arbitrators in other legal systems to apply American law exactly as we understand it. This is another reason why CISG exists. It’s the law in the U.S., in Italy, and in most of the rest of the world. + If you specify American courts or American arbitrators in a forum selection clause, you’ll be obligating your client to litigate or arbitrate on this side of the Atlantic every dispute with an American customer. What problems would that create for your client? Would the client be better off with a forum selection clause specifying a courthouse near its headquarters in Italy? + In one transaction — the MCC Marble case — the objective standard of a meeting of the minds would have been better for the client. But will that always be true, even when dealing with Americans? Are there situations where the subjective standard would actually help the client? After all, the subjective standard reflects the legal culture in which the client and its employees operate every day. An Italian lawyer told you that. The client and its employees don’t make contracts our way ona daily basis. They do it the subjective way because that’s the system they live in. Wisdom should cause you to reject the common law out of hand. Although the UCC might seem attractive, there are real problems that you should worry about. After weighing everything above, a good lawyer in your situation would be reluctant to choose the UCC over CISG. You could still write a good answer choosing the UCC. But if you chose it without worrying about at least some of the problems, you missed the big picture. Nobody noticed all the problems, but you should have seen some of them. The question’s second sentence tells you that the client wants your advice. If you took a narrow view of this, ignoring the problems, it would be hard to get more than three or four of the six points. A merger clause would be a good idea, but it won’t solve the problem. A merger clause excludes prior and contemporaneous agreements and promises made by the other party. It doesn’t exclude subjective thinking — a thought like “I don’t really agree with section 4 on this form.” You might be able to draft a clause that inserts something objective into a form governed by CISG: By signing this document, you agree to all of its terms. Your signature certifies that there is no term in this document to which you object or consider yourself not bound. Your signature also certifies that you have not communicated to any of our agents or employees any reservation about whether you are bound by all this document’s terms. And by signing this document, you promise that you will not later claim that you do not consider yourself bound by one or more of its terms. You didn’t need to come up with this idea. Nobody did. A good lawyer might have, but you couldn’t be expected to in a first-year Contracts course. Contract formed? RP test to see if contract formed under context of everything = if something is unknown, other than offer/acceptance/consid, there are 5 possibilities: 1) mutual mistake of fact, 2) unilateral mistake of fact 3) breach warranty 4) misrepresentation 5) one/more assumed the risk of ignorance OFFER Meeting of Minds: Manifestation of mutual assent (§18), conduct as manifestation of assent (819) ¢ EXAMPLES: “welcome solicitors $20/min”: a RP would think u would read sign before so action is enough, and a RP would think this is an offer. (page 32 supplement) VS. ¢ a similar arbitration sign in a restaurant prob not an offer: diff context, diff language (page 60 casebook)// Verizon wireless customer agreement says “by opening package or activating service, agree” or amazon “by placing this order u agree”: MM! Offer: O §24: offer is a manifestation of willingness to enter into a bargain (objective test on apparent intent, not actual intent: WOULD A RP IN THAT CIRC THINK OFFER?), so made as to justify another person in understanding that his assent to bargain is invited and will conclude it. MUST INCLUDE (either expressly or by implication): 1. Reasonably communicated to person addressed 2. Indicate a desire to enter a contract (must specify performances to be exchanged and terms) 3. Directed to some person or group of persons 4. Invite acceptance (may or may not include mode and time for acceptance) - LANGUAGE OF COMMITMENT 5. Engender reasonable understanding that acceptance will create contract (confers power of acceptance on offeree to create a contract: offeree should understand this is a contract offer: ask if offeree thinks this is an offer, from RPS. Look @ language, behavior, previous relationship?, custom or usage in marketplace if parties are members of same trade) - NOT ADVERTISEMENTS OR CATALOGUES, unless could be accepted w/o negotiation or limited to specific # of ppl [UNLESS x, OR: clearly indicate intent by circs, OR invites whom addressed to take specific action w/o further communication OR over-acceptance unlikely] - §24 =an offer is a manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will complete it.” - An advertisement usually does not justify such an understanding unless it is “clear, definite and explicit and leaves nothing open to negotiation.” - “terms.... Wld u agree to this price” = if essential terms in it, its an offer because ALL U NEED TO DO IS SAY YES TO ACCEPT - SIMILARLY, “do XYZ [definite] and if its to my personal satisfaction, ill pay this amt.” though further “assent” needed by offeror, its_ an offer bc assent is objectively measured, in good faith, so cant just later decide not to assent. - Bids [response to request 4 bids]= offers. Acceptance = in auction, hammered down / in construction, when tell subcontractor ? ya Vs. invitation to deal §26: preliminary negotiations / price quotes made by companies, for instance, are not offers. [person buying has reason to know tht other person making manifestation of willingness to bargain requires a further manifestation to conclude the bargain] O ESTIMATE = NOT AN OFFER. So if estimate , I say ok go ahead [ok go ahead = offer that estimator can choose to reject or accept] O Offer vs. invitation to deal: offers have INTENT to bargain and DEFINITENESS of terms: “I will sell/buy” or “I offer” O Invitations: “are u interested” “wld u give” “I quote” [unless response to an inquiry where says for immediate acceptance, cld be offer] “I wld consider” §33: must be sufficiently definite to be enforceable. Not enforceable / fails for indefiniteness if it does not “provide a basis for determining the existence of breach and for giving an appropriate remedy.” [will never gap fill subject matter or quantity // must be certain and final: NO FURTHER NEGOTIATIONS OR EXPRESSION OF ASSENT BY OFFEROR IS NECESSARY TO CONCLUDE DEFINITE BARGAIN... If too indefinite, an invitation to deal — see §26] O Can gap fill [reasonable] price if say nothing on price but NOT ABLE TO IF agree to agree = “at a price to be agreed upon” under §204 AND NEVER DO. [vs. UCC 2-305 will gap fill agree to agree clause] 10 offeror, SO ONLY KNEW OF OFFER AFTER BEGAN PERFORMING, may accept by completing performance or indicating intention to accept - §51,53 [no knowledge of offer/reward ok if part performance] iv. Even if not principal motive for performing act, but know act gives reward, its ok and can still get reward Third party’s cannot accept [§29] // “general offers” or special kinds called “reward offers” = only the first person who performs the acts called for in the offer can accept it [unless ad makes it clear that the offer to any and all ppl who __]: THE FIRST PERSON WHO ACCEPTS TERMINATES THE POWER OF ACCEPTANCE FOR ALL // §53(3): a valid acceptance of a reward offer = offeree must manifest an intention to accept it at the time the acts called for in the offer are completed When an advertisement / general offer / reward offer requires acceptance by performance and that BILATERAL CONTRACT - Express promise - Promise implied from conduct - In appropriate cases, performance of an act designated by the offeror to signify 2 promise = In appropriate cases, silence (e.g., when offeree leads offeror to believe silence will constitute acceptance or when offeror specifies that silence will constitute acceptance and offeree subjectively intends silence to constitute acceptance) Offeree must communicate acceptance to form a contract ‘On acceptance, bath offeree and offeror are bound to perform SUE ia ee y cee ~ Performance of the act requested in the offer Offeree does not need to give notice of performance to form a contract, but must diligently try to notify offeror in a reasonable time after completion of performance to obligate the offeror ‘On acceptance, offeror is bound to perform; offeree has already completed performance performance requires subs expense, free revocation leads to forfeiture and thus a binding option contract may be formed when offeree commences performance (§45) Also can be irrevocable because of estoppel (§87(2)), where offer reasonably expects to induce action/forbearance of a subs character on offeree b4 acceptance and it does induce such, it is a binding option contract to the extent necessary to avoid injustice Even if seller does not acceptance performance [rejects it after completed], so don’t actually “complete performance,” if the performer/offeree tendered complete performance, this satisfies the manifestation of intention to accept (§50). DEFAULT RULE = Silence is NOT ACCEPTANCE [UNILATERAL MODS OR SHRINKWRAP = IN BOX AFTER U GOT THE GOODS/ AFTER OFFER MADE AND ACCEPTANCE]. Exceptions SILENCE IS ACCEPTANCE IF]: [§64] Had a duty to respond but didn’t (prior/pre-existing " yelationship, pattern of dealing would call for silence or inaction: but cannot impose a duty by making failure to act an acceptance) - Course of dealings - GIVES OFFEROR REASON TO BELIEVE SILENCE IS ACCEPTANCE 2. Ifa party (offeree) retains benefit [or unjustly enriched by retaining benefit w/o paying value] OF OFFER or offered (contained in offer or accompanied by offer) without responding: §69 - And offeree has reason to know offered - And offeree knows [UE: or has reason to know] offeror will expect compensation - And had time to reject [if no opportunity to reject, silence is not acceptance] - Kind of like implied-in-fact contract 3. Offeree exercises dominion over goods or - Accepts them. AND THEN DOES SOMETHING LIKE SELLS THEM // uses software w/ right to return software if don’t like terms later inserted // EVEN IF DOESN’T INTEND TO ACCEPT - Doesn’t include mere inspection or mailing of unordered merchandise, in many states 4. Offer states offer may be accepted by silence and offeree remains silent w/ INTENTION of accepting Similarly, silence may count as acceptance when (i) the offer ee has solicited the offer and drafted its terms; (ii) the offer, as drafted by the offeree, is so worded that a reasonable person in the offeror’s position would believe that the offer was to be deemed accepted unless the offeree notifies the offeror that the offer is rejected; and (iii) the offeror relies or is likely to have relied on the reasonable belief that lack of a prompt rejection constituted an acceptance. This pattern commonly arises in two situations: - solicitation of “orders” 4 goods -applying for insurance and insurer holds application [on own form] for an unreasonably long time w/o make a decision Vs. UCC ON ACCEPTANCE IS SIMILAR: §2-204 [formation] says can accept in any manner sufficient to show agreement UNLESS UNAMBIGUOUSLY SHOWS SPECIFIC MANNER/MODE of acceptance — ie. I offer to buy ur X if u deliver X to me by nov 12" = can only be accepted by delivering before nov 12" and not accepted just by promise to do so O True even if parties fail to include terms tht would result in a failure at common law // don’t fail for indefiniteness if parties intend to make a contract and a “reasonable basis” [look at commercial context. But more missing terms, more likely didn’t intend to make contract] = difference 1 > 2-204(3), but see 2d 33(2) = Only if not in writing, no oral testimony [or only oral if agreement in writing and PER bars], and no COD/usage: = Gap fillas: 2-305 [open price term: reasonable price @ time delivery], 2- 511 [tender of payment], 2-310 [open time for payment: due at receipt of product/upon delivery in cash], 2-308 [absence of specified place 4 delivery: at sellers place of business or residence if no business unless know place where goods r], 2.301 [seller obligated to transfer/deliver 11 1. COVENANT O A promise to do/ not do something / CREATES A DUTY (obligation) that is triggered by something [COVENANT = PROMISE OF ACTION OR NON- ACTION vs. WARRANTY = PROMISE OF A FACT] O Many of the times, will say “may” but if it follows a scheduling provision, inevitable and if u step back and think about it, many of the times it will be a duty even if not “shall” or “must” oO EXAMPLES: “students must vacate”, “university shall offer comparable space”; “shall remove all valuable items and may be required to remove all property”; “must be used only as a private apartment” “only a party signing this lease may use the apt”, “tenant must take good care of apt”; “landlord shall permit the tenant to live “ ; “YOU AGREE THAT YOU WILL NOT USE... “ “NO PORTION OF THIS SERVICE MAY BE REPRODUCED”, “YOU SHALL NOT EXPLOIT” “THIS MEANS YOU CANNOT SUE OR RECOVER’, “you agree to indemnify, hold harmless...” “website will deliver to u” “website wnt charge credit card co. before received in good condition” Oo CONSEQUENCES: damages 2. DISCRETIONARY AUTHORITY O Power or permission to act, but no obligation to (opposite of covenant). Many times, condition what they want by imposing a condition on their DA b/c deprives some1 of something and is self-effectuating oO EXAMPLES: “tenant may install any paneling”, “landlord may at reasonable times enter the apt” , “any merch may be treated as a gift who shall have the right to _,_ or _” ; “you can cancel at anytime”; apple, at its sole discretion, without notice to you, may... terminate, preclude access..etc”; oO CONSEQUENCES: nothing [can do or not do it] 3. DECLARATION oO CREATES A LEGAL TRUTH / LEGAL STATUS, NOT A PHYSICAL FACT. A statement of facts that the parties agree is true / a joint creation!!!! oO EXAMPLES: “for the purpose of this agreement..” , “arbitration and not litigation” “X constitutes a ...”, “I AGREE TO THE TERMS AND CONDITIONS”; “the university assumes no responsibility”; “unordered merch means...”, “mailing unordered merch constitutes an unfair method of competition”; “this means that you cannot sue as a result of its decision or refuse to process any info” aka [you lack the power to sue us and we are not liable] “you accept this agreement by agreeing, opening or activating” “that means your accepting the change oO CONSEQUENCES: nothing [share responsibility for statement and by agreeing make it true] 4. CONDITION =POWERFUL TOOLS FOR INCENTIVIZING PERFORMANCE ! mM ¢ May or may not be true: a fact. That if exists/true/satisfied, triggers either: * Covenant: if condition isn’t satisfied, party with covenant doesn’t need to perform/ isn’t obligated to perform [ex: if the tenant fails to pay, the tenant shall pay penalty] ¢ Discretionary authority: if not satisfied, party w/ discretionary authority isn’t allowed to exercise it [ex: if tenant fails to pay, landlord may...] ¢ Declaration: if not satisfied, declaration isn’t considered true [ex: if premises destroyed, this lease terminates] ¢ EXAMPLES: “in the event that”, “if the tenant has obtained the landlords consent” , “except for _ or _” “if you fail, or apple suspects” , “BY USING THE ITUNES SERVICE” ¢ CONSEQUENCES: isn’t obligated, isn’t allowed or isn’t true; “if you do accept”, “as long as you return”, “if you signed the _”, “unless u cancel within..”; “if you use service” “if we fail to negate changes” 5. WARRANTY: promise of fact in entire string of time @ A promise by one party of fact for past, present or future that a statement of fact is true to other party [if promising action (covenant) but if promising fact outside its control (warranty) // If doesn’t work (condition), we will fix (covenant) but promise it will work (warranty) ] @ EXAMPLES: “this works and will continue to work” “seller owns laptop ur buying” “$tll work for a year” and “manuf by Mac” “Mac owns it now” @ CONSEQUENCES: CONTRACT = damages [or if limited warranty, replace or repair] 6. REPRESENTATION: statement of fact ab past or present ¢ A statement of fact made by one party to induce other party to deal / agree to all or some of contract [SINCE NOT A PROMISE, CANT BE BREACHED] ¢ EXAMPLES: “1 inspected the apartment” “when you accept, your representing that you are at least 18 years... if accepting for orgs, means you are authorized to bind”; “by accepting you are agreeing to every provision of this agreement whether u have read it” “manuf by Mac” “Mac owns it now” ¢ CONSEQUENCES: TORT = avoid contract, have court rescind it [recission]. If fraudulent misrep, can get damages Sources of law: What law is governing that contract or not contract? COMMON LAW: service ¢ Most contract law found in cases [primarily state law] and 2™ restatement shows what majority of states use ¢ No implied warranty anytime u sell a service [favors sellers > but there can be express warranties if state them] ¢ SALE OF LAND, INTELLECTUAL PROPERTY, LOANS !!!!I!! STATUTES UCC [UNIFORM COMMERCIAL CODE]: goods ¢ Article 2 governs sale of goods: §2-102 / §1-105(1)): EVENS UP ANTIES BY GIVING IMPLIED WARRANTIES OF QUALITY INSIDE A CONTRACT (consumer/buyer protections but sellers can protect by adding risk into price or through express limitations or disclaimers on implied warranties ) ® Tangible, moveable property [INCLUDING CROPS, UNBORN YOUNG ANIMALS]. NOT realty. Not investment securities. Not $ in price to be paid MIX OF GOODS AND SERVICES: * In cross-border goods sales that don’t involve American customers, it would be impractical for your client to use the common law or the UCC. Would it be acceptable for American law to govern your client’s transactions with French or German customers? Would those customers tolerate that? * Would it be practical for your client’s employees to follow two sets of practices so your client can comply with two bodies of law — one when dealing with Americans and another when dealing with other customers? This is another reason why CISG exists. * The UCC has many protections for buyers — such as implied warranties. You don’t know whether CISG is more seller-friendly than the UCC, and it would take some research to find out. But you already know enough about the UCC to be cautious about this. Remember: your client is a seller. If you choose the UCC, you’ll need to track down its buyer-friendly provisions and find ways of limiting their effect. You can exclude the implied warranties, using 2-316. But you should be concerned about whether there are other types of provisions scattered through article 2 that you might not know about. + If you choose the UCC or the common law, you’re pretty much locked into using American courts or American arbitrators in a forum selection clause. You can’t count on judges and arbitrators in other legal systems to apply American law exactly as we understand it. This is another reason why CISG exists. It’s the law in the U.S., in Italy, and in most of the rest of the world. + If you specify American courts or American arbitrators in a forum selection clause, you’ll be obligating your client to litigate or arbitrate on this side of the Atlantic every dispute with an American customer. What problems would that create for your client? Would the client be better off with a forum selection clause specifying a courthouse near its headquarters in Italy? + In one transaction — the MCC Marble case — the objective standard of a meeting of the minds would have been better for the client. But will that always be true, even when dealing with Americans? Are there situations where the subjective standard would actually help the client? After all, the subjective standard reflects the legal culture in which the client and its employees operate every day. An Italian lawyer told you that. The client and its employees don’t make contracts our way ona daily basis. They do it the subjective way because that’s the system they live in. Wisdom should cause you to reject the common law out of hand. Although the UCC might seem attractive, there are real problems that you should worry about. After weighing everything above, a good lawyer in your situation would be reluctant to choose the UCC over CISG. You could still write a good answer choosing the UCC. But if you chose it without worrying about at least some of the problems, you missed the big picture. Nobody noticed all the problems, but you should have seen some of them. The question’s second sentence tells you that the client wants your advice. If you took a narrow view of this, ignoring the problems, it would be hard to get more than three or four of the six points. A merger clause would be a good idea, but it won’t solve the problem. A merger clause excludes prior and contemporaneous agreements and promises made by the other party. It doesn’t exclude subjective thinking — a thought like “I don’t really agree with section 4 on this form.” You might be able to draft a clause that inserts something objective into a form governed by CISG: By signing this document, you agree to all of its terms. Your signature certifies that there is no term in this document to which you object or consider yourself not bound. Your signature also certifies that you have not communicated to any of our agents or employees any reservation about whether you are bound by all this document’s terms. And by signing this document, you promise that you will not later claim that you do not consider yourself bound by one or more of its terms. You didn’t need to come up with this idea. Nobody did. A good lawyer might have, but you couldn’t be expected to in a first-year Contracts course. Contract formed? RP test to see if contract formed under context of everything = if something is unknown, other than offer/acceptance/consid, there are 5 possibilities: 1) mutual mistake of fact, 2) unilateral mistake of fact 3) breach warranty 4) misrepresentation 5) one/more assumed the risk of ignorance OFFER Meeting of Minds: Manifestation of mutual assent (§18), conduct as manifestation of assent (819) ¢ EXAMPLES: “welcome solicitors $20/min”: a RP would think u would read sign before so action is enough, and a RP would think this is an offer. (page 32 supplement) VS. ¢ a similar arbitration sign in a restaurant prob not an offer: diff context, diff language (page 60 casebook)// Verizon wireless customer agreement says “by opening package or activating service, agree” or amazon “by placing this order u agree”: MM! Offer: O §24: offer is a manifestation of willingness to enter into a bargain (objective test on apparent intent, not actual intent: WOULD A RP IN THAT CIRC THINK OFFER?), so made as to justify another person in understanding that his assent to bargain is invited and will conclude it. MUST INCLUDE (either expressly or by implication): 1. Reasonably communicated to person addressed 2. Indicate a desire to enter a contract (must specify performances to be exchanged and terms) 3. Directed to some person or group of persons 4. Invite acceptance (may or may not include mode and time for acceptance) - LANGUAGE OF COMMITMENT 5. Engender reasonable understanding that acceptance will create contract (confers power of acceptance on offeree to create a contract: offeree should understand this is a contract offer: ask if offeree thinks this is an offer, from RPS. Look @ language, behavior, previous relationship?, custom or usage in marketplace if parties are members of same trade) - NOT ADVERTISEMENTS OR CATALOGUES, unless could be accepted w/o negotiation or limited to specific # of ppl [UNLESS x, OR: clearly indicate intent by circs, OR invites whom addressed to take specific action w/o further communication OR over-acceptance unlikely] - §24 =an offer is a manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will complete it.” - An advertisement usually does not justify such an understanding unless it is “clear, definite and explicit and leaves nothing open to negotiation.” - “terms.... Wld u agree to this price” = if essential terms in it, its an offer because ALL U NEED TO DO IS SAY YES TO ACCEPT - SIMILARLY, “do XYZ [definite] and if its to my personal satisfaction, ill pay this amt.” though further “assent” needed by offeror, its_ an offer bc assent is objectively measured, in good faith, so cant just later decide not to assent. - Bids [response to request 4 bids]= offers. Acceptance = in auction, hammered down / in construction, when tell subcontractor ? ya Vs. invitation to deal §26: preliminary negotiations / price quotes made by companies, for instance, are not offers. [person buying has reason to know tht other person making manifestation of willingness to bargain requires a further manifestation to conclude the bargain] O ESTIMATE = NOT AN OFFER. So if estimate , I say ok go ahead [ok go ahead = offer that estimator can choose to reject or accept] O Offer vs. invitation to deal: offers have INTENT to bargain and DEFINITENESS of terms: “I will sell/buy” or “I offer” O Invitations: “are u interested” “wld u give” “I quote” [unless response to an inquiry where says for immediate acceptance, cld be offer] “I wld consider” §33: must be sufficiently definite to be enforceable. Not enforceable / fails for indefiniteness if it does not “provide a basis for determining the existence of breach and for giving an appropriate remedy.” [will never gap fill subject matter or quantity // must be certain and final: NO FURTHER NEGOTIATIONS OR EXPRESSION OF ASSENT BY OFFEROR IS NECESSARY TO CONCLUDE DEFINITE BARGAIN... If too indefinite, an invitation to deal — see §26] O Can gap fill [reasonable] price if say nothing on price but NOT ABLE TO IF agree to agree = “at a price to be agreed upon” under §204 AND NEVER DO. [vs. UCC 2-305 will gap fill agree to agree clause] 10 offeror, SO ONLY KNEW OF OFFER AFTER BEGAN PERFORMING, may accept by completing performance or indicating intention to accept - §51,53 [no knowledge of offer/reward ok if part performance] iv. Even if not principal motive for performing act, but know act gives reward, its ok and can still get reward Third party’s cannot accept [§29] // “general offers” or special kinds called “reward offers” = only the first person who performs the acts called for in the offer can accept it [unless ad makes it clear that the offer to any and all ppl who __]: THE FIRST PERSON WHO ACCEPTS TERMINATES THE POWER OF ACCEPTANCE FOR ALL // §53(3): a valid acceptance of a reward offer = offeree must manifest an intention to accept it at the time the acts called for in the offer are completed When an advertisement / general offer / reward offer requires acceptance by performance and that BILATERAL CONTRACT - Express promise - Promise implied from conduct - In appropriate cases, performance of an act designated by the offeror to signify 2 promise = In appropriate cases, silence (e.g., when offeree leads offeror to believe silence will constitute acceptance or when offeror specifies that silence will constitute acceptance and offeree subjectively intends silence to constitute acceptance) Offeree must communicate acceptance to form a contract ‘On acceptance, bath offeree and offeror are bound to perform SUE ia ee y cee ~ Performance of the act requested in the offer Offeree does not need to give notice of performance to form a contract, but must diligently try to notify offeror in a reasonable time after completion of performance to obligate the offeror ‘On acceptance, offeror is bound to perform; offeree has already completed performance performance requires subs expense, free revocation leads to forfeiture and thus a binding option contract may be formed when offeree commences performance (§45) Also can be irrevocable because of estoppel (§87(2)), where offer reasonably expects to induce action/forbearance of a subs character on offeree b4 acceptance and it does induce such, it is a binding option contract to the extent necessary to avoid injustice Even if seller does not acceptance performance [rejects it after completed], so don’t actually “complete performance,” if the performer/offeree tendered complete performance, this satisfies the manifestation of intention to accept (§50). DEFAULT RULE = Silence is NOT ACCEPTANCE [UNILATERAL MODS OR SHRINKWRAP = IN BOX AFTER U GOT THE GOODS/ AFTER OFFER MADE AND ACCEPTANCE]. Exceptions SILENCE IS ACCEPTANCE IF]: [§64] Had a duty to respond but didn’t (prior/pre-existing " yelationship, pattern of dealing would call for silence or inaction: but cannot impose a duty by making failure to act an acceptance) - Course of dealings - GIVES OFFEROR REASON TO BELIEVE SILENCE IS ACCEPTANCE 2. Ifa party (offeree) retains benefit [or unjustly enriched by retaining benefit w/o paying value] OF OFFER or offered (contained in offer or accompanied by offer) without responding: §69 - And offeree has reason to know offered - And offeree knows [UE: or has reason to know] offeror will expect compensation - And had time to reject [if no opportunity to reject, silence is not acceptance] - Kind of like implied-in-fact contract 3. Offeree exercises dominion over goods or - Accepts them. AND THEN DOES SOMETHING LIKE SELLS THEM // uses software w/ right to return software if don’t like terms later inserted // EVEN IF DOESN’T INTEND TO ACCEPT - Doesn’t include mere inspection or mailing of unordered merchandise, in many states 4. Offer states offer may be accepted by silence and offeree remains silent w/ INTENTION of accepting Similarly, silence may count as acceptance when (i) the offer ee has solicited the offer and drafted its terms; (ii) the offer, as drafted by the offeree, is so worded that a reasonable person in the offeror’s position would believe that the offer was to be deemed accepted unless the offeree notifies the offeror that the offer is rejected; and (iii) the offeror relies or is likely to have relied on the reasonable belief that lack of a prompt rejection constituted an acceptance. This pattern commonly arises in two situations: - solicitation of “orders” 4 goods -applying for insurance and insurer holds application [on own form] for an unreasonably long time w/o make a decision Vs. UCC ON ACCEPTANCE IS SIMILAR: §2-204 [formation] says can accept in any manner sufficient to show agreement UNLESS UNAMBIGUOUSLY SHOWS SPECIFIC MANNER/MODE of acceptance — ie. I offer to buy ur X if u deliver X to me by nov 12" = can only be accepted by delivering before nov 12" and not accepted just by promise to do so O True even if parties fail to include terms tht would result in a failure at common law // don’t fail for indefiniteness if parties intend to make a contract and a “reasonable basis” [look at commercial context. But more missing terms, more likely didn’t intend to make contract] = difference 1 > 2-204(3), but see 2d 33(2) = Only if not in writing, no oral testimony [or only oral if agreement in writing and PER bars], and no COD/usage: = Gap fillas: 2-305 [open price term: reasonable price @ time delivery], 2- 511 [tender of payment], 2-310 [open time for payment: due at receipt of product/upon delivery in cash], 2-308 [absence of specified place 4 delivery: at sellers place of business or residence if no business unless know place where goods r], 2.301 [seller obligated to transfer/deliver 11 goods, buyer must accept and pay for them] 2-507 [tender of delivery: pay when delivered] 2-309 [duration — (1) shipment/delivery = reasonable time, (2) if successive performances and indefinite, reasonable time but can be terminated wheneva (3) termination [except on happening of some agreed event] must reasonably notify other party], 2-306 [quantity IF outputs or requirements — good faith/ not unreasonably disproportionate or exclusive dealing — best efforts], 2-311 [options and cooperation respecting performance: if offeree accepts w/ specifications in a reasonable & good faith manner], 2-314 [implied warranties merchantability tht goods will pass without objection in trade title] = 1-203, 1-204, 2-103: “reasonable” and “good faith” criteria to terms completely omitted vs. agreement as to definite terms implied from 1- 303 [COP, COD, UOT= express terms prevail over all, UNLESS 1-303fL COP shows waived express term] ™ — 2-103(1)(b) / 1-201(b)(20) = GOOD FAITH = Honesty in fact or observance of reasonable commercial standards of fair dealing = SPECIFIC GAP FILLAS: employment contract w/ no duration = terminable at will / obligee may transfer rights if not specified its personal to obligee / no sequence of performance: if both single/instantaneous acts, must be made concurrently but if one is instantaneous and other needs longer time, longer performance must take place first [title and payment at same time for purchase of house but to build a house, builder must complete construction b4 pay] = Cant gap fill essential terms, like subject matter and parties [bc if essential terms missing, not enforceable as a contract]. Unless knockout rule. .... i.e. can gap fill price SOMETIMES [more common in UCC: encourage contracts, usually between merchants] O Not necessary to determine moment of MM = difference 2 O Special rules for acceptance [§2-207] when additional or diff terms in acceptance = difference 3 O Can make irrevocable w/o consideration in special circs = firm offers [§2-205 = difference 4 O Can be sent nonconforming goods and be acceptance = difference 5 [2- 206b] :nonconforming goods = acceptance and breach [if accept them, can sue for breach// if don’t accept them , thts ok but cant sue 4 breach] 2-206: offer and acceptance Acceptance > any manner and any medium reasonable , unless offer restricts it A. prompt promise to offeror to ship B. prompt or current shipment of conforming or non-conforming goods [unless non-conforming goods where seller seasonably notifies buyer only as an - common law wld treat nonconforming goods in a unilateral contract as no acceptance 12 15 acceptance “with adjustment” or otherwise limiting remedy in a reasonable matter under 2-718 or 2-719) or 3) orig doc objects to additional terms [w/ limitations clause, for ex. = IF SO, STILL CONTRACT JUST TERM NOT 2b. there is a different term > (2) doesn’t tell us, see Northrup to see that knock-out rule applies 2c. there is an additional or different term, but one or neither party’s is amerchant > (2) doesn’t tell us, see case KLOECK to see that amendment must be followed by another objective manifestation of assent/expressly agreed to . 1F NOT, OFFEROR’S TERMS APPLY [i.e. offeree’s acceptance terms don’t ] 2d. the forms have an additional or different term AND 2™ form has a proviso > no contract and 2™ form is a rejection/counter-offer: 2di. 1° form party accepts counter-offer and contract exists on 2"! forms terms 2dii. No acceptance, but parties behave as if there’s a contract and we go to 3 to determine. (2): the proviso in the acceptance prevents a contract in 1 but parties behave. as if contract or just creating a contract w/o words, but through action (forms don’t create a contract): 3a. only terms on which both parties agree go into the contract. Supplementary terms (§1-303, Article 2, and if not common law) fill gaps. §1-303 is best gap filler: Express terms [what parties said to each other] Course of performance [at least 2 incidents, that show party’s expectations via how they behave in this deal/contract = 1 party behaved repeatedly and other party, knowing this, accepted it without objection = must be >1 behaviors in same deal. Cant be PO, invoice. New PO, new invoice.] Course of dealing [at least 2 incidents, that show party’s expectations via how they behaved in prior deals/contracts with each other = establishes a common basis of understanding for interp their expressions and other conduct // HABITS ARE ESTABLISHED IN PAST DEALS. But if never litigated/arbitrated, arbitration clause wouldn’t help here ] Usage of trade [how people behave in the same market or same industry to the extent that party’s would know this is what is expected, but if merchant very likely to be unclear = such regularity to justify expectation that it will be observed with respect to transaction in question // at common law, litigation prevails over arbitration for example | Trade usage/usage of trade means the way things are usually done in this industry or this market if the parties have reason to know how things are usually done. b/c as repeat players, they are familiar w/ them O Usage > practice/method/custom (1), having such regularity (2) as to justify an expectation that parties will observe/assume it applies to their transaction (3) unless agreed otherwise, court [and parties] expect them to do things the way its normally done . need to disclaim it if intend not to be bound by it = 1-303c: if trade code, Q of law for judge Case ON (3) = CONDUCT AS CONTRACT: Commerce & Industry Co. v Bayer: FACTS = MM/C&I sends PO with arb agreement. Bayer sends invoice back w/ product that is silent on arbitration but expressly conditions MM acceptance. Performed. Bayer now wants arb — wtf , MM/C&I now wants jury. COURT HELD = U GET A JURY!! Bayer’s invoice = rejection under 2-207(1). Thus (2) is irrelevant and go str8 to (3). NOW, there’s a contract bc parties BEHAVED as if there was one. A) terms which parties agree = so no arb. And B) gap fillas -D failed to show any evidence of industry custom and usage for arbitration, SINCE INGENERAL U GET A RIGHT TO A JURY!!! Commerce & Industry v. Bayer — UCC 2-207(3) decision FACTS: Malden Mills purchases raw materials, manufactures products and then sells them to wholesalers; MM original lawyer included an arbitration clause in their form to limit litigation costs; Bayer’s invoice did not include an arbitration clause; Bayer’s product from MM catches fire and destroys property creating multiplier effect of harm on economy where everyone gets hurt; ¢ The arbitration clause against future harm almost ended up hurting Malden Mills since Bayer’s argument was to implement MM own arbitration clause in this dispute showing attorney foresight can never be perfect and is limited by playing the risk percentages at the time of drafting ¢ Bayer’s contract attempted to insert direct Proviso language from 2-207; ie: there form was a rejection and counteroffer ¢ Subrogation: Insurance company assume an insured party’s MM rights in the suit ¢ UCC 2-207 Analysis a not a contract from the parties writings go to subsection (3) (conduct) o When the product was shipped and accepted by Bayer magic moment occurred and the contract is binding where the terms agree: price/product o Forms did not agree on arbitration (issue at dispute) o Thusthe court went through on page 138. Whether the plaintiffs were obligated to arbitrate. The court went through the 1-303 gap-filling devices and decided the following: = There was no course of performance evidence because there had been no prior disputes in the current contract. = There was no course of dealing evidence because there had been no prior disputes in earlier contracts between the same parties. = No trade usage evidence showed that in that market and industry parties customarily arbitrated rather than suing each other. o Therefore the current contract did not include a requirement that these parties arbitrate this dispute. ° 16 own form. [[Or IF DIDN’T WANT ARB - object and say “no arb” = aka knockout rule aka litigation.]] oO NORMALLY —U WANT WHATS IN UR FORMS: (1) proviso — IF OFFEROR, but not offeree [unless u put it in, no contract, and get other side to send u goods so (3) applies and ur terms will apply IE COMMON LAW. ...... but IF UCC WILL APPLY IF GAP FILLED OR IF AGREED TO and the proviso will protect.u from inadvertenly agreeing to any of offeror’s boilerplate terms -BUT NOT A GREAT RULE. ALSO ENSURES NONE OF UR BOILERPLATE WILL BE IN IT....SO PROVISO IS KINDA SHIT EVEN HERE !] (2) then show materially alters/not merchants/ OR OBJECT TO IT WITHIN A REASONABLE TIME, but don’t say “no arb” cuz knockout rule aka litigation, just object. OOOOOR show (1) gap fillers show expected arbitration: 2-309 if objected to it much later, i.e. this was a reasonable time // 1-303 if the lawyer showed custom tht contract formed btwn them many times before w/o express acceptance??? W/ arb. Case on (2) = DIFFERENT TERMS: Northrop v Litronic: FACTS = D [LITRONIC- supplier] mailed offer to sell 4 boards, 19,000 per, 90-day warranty delivery in 6 weeks. “terms take precedence over any terms proposed by buyer” = [RPO/RB because such a complicated thing buying: request for bids: send us an offer, basically] . phone call. P[buyer] sent order form providing a warranty with no time limit. [“turn on” letter followed, then PO. PO required D to send written acknowledgment to P, but D never did.] D didn’t deliver 3 of 4 boards until 1 year. 5-6 months post delivery, P returned 3 boards claiming defective. D refused to accept due to 90-day warranty, P believed it was unlimited. COURT = PO sent by P + convo = acceptance under 2-207(1). Since (2) doesn’t say diff, apply majority knock-out rule. Known (2) is additional, not diff and knockout rule applies. O Lawyer did: allowed for battle of forms to occur, put in own language thinking it would trump Litronic’s offered terms [cuz merchants, not materially alter, no object]. O Lawyer shida done [litronic]: ARGUED THAT 90-DAY WARRANTY WAS MORE REASONABLE for time to reject nonconforming goods under 2-309, since did not, judge held that 6 months was reasonable since Northrop argued complexity of the required testing..... include merger clause so clients’ employees cldnt testify to negotiating: they said tht northrops employee shlda known that litronic always includes a 90 day warranty in their acceptance bc of their COD.... or give employees a script and restrict what they say during this ... - BAD . SHLD NEVER TELL EMPLOYEES TO LIE..... Oo *** BEST BET: INSTEAD OF “TERMS TAKE PRECEDENCE OVER BUYERS”, TO PROTECT SELF IF RLLY WANT OWN TERMS = PUT A PROVISO.....OR OBJECT IN ADVANCE TO ANY TERM.6G. ... .LITRONIC DID NOT DO THIS [DIDN’T ENSURE HIS WARRANTY TERM WOULD APPLY) to prevent a contract in (1), (3) through conduct and gap fillers show warranties have time limits.- COURT DID USE GAP FILLERS CUZ KNOCKOUT RULE [JUST DIFF TERMS NO PROVISO OR OBJECTION] AND CONDUCT > AND FOUND SAID 6 MONTHS WAS REASONABLE: oO SO WOULDN’T RLLY WORK HERE [BOTH PROVISO + OBJECTING IN ADVANCE > CONDUCT > KNOCK OUT RULE/ GAP FILLERS > 17 = Final assent deferred until the non drafting party has an opportunity to read the terms, os the contract was made at point of purchase * — Buyer accepts offer if she hasn't rejected it within a reasonable time * — Duty to read at time of delivery * Gives buyer opportunity to refuse to contract on the offeror’s standard terms clickwrap terms (online: click “I agree”: iLAN) > reasonably expected to read, or should read, so terms apply [OR TERMS ENCOUNTER WHEN DOWNLOADING SOFTWARE] oO LLAN CASE SHOWS THAT COURTS ARE INFLUENCED BY ARTICLE 2 WHEN DECIDING SOFTWARE LICENSE SALES UNDER THE COMMON LAW [BC PARTIES EXPECTATIONS ARE SIMILAR TO EXPECTATIONS OF PARTIES IN GOODS TRANSACTIONS] 0 Asabove, ok to affirmatively require rejection. BUT CANT UNILATERALLY MOD [LICENSING / SOFTWARE AGREEMENTS] OR ADD TERMS AFTER, WHILE CAN IF SHRINKWRAP: Vs. - BUT IF NOT A MODIFICATION, BUT MERELY EXPRESSES WHAT WAS IMPLIEDLY AGREED WHEN CONTRACTED (OR REASONABLY EXPECTED), ITS OK = SHRINKWRAP // BOXTOP TERMS: AFFIRMATIVE REQUIREMENT OF REJECTION Shrinkwrap terms m= = Standard terms enclosed within the item’s packaging, so the term is NOT known to the buyer at the time of contracting = ~~ Why is this valid? Usually with a contract, one party cannot unilaterally add terms or change terms of the contract e Here, the buyer (1) knows the contract was standard to be subject to such a term; or (2) should have reasonably expected the contract to be subject to such a term Box-Top terms or invoice, Boxtop terms * Standard terms placed on packaging by the seller, so they are discernable to the buyer = Contract is formed at the point of sale * — Buyer, by taking the item to the cashier, manifests intent to contract subject to whatever policy is on the box = Why isit valid? © Buyer saw or reasonably should have seen the term (e.g. return policy) shrinkwrap / boxtops terms / rolling contracts are usually ok to send terms after receive TANGIBLE goods [not software, and not unilateral / additional mods AFTER ORIG TERMS/orig manifestation of assent] because u can send back goods under UCC before law will deem u to have accepted them [inspect] ProCD: software terms in box says “if you don’t like it, return it within X days.” This line of cases says an affirmative requirement of rejection = enough for acceptance ... argue against by unconscionablility, public policy AND virtually an illusory promise / contract. Clause gives the 20 stronger party [WITH SUBSTANTIALLY GREATER BARGAINNING POWER akin to using deceptive tactics in a consumer based contract] a free way out: at their will to change contract and not rlly bound/restricted. - Character of parties, process and substance of agreement [std form contract W/ unreasonable terms, Irrevocability, high price/deposit, need to sign on spot w/ no lawyer, etc.] - IF software license cases: VENDOR PROPOSED CONTRACT THAT BUYER ACCEPTS BY USING SOFTWARE, THIS IS OK BC OPPORTUNITY TO READ THE LICENSE [AND NO ADDITIONAL AGREEMENT/TERMS!]! - like clickwrap] = ProCD // affirmative requirement of rejection enough for acceptance [“send it back”] e@ =ProCD v. Zeidenberg > says U CAN JIVE TULLE °- Facts = Zeidenberg= P; bought a database on CD =~ ProCD= D; company that produced the CD =~ Zeidenberg opened the CD packaging, installed the software on his computer, and created a website e@ On the site, he uploaded the software information from the CD © he charged people a fee that was less than what ProCD charged m= Shrinkwrap term © when Zeidenberg opened the packaging, the license was inside; but he wasn’t aware of that license before he bought the CD =~ Clickwrap term e@ When he put the CD in his computer, a software license popped up prominently and prompted him to accept before continuing © Rule + Application = = Court applies UCC 2-204 and 2-206 = Failure to read is not an excuse m= ~~ ProCD made the license clear and obvious enough m= = Zeidenberg could have returned the CD if he didn’t like the shrinkwrap terms ... vs. INTANGIBLE GOOD LIKE SOFTWARE: IF downloading additional thing/PRODUCT ON WEBSITE: MUST HAVE AN ADDITIONAL I AGREE TO THE TERMS AND CONDITIONS = needs an additional manifestation of those terms IF diff from website’s manifestation [yes/no for agreeing to T/C] - Shrink-wrap terms for software or tangible goods where modification is AFTER additional terms sent >. CANT UNILATERALLY CHANGE / add/ MODIFY TERMS UNLESS EXPRESSLY AGREED TO. = Kloeck: UCC // affirmative requirement of rejection OF ADDITIONAL TERMS CANNOT BE APART OF an “acceptance” and CAN NEVER MODIFY (ex.: buried in boilerplate language, or offeree is a customer and terms are unfair, unexpected or insufficiently clear, or online and notice is not given where a reasonable person would not see the terms link right away and would thus have no duty to read or be bound) e LIKE THE Spechts / Netscape hypo: signs up for website/software and agrees to all those terms for site in general = DUTY TO READ HERE: yes/no. Same company, diff product [plug-in download on website] = adds another term below download button. Had to scroll down and didn’t see the 21 terms. Since not conspicuous, a reas person wldnt see this as a sep licensing agreement = TREAT AS 2 CONTRACTS. e When will the court enforce these? Important factors: © Reasonable expectations = objective std [offer must create reasonable expectation in offeree] ™ Courts more likely to enforce standard terms if they are fair and reasonably expected @ Wilda reasonable person think there was a contract here © Conspicuousness ™ Court more likely to enforce if the terms were clear, conspicuous and intelligible e Buried in fine print? Difficult for a lay person to understand? Courts are reluctant to enforce, especially if the buyer is a regular consumer or commercially unsophisticated Was the link properly placed? Was clickwrap device set up so it’s clear when customer clicks “I agree” he is clearly manifesting assent to the terms © Is it a forum selection or arbitration clause? ™ Courts usually uphold these even if they aren’t very clear (see Carnival Cruise Lines, where it was on the ticket the people only received after they purchased) @ Exceptions where court will not uphold these: e (J) party didn’t actually assent because it wasn’t adequately brought to their attention (duty to read is excused) e@ (2) term is unconscionable (inappropriate and unfair) e Can the terms be altered? © The original terms usually include a clause that the drafter has the right to modify the terms at its discretion = “reserves right to change at sole discretion” ™ Binding if the customer can be held to have manifested at the time of contracting (e.g. clickwrap i agree) ™ Customer MUST receive a clear, separate notice of any changes (that’s why you get a billion emails from apple or letters from your bank on changed terms) e iLAN: even tho software is the sale of something intangible/”right to use intellectual property” , and common law applies, COURTS VERY INFLUENCED BY ARTICLE 2 // USE ARTICLE 2 FOR SOFTWARE DISPUTES BC BUYERS’ expectations are ARGUMENTS AGAINST ENFORCING ARB / FORUM SELECTION CLAUSES: 22 1) Offeror has to do something that is an act of revocation (“I revoke”, something inconsistent that is clear that no longer wants it, OR ambivalence alone) AND = Dickinson v Dodds: selling land (a unique asset = CAN ONLY BE SOLD ONCE) to Allen = makes performing impossible. s NEGOTIATING with someone else, on the other hand [just talking to Allen about offer], is not revocation or ambivalence. It is prudence 2) AND This act of revocation must be known to the offeree (effective only when communicated to offeree by reasonable means in circs of transaction, directly or indirectly) = If offeree obtains definite and unambiguous info from a reliable source that offer no longer open for acceptance, this is a revocation and can’t accept ***BOTH MUST OCCUR BEFORE ACCEPTANCE IS EFFECTIVE, SO NO MM*** Revocation by offeror — must be received to be effective : anytime before acceptance can revoke A. AMBIVALENCE IS REVOCATION: Page 90: “don’t know if ready/haven’t decided” > law treats this as revocation b/c law expects a perfect alignment of MM and here, and this is objective evidence of non- committal B. OFFEREE IS AWARE OF OFFEROR’S Unambiguous indication [language or conduct] that is inconsistent with the intent to contract with offeree O Soif general / ad offer: revocation only effective if given by a notice given equal publicity when no better means of communication reasonably available C. (Indirect) REVOCATION:_An offer is revocable, even if states will be held open for a stated term, unless meets requirements for option or firm offer Option: offeree must pay consideration to create the binding commitment by offeror Firm: offeror must be a merchant, offer in a signed writing, assurance held for stated time or reasonable time if not stated no > 3 mo.’s [if so, consideration], and if assurance on offerees form then offeror must sep. sign this assurance 4 ways can’t revoke [exception to general rule that can revoke anytime before acceptance]: 1) OPTION CONTRACTS [NEED CONSID. AND NO MAILBOX RULE, i.e. acceptance of option effective on receipt by offeror = §25 / §87] @ OPTION is an agreement in which offeror promises not to revoke an offer in return for the offeree providing consideration (something of value—BUT CAN BE NOMINAL OR SHAM CONSIDERATION: doesn’t matter value and usually doesn’t even matter if pay, as long as promise to pay 10$ to keep it open, for ex. = DOESN’T MATTER IF U ACTUALLY PAY WHEN U CREATE OPTION: BECAUSE PROMISE TO PAY CONSID IS SEP FROM PERFORMING, I.E. PAYING. ONLY NEED TO PROMISE 25 CONSIDERATION. . . but if insist consid be paid up-front, must pay up-front. OTHERWISE, free to schedule performance [paying consid] whenever want) 0 Force field around an offer. Cant revoke during option period O Rejection or counteroffer does not necessarily terminate the offer 0 YOU CANT REVOKE OPTIONS AFTER THEY HAVE BEEN ACCEPTED ¢ Remember = option is its own contract. 0 Soif option is agreed upon [I promise to give u 5$ if u keep it open for 2 weeks , and offeror says yes: that’s its own contract. Don’t need to pay 5$ to show that it was a valid option — but not paying 5$ is breach...] O Dickinson v Dodds: didn’t pay consid to keep option open, AND DICKINSON DIDN’T EVEN PROMISE CONSID [SO NO VALID OPTION] so Dodds able to revoke b4 time runs and Dickinson knew this from a 3% party > no option and NO contract to sell land bc no meeting of minds [offer but no acceptance: revoked!] Case on Options: Dickinson: D signed and delivered a memo to P saying intended to sell land for 800P and offer leftover til 9am Friday. B4 time expires, D sells property to some! else. P finds out from a third party, D doesn’t tell him but doesn’t matter because not even an acceptance. Day of, D tries to accept. COURT = D’s memo was an offer to sell, no consideration. PROMISE = mere nudum pactum and any moment before a complete acceptance, can decide to withdraw offer. NO MM bc b4 P tried [any attempt] to accept, aware D changed mind. O Lawyer did: thought promise was binding w/o consideration O Winner [dodds = seller ] clda worded memo so that it was advertised to many ppl, or clda worded memo as an invitation to deal [Invitations: “are u interested” “wld u give” “I quote” [unless response to an inquiry where says for immediate acceptance, cld be offer] “T wld consider” - not an offer, or directly informed him of revocation, or clda just left out “keep this offer open til 9am” O Lawyer shlida [for Dickinson]: PROVIDED CONSIDERATION for undertaking promise so promise was legally enforceable OR show detrimental reliance in some way [sold old house and didn’t know he withdrew offer] or some other exception to consideration.... @ IF WANT TO KEEP CONTRACT IRREVOCABLE: EITHER PAY (COMMON LAW) OR WITHIN 3 MONTHS AND IN WRITING (UCC: 2-205 2) FIRM OFFERS [NO CONSIDERATION AND NO MAILBOX RULE, BUT NEED SIGNED WRITING OTHERWISE REVOCABLE] (82-205). 1. (an offer) by a merchant = NOT IN THE GENERAL SENSE, AS IN 2-207, BUT: = §2-104: either (1) person who deals in goods of the kind in transaction [sells logs], (2) by his occupation has knowledge or skill peculiar to 26 ~ the practices or goods in transaction [a logger but doesn’t sell logs] or (3) whom such knowledge or skill may be attributed by his employment of an agent/broker/intermediary who has such knowledge or skill 0 This definition applies to 1) firm offers 2) 2-314: warranty of merchantibility and dealing with responsibilities of merchant buyers to follow seller instructions oO ALL ELSE: -2-201(2), 2-205, 2-207, 2-209 [SOF, firm offers, confirmatory memoranda and modification resting on normal business practice ought to be familiar/typical to any1 in business] = merchant in general sense, i.e. almost every 1 in business under 2-104 definition since the practices in these transactions are non- specialized business practices such as answering mail = DO THEY BOTH DEAL PROFESSIONALLY IN MARKET? [both deal w/widgets? — does one buy it and bulk and other use it in manufacturing????] To buy or sell goods (or lease goods) In signed writing Why by its terms gives assurance it will be held open = Cannot be revoked for lack of consideration For the time stated, if not stated then a reasonable time for no >3 months O Unless provide consideration, which takes u out of UCC and into common law But if the term of assurance is on a form supplied by offeree, must be SEPARATELY signed by offeror —2 SIGNATURES ¢ “Offeree” produced contract but not offeror. Since offeror is technically the master of the offer, needs to sign it. Case on Firm Offers: 2494 Inc v McCorkle: FACTS =_D signed contract that Sign-o-lite “slid across the table” for them to offer back to Sign-o-lite, to lease signs from sign-o-lite ... but McCorkles revoked offer b4 receiving notice of acceptance. Sign-o-lite sued for breach bc contained an irrevocability clause. COURT HELD = IRREVOCABILITY CLAUSE INEFFECTIVE BC even tho 2a-205 does not require sep consideration for firm offers, requires separate signing to protect little guys in firm offers WHEN NOT A MERCHANT. So FAILS CUZ OFFERORS NOT A MERCHANT, BUT ALSO FAILS BECAUSE DIDN’T SEP SIGN [FORM PROVIDED BY OFFEREE]. and no option cuz no consid. 27 O Lawyer: created irrevocability clause. Thought ok w/o consid be firm offer. O Lawyer shida done [FOR sign-o-lite]: ETTHER TOLD CLIENT TO PROVIDE CONSIDERATION orrrmrr SEPARATELY SIGNED (ELEMENT 6: orrrr not create form themselves, so they are still offeree but don’t need offeror to sep sign and as offeree, have power to accept) AND SHOWN MERCHANT SOMEHOW (ELEMENT 1) HOWEVER: OK IF promise is conditioned on an event that can occur [exception: cannot possibly occur] // good faith inquiry of the performance meeting personal satisfaction , & if performance is technical or commercial in nature, must be reasonable Additional Terms: 0. Kills at common law = counter-offer [new offer is made; violates mirror image rule]: §59 0. It’s usually ok at UCC = see §2-207. 3. Lapse of time (subjective: SOL or latches: claim expires at a certain point) and very fact- specific 4. Death or incapacity [stroke, for ex.] of either party BEFORE acceptance [EVEN IF OFFEREE DOESN’T KNOW] or 5. Non-occurrence of any condition of acceptance under terms of offer [doesn’t comply w/ acceptance offeror asked/silence or inaction is usually not acceptance: Case 2 [Norcia]] Need CONSIDERATION OR (2) RELIANCE [PE!!!!] or (3) sometimes past/moral consideration to extent promised or (4) waiver of nonmaterial condition of bargain or (5) special forms **no matter what = if there’s a mod, even if signed to and agreed to and otherwise satisfied SOF, NOT ENFORCEABLE IF NO CONSIDERATION** 1. Consideration A. CONSIDERATION GENERALLY: generally [or a promise in exchange for performance or forbearance: both parties must objectively want to induce other into deal when exchanging, to constitute a bargain] ¢ §71: requirement of exchange: consideration [performance or a return promise] must be bargained for [each party views what they give as price of what they get] ¢ Can be a promise ¢ an act other than a promise ¢ a forbearance [refraining: i.e. terms and conditions when buy license to use software], or = if agreement based on promise 2 forbear from asserting a legal right, promisor must hv an honest [good-faith] OR reasonable belief (uncertainty, objectively] in validity claim if its truly invalid: §74 = promise to forbear lasts for a reasonable time if no time stated * acreation/ modification/destruction of a legal relation or status [promise to use license given software’s terms] = MEANS NOTHING IF SUFFER LEGAL DETRIMENT BUT DIDN’T AGREE THTS PRICE PAY FOR PROMISE = Promises that are bought will be enforced (will be harmed if not enforced) but promises that are free [gratitutious, no consid] wont be enforced (no harm if not enforced) 30 ¢ 2 ways to measure: [plaintiff usually promisee, defendant promisor] 1) getting something: a benefit to promisor: is the promisee’s detriment suffered in exchange for the promise? MUST BE A DETRIMENT, BENEFIT TO PROMISOR IS NOT THE TEST, though can help in determining it. - If never had legal right to use donators $ at the time promise is made, suffer no legal detriment [& NO CONSID] from being bound to use her $ for advancing cause, espec cuz prob have legal duty to use funds for charity — unless specifies committed to use $ for specified use donor asks for, then prob consid [pg 224 E&E] ¢ Even tho donator is getting a tax deduction, this benefit alone to promisor is not enough if promisee suffers no detriment 2) agreeing to be “less free”: Detriment (relinquishment of legal right: act now or in future — giving up legal right not to act, forbearance or complete/partial abandonment of intangible right) to promisee = Mutuality [of consideration]= both parties need to be less free. Doesn’t mean it must be an even trade. THOUGH LAW DOESN’T LOOK AT ADEQUACY OF CONSIDERATION, common law doesn’t accept sham [false — not actually given] or nominal considerations [in name only / a pretense and not rlly bargained for or not rlly used to induce — DIDN’T INTEND PROMISE/PERFORMANCE TO BE PRICE FOR OTHER PARTY’S PROMISE/PERFORMANCE, UNLESS OPTION CONTRACT OR GUARANTIES: agreeing to pay debts of anotha, then nominal ok]: §79 comment d: So if say I'll give 100k to u, in consideration for a coffee mug bearing logo [or for consideration received which doesn’t exist ]= pretense of consideration is not rlly given in exchange for promise, but serves purpose of establishing apparent exchange to validate promise // false detriment tht cannot reasonably be conceived as inducing return promise - But gross disparities in consideration may be used as evidence tht parties didn’t bargain but nominal consid/evidence to support fraud, duress or incapacity defenses - Unconscionability in process leading to bargain be terms in form contract so unfairly surprising or improperly exploited others ignorance or rarely, to overturn contracts so imbalanced as to be oppressive even tho no defects in bargaining process - Option/guaranty exception to allowing nominal doesn’t happen if nominal + sham [not real bargain in substance or in form] unless i) relied upon or ii) 2-205_provides 4 enforcement “jllusory promises” always ok if: ¢ agree to pay u $100 if it’s to my personal satisfaction [must be a good faith(personal taste) or reasonable(technical or commercial) satisfaction]= valid contract w/ consideration = GOOD FAITH !!!! > MUST BE SOME LIMITATION. CANT BE ENTIRELY OPTIONAL. LIMITATION HERE IS GOOD FAITH SATISFACTION 31 ® Output or all of widgets that you require exception [in good faith]= valid contract w/ consideration, even tho quantity not specified: ¢ Amt is not left to will of promisor. Its an objective standard by the terms of the promise to determine the amount to be delivered or paid ¢ Promisors duty is conditional upon existence of an objective need for commodity or service, and although promisor can control to an extent, there is a limitation of his future liberty of action “REASONABLE” OR “BEST EFFORTS” TO PERFORM and DUTY OF GOOD FAITH [in 1. [YES CONSIDERATION] OUTPUT: Discretionary performance on sellers side in output: to sell all can, subject to limitations of good faith, reasonableness or exclusive dealing [buyer promises to produce/buy everything seller can sell. Seller has 1 buyer = agreeing to sell exclusively: a lithium mine agrees to sell all products of its mining in this year to a chemical processor] = Measures all can sell obligation by good faith / past dealings / what other ppl in industry do = reasonable/good faith obligations [REASONABLE EXPECTATIONS IN CONTEXT OF TRANSACTION] 2.[YES CONSIDERATION] REQUIREMENTS: Discretion to order only what is required on buyers side: illusory if absolute commitment, but ok if subject to good faith and/or other 2 limitations above [seller promises to sell everything buyer needs = agreeing to buy exclusively: util company agrees to buy all gas it needs for calendar year from supplier X] = Measures all can buy obligation by what objectively needs or wants, not what desires [seller promises to sell everything buyer needs] where quantity is measured by however much buyer needs, seller is obligated to sell reasonable/good faith obligations IN ADDITION TO GOOD FAITH OBLIGATION, the quantity tendered under an output contract or demanded under a requirements contract cannot be “unreasonably disproportionate to any stated estimate, or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirement.” The U.C.C.’s Official Comment adds that if an estimate of requirements or output is included in the agreement, it will be treated as “a center around which the parties intend [any] variation to occur.” 3.[YES CONSIDERATION] Exclusive agency exception [to best of ur ability/good faith efforts to turn profits] = valid contracts w/ consideration because implies obligation of best efforts [seller promises only to sell to buyer, or buyer promises to sell only to seller ¢ Exclusive contracts can show that seller promises to sell only to buyer (sell exclusively = how quantity is measured is output of seller) or buyer promises 32 © Lets pretend there is not: if no consid > Geremias often not protected [not O ~ elements of promissory estoppel: 1) promise which promisor shld reasonable expect to induce action/forbearance of a definite and substantial character on the part of the promisee? [doesn’t matter tone or threat, it’s the overall meaning of the letter to Geremias which is “we will protect you” — Geremias left that letter thinking they’re still protected & their car is still protected. PROMISOR SHOULD KNOW IF WE THREATEN OR PROMISE, EFFECT IS STILL SAME: PAY. AND GEREMIAS, AS REASONABLE EXPECTORS, WILL THINK PAY. AND CREDIT UNION KNOWS THEY’RE LYING AND WONT ACTUALLY PAY] 2) did the promise induce such action/forbearance? CONSIDERATION [BC THERE IS!. In 2™ agreement/letter sent to Geremias] lending them more money to pay premium for car loan that they gave !!!! “apply this amt to your loan” = interest is consideration © Nota gratuitous/uncompromised promise > but valid consid bc Geremias paid more interest O Just like consideration in orig loan ****POLICY REASONS FOR THIS PROMISSORY ESTOPPEL DECISION: Making lender the insurer when they make this kind of promise [in context of lender, borrower relationship — make lender pay insurance when dont pay premium but promise to] ***** NOT CONSIDERATION [but if parties intended to make a bargain, court will usually find one: i.e. if parties intended their performance/promise to be the price of the other party’s performance: because courts look at substance [intent], not form [vale/price], in whether its nominal/gift or bargained-for-exchange]: A) Gift promise [merely gratuitous/nominal consid], or conditional gifts [promisee’s detriment is incidental to promise/detriment was not bargained for bc no benefit to promisor is evident. An objective RP would see that parties didn’t see it as the price for the promise/performancel gift], but simply as the act needed to take delivery of the gift: NOT A BARGAIN. If detriment (“condition”) goes beyond use of gift, then it’s consideration]... but see moral obligation exception belooooocow under common law exceptions 35 B) Past consideration [82 and 83] = BECAUSE OF THEIR ACTS, NOT IN EXCHANGE FOR THEIR ACTS [act in past now being recognized as a gift promise: in recognition of your last 30 years of working, I give ua gift bonus of $30k] = IF PROMISEE SUFFERED DETRIMENT BEFORE PROMISE MADE, DETRIMENT IS NOT EXCHANGED FOR PROMISE Under Restatement 2d § 86, a promise based on past consideration will be enforceable to the extent necessary to avoid injustice unless: a) the promisee intended the benefit received by the promisor as a gift, or b) the value of the promise is disproportionate to the benefits received. 3 exceptions where past consideration is enforceable [and not simply a donative promise: (1) promise to perform a voidable obligation[ratification] if the new promise is not subject 2 same defense (AGE, FRAUD, DURRESS, ETC.) tht made 1* obligation voidable (2) promise to pay a debt discharged by bankruptcy [can never be implied from mere acknowledgment/part payment. MUST BE EXPRESSLY PROMISED. No writing needed. (3) promise to pay a debt barred by SOL [new promise, not old debt, is enforceable so can condition new promise, can acknowledge debt and not promise: but be careful, cuz this can be implied from acknowledgment/part payment: “Im sorry I haven’t paid but I had no extra money last year”.. usually need not be in writing] CHECK MATERIAL BENEFIT RULE [86] IF NONE APPLY: when a promise is made in recognition of a benefit previously conferred on the promisor (subject to other requirements of Restatement 2d § 86), or promises to pay debts made unenforceable under the statute of limitations or by bankruptcy under Restatement 2d §§ 82 and 83. PAST CONSIDERATION arguments: 0 If trying to prove consideration > §86 restatements says material benefit: X enabled Y to get benefit, so thts adequate consideration for Y giving X ___ = or if trying to prove consideration for gift > “if u come over, ill give u bike” = me going to ur house was a detriment bc u were lonely and wanted company and I was busy and didn’t want co./ cost of gas / etc. = Treserved my rights to go back on my decision [I decided, prior to ur promise to___, but I reserved my rights not todo ___whenI___] = GIVING UP INVALID LEGAL CLAIM: IF giving up smoking is valid consid, giving up suing on an invalid but honest legal claim shld be too! // some grounds for thinking it wld be successful 0 If trying to prove no consideration > past consideration / merely gratiutious / not a bargained-for-exchange = For gifts, “if u come over ill give u bike” > COMING TO UR HOUSE WAS NOT THE PRICE OF ACQUIRING THE BIKE, BUT RATHER THE MEANS OF EFFECTUATING THE GIFT. = GIVING UP INVALID LEGAL CLAIM A reasonable person wld see ur forbearance as nugatory, ridic or wholly trivial..... akin to promising not to put ur hands in ur pocket and not “akin to law” / falls foul of maxim de minimis non curat lex 36 C) Conditional promises [in which promisor need only perform if a specified condition exists] that (1) are within the control of the promisor [kind of illusory] AND (2) DOESN’T LIMIT PROMISORS FUTURE OPTIONS AT ALL [i.e. I promise to do X if I chose to do X] 37 Think: many times it will limit promisors options = bc if specified conditions occur, options wld be limited cuz wld be mandated to perform if the condition is completely outside control of promisor [and thus contingency is genuine], and is uncertain but in the realm of future possibility > ok [consideration] // OR IF IN PARTY’S CONTROL BUT PARTY ACTS IN GOOD FAITH !! OK!! O Or “If I buy that house by March 30, I promise to lease it to you for a year”: buyers promise is subject to a condition that is entirely under buyers control, but the promise does shrink buyers options: after making promise, buyer is not free to buy house AND NOT rent it to renter. THUS, both promises enforceable but neither party will have an obligation to perform unless buyer does in fact buy house by march 30 O Same w/ “if u buy dealership, u will hire me” [buying in complete control but limits options still] If alternative promises, each of the performances tht promisor can choose must be consideration O cant say: “ill [reader: promisor] promise bookseller tht if bookseller [promise] gives reader $100, I can either buy ur book or choose to look at ur rare books I might buy” oO IF PROMISEE GIVES PROMISOR X, PROMISOR CAN EITHER DO Y promisor is entitled to chose, all alternatives must be consideration VS. if promisee gets right to choose between alternatives, consid when promise has the right to demand 1 of 2 alternative performances from the promisor so_a promise to render alternative performances is consid if any one of the altern performances = consid [bc promise restricts promisor’s options at time of promise bc promisor doesn’t know which choice promise will make]: 0 cansay: “if bookseller gives reader[promisor] 100$, bookseller [promisee] may choose to hv reader give bookseller a book or serve on a jury if told to do so” oO IF PROMISEE GIVE PROMISOR X, ICAN CHOOSE TO HV PROMISOR DO Y OR Z = IF EITHER Y OR Z IS VALID CONSID, OK! ! If promisee is entitled to chose, only 1 alternative must be consideration O Example: Constructco contracts with Lessor to construct a commercial building by July 31. Toyco, a prospective tenant in the building, is eager to ensure that the building is completed on schedule. Accordingly, Toyco promises to pay Constructco $5,000 if it completes construction by July 31. Constructco completes the building by July 31, but Toyco refuses to pay. The contract is enforceable, because at the time Toyco made the promise to Constructco, Constructco was under a contractual duty to Lessor, not to Toyco. **A few authorities do not recognize an exception to the legal duty rule in such a case, on the ground that when Constructco made the promise to Toyco, Constructco was under a preexisting legal duty to perform, even though the duty did not run to Toyco. However, even this minority view recognizes an exception to the legal duty rule where Toyco makes a contract with Constructco and Lessor jointly—i.e., where Toyco promises something to Constructco and Lessor in return for their joint promise to have the construction completed by July 31. The rationale is that Constructco and Lessor originally had a legal right to mutually rescind their preexisting contract (as between themselves), but by jointly agreeing with Toyco to perform their contract, they promised to do something they were not previously obliged to do—i.e., refrain from mutually rescinding their contract.** 2. if a party who promises to do no more than was required under the original contract had a valid defense under the original contract (e.g., mutual mistake). In such a case, that party was not legally obliged to render any performance because of the defense. - Example: Buyer and Seller enter into an oral agreement under which Seller agrees to sell Buyer a parcel of land for $450,000. The agreement is unenforceable against either party under the Statute of Frauds because a contract to sell land must be evidenced by a writing to be enforceable ..... Seller later states that she will not sell the parcel for $450,000, but she will sell it for $500,000. Buyer agrees, and the agreement is put into writing. - Buyer’s promise is enforceable because, as a result of the Statute of Frauds, Seller was not under a TeeX legal duty to sell the parcel 3. Fair and Equitable Modification in Light of Unanticipated Circumstances USUALLLLY, payment of lesser amount of debt owed [STILL VALIDLY OWED] to discharge debtor’s full obligation = no consid under legal duty rule - so creditor can still sue for full debt bc promise by debtor was not binding for lack of consideration. EXCEPTIONS: - bc prevents routine settlements of debt: if creditor wants to encourage faster payment from debtor [NOT SLOWER], to avoid forcing debtor into bankruptcy, or to encourage debtor to seek alternative financing to pay for full obligation to creditor, for ex. - EXCEPTION 2: if debtor does something different to discharge full obligation debt: i.e. pay 50k not 100k but agree to work for creditor 40 EXCEPTION 3: honest dispute ab IF an obligation is owed [i.e. agrees to pay 12k. but honestly believes performance fell short of what agreed to under service contract. Next agree to pay 11k in full satisfaction of agreement, thts ok] EXCEPTION 4: honest dispute ab WHAT obligation is owed = UNLIQUIDATED DAMAGES [creditor, even tho believes full discharge is X+100, if unliquidated: unclear/uncertain, then X payment is ok [even if debtor admits its at least X].... But if debtor owes 2 obligations: unliquidated and liquidated, payment of liquidated is not consideration/discharge for the unliquidated obligation...... AND IF creditor cashes in full-payment check thts less than what creditor thinks its owed, prob discharge of entire debt / UCC has conditions [3-311] EXCEPTION 5: if debtor promises not to liquidate business/NOT TO FILE 4 BANKRUPTCY to ensure debt is paid, that’s prob a detriment and valid consideration.. EXCEPTION 6: lesser payment to discharge full debt in an agreement btwn its multiple creditors , where debtor is a 3" party EXCEPTIONS 7 [in some states]: written release EXCPETION 8 [split]: executory contracts: payment of a lesser amount than is due in the case of a contract that involves ongoing periodic payments (e.g., reduced rent payments under an ongoing lease). Some authorities hold that in such cases, an agreement to accept lesser payments in full satisfaction of the payments already due is enforceable to the extent that it is executed (i.e., the agreement is enforceable as to those periodic payments already made and accepted) Other authorities hold that because performance of a preexisting legal duty is no more consideration than a promise to perform, the shortfalls in payments already made can be recovered. If nothing else > duress under 176(1) = improper threat [to not perform if no more $] that breaches the duty of good faith and fair dealing owed to promisor = b/c demand for more $ had no legit commercial reason Or 176(2) = improper threat bc threat demanded [more $, same work] was an exchange on unfair terms [i.e. more than just demanding more $ to better reflect the current mkt value] Or 177 — undue influence [unfair advantage of anothers weakness of mind or oppressive and unfair adv of another’s necessity or distress] Case on DEMANDING MORE MONEY FOR SAME WORK: Lingenfelder v Wainwright Brewery Co. FACTS = Jug threatened to quit. D [Wainwright] promised extra payment of 5%. When Jug finished work, D refused to pay. COURT = no consideration. O Laywyer did: assumed promise enforceable [thought economic duress was ok] O Lawyer shlda: insisted on adding something else, i.e. doing more work, change building plan or some other extra value that constitutes consideration for a promise to be upheld AT COMMON LAW [WAINWRIGHT WINS BC NO MUTUALITY]. AT UCC BREWERY WINS BC NOT GOOD FAITH] need to show good faith: mod must be made in a good faith , not bc he wants to make an extra 5%. SHLDA SAID NEEDED THE INCREASE PAYMENT TO SATISFY MATERIALS OR OTHER INCREASED 41 BURDEN, THEN THE COURT WLDA VIEWED IT DIFFERENTLY [if brought up b4 end of performance/contract and both parties agreed] 0 If Jug did this and now representing employer: SAY UNDER 1-308 [acceptance under reservation of rights], RESERVED RIGHTS: [make sure contract says “w/o prejudice”, “under protest” or “the likes are sufficient” so ur not waiving rights to perform in a manner demanded/offended by other party SO THAT MODIFICATION [increased price for materials to be produced] IS NOT ENFORCEABLE 2 choices when employee refuses to continue without more pay: 1) employer refuses to pay extra, and suffers catastrophic delays or 2) promises to pay, where court might enforce it [even tho not enforceable: if employer make it obvious that no consideration and hard to prove PE: DNT ASK HIM TO DO ANYTHING ELSE. PROMISE TO GIVE HIM EXTRA $ FOR FRE: :”wishing to insure timely completeion of buildings covered by this contract, parties agree that W will pay J __ in addition to the fee already agreed to. Jug will not do any additional work for this and is not obligated to [more effective in contract mod because other party will sign] or send a letter to jug w/ similar wording.] if jug doesn’t object to ur description, court wld hold that his failure to object shows he didn’t disagree w/ ur description O PE wise [to prevent it]: make sure something in writing will prove the extortion. Make sure jug cant prove that enforcing the promise is necessary to prevent injustice. JUG already clda done your job for u. if he has sent a threatening letter, preserve it. If not get emploees to write down what he told them. Do it b4 their memories fade. Harris v Watson (commercial context is what gives contract meaning: if a contract for wages to sailors exists, a promise by captain of ship to pay additional $ during times of danger does not constitute adeq consideration, bc a party cant partially perform and demand extra comp b4 completing performance = WHEN THE FREIGHT IS LOST THE WAGES ARE LOST, imputed into contracts, = POLICY REASOn.... SHDA SAID EXTRA COMP NEEDED BC EXTRA WORK NEEDED, NOT BECAUSE DANGER NOW & Stilk v Myrick (if contract for wages exists, even if emergency circs demand additional work, cannot modify contract w/o additional consideration = SAME FACTS BUT NO EMERGENCY. PROBLEM WAS DESERTION OF EMPLOYEES. BUT TRUE DUTY WAS TO DO EVERYTHING REQUIRED BY THEM, SO DUTY SAME. .. even tho crew smaller so more work each. [MEANS EMPLOYERS CAN INCREASE DUTIES WITHOUT INCREASING PAY, imputed into every contract] Good consideration / modification notes Problem 51, pg 237No due diligence is ever perfect > Teddy Const. Co. could not do so: imposs Teddy finds out gonna be a fortune and cost a mil X > demands more $, so amend, Abby doesn’t pay additional $ be she changed her mind © Common law imitates article 2 UCC [219-22 of 2d, below, as a result of what UCC said] 0 COMMON LAW (cuz it’s a service — 2d restatements): O §219 (USAGE: habitual or customary practice), 8220 (USAGE RELEVANT TO INTERPRETATION: agreement to be interp in accordance w/ a relevant usage if each(=both) party knew or had reason to know of the usage and neither party knew or had reason to know that the meaning attached by the other was inconsistent w/ usage), §221 (USAGE SUPPLEMENTING AN AGREEMENT: supp/qual by a reasonable usage w/ respect to agreements of the 42 ACQUIESCE/waive above clause through CO: - 3 cases [Harrison, Stilk and Lugenfielder] all services contracts, where it shouldn’t be that can threaten to breach and get away w/ it, however in goods contracts, must meet the test of good faith [§1-304: obligation of good faith in every contract or duty within UCC] = must Pre-existing duty > UCC 2-209 rejects but mods must be in good faith O Wainwright wlda still won in Lugenfielder even if in goods mkt because LUGENFIELD WASN’T ACTING IN GOOD FAITH. O Under common law, employer wins bc no mutual consideration O Ifu prevent someone from performing in a unilateral contract where performance = acceptance, bad faith b cur making it impossible for other party to fulfill contract Mutuality at common law [can never amend without expecting a trade: if increasing wages for same work, not enforceable mod] > O Where Price obligated to buy all the sand McMichael “could sell” > QUANTITY is based on concrete requirements that cld be measured, EVEN IF promisor can control it to an extent, as long as some limitation of future liberty / there is a duty and obligation, he cant get out w/o consequences [GOOD FAITH FOR QUANTITY IN REQUIREMENTS, OUTPUT, EXCLUSIVITY CONTRACTS // GOOD FAITH IF PRICE FORMULA / MEASURABLE ASPECT WHEN PRICE NOT SPECIFIED] Vs. if commitment was left to the will/desire of promisor > no consid = Bad faith = inhibiting other party’s ability to perform // MAKING AN UNDERTAKING [a commitment] to certainly or unambiguously intend to bargain with person or compensate someone C) COMMON LAW EXCEPTIONS [882-86] TO CONSIDERATION OR MAKES PROMISE AFTER RECEIVING BENEFIT EXCEPTIONS to mutuality at common law: mutuality requires, always, that both parties are bound or neither are bound > exclusive dealing/requirements 45 1. Unilateral contracts [where immediate performance is exchanged for promise, only promisor has outstanding obligation at time of contract formation] = PERFORMANCE IS CONSIDERATION preparations to perform may constitute reliance, thus making the offeror’s promise binding under Restatement § 87(2). Here, an offer may become binding as an option contract where there has been justified reliance under the principle of promissory estoppel. [Option = while unilateral, needs consideration BUT CAN BE NOMINAL vs. FIRM OFFERS = NEEDS NO CONSIDERATION ] UNILATERAL CONTRACTS NOT SUBJECT TO MUTUALITY/ ILLUSORY PROMISE RULE: O LE. smallest obligation is enough to convert an illusory into an enforceable promise WHEN unilateral [act for performance: performer not bound, but promisor bound if act completed and cannot revoke if act begins]: 0 if buyer promises to buy [NOT A MIN OR MAX JUST] 200 tons of steal per month from seller at 500$/ton, subject to cancellation at any time = buyers promise is illusory. BUT, if buyer also agreed to purchase a minimum of 2 tons total or to cancel w/ at least 1 days notice, buyer wlda limited future options and promise = consid 2. § 86 promise for benefit received = MATERIAL BENEFIT RULE combined with PAST CONSIDERATION/MORAL OBLIGATION RULE WHERE “OBLGIATION” IS VOIDABLE/ not enforceable BUT STILL DOES IT [and none of 3 exceptions of past consideration being enforceable apply: (4) promise to perform a voidable obligation (2) promise to pay a debt discharged by banktruptcy (3) promise to pay a debt barred by SOL] (1) A promise is made In recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice (2) A promise is not binding under subsection (a) if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched or (b) to the extent that its value is disproportionate to the benefit. Referred to as the “material benefit” rule, §86 expands the application of the moral obligation exception to cover a wider range of promises in recognition of a prior benefit conferred by promise upon promisor previously that GAVE RISE TO A MORAL OBLIGATION, even if not LEGAL, tht courts will enforce. §86 replaces the terms “past consideration” and “moral obligation” with “promise for a benefit received”: BENEFIT RECEIVED IMPLIES SOME MORAL OBLIGATION TO REPAY BENEFACTOR/PROMISEE. Doesn’t matter if promisee incurred expenses. Only matters tht O where a debtor promises to pay for a debt although there is no longer a legal obligation to do so because the debt has been discharged through bankruptcy or barred by the statute of limitations. BUT A MORAL OBLIGATION TO DO SO ONCE PROMISED WLD= ALL LIMITED TO TERMS OF NEW PROMI$E 0 CHARITABLE DONATIONS [or ongoing pledges to nonprofits/universities], and marriage settlements are presumed to have been relied on and BINDING ‘W/O CONSIDERATION. 46 0 if bankruptcy proceeding already started [offer to pay AFTER no more legal obligation —- MUST PAY] O many others, may not be economic: like someone saving ur life!!!!!!!! Ur promise to compensate em will be enforced because promise to pay based on a material benefit to promisor THAT CONSTITUTED VALID CONSIDERATION Cts might restructure a promisee’s expenses to reflect/be treated as a material benefit to promisor bec PROMISEE HAD SOME RELIANCE INTEREST(shld be compensated for costs) by treating expense of promisee = promisors benefit - Courts sympathize, invent legal fictions whereas they imply tht the SUBSEQUENT promise is contemporary w/ the previous benefit [in effect, willing to imply a promise tht ___ (gratitutious promise was implied in fact as part of/a reward for __his beneficial acts/reliant acts_) " CAN SAY SHLD BE COMPENSATED VIA PE [USING PE AS A SHIELD, NOT A SWORD] TO RECOVER THEIR RELIANCE INTEREST IN MONEY INVESTED IN BUILDING some specialized goods O benefit cant have been conferred as a gift tho bc no moral obligation to repay the value of a gift a New York statute provides that past consideration is valid to support a written promise if the consideration is expressed in writing, is proved to have been given or performed, and would have been valid consideration if it were present rather than past consideration. [N.Y. Gen. Oblig. Law § 5-1105] And a California statute provides that “a moral obligation originating in some benefit conferred upon the promisor ... is ... a good consideration for a promise, to an extent corresponding with the extent of the obligation, but no further or otherwise.” [Cal. Civ. Code § 1606] 3. promise to pay all or part of a debt owed by debtor where collection is barred only by a statute [SOL] but otherwise an enforceable indebtness- §82(1) The following facts operate as such a promise unless other facts indicate a different intention: - Avvoluntary acknowledgment to the obligee, admitting the present existence of the antecedent indebtedness; or - Avvoluntary transfer of money, a negotiable instrument, or other thing by the obligor to the obligee, made as interest on or part payment of or collateral security for the antecedent indebtedness; or - Astatement to the obligee that the statute of limitations will not be pleaded as a defense. 4. promise to pay a debt incurred as a minor if made upon reaching age of majority (§85) 47 - [C]: to the extent that justice requires enforcement in view of material change of position in reliance on promise 3. Doesn’t apply to creditor agreeing to accept partial payment on LIQUIDATED, PRESENT DEBT Other exceptions to consideration:[in addition to moral obligation/past consid/material benefit rule (1) and reliance (2)]: 1. Waiver of some nonmaterial condition to the bargain (3 - §84) - a party excuses BY CONDUCT (or promises to excuse) the nonoccurrence or delay in fulfillment of a condition to that party’s duty to perform under the contract - waiver is enforceable if it is given in exchange for separate consideration. It is also enforceable (subject to the possibility of retraction) without separate consideration if (i) the waived condition was not a material part of the agreed-upon exchange, and (ii) uncertainty of the occurrence of the condition was not an element of the risk assumed by the party who gave the waiver. - Even though a waiver is otherwise enforceable, it can be retracted if each of four conditions is met: (i) The waiver was not given for separate consideration; (ii) The other party has not changed position in reliance on the waiver; (iii) The waiver relates to a condition to be fulfilled by the other party to the contract, rather than by a third party; and (iv) The retraction occurs before the time that the waived condition was supposed to occur and the party who gave the waiver either (a) gives notice of its intention to retract while there is still a reasonable time for fulfilling the condition, or (b) provides a reasonable extension of the time in which to perform. 2. Form: promise given in some special legal form, such as under seal ina state tht recognizes binding force of seal [4] 3. Contract that is voidable by one part on such grounds as minority, incapacity, bargaining impropriety or unconscionability or mistake or SOF bars: - ENFORCEABLE AGAINST THE PARTY WHO IS NOT A MINORITY/INCAPACITATED/ETC., THO because even tho voidable by minority party, still enforceable if minority made a real promise [and doesn’t make it an illusory promise just cuz voidable by tht party] - only not enforceable against the minor/incapacitator, etc. D) PROMISSORY ESTOPPEL: support promise made w/o consideration WHEN THE PROMISEE INCURRED SOME LOSS IN RELYING JUSTIFIABLY ON THE PROMISE [promise + detrimental reliance on that promise = “gag in mouth”: °90: promisor estopped from asserting lack of consideration]: 1. Promise made 2. Promisor must reasonably expect her promise will induce action or forbearance 3. Action or forbearance must actually be induced [detrimental reliance] = CASUAL LINK BITWN PROMISE + RELIANT ACTS 4. Therefore justice requires enforcement = Generally only applies/bars relief when the party asserting the rights deliberately engaged in the misleading behavior with knowledge or reason to know it could be misleading and could induce reliance by the other 50 51 *GENERALLY ONLY AWARDED DAMAGES ON PROMISSORY ESTOPPEL THEORY FOR RELIANCE EXPENSES INCURRED AFTER CONTRACT IS MADE [EXPENSES BEFORE MADE IF BREACHING PARTY KNEW/REASON TO KNOW OTHER PARTY WLD INCUR LOSSES IF BREACH]* Detrimental reliance on the promise as a basis of enforcing it [§90 second restatements]: promise made w/ reasonable expectation promisee wld rely and promise DID in fact induce promisee’s action or forbearance: some harm or loss exists (proof of reliance not required for charitable pledges/marriage settlements), enforcement is necessary to avoid injustice and remedy is limited as justice requires] OR §90(2): IF CHARTIABLE PLEDGE > NO ACTION / FORBEARANCE INDUCED BY RELIANCE NEEDED IF SATISFIES REST OF PE REQUIREMENTS When is it used: (gratuitous promises OR promises that aren’t contractual b/c of lack of consideration or other deficiency): A) Most commonly, gifts and charitable donations [validate gratuitous promises] COMMERCIAL PURPOSES: B) despite failure to comply with legal formalities such as SOF, when fairness demands that the informal promise not allow promisor to escape liability. Read in conjunction w/ legal formality: Reliance on a promise that falls short of contract bc of some defect/omission in agreement formation [vagueness, escape clause, yet enough of a commitment to justify reliance] = does fairness demand accountability despite absence of binding contract???? C) if the precontractual statement is reasonably intended as a binding commitment, justifying reliance and attracting liability can occur [generally negotiation statements not basis tho] - maxim id certum est quod certum redid potest: that is certain which can be made certain. What may be uncertain or vague can be implied definite through course or pattern of conduct - what was the context? Friends? Social setting? OR NA D) East Providence: will make lender the insurer when make a promise(in a lender, borrower relationship) to pay premium but don’t = will make lender pay insurance .. “adeq consideration” be borrower wont pay if u tell them ur gonna pay E) SOMETIMES for irrevocability, usually in subcontractor bids [as an implied promise not to revoke if no bid shopping or unreasonable be stark difference in subcontractors bid and all else]: To create an enforceable option, even though no consideration was given for the promise of irrevocability [§87(2): “offer is binding as an option to the extent necessary to avoid injustice if the offeror should reasonably expect to induce action/forbearance of a substantial character on the part of the offeree before acceptance and which does induce such_ action/forbearance” A reliance theory is also applied in connection with bids on construction contracts to make the subcontractor’s bid an option contract to the extent necessary to avoid injustice, Unless the parties have agreed otherwise, where a subcontractor makes a bid to the general contractor, the subcontractor’s offer is irrevocable until the general contractor has had a reasonable opportunity to notify the subcontractor of the award and accept the subcontractor’s offer. Finally, unless the offer provides otherwise, acceptance of an option contract is not effective until it is received by the offer Case on Promissory Estoppel: East Providence CU v Geremia: FACTS = D’s took out loan from P in exchange for a promissory note, secured by mortgage on D’s ranch wagon which required D’s pay insurance. If didn’t maintain insurance, P cld pay premium and apply tht amt to D’s loan. Cld also calculate interest and add tht to loan as well if do this. D’s ab to be cancelled, P said wld pay premium and apply amt to their loan. D’s said ok! 2 months later, car accident. P’s never paid ins. Value totaled vehicle more than amt D’s owed on loan. P brings suit to recover outstanding balance on loan. COURT SAYS = na, it was an enforceable promise to pay ins premium w/ valid consideration and thus estopped from trying to take back promise. EVEN IF P never intended to compute interest on amts paid, and promise was a truly gratitutious undertaking, court believed sufficient detrimental reliance to satisfy promissory estoppel [promised to pay, enforceable thru reliance by D and forbearance by D of paying selves.] O Lawyer said: gratitutous promise [no interest actually calc] O Lawyer shida said: DON’T MAKE THAT PROMISE TO PAY OVERDUE PREMIUM, BECAUSE DETRIMENT TO D IF DON’T AND INDUCES FORBEARANCE. Since “apply this amt to ur loan” = consid, bc D’s paying more for additional promise by P. //shlda did a little DD before lawsuit, i.e. tell insurance company [in writing is best]: ok I agree to ur accepting paying my insurance [we geremia, on reliance of ur phone call / letter u sent on X date, that u are making payments on our behalf] a Doesn’t make it void/voidable. IF ALREADY PERFORMED, EVIDENTIARY REQUIREMENT ALREADY SATISFIED AND CANT CLAIM SOF - LIMITED to the amount NECESSARY to prevent injustice !!!!!1!I!! STEP ONE: is the contract covered by the statute? — 5 general ones, but each state has own statute: 8110 RESTATEMENTS 1. WHEN U AGREE TO ANSWER FOR DEBTS OF ANOTHER: 0 Executor/Administrator Contracts: = Contracts by exec/admin to answer for debts of decedent (incurred by decedent, not by new debts of estate) and payable out of exec/admins own personal assets must be in writing 0 Suretyship Contracts: = Surety (guaranty)= some who agrees to be liable for paying someone else’s debt (default or miscarriage) by co-signing. If promisor, not surety, is primarily liable, i.e. a joint debtor, statute does not apply = If surety gains an economic benefit [and MAIN purpose is to serve own financial interest, not accommodate principal debtor], oral is enforceable/SOF does not apply - the surety provision of the Statute of Frauds requires only that a promise to answer for the debt or default of another be in writing. Such a promise must be collateral to another person’s promise to pay rather than a primary promise (a promise to pay directly for the benefits given to another). Here, the friend did not promise the seller that if he sold the good to the buyer and the buyer did not 52 O UCC §2.201(2) exception to the signature rule when both parties are merchants: if all of the following are met, then writing can be enforced against the party who did not sign it: 1. If both parties are merchants 2. Within a reasonable time of the oral contract, one sends a written confirmation to the other, signed by sender and otherwise satisfies statute against sender 3. Recipient has reason to know its contents 4. Recipient does not give written notice of objection to it within 10 days of receipt STEP THREE: if covered and DOES NOT SATISFY STATUTE DOES THE ORAL CONTRACT FALL WITHIN ANY EXCEPTIONS ???? 55 1. PART PERFORMANCE EXCEPTION: parties’ performance must be unequivocally referable to the oral agreement and must be partial payment, possession or valuable improvements [2 of these 3]— aka conduct must be very clear to refer to and demonstrate existence of specific contract = REASONABLE RELIANCE ON PROMISE, LK 3 0 FULL PERFORMANCE OF A CONTRACT tht cant be performed within 1 year will usually take it out of SOF 0 Typical for sales of land: IF PERFORMANCE UNEQUIVOCALLY indicates sale of land [is performance consistent w/ contract for sale land?] and 2 of following: (1) payment in whole or part, (2) possession (3) valuable improvements = but if oral lease w/ option to purchase land, for ex., must have conduct that is designed to apply to the option itself, alone from lease which could be difficult bc payments/doing everything else in property is consistent with the lease as well as the option, not just the option Sale goods: §2.201(3)(a) — covers cases in which seller has begun manuf goods that are specially made for buyer and not otherwise easily saleable & (B) = enforced party [claiming SOF as defense] admits contract §2.201(3)(c) — allows enforcement of the contract only to the extent payment for the goods has been made and accepted, or goods have been delivered and accepted O > if part performance, only part of which delivered or manuf is enforceable, not whole if contract JUDICIAL ADMISSION EXCEPTION: party who admits to contract in testimony or pleadings should not be allowed to raise the statute as a defense Common law rejects // UCC accepts under narrow exception: §2.201(3)(b) permits enforcement against a party, despite noncompliance w/ statute, if party admits “in pleading testimony or otherwise in court” that contract was made, and is enforceable ONLY TO EXTENT OF QUANTITY OF GOODS ADMITTED PROTECTION OF RELIANCE: ESTOPPEL AND PROMISSORY ESTOPPEL = PART PERFORMANCE EXCEPTION [vs. full performance = don’t need PER, shows contract !) whether promisee’s conduct in reliance or other evidence corroborates the existence of a contract is important when deciding whether to grant promissory estoppel when part performance, alone, does not create exception: also important in determining whether injustice can only be avoided by enforcing promise: availability of other remedies, definite and substantial nature of action/forbearance, (INDEPENDENT DETRIMENT/reliance FROM LACK OF ENFORCEMENT), the extent to which corroborating evidence shows the making and terms of promise , the reasonableness of action/forbearance and extent to which action/forbearance was foreseeable O §129 easier: action in reliance for transfer of land may be specifically enforced even if no SOF compliance if party seeking enforcemement reasonably relied and continuing assent of other party has just changed position Relied to detriment or fraudulently induced? - If conduct or promise foreseeably induces P to change position in reliance on an oral agreement, may use PROMISSORY estoppel to remove contract from SOF O Promissory estoppel is more useful when there is no factual representation inducing reliance, but one of the parties justifiably relies on the oral contract as a promise, thereby suffering more detriment O 8139 recognizes this, similar to §90: a promise reasonably expected to induce reliance, the inducement of justifiable reliance on the promise by the other party, and the need to enforce promise to prevent injustice [stricter than 90 bc must be a substantial reliance] O Equitable estoppel can be used if fraudulent misrepresentation: requires tht at the time statement made, speaker intended to induce other party to deal and knew assertion was not true [if changes mind, not fraudulent when made] LAST STEP: NOT COMPLIED WITH AND NO EXCEPTION: 0 USUALLY NOT VOID, BUT UNENFORCEABLE [meaning it’s a valid contract, but cannot be sued upon in court] 0 Ifunenforceable for noncompliance, party seeking to rely on SOF as a defense cannot raise it by a general denial, it must be specifically pleaded as an affirm defense or waived [CAN ONLY PLEAD AS A DEFENSE IF PARTY TO BE CHARGED SIGNED IT] Case 1: Forestal Guarani Case 2 ON COMMON LAW SOF: Waddle v Elrod: FACT S= Regent sues Waddle and Elrod. Waddle filed cross claim against Elrod stating Elrod acquired / interest thru undue influence by driving Waddle to her attorneys office and persuading her to sign it over. BOTH PARTIES AGREED TO SETTLE IF ELROD CONVEYED ¥2 BACK TO WADDLE. ATTORNEY [waddle’s — sent by waddles lawyer, aka waddlle] SENT EMAIL and cross-claim included legal description of property [precidely identifying deed and allegation in a pleading signed by Waddle] Elrod sent email back confirming [signed by elrods lawyer, aka elrod]. 3 WEEKS LATER, ELROD ADVISED ATTORNEY NO LONGER WISHED TO SETTLE. ... COURT SAYS = SOF applies to this but the emails + legal description prop in cross claim satisfy SOF. Combo of docs sent satisfy. O Lawyer did: since SOF applies, ok to send approval without truly thinking if wanted to settle or not SINCE NO ONE DOC HAD ALL SIGNATURES, AND SINCE NOT SPECIFIC ENOUGH [NO PROPERTY ADDRESS OR DETAILS], clda denied property in email and wlda been enough. Her answer, however, admitted property in cross claim. 0 Elrod shida done: advised client tht if she agreed to settle now, cnt revoke 3 weeks later be emails back and forth satisfy UETA writing requirements. Shlda denied property 56 claim [DENIED ACCURACY OF LEGAL DESCRIPTION] — but since didn’t, admitted truthfulness of allegation of description below. OR , shda done something outside SOF to say unenforceable because of some undue influence, spec chars or COP/COD/USAGE Case 3 ON UCC AND MERCHANTS EXCEPTION TO STATUTE OF FRAUDS/NO EXCUSE FOR NOT OBJECTING IF REAOSN TO KNOW SENT PO: Thompson Printing v Goodrich: FACTS = Thomson goes to Goodrich dpt to look at printing machinery. Discussed sales terms, including price w/ goodrichs manager. 4 days later, Thompson sends Goorich PO for equipment + 1k in part payment. Goodrich manager says never received PO until weeks later when Thompson called, and by then, machines already sold. Thomposn sued Goodrich when refused to perform. TC says oral not enuf for SOF. APPELLATE COURT SAYS: MERCHANTS EXCEPTION APPLIES WHEN (1) 2 merchants reach an agreement (2) one merchant sends other a writing mentioning the deal and (3) recipient fails to object within 10 days. SO SATISFIED. O Lawyer 4 goodrich did: NO DUE DILIGENCE IN OWN MAILROOM. THIS IS AN AOR. O Goodrich shlda done: MORE DUE DILIGENCE WITH THEIR MAILING DPT. PO SHLDA ALTERTED MAILROOM THT DOCUMENTS REFERRED TO PRINTING DEPARTMENT, anyways P’s phone # was on it. Cnt plead non-receipt when mishandled it/ no due diligence. Once sent, Goodrich must have then objected in a reasonable time [merchant excpetion — 10 days: saying didn’t receive] ....or shlda showed no reason to know its contents [show a spurious document, no reason to know wld reveive thompson’s doc bc orig discussion was so informal or something]. OR show no oral contract because this takes away SOF defense when receiving writing confirm and doesn’t object ONLY IF SENDER CAN PERSUADE TRIER OF FACT THAT CONTRACT WAS MADE ORALLY WHICH DOC SENT APPLIED TO ONCE WE HAVE A CONTRACT [OFFER + ACCEPTANCE + ENFORCEABLE] > ASK IF THERE IS A DUTY TO PERFORM? - Have the reasonable expectations induced by the contract been fulfilled? If not, ask if some event occurring after formation excuses performance? 1) condition vs. promise: if there is a condition: - has the condition been met? - if not, has it been excused so that there is a duty to perform despite the fact that the condition did not occur? 2) present duty to perform: a. conditions precedent: have all CPS been performed or excused? b. changed circumstances: did the circs change so that performance was impossible or highly impractical? c. frustration: did the purpose or value of the contract become totally frustrated by a supervening event? 3) discharge of contract: has the contract been discharged by full performance or some other ground such as recission, release, accord and satisfaction or payment in full check? Damages: expectation [normal for breach: whats required to put injured party back to position wlda been had the promise been performed? Depends on nature of contract & 57 3. Material to the Deal 4. Didn’t assume risk 5. Must have one of the following: a. Enforcement would be unconscionable, or b. Other party had reason to know mistake, or c. Other party caused the mistake a-Default remedy: Recission/RESCIND CONTRACT > more likely, used as a defense to void contract: Likely to Succeed if: 1. “Snapping Up”: one party takes advantage of obvious error 2. Serious Clerical Error: if error such that enforcement would be unconscionable IF YOU DON’T WANT RECISSION/VOID CONTRACT, WANT SOMETHING INSTEAD THAT WAS IN THE CONTRACT TO BE CHANGED [WANT MONEY/PERFORMANCE]> PLEAD REFORMATION [CLEAR AND CONVINCING EVIDENCE THAT WRITTEN CONTRACT IS NOT WHAT AGREED TO] B) Mutual: both sides are mistaken: §152: [NOT A §20 MISUNDERSTANDING that wld fail for no manifestation of assent AS TO MEANING OF TERM, I.E. CHICKEN OR WHETHER IT WAS THE AAA SHIP OR AAA PLANE = bc that’s in accord w/ the facts !!!— best answer if : diff meanings/no knowledge of either [or both have knowledge of either - §20] is NO CONTRACT WAS FORMED BC NO MUTUAL ASSENT, NOT VIODABLE.] Restatement (1) §151- Mistake Defined A mistake is a belief that is not in accord with the facts. (A) MUTUAL MISTAKE A mutual mistake oceurs when both parties are unaware of critical facts existing at the time of the contract’s inception. The assumption of fact relied on by both parties must be the same; otherwise there would be two unilateral mistakes. See Ewing. §152 - When Mistake of Both Parties Makes a Contract Voidable (1) Where a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of mistake under the rule stated in §154 (assumption of risk). (2) In determining whether the mistake has a material effect on the agreed exchange of performances, account is taken of any relic! by way of reformation, restitution, or otherwise. - mutual mistake = If both parties are unaware of critical facts existing at contracts inception [basic assumption on which contract made has a material effect on the agreed exchange of performances], contract is voidable by the adversely affected rule unless §154 makes him bear 60 e Mistake is a true misbelief about a material fact. e Ifa party knows of its own ignorance, they assume the risk, unless protected by a warranty or representation. e Protect mistakes through Warranties, Reps, and Due Diligence Elements to Avoid based on Mutual Mistake 1. Basic Assumption 2. Material Effect 3. Does Not Bear Risk of Mistake e Default remedy is recission. e Recission: an equitable decree by which the contract is simply cancelled, at which point the court typically orders restitution of the considerations already exchanged. - to get recission > false statement of fact made by one to induce other to deal + reasonable reliance on that false statement - Q: was it a material point that affects the substance of the whole consideration??? O YES MISTAKE [no contract]: substance of what is delivered or received is diff from bargained for -SUBSTANCE OF DEAL ~> Sherwood v Walker // DIFFERENT USES [barren vs breeding] = different identities O NO MISTAKE [yes contract]: difference in some quality or accident — QUALITY OF ITEM [a racehorse is a racehorse, regardless of quality. Its USE IS THE SAME SO ITS IDENTITY IS THE SAME] - WORKS: “BOTH PARTIES DIDN’T KNOW THAT THEY DIDN’T KNOW” given smoking gun evidence or If mutual mistake affects the substance of the whole consideration = can rescind: see case 1 [Sherwood] O [Williams / Glash: 62-63] RELEASES = 152 COMMENT F : > usually voidable if injured party didn’t bear risk [didn’t know of injuries when signed] vs. not voidable on mistake if injuried party beared risk, i.e. knew of injury just didn’t O Comment f =”flies in the fact of what would otherwise be regarded as the basic assumption” O Not language of release alone = consider conduct of parties and info avail at time of signing .... Burden of proof on party seeking to avoid release to establish mutual mistake by preponderance of evidence O Knowledge of parties at time of signing w/ respect to injury, amt consideration paid, extent of negotiations and dicussions ab personal injuries, hastle or lack thereof in obtaining release - DOESN’T WORK: “BOTH PARTIES KNEW THAT THEY DIDN’T KNOW” no smoking gun evidence to SOM/mistake or ACONTRACTING PARTY CANT BACK OUT OF AGREEMENT JUST BC SHE LATER LEARNS MADE A BAD DEAL [ERROR IN JUDGMENT IS NOT A MISTAKE]: [Woods = shlda done due diligence... NEITHER PARTY HAD A BELIEF. SELLER DIDN’T REP OR WARRANT STONE WAS A TOPAZ] C) REMEDY = AVOIDANCE BY ADVERSELY AFFECTED PARTY, IF DIDN’T BEAR RISK OF MISTAKE UNDER 8154 61 ***inadequacy of price does not warrant recission: must be mistake. NOT JUST THE VALUE IS MORE THAN THE PRICE PAID**** Only UCC provision on mistake: 2-403: says can deliver goods even if have voidable title to them as long as its transferred to a good faith purchaser for value and is transferred to the extent of the interest purchased/acquired Case 1 MUTUAL MISTAKE FOUND: Sherwood v Walker: P calls to buy cow from D. terms over phone. Cow not barren as agreed upon. P secured cow via writ of replevin. COURT SAYS = mutual mistake because truly relates to the substance of the contract, rather than merely the wuality of the contracted-for-item. O What Sherwood did: bought cow at beef price, hoping it may be worth more than he paid. Didn’t tell any1. 0 SHLDA DONE [Sherwood]: “I knew this was a fertile cow” but because he never said tht to any1, viewed as believing it was only a beef cow, OR NOT ASKED FOR THE SHRINKAGE REQUIREMENT OR ASKED FOR A HIGHER PRICE TO PAY > THAT WAY, NO EVIDENCE HE HAd A MISTAKE, THUS MAKING WALKERS STATEMENT “probably barren” A UNILATERAL MISTAKE. // or showed he did his due diligence but seller didn’t // “we rep and warrant that we have limited knowledge as to the fertility of the cow” [IF THEY DON’T WANT A BARREN COW] .... IF THEY WANT SELLER TO REP: “seller reps and warrants O NEXT TIME, WALKER CLDA SAID: “seller reps and warrants that this cow is barren” > BC if not, then recission Evidence of mistake: walker = “probably barren” // Sherwood = “price agreed and shrinkage requirement” = negate dis somehow [SMOKING GUN EVIDENCE OF MISTAKE] Evidence no AOR: seller — evidence is willingness / beef price. // buyer = evidence wanted her not to be fed b4 taking delivery. LEFT WITH MUTUAL MISTAKE bc not unilateral[ smoking gun above, no breach warranty [no one promised other tht could breed] and no misrep [neither made statement about whether cow cld produce on which other party relied. Seller made statement, but its seller who’s selling... cant detrimentally rely on own representation.] Case 2 SELLER ASSUMES RISK IN MISTAKE CASE, NOT IDENTITY BUT QUALITY : Wood v Boynton: FACTS = P found stone, didn’t know what it was, sold it to D who owned a jewlery shop. D wasn’t an expert, said “idk it could be a topaz” so agreed to buy for $1. Court = Valid sale. ONLY WAY NOT [to resind sale and revist title in vendor: 1) vendee guilty of fraud/intentional misrep [nope, both entirely ignorant. She said idk. He said maybe a topaz. “I don’t believe its imposs it’s a topaz/ it might be a topaz” — this is not fraud !!! needs to intentionally lie - “def not topaz” or 2) mistake by vendor as to identity of thing sold — [SHERWOOD]. Neither apply here so Wood AOR and valid sale. O Wood shida: although prob cldnt do more due diligence [clda gotten appraised tho], BUT def clda gotten a warranty as a seller [AS SOON AS BOYNTON SAYS JEWELER, WE STOP AND SAY: U KNOW MORE THAN US AS A JEWLER. 62 2. Representations = common law: a statement of fact turns out to be false: §162 [fraudulent or material], §164 voidable IF YOU WANT RECISSION, PLEAD (1) statement fact (2) intended to induce reliance (3) P relied (4) justifiably (5) detrimentally (6) statement was material to deal (7) statement was not true when made (8) D made statement w/ NO SCIENTER — INNOCENT MISREP // NEGLIGENTLY — NEGLIGENT MISREP // WITH INTENT TO DEFRAUD — FRAUDULENT MISREP - Statement of fact is used to induce other party to deal. NOT A PROMISE. [if statement, prob intended = did it increase the odds that some1 wld deal???? - And can only represent PAST AND PRESENT FACTS , not future. Cant state the future — this and w/ intent to induce reliance: not necessarily needs to be true, see midterm question 2 [vs as a promise made part of sellers consideration for price of house = warranty] are diffs btwn reps & warranties - and did in fact induce reliance, and Plaintiff relied justifiably and to his/her detriment and statement was material [OBJECTIVELY: WLD A RP CONSIDERED THIS IMPORTANT IN DECIDING WHETHER TO PURCHASE PROPERTY?] & false when made - can misrepresent ur own thoughts [present facts] = problem 118 0. sale of land deal and innocent misrep > burden on seller [only not justifiable to rely if buyer’s DD was wholly irrational, propsterous or in bad faith] 0 if fraudulent misrep / amt of lying outweighs the buyers’ naive > then AOR ok = NO UCC EQUIVALENT. THUS, COMMON LAW GOVERNS FOR ALL SALES, EVEN SALES OF GOODS !!! MW A. FRAUD: deliberate lie [affirmative misstatement or assertion w/o confidence in truth/ concealing doubt in doubted statement: §162], hiding truth [concealment: §160: ONLY IN SPECIAL CIRCS] or keeping silent [nondisclosure if circs of fair dealing impose duty to disclose: §161 or if asked a question that calls for disclosure and answer in a manner deliberately calculated to mislead] - innocent / neg = must be a material misrep [likely to induce a RP to manifest his assent] - fraud = jurisd are mixed - 161: DUTY TO SPEAK UP If: A) earlier assertion not a misrep bc it was true and later learns not true/no longer true B) earlier assertion misrep but not fraudulent: believed true, later learned not or didn’t intend it to be relied on, later learns was or C) earlier assertion not a material misrep bc no reason to know of other party’s special chars tht made reliance later, and later learns of special chars “ - non-disclosure as a misrep if A) knows disclosure is necessary to prevent previous assertion , B) know disclosure wld correct mistake of basic assumption [Sherwood category] of other party and non-dislosure amounts to bad faith in accordance w/ reasonable stds dealing [“NOT HAUNTED” = aka other party makes a mistake of fact in Sherwood category and I know about it and say nothing], C) misapprehension on innocent party as to what doc is/ contents writing is, D) fam/friends/ trust or a fiduciary relationship non-business like, “E” from stambovsky): Where A fact (1) 65 Created by one party (2) that Materially impairs the contract’s value to the other party (3) the Other party would not have discovered the fact through due diligence (4) the other party would not have conducted due diligence or due diligence would not have uncovered the fact §168 = an opinion is a statement of fact because it states that a person has a particular state of mind concerning the matter to which his opinion relates. [can be justified that facts are avail to justify tht opinion or at least that there are no facts that are incompatible w/ it = statement of fact/opinion becomes an assertion as to those facts = judgments as to quality, value or authenticity // misrepresented a present fact — his state of mind when he made the promise - §169 says justified in relying on opinion [ABOUT A BASIC ASSUMPTION OF THE DEAL] tht doesn’t go as far as 168 only if stands in relation or trust to person, reasonably believes other person has superior skill or some special reason partic suspectible to misrep - “Zenov expressed her opinion about sea travel. But because of her superior knowledge, Aalberg relied on her expertise and treated her opinion as fact.Therefore, Zenov misrepresented the facts” “EXCPETIONS” to allow recission if not otherwise justifiable reliance — opinions where 1 party knows more, other party asserts undue influence, public policy ... §169 = reliance on opinion is not justified unless/ is justified only if (a) trusting relationship w/ person who gives opinion, (b) reas believes other person has special skill/judgment or objectivity with respect to the subject matter or (c) is for some other special reason partic susceptible to misrep 8177 — undue influence makes voidable if unfair persuasion under domination of party exercising persuasion or by virtue of relationship is justified in assuming person wnt act inconsistent w/ his welfare / (2) if assent induced by undue influence of other party, contract is voidable by victim §178 = UNENFORCEABLE TERMS ON GROUNDS OF PUBLIC POLICY MUST BE JUSTIFIED IN RELYING ON EITHER FRAUDULENT / MATERIAL MISREP > IF SO, CAN ALWAYS GET AVOIDANCE - §164 = (1) if a manifestation of assent is induced either by fraudulent or material misrep by other party upon which the recipient is justified in relying the contract is voidable by the recipient - §164(2) = if a party’s manifestation of assent is induced by either a fraud or a material misrep by one who is not a party to the transaction upon which the recipient is justified in relying, contract is voidable unless other party in good faith and w/o reason to know of misrep either gives value or relies materially on transaction B. INNOCENT/NEG misrep [incorrect but blameless or honest but careless 0 VICTIMS DUTY / RESPONSIBILITY TO CHECK IT / level of DD required VARIES ON WHETHER IT WAS FRAUDULENT OR INNOCENT 0 IF SALE OF LAND DEALS: law places min burden on DD requirement and defect discovery on seller, not buyer, past a min threshold point of DD [not 66 required to check up on every rep stated: be want to make repping party take resp for risk of untruthfulness = purchaser of land may rely on material reps made by seller and isn’t obligated to ascertain whether true]. oO LIMITATION: buyer relying on innocent misrep IF BUYERS DD WAS WHOLLY IRRATIONAL, PROPOSTEROUS OR IN BAD FAITH [limit is at the extreme end of foolishness] — 314 comment b [recission is permitted for material misreps unless the buyer was so negligent that he failed to act in good faith and in accordance w/ reasonable stds of fair dealing. Ps conduct must be preposterous or irrational oO Another important aspect in it is 4 [relied justifiably] // ALSO, 6 [material] is important: WAS IT OBJECTIVELY IMPORTANT? -REMEDY = avoidance or IF fraudulent, damages ! [if elements 3, 4 and 5(reliance) shown] Case ON INNOCENT MISREPS/SALE OF LAND: cousineau v walker: facts: said 580ft frontage [measurable].. 80,000 cubic yds gravel is what appraiser told Walker. Walker first listed as 1 mil, then simply listed it as “good gravel base”. Cousineau, AN EXPERIENCED BUSINESSMAN, purchases it for gravel purposes. Turns out, land only has 415 ft of frontage and only 6,000 gravel. COURT: misrep: yes statement of fact [580 ft, 80,000 yds = MEASURABLE, not puffery], no not true when made [imposs for it to be 580 ft then 415 ft, so ya], yes material [value of deal — cnt use it now], yes detrimental reliance bc affected value of deal. P JUSTIFIABLY RELIED?? Well, ya but hardest Q. COUS shlda done more on a practical matter [didn’t do DD], wlda been cheaper [paid less in end], but DOING MORE THEORETICALLY POSS BUT IMPRACTICAL IN LAND DEALS: law places min burden on DD FOR SALE OF LAND DEALS./certain amt of DD is enuf and beyond that, buyers protection in misrep law. - Lawyers did: emphasized caveat emptor, Cous’ lack of DD and unjustifiable reliance as a businessman w/ experience. Said gravel also not material element as didn’t appear in purchase agreement ... - Lawyers for Walker shlda: instead of caveat emptor/no DD, “we rep and warrant that we are not positive about the amount of gravel or highway frontage” . after the fact, show P didn’t rely or not detrimental [wlda removed gravel/needed more gravel anyways even if knew frontage // didn’t rely on listings anyways bc listings contradicted each other] or reliance completely unjustifiable [D gave them pics of the land or an opportunity to check it out ] - PRIMARILY TRY TO REBUT MISREP CLAIMS, NOT BREACH OF WARRANTY CLAIMS, BC COUSINEAU WANTS RECISSION [DOESN’T WANT LAND W/ NO GRAVEL] AND DOESN’T WANT DAMAGES [SO DOESN’T SUE UNDER BOW] SO DON’T NEED TO DEFEND ON BOW Case on NONDISCLOSURE as MISREP: stramboovksy v ackley: FACTS: D advertised haunted nature of house everywhere. Also included in a walking tour of the home. Own name. P didn’t know this, D didn’t tell him. A, B, C, D 161 DON’T APPLY. NEVER SAID ANYTHING TO D, NEVER SAID WASN’T HAUNTED. MERGER CLAUSE: “AS IS” BUT: COURT fair reading of merger clause reveals it expressly disclaims only reps w/ respect to physical condition of house: reas interp is limited tot angible or phys matters. If language of contract as broadly construed as D urged, then didn’t deliver the premises “vacant”. Materially impairs: 1) small % pop believes in ghosts and will refuse to buy it and 2) makes it less creepy even if don’t believe in ghosts [fact = telling everyone in public that haunted, so 67 is not enough/ but they buyer may be able to sue for breach of implied warranty for fitness for a partic purpose if can satisfy all 2-315 elements O 2-312: implied TITLE : good title, free from other interests, wont’ require any legal trouble CISG: article 35 [deliver goods of quality/quantity/description in contract and packed like tht. Unless otherwise agreed, don’t conform unless they: 1) fit for ordinary purpose 2) Are fit for any partic purpose known to seller unless showns buyer didn’t rely/unreasonably rely 3) possess qualities of sample 4) contained and packaged in usual manner §2-316: excluding warranties: CAN ONLY DISCLAIM IF DOESN’T NEGATE WHAT U EXPRESSLY SAID ON THE BASIS OF THE BARGAIN/ IN THE DEAL. [aka cant disclaim express warranties] O (2) Merchantability: must mention merchantability and if in writing, wording must be conspicuous O (2) Fitness of purpose: must be conspicuous and can be done ONLY IN WRITING oO Allimplied [3a], nonwithstanding (2): “that there are no warranties which extend beyond the description on the face hereof” 0 If buyer examined goods or model as fully as desired or refused to examine, no implied warranty to defects if clda been discovered w/ examination 0 Or disclaimed by COD, COP or usage O under UCC § 2-316(2), “Language to exclude all implied warranties of fitness is sufficient if it states for example, ‘There are no warranties which extend beyond the description on the face hereof.” O To specifically exclude the warranty of merchantability, UCC § 2-316(2) provides, “to exclude or modify the implied warranty of merchantability or any part of it, the language must mention merchantability.” Here, there was no “as is” or “without all faults” language which would exclude al/ implied warranties under UCC § 2-316(3)(a) nor was there a disclaimer which mentioned “merchantability” under UCC § 2-316(2). As such, because Barry purchased the car from a merchant, and because the car did not work, it did not pass without objection in the trade, and Barry has a claim for breach of the merchantability warranty. UCC § 2-314. Oo CANNOT EXCLUDE EXPRESS WARRANTIES (1) O Limitations [not exclusions]: sometimes a seller can give a warranty but limit scope of liability if breach. Can, but limitations on its use : 2-316(4) and 2-719 [limited warranties upheld unless unconscionable // consumer transactions, unless warranty fails of essential purpose] CISG — article 35 Assumption of the risk of not knowing — if u don’t ask for/have any of the above and don’t engage in any due diligence §154: (a) rarely occurs —risk allocated to him by agreement of parties. (c) is very narrow — risk is allocated by court on ground tht its reasonable. (b) is what matters in litigation > was the adversely affected party aware, when the contract was made, that his knowledge was limited? And did he treat his lack of knowledge as sufficient [good enough to proceed]? : CONSCIOUS IGNORANCE 70 See Ewing: although plaintiff had limited knowledge and was aware at the time of this limited knowledge when bought prop at auction from D ab the boundary line, his conscious ignorance depended on the scope of risk assumed - P relied on Ds statement tht unaware of true property line boundary but believed it ran X - Their mutual mistake was beyond the scope of assumed risk [ But see §164: says if manifestation of assent is induced by either a fraudulent or material misrep when justified in relying, contract is voidable see §157 and §158 if all else Ask all facts client thinks it knows. Then sep ones know true from ones ASSUME to be true. Often unconscious assumptions. - If fact is important, ask how they know If other side has superior knowledge > GET A REP AND WARRANTY [and investigate, DD, get other side to make promises to facilitate DD] - If they know [other side]: 1) ask for substantiation 2) negotiate for opps to do DD 3) rep warrant in writing [negotiate for broadest ones. If they flat out refuse, tell client danger / warn them bce flat out refusal is a red flag. Usually, they’ll negotiate for narrower reps or warranties] Parol evidence : want to modify / change [add to or subtract from/contradict] agreement WITH EVIDENCE BEFORE [PRIOR] OR DURING [CONTEMPORANEOUS]. AFTER = MOD, NOT PER. Doesn’t exclude written contemp, only oral. Excludes oral and written prior agreements in general *general rule > PE is not allowed* because Courts want to encourage written agreements / discourage lying about oral agreements / encourage prudence in drafting agreements - Writing: “written” doesn’t mean it has to be on paper , just on the record [oral ok] - “agreement” and “contract” > parol evidence rule says agreement, not contract be point of PER is to determine whats in the deal [whats the entire contract] O Contract = agreement + any other agreements or terms that survive the PER EXTRINSIC EVIDENCE: evidence beyond the words of the written agreement [parol and interpretive] O Parol = evidence of contract provisions not expressed in a partic written agreement. Unless barred by PER, can be used to expand / supplement agreement: 2-202 or 216 O Inteprative = courts say extrinsic or parol evidence. Interpretive evidence explains whats in agreement [vs parol = expands it] 0 SAMEEE EVIDENCE CAN BE USED FOR EITHER PURPOSE [i.e. usage of trade can be used to add to agreement [parol] or explain it [interp]] ***circular > PER impacts interp by restricting evidence extrinsic to the written contract but interpretation, often in light of that very extrinsic evidence, must be used to decide whether and to what extent the writing shld have the effect of excluding the extrinsic evidence*** §214: WHY IS EVIDENCE BEING OFFERED? 71 - a, b=to show whether agreement is integrated (a) and if so, how integrated (b) [not offered to show tht PER shld be in [not to apply it] but offered to figure out whether PER will be applicable here????] O not whether witness can testify as to the PE [PER excludes certain testimony = this is a 209, 210 question] but whether witness can sit in chair in first place, to see if PE shld be allowed later - c=to show what the agreement means = scriveners error for example - dande = to show grounds for avoidance or what remedies would be / might be interpretive evidence but could be some other kind of extrinsic evidence [not parol] - Nothing in 214 is parol cuz nothing here adds > SO IF YES TO ANY OF THESE, NOT OFFERED FOR A PAROL PURPOSE / NO PER 209(2): judge decides whether its integrated. Juries wouldn’t be able to do it reliably // 210(1) = completely integrated, 210(2) = partially integrated // 211(3): consumer protection aspect. But 211 covers all standard-form contracts, not just consumer standard-form contracts - “integrated” = final. Final meeting of the minds on that provision. Decided wont negotiate that provision further O Completely integrated = parties have finished negotiating the whole thing. They have a (A) Restatement final (1) §213 - Effect of Integrated Agreement on Prior Agreements (Parol Evidence Rule) (1) A binding integrated agreement discharges prior agreements to the extent that it is inconsistent with them. (2) A binding completely inlegraled agreement discharges prior agreements lo 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 had not been integrated. For Scope under (2), see Restatement §213, Official Comment c. Determination of scope is “made in accordance with all relevant evidence and require|s] interpretation of both the integrated agreement and of the prior agreement.” agreement on everything - ALL TERMS THOUGHT AB WERE AGREED UPON = Merger clauses = not 100% conclusive proof that parties intended a complete integration. Strong evidence to contrary can overcome [SEE 211(3) restatement — lopez: where standardized term seems unreasonable be wld not have assented to the contract if knew tht clause was there/what it meant]. But unusual. ODDS ARE COURT WOULD FIND IT COMPLETELTY INTEGRATED IF MERGER CLAUSE = 211(3) notes = not just adhesion contracts. But when unknown terms go beyond the range of reasonable expectation. 72 75 4- corners [traditional/Thomson/logs] > objective test of assent and reasonable meaning of language. IF THE WRITING, INTERP AS A WHOLE IN ACCORDANCE W/ PLAIN MEANING OF LANGUAGE USED, appears to be final > deem integrated [judge decides parties’ intent based on 4 corners of written doc] = DOES WRITING ITSELF ESTABLISH AN INTENT TO INTEGRATE [SCOPE/LANGUAGE]? IF CLEAR, UBAMBIGUOUS AND COMPLETE, WLD NEED VERY PLAUSIBLE EXTRINISIC EVIDENCE TO OVERCOME tht writing itself establishes intent to integrate = 4corners of doc alone/on face of doc show fully integrated: long, formal and detailed [likely to be complete expression of agreement of parties’ rights/obligations] or sketchy and casual [in which might only cover fragment of larger deal] “contextual approach” > [Modern/Lopez] even if appears on face to be complete, inquiry into context can change this and shld be allowed .. 2162b: wld cires offer an explanation as to why a term was not included? Wld that term have been naturally agreed to separately? = If extrinsic evidence is both reconcilable w/ apparent intent [PE can be reconciled w/ terms of writing] and demonstrate a justification of going beyond writing > will allow it = But MODERN COMMON LAW WOULD HEAR EVIDENCE RELATING TO INTEGRATION LEVEL TO DETERMINE IF INTENDED TO BE FINAL [PE can be taken into acct to properly construe writing and determine intent of parties] = 211(3) would EVEN WITH MERGER CLAUSE [LOPEZ]: didn’t intend for merger clause to mean what it does so not compl integrated [214c, but can also say its intent of integration level — 214a or b]: LOOKS AT WHAT PARTIES ACTUALLY DID TO MAKE A ANDB DETERMINATIONS, NOT JUST WORDS OF MERGER CLAUSE, TO DETERMINE NOT COMPLETELY INTEGRATED = Parol evidence is admissible to show whether language denying existence of any other agreement is controlling = When material extrinsic evidence shows outside agreements were relied upon, parol agreements shld be given effect rather than allowing boilerplate to vitiate the manifest understandings of the parties 210(1) = ***IF MERGER CLAUSE > COMPL INTEGRATED UNLESS ONE PARTY HAS NO LAWYER & CLD NOT HAVE POSSIBLY KNEW WHAT AGREEING TO: VERY RARE THO*** IF court does not think its possible rp would have thought not integrated// a rp would know integrated because of merger clause > don’t need to admit evidence that shows it was not integrated [fentress] // IN THOMSON, TRADITIONAL COMMON LAW: court didn’t hear evidence relating to integration level EVEN THO minority in THOMSON SHOWED 2162b APPLIED: terms are so vague to understand log mkt and whether a quality warranty as to the logs wldve rlly been in it, if agreed to, to determine integ level = PARTIALLY INTEGRATED O Fully = Complete, final and certain record of agreement [unambiguously and clearly expresses every term in agreement and intended to be exclusive statement of everything agreed to] = if so, NOTHING PRIOR/CONTEMP CAN BE ADDED INTO EVIDENCE // prior oral or written, contemp oral barred. ... §217 = oral condition to the performance of promise = not compl integ 210(2) = if COLLATERAL / consistent additional terms > not completely integ [216] 0 Partially = may fully and finally express some of the terms but not all = if so, go to question 3: prior oral/written can be used to supp, mod or change if doesn’t contradict, subject to limitations = IF FRIENDS / HISTORY > MORE LIKELY FIND PARTIALLY INTEGRATED [trust eachother to respect oral shit]// 2162B EASIER TO APPLY. final, but not complete: talked ab otha stuff didn’t think needed 2 write it all] BUT IF AT ARMS LENGTH > STRANGERS NOT LIKELY TO OMIT A TERM THEY HAD AGREED UPON [all written, prob] s OR, IF STANDARD TERM > MORE LIKELY TO APPLY 2162B [MORE LIKELY NATURALLY OMITTED, ESPEC IF DIFF BARG POWEBR].. but when reduced to forms less likely to show not a complete agreement CONSISTENCY PLAYS A ROLE, even tho 216/2-202 primarily an issue of consistency or contradiction > [this covers what collateral agreement rule covers] If 2(b) is satisfied > not completely integrated, if omitted, so CAN USE IT TO SUPPLEMENT AGREEMENT :IF omits a term tht “might naturally be omitted had parties agreed to it” [2162b] = NOT INTEGRATED /admissible [IF NATURALLY MIGHT BE MADE AS SEP AGREEMENT, DOESN’T DIRECTLY CONTRADICT WRITTEN AGREEMENT] or “would certainly have been included had parties agreed to it” [UCC 2-202] /if parties LEFT OUT SOMETHING THEY WOULD HAVE REASONABLY AGREED TO TO MAKE THIS DEAL= not 1 Oa [or inconsistent! If meant tht, wlda def put it in!!!!] o Yes> = written agreement Y is completely integrated > earlier agreement has been discharged [ceased to exist] if its in within scope of agreement Y [213(2)]: SCOPE — THINK OF ICE HOUSE. Wldnt do it if weren’t for... = written agreement Y is partially integrated > earlier agreement has been discharged [has ceased to exist] if its inconsistent with agreement Y [213(1)] ***** LE. NO MATTER WHAT, AT THIS POINT, IF INTEGRATED IN ANY SENSE, U CANNOT USE EVIDENCE OF INCONSISTENT AGREEMENTS ¢ inconsistent = broader than contradicts. Includes when 2 assertions, both prob cant be true 0 NO ~~ MOVE ONTO NEXT QUESTION 76 - is parole evidence being offered to prove an additional written agreement that was entered into contemporaneously with written agreement Y? O Yes > rethink it being fully integrated / may stitch together 2 sep writings ONLY IF the parts don’t overlap/contradict > WILL SHOW NOT COMPLETELY INTEGRATED = Agreement Y is not completely integrated [deal expressed through 2 written agreements signed contemporaneously: each covers part of deal]. = If each is integrated (final) as to its own terms, each is partially integrated be address sep parts of deal and don’t overlap so neither creates PER problems for the other = Agreement X + agreement Y = contract Z 0 No > MOVE ON TO NEXT QUESTION with written agreement A? O Yes[215 and 216] > MOVE ON TO NEXT QUESTION O PER generally doesn’t allow contemporaneous oral agreements MAJORITY IN MITCHELL, LIKE MAJORITY IN LOPEZ, BELIEVES PROMISE WAS ACTILALY MADE [lopez thinks 65 was real price] - But PER DOESN’T PASS JUDGMENT ON TRUTH !!!!!!!! DOESN’T MATTER WHAT PARTIES ACTUALLY SAID TO EACHOTHER. IT ONLY MATTERS WHEN THEY SAID IT. - Ifits prior, doesn’t come in [regardless if in writing or orally] - If its contemporaneous, comes in if in writing AND DOESN’T CONTRADICT - If it was collateral or if it was oral > why don’t we allow it in? be we don’t trust it = 216 A and B shows collateral! © One side or other would always be able to testify against writing o We need some certainty in wirting. We need to know that that’s the deal, if in writing and signed oO And they need to be able to trust the writing as the deal If requirements of PER met, wont allow testimony even tho believe testimony is accurate [lopez with 65 price, Mitchell with ice house promise AND lying now] - Why does the law allow this??? What are the policy reasons for this??? oO Well, be no rule is perfect — always will be a % tht it doesn’t work the way u want / don’t get the policy reason u want = So, w/ this rule, more times out of all the times > less lying = So this rule, honest person lost and liars won > but we need to be willing to put up w/ this in order to get the greater good = BCA SOPHISTICATED, WELL REPRESENTED PARTY wouldn’t allow this lying to occur = Rule encourages sophisticated parties to have parties sign a contract w/ all of the terms agreed to in it oO. Efficiency = More predictable it is, less effort society has to put into adjudicating it = Requires very little effort to enforce [more of an arbitrary rule] AND = Less confusion / more unanimity 3 possibilities: - 1. liar gets away w it — this case - 2. role reversal — liar cant get away w/ it - 3. honest ppl r just remembering something diff - _ this rule is good for 2 and 3: thus, we don’t believe the testimony of even honest ppl - it’s a cruel rule when it doesn’t work [1] , but great rule when it does [2 and 3] 77 agreed to. Thus bar 214a evidence introduced ...P wins. [[will lose under UCC in 2 places: 2- 202b: consistent additional terms cuz not inconsistent to promise quality when no other quality and UCC wld say not compl integrated. Lose again bc implied warranty of merchantability and not disclaimed. So even if compl, came w/ this warranty] - Lawyer shlda before fact: made sure everything other side promised to client was in writing: ask 1) what u were promised 2) whats in contract. IF NO QUALITY, ASK FOR THIS, THEN GET IT IN WRITING. - Lawyer shlda after the fact: emphasized modern/UCC analysis: absence of term necessary/essential to deal — what kind of logs being sold [no such thing as just a log — each has a diff use] / what kind of good is being bought or sold is missing = MATERIAL TO DEAL, MUSTA AGREED TO IT SO SHOWS NOT COMPLETELY INTEGRATED. RP WLD INCLUDE QUALITY LOGS [usage] BC DON’T KNOW WHAT ACTUALLY BUYING IF DON’T[absence of it=material].. show purchaser [D] not experienced so wldnt know... show diff species trees have diff uses so material... not completely integrated since just basic terms and UCC/most common law wld eval this diff Case on INTEGRATION LEVEL/MODERN COMMON LAW: Lopez v Reyonoso: P buys car from D. D tells P price was 8500. Contract says 6500 with 500 down payment. Merger clause. D says P wanted drafted this way but rlly 8000 w/ 2000 down payment. P real down payment = 2k. P says 2k applied to 6500, D says no 2k applied to 8500. P sues D for breach for repossessing car and refusing further payment after P pays less. COURT SAYS: yes shld admit extrinsic evidence to determine whether contract was final expression of parties’ agreement [214a/b] bc 214c shows merger clause [factually false] not intended to mean what it says/ since in sellers std form/boilerplate contract, don’t trust it AND DOESN’T REFLECT AGREEMENT: stories ab price directly contradict merger clause and no lawyers on both sides. So we need to look at what partys actually did to see what intended by writing [vs merger clause] = now, find its not completely integrated so admit PER. [[also INTERP: intent can be discerned from language agreement, circs surrounding its making, subsequent conduct, reasonableness of interp and here, shows price doesn’t mean what it really means [oral agreement doesn’t contradict terms because sale price and repyayment schedule same/consistent under oral agreement: price isn’t total price so 214c applies to allow price evidence showing dif than what written down]].// basically merger clause was not believeable because if 6500 was the sales price, and if D invested 6k into it, wldnt be profitable ..... - Lawyer shlda: said 213(2) bars anything in scope and since merger clause, compl integrated. EVEN IF not completely integrated, IT CONTRADICTS! ITS INCONSISTENT and thus still be barred (213(1)) since partially integrated!!! Price became 6500 at moment signed. Not ambiguous. Also its sellers merger clause, his boiler plate. He cnt now argue shouldn’t be bound by it bc now its inconvenient for him! !!! [even if he didn’t understand it, hes not the party who wants it ignored: NOT UNFAIR TO BIND HIM TO HIS OWN FORM - This case rejects binding nature of merger clause // betaco said even tho merger clause, remand for jury to determine if fully integ [bc although MC was clear and conspicuous, the cover letter sought to be introduced was informal/adjectives vs, PO and potentially conflicted PO, and P was a sophisticated buyer 80 Case on Collateral ORAL Agreements: MITCHELL: D sells farm to P. P requested D’s icehouse across the street be removed, D orally agreed before singing. D never did this. COURT = ORAL AGREEMENT wld ordinarily be expected to embody in a written agreement for this sale, based on circs surrounding written agreement. Since not in it, INADMISSIBLE TO CHANGE WRITING. Not independent and distinct so inadmissible. - Lawyers said: wldnt ordinarily be expected to be written because so complicated that wld ne naturally omitted [vs court: due to comprehensive nature of writing, ordinarily expect it to be there and not so complicated/and since its what buyer wants and what buyer is paying for, shld be in —SO TOO CLOSELY RELATED AND NOT COLLATERAL SO INADMISSIBLE- and since client is soph business man, not gonna succeed in testifying didn’t know nature of contract] - Lawyer shlda: included agreement in written contract, on sep piece of paper cross referencing it to supplement and/or pay consideration for this. AS SOON AS SEE MRTGER CLAUSE: STOP = 1) what do u believe ur being promised here. Everything u assume is gonna be promised, tell me and we’ll ensure its in contract 2) make reps and warranties but seller will prob never agree to this or 3) “letter _ to buyer dated _, is exhibit B, is part of contract and all of the promises in it are in the contract” // DON’T GET RID OF MERGER: U WANT THIS TO!!! DON’T WANT OTHER SIDE TO SAY PROMISED TO SHIT WE DIDN’T PROMISE TO. JUST MAKE SURE ALL PROMISES THAT UR CLIETN BELIEVES GETTING IS IN DEAL // just EXPAND DEAL SO WHAT IS OUTSIDE FACE IS NOW INSIDE FACE, DON’T NEED REPS/WARRANTIES. And known that law assumes liars more common than truth tellers + efficiency and predictability + wanna encourage writing it // show tht PARTIES NOT WILLING TO SETTLE ON THIS AT THIS CLOSING. NEEDED SEP CLOSING // SEP CONSIDERAITON FOR ICE HOUSE REMOVAL//SO IMPORTANT THO THEM SO NEEDED MORE NEGOTIAITONS Case on UCC INTEGRATION LEVEL for Collateral ORAL/ NOT RLLY: IT’S A PO + COVER LETTER ISSUE agreements [since prior written would not be admissible] : Betaco v Cessna: FACTS= D sent info in cover letter (a) See Cessna: Plaintiff, owner of'a holding company that acquires “more range than citation I” and PO w/ detailed aircraft for sale and Lease, cutcred into a written agreement to buy a jet specifications and NO ORAL MOD clause to P from defendant aircraft seller that contained a merger clause and a limited. . . . ‘warranty providing thar all other warranjes are ineflective. Plaintiff for jet. P, verty experienced merchant, signed PO and deposited 150k. D’s employees then analyzed jet and told P “not more range than citation I”. P sought to cancel. D refused, P sued tht cover letter was express warranty tht was breached. P wants to introduce cover letter into evidence. claimed that the original agreement stemmed from an email defendant COURT SAYS= WARRANTY LIMITATION/INTEG sae i tlh One ne me CLAUSES: tue cannot disclaim express warranties... But . anes 4 ' the disclaimer rule is subject to 2-202: thus, if signed “Sle provided in the written agreement ou the jet’s actual rage proved otherwise. The cout’s discussion focused primarily on whether or wot the contract is deemed fully integrated, plaintiff is preduded agreement was fully integrated. from attempting to establish any express warranty . outside signed contract ..... integration clause: merger §2-202, Official Comment 3 - - : Hr the additional terms are such that. if agreed upon, clause is strong evidence tht fully integrated tho not they would have been included, then evidence of dispositive. Theres one here. : Tho preprinted clause tht their making should not be omitted. couldn’t be negotiated, wasn’t buried in fine print or (a) Merger/integration clauses; (b) Disclaimer clauses; (e) Nature amd seope of the parties? prior determinationsiextrinsie terms; (@) Sophistication of parties 1. Question of Fact to Determine from Writing Whether the Entire Agreement is in Writing. opaque but in caps even tho on back, front said to look to back in bold //Betaco also had ample time to read it b4 signing it // Another way to look at degree of integration: Is term one tht would have been contained in conract itself had intended it to be part of agreement??? cant introduce prior written agreement [not contemporaneous because it was Consider five factors to determine the intent of the partics prior — THE COVER LETTER regarding the completeness of their agreement: WITH MORE RANGE THAN (1) Language of the agreement; CITATION I [w/ PO tht had (2) Objective of the contract; integration clause/ merger clause. (3) The circumstances of the contract’s making; After PO signed w/ deposit, betacos (4) The subsequent conduct of the partics: and employee analyzed it and found out that citation jet did not have more range than the citation I . betaco sought to cancel on idea tht breached express warranty ]. So oral testimony wld be ok to supplement consistent additional terms on express warranties if not completely integrated [2-202b, not COD/COP/usage and not interp]. But, NOM makes only mods able to be in writing, mods cant be oral. ALSO NOT SUPP TERM, BUT CONFLICTING: its not a supplemental term on subject in which parties otherwise silent, but potentially conflicting term [written contract contains express representation as to range of citation jet | > 2-202 would expressly exclude from admission this into evidence Additionally, the parties were sophisticated. More importantly, the contract contained detailed specifications about the CitationJet’s range, while the cover letter contained a more general statement that the CitationJet “has more range than the popular Citation I.” (5) The reasonableness of respective interpretations. Also finds that the purchase agreement accompanying cover letter [context] shows not meant to supplement: purchase agreement had many details tht are precise and explicit about the assumptins underlying each estimate while cover letter had many adjectives but little details Context tht betaco signed w/o lawyer not significant either bc not lengthy or obtuse , nor was it a contract of adhesion. Both sophisticated and no fraud / mistake / other circ call into Q the binding nature of itTHUS INTEGRATION CLAUSE SHLDA COME AS NO SURPRISE TO BETACO AND HIS DUTY TO READ IT SO HIS FAULT FOR SIGNING IT WITH IGNORANCE TOIT . - Lawyer shlda: STOPPED WHEN SAW NOM / merger CLAUSE. DON’T TRY TO GET REPS/WARRANTIES WONT GET. “NO REPS WARRANTIES” CLD HAUNT U. LATER [don’t want D to say P promised stuff eh didn’t]. JUST TRY TO EXPAND DEAL SO EVERYTHING [LIST OF] CLIENT WANTS/THINKS PROMISED IS IN DEAL: “letter Cessna to Nick dated _, is exhibit B, is part of contract and all of the promises in it are in the contract” // - DON’T GET RID OF MERGER: U WANT THIS TO!!! DON’T WANT OTHER SIDE TO SAY PROMISED TO SHIT WE DIDN’T PROMISE TO. just EXPAND DEAL SO WHAT IS OUTSIDE FACE IS NOW INSIDE FACE, DON’T NEED REPS/W ARRANTIES. - And known that law assumes liars more common than truth tellers + efficiency and predictability + wanna encourage writing it AND KNOW CLIENT WONT SUCCEED 82 - (1) The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves. - 44 - (2) The parties are considered, unless otherwise agreed, to have impliedly made applicable to their contract or its formation a usage of which the parties knew or ought to have known and which in international trade is widely known to, and regularly observed by, parties to contracts of the type involved in the particular trade concerned. MCC Marble :Real problem: boilerplate says buyers complaints must be delivered by certified mail no longer than 10 days after effective delivery > certified mail is horrible ... They testified in aff that MCC marbles agents [monzo] didn’t consider MCC bound to boilerplate > said something like I don’t understand it, but I don’t think my employers bound by this. Only bound to price / quantity what he can understand [SOMETHIN LIKE THIS] . In boiler plate that P cant understand and didn’t even try to understand. there are provisions: UCC/common law wlda said too bad but not here// Tardiness and payment is grounds for default** = MCC Marble shida figured tht out b4 signing in terms of prudence = AKA In US, under UCC, wld just negotiate [bc buyer has strong rights to reject when the delivery does not perfectly conform to delivery specs].. BUT COURT SAYS: MCC’s subjective intent is relevant if parties agreed that wouldn’t be bound by this 10 day boiler plate term. SO CAN REDUCE PAYMENT IN PROPORTION TO DEFECTS IN DELIVERY. DON’T NEED TO SEND IT BACK. - What the Lawyers Should’ve Done: D should’ve walked through what its employees should and shouldn’t have said during their affidavits, as the fact that all 3 stated that the parties subjectively intended not to be bound by the terms on the reverse of the order form insured that the case fell under Article 8(1) of CISG, and therefore allowed for subjective intent to be accounted for. This put D in a losing position on appeal, as they simply got lucky at the trial ct level. If MONZO DID KNOT INTEND TO BE BOUND BY BOILERPLATE and if DAGS agents also did not intend to be bound by pollerplate, then BP is not part of contract even tho its what the parties signed ! e UCC and CL - what governs is what you did e CISG - what governs is what you thought. 2. EXCEPTIONS: COLLATERAL AGREEMENTS 216!!!! MITCHELL ICE HOUSE // 2-202 BETACO COLLATERAL AGREEMENTS = perhaps most important limit on parol evidence rule. 0 Prior or contemporaneous understandings that are distinct from a subsequent written contract [even if that contract is fully integrated -bc so sep that parties didn’t intend it to be covered by integrated writing] = COLLATERAL / PER does not apply to these !!J!!!1! , EVEN IF SAME TRANSACTION, AS LONG AS SEP/DISTINCT ENOUGH [Mitchell majority said closely enough related to sale of property tht one wld expect to find it in writing if agreed to / dissent said: sep ancillary contract] O PER DOES NOT PROHIBIT EITHER PARTY FROM THIS EVIDENCE [testifying or offering other proof that reached this collateral agreement] because the subject matter is so diff that the parties would not necessarily address em in 85 writing agreement thts subsequent // doesn’t apply [PER] when omitted prpovisions are so distinct that wouldn’t necessarily expect to see em in writing 0 COLLATERAL AGREEMENTS NOT ALLOWED TO CONTRADICT THO, STILL. 216(1) evidence of a consistent additional term is admissible to supplement an integrated agreement unless the court finds that the agreement was completely integrated If neither 2(a) nor (b) applies [SHOWING NO DISTINCT SHIT] > completely integrated, so CANNOT SUPPLEMENT. If 2(a) or (b) is satisfied [SHOWING DISTINCT SHIT] > not completely integrated if omitted so CAN USE IT TO SUPPLEMENT AGREEMENT: 216(2)(A) = agreed to for SEP CONSIDERATION: wild only apply if collateral agreement [ PART OF SAME SCOPE | has sep consideration = NOT COMPLETELY INTEGRATED if omitted Diff from option contract: its separate . option contract = all promises have been performed b4 “real contract” begins: option = keep offer open. Option contracts are independent of regular agreements // PRECEDES ORIG AGREEMENTS VS. COLLATERAL AGREMENT = TO THE SIDE. Problem 1, page 604: buys land. Wants statute in land. Minutes later, said ill add 5k if I can get statute > must give statute. Though oral, PER IS NO BAR TO THIS AS IT OCCURRED AFTER SIGNING OF WRITING. 2 SEP TRANSACTIONS, collateral sep agreement because 1) sep consideration 2) not simultaneous, but minutes later [more like contemporaneous] Ex: employment contract. Then, fully integrated real estate contract. EMPLOYMENT CONTRACT IS COLLATERAL AND CAN BE USED IN EVIDENCE THAT THEY HAD REACHED THIS ORAL AGREEMENT FOR EMPLOYMENT // Purchasing a good to install in airplanes but I also want manuf to service them also = 2 contracts, 1 deal [for engines] *both parts of deal are so complicated that need 2 deals* This wld work if ur buying a car [deal where all same scope but multiple deals in tht scope -buying car, buying services for car, for ex.] = ICE HOUSE WOULDN’T BE THIS COMPLICATED. WOULDN’T NEED SEP CONSID. SO DOESN’T APPLY TO 2A ANYTIME THERE’S A CLOSING / CONTEMPORANEOUS PERFORMANCES !!!! parties sign purchase agreement [$ paid up front when delivery up front] and delivery agreement [service $ is a periodic payment] = sep consideration 216(2)(B) : at least 1 of them, out of self protection, would INSIST it be in writing / other would be willing to go along [not that both think shld be in it] = NOT COMPLETELY INTEGRATED if omitted 86 © would not naturally omit this from the writing be the $ and what the $ buys shld be accurately reflected in contract [what money buys] = what BUYER needs to insist on [ wld not naturally omit, if a well- advised buyer !!!] // And buyers hv way more risks 0 The $ = what seller insists on in putting in contract o TESTIS SUBSTANCE, NOT FORM = 2-202: SEP CONSID? ORDINARILY NOT EXPECTED TO BE IN IT? // decisive factor is how closely bound to the contract is the supposed collateral agreement ™ Coll: 2 entirely distinct contracts, each for sep consideration be made at same time and distinct legally // OR Aka parol evidence rule does not apply to omitted provisions that one would not necessarily expect to see in the writing = Same: 1 agreement is entered into wholly or partly in consideration of the simulatenous agreement to enter into another, the transactions are necessarily bound together If one oral and one written, then problem arises whether the bond is sufficiently close to prevent proof of the oral agreement [collateral yet connected: written and oral are bound tg bc no indep consideration passed to defendants for parol promise: how bound? — thus, NOT ADMISSIBLE. ..!!V! 3. US v Fentress Plea bargain: - 1) promised to plead guilty to 2 bank robberies: so the two together would not exceed 25 years [thus expressly contemplated that both terms would run consecutively] - 2) promised to plead guilty to 6 other violations. Prosecution promised to recommend that the sentences imposed be made to run concurrently with eavh other and to also run concurrently with any sentence imposed upon defendants other 2 guilty pleas **nothing else: said this document contains full and complete agreement between the parties and no promises or representations have been made except as incorporated herein** = MERGER CLAUSE!!! [nothing ab the 12 year sentence currently serving] District Court: - gave him 25 years in addition to Georgia sentence and ordered him to pay restitution FENTRESS ARGUMENT: - prosec breached plea bargain bt asking DC to order restitution and consecutive sentences Appellate Court found: - no. under contract principles, prosec did exactly what promised [length and overlap] - even fentress admits he agreed to merger clause of plea bargain instrument and perhaps for tht reason didn’t object when ADA argued for restitution and consecutive sentences or when district court ordered this - 210 2d says this is fully integrated agreement and cannot be supplemented with unmentioned terms [216] so his argument that “ADA would offer no recommendations other than those identified in the plea bargain instrument” cannot stand — §214© // there’s no parol evidence in interp. // all about ambiguity of words: is it ambig on face or reas. Susceptible to this meaning??????? 87 ambiguity [Angus]: “Words are just symbols of thought and the context which they are given can affect their meaning” - ***TF EXTRINSIC EVIDENCE ADVANCES AN INTERP TO WHICH LANGUAGE OF WRITING IS REASONABLY/FAIRLY SUSCEPTIBLE, SHOULD BE ADMISSIBLE*** - If preliminary consideration of all credible evidence offered to prove the intent of the parties still leaves contractual terms fairly susceptible to at least 2 rational interps, extrinsic evidence relevant to prove either meanings is admissible Step 1: if UCC, especially, is there any COP/COD/trade usage tht can be used to construe meaning of words? YES: hear the evidence NO: move on Step 2: any extrinsic or intrinsic [on its face] ambiguity? NO: was it a insurance co. policy [wording interp to express insured’s reasonable expectations even if unambiguous]? Hv u construed AND supplemented words with COD/COP/usage? unless need further extrinsic evidence to now resolve any ambiguity u created, ur done !!! YES: [before use COD/usage to construe words] A) intrinsic ambiguity [Angus]: start off with plain meaning [express terms] > then dictionary definitions > move on to discussions/conduct during negotiations > discussion/conduct after negotiations when performing [COP] > conduct in prior negotiations [COD] and > usage [if both merchants in market or if both shlda known/knew of it] B) extrinsic ambiguity [PG]: EVEN IF NO AMBIGUITY ON ITS FACE, if either party wants extrinsic evidence/contents there is ambiguity, USE same hierarchy as above IN [A] TO ESTABLISH AMBIGUITY, THEN BACK UP TO [A] TO RESOLV AMBIGUITY - even if extrinsic evidence seems to contradict express term on its face, if it can REASONABLY BE CONSTRUED TO BE CONSISTENT with the express terms, allow it. [CN] Step 3: Supplement all terms WITH COD/USAGE, if UCC, OF ANY WRITING WHETHER COMPL INTEG OR NOT, WHETHER AMBIGUOUS OR NOT, UNLESS CAREFULLY NEGATED - contracts are to be read on the assumption that these elements were taken into account when doc phrased. don’t make overly simplistic and overly legalistic interps. Step 4: look at the logic of the deal: do ur interps / supplemented terms make sense in light of it? - YES: great. [§202] - NO: reconsider. [if u interp price where now it wldnt be profitable in this deal, for ex., prob not the price that the parties’ intended it to mean] Sources of evidence in interpretation 1. express terms themselves: actual words spoken or written to express agreement. But interp in light of the document or oral agreement as a whole = OBJECTIVE MANIFESTATIONS OF ASSENT A. general/ordinary/lay meanings preferred to specialized/technical meanings, BUT: - technical words a technical meaning if used in a field / technical transaction 90 - except when technical definitions in ins. Policy which are in effect exclusions of coverage = wnt be interpreted to defeat reasonable expectations of purchaser [D] B. specific provisions given greater interp weight than general provisions C. negotiated terms resolved in favor of standardized terms when in conflict D. IN A POLICY PROVISION [btwn ins/ins co] or any other unequal barg power > use reasonable expectations doctrine to interp words, regardless if ambiguity - ambiguity not irrelevant, just a factor in determining reasonable expectations [as is whether told it was important, but obscure, conditions/exclusions/limitations on liability and whether partic provision is known by public generally] - so when theres a major exclusion in hidden definitions section, insured held only to reasonable knowledge of literal terms and conditions - doesn’t eliminate duty to read, but does increase burden on ins co’s to communicate coverage and exclusions ACC URATELY and CLEARLY and requires tht expectations of coverage be reasonable under circs 2. context of agreement: discussions and conduct of parties when negotiated, conduct in performing after formed [COP — if performance is tendered and accepted, strong indicator of what was intended VS. waiver of rights or modification agreement], conduct in prior comparable transactions w/ each other [COD] and customs and usages in the market which they are dealing with each other [usage — if both in the mkt/trade or if not, if knew/reasonably shlda knew: so notorious, universal and ancient] = ALL OBJECTIVE EVIDENCE OF SOME MANIFESTATION OF ASSENT/INTENT OTHER TOOLS OF INTERPREATATION [pages 39 and 141-142 q&A 91 - Expression unius est exclusion alterius “the expression of one is to the exclusion of the other” — aka if list of enumerated items, something not listed [of the same kind, even] is impliedly rejected / excluded - Ejusdem generis “of the same kind” — aka if list of non-exclusive: including but not limited to trucks. Cars, etc.... to determine whether what’s not listed shld be included > want to find a broad common denominator / general limited by specific so deemed to refer to things of same kind: “skateboards, roller blades and other means of locomotion barred” = make use of wheels under feet [common denom] so other means of locomotion don’t include motorbikes. But if common denominator is wheels, wld be included in gen language - Id certum est quod certum redid potest — that is certain which can be made certain [IMPLYING DEFITENESS IN A PROMISE FROM PAST COURSE OF CONDUCT: does it constitute a regular course of dealing? History of this sort of thing? Or from other certain things.... ] - Noscitur a sociis “known by the company it keeps” — aka context in which word is used: “floors, steps” are to be kept free from obstruction... so a floor wnt be included if meant for storage bc all other words indicate passage use // aka if “no dogs, cats or primates”, primates=apes, not people bc primates meaning is qualified by the other words of animals - Contra profentem “construed against the drafter” — aka if all else fails to ascertain meaning, drafter at fault for ambiguity especial - ly in context of little and big guy// bargaining power differences lk insurance companies! !!] - ut res magis valeat quam pereat — “the thing should rather have effect than be destroyed” aka if 2 interps, one makes contract invalid / other makes contract valid, prefer 1 that validates it [also prefer reasonable/lawful interps and prefer ones with positive effects on public policy/public interest] What if a term is OMITTED? - Cld mean failed to reach an agreement on it. OR - Cld mean parties didn’t consider it necessary to articulate [not a lack of consensus, but an intent to adhere to some “off-the-shell” market or legal standard that they thought of as too obvious to need articulation O Friends, trust each other, COD, not a commercial issue, etc. *TO DETERMINE WHICH OF THE TWO POSSIBILITIES IS THE RIGHT ONE, INTENT MUST BE DETERMINED BY LOOKING AT THE LANGUAGE OF THE AGREEMENT AS A WHOLE IN LIGHT OF ALL THE CIRCUMSTANCES OF THE TRANSACTION [2162b]* Preliminary negotiations? - LONG, COMPLEX TRANSACTIONS / DEALS IN CONTRACT CONTEMPLATED - If preliminary in form, but does reflect agreement on all major issues tht need negotiation and the parties’ intent to be bound by it, even tho contemplate executing a final memorandum of agreement, they regard tht step as a formality [352 E&E] = binding!!! Vs. - Some terms of relationship settled but leaves room for other, important aspects of it to future negotiation > not binding / more of an agreement to agree. - [but does commit them to continue to work with each other and negotiate in good faith to reach a final agreement > kinda like promissory estoppel: if memo of understanding/letter of intent shows agreement to work toward an ultimate goal, complex project subject to many contingencies tht made it imposs to settle all terms in advance, contractor already made extensive contributions]: 351 E&E - Or mere intent to work in future, but no intent to create a present binding obligation > obvi not binding What if material misunderstanding [total ambiguity] that was entirely reasonable on both ends and NO BASIS FOR PREFERRING ONE OVER THE OTHER? - General rule: precludes contract formation when parties equally innocent in not reasonably realizing the misunderstanding or equally guilty in realizing it but saying nothing - BUT, on balancing degree of fault of parties, if it appears that one party is more accountable than the other for knowing of the misunderstanding, a contract must be found to exist on the terms understood by the more innocent party [§20, 201] - Pearless ship case, both scheduled diff times [Raffles v Wichelhaus], Konic case on price [heard 50-200, when heard 5620 thought 56.20 not 5,620] CISG: art 8-9 focuses on subjective intent 92 “extrinsic ambiguity” Pacific Gas = even if words are not ambiguous on its face, can use extrinsic evidence to establish ambiguity and then use extrinsic evidence to solve ambiguity // CALI RULE - Whether an indemnity provision [like replace, UK, ton, north] in a repair contract covered damage to machinery belonging to the owner or applied only to claims by third parties [e&e 347] - Contract included provision: G.W. agreed to “indemnify” Pacific against “all loss, damage, expense and liability” resulting from contract. O Indemnity: 1) compensate or 2) secure against legal liability for actions [liable to P because of what D2 did to P— D2 impleads D for liability to P - Here, Thomas drayage brings in equipment do something on PG’s property tht damages neighbors prop. Neighbor sues PG. PG impleads thomas drayage bc contract requires drayage to indemnify PG for PG’s liability for someone else = TC said “classic language for a 3"! party indemnity provision” BUT THE PLAIN LANGUAGE OF THE AGREEMENT ALSO REQUIRED HIM TO INDEMNIFY FOR INJURIES TO PLAINTIFFS PROPERTY Oo. Aka trial court thought it meant both meanings O “Cuz plain language” = compensation O TC construed it as a 4 corners > which showed both meanings of indemnify O Having determined that the language of contract had a plain meaning, refused to admit any extrinisic evidence tht would contradict its interp > THAT’S WHAT LED TO PG APPEALING AND THE SNARD / SARCASTIC REMARKS: “Exclusion of testimony that might contradict the linguistic background of the judge reflects a judicial belief in the possibility of perfect berbal expression” > NO MAGIC WORDS. NO MEETING OF THE MINDS IF CONTRACTS ARE CREATED BY WORDS ALONE AND NOT INTENTIONS 95 @ “The test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible...” - If either party contends that something in contract is ambiguous, party is entitled to have testimony that would establish something tht doesn’t look ambiguous is in fact ambiguous // shldnt allow judges to see plain meaning and then apply it to contract given experiences in life... // cant just say “Classic/PLAIN language for a 3" party indemnity provision” so cant establish otherwise. - Lawyer shlda: drafted not in overly complicated legalise, but in clear/laymens language: if intention to indemnify is only for 3" parties, say so!!! define every term!!! So that non lawyers know what it means !!!! straightforward: agree to take out insurance policy for P and property // Show COD in extrinsic evidence previous dealings clearly show intent is to indemnify only for 3" parties Case on UCC dealing with ambiguity: FRIGALMENT [CHICKEN CASE]= seller (d) wrote contract for sale of chicken grade A gvt inspected. Buyer [P] accepted but when received complained wrong type of chicken. COURT: chicken in context [EXPRESS WORDS]= just grade A gvt inspected [later helpful]. Size [2.5Ibs and 1/5 lbs chickens], court says size doesn’t matter cuz nothing in size of chickens sold tht would exclude 1 of 2 meanings [even tho younger ones r usually smaller: its possible to have younger in either size/older in either size bc apples of 2 diff dizes cld be diff kinds of apples even if 1 species only came in 1 size]....price a good indicator but not binding [Am seller says market context shows imposs to buy broiler chicken at the price called for in contract tht wouldn’t involve a loss so couldn’t have intended it to mean only broiler] Ok so EXPRESS TERMS DON’T HELP. NEXT: what did parties say to each other in negotiations?? Not helpful because in diff times during negotiation, used diff words and also refused to use German words which distinguished chickens. And wasn’t a language prob OK SO COP?? No. never acted in 2 incidents to lead other party to believe chicken meant this because 1 party acted in a way consistent w/ 1 meaning and other party acquisesed : INSTEAD, buyer rejected chicken deliveries. NO_ COD EITHER [seller new to mkt]. FINALLY, USAGE: testimony, need to show P has knowledge or shlda known this if using usage as evidence [notorious/reasonable/universal if not a merchant]: dpt of agriculture regs [1-303c: if it s established that such usage is embodied in a trade code or similar record, interp is a Q of law] = here, trade code generated by trade itself so every] in industry understands what it means with precision. This is best type of usage. Since dpt of agriculture gave list, anything on list satisfies meaning of chicken AND USUALLY, GREAT USAGE EVIDENCE BUT HERE EVEN BETTER BECAUSE REGS ARE CITED IN CONTRACT ITSELF [grade, gvt A]. since in contract, binding on interp. And logic of deal, espec evidence on PRICE, shows that this is what chicken was supposed to mean. - LAWYER SHLDA: specified English word for chicken, or use german specifications - realized price paying too low for broiled chicken - told seller first time exactly what desired and confirm seller’s expectations of deal - done due diligence to see what grade A chicken encompasses [LOOK UP DEFINITION] - continued to reject shipments and call w/ formal, provable complaints Case on [UCC “realism” ] NOM CLAUSE AND USAGE/COD TO CONSTRUE PARTIES’ EXCPECTATIONS FOR QUANTITY TERM WHEN FORMED AGREEMENT: Columbia Nitro v. Royster: FACTS: P producter nitgroen/mix fert. D = manuf of mixed ferts [made of nitrogen, phosphate]. Contracted on output contract, min of 31k tons P wld buy from D w/ a price per ton subject to escalation clause dependent on production costs. In mkt, prices plunged and P cldnt profit from selling. D initially complied w/ price reduction requests by P but then insisted on orig contract price. D breached [sold unaacepted phosphate for Ps account at substantially low price, below contract price]. P sues. COURT SAYS = 1. Does not need to be ambiguous to introduce parol evidence. CAN INTRODUCE COD/USAGE TO EXPLAIN/SUPPLEMENT ALL WRITINGS, AMBIGUOUS OR NOT. Thus, P can introduce evidence usage [mixed fert industry: crop/weather conditions, farming practices, gvt agric pgms, and express terms being mere projects to be adjusted according 2 market forces] and COD previous 6 years: repeated/subs deviation from std prices= pattern amounting to variance of 500k in reduced sales including D regusing goods contracted for] > thus, no duty to accept quoted prices at 96 the min quantites SINCE COD/USAGE relevant to parties expectations when formed agreement [not a unilateral modification, but “a part” of agreement impliedly]. 2. Though inconsistent w/ express terms, on its face, when evidence of COD/usage is reasonably construed as consistent w/ express terms, test is not if completely integrated but even if compl integrated [on its face, or in reality,] IF IT IS REASONABLE TO CONSTRUE THIS EVIDENCE CONSISTENTLY W/ EXPRESS AGREEMENT: here, it is: didn’t prohibit usage/COD, silent ab adjusting prices to reflect declining mkt and min tonnages expressed in terms of “products supplied under contract” not just “products” or “products purchased” 3. since default clause in contract doesn’t explain what happens if P fails to purchase min quantity of phosphate, MUST consider COD/usage to determine whether P defaulted. .... 4. Claim that non-verbal contract clause precludes testimony doesn’t help D because COD/usage is diff than terms/conditions/understandings, verbally, made. Cod/usage must be admissible to supp terms OF ANY WRITING, COMPL INTEG OR NOT, UNLESS CAREFULLY NEGATED. AND CONTRACTS ARE TO BE READ ON THE ASSUMPTION THAT THESE ELEMNTS WERE TAKEN INTO ACCOUNT WHEN DOC PHRASED. DON’T MAKE OVERLY SIMPLISTIC AND OVERLY LEGALISTIC INTERPS. - Lawyers shlda: included default clause that established damages for failure to order [not just for nonpayment of reveived goods] and - shlda defined obligations more clearly and added a clause explaining tht the contract was to be viewed partic to this singular transaction, and not in general as part of phosphate/fertilizer trade [indicate DEAL SHLD BE CONDUCTED OUTSIDE OF TRADITIONAL USAGE STDS] and - DON’T BE SILENT ON ADJUSTING PRICES, SO LAW CANT ASSUME INTENT TO ALLOW [cuz will be construed against draftsman] Case on INSURANCE COVERAGE: GIVEN EXPRESS DEFINITION, use REASONABLE EXPECTATIONS TO SEE IF AMBIGUITY= Atawater Creamery — Special interpretive rules / special rules on implied terms :Burglary conducted in better ways are more risky for ins co’s — thts why special rules Altawater: Altawater sought decl. judgment against western, insurer, for coverage to losses during burglary [2/3 doors open, padlocks GONE, turntables loosened = only evidence tht wasn’t an inside job, all in interior not exterior so not evidence tht is specified for in policy]. Altwater peeps said dnt remember, but western testifies told altawater what forcible entry requirement was [INS CO SHLD GET A PRIZE FOR ITS DUE DILIGENCE, BUT THIS COURT SAYS DOESN’T MATTER IF COVERAGE DEFINITION BURIED]. TC said definition of burglary in policy excludes coverage so nah. [“evidence of forcible entry” requirement in DEFINITION ITSELF: visible, phys marks of damage to exterior at point of entrance or to interior at point of exit so not ambiguous, and no forcible entry evidence means no coverage] Altawater satisfied this in previous 2 burgs, not here... THIS COURT SAYS = doesn’t matter tht clear/precise definition in policy because (1). burglary definition is used generally and construed differently and has been held ambiguous/favor coverage in absence of physical visible marks , (2) 3 courts held definition merely provides for one form of evidence and other evidence will suffice for coverage. [NOT A RULE OF EVIDENCE BUT A LIMIT ON LIABILITY -— this court agrees, but not dispositive]. (3) EXCLUSIONS ARE READ NARROWLY AGAINST THE INSURER IN STD FORM CONTRACTS: closely related to ADHESION: unfair bargaining power on take it or leave 97