Contracts Outline, Exercises of Contract Law

Download Contracts Outline and more Exercises Contract Law in PDF only on Docsity! Contracts  Outline     Sources  of  Law:     • Common  Law   • Restatement  of  Contracts   • Uniform  Commercial  Code  (UCC)     o Governs  sale  of  goods,  goods  =  any  movable  item   • Convention  on  Sale  of  International  Goods  (CISG)     I. Contract  Basics:     a. Offer   i. Outward  manifestation:  oral,  written  or  via  conduct;  and  signal  that  acceptance  will   conclude  the  deal   ii. Available  for  a  reasonable  amount  of  time   iii. Person  who  gives  offer  can  revoke  it  at  any  time     b. Acceptance   i. Expression;  or   ii. Silence;  or   1. Custom  in  long  relationships   iii. Action.   iv. Cannot  be  revoked   1. Mailbox  Rule  =  acceptance  by  mail  creates  a  contract  at  the  moment  of   dispatch     c. Consideration     i. =  agreement  needs  to  be  an  exchange,  you  need  both  arrows   ii. needs  to  be  credible  that  they  were  bargained  for  and  given  in  exchange   iii. and  it  is  a  detriment   iv. moral/past  consideration  =  generally  not  sufficient   v. preexisting  legal  duty  is  not  consideration     d. Formation:  UCC  §  2-­‐204  –  broad,  a  k  doesn’t  need  special  moment  of  the  making     e. Bilateral  v.  Unilateral  Contracts   i. Bilateral  Contract  =  exchange  of  mutual  promises   1. Exs.  Horse  exchange,  any  goods   ii. Unilateral  contract  =  acceptance  by  performance,  limited  to  two  scenarios:   1.  i.  completion  of  performance  is  the  only  manner  of  acceptance;  and     2. ii.  offer  to  the  public   a. Ex.  Bounty  hunter  “wanted  dead  or  alive”   Offer   Acceptance   Considerati on   Contract   b. Ex.  Radio  show  offer  $100  to  the  99th  caller   c. Ex.  Tramp  must  walk  to  the  store  to  get  the  coat,  Brooklyn  Bridge   walk  for  $     f. Dead  man  statute  =  when  one  party  is  dead,  prevents  extremely  biased  testimony,  need   evidence  to  strongly  corroborate  an  agreement       g. Statute  of  Wills  =  formal  requirement  helps  courts  avoid  swampy  analysis     h. Statute  of  Frauds  =  things  need  to  be  written  down    &  signed  to  be  enforceable   (affirmative  defense,  must  bring  it  up  in  litigation  or  face  malpractice)  (UCC  version  is  §2-­‐ 201)     • Types  of  Ks  that  must  be  in  writing:   1. Suretyship  provision  (ex.  Co-­‐singer)   2. K  for  sale  of  interest  in  land   3. K  that  cannot  be  performed  within  one  year  from  its  making  (one-­‐year   provision)  when  there  is  no  way  you  can  perform  the  K  in  a  year.   4. Sale  of  goods  in  excess  of  certain  value  ($500  or  more  in  UCC)     • Exception  to  Statute  of  Frauds:  (UCC  exceptions  §2-­‐201(3))   o Promissory  Estoppel  §139  restatement   o Specially  made  products   o Admittance  in  court  that  K  was  made   o Paying  in  reliance  on  the  contract  (promissory  estoppel)     i. Benefits  of  Legal  Formality  (Fuller’s  F(n)  of  Form):     i. 1.  Evidence;   ii. 2.  Caution;   iii. 3.  Channeling     j. Promissory  Estoppel  (Restatement  90)  =  consideration  is  not  necessary  if  the  facts   indicate  that  the  promisor  should  be  estopped  from  not  performing.       i. A  promise  is  enforceable  if  necessary  to  prevent  injustice  if:   1. The  promisor  should  reasonably  expect  to  induct  action  or  forbearance;  and   2. Such  action  or  forbearance  is  in  fact  induced.   a.  (The  remedy  is  Reliance  Damages).     k. Contracts  subject  to  conditions  of  personal  satisfaction       i. Illusory  promise  –  not  enforceable  (exs.  If  you  have  a  legal  duty  anyway,  too   subjective)  no  real  commitment,  the  promise  I  just  exchanged  is  (0  value)  with  what   I  give  you)     1. Ex.  “I  promise  I  will  stay  here  until  noon,  unless  I  change  my  mind.”     ii. Personal  satisfaction  clause  –  a  very  subjective  commitment,  promisor  is  limited   by  good  faith     1. Ex.  “I  will  pay  you  if  I  am  personally  satisfied  with  your  work.”     VI. Remedies  ($)       a. 3  initial  questions  to  ask:     i. nature  and  extent  of  the  plaintiff’s  compensable  loss,  including  harm  suffered  and   availability  and  form  of  the  legal  remedy  or  remedies  to  redress  it;       ii. if  there  is  more  than  one  means  of  remedying  the  loss,  we  must  decided  which  of  the   available  remedies  most  effectively  and  comprehensively  compensates  for  it;       iii. take  into  account  any  policies  or  principles  that  may  limit  the  defendant’s  liability   for  the  loss.     b. WTF  is  a  K  breach  anyway?    It  is  the  failure  by  one  or  both  parties  to  fulfill  the  contract.   Can  be  either  (1)  material  or  (2)  non-­‐material.       c. Specific  Performance   i. Court  order  for  parties  to  complete  the  contract  (rare  in  US  because  we  don’t  want   courts  involved  in  ongoing  matters  that  would  require  a  lot  of  oversight)   ii. UCC  §2-­‐716  –  Buyer’s  Right  to  SP  or  Replevin   1. Goods  are  unique  or  in  other  proper  circumstances   iii. Woodward  says  this  would  be  like  involuntary  servitude     d. Expectation     i. To  put  parties  in  as  good  of  a  position  as  if  the  K  had  been  fully  performed   ii. Default  measure  of  damages.    Aggrieved  party  is  entitled  to  amount  that  will  restore   her  to  the  position  she  would  have  been  in  had  the  K  been  fully  performed.     iii. Hadley  v.  Baxendale  –  the  Foreseeability  Test  –  “the  damages  which  the  other  party   out  to  receive  in  respect  of  such  breach  of  contract  should  be  such  as  may  fairly  and   reasonably  be  considered  either  arising  naturally…or  such  as  may  reasonably  be   supposed  to  have  been  in  the  contemplation  of  both  parties,  at  the  time  they  made   the  contract”     Re m ed ie s   SpeciZic   Performance   force  a  party  to   fully  perform   Expectation   as  good  as  if  K   fully  performed   Reliance   before  the  K  had   been  formed   Restitution   status  quo,   quantum  meruit   1. UCC  §2-­‐715(2)(a)  –  expression  of  Hadley     RULES:   2. Arising  naturally   a. General  damages    =  what  you  normally  get  from  breach  of  K,  diff  $   3. Reasonably  foreseeable   a. Special  Damages  =  damages  specific  to  this  case  &  specific  to  these   facts     iv. Lake  River  v.  Carborundum  (100)–  breach  deterrence  v.  liquidated  Ds     1. Not  enforceable  LDs  because  it  was  a  penalty  clause  and  a  conversion  to   keep  the  material   2. Blunderbuss  K  –  would  have  had  to  pay  certain  damages  no  matter  what   point  the  K  was  breached   3. LD  clause  is  valid  when  there  is  a  proportionality   4. Benefit  of  LDs   a. Keep  breach  from  happening   b. Predictability  you  know  the  worst  case  scenario   c. Shorter  litigation  time     v. Golden  parachute  –  pg.  111   1. Using  wealth  to  oppress  people   2. “pound  of  flesh”  =  we  don’t  want  to  support  retributive  stuff     vi. Efficient  Breach  =  NIPSCO  good  example.   1. If    both  parties  are  in  a  losing  contract  they  should  breach.       2. Coase  Theorem  =  (economic  perspective,  Woodward  doesn’t  like)  if  there  are   no  transaction  costs,  the  good  wills  end  up  with  the  person  that  values  the   goods  the  most   a. I’m  going  to  do  it  until  it  is  uneconomical  for  me  to  do  this  thing     vii. Asante  Technologies  –  to  opt  out  of  CISG  you  have  to  explicitly  say  that     viii. Parker  v.  20th  Century    (51)-­‐       1. You  don’t  have  to  accept  an  inferior  offer  to  mitigate.    (2-­‐709)  (b).         2. We  don’t  give  $  for  lost  opportunity.    You  don’t  have  to  accept  different  &   inferior  offers.     ix. Copylease  v.  Memorex  (89)  –  specific  performance  not  enforceable  in  US  and  even  if   you  did  it  is  more  of  a  bargaining  chip  for  better  damages  in  settlement  (law  &   action)     1. Uniqueness  Test  (UCC  2-­‐716)   a. Specific  performance  may  be  decreed  where  the  goods  are  unique  or   in  other  proper  circumstances.       x. Evergreen  v.  Milstead  –  drive  in  movie  theater  case  should  been  open  for  summer   but  didn’t  open  until  later.    Too  many  variables  involved  in  a  start  up  –  you  need  a   well-­‐established  business  to  determine  the  reasonable  certainty  of  lost  profits     xi. Chung  –  (pg.  123)  “contract  is  breached  in  a  wanton  or  reckless  manner  as  to  result   in  a  tortious  injury,  the  aggrieved  person  is  entitled  to  recover  in  tort”     1. Emotional  damages  are  allowed  –  window  into  the  morality  of  breaching   2. Proof  of  damages  new  businesses     xii. General  Expectancy  Damages  Calculation     Loss  of  value  of  the  breaching  party’s  performance   +any  incidental  and  consequential  costs  generated  by  the  breach   -­‐ any  payments  received  from  the  breaching  party   -­‐ -­‐any  costs  saved  as  a  result  of  the  breach  =   Expectation  Damages  of  the  Aggrieved  Party     xiii. UCC  Sections:  §2-­‐709,  §2-­‐715   1. Sellers  Expectancy  Damages:     K  Price  –  Market  Price  –  Incidental  expenses  +  Expenses  avoided     2. Buyer’s  Expectancy  Damages:     Price  of  substitute  goods  –  K  price  –  incidental  expenses  +  expenses  avoided     xiv. Liquidated  Damages:  §2-­‐718(1)  –  partiers  can  agree  to  damages  of  a  breach  in   their  K   1. Liquidated  damages  cannot  be  “penalties”  (pound  of  flesh)  any  award   unreasonably  disproportionate  to  the  actual  damages  incurred  will  be   considered  a  penalty,  and  will  not  be  enforced  §2-­‐718(1).   a. Case  example  where  we  had  penalty  damages     xv. Incidental  Damages:     1. Sellers  §2-­‐706,  §2-­‐710  seller  may  recover  incidental  damages  only  (i.e.  stop   delivery  charge,  commissions,  storage,  resale  costs)   2. Buyers  §2-­‐715  –  Buyer  gets  incidental  and  consequential  damages   xvi. Direct  Damages     1. Damages  for  price  §2-­‐708(1)  market  price  –  K  price;  OR   2. Damages  for  price  if  resold  2-­‐706  resale  price  –  K  price;  OR   3. Lost  Profit  §2-­‐708(2)  IF:   a. Damages  for  price  are  “inadequate”   b. The  seller  is  a  “lost  volume  seller”  –  he  has  access  to  an  unlimited   supply  of  such  items  (and  could  have  made  two  sales)     Lost  profit  =  retail  sale  price  –  K  price       • Neri  v.  Retail  Marine  Corp.  (65)  =  case  is  a  lost  volume  seller.   Would  a  second  sale  occur  if  the  first  was  not  breached?  UCC  -­‐  2-­‐ 708(2)   j. Limitations  on  Damages:     i. Foreseeability   (Hadley)     ii. Measurability  –   damages  must  be   measurable     iii. Mitigation  –  parties   must/should  attempt   to  mitigate  any  losses   from  breach  of  K.    (i.e.   resell  their  goods).     Burden  of  proof  is  one   the  D  to  prove  that  the   P  did  not  mitigate.  2-­‐ 709(b)       k. Measuring  Subjective  Losses     i. Peevyhouse  v.  Garland  Coal  Mining  (pg.  196)  –  whether  or  not  to  apply  diminution   in  value  v.  cost  of  performance  rule.  (both  rely  on  Expectation  principles)    Court   found  that  the  back  digging  was  incidental  to  the  main  purpose  of  the  contract.    My   opinion  –  a  misreading  of  the  dismal  swamp  problem.   1. Subjective  value  of  a  property  and  how  that  idea  is  applied.     2. Diminution  in  value=  (market  value,  objectified  loss)  the  difference   between  the  present  value  of  the  farm  and  what  its  value  would  have  been  if   D  had  done  what  it  agreed  to  do   3. Restatement  168  –       ii. Hawkins  v.  McGee  (210)–  Dr.  guaranteed  a  perfect  hand,  guy  got  a  harry  hand.    Trial   Court  instructed  jury  on  reliance.  Damage  –  getting  guy  back  to  his  burnt  hand.     iii. Sullivan  v.  O’Connor  (cap.  5)-­‐  nose  job  case  –  she  gets  the  recovery  for  out  of  pocket   expenses  and  worsening  of  her  condition  and  pain  &  suffering  of  3rd  operation  –   should  be  reliance,  because  it  is  more  manageable.  She  gets  the  consequential  dams   (3rd  operation)  in  both  ways  of  calculating.     1. Woodward  thinks  she  SHOULD  get  reliance   2. Jury  had  no  relevant  evidence  of  pain  and  suffering  for  3rd  operation  but  that   is  what  they  awarded  anyways   3. Jurors  were  obviously  in  practice  thinking  about  2nd  operation  pain  an   suffering  when  they  awarded  the  third.   4. no  ruling  to  apply.    Mostly  dicta.             Limitations   on   Damages   Foreseeability   Measurability  Mitigation     Spring  Semester     Favorite  quote  of  the  semester:  "this  being  the  statute  of  frauds,  no  argument  is  too  stupid  to  advance."     I. Franchises     a. Hoffman  v.  Red  Owl  Stores  (377)   i. Hoffman  relied  on  Red  Owl  promise  and  sold  bakery  &  grocery  store  in  reliance  for  a   Red  Owl  franchise   ii. Promissory  estoppel  case,  damages  are  reliance,  but  needed  new  trial  on  awarding   damages     b. Economic  Considerations   i. Franchisee  needs  to  know  projection  of  proceeds  v.  the  value  of  their  investment   ii. Due  diligence  requires  $  and  cooperation     c. Franchise  Contract   i. Favorable  to  franchisor  because  they  created  it   ii. Strict  rules  to  protect  “brand  trademark”   iii. Termination  provisions  potentially  onerous  (personal  satisfaction  clause)   iv. Surprise  inspections   v. Ability  to  dictate  location     d. So  what  are  the  benefits  to  a  Franchisee?   i. Biz  reputation  =  “goodwill”   ii. Advertising/marketing   iii. A  stable  product   iv. A  biz  model   v. Training   vi. HR  support  (i.e.  employee  manuals)     e. Collins  Drugs  v.  Walgreens  (400)   i. Ending  the  franchise  relationship   ii. Economic  problems  are  not  good  cause   iii. Small  drug  store  wanted  injunction  (think  NIPSCO-­‐  we  aren’t  going  to  allow  this,   they  just  want  bargaining  power)  did  get  $  damages     II. Long  Term  Employment     a. ADR  in  collective  bargaining     b. Grievance  Processes  Under  Collective  Bargaining   i. In  Re  Trans  World  Airlines,  Inc.  (419)   1. Employment  agreement  negotiated  by  union  on  behalf  of  its  members,  fried   for  “insubordination”  instead  of  long  hair   2. Arbitrators  are  expected  to  bring  in  their  own  experience  and   understandings,  not  “logical”  or  “neutral”   c. Judicial  Review  of  Arbitration   i. The  trilogy  =  labor  union  cases  decided  on  same  day  in  1960   1. US  Steelworkers  of  America  v.  Warrior  &  Gulf  Navigation   d. Employment  Relations   i. Employer’s  assertion  of  power  to  hire  and  fire  employees     e. Proving  Employment  Contracts  &  Gaining  Meaningful  Remedies:   i. McIntosh  v.  Murphy  (430)   1. Justifications  for  statute  of  frauds:   a. Evidentiary   b. Cautionary   c. Channeling   2. McIntosh  gets  mgmt.  job  in  Hawaii,  has  to  move,  is  there  for  2.5  months  then   gets  fired   3. Reliance  was  such  that  injustice  could  only  be  avoided  by  enforcement  of  the   contract     f. Employment  at  Will     i. Employment  at  will  means  an  employee  can  be  discharged  at  any  time   1. A  doctrine  to  get  out  of  the  “swamp  of  employment  relations   2. Some  argue  that  it  is  an  “interjudicial  race  to  the  bottom  in  employment   standards”     ii. Modern  Development  of  @  Will  Doctrine   1. Discrimination  cases  have  forced  due  process  into  the  workplace   a. Companies  need  strong  records  that  the  employee  was  bad  at  their   job  to  fire  them   b. Forces  companies  to  develop  processes  to  document  poor   performance   c. Thereby  essentially  builds  “cause”  into  the  firing  process     iii. Non-­‐Compete  Agreements  (in  PP  section  later)   1. General  rule  =  must  be  reasonable  in  geography  &  time     iv. Wagenseller  v.  Scottsdale  Memorial  Hospital  (447)   1. In  absence  of  a  contractual  provision,  an  @  will  employee  may  be  fired  for   good  cause  or  for  no  cause,  but  NOT  for  bad  cause     v. Forer  v.  Sears   1. “permanent  employment”  =  at  will  employment,  according  to  WI  court   vi. Skills  &  Value  Problem  Checklist  w.  Employment  @  Will  Client   1. Conflict  of  interest  check   2. Engagement  letter   3. Client  likely  wants  to  know  practical  advice  of  “what  to  do”  next   4. Inform  client  of  downsides  of  litigation   5. Give  advice  on  what  you  think  are  all  potential  consequences     III. Long  Terms  Relationships  in  Commercial  Transaction     a. Lawyers  need  to  do  due  diligence  –  control  risk     i. Look  at  the  business  assets:   V. Social  Controls  on  Free  Contracting         a. Illegal  Contracts     i. Illegal  contracts  are  UNENFORCEABLE   1. Usually  hidden  values  are  operating  in  an  illegal  contract  case   2. Knowledge  of  WHY  the  party  wants  a  provision  is  important  to  determine  if   it  is  fraudulent     ii. Edna  Carrol  v.  Agenes  Beradon  (494)   1. Legal  form,  illegal  substance     2. Prostitution  house  k,  really  a  contract  for  the  business   3. Beardon  stopped  paying  for  prop  and  then  said  she  didn’t  have  to  keep   paying  for  the  k,  B  tried  to  raise  illegal  k  as  defense  –  mortgage  with  Edna     iii. Coma  Corp  v.  Kansas  Dept.  of  Labor  (499)   1. Restaurant    tries  not  to  pay  “illegal  immigrant”   2. We  want  to  protect  wage  earners  so  we  want  to  pay  undocumented   immigrants   3. Comparative  fault  in  illegal  contracts     iv. Karpinsky  v.  Collins  (Danzig)   1. Milk  price  controls  case,  P  wants  to  recover  $  for  secret  rebates/kickbacks   2. Comparative  fault  in  illegal  contracts   3. In  pari  delecto=  equally  at  fault   4. If  you  are  NOT  in  pari  delecto  you  can  get  restitution  damages,  so  a  k  doesn’t   matter  anyways         social   limits  to   free  K   illegal   k   violat e  PP   Dures s   Undue   Inplue nce   Misre prese ntatio n   Fraud   Good   Faith   b. Contracts  that  Violate  Public  Policy     i. Rest.  §178  –  a  promise  is  unenforceable  if  the  interest  in  its  enforcement  is  clearly   outweighed  in  the  circumstances  by  a  PP  against  the  enforcement  of  such  terms     ii. Fullerton  Lumber  Co.  v  Torborg  (Danzig)   1. No  compete  clause  in  employment  contract,  guy  left  to  start  his  own  lumber   biz   a. Was  a  10-­‐year  no  compete  too  long?   2. Damages  probably  impossible  to  calculate   3. “blue  pencil  test”  =  the  court  can  delete  shit  from  the  k  and  what  is  left  is   “still”  what  the  parties  agreed  to…(cough  cough  BS)     iii. Anti-­‐Competitive  Contracts  (Non-­‐Competes)   1. Rule:  non  competes  must  be  reasonable  in:     a. geography;  and   b. time.   iv. Sources  of  PP:   1. Legislation  (best  bet,  judge  doesn’t  have  to  stretch);  or   2. Judicial  decision.     c. Contract  &  Choice     Balance  to  Protect  Conflicting  interests:         i. Capacity  to  Contract     1. Mental  incapacity,  drugs,  age     2. Mental  incapacity  to  contract   a. Restatement  §15  concerned  with:   i. Status  of  individual;  and   ii. Knowledge  of  “predator”   1. Understanding   2. Act  in  a  reasonable  manner     3. Ks  Made  under  the  Influence  of  Drugs   justipied   expectations  &   security  of   transactions   persons  unable  to   protect  themselves   against  imposition   a. Harlow  v.  Kingston  –     i. you  don’t  necessarily  have  to  be  drunk  at  time  of  contracting,   drunken  debauch  that  caused  P  to  agree  to  a  K  to  continue   drinking  bing  upheld  as  a  voidable  contract   ii. Important  fact  –  grossly  inadequate  consideration   b. Restatement  §16  –  in  most  instance  other  party  must  have  reason  to   know  that  by  reason  of  intoxication  the  other  party  was  unable  to   understand  the  nature  and  consequences  o  the  transaction  or  to  act  in   a  reasonable  manner   4. Ks  Made  with  Minors   a. Infancy  =  defense  that  a  contract  made  with  a  minor  is  voidable  at  the   minor’s  election   b. Restatement  14  –  only  voidable  contractual  duties  for  anyone  under   18   c. PP  rationale  –  easy  to  administer  bright  line  rule,  don’t  have  to   determine  relative  intelligence  of  minors,  etc.     ii. Duress    (threat!)   1. Duress  =  Lack  of  free  will,  proper  v.  improper  advantage  taking   2. Mitchell  v.  CC.  Sanitation  Company  (533)   a. P  signed  2  releases  to  his  personal  injury  on  the  job,  employer   threatened  to  fire  him  if  he  didn’t  sign,  incurred  much  more  in   personal  injuries  than  the  $  he  got   3. The  Selmer  Co.  v.  Blakeslee  Midwest  (541)   a. General  contractor  must  provide  material  for  subcontractor  to  do   their  work  but  breaches  k  by  delivering  material  late,  despite  this   breach  the  subcontractor  agrees  to  an  oral  k  to  complete  the  work   provided  that  GC  pays  extra  cost   b. General  rule  =  If  you  extract  a  promise  by  means  of  a  threat,  the   promise  is  unenforceable   c. The  mere  stress  of  business  conditions  will  not  constitute  duress   where  the  D  was  not  responsible  for  the  conditions   4. Restatements  §174-­‐177     iii. Undue  Influence  (relationships!)     1. Unfair  persuasion;  and  other  party  was  vulnerable  to  such  persuasion.   a. not  a  precise  rule  but  must  be  something  other  than  an  impersonal   market  relationship     2. The  court  needs  to  see  the  weakness  of  the  party  wanting  to  get  out  of  the   contract  as  excusable     3. Undue  Influence  problems  often  arise  in  gifts  &  wills     4. Proper  remedy  are  voidable  k  obligations  and/or  restitution  of  any  benefits   conferred     5. Fiduciary  =  person  with  an  obligation  to  look  out  for  the  interest  of  another     a. Held  to  a  higher  standard  or  fairness   d. Form  Contracts     i. Contract  of  Adhesion  =  boiler  plate,  standard  form  k   1. K  where  T&Cs  are  set  by  1  of  the  parties  and  offered  on  a  “take  it  or  leave  it   basis”   ii. Battle  of  the  Forms  =  UCC  2-­‐207     iii. McCutcheon  v.  David  MacBrayne  Ltd.  (583)   1. Look  at  this  again…   2. UCC  2-­‐719  (3)   iv. Yauger  v.  Skiing  Enterprises  (592)   1. Skiing  case,  little  girl  dies   2. Form  was  called  an  “application”  not  a  waiver     v. Choice   1. ProCD,  Inc.  v.  Zeidenberg  (599)   a. Shrink-­‐wrap  licenses  –  retail  software  packages  are  covered  in   shrink-­‐wrap  and  vendors  write  licenses  that  become  effective  as  soon   as  the  customer  tears  the  wrapping  from  the  package     i. Shrink-­‐wrap  licenses  are  enforceable  unless  their  terms  are   objectionable  on  grounds  applicable  to  contracts  in  general.     vi. Hill  v.  Gateway  2000,  Inc.  (609)   1. Arbitration  clause,  30-­‐day  return…   2. Acceptance  was  triggered  when  the  Hill’s  kept  the  computer  for  more  than   30  days     vii. Closik  (Closec)  v.  Gateway….     viii. Plain  language  statute  =  biz’s  required  to  use  common  language  &  appropriately   divide  headings  in  form  k’s   1. PP  rationales:   a. Better  for  biz  because  consumer  knows  the  terms   b. Easier  for  biz  to  win  in  any  litigations     ix. “click  to  agree”  doctrine  –  well  established  and  accepted  in  k  law,  k  forms  at  the  click     x. Reasonable  Expectations  as  a  Limit  to  Form  Ks     1. C&J  Fertilizer,  Inc.  v.  Allied  Mutual  Insurance  Co.  (616)   a. Burglary  insurance  policy  so  narrow  not  what  a  reasonable  person   would  expect,  had  to  be  an  outside  job  and  visible  marks  by  tools   b. Court  considered  the  education  of  the  guy  who  signed,  he  had  signed   similar  insurance  provisions  that  did  not  contain  this  language   i. Restatement  211  (3)  applied     xi. Some  Risk  shifting  devices:   1. Disclaimer  of  consequential  damages   2. Mandatory  arbitration       e. Warranty,  Disclaimers  &  Remedy  Limitations     i. Warranty  =  a  promise,  most  likely  to  be  in  a  sale  of  goods  case     ii. UCC  Sections:   1. §2-­‐312  -­‐  Warranty  of  Title  Against  Infringement   2. 2-­‐313  -­‐  Express  Warranties  by  Affirmation,  Promise,  Description,  Sample   3. 2-­‐314  -­‐  Implied  Warranty  Merchantability   4. 2-­‐315  -­‐  Implied  Warranty  Fitness  for  a  Particular  Purpose   5. 2-­‐316  -­‐  Exclusion  or  Modification  of  Warranties       f. Unconscionability     i. Unconscionability  doctrine  is  a  technique  for  controlling  the  quality  of  a  transaction   when  the  free  market  is  ineffective.   1. UNCON  focuses  on  (1)  unfair  process  AND  (2)  unfair  results.   ii. UCC  §2-­‐302   1. Effect  of  the  UCC  provision  is  to  reduce  unconscionability  applications   iii. Restatement  §208     iv. How  to  Evaluate  Unconscionability:   1. Procedural;  AND   2. Substantive     v. Williams  v.  Walker-­‐Thomas  Furniture  Co.  (668)   1. Rent-­‐to-­‐own  industry   a. A  way  to  skirt  around  financial  industry  regulations,  as  rent  to  own   you  are  still  acting  like  a  creditor,  but  don’t  have  to  deal  with  all  the   regulation   2. Monthly  installment  k   3. Add  on  clause   4. Cross-­‐collateral  clause  =  company  puts  your  $  and  spreads  it  a  little  bit   among  ALL  the  shit  you  owe  $  on,  so  you  can  never  really  pay  off  any  one   item   5. Replevin  =  take  back,  repossess  (§2-­‐716(3))     vi. Jones  v.  Star  Credit  Corp  (675)   1. K  was  for  monthly  rental  of  a  $900  freezer,  P  paid  $1,234  towards  the  freezer   2. Max  retail  price  of  the  freezer  was  actually  $300   3. Salesman  came  into  the  house  to  k,  people  “let  their  guard  down”     vii. Allen  v.  Quality  Furniture  (Danzig)   1. Predatory  lending  targeted  at  low  income  communities   2. P  thought  she  was  buying  food  at  cheap  price,  but  instead  bought  commercial   freezer   3. “unconscionable  facts:”   a. 8th  grade  education,  low  income,  taking  care  of  kids  running  around,   sales  pitch  in  her  house,  sales  pitch  is  like  fraud  throwing  in  the   freezer,  attorney’s  fees  provision  is  one  sided  in  favor  of  company  no   matter  what   4. Acceleration  Clause  =  everything  you  owner  on  a  lease  loan  becomes  due  at   the  time  of  default   5. Holder  in  Due  Course  =  “dumping  paper”  means  that  the  normal  warranty   claims  are  gone,  the  3rd  party  is  a  BFP  who  isn’t  held  to  those  helpful   standards   a. Seems  like  a  fraudulent  way  to  abuse  protective  legal  principles   viii. Remedies  for  Unconscionability  =  a  court  may:  refuse  to  enforce  a  k;  blue  pen  test   the  offending  clause  and  enforce  the  remainder  of  the  k;  or  limit  the  application  of   the  offending  clause  to  avoid  any  unconscionable  result     ix. Consumer  Arbitration     1. Kilgore  v.  Keybank   a. Similar  to  a  Ponzi  scheme:  helicopter  school  gets  paid  cash  today  for   its  current  expenses,  not  the  thing  [education]  you  are  buying  in  the   future   b. Damages  sought  was  an  injunction,  this  tactic  “advanced  the  ball”  for   the  clients  because  it  helped  to  keep  the  case  in  judicial  court   i. CA  doesn’t  allow  injunction  in  arbitration     2. AT&T  v.  Concepcion   a. California  state  contract  law,  which  deems  class-­‐action  waivers  in   arbitration  agreements  unenforceable  when  certain  criteria  are  met,   is  preempted  by  the  Federal  Arbitration  Act  because  it  stands  as  an   obstacle  to  the  accomplishment  and  execution  of  the  full  purposes  and   objectives  of  Congress.     3. Why  “Opt-­‐Out”  Options  in  Standard  Ks  Doesn’t  Matter  to  Biz:   a. Consumers  don’t  read  k  anyway   b. Small  window  of  time  to  opt  out  usually  by  the  time  someone  has  a   dispute  they  have  missed  the  time  period   c. Consumers  don’t  recognize  legal  terms  as  well  as  biz  terms  like   payment   d. The  odds  of  small  #  of  people  who  will  opt  out  having  causes  of  action   later  are  even  smaller