1. Are we in UCC or Common Law?  Goods vs. Services [princess cruise test]  Go to C-Law or UCC sheet o Both Merchants? 2. Formation Issues [oral or written]  At what point was there a contract? o Agreement formed from preliminary negotiations o Agreement to negotiate in good faith o Formal contract contemplated  Offer  Acceptance  Consideration  Revocation?  Part performance?  Battle of the forms 3. Does statute of frauds apply?  6 types of contracts  Is there a writing to satisfy the SOF? o Essential terms  If no, is there an exception? 4. Contract Interpretation  Integrated Writing/Partially Integrated Writing  Parol Evidence Rule o Exceptions 5. Other relief theories  Promissory Estoppel  Unjust Enrichment 6. Implied Terms  Good faith  Warranties – only in UCC except for residential leases/homebuilders 7. Contract Avoidance  Minority  Undue Influence  Duress  Incapacity

*** Are we in UCC or common law? *** CHECK FORMATION FIRST

Contracts I – Boyack – Fall 2010 1 1. DOES Statute of Frauds APPLY?

Statute of Frauds is: an additional requirement for contract to be enforceable. Non-compliance with the statute of frauds is an affirmative defense 1. Executor/Administrator to pay debts of estate from his own assets 2. Suretyship (debtor, creditor, surety) <~~3 parties a. Surety promises to pay if debtor fails [there is consideration for promise, but surety isn’t recipient of consideration] b. EXCEPTION: If surety makes promise for his own benefit and receives some direct economic benefit from doing so; oral is enforceable 3. Promises in consideration of marriage [prenuptial, contingent on others’ marriage] 4. Contracts for the transfer of any interest in land (including leases, easements, mortgages, purchase agreements, deeds) 5. Contracts that cannot be performed in one year a. Performance must take longer than one year (if any way to be performed or terminate according to its terms in one year, no writing required); Breach is not a natural termination. b. Performance will not be completed within a year of contracting; it would be breach of contract to perform before the one-year date. 6. Sale of goods under UCC over $500 [SEE UCC] 7. Other specific consumer contracts (certain loans and cc transactions) If mods to any of these, mods must also be in writing

2. IF SOF APPLIES, IS WRITING SATISFIED? Writing must have:  PROMISE + ESSENTIAL TERMS [PRICE] + SIGNED BY D /party to be charged  Writing can be pieced together – tacking – If, essential terms, at least one doc signed by D, and unsigned doc on face references other doc, assent to terms of unsigned doc  Signature may be sufficient to AUTHENTICATE but not to BIND.

3. IF SOF APPLIES BUT WRITING IS NOT SATISFIED [IS THERE AN EXCEPTION]?

Contracts I – Boyack – Fall 2010 2  Bars to SOF defense: D waived right to defense, D affirms validity of contract, FULL performance of contract (can’t waive previously completed K)

 Partial Performance (Real property ONLY) – equitable remedy, not in suit for damages: . Has buyer taken possession? . Payment of all or part of purchase price? . Valuable improvements made by buyer?

CLASSIC ESTOPPEL: NO SOF defense exists for a D who: [NOT ALL STATES HAVE ADOPTED] 1. promises he already signed a writing 2. promises that he will sign a writing 3. assured that no writing is required (and there is RELIANCE)

Promissory Estoppel [NOT UNIVERSALLY ACCEPTED]– underlying promise of contract; creates CONTRACT REMEDY b/c THERE IS CONSIDERATION, just removing the WRITING issue. [relies on oral promise of CONTRACT not of WRITING] Must show: Promise + Reliance + Detriment + Injustice.  Injustice: Availability and adequacy of other remedies.  Make sure there was CLEARLY a contract.

Restitution: DON’T FORGET ABOUT USING IT (won’t fix SOF but would give you FMV of services)

1. WAS there a contract? (§1 Contract defined) Implied in fact contracts are agreements that meet all of the requirements of contract except that the agreement is implied rather than express (doesn’t have to be oral/written; can be actions)

AT WHAT POINT IS THERE A CONTRACT? 1. Contract formed as a result of preliminary negotiations a. Was there objective commitment by both parties to be bound? REASONABLE PERSON TEST i. Language of preliminary negotiations, specificity, actions, formal contract contemplated?, reservations of commitment?

Contracts I – Boyack – Fall 2010 3 2. Contract is an agreement to negotiate in good faith a. What is good-faith? b. Was there consideration? [promise in exchange for promise. If one sided, use PE to recover] c. Was there reliance? d. What is recovery? [reliance damages hard b/c speculative - no K guarantee] 3. Contract is not finalized until formalized a. If party has reason to know no obligation exists until other terms assent to b. Factors to consider: i. Are they normally put in writing? ii. Were we missing lots of details? iii. $$ is it a very large amount? iv. Standard form? v. Was any preparation for performance taken? vi. Statements or actions during negotiations, trade usage, course of dealings or performance

2. WAS THERE A PROMISE? a. RULE: Manifestation of objective commitment to be bound (Oral, written, or conduct (CHECK FOR CONTRACT AVOIDANCE THEORIES) i. Not just a prediction or intention for something to happen ii. Can be a combination of statements = promises iii. Reasonable person test Objective Theory 1. EXCEPTION: not enforced if promisee knows promisor did not intend to be bound; promisor’s subjective intent means nothing 2. §77 Illusory promises: NO ONE is bound. (MAKE SURE YOU DON’T HAVE REQUIREMENTS/OUTPUT K UNDER UCC)

2. WAS THERE AN OFFER? b. Remember, only assent from the other side is needed (Yes, OK, done). i. No further assent needed by offeror ii. Rule: An offer is a communication of a commitment to be bound to specific terms subject only to a promisee’s acceptance. c. Distinguish offers from invitations for an offer or preliminary negotiations (look for important terms) i. Advertisements to the general public create mere invitations to offer (§26) 1. Rule: If the ad objectively manifests a commitment to be bound, subject only to acceptance by a buyer, then it is an offer.

Contracts I – Boyack – Fall 2010 4 3. WAS OFFER REVOKED/TERMINATED? Offeror can generally revoke offer any time prior to acceptance. Unless option paid for with consideration (See CONSIDERATION section) d. Ways to revoke/terminate offer (§36)  MAILBOX: Offers and Revocations of offers are effective UPON RECEIPT (not dispatch) 1. Offeree rejects or makes a counteroffer a. Unless offeree manifests intent to the contrary, a counter-offer terminates the offeree’s power of acceptance (unless offeree says otherwise, counteroffer = rejection as well as new offer) i. Offeror explicitly revokes ii. Offeree receives communication (from anyone) that offer is no longer open iii. Expiration by terms of the offer iv. Expiration by lapse of time (factual question – how much time is enough to terminate?) v. Offer terminates upon incapacity, death, etc. (death doesn’t revoke an offer if it’s already been accepted) vi. Special situation of unilateral contract w/performance started (Restatement §45) 3. WAS THERE ACCEPTANCE? a. Rule: A reply which is conditional on the offeror’s assent to terms additional or different than from those offered is not an acceptance but a counter-offer. [Mirror Image Rule] ONLY IN COMMON LAW NOT UCC b. FORM OF ACCEPTANCE INVITED (§30): Any manner, by any medium reasonable UNLESS indicated otherwise by language or circumstances. c. You can’t accept an offer you don’t know about. d. Mailbox Rule i. Offers and Revocations of offers are effective UPON RECEIPT (not dispatch) ii. Acceptances of offers are effective UPON DISPATCH (not receipt)

e. Unilateral Contracts (ACCEPTANCE BY PERFORMANCE)

Contracts I – Boyack – Fall 2010 5 i. If the offeror mandates that the only way to accept is by performance and until acceptance (required performance is rendered) neither party is bound 1. Promise or performance: unless they state that you have to accept by performance, you can accept by promise, in which it’s not revocable before you perform. (lady who wants cousin to watch dog example) 2. If person rendering performance knows the other person would have no way of knowing, contractual duty of offeror discharged UNLESS a. Offeree notifies reasonably b. Offeror learns of performance w/in reasonable time c. Offer indicates no notice needed ii. §45: When offer invites performance as acceptance, not promise, the beginning of performance creates a pseudo-option contract (or an irrevocable offer); beginning of performance usually creates implied promise to complete performance iii. These can’t be revoked by offeror (or changed) during the period of the option What act = START of performance 1. And did performer reasonably notify of the start of performance? 2. And has the performer been reasonably diligent in continuing to perform (through completion)? *safe to start performance, make sure they know that, and continue to perform.

4. WAS THERE CONSIDERATION? Rule: Something of value to either the promisee or the promisor of a contract that is given or will be given by the promisee to the promisor in exchange for a performance or a promise of a performance by the promisor.

1. Bargained for exchange 2. RULE: Benefit/Detriment Test– Yes if the exchange results in either a benefit to the promisor or a detriment to the promisee (QUID PRO QUO) 3. RULE: Self-interested motive (more than just good feelings or love) that induced the promise

Contracts I – Boyack – Fall 2010 6 a. In Hamer possibly a benefit (unexpressed), and an expressed detriment (losing the legal right to do something). b. It isn’t a benefit/detriment to “bribe” someone to do something they are already bound to do c. NOT A GIFT i. Anti palimony – reduce to writing and make express that it is a joint venture. 4. Partial motivation is sufficient 5. If a benefit accrued to the promisor by giving something away for free, then consideration existed even though no money actually changed hands 6. We don’t care about adequacy; general rule is: you need sufficient (aka – actual) consideration 1. Gross inadequacy may be an indication that a bargain is tainted by fraud, mistake, misrepresentation, duress, or undue influence. 7. An exception to the past consideration bar: There IS a way to have something that has past furnish consideration for a present promise: a. Plowman -- ONE type of exception to the past consideration = no consideration rule: A promise to make good on past legal debts that are barred by some “technicality” There WAS a legal debt owed, but now it cannot be legally recovered because of one of 3 situations: 1. Debt is barred by bankruptcy 2. Debt is barred by statute of limitations 3. Debt is barred because when debtor incurred it, he was below the age of legal consent (under 18). b. (no consideration needed for modifications): modification will be binding IF . it is motivated by unforeseen circumstances AND . it is fair & equitable . (note – harder to modify under Restatement approach than UCC – must prove unforseen circumstances and fair/equitable terms)

For Unilateral Contracts: (The performance must be motivated by the offer – must have been accomplished as an acceptance)

Contracts I – Boyack – Fall 2010 7 5. OTHER RELIEF THEORIES: EQUITABLE ESTOPPEL 1. Elements of EQUITABLE ESTOPPEL: a) Statement of fact b) Made w/intention that it be relied on c) It is actually, reasonably relied on d) Detriment to the person relying e) Injustice in allowing fact stated to be disavowed PROMISSORY ESTOPPEL a) Promissory estoppel – requires PROMISE (commitment – first step in contract) b) RELIANCE: Reasonable, foreseeable, detrimental (Silence can be confirmation of promise during period of reliance) Does reliance have to entail a monetary cost? i. NOT always: Court found that a jury could find detrimental reliance based on the differences between the new job and the old job, i.e. different levels of stress associated with different jobs c) Injustice Sliding scale:  The more formal a commitment, the less reliance is needed  And the less formal a commitment, the more reliance is needed Difference between “detriment” in consideration & “detriment” in reliance?  The detriment that constitutes consideration must be bargained for, or sought by the promissor, whereas the detrimental reliance under promissory estoppel theory need not have been sought by the promisor.

CHARITABLE SUBSCRIPTIONS AND RESTATEMENT Three approaches: Treat as K and look for consideration, stretch to find consideration, if promise, reliance, detriment, injustice, use PE, or use 90(2)

§90(2) – ONLY ADOPTED BY IOWA

Contracts I – Boyack – Fall 2010 8 In the context of a charitable subscription the Restatement 90(2) does not require a showing of reliance  “A charitable subscription…is binding… without proof that the promise induced action or forbearance”  But even in jurisdictions using 90(2) courts might sneak in a look at reliance - in the “injustice” element.

UNJUST ENRICHMENT Implied in law contracts are not contracts, it “is an obligation imposed by the law without regard to either party’s expressions of assent either by words or acts.”

Benefit – no promise needed Injustice Remedy is: restitution (pure equity); based on “breach of duty”

Defenses: No benefit was accepted; Retention of benefit was not unjust

Promissory restitution (unjust enrichment w/ a promise) Moral obligation or material benefit Breach of promise Remedy is: right to contract remedies

The Material Benefit Rule: you’ve been unjustly enriched by a benefit previously received (past consideration not sufficient unless expectation of repayment and unjust not to enforce) (treats detriment as contemporaneous with promise – only binding to extent to prevent injustice) or Under §86 of the Restatement; promise for a benefit received (escaped bull, medical care, women cleaning house)

“ Moral Obligation” 1 st: Debts barred by a statute of limitations (§ 82) 2 nd: Debts of debtors in bankruptcy (§ 83). Note: a court will not imply promise to revive debts discharged in bankruptcy (must be express promise) 3 rd: Contracts made by a minor. (§ 85) Note: these are all cases of PRIOR legal obligations (“moral” is a misnomer here).

§116 of the Restatement of Restitution – person who supplies services, although acting w/o others’ knowledge if entitled to restitution if: 1. unofficiously with intent to charge AND 2. things/services needed to prevent serious bodily injury or pain AND 3. no reason to know other would not consent AND 4. impossible for other to give consent Problem will be the intent to charge.

§20 Restitution: Protection of Life/Health

Contracts I – Boyack – Fall 2010 9 Professional services to treat life/health has claim for restitution to reasonable value of services

§107(2): Implied-in-fact created when someone requests services performed or transfer of property: infer bargain to pay.

§117: Preservation of another’s things or credit Lawful possession of things he took Reasonably necessary to render services before being able to communicate with owner No reason to believe owner wouldn’t want you to act Intended to charge Things have been accepted by owner

Courts have been reluctant to find intent to charge when plaintiff is a non- professional

NY legislation: statute that specifically allows promise based on “moral obligation” to be enforceable if made in writing & signed by promisor

COMMON LAW Option contracts (mini contracts): A promise to keep an option open is only enforceable if the promise is “paid for” (by some exchange – supported by consideration) PROMISE + CONSIDERATION (T4, NO ABILITY TO REVOKE OFFER)

MAILBOX RULE DOES NOT APPLY TO OPTION CONTRACTS Three approaches to consideration in option contracts (sliding scale)  Classical contract view (actual consideration)  Formality requirement as a substitute for consideration (NOMINAL CONSIDERATION)  Or, following §87(1)(a), since nominal consideration is just formality anyway, formal language used as a substitute for consideration in option contracts (magic language or PURPORTED CONSIDERATION approach) (adopted by Texas & a handful of other states)

You don’t need consideration for an option contract if it is part of your rights purchased under another contract. Ex: option to renew lease in an existing lease contract. (You are already paying rent).

You can revoke before your time is up, and then change your mind and that’s okay.

CONTRACTING SITUATIONS Ex: prime bids on contract (extends offer to client); uses subcontract prices (uses lowest bid of sub); awarded contract by client (acceptance); sub revokes.

Contracts I – Boyack – Fall 2010 10 Issue: even if sub’s bid was an offer, no communication of acceptance before it was revoked. Also can’t argue classical contract theory b/c difficult to make argument that sub expected to be bound by mere use of bid.

Argue option K? No factual basis to imply a promise. Hard to show any consideration.

James Baird Application of promissory estoppel to an unaccepted offer – a big change in law  Promise: IMPLIED (sub keeps bid open for reasonable time so prime can accept as soon as awarded contract)  Reasonable expectation: prevailing practices in the industry: sub should realize prime may use his bid. Precludes recovery if prime knew there was a mistake.  Enforcement necessary to avoid injustice: Did they act in good faith to accept bid? Did they bid shop?  Remedy: Necessary to have a claim for breach of contract because offer is being kept open by PE. Would hold sub liable for extra cost of using another sub reasonably.

1. Drennan: used §45, the law anticipates the protection of a promisee who has not yet accepted an offer if they’ve started to rely on it and draws analogy to the situation in Drennan (sort of like starting performance…) A critique: §45 – is NOT really the same thing as the estoppel substitute for acceptance here. Most later cases in area of GC/Sub bidding follow Drennan

2. Fair to hold sub to its offer b/c should have realized bid would be relied upon.

§87(2): “An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice”  But the principle set forth in §87(2) has not necessarily been embraced by courts outside of the general contractor/ subcontractor problem (but the concept is now in the law and it sometimes crops up in other scenarios)

When are they not bound?  Express revocability  Post-award bid shopping  Mistake known to GW  Offer only expressly an estimate

General rule: Revocation is only precluded if:  Option contract exists  Unilateral contract + part performance (Restatement 45)  Restatement 87(2) (if it applies)  Rule is that promissory estoppel MAY create an option contract in absence of consideration. Restatement §87(2)

Contracts I – Boyack – Fall 2010 11 Basic Recovery Contract – where you would have been with contract Promissory Estoppel – recovery based on reliance (not full, but reimbursement for actual loss) Restitution – strips you of benefit

ELECTRONIC CONTRACTING 1. Shrinkwrap  Terms are included within packaging – seller’s sale is offer  Customer accepted by keeping purchased item  How do we deal with these new terms proposed? o Buyer can a)return or b)keep – acceptance?

WHO OFFEROR IS May determine if 2-207(2) is applicable (new terms or not) 2. Browse-wrap  Terms included on website but buyer not required to click ‘I agree’  Assent implied by use  Usually terms of a license agreement [not in UCC] than a purchase contract

Enforceable if 4 Requirements Met:  User is provided w/ adequate notice of the existence of the proposed terms  Use has a meaningful opportunity to review terms  User provided w/ adequate notice that taking a specific action manifests assent to the terms  User takes action specific in the latter notice.

3. Click-wrap  ‘I accept’ required  Clicking is adequate manifestation of assent

CONTRACT INTERPRETATION Unambiguous meaning is question of law not question of fact; court will then bring in evidence so finder of fact can determine meaning

Subjective  Intent (autonomy)  Might not mean the same thing  Hard to determine (inefficient)  East to avoid enforcing agreements Objective  Plain meaning  Efficient and fair  Might enforce unwanted term no one intended  Expectation/predictable/efficient

Contracts I – Boyack – Fall 2010 12  Words can have multiple meanings

Modified Objective Approach  Agreed upon meaning trumps – subjective approach to agreed terms  If disagreement, see §201(2) o Did parties know what other thought? o Did they have reason to know? o Least cost avoider of confusion bears burden to clear up risk o If neither know or have reason to know court may find no contract or interpret to create result and gap fill

How to interpret: 1. Look at language of contract 2. Look at words surrounding Something can be incorporated by reference 3. Look at negotiations True intent can be shown by course of conduct 4. Trade usage 5. Legal standards 6. Best guess/common sense – Posner; reasonable construction

Methods of interpretation: I. Ordinary, general meaning (not technical) II. Favor what validates purpose of K III. Specific term preferred over general IV. Handwritten trumps pre-printed V. General limited by specific words VI. Meanings affect other words VII. CONTRA PROFERENTUM: CONSTRUE AGAISNT DRAFTER (last resort or when unequal bargaining power)

Interpreting Adhesion contracts: What makes adhesion contract?  Standard form (not sufficient in itself); non-negotiable; imbalance of power  Still valid/binding but o 1. Construe against drafter OR o 2. Apply reasonable expectations test. . Reform contract to give effect to reasonable expectation of least advantaged party even if explicit language says otherwise  SOME COURTS LIMIT TO ONLY INSURANCE POLICIES. FL REFUSES TO ADHERE.  Customer not bound to anything couldn’t have reasonably expected. Can’t sneak in terms you know someone wouldn’t agree to. o How do you prove they wouldn’t have reasonably expected? . Bizarre/oppressive test

Contracts I – Boyack – Fall 2010 13 . Eliminates dominate purpose of contract . More likely to not have had opportunity to read, illegible, or hidden terms

PAROL EVIDENCE  Rule of substantive law!  Cannot contradict writing or vary terms of integrated writing  If partially integrated, can supplement but not contradict  If integrated writing – no new evidence allowed (four corners approach/classic/willistonian or, look at evidence to determine if integrated restatement approach/liberal/corbin)  Merger clauses can signal complete agreement but aren’t dispositive of a complete agreement.

EXCEPTIONS: what can ALWAYS come in: 1. Contract is invalid (fraud, duress, minor) 2. Collateral agreement (new contract/separate agreement) - doghouse collateral, warranty not 3. Oral condition precedent to formation (gives validity) 4. Evidence of no consideration 5. Future agreements 6. Equitable remedy (judicial reformation) 7. Anything let in to interpret contract if ambiguity.

Implied Terms In fact – solely on intent of parties In law – could be intend, what most parties would intend, imposed by court b/c of policy

Good Faith [look at purpose of K and expectations of parties] Best Efforts (objective/subjective)  Fiduciary  Joint-maximization  Usage of trade  Lack of bad faith

Reasonable Efforts  Objective

Two standards to apply good faith – trier of fact will decide  Subjective honesty in fact  Objective of observations and reasonable standards. A party’s right to approve for some sort of work provided or product delivered is limited by good faith.

Satisfaction:

Contracts I – Boyack – Fall 2010 14  Honest (subjective)  Reasonable person (objective)

When party’s discretion is aesthetic, courts say party can reject based on subjective dissatisfaction (rather than objective)

Wood v. Lucy, Lady Duff  implies good faith (consideration would fail if not) to exclusive license contract  Cardozo: implies reasonable efforts o If not exclusive license agreement: the minute you sell goods, you have a contract. (unilateral offer, accepted by performance) o Non-exclusive arrangements are not contracts yet – just price quotes  You can bargain around reasonable efforts if you do so explicitly

BREACH OF CONTRACT CLAIM FOR BAD FAITH

What is bad faith vs. good faith 1. Concealing defect / fully disclosing material facts 2. Willfully failing to perform in full / substantial performance without deviation 3. Abusing bargaining power to create price increase / no abuse 4. Preventing broker you hired from closing deal / cooperating 5. Lack of diligence in mitigating other party’s damages / diligence 6. Arbitrarily exercising power to terminate contract / acting reasonable 7. Adopting overreach of contract language / fair interpretation 8. Harassing other party for assurances of performance / adequate assurances

Warranties SERVICE: THERE IS NO WARRANTY FOR SERVICES – MUST ARGUE GOOD FAITH PERFORMANCE OF CONTRACT

Warranty of Habitability or Warranty of skillfull construction (homebuilders sales) Decent quality and fit for habitation  Home is free from defective materials  Construction is good and workmanlike  Compliance with local building codes AND o Home is habitable . You can live in it . No latent defects  present and capable of emerging or developing but not now visible, obvious, active

Implied warranty of habitability in leases  NON DISCLAIMABLE  Housing codes read into all residential leases

Contracts I – Boyack – Fall 2010 15 o What about commercial?

Contract Avoidance _ NO COMMITMENT TO BE BOUND

Infancy doctrine Rule: minor can decide to get out of, therefore K’s with minors are voidable.  Put them back the way they wuz! (neither party gets benefit of K) o What if you can’t? o Exceptions . Kobe Bryant rule: you affirmed after an adult  If you fail to disaffirm or expressly affirm . Contract is for necessities (PH not one) – make sure you say its not . Minor is using it as SWORD in situation where consumable goods  Rule: IF Recission would cause loss to other party, value of recovery limited by Restitution IF JUSTICE SO REQUIRES WHEN: o Majority: if minor had been a bad actor (lied, deliberately destroyed) o Minority: anytime consumed situation UNLESS party who contracted: . Took advantage of minor . Acted in bad faith (overreaching, unfair terms) o What is recovery limited to? . Either benefit (fair value of benefit given to minor) or . Use – cost to other party of minor’s use Intoxication Less sympathetic. Only if SO drunk that you can’t understand what is happening AND other party has reason to know of that

Duress 1. Physical threat (overcomes will of reasonable person) - traditional 2. Threat to person’s property 3. Economic Duress a. Improper threat i. Prosecution, tort/crime, breach of duty of good faith (not always bad faith to breach contract though, be careful) b. No reasonable alternative – time, $$ sensitive /pressure c. Causation (threat must induce the action)

1. Contract procured by the threat = automatically void

**argument against people in ‘dire straits’ vs. inducement of contract b/c that party caused the economic duress (not all courts agree).

Undue Influence

Odorizzi – still had understanding but some amt of incapacity/duress together Causation issues with duress: policy was to fire him, publicity – do they have to? Or is motive to ruin his life?

Contracts I – Boyack – Fall 2010 16 Need: fragile state, but still cognitive ability (elder, sick, severe emotional strain, UNDULY SUSCEPTIBLE) (special relationship makes this stronger) AND Excessive pressure – convincing/compelling

Factors: 1. Unusual/inappropriate time 2. Consummation @ unusual place 3. Demand to finish 4. Consequences of delay 5. Multiple persuaders 6. Absence of advisers 7. No time to consult (Statements made)

Theory Shit Contracts  Freedom of contract o Efficiency interest – win-win o Liberty interest – freedom to enforce o Reliance interest – people’s expectations

 Charity o 90(2) . Remove uncertainty . Protect interests in charities/donors - formality . Reduce litigation . Flexibility remains (non binding promises allowed still) . Chilling on donations . Policy issues

 Parol Evidence o Evidentiary o Cautionary o Channeling

 Contract Avoidance o Classical approach . No value judgments/referee/enforcer/no paternalistic juidicary o Policies of Protection . When is protection really oppressing freedom to contract? . Minors: protect contracting parties, minors can cherry pick, discourage contracting with minors

Warranty of habitability  Caveat emptor is old fashioned

Contracts I – Boyack – Fall 2010 17  Industrialization of homes; inability to bargain  Lack of ability to inspect  Builder is least cost avoider

Last Shot Rule  Arbitrary (no ones reads)  Favors sellers (they send last documents – acknowledgement)  Didn’t intent to be bound to those terms

CONTRACTS UNDER UCC

NEVER A SUBSTITUTE FOR QUANTITY(unless you have output/requirements K) – ONLY ESSENTIAL TERM

§103-4 GOOD FAITH IMPLIED AND NOT WAIVED – cannot be disclaimed Good faith is opposite of bad faith; What is bad faith: voluntarily, malicious, undermining contract fruits (see common law stuff) Honesty in fact + observance of reasonable commercial standards Quantity can be – ‘all of our requirements’ or ‘as much as I can produce’ (output)

§2-306 Output, requirement and exclusive dealings (1) Actual output/requirements as may occur in GOOD FAITH, except nothing UNREASONABLY DISPROPORTIONATE to stated estimates or in absence of estimate, any normal or comparable amounts.  What is unreasonably disproportionate? o Past history of parties o Estimates by parties [set min/max] o Prior course of dealing o Prior course of performance

(2) Exclusive dealing imposes UNLESS OTHERWISE AGREED UPON, obligation to use best efforts to supply. [If not exclusive dealing, is it illusory?]

*Hard to attack integrated writing in UCC, b/c only essential term is Q. UCC gap fills.

§2-201 Statute of Frauds Requirement

Contracts I – Boyack – Fall 2010 18 (1) Sale of goods for $500 or more only enforceable if sufficient writing to indicate contract has been made that is signed by party against whom enforcement is sought. [doesn’t need to be sent to anyone] [don’t need to indicate who is buyer/seller]

What is writing: §1-201(43) – printing, typewriting, any other intentional reduction to tangible form.

Only enforceable up to amount of quantity [okay if inaccurate] stated in writing. Okay if other term incorrectly stated. (Unless goods are being used to ‘pay,’ then Q of those goods is needed).

(2) BETWEEN MERCHANTS – READ YOUR MAIL RULE If w/in reasonable time, writing confirming the contract rec’d and party rec’ing it has reason to know of its contents, satisfies SOF unless written notice of objection is given w/in 10 days of receipt. [burden on party rec’ing] OR if writing not sufficient for SOF, or wasn’t sent to right place.

(3) [EXCEPTION TO SOF] CONTRACT STILL ENFORCEABLE W/O WRITING IF: (a) Specially manufactured goods AND not suitable for sale to others AND substantial performance in making them has begun. (b) Admittance by party that contract was made (up to Q admitted) (c) Payment made AND accepted or goods received/accepted - INTENT TO TRANSFER - PHYSICAL TRANSFER OF POSSESSION - ACCEPTANCE

§2-202 Final Written Expression: Parol Evidence Terms of written agreement may not be contradicted by evidence of prior agreement or contemporaneous oral agreement BUT MAY BE EXPLAINED OR SUPPLEMENTED [TREATED AS PARTIALLY INTEGRATED] (a) by course of performance, course of dealing, or usage of trade (b) by evidence of consistent additional terms UNLESS the court finds the writing to be complete and exclusive statement of terms agreed to.

§1-303 Course of Performance, Course of Dealing, Usage of Trade **USAGE OR TRADE AND COURSE OF PERFORMANCE CAN COME IN ALWAYS AS LONG AS NOT INCONSISTENT [MAY SUPPLEMENT OR QUALIFY]

(a) COP = sequence of conduct b/t parties to a particular transaction IF (1) agreement involves repeated occasions (2) the other party accepts or acquiesces w/o objection (3) ONE instance of performance is insufficient - two is okay if that would equal 100% of performances

Contracts I – Boyack – Fall 2010 19 (b) COD = sequence of conduct concerning PREVIOUS transactions before this transaction (Establishes common basis of understanding)(previous ones must be similar to this one) (c) UOT = practice/method having regularity of observance in place/vocation/trade, justifies that it will be observed with respect to this transaction. MUST BE PROVED AS FACTS.  1. Define Trade  2. Show usage exists b/t parties of that trade  Look at: How much usage? (regularity of observance)  Who is bound by it? (members of trade, non-members who are aware or dealing with members) – USE REASONABLE PERSON STANDARD. If you are brand new: grace period. Did they have reason to know? Show majority of users do this.  How long? (e) EXPRESS TERMS construed consistent w/each other. If such construction is unreasonable: Express > COP > COD > UOT

§2-104 Merchants a person who “deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill”

“between merchants” = both [look at this carefully, it’s not that narrow = if NOT a consumer (ie: you are reselling, probably a merchant] See: DINA’s delectables you fuck up.

§2-105 Goods “goods” = movable at time of identification of sale (includes unborn young of animals and crops) NOT MONEY, NOT REAL ESTATE; you can have a sale for future goods [barns were goods in Buffaloe v. Hart]

Includes §2-107 = “things attached to realty” timber, oil, gas; capable of severance without material harm

Includes dealor-distributor relationships (Leibel) WHAT IS NOT UNDER UCC is hiring someone’s SERVICES to sell your goods.

IF MIXED: look for predominant factor/purpose/thrust (language of contract, nature of business of the supplier, intrinsic worth of materials) PRINCESS CRUISES TEST

Where labor is devoted to creation of goods – probably goods but check using test.

§2-305 Open Price Term

Contracts I – Boyack – Fall 2010 20 Parties can conclude a contract even if price is not settled. Price will be a reasonable price at time of delivery if: nothing is said to price, is left to be agreed or failure to agree, or price is to be fixed to agreed market terms or standard. MAKE SURE THAT THEY FIRST INTEND TO AGREE TO DO THIS.

Price to be fixed by the seller or buyer in good faith.

When one party fails to fix price through fault, other can fix or treat contract as canceled.

If there is no intention to be bound by parties, and the price isn’t fixed or agreed, no contract. Must return goods, or if you can’t, pay reasonable value at time of delivery.

***DIFFERENT RULE FOR COMMON LAW – court will generally not enforce price unless calculated formula

§2-204 Formation in General 1. Any manner sufficient to show agreement, including conduct which recognizes a contract exists 2. Agreement sufficient to constitute contract even though moment of making is undetermined 3. Even though one or more terms are left open, no failing for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for remedy. a. More terms open, less likely to have agreement

§2-205 Firm Offers (Option Contracts) MADE BY A MERCHANT (not, non- merchant) Signed writing (at minimum, initials – authentication is essence of this section) which by terms gives assurance to be held open, not revocable for lack of consideration, not to exceed 3 months if no time stated – NO CONSIDERATION NEEDED (likely to accept electronic communication)

If assurance is on a form supplied by the offeree, the offeror must sign the assurance separately!!!

OPTION CONTRACTS CANNOT BE ORAL – will be revocable.

§2-206 Offer and Acceptance (Contract formation) 1. Unless otherwise unambiguously indicated by language or circumstances a. Offer = inviting acceptance in any manner by any medium reasonable to the circumstances (look to common law) b. See 2-206 for shipment/conforming goods/inviting acceptance (either shipment or prompt promise to ship is proper means of acceptance) c. Where beginning of performance is reasonable mode of acceptance, an offeror who is not notified of acceptance within a reasonable time may treat the offer as lapsed. (beginning of performance must unambiguously

Contracts I – Boyack – Fall 2010 21 express the offeree’s intention to engage himself; you have to have NOTICE to other party; HOWEVER, under common law you can still have performance having a temporary bar to revocation)

§2-207 Additional terms in acceptance/confirmation prevents last shot rule from controlling terms of contract (overrides mirror image rule) [Assume we have an offer already by this point– see common law rules for offer]

#1 IS FOR MERCHANTS OR NON-MERCHANTS 1. A definite and seasonable [at or w/in time agreed or reasonable time] expression of acceptance OR written confirmation operates as an acceptance, UNLESS expressly made conditional on assent to the additional OR different terms.  (make sure you actually have an expression of acceptance)  (if you expressly condition acceptance, then you have counter- offer; can only be done with clear and definite language; material difference not enough) “My acceptance of your offer is conditional on your assent to all the terms of my acceptance”= COUNTEROFFER IN UCC AND COMMON LAW  (you can have oral agreement, with written confirmation after. Terms become part of agreement if they reflect oral agreement. You cannot have conditional acceptance after you have an oral agreement)

#2 IS BETWEEN MERCHANTS ONLY – ARE THEY MERCHANTS? IF NOT, Additional terms NOT part of contract but proposals for additional terms. 2. Additional terms are proposals for addition to contract. Terms become part of the contract UNLESS a. Offer expressly limits acceptance to terms of offer b. Material alteration (surprise or hardship test) c. Notification of objection to them has already been given, or is given within a reasonable time after notice of them is received i. If no response of objection given, inclusion has been assented to. ***cant have silence!

* #2 only for additional terms. However: 1)comment three says additional and different; 2)different terms should be subject to same analysis b/c they will almost always materially alter so it doesn’t matter; 3)knock out rule: they fall out, we are left with whatever was agreed upon as contract

3. Conduct by both parties sufficient to make a contract although writings do not establish one. In this case you have terms on which writings of parties agree, together with any supplementary terms in provision of this Act. (Actions speak louder than words)

Contracts I – Boyack – Fall 2010 22 §2-207 REVISED says everything not agreed upon = UCC gap fillers

§2-309 Notice of Termination

(2) Where contract provides for successive performances but is indefinite in duration, it is valid for a reasonable time but unless otherwise agreed may be terminated at any time by either party. Good faith + commercial standards = reasonable time

(3) Termination of a contract by one party except on the happening of an agreed event requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable. Notice: enough not to be stripped of investment totally Parties can agree: no notice needed, gap fillers waived, unless unconscionable

2-313 Express warranty created by: 1. Affirmation of fact or promise that creates an express warranty that goods shall conform to affirmation or promise 2. Description of the goods 3. Sample or model 4. No formal words ‘express or guarantee’ needed 5. PURPORTING OPINION IS NOT ENOUGH, neither is affirmation of value 6. Past deliveries can set a description of quality 7. Technical descriptions are okay

2-314 Implied warranty of merchantability (implied in law) for ALL goods sold/produced by a merchant (not resale in this context, more strict than UCC). Not applied to a non-merchant sale/ SELLER MUST BE MERCHANT  Quality  Fit for ordinary purposes  YOU CAN EXPRESSLY DISCLAIM o Pass w/o objection in trade under contract description o Fair/average quality o Fit for ordinary purposes o Even kind quality and quantity o Adequately contained, packaged and labeled as agreed o Conform to the promise or affirmations of fact made on label/container

2-315 Implied warranty/fitness for particular purpose where seller has reason to know of purpose + buyer relies , creates implied warranty (implied in fact)  Buyer has specific purpose [usually something other than ordinary purpose]  Seller knows of specific purpose

Contracts I – Boyack – Fall 2010 23  Buyer relies on seller’s expertise in fulfilling his needs of special purpose  Goods don’t have to be generally defective, just not effective for buyer’s specific purpose

2-316 Disclaiming warranties (2) to exclude, language must include mention of merchantability and be conspicuous (Reasonable person would notice). Language to exclude all implied warranties is sufficient IF “there are no warranties which extend beyond the description on the face therof.”

(3) unless otherwise, all implied warranties are excluded by expressions like as is, with all faults, or something else that calls buyers attention to the exclusion AND buyer examined the goods/sample/model as fully as desired OR has refused to examine, there is NO IMPLIED WARRANTY with regard to defects which an examination ought reveal AND an implied warranty can be excluded or modified by course of dealing or course of performance or usage of trade CONTRACTS CAN HAVE BOTH IMPLIED MERCHANTABILITY + IMPLIED FITNESS

Contracts I – Boyack – Fall 2010 24