Spring Contracts Outline #3

Predominant purpose test

Was there a contract or an invitation to deal

Was it bilateral or unilateral

 

Parties arguments

X is likely to argue: (list all arguments)
Y is likely to argue…

 

PER: NOT APPLICABLE TO SUBSEQUENT AGREEMENTS

Ad may be offer – depending on legal intention

Not admitted to vary/add/contradict

Except: fraud, mm, duress, ambiguity, CP, PE

WILLISTON/NY:

• collateral
• not contradictory (express or implied)
• not normally included in original document
• first determine whether
• final and complete expression
• if yes, express, ambiguous or silent on dispute
• express/silent = no evidence
• ambiguous = extrinsic evidence allowed             
• Integration

CORBIN/NY

• all extrinsic evidence allowed to establish intention of parties and determine what written document means
• after intention clear evidence may be excluded
• collateral agreement excluded only when likely to mislead fact finder
• court may conclude there is sufficient evidence to justify finder of fact in concluding CP or fraud exists
• evidence may also preclude credible argument that extrinsic evidence is relevant

 

Offer expression of intent to be bound to definite terms if other party agrees to same terms

 

FORFEITURE

Excuse to avoid  forfeiture where: optionee has paid to perform, remains ready to perform, has acted in good faith; optionor hasn’t suffered injury, reasonable expectations not defeated, receives benefit of bargain.

 

Where vague, conditions working forfeiture = promises breach of which allow damages

 

MA

Does each party understand what terms mean

Does each party understand what other intends

Do they agree to same terms
Mutual Intent – did the parties intend to contract

Mutual assent – did each assent to the same terms

Formation – was a contract formed

Policing doctrines

PE – what does the contract include

Interpretation – what does the contract mean

Promises and conditions – how does the contract operate

Anticipatory Repudiation – was the contract breached

Cessation – can the breach be excused

Remedies- are there damages

 

I. OFFER

1. What is an offer?
1. Corbin: an expression by one party of her assent to be bound to certain definite terms, provided the other party to the bargain agrees [assents] to the same terms.
2. Terms provided in legally sufficient offer: Parties, consideration, time, place and mode of performance (ie, who, what, when, where, how)
2. Invitation to make an offer v. offer: whether the facts show that some performance was promised in return for something requested.
1. Whether a particular ad is an offer, rather than an invitation to make an offer, depends on the circumstances and the legal intentions of the parties.
2. “I am asking” invites offer
3. “for immediate acceptance” invites acceptance
4. Whether offer is made depends on objective reasonableness of alleged offeree’s belief
3. Offer and intent
1. Where the offer is clear, definite, explicit and leaves nothing to negotiate, there is an offer which can be accepted and offeror objectively intended to make acceptable offer.
2. Offeror’s power: sets terms and manner of acceptance
3. Duration of offer: set by offeror or reasonableness
4. Termination of offer: revocation or counter offer
4. A manifestation of an intent to be contractually bound upon acceptance by another party.
5. Not effective until received by the offeree
1. Stated time: any acceptance after stated time is a CO
2. No specific time: deemed to be open for a reasonable time depending on circumstances, trade usage and prior dealings of which of the offeree knows or should know.
3. Offer begins to run from the time it is received, or should have been received in the case of a delay.
4. Telephone/face to face: terminates at the end of the conversation unless otherwise indicated
6. When may an offer be revoked?
1. At any time prior to acceptance by communicating to the offeree that the offeror no loner intends to be bound or by action inconsistent with intent to be bound once offeree learns of such action
7. Offers that may not be revoked
1. Offerree gave consideration for an irrevocable period of time
2. Offer relied to his detriment on express/implied promise not to revoke
3. Offeree relied on the offer to his detriment (estoppel)
4. Offeree began performance of the promise to any extent (unilateral K)
5. Mere preparation to perform does not preclude revoking
6. Goods contracts: reasonable time not to exceed three months
8. When is revocation effective?
1. Upon receipt by offeree
2. MR: when sent by the offeror

 

II. ACCEPTANCE

1. this is the last step in contract formation
2. once accepted offer becomes a contract
3. offer + acceptance = contract
4. what constitutes effective acceptance?
1. Mirror image rule
2. Equivocal, conditional or limited acceptance – CO
3. CO requires acceptance by offeror
4. An offer imposes no obligation until accepted according to the terns of the offer
5. Offeror sets the terms of acceptance
6. Performance rather than promise to accept = acceptance if completed in time allowed for accepting offer.
7. Restatement 32: invitation of promise or performance – in case of doubt offer is interpreted as inviting acceptance via promise or performance as offeree chooses.

9. How may an offer be accepted?
1. By any means reasonable under the circumstances
2. A contract may be formed even if an offer indicated acceptance if to be by promise if:
1. Offeree begins to perform in lieu of making a promise
2. Offeror learns of commencement of performance and acquiesces to such manner of acceptance
10. Notice of acceptance:
1. Failure by offeree to notify offeror of acceptance within a reasonable time may preclude the offeror from enforcing the contract.
2. Acceptance by performance.
3. Notice of acceptance by return promise
11. When is acceptance effective?
1. When sent
2. If improperly dispatched, on receipt
3. If improperly dispatched but received on time, when sent
4. Options: acceptance is not operative until received by offeror
12. Terms of acceptance
1. Non goods contracts – mirror image rule: no contract is formed if the acceptance contains terms that are additional to or different from those set forth in the offer
2. A contract is formed if offeree unequivocally accepts offeror’s terms, despite a simultaneous suggestion of alternative terms so long as acceptance is not contingent on acceptance of the proposed terms.
3. Sale of Goods – UCC: Rejects mirror image rule. Gives effect to definite and seasonable expression of acceptance even though it contains terms additional to or different from those offered, unless offeree expressly makes the acceptance conditional on offeror’s asset to the different or additional terms.
4. Additional terms – one or more non-merchants: Construed as mere proposals for modification and the terms of the contract are those set forth in the offer
5. Additional terms – both merchants: Additional terms become part of the contract unless
1. Offer expressly limits acceptance to terms of offer
2. They materially alter it
3. Notification of objection to them has already been given within a reasonable time.
6. Different terms: 2-207 is silent on the treatment of different terms
13. In a sales contract, whose terms and conditions should be favored when there is no agreement on the terms which are the subject of dispute?
1. UCC 2-204: An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.
2. UCC 2-207: presumption that parties intended to contract consistent w/2-204             
1. 2-207(1): communication of parties = contract.
1. May be used to establish assent
2. identify offer and acceptance
2. 2-207(2): terms of contract established via writing
1. Was acceptance expressly conditional?
3. 2-207(3): terms of contract established via parties conduct
1. If acceptance was expressly conditional, and offeror accepted, offeree’s terms control.
2. if not expressly conditional, offeror’s terms control unless there are additional terms.
3. Is there a contract based on parties’ communications?
4. If so, what are its terms?
5. If there are mutually exclusive terms, is there a contract formed by the remaining terms and the parties’ conduct?
6. In contrast to MI rule, 2-207 shifts advantage from last shot to the party making the 1st offer.
7. Where S has catalog or list price, buyer’s P.O. = offer
8. 2-207 covers situations where acceptance
1. Omits term of the offer
2. Contains a term or terms not in the offer (additional), or
3. Contains conflicting (different) terms
4. And allows contract to go forward rather than be rendered unenforceable
9. Was acceptance expressly conditional?
1. Offeree must do more than express its intention to be bound by its own terms. A conditional acceptance occurs not merely when acceptance is expressly conditional on additional or different terms, but only when it is expressly conditional on the offeror’s assent to those additional terms.
2. Offeree must do something to show that he is unwilling to proceed unless assured of the offeror’s assent to the additional or different terms.
10. UCC 2-207 comment 6: when there is a conflict, both parties are presumed to object to the other’s provision.
11. UCC 2-207(3): When different terms conflict, 2-207(3) applies and the contract is composed of all terms that agree plus applicable gap fillers.
14. Different term: Conflicts with or contradicts an additional term
15. Additional term: One not previously covered by the prior transaction and thus supplementary and complementary rather than contradictory
16. acceptance by conduct:
1. A vendor/offreor may invite acceptance by conduct and may propose limitations on kind of conduct that constitutes acceptance.
2. Buyer may accept by performing acts vendor proposes.
3. A contract need not be read to be effective. People who accept take the risk that the unread terms may in retrospect prove unwelcome.
17. When there is only one form 2-207 is irrelevant.
1. 2-207 is used to ascertain the existence of a contract when there are competing forms. If there is only one form, there is no question about which form and what terms located on one form or the other constitute agreement.
18. When a disclaimer is not expressed until after the contract is formed, UCC 2-207 governs the interpretation of the contract and between merchants, such disclaimers, to the extent they materially alter the parties’ agreement, are not incorporated into the parties’ agreement.
19. When is rejection effective?
1. When received by the offeror
2. Shrinkwrapped warranties: cases divided on whether purchaser is bound by arbitration clause contained in a limited warranty that is packed within the product box

 

III. FORMATION – was a contract formed

20. intention to make an agreement and agreement to the same thing are not equivalent
21. Mutual assent v. misunderstanding: Does each party understand what they intend? Does each party understand what the other intends? Do they agree to the same terms? If NO then there is no mutual assent and no agreement, unless one party knows or should know of misunderstanding of terms by the other.
22. Restatement 20 – misunderstanding
1. Material contract terms: terms in a contract considered essential (describing goods, fixing price, fixing quantity, setting delivery date).
2. Materially different: differing in some essential way with regard to the terms addressed.
23. Mutual misunderstanding: if there is MM, there is no MA, and hence no manifest intent to contract regarding those terms.
24. Unilateral misunderstanding: if party seeking enforcement per their understanding has actual or implied knowledge of the other party’s misunderstanding and does nothing, the contract is enforced per the unknowing party’s understanding.
25. Is the contract barred by the S of F?

 

IV. WHAT DOES IT INCLUDE

26. Is the PER in effect?
1. PER operates where there is a writing that represents the final embodiment of the contract or some of its terms
2. Governs whether parties may introduce evidence of extrinsic agreements to prove existence of additional/modified terms
3. Does not apply to evidence offered to:
1. Aid in interpretation of existing terms
2. Show whether a writing is an integration
3. To establish whether an integration is complete or partial
4. To establish subsequent agreements/modifications
4. Complete integration: PER precludes evidence of prior or contemporaneous agreements to contradict or supplement the contract.
5. Partial integration: PER precludes evidence of prior agreements that contradict a term in the contract; contemporaneous oral agreements. Consistent additional terms may be established by evidence of contemporaneous writings; course of dealing/performance or trade usage.
6. Determining whether a writing is a complete or partial integration:
1. Four corners – plain meaning. A writing that appears complete and final is presumed to be a complete integration.
2. Collateral contract concept – all final writings deemed to be partial integrations
3. Reasonable person (Williston) – if a writing appears to be a complete expression of parties’ agreement, it is a complete integration unless additional terms are such that is would be natural to enter into separate agreement in which case it is a PI. (majority)
4. Intention of the parties (Corbin) – allows all relevant evidence on the issue of intent.
7. Merger clauses: Generally conclusive on the issue of integration and will be enforced absent proof of fraud or mistake.
27. When is an agreement fully integrated?
1. Obj. test for determining intent via ambiguous actions?
1. Imputed from reasonable meaning of words and actions
2. Obj. test for determining intent via ambiguous writing?
1. Intention gathered from entire body of writings
28. When should we take into account evidence of prior or contemporaneous oral/written agreements when ascertaining parties’ intent regarding contract obligations?
29. PE R
1. Assumes duties or restrictions not appearing in final written contract even if accepted earlier weren’t intended to survive
2. Agreement reduced to a signed writing can’t be changed by contradictory or inconsistent prior or contemporaneous oral or written agreements.
3. Seeks middle ground b/w total adherence to written language of agreement and total reliance on extrinsic evidence of prior/contemporaneous agreements.
4. Purpose of PER is to give legal effect to intent of parties as expressed in written agreement exclusive of superseded oral or written negotiations.
5. An agreement is integrated if parties intended writing to be final and possibly complete expression of agreement
6. Evidence inadmissible unless:
1. Collateral
1. may mean 2 agreements must be supported by separate consideration.
2. R2d 216: there must either be separate consideration or term must be one that under the circumstances might naturally be omitted from the writing.
2. Non contradictory
3. Not natural to include/reduce to writing (not so clearly connected w/the written agreement that it should be reasonably expected to be included.
7. Test is whether or not the agreement is integrated and if integrated
1. Fully (no evidence allowed)
2. Partially (supplemental but not contradictory evidence is allowed)
8. Application
1. Corbin: can’t prove completeness and exclusivity w/o examining all surrounding circumstances. Rule doesn’t apply until it’s determined that a written agreement is integrated, which cannot be determined w/out resort to extrinsic evidence of adoption and assent.
2. Williston: if contract appears complete, no additional evidence of terms.
3. Extrinsic evidence can be used to determine what the parties intended the words to mean.
4. Where term is deemed ambiguous extrinsic evidence is used to establish intent.
30. Gap fillers
1. Price – reasonable price at delivery
2. Place of delivery – seller’s place of business
3. Time for shipment – within a reasonable time
4. Time and place for payment – sure at time and place buyer is to receive goods
5. Duration of contract requiring successive performances – valid for a reasonable time but may terminate the contract at any time unless otherwise agreed.
31. Agreement to agree – unenforceable if term involved is material

 

V. INTERPRETATION

32. How are contracts interpreted?
1. Course of performance
2. Course of dealing
3. usage of trade
4. Words and conduct in light of circumstances
5. A writing is to be interpreted as a whole
6. Language is interpreted in accordance w/general prevailing meaning
7. Manifestations of parties intentions interpreted as consistent w/each other & w/course of performance/dealing and trade usage.
8. Order of significance: express terms; course of performance; course of dealing; usage of trade
9. Specific terms > general terms
10. Negotiated terms > standard terms
33. When are contract terms reasonably certain?
1. Provide a basis for determining occurrence of a breach and an appropriate remedy.
2. Open terms: If parties intended to contract, provided by gap fillers, course of performance/dealing and trade usage in goods contracts
3. Omitted terms: when essential term is omitted, court may supply a term reasonable under circumstances
4. Different meanings intended: prevailing interpretation is that of party that did not know or had no reason to know of any different meaning attached by the other, and the other knew or had reason to know of the meaning attached by the first party.
34. How can a contract be modified?
1. Mutual assent
2. UCC does not require mods to be supported by consideration.
3. Non-goods contracts mods must be supported by new consideration except:
1. Unforeseen difficulties exception
2. To the extent justice requires enforcement of the mod due to material change of position in reliance on modified promise
4. When does a modification have to be in writing?
1. Disagreement as to whether contract subject to S of F may be mod. orally. PE may be invoked to enforce an oral mod subject to S of F.
2. Disagreement as to whether parties may waive contractual requirements that mods be in writing.
3. UCC requires mods to be in writing where:
1. required by signed agreement b/w parties
2. contract as mod. falls w/i S of F.
4. ineffective attempted mod that is unenforceable due to noncompliance with the writing requirement may constitute a waiver of the original terms.
1. waiver effective only against existing contractual right and cannot create a new obligation.
2. waivers generally apply to conditions of the contract but not essential parts of the bargain.
3. waivers do not require MA or consideration and do not fall within statutory writing requirements.
4. Waivers may be retracted unless other party relied to his detriment
35. How is engaging in contract interpretation different from the process of applying the parol evidence rule?
1. Look to extrinsic evidence at the time of contract
2. If plain and unambiguous, intent is read as consistent with the language.
3. Latent ambiguity
4. Patent ambiguity
5. Is the language clear and unambiguous v. is the writing a complete integration?
36. Standards of interpretation: court should consider
1. Context in which the agreement was executed
2. Established business usage of the terms the parties employed
3. Parties performance
4. Ambiguous writing is construed against the drafter
37. Restatement 2d 201: whose meaning prevails
1. Restatement 20
38. What is interpretation?
1. The process of ascertaining the meaning or meanings of symbolic expressions used by the parties to a contract, or of their expressions in the formative stage of arriving at the creation of one or more legal obligations…the direct application of the symbols used to the factual situation that gives rise to the controversy.
2. A court construing the language of the parties must adopt their vernacular – the plain or accepted meaning may not be the trade meaning. Context is key.
39. Gap fillers
1. Where intent may not be ascertainable, courts may substitute fairness
2. If parties intent to enter into a binding agreement, that agreement is valid in law, despite missing terms, if there is any reasonably certain basis for granting remedy.
40. When faced w/gap regarding order or quality of performance, courts
1. Ascertain party’s intent from contract language and surrounding circumstances; or if
2. Less substantial evidence, look to general trade custom; or if
3. No evidence of probable intention, fill gap by devising general rule of law
4. Order of performance: Term supplied by Gap-filler is called
1. implied in law condition precedent
2. constructive condition precedent
1. Supplied where it is unclear whether court’s decision based on parties intent, a rule, or a combination of the two.

 

VI. DEFENSES – POLICING DOCTRINES

41. Mistake and misunderstanding
1. When a promise is made under false impression
2. Mutual mistake – shared mistake
3. Unilateral mistake – one of the parties. Mistake is grounds for rescission if the other party knew or should have known  of the mistake.
4. Misunderstanding – mistaken impression that language of the contract was unambiguous.
5. Mutual and unilateral mistakes are voidable
6. Misunderstanding – no contract is formed
42. Void v. voidable contracts
1. Voidable: usually on grounds affecting assent
2. Void: usually on grounds of public policy
43. Which defenses affect assent?
44. Misrepresentation: one person manifests by words or other means something that is not correct according to the facts that the circumstances provide. Can occur verbally or in other ways.
45. Negligent misrepresentation: The representation is not made carefully. They do not directly lie but they make a representation about something while having no reasonable basis for believing it to be true. Elements:
1. False representation as to past or existing fact
2. Person stating belief has no reasonable grounds for believing it’s true
3. Representation was made w/intent to induce other party to rely on it
4. Other party believed misrepresentation and reasonably relied on it
5. Other party suffered damages as a result of reliance
46. Fraudulent misrepresentation:
1. Representation is made with the purpose of deceiving
2. Can be considered a tort – Rest. 2d Torts 552C
3. Inadequacy of consideration is insufficient reason for refusing to enforce a contract It must be couple with inequitable or oppressive conduct.
4. Two stage inquiry:
1. Examination of consideration (substantive)
2. Examination of bargain process (procedural)
5. Remedy: restore status quo (as if deal was never made)
47. Reasonableness of reliance: Based on the totality of the facts. Reliance on opinion may be reasonable where opinion is expressed by one who possesses or appears to possess superior knowledge on such matter, such as where there is a special relationship of trust.
48. Unconscionability
1. Unfair surprise
2. determined at the time the contract is made
3. An unconscionable contract is one:
1. Such as no man or woman un her senses would make and no honest and fair man would accept
2. Where there is an absence of meaningful choice (procedural) for one party coupled with contract terms unreasonably favorable to the other party, and characterized by gross inequality of bargaining power.
4. Mutual mistake: adversely affected party may void the contract if
1. Mistake concerned basic assumption on which contract was made
2. Mistake materially affects agreement
3. Adversely affected party does not bear risk
5. Unilateral mistake: A party may avoid a contract where the other party knew or had reason to know of the mistake. If the other party does know of the mistake, aggrieved party may avoid contract where
1. Enforcement would be unconscionable
2. Avoidance would not result in substantial hardship to non-mistaken party.
3. Agreement is entirely executory
4. Mistake is substantial
5. Mistake is clerical or computational error or misconstruction of terms
6. Mistake is not a defense where the party: 
1. Assumed the risk
2. Is at fault for the mistake (generally only gross negligence, violation of legal duty or failure to act in good faith)
3. Failed to read the contract
4. Mistakes preventing a meeting of the minds are void
7. Defenses of duress & misrepresentation may be available even if committed by a third party if the other party to the contract knew or had reason to know that the victim was improperly induced to enter the contract.
49. What defenses are based on unconscionability and public policy?
1. A defense based on unconscionability must present both procedural and substantive unconscionability.
2. Procedural unconscionability: unfair surprise. Relates to aggrieved party’s understanding of contracts terms due to inconspicuous print, unintelligible writing, lack or opportunity to seek clarification, illiteracy, imbalanced bargaining positions.
3. Substantive unconscionability: Contracts that are deemed to be oppressive, such as provisions that deprive one of the benefit of the agreement or an adequate remedy for the other party’s breach, provisions that bear no reasonable relation to the risk involved, provisions that are substantially disadvantageous to one w/out commensurate benefit to the
50. When has performance of a contract become impossible or impracticable?
1. Impracticable:
1. An event has occurred that makes performance in the contemplated sense impossible or impracticable.
2. The party seeking relief must not have been at fault in causing the event to occur
3. Non-occurrence of the event mush have been a basic assumption upon which the contract was made
4. The party seeking relief must not have assumed the risk of the even occurring.
5. UCC: A seller’s delayed delivery or non-delivery of goods based on impracticability is not a breach.
2. Events that may make performance impossible:
1. Death or disability of person indispensable to contract
2. Destruction of subject matter of contract or other thing necessary for the performance of the contract so long as not the fault of party asserting defense.
3. Failure of specific thing necessary for performance to come into existence.
4. Supervening gov’t action making performance illegal.
5. Circumstances that would involve extreme or unreasonable difficulty, expense, injury or loss.
3. Partial impracticability
1. if only part of performance has become impracticable and promisor can substantially perform, he must do so.
2. UCC: If impracticability affects only a part of the seller’s capacity to perform, the seller must allocate production and deliveries among its customers.
4. Supervening frustration of purpose: If after the contract is formed circumstances arise which substantially frustrate a party’s purpose in entering into the contract, the party’s remaining duties are discharged, provided
1. The party seeking discharge is not at fault
2. The nonoccurrence of such event was a basic assumption on which contract was made, and
3. Language or circumstances do not prohibit excuse based on frustration of purpose. 
5. Existing impracticability and frustration of purpose: If existing at the time the contract was made there is no duty to perform where
1. The party raising the excuse had no reason to know of the facts giving rise to impracticability or frustration. 
2. Nonexistence of such facts is a basic assumption on which the contract was made
6. Temporary I and F: Other party may suspend performance and if there is a reasonable probability that substantial performance will not occur, cancel the contract.
51. What are the remedies for avoidable contracts?
1. Reformation: may be available where there is no duress, mistake or misunderstanding. Reformation addresses nonconformities (typographical and other inadvertent errors) in the record not the contract itself. Reformation does not seek to make the bargain.
2. Restitution: A party that has rendered full or partial performance may be entitled to restitution.
3. other, great disparity in the cost and selling price of an item.

 

VII. PROMISES & CONDITIONS – how does contract operate

52. Was the condition excused
1. Party prevents or hinders fulfillment of the condition
2. Party waives the condition
3. Condition cannot be performed due to impossibility
4. Fulfillment of condition would cause disproportionate forfeiture
5. Dependent v independent conditions
1. Builder’s construction is a condition precedent to home buyer’s duty to pay
2. Home buyer’s duty is dependant on builder’s performance
3. Builder’s duty to build is independent of buyer’s obligation
6. Condition v promise
1. Failure to meet a condition does not entitle the other party to damages absent breach of an independent promise.
53. It is not substantial performance of a condition that must be rendered. Substantial performance is the condition
54. The decision about whether a condition is met is controlled by one of the parties to the contract.
55. Condition: Am event not certain to occur, which must occur, unless its non-occurrence is excused, before performance under a contract becomes due.
56. Section 225 Effects of non-occurrence of condition
1. Performance of duty subject to condition cannot become due unless the condition occurs or its non-occurrence Is excused
2. Unless it has been excused, non-occurrence discharges duty when condition can no longer occur
3. Non-occurrence is not a breach unless he is under a duty that condition occur
57. Rule against forfeitures – can be invoked to avoid forfeiture of right to exercise option where
1. Optionee
1. Has paid for option
2. Remains ready to perform
3. Has acted in good faith
2. Optionor
1. Hasn’t suffered injury justifying termination
2. None of optionor’s reasonable expectations have been defeated
3. Optionor receives benefit of bargain
58. Who performs first?
1. Promises capable of simultaneous performance are each due simultaneously, with each being conditioned on tender of the other
2. Where the duty of only one party requires a period of time for performance, such duty is due first
3. Where the contract provides for a series of performances and payments, performance of one part is a condition precedent to payment, which becomes the condition precedent to the next performance installment.
59. What is a condtion?
1. The occurrence of non-occurrence of an event that gives rise to or extinguishes a contractual duty. A conditional duty becomes due fulfillment or excuse of such condition.
2. Conditions precedent: a promise which by its terms is to be performed prior to the return promise
3. Concurrent conditions: promises that are capable of being performed simultaneously, and neither party has a duty to perform until the other has performed.
4. Conditions subsequent: An event, occurring after a duty has arisen, that discharges such duty.
5. Express conditions and implied condition based on course of performance/dealing and usage of trade must be strictly fulfilled in order to give rise to a conditional duty.
6. Constructive conditions (judicially imposed in the interest of justice) may be fulfilled by substantial performance. Courts may interpret an express or implied condition as a constructive condition where substantial performance has been rendered in order to avoid a forfeiture.
7. Conditions may be excused by:
1. Rejection of proper tender of performance
2. Wrongful prevention or hindrance of other party’s performance
3. Waiver of a non-material condition that has not yet failed.
4. Election to continue performance after a condition has failed
5. Equitable estoppel where party wrongfully prevented occurrence
6. Avoidance of disproportionate forfeiture
7. Impossibility of performance of non-material condition
8. Unreasonable w/holding of approval by a third party
8. Personal satisfaction – Approval as a condition: Where a party’s duty is conditioned on his own approval of the other party’s performance, it will be enforced, even if the other party will suffer a forfeiture where
1. Approval concerns a matter of aesthetics or taste and the disapproval is based on honest dissatisfaction or
2. Approval concerns a matter of utilitarian function and it was not unreasonably withheld

VIII. BREACH – ANTICIPATORY REPUDIATION

60. Performance and breach
1. Did a party fail to perform in good faith
2. In one party failed to perform was there an express or implied condition?
3. If party did not perform perfectly, did he perform substantially?
4. If he did not perform substantially, was the contract divisible
5. If both parties failed to perform, was one parties failure justified because the other party had committed a material breach?
6. Did a party repudiate the contract, even though time for performance had not arrived?
7. Did it appear that a party would be unable to perform, even though the time for performance has not arrived and the other party has not repudiated?
8. Was failure to perform excused by impossibility or frustration?
9. Was the contract discharged by mutual rescission or release
61. What constitutes a breach?
1. Nonperformance of a contractual duty which has become due
2. Anticipatory repudiation of obligations.
3. UCC: seller – offering tender or delivery of non-conforming goods; buyer – wrongfully rejecting goods, wrongfully revoking acceptance, or failing to make a payment when due.
4. Material breach in non-goods contracts: if a party fails to perform and the breach is material, aggrieved party may
1. Cancel the contract and sue for damages or
2. Continue the contract and sue for partial damages
5. If the breach is not material aggrieved party may not cancel contract and can only sue for partial damages.
6. Factors relevant to a determination of whether a breach is material: extent to which aggrieved party can be adequately compensated for the benefit of which he will be deprived, extent to which breaching party will suffer forfeiture, likelihood breaching party will cure his failure under the circumstances, extent to which breaching party has acted in accordance with the standards of good faith and fair dealing.
62. What constitutes a repudiation?
1. A party repudiates by:
1. Making a statement indicating that he will breach the contract
2. Engaging in a voluntary affirmative act that renders him unable to perform the duty
3. Failing to provide assurance of due performance in response to such a request by the other party when there exists reasonable grounds to believe that the obligor will not perform.
2. Anticipatory repudiation by one party entitles the other party to
1. bring an action for damages for total breach
2. discharge his remaining obligations
3. Anticipatory repudiation in goods contracts which will substantially impair the value of the contract allows the aggrieved party to
1. Await performance by the repudiating party for a commercially reasonable time
2. Seek remedy for breach even if he has notified the repudiating party that he would await performance and has urged retraction
3. Suspend his own performance
4. Retraction of repudiation – UCC: A repudiating party may retract his repudiation up to the time his next performance under the contract is due, unless the aggrieved party has since
1. Cancelled
2. Materially changed his position
3. Otherwise indicated that he considers the repudiation final.
5. Retraction of repudiation – restatement: allows for retraction of repudiation under similar circumstances but without terminating the right of retraction upon the repudiating party’s next performance installment.
63. Rejection of non-conforming tender of goods
1. Rejection: within a reasonable time after delivery or tender of goods, buyer may reject goods that fail to conform to the contract. Buyer must seasonably notify the seller of such rejection. Buyer cannot reject the goods once he has accepted them.
2. Single lot contracts: buyer may
1. Reject the whole lot
2. Accept the whole lot
3. Accept any commercial until and reject the remainder
4. “perfect tender” rule – B may reject for any non-conformity, even if seller has substantially performed. Rejection must be exercised in good faith. S is entitled to cure under certain conditions.
3. Installment contracts:
1. Perfect tender rule non applicable
2. Buyer may reject installment only if non-conformity substantially impairs the value of the installment and cannot be cured.
3. Substantial impairment may pertain to quality of goods, timing of tender, quantity, etc…
4. Material burden in curing falls on S but B must cooperate in curing defective tender. (ex: reasonable minor outlay or time or money).
64. Acceptance & revocation of acceptance of goods
1. Acceptance may occur when
1. After a reasonable opportunity to inspect, B indicates to S either that goods conform or that he will retain them despite non-conformity
2. B engages in any act inconsistent with S’s ownership of the goods.
2. Revocation: B who initially accepts non-conforming goods may revoke the acceptance if the nonconformity substantially impairs its value to him and the buyer accepted it:
1. On reasonable assumption that no-conformity would be cured and it has not been seasonably cured, or
2. W/out discovering such non-conformity if his acceptance was reasonably induced by difficulty of discovery before acceptance or by S’s assurances.
3. Buyer must notify seller of revocation within a reasonable time after he discovers or should have discovered such defects and before there is any substantial change in the condition of goods. Revocation is not effective until B notifies S.
65. Cure of non-conformities
1. S may be entitled to cure conformity if
1. If time for performance has not yet expired, S may notify B of his intention to cure and make conforming deliver w/in contract time.
2. If time for performance has expired, seller may have further reasonable time to make a conforming delivery upon seasonably notifying B, if S had reasonable grounds to believe non-conforming goods would be acceptable w/or w/out money allowance.
2. Non-goods contracts: Restatement suggests party that commits breach may attempt to cure breach. Split of authority w/many cases holding that there is no right in non-goods contracts for the breaching party to cure unless contract expressly provides such right.
66. Assurance of due performance
1. Restatement & UCC: where there are reasonable grounds to believe that a party will not be able or willing to perform, the party entitled to receive such performance may make a demand for assurances from the other party that performances will be forthcoming.
2. In goods contracts, demand must be in writing.
3. Commercial standards dictate reasonableness of grounds for insecurity and adequacy of any assurance
4. A party may, if reasonable, suspend any performance for which he has not already received the agreed exchange until he receives such assurance.
5. Failure to provide assurances within a reasonable time (in goods contracts not to exceed 30 days) constitutes a repudiation of contract by such party.

 

IX. CESSATION

67. Good faith
1. Rest. 2d 205
2. Where what is at issue is the retroactive reduction or elimination of a central compensatory element of the contract it is not likely that the parties had in mind absolute power.
3. Whether a contract has terminated in good faith turns on the motive for termination and is a question of fact.
68. How may a party’s duties under a contract be discharged?
1. Complete performance, rescission, substitute contract, rejection of proper tender, occurrence of a condition subsequent, breach by the other party, impracticability and frustration of purpose, failure of consideration.
2. Rescission: Parties to a contract may mutually agree to rescind their contract where
1. There are duties still to be performed by both parties and
2. Any vested third party rights will not be affected
3. CL: Rescissions ma be oral even if contract falls within S of F.
4. UCC: rescissions must be in writing if there is a signed agreement that expressly requires any rescission to be in a signed writing.
5. Consideration: if both parties’ duties are executory, an agreement to rescind is binding w/out additional consideration since the release of each party’s rights provides the consideration. If one party has fully performed, the other party must furnish consideration to support the rescission.
3. Substitute contract: Immediately discharges all duties under the original contract. If obligor breaches, an action on substitute contract alone may be brought.

 

69. what is a contract? A BFE of consideration
70. how do we know we have one?
1. Ascertaining MA – whether the parties may be deemed to have a contract depends on their ascertainable intent
71. 3 stages of contract relationship
1. Negotiation
2. Agreement
3. Performance
72. Did the parties negotiations result in agreement? Was there MA? (stage between negotiation and agreement).
73. The law imputes to a person an intention corresponding with the reasonable meaning of his words and acts.
1. Objective intent – courts look at writings, words, actions and circumstances to ascertain an intent to be bound
74. Were the parties actions ambiguous – capable of more than one meaning?
75. Negotiation → mutual assent  → contract  → performance
76. What is MA?
1. Intent to contract
2. Assent to the same terms
77. when the subject matter of an agreement is of a kind that is customarily dealt with in enforceable contract, and the parties have acted under the agreement, a court is likely to look with some distaste at provisions that seem to exclude all sanction and remedy

 

ACCEPTANCE

78. what is effective acceptance?
1. Mirrors offer
2. Manifested by appropriate act (ie putting acceptance in the mail)
79. How may the power to accept be terminated?
1. Restatement 36
2. Rejection by offeree
3. Not accepted within time fixed
80. effectiveness of offer
1. when there is no specified date of expiration, offer expires after a reasonable time.
2. Offer is effective when it is received
81. options
1. the promise of an option is no difference from the promise of a gift – there is no consideration for either
2. any money consideration paid for an option is binding upon the seller
3. Restatement 87: option contracts (PE)
4. UCC 2-205: firm offers – a firm offer may not be revoked for lack of consideration
5. There is a presumption that an offer is to enter into a contract (immediately and fully protects both parties)
6. Restatement 45: partial performance by offeree creates equitable interest in offeror’s performance
7. An offer for an exchange does not become a promise until consideration has been received
8. Limits on revocation
1. Option secured by consideration
2. Acceptance via return promise
3. Performance
4. Firm offer under UCC 2-205
82. mirror image rule
1. offeree must communicate definite and unequivocal acceptance of the offer
2. equivocal, conditional or limited acceptance = CO
3. CO may be treated as a new offer (requiring acceptance by the original offeror) or a rejection
4. Mirror image rule is a last shot rule
83. Express conditional acceptance (UCC) v. qualified acceptance (Rest.)
1. UCC: there is no offer unless offeree’s terms are accepted.
2. Rest.: There is a contract on the original terms of the offer, but if the offeror is willing to entertain a change, the offeree is willing to accept that too,
84. Policing doctrines – defense to duties that arise from agreement w/consideration
1. Policing doctrines – terms grossly unfair or overreaching at bargaining (negotiation) stage. Two types of policing doctrines, those addressing:
1. The existence and quality of assent
2. The substantive terms of exchange
2. Changed circumstances
85. Freedom to contract is compromised by undermining assent
86. A person may rescind a contract to which he has been induced to become a party in reliance on false though innocent misrepresentations respecting a cognizable material fact made as of his own knowledge by the other party to a contract.
87. UCC 2-316: (1) words or conduct relevant to creation of express warranty and tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other. (2) to exclude or modify implied warranty of merch. or any part of it, language must mention merchantability. In cases of a writing must be conspicuous. To exclude or modify implied warranty of fitness must be in writing and conspicuous.
88. UCC 1-102: Requirements that may not be disclaimed
1. Good faith
2. Diligence
3. Reasonableness
4. Care
89. Under UCC 2-302(1) the court may find a contract unconscionable as a matter of law
90. Contract modification
1. Restatement 89(a): A promise modifying a contract not fully performed on either is binding if the modification is fair and equitable in view of circumstances not anticipated when contract was made.
1.  
91. CL – substantial performance test
1. does performance meet the essential purpose of the contract?
2. Damages: entitle to enforce contract (ED)-offset for imperfect performance
1. Cost of completion: amount it would cost to repair deficiency
2. Diminution in value: if substantial economic waste is involved, amount by which deficiency diminishes value of performance.
92. UCC – Exceptions to perfect tender rule
1. Time for performance not yet expired – seller can cure
2. Installment contracts – B cannot reject if nonconformity does not substantially impair value, nonconformity can be cured, and seller gives adequate assurance of cure.
3. Reasonable grounds for believing tender conforms – S can notify B of intention to cure defect and if S retenders conforming delivery in reasonable time, B must accept it.
93. Installment contract: installment contract: a buyer must accept each installment unless its value is materially impaired and the defect cannot be cured.
94. Rest 260: Promise v condition: if the contractual provision purports to be the words of the party of whom performance is required, the provision is a promise. If it’s supposed to be the words the other party, it’s a condition. In ambiguous situations, courts prefer promises over conditions.
95. Prospective inability to perform: Requires that the inability be the result of the party’s own actions.
96. 7 essential terms of an offer at CL: DSQQWPP
97. Ways to terminate an offer (RD DIRT)
1. Revocation
2. Lapse of time
3. Death
4. Illegality
5. Rejection/counter offer
6. Destruction of subject matter
98. Frustration: (Realized purpose; Unforeseeable; destroys purpose; Event supervenes)
99. Mutual rescission: where a contract is full executory (neither party has performed).
100. Anticipatory repudiation vs. prospective inability to perform
1. AR: party refuses to perform regardless of ability to do so
2. PIP: regardless of intent to perform, a party is no longer able to do so, due to his own voluntary actions
101. Acceptance:              
1. CL – acceptance by unacceptable means effective on receipt
2. UCC – acceptance by unacceptable means is invalid

 

Tribune test

Baird is old rule and Drennan is new rule