Contracts Outline Kar

7/30/2019 Contracts Outline Kar

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I. Express contractA. Formed by language, oral or written

II. Contract implied in factA. Expressions of assent through conduct

III. Contract implied in law (quasi-contract)A. No pre-existing bargaining, either expressed or impliedB. Content of obligation comes from fair market valueC. Someone can confer a benefit on you with your knowledge & consent (non-gratuity)D. Promissory restitution

1. Material benefit1) Three beasts of Contracts

a) Breach of contractb) Promissory Estoppelc) Restitution Unjust Enrichment (Quasi-Contracts)

THE FIRST BEAST BREACH OF CONTRACT

1. Mutual Assent- Parties can express mutual assent to a contract either bya. signing a final written contractb. engaging in conduct sufficient to establish the existence of an agreementc. engaging in an effective offer and acceptanced. Objective Theory for Intent-

i. What a reasonable person in the position of the other party would conclude thathis objective manifestations of intent meant

2. Identify Offera. Offer- manifestation of enter into a bargain, so made as to justify another person

in understanding that his assent to that bargain is invited and will conclude the

bargain. In determining whether a given communication meets this definition, courts

will typically look at four factors1. Language of the communication

a. Courts will employ an objective, rather than a subjective test:b. They will ask what a reasonable person in the position of the

parties would have understood the words or conduct to mean,rather than what the parties subjectively intended by their wordsor conduct.

ii. Advertisement- advertisements are typically construed as solicitations ofoffers rather than offers in the U.s

1. Exception- to "bait-and-switch ads," or offers that are made not to sellan advertised product at an advertised price but rather to draw customers

in to a store to sell them other similar products that are more profitableto the advertiser.

a. Although normally ads do not constitute offers,Izadiv. MachadoFord makes an exception because any reasonable person wouldthink that an advertiser does indeed commit itself to selling on afirst-come-first-served basis

b. Bait-and-switch offer which is made not in order to sell theadvertised product a the advertised price, but rather to draw the


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customer to the store to sell him another similar product whichis more profitable to the advertiser

c. The more inquiries that are required, the more likely a court willview communication as merely preliminary negotiations NOTamount to an offer

2.

Its history3. Its specificitya. An offer cannot be conditional and require further assent by the

accepting partyb. Price quote is not an offerc. Terms of a contract are reasonably certain if they provide a basis

for determining the existence of a breach & for giving anappropriate remedy

4. Its directedness3. Check For Acceptance

a. Acceptance- is the offeree s manifestation of assent to terms thereof made by the offeree in amanner invited or required by the offer

i. Acceptance by performance requires that at least part of what the offer requests beperformed or tendered and includes acceptance by a performance which operates as

a return promise

ii. Acceptance by a promise requires that the offeree complete every act essential to themaking of the promise

iii. An offer may be accepted only be a person in whom the offeror intended to create apower of acceptance

4. Check for Acceptance Prior to termination of power to accepta. Termination by counteroffer/rejection

i. Qualified acceptance- Battle of the forms- what terms become part of thecontract

ii. Last Shot Rule- Common Law- when the parties exchanged written proposals,the rule gave an unwarranted advantage to the party who fired the last-shot(COUNTER OFFER), that is, the party who sent the last written proposal

1. A contract is never formed through the forms until someone performs2. Assumes the parties are reading & understanding all parts of the

contractsiii. Mirror Image rule (common Law)

1. a reply to an offer which purports to be an acceptance but containsadditions, limitations, or other modifications is a rejection of the offer &

constitutes a counter-offer

a.

Under common law, acceptance must be a mirror image oforiginal form. Qualified acceptance acts as a counter-offer. This

is not much less limiting than the last-shot rule.

2. UCC 207-a. Unless the additional or different terms are not material and the

offeror does not object to them, then the purported acceptance isan acceptance & additional/different term become part for thecontracts


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i. Provides in 2-207 that document can constitute anacceptance even though it states terms additional to ordifferent from those offered or agreed upon

1. Abolishes common law- mirror-image rule2. Qualified acceptance is acceptance unless the

acceptance is expressly made conditional onassent to the additional or different terms3. Between Merchants

a. Additional terms proposed in theacceptance can become part of the contractin certain circumstances if the other party(the offeror) merely remains silent

b. Exceptionsi. Expression of acceptance does not

form a contract if it is expresslymade conditional on assent to the

additional or different termsii. They offer expressly limitsacceptance to the terms of theoffer,

iii. Materiality- They materially alterit, or the new term materially altersthe contract

iv. Objection- Notification ofobjection to them had already beengiven or is given within areasonable time after notice ofthem is received

v. [not used if both parties contain themagic words expressly limitingacceptance to the terms of theoffer]

c. Shrink Wrap terms- Terms are inside thebox of the goods

i. Dickered terms- expressed andnegotiated

ii. Booklet- standard formd. Clickwrap terms- you click a box saying

you have read and accepted the termse. Browsewrap- attempt to claim that simply

by engaging in certain performance youare expressing performances of thewebsite

4. Between one Merchant and a regular buyer


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a. The only way an additional term canbecome part of the contract is if the offerorexplicitly assents to it

5. Knockout Rulea. The conflicting clauses knock each other

out of the contract, so that neither entersthe contract.b. Instead a UCC Gap Filler provision is

used if one is relevant, otherwisec. the common law controlsd. ExampleBuyer sends a purchase order

for 1,000 bikes with a clause that thesewill not be defective for a year. Seller thensend confirmation except with a completedisclaimer of warranties. Buyer makes noresponse. Bikes are defective. Buyer sues

who wins? Buyer, warranties clausesknock each other out, and UCC Gap filler(or common law) applicable is 2-314implied warranty of merchantability

6. Contract by Parties Conducta. Conduct by both parties which recognize

the existence of a contract is sufficient toestablish a contract for sale although thewritings of the parties do not otherwiseestablish a contract

i. In such case, the terms of theparticular contract consist of thoseterms on which the writings of theparties agree, together with thedefault rules of UCC

b. Not a counteroffer- if buyer or sellerinquire regarding the possibility ofdifferent terms, a request for a better offer,or a comment on the terms of the offer

b. Termination by Lapse of timei. Mailbox Rule- an acceptance in some circumstances will be treated as effective

as soon as dispatched by the offeree1. Exception- will not apply however, if the offeror has stated (express or

by implication) that he must receive the acceptance for it to be effective-the offeror is the master of the offeror

2. Does not apply to the exercise of options 3. Modified mailbox rules place the risk of non-arrival on the offeree

ii. Rejections are often effective upon receipt by offerorc. Termination By revocation of the offer


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i. If offeree takes a definite action inconsistent with keeping the offer open & theofferee receives a reliable communication about this information

ii. Bases for Irrevocability1. Option contract

a. Must be supported by consideration2.

Unilateral contractsa. Promise for a return performance- promise to pay completion of

an actb. Promisor is incentivizing performance without any obligation

from promisee to performc. Offer can only be accepted through complete performanced. Acceptance & Consideration occurs simultaneouslye. An offer is freely revocable before its been accepted EXCEPT

when the offeree begins the invited performance or tenders abeginning of it

f. Creates an option contract- promise to keep the offer open for areasonable period of timeg. Petterson v. Pattberg reveals the inequality allowing promisor torevoke when promise takes actions to accept

i. If restatement 45 were in play, this promise would havebeen irrevocable

ii. Revocation occurs when offeror takes an actioninconsistent with the promise & the offeree receives wordof this

3. Promissory estoppel doctrine for offers applying to constructioncases

a. An offer that the offeror should reasonably expect to induceaction or forbearance of a substantial character on the part of theofferee before acceptance and which does induce such action orforbearance is binding as an option contract to the extentnecessary to avoid injustice

i. this rule is almost never going to apply because its notusually reasonable for someone to rely on a mere offerbefore accepting; typically an offer alone will give no riseto liability

ii. exceptions when promisee relies n the offer, but itsunreasnobale for one to accept prior to relying on thepromise

iii. includes certain construction contracts where one mustrely on the offer but cannot yet accept it

1. see Drennan2. Rule is very limited (Berry v. Knoch)

4. Restatement: offer is binding if writing is signed by the offerer, recitesa purported consideration for the making of the offer & proposes anexchanges on fair terms within a reasonable time (formalityrequirement)


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a. Only minority of jurisdictions use this ruleb. Berryman doesnt succeed by merely following this provision

5. UCC 2-205 (Firm Offers): an offer by a merchant to buy or sell goodsin a signed writing which by its terms gives assurance that it will be heldopen is not revocable for lack of consideration, during the time stated or

if no time is stated for a reasonable time, but in no event may suchperiod of irrevocability exceed 3 months, but any such terms ofassurance on a form supplied by the offeree must be separately signedby the offered (another formality requirement)

a. no considerationb. princess cruise line rule: when the predominate purpose of a

maritime or land-based contract is the rendering of servicesrather than the furnishing goods, the UCC is inapplicable, andcourts must draw on COMMON LAW doctrines wheninterpreting the contract

5. Termination by death of offerora.

Communications that do not constitute offersi. Opinions about future results

ii. Statements of intentioniii. Invitations to submit a bidiv. Advertisements, catalogs and mass mailings

1. Contracts with bait and switch (IZADO)- offers that are made not sell anadvertised product at an advertised price but rather to draw customers into a store to sell them other similar products that are more profitable tothe advertiser

6. Considerationa. Consideration- Promise is supported by consideration if and only if there is a return

promise that is a benefit to promisor or detriment to promisee (historical test)b. Must be bargained for (added in penny case)-> test used in restatement

i. There is a return promise performance that is "bargained for "ii. Bargained for= (i)sought by original promisor in exchange for original promise

+iii. (ii) given by promisee an exchange for a promise

c. Exchanging promises of future performance is sufficient considerationd. Example of rich man offering tramp a coathe is not interest in getting him to go into

store, so this is not a consideration because there is no reciprocal conventionalinduction

i. No bargaining when giving a gifte. Restriction of family members activities for a certain amount of cash is sufficient

consideration (Halmer v. Sidway), but promise must be conditional on something,otherwise is just a gift

f. PAST CONSIDERATION IS NO CONSIDERATIONg. Promises cannot be illusory or optional for considerationh. Relative values of consideration is not important- need not be equali. Purposes served by consideration


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i. Evidentiary Function- evidence of the existence & purport of the contract inthe case of controversy

ii. Cautionary Function- acts as a check against inconsideration actions &cautions one to the full legal effects of making a contract

iii. Channeling Function- serves to mark or signal an enforceable promise; createsa bright line testj. Cases where there is no consideration

i. Inadequacyii. Nominal consideration ($1 dollar example)

iii. FIND OTHERSk. Check direction

7. REMEDY: EXPECTATION DAMAGES8. Moral Obligation Doctrine (exception where promise is enforceable even without

consideration)a. Promise (waiver/promise not to raise a defense)b. To fulfill a prior first beast contractual obligationc.

That has become unenforceable or inoperative because of some defensed. Is enforceable even without any new consideration

e. Ex. Minority reaching majority to affirms a contract- no new consideration requiredInterpretation/Construction

1. Interpretation (identify parties mutual assent) vs. Construction (legal effect of contractnot indicated by assent)

2. Subjective Approacha. Peerless case- 2 ships names peerless one leaving October and one in December-

no consensus or meeting of the minds & therefore no binding contract3. Objectivist Approach

a. Criticizes subjectivist approach for making the enforcement of contracts toodifficult

b. Allows fairness- a speaker should expect his words to be understood inaccordance with normal usage

4. Modified Objective Testa. Where one party knows or has reason to know what the other party means by

certain language and the other party does not know or have reason to know of themeaning attached to the disputed language by the first party, the court will enforcethe contract in accordance with the innocent partys meeting

i. Responsibility for knowing the others party intended meaning5. Process of Interpretation

a. Dickered language of the contracti. (BRING IN LATIN PHRASES AS APPROPRAITE)

ii. The meaning of a word in a series is affected by others in the same series(NOSCITUR A SOCIIS)

iii. a general term joined with a specific one will be deemed to include onlythings that are like the specific one; leads to a restrictive interpretation(EJUSDEM GENERIS)


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iv. If one or more specific items are listed, without any more general orinclusive terms, other items although similar in kind are excluded(EXPRESSIO UNIUS EXCLUSIO ALTERIUS)

v. Interpretation that makes the contract valid is preferred to one that makesit invalid

vi.

If a written contract contains a word or phrase which is capable of 2reasonable meanings, the interpretation that is less favorable to the partywho drafted the contract is preferred. This favors the party of lesserbargaining power, who has little or no opportunity the terms of thecontract & accepts one drawn by the stronger party (CONTRAPROFERENTEM)

vii. Every term of the contract should be interpreted as a part of the wholeviii. The principal apparent purpose of the parties is given great weight in

determining the meaning to be given to manifestations of intentionix. A specific provision is an exception to a general onex. Hat Handwritten or typed provisions control printer provisions

xi.

Interpretation or construction that favors the public interest is preferredxii. PREFER INTERPRETATIONS that are not VERy LoPPsided (valid,effective, reasonable, legal, consistent with parties purpose, consistent

with public policy)

b. Course of performancei. Action of the parties in carrying out the contract

ii. A single instance does not constitute a course of performancec. Course of Dealings

i. Relations between the parties prior to signing the contractd. Trade Usage

i. Trade is defined in UCC as Any practice or method of dealing havingsuch regularity of observance in a place, vocation, or trade as to

justify an expectation that will be observed with respect to the

transaction in question

ii. A usage need not necessarily be practiced by members of the party owntrade or vocation to be binding if its so commonly practiced in a localitythat a party should be aware of it (nanakuli v. shell)

iii. Full recognition is available for new usages & usages currently observedby great majority of decent dealers

iv. If both parties to a contract are members of the same trade, both should bebound by usage of the trade even if one of the parties didnt know of the

usagee. UCC states that performance, usages, and prior dealings are important enough to

be admitted always, even for a final & complete agreement; only if they cannot bereasonably reconciled with the express terms of the contract are they not bindingon the parties

f. Boilerplate Language of Contracti. Reasonable expectations of parties trumps boilerplate language

ii. Contracts of Adhesion


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1. A party who adheres to the other partys standard term does notassent to a term if the other party has reason to believe that theadhering party would not have accepted the agreement if he hadknown that the agreement contained the particular terms

2. Requirementsa.

Must be a form contract (standard form)b. Must be drafted by the superior party

c. Must be on take-it-or-leave-it-basis3. In such cases we will distinguish between boilerplate language

and the language the parties mutually assented to6. PAROL EVIDENCE RULE

a. If a contract is fully integrated, then parol (oral/not within the 4 corners of thedocument; contemporaneous or prior) evidence is inadmissible for 2 purposes

i. To vary or contradict terms of final contractii. To add/supplement terms of final contract

iii. To completely negate, but admissible if only qualifying- Nanakulib.

But is admissible for every other purpose (if relevant)i. Disambiguate

ii. show fraud, duress or all other standard defensesiii. for agreement made after the execution of the writing

1. to establish subsequent agreement or modification2. if this is happening contemporaneously, courts will be skeptical in

admitting thisiv. to establish oral condition precedent to effectiveness of the contract as a

whole1. a condition is not a promise- something not certain to occur, but if

does occur, it would give rise to an obligationexpress conditionv. to reform a contract for mutual mistake

vi. evidence introduced to establish a collateral agreement between theparties- different subject matter in object of exchange

c. Process of determining whether Parol Evidence is admissiblei. Is integration complete or partial?

1. Judge first considers the offered evidence and if he finds that thecontract language is reasonably susceptible (or ambiguous) tothe interpretation asserted by its proponent, the evidence isadmissible to determine the meaning intended by the parties

ii. Is the parol evidence consistent with what was written?iii. Was the parol agreed to by both parties? (jury determination)

d. Where parties have deliberately put their engagements into writing without anyuncertainty as to the object or extent of such engagement, it is presumed that thewhole engagement of the parties & the manner & the extent of their undertakingwas reduced to writing (Thompson v. Libby)

e. 4 corners approach- determine finality by looking solely at the written documentf. Restatement allows judge to consider extrinsic evidence first and then decide

whether contract is ambiguous; some courts will not allow extrinsic evidence touncover a latent ambiguity


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g. Merger Clause- standard in contracts that states the writing is intended to be finaland complete all prior understanding are deemed to have been merged into or

superseded by the final writingh. Parol Evidence might be admitted when it is completely different agreement that

would neither supplement nor change the original agreement (doesnt work in

Thompson)7. Implied obligation of Good Faitha. Construction- applies to all contractsb. Good Faith requires not merely honest, but also the observance of reasonable

commercial standard of fair dealing in the tradei. some states have retained the minimal standard ofhonesty in fact at least

for parties who are not merchantsc. Should include

i. Fully disclosing material factsii. Substantially performing without knowingly deviating from specifications

iii. Refraining from abuse of bargaining poweriv.

Acting cooperativelyv. Acting diligently to mitigate the other partys damages

vi. Acting with reason & not arbitrarilyvii. Interpreting contract language fairly

viii. Accepting adequate assurances

JUSTIFICATION FOR NON-PERFORMANCE

1. Breach of Contracta. Nonperformance of a duty that becomes dueb. Performance is not due if non-performance is justifiedc. Partial breach is not a justification; must wait until end to sue for damages

2. Justificationsa. Prior Material Breach

i. Can stop performance until curedii. Can also sue at end for damages

iii. Jacobs & Youngs v. Kent- not using reading pipes not a material breachbecause there was substantial performance

iv. Circumstances significant in determining whether a failure is material1. The extent to which the injured party will be deprived of the

benefit which he reasonably expected2. The extent to which the injured party can be adequately

compensated for the part of that benefit of which he will bedeprived

3. The extent to which the party failing to perform or to offer toperform will suffer forfeiture

4. The likelihood that the party failing to performance or to offer toperform will cure his failure, taking account of all thecircumstances including any reasonable assurances


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5. The extent to which the behavior of the party failing to perform orto offer to perform comports with standard of good faith and fairdealing- was failure to perform willful?

v. Even a minor deviation will give the other party a right to recoverdamages for nonperformance, but the damages may be negligible

vi.

Other test for Materiality (MINORITY)1. Whether breach operated to defeat the bargained-for objectives ofparties

2. Whether breach caused disproportionate prejudice to thenonbreaching party

3. Whether custom and usage consider such a breach to be material 4. Whether the allowance of reciprocal nonperformance will result in

the accrual of an unreasonable and unfair advantageb. PRIOR TOTAL BREACH

i. Can stop performanceii. Can terminate the contract immediately

iii.

Can sue immediately for damagesiv. Can seek an alternative contractv. Circumstances significant in determining when remaining duties are

discharged1. See those for prior to material breach2. The extent to which delays hinders substitution3. Extend to which time is of the essence

vi. Sackett v. Spindler- prior material breach ripened into total breachc. ANTICIPATORY REPUDIATION

i. Before one performance becomes due he decides not to performii. Treat as total breach as long as you can find a material repudiation of the

contractiii. Requires a clear manifestation of an intent not to perform the contract on

the date of performance. This intention must be a definite and unequivocalmanifestation that he will not render the promised performance when thetime fixed for it arrives

iv. A suggestion for modification DOES NOT amount to repudiationv. Conduct can amount to an anticipatory repudiation but performance must

be a practical impossibilityvi. The effect of a statement constituting a repudiation is nullified by the

retraction of the statement if notification of the retraction comes to theattention of the injured party before he materially changes his position inreliance on the repudiation or indicates to the other party that he considersthe repudiation to be final

vii. Truman Flatt v. Schupf- ambiguous intent over whether the plaintiffwould perform, but even if it had been anticipatory repudiation, theplaintiff retracted the repudiation I a timely manner before defendants hadmaterially changed positions or suggested that the repudiation was final

d. REASONABLE GROUND FOR INSECURITYi. Can make a demand for adequate assurance of performance


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ii. Adequate assurance must occur within a reasonable time, UCC says not toexceed 30 days

iii. If this is not met, you can treat it as total breachiv. For something short of anticipatory repudiation, you can work under

reasonable grounds for insecurity

v.Hornell Brewing v. Spry - One party may demand assurances from anotherparty when there are reasonable grounds for insecurity regarding thatpartys performance and the demanding party may suspend its

performance until it has received such assurances.

e. Non-Occurrence of Express Conditioni. Express Condition

1. Event not certain to occura. Event not certain to occurb. Which must occur in order for a duty to arise

ii. Test:1. Was there an express condition on this duty?

a. Conditions agreed to and imposed by the parties themselvesb. Ambiguities will be construed against express conditionsc. Does this condition protect defendant so that defendant can

raise its nonoccurrence as a justification?-conditionsusually meant to protect one party over the other

2. Then it must be construed strictlya. Must be literally performed; substantial performance is not

enoughb. Unless non-occurrence (justification) was excused/ unless

there is a reason non-performance is not justified by thenon-occurrence

i. WAIVER1. Intentional relinquishment of known right2. That must be non-material3. Through actions or oral confirmation to

suggest waiverii. ESTOPPEL

1. Intentional relinquishment of known rightand

2. Consideration or prejudicial reliance3. [if condition is material, can try this]

iii. PREVENTION1. Party has some control over occurrence ofcondition and2. Fails to make good faith efforts to ensure

condition arisesiv. AVOIDANCE OF FORFEITURE

1. There must be forfeiture and2. Non-occurrence of condition must be non-

material


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3. Interpretation as a means of reducing therisk of forfeiture cannot be employed if theoccurrence of the event as a condition isexpressed in unmistakable language

4. The Restatement says to the extent that thenon-occurrence of a condition would causedisproportionate forfeiture, a court mayexcuse the non-occurrence of that conditionunless its occurrence was a material part ofthe agreed exchange

5. A tenant or mortgagor should not be deniedequitable relief from the consequences of hisown neglect or inadvertence if a forfeiturewould result

DEFENSES

1. Basic rule for defensesa. Party may void contract for ___ if

i. Basic elementsii. Never affirmed/ratified with capacity

iii. Consideration must be fully restoredb. Policy behind defenses

i. Through To engage in a contract parties should1. Have rational capacity to determine what is in best interests2. To conform actions to judgments

2. Procedural defensesa. MINORITY

i. Policy question1. Capacity to understand contract & consequences2. Vulnerability of miunor & concner for explotation3. Taking away minors ability to use promises as a tool?

ii. Minority may void contract if1. Underage at the time of signing2. Never affirmed with capacity

a. Expresslyb. Indirect through a guardianc. Implicitly through conduct that does not disaffirm within

reasonable time after reaching majority3. Regardless of whether full consideration can be restored

iii. What can defendant do in response?1. Argue for set-off deduction


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a. If contract is fair and not overreaching, defendant candeduct for use or depreciation

i. Fair- substance of agreement itselfii. Overreaching- procedure of negotiating into

contract

2.

argue for restitution for necessaries3. if minor lies about age, defendant can sue in torts for fraudiv. Dodson v. Shrader- The court must balance protection of minors with

interests of business people who could then not safely deal with minors. Asystem which allowed a minor to disaffirm a contract when an itembecame worn out and get his whole purchase price back would lead toconcorruption of young people and encourage habits of trickery anddishonesty.

b. MENTAL INCAPICTYi. Party may void contract for mental incapcacity if

1. Unable to understand the nature & consequences of thetransaction (cognitive incapacity) or2. Unable to act in a reasonable manner in the transaction & theother party knew/had reason to know of the condition

(volitional capacity)3. Never affirmed with capacity

a. Expressb. Impliedc. Indirect- through a guardian

4. Consideration must be fully restoreda. Exceptions: if other party has actual knowledge of

incapacity, contract is overreaching or contract is unfairb. If exception exist to restoring consideration, there is no

argument for defendant to set-off deduction because itrequires no bad faith/overreaching in contract

ii. Contract is voidable if a party has reason to know because of intoxicationthat the other person is unable to either understand the transction or act ina reasonable manner

c. DURESSi. Wrongful or improper threat

1. Threat of illegal/criminal or tortuous conduct2. Threat of criminal prosecution3. Threat to breach contract in bad faith4. Threat to bring civil suit in bad faith (include threat to sue for

breach of contract)ii. No reasonable alternatives

1. Remember to identify actual harm threatened when determiningreasonableness of alternatives

2. Possible reasonable alternatives: the availability of legal actionparty have created the financial hardship ion if that court presents aviable option, alternative sources of goods/services when there is a


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threat to withhold such things, and toleration if the threat involvesonly a minor vexation

iii. Actual inducement- causality (substantially contributes to decision)iv. Contract is void if made under coercion involving a physical threatv. Totem v. Alyeska Economic duress, wouldnt pay up unless plaintiff

settled for a less amount way lower than FMV1. Contracts made under economic udress are demed voidable ratherthan void

2. Most courts require that the party have created the financialhardship in addition to taking advantage of the other partys direcircumstances

d. UNDUE INFLUENCEi. Persuasion that tends to be coercive in nature, which overcomes the will

without convincing the judgmentii. Do take into account the susceptibility of plaintiff

iii. Elements of over-persuasion1.

Insist demand that the business be finished at once2. Extreme emphasis on undue consequences of delay

3. Use of multiple persuaders by the dominate side against a singleparty

4. Absence of third-party advisers5. Statement that there is no time to consult financial advisers or

attorneyse. MISREPRESENTATION

i. Statement of Fact1. May include statements made recklessly or negligently with

respect to truth of statement2. Vs. opinions wher one expresses a belief without certainty3. When can a statement of opinion be actionable?

a. When the person is giving it doesnt actually believe whattheyre saying

b. When there is a special relationship of trust between partiesc. When one is an expert on the subjectd. Age/susceptibility of plaintiff

ii. That was falseiii. And a material elementiv. Reasonable reliancev. Causes entry into contract

vi. Syester v. Banta - A party to an agreement may rescind such agreementand recover damages if the agreement was fraudulently entered into. Inorder to successfully assert a claim of fraud, all elements of the claim mustbe met.

vii. Tort recovery v. Breach of contract recovery1. Benefit of punitive damages2. Include above elements

a. Knowledge of falsity


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b. Intent to deceivec. And causes harm (instead of causing one to enter contract)

3. Can be sued for misrepresentation and non-disclosuref. NONDISCLOSURE

i. Elements1.

Omission of statement of fact2. That was true

3. And a material element4. Reasonable reliance5. Causes entry into contract

ii. Duty to disclose1. Necessary to prevent a previous assertion from being

fraudulent/material2. Disclosure would correct a mistake of the other party as to a basic

assumption on which that party is making the contract and ifnondisclosure amounts to a failure to act in good faith and in

accordance with reasonable standards of fair dealings3. Disclosure would correct a mistake of the other party as thecontents or effects of a writing evincing or embodying anagreement in whole or part

4. The other person is entitled to know the fact because of arelationship of trust and confidence between them

iii. Where the seller of a home knows facts materially affecting the value ofthe property which are not readily observable and are not known to thebuyer, the seller is under a duty to disclose them- termite case

g. STATUE OF FRAUDSi. If applicable, contract will be unenforceable

1. Basic provisionsa. Goods

i. UCC requires goods in excess of $500 to be inwriting

b. Servicesi. One-year provision- a contract that is not to be

performed/completed within one year from themaking thereof

ii. Exceptions1. Lifetime contracts- possible to fully perform

within a year2. If it possible to be performed within a year

(no matter how unlikely), does not apply,even if the probability is low

c. Landi. All land ales must have a written agreement

2. Implausible contract rulesa. Executor-administrator clausepromise by

executor/administrator to answer for decendents obligation


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b. Surveyorship provision- promise to answer for the debtsof another

i. Must be made to creditor not debtorii. Does not release debtor in exchange

iii. No economic advantage3.

Check if requirements are meta. Writing

i. Must reasonably establish identify the subjectmatter of the contract

ii. Must establish either contract was formed or offeredby signing party

iii. States with reasonable certainty the terms of theunperformed promises in the contract

iv. Crabtree v. Elizabeth Arden1. Linking doctrine- memorandum need not

be in one document- can be pieced together

from separate writingsa. Must be one signed writingb. Must relate to same subject matter or

transactionc. Must be some evidence of

acquiescence (lower stand of proofthan signature)

d. Some courts (minority) insist thatsigned writing refer to unsignedwriting

e. More popular position is that asufficient connection between papersis established simply by a referenceto the same subject matter ortransaction

f. Restatementjust states that one ofthe writings must be signed and thatother writings clearly indicate thatthey relate to the same transaction

b. Signaturei. By or on behalf of person charged

ii. Signature may be any symbol made or adopted withthe intent, rea, or apparent, to authenticate adocument

4. Check if exceptions to statue of fraudsa. Promissory estoppel like exception- a promise which the

promisor should reasonably expect to induce action orforbearance on the part of the promisee and which doescause action or forbearance is enforceable notwithstandingthe statute of frauds if injustice can only be avoided by


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enforcement of the promise. The remedy granted for breachis to be limited as justice required.

5. Exception for reciprocal/mutual3. SUBSTANTIVE DEFENSES

a. Unconscionabilityi.

Procedural Unconscionability1. Unfair in the process2. May refer to lack of choice by one party or some defect in the

bargaining processii. Substantive Unconscionability

1. Fairness of the terms of the resulting bargain2. Is the barging VERy LoPPsided (valid, effective, reasonable,

legal, consistent with parties purpose, consistent with public

policy)3. Look at standard market patterns/prices- is price excessive?

iii. Majority test requires both procedural & substantive on a sliding scaleiv.

Requires absence of meaningful choice on the part of one of the partiestogether with contract erms which are unreasonably favorable to the otherparty

v. UCC considers these factors1. Whether the consumer is likely to default2. Whether the consumer will receive substantial benefit from the

transaction3. Gross disparity between the contract & market price4. And whether seller has knowingly taken advantage of a consumers

bargaining impairment due to mental impairment, lack ofeducation or similar factors

vi. Williams v. Walker Thomas Furniture Case1. Procedural- taking advantage of people with a lack of eduaciton

& ability to understand contract terms2. Substantive- contract terms were counterintuitive, creating an

increase of risk for the consumer as they had showntrustworthiness that they could pay off previous items

THE SECONDBEAST PROMISSORY ESTOPPEL

1. Promisea. Statement of intention so made to induce another person to believe they are

undertaking a commitment

b. Can be based on conduct as well as an express promise (Wright v. Newman- childsupport case)

2. That induces action or forbearance3. That the promisor reasonably expected to induce action or forbearance4. And that injustice can be avoided only by the enforcement of the promise


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a. Detrimental reliance5. The remedy granted for breach may be limited as justice requires

a. Reliance damages6. Commonly occurs in these special cases

a. Family contractsi. Focus on interest of children

b. Charitable subscriptionsi. Importance of charities

ii. Enforceable with promise & consideration or relianceiii. Courts are quite liberal in construing these elements in order to be

favorable toward charitable subscriptions

iv. Although typically in promissory estoppel cases, the remedy may belimited as justice requires, courts frequently still apply expectation to these

cases

v.

Restatement 90(2)eliminating the requirement for an induced actionor forbearance; basically making any promise enforceable

1. Many courts, including decision in king have been reluctant toadopt this restatement standard, but instead they typically stretch to

find either consideration or reliance

c. Employee pension plansi. Social welfare, retirement policies

d.

The THIRD BEAST- RESTITUTION/UNJUST ENRICHMENT

1. No-preexisting bargaining, either expressed or implied2. Conferral of benefit (enrichment)

a. Only entitled to restitution when one has conferred a benefit on another by way of partperformance or reliance

3. Under circumstances in which retention would be unjust4. Remedy

a. Give item or fair market value of item back5. Arises when

a. Gift exchanges creates an obligation to reciprocratei. Presumption against the legal right to receive payment for a gift you give

someone; we want to force people to go to the first beast & engage in self-

interested bargaining first

6. When someone is entitled to restitutiona. He acted unofficiously and with intent to charge therefor, and

i. Officiousness- intervention in anothers affairs when there are not justifiedcircumstances


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ii. Non-gratuitous/professional activityb. The things or services were necessary to prevent the other from suffering serious bodily

harm or pain, and

c. The person supplying them had no reason to know that the other would not consent toreceiving them if mentally competent, and

d. It was impossible for the other to give consent or because of extreme youth or mentalimparimetn, the others consent would have been immaterial

i. Consent is not always possible in certain cases when something is necessary toprevent the other from suffering serious bodily harm or pan or the person is

mentally incompetent or too young to cosnet (allows for restitution when

something is beneficial to a person who is unable to consent or in dire need)

7. Can get restitution also for preserving another things/property ifa. He was lawfulb. It was reasonably necessary that the services be rendered or expenditures incurred

before it was possible to communicate with the owner by reasonable means

c. He had no reason to believe that the owner did not desire him so to actd. He intended to charge for such services or retain the things as his own if the identity of

the owner were not discovered, and

e. The things have been accepted by the owner8. Can get restitution when youve exhausted remedies for other & other owner has not paid

anyone for servies (see Commerce v. Equity- subcontractor could recover from owner when the

owner had not paid general contractor & subcontractor had exhausted remedies against the

general contactor)

9. Courts refuse to allow recovery for non-professionals for losses involved in rescues10.A party is not barred from restitution for the reason that the contract us unenforceable because

of the statute of frauds (or any other of the standard defenses) unless the statute provides

otherwise or its purpose would be frustrated by allowing restitution

11.MATERIAL BENEFIT RULEi. Promissory restitution- if a person was subject a legal obligation that has become

unenforceable (because of passage of time, or some other reaction) a subsequent

promisor to honor or receive the legal obgliation will be enforceable at law

ii. a promise made in recognition of a benefit previously received by the promisor fromthe promisee is binding the extent necessary to prevent justice

iii. A promise is not binding1. If the promisee conferred the benefit as a gift or for other reasons the

promisor has not been unjustly enriched (ruling out officious intermeddling)

or

2. To the extent that the value is disproportionate to the benefit (fair marketvalue)

iv. Used in cases where one agrees to pay after having life savedv. Not all courts agree with material benefit rule

12.Expectation damages


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i. The reasonable value to the other party of what he received in terms of what itwould have cost him to obtain it from a persons in the claimants position or

ii. The extent to which the others partys property has been increased in value or hisother interests advanced

CONTRACTUALISM ABOUT CONTRACTS

THEORIES

1. Public Policy1. Problem not with the process but with the terms that result from the process2. 3 Tensions in Contract Law

a. Why do we allow for the enforcement of purely executory contracts(obligations are all in the future/have not been performed at all, withno reliance)? And why do we give out expectation damages (and to alesser extent specific performance) for breach of such a contract? Whydo we not allow for more than expectation damages (i.e. punitive orliquidated damages) or less?

b. Why centrality of the consideration doctrine? Why do we limitenforcement of contracts? What about all the puzzling exceptions toconsideration?

c. Why tension between deference to voluntary assent and policing forfairness?

2. 3 Theories for Contract Lawa. Promise Theoristsholding people to promises is a respect for their autonomy &

freedom of will1) Moral obligation to keep promisesdoesnt explain why we cant choose

remedies when one does breach a contract2) Morality of promise keeping has no need for a limitation on contracts that

only have bargained-for consideration3) Dont want the government to interfere with ability to use promises as tools

no policing for fairnessb. Efficiency Theoristscontract law is about maximizing good consequences & the

utility of goods; want Pareto efficiency, where at least one person is better off & noone is worse off1) We should assume that a voluntary agreement, if enforced, will be conducive

to the welfare of both parties (& Pareto efficient/superior); allows for anefficient breachas long as someone can pay for recovery for the damages,they are free to breach; using specific performance or other remedies deterssome people from moving to a Pareto superior state of affairs (better off aftera breach)


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2) Maximizing human welfare/efficiencywant to maximize use of contracts,but there are some good reasons to require consideration for certain cases (i.e.unilateral)

3) Explanation for voluntary assent but not for a principle of fairness. Duress andfraud are the only defenses used by efficiency theorists. But the problem with

this is that it assumes people are perfectly rational and have sufficientinformation to make decisions. This isnt practical because of classdistinctions and the asymmetry of information.

c. Contractualist Theoristscomes out of social contract theory; based on Rawlstheory that people are rational utility maximizers put behind the veil of ignorancewho will want to maximize equality, not knowing their own particular situation1) People would consent to expectation damages because people know that if

they are the victim of breach they will still get the monetary value (essentiallyequal as fulfilling the contract)

2) You dont ordinarily be bound by a rule unless youve given fullconsideration of using the promise as a too

3)

Voluntary assent allows people to regulate their own contracts, but ifthings are egregiously unfair, we can fix it. Asymmetrical informationcreates a need for all other voidable defenses. Gross asymmetries inknowledge & rational capacity to determine whats in ones best interests

should be remedied by the courts

Contracts Outline Kar

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