CONTRACTS OUTLINE
O’Connell - Spring 1996

K (Restatement §1):  A promise/set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.

Time Line of K:
	Pre-Classical (pre-1880’s)  Raffles
	Classical (1880-1920)  Langdell, Holmes, Williston
	Legal Realism (1920-1960)
	“Modern” K Law (1960 to present)
Remember:  K law never goes away, it just hides, waiting to be picked out for use in a particular situation.

I.	MUTUAL ASSENT:  Contract’s Core Concept

A.	Subjective and Objective Theories of K

1.  Subjective test:  focus on intent of parties, on what the hearer understood.

Raffles v. Wichelhaus (1864) [two ships the Pearless] (supp)
Classical K theory
Facts:  /buyer argued that his order was for October cotton (cheaper) and  argued that purchase was for whatever cotton arrived in England on a ship called the Pearless.
 argued no meeting of minds b/c the parties were not talking about same thing.
Rule:  Must have meeting of minds and the test applied is subjective (apparently lying was not as big a concern back then.  The court more concerned about enforcing K that parties did not actually enter into.)  
Note:  Subjectivity is NOT dead.  You can argue a matter either was to best suit your needs.  
Master Concept:  K’s are volitional, at will, neither party can be forced into it.  Therefore, parties must be agreeing to same thing (thus, meeting of minds is critical).  For a K to exist, there must always be volition, agreement, serving a purpose for each party.

2.  Objective Test:  Focus not on what the parties intended or wanted, but what a reasonable 	person in the same situation would have thought.

Ray v. William G. Eurice & Bros. Inc. (MD 1952)
Facts:  Argument about plans to build house.   argues that he thought they were agreeing to his plans, not the s plans, and thus there was no meeting of the minds.
Rule:  Although TC found for  b/c it believed his story, App. Ct. rev’d b/c it states that what the parties thought is not important, all that matters is that the parties signed an agreement.  The fact of the signing is an outside sign, an external manifestation, an objective result showing that a K was entered into.
Note:  The approach favored by Williston, etc., is the rule of today:  its objective (reasonable person) with a mix of subjectivity (person in the position of the parties).  He states that true interpretation is not about what the parties though or intended, but what a reasonable person in the position of the parties would have thought it meant.

3.  Objectivity in Action

Larock v. Enabit (TX 1991) (supp)
Facts:   appeal, trying to force  Enabit, a chiropractor, to abide by non-competition clause.  The clause was part of a sham agreement that stated that the  was an individual contractor, but court saw this as nothing more than a employee/er relationship.
Rule:  While the law allows non-comp clauses, it requires them to meet certain criteria:  (1) it must be ancillary to an enforceable agreement; (2) it must contain reasonable limits on scope of activity, time, distance, etc.  If (1) is met, but not (2), the court can reform the covenant so its meets the criteria.  The Q here was thus whether there was a valid agreement.  Seeing the independent contractor agreement as nothing more than a sham to avoid taxes, the court says the agreement was invalid.

Chan v. Korean Air Lines (DC Cir, 1989) (supp)
Facts:  Warsaw/Montreal conventions allowed a limit on damage awards to victims’ families in airplane crashes.   argued that limit should not apply b/c air line did not meet reqs. of the convention, i.e., font was supposed to be no smaller than 10 pt., here, 8 pt.
Rule:  Scalia disagrees, he assume that the drafters wrote the law as intended, and that it allowed for slight errors such as the one made by the air line.  He does his usual trick of comparing section of the law to prove his point.  Completely objective approach.

4.  Final Note on Objectivity/Subjectivity

The change from O to S came about because of changes in the market, such as industrialization, less face to face dealing (internationalization and the growth of transportation), etc.  

5.  “Agreement” in the absence of Understanding

St. Landry Loan Co. Avie (LA 1962)
Facts:   bank sued  as co-signer of loan.  The  did not speak English and the bank officer read him the agreements, but did not do so accurately.  TC found for , saying he did not understand what he was getting into.  ( thought he was merely forwarding money from lender to his family, not co-signing the loan.)
Rule:  B/c of fraud alleged or found, Ct. finds for .  Basically, you sign, you’re bound.  Signature means  understood and agreed.  If no fraud found,  can not be let out of K.

Meeting of Minds:  

6.  Applicable UCC Sections, and misc.

2-204:  Formation in general
	1)  K made in manner to show agreement, conduct by both parties recognizes K 	exists.
	2)  Knowing exact moment of formation not req. for agreement to be K
	3)  K for sale does not fail for indefiniteness if parties intended for K and there is 	basis for remedy

Mutual assent to all terms not req., just to the essential terms.

II.	THE CLASSICAL LAW OF K:  THE CORE FROM WHICH IT ALL BUILDS

A.	Offer and Acceptance

Classical Model of K is based on three phase process:
	1)  Preliminary negotiation
	2)  Offer:  
	3)  Acceptance  

1.  What is an Offer

Definition of O:
Direct complete proposal that a K be entered into, providing for an exchange of defined performances.  (Sec. 24 RST.) or 
Manifestation of willingness to enter into a bargain so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.
Direct proposal to enter into a K.  Creates a power of A in O’ee.
O becomes legally binding promise, it creates a legal right to create a K.

Note that offer is different than a future intention, price quotation, preliminary negotiation or invitation (difference is that invitation tends to be for something in future, O is more of the present tense, a “ready to go” quality), advertisement (which is an invitation to make an offer).  

Definition of A:
Manifestation by O’ee of willingness to be bound by the terms of the O; can be oral, written, expressed via conduct; the last act in simple negotiation.
	Restatement §50:
	1) A must be made by O’ee.
	2) A by performance reqs. at least part of promised performed.
	3) A by promise reqs. O’ee to complete every essential act.

Lonergan v. Scolnick (CA 1954)
Facts:  sale of land via newspaper ad, etc.,  sold land to another person   sought specific performance, i.e., he wanted the land, as opposed to damages. 
Rule:  Seller’s ad in paper was not an offer, it was an invitation to make an offer.  Ad was not specific, and very general.  It did not give layout of land, etc.  If court can’t determine what the K was, it can’t enforce it.  If that’s the case, NO K.
Note1:  Since ad was not O, what was?  Ct says the s response letter was.  But this letter was not accepted, b/c it said “act fast,” and the  didn’t respond for another week.
Note2:  This is general rule for ads, but it can be manipulated to come out differently, see Lefkowitz.  
Reasonable buyer:  Whether a statement is an O, or and invitation for an O is determined by what the reasonable person in that position would understand the statement to be.
How long is O valid for:  until (1) rejection, (2) revocation, or (3) for a reasonable period of time.  See below Lefkowitz for more.
Note3:  Law very protective of O’ers.  So, communications are strictly construed to determine if O has been made.  If O has been made, the power has switched hands and the other party now has the power of A.

Lefkowitz v. Great Minneapolis Surplus Store (MN 1957)
Facts:  Ad in newspaper, “first come, first serve.”   said ad was not an offer, but invitation to make an offer.
Rule:  Court said ads can be offers if facts show that some performance was promised, in positive terms, in return for something requested.  Here, the offer was clear, definite, left no room for negotiation.  [This is against the general rule.  See below for more on this.]
Note:  Owner of business a scumbag, so Ct. stretched O so as to screw him.
Revocation:  O’er can revoke offer anytime before the O is accp’t.  
Damages:  Tort damages are intended “to make the plaintiff” whole, K damages look forward, where would the plaintiff be had the K not been broken; sometimes called ‘expectation damages” or “benefit of bargain damages.”
How can Ct. find against general rule:
  Doctrinal/factual:  facts make application of doctrine inapplicable.  Here ad was specific and asked for performance - “first come, first serve.”
  Rationale for Rule:  exists to protect retailer from having to satisfy everyone.  Here, 	however,  did not need this protection b/c the ad said “only one left.”
  Other External Forces:  Before beginning of consumer revolution, so court had no other option to but to find a common law exception, i.e., the ad was specific enough to 	enforce.

2.  Bilateral K’s (two promises made)

Henthorn v. Fraser (Eng. 1892) [Counter-Offers]
Facts:  Here, A sent in mail for purchase of land, revoke sent, revoke received, A received.
Rule:  Revocation does not take effect until actually communicated to the O’ee.  The O’er is continually making O until the O’ee is made aware of revocation.  A takes effect when posted (mailed).  This is known as the “mailbox rule”.  So here, b/c A was sent before the revocation was received, the O’er was bound to deal with the O’ee.
Note:   tried to argue that mailbox rule should not apply b/c the O was made in person, thus, the A should be too.  (This was the old rule, i.e., that medium of A must be in medium of O.)  Court rejects this argument, saying that  had implied permission to A by mail b/c  did not make it clear that an in-person A was req’d.  The question is one of reasonableness.  Here, the  lived some distance away.  Could the  reasonable expect that the  would come all the way back just to A.  No.  So, the mailbox rule applies anytime it is reasonable for the O’ee to reply via mail.

What Happens to O once it has been made:  
  A:  Meeting of  minds, K is complete and O is gone.
  Rejection:  O is gone.
  Lapse:  Last reasonable period of time, or for a specified period of time set forth in O.  	(O’er is master of O and can control the time frame, but must do so expressly.)  	Note:  if specified time and A is sent, the rule is specified time plus reasonable time 	for mail to arrive.
  Counter-Offer:  

Default Rules:  The law sets defaults that apply unless the parties stipulate otherwise, e.g., an O lapses in a reasonable time period unless otherwise specified by the O’ee.

Normille v. Miller (NC 1985)
Facts:   signed P & S agreement w/ time limit.   made changes to P & S on same sheet of paper, failing to cross out the “valid until” date.   thought they had time to think over the counter-O b/c the date had not been crossed out, but in meantime, broker went and found another buyer and this buyers O was Accp’t.  Broker then told , “you snooze, you lose.”  Although  finally accp’t counter-O, it was not until after he had heard that the other buyer had bought house.  
Rules:  (1) The owners’ changes turned the P & S, which was an O, into an counter-O, i.e., a new O.  The legal effect of the counter-O is rejection of the original O, and turning the O’ee (and in this case, the owner) into the O’er.  (2)  The counter-O had been revoked b/c.  Why?  Even though owner did not relay his revocation, behavior inconsistent with the O (i.e., selling house to another person) is recognized as a revocation.  However, the O’ee must have known (or, as a reasonable person, should have known) of the act that that served as the revocation.  “You snooze, you lose” served as the requisite act here.
Note1:  At point of counter-O, there is no meeting of the minds.
Note2:  Counter-O sometimes referred to as “qualified” or “conditional” A.

3.  Unilateral K (one promise made)

Unlike bilateral Ks, where a promise is exchanges for a promise, here, the O’er wants, in exchange for her promise, not a promise in return, but an act.  
If the O’er should offer to exchange his promise of future performance only in return for the O’ee’s actual rendering of performance, rather than here mere promise of future performance, then the transaction gives rise to a unilateral K.
The promisor, i.e., the O’er, is bound once the act is performed.  The doing of the act is both A and performance (completion of the K).

Lost Dog Problem:  (supp. p. 24)  Finder of dog must return dog to certain spot and can get $50.  Assume the following scenarios:
Finder sees sign, but call owner and has him pick up dog.  No $ b/c finder did not do the act requested.
Finder returns to required spot, but did not see sign prior to doing so.  No $ b/c there was no meeting of the minds.  Person can not A offer she does not know about.  B/c the act is both A and performance, there can be no K b/c there was no A.
Finder sees sign and does as requested.  Gets $.

Revocation of Unilateral K:  O’er can revoke O up till the time that the act is complete b/c up till then, there has been no (full) A.

Bishop v. Eaton (MA 1894)
Facts:   wrote letter to  telling him OK to lend to his brother, that he would cover the debt.   then guarantees the loan to brother.  Question:  is the letter to  an O for a unilateral K.
Rule:  The letter was an O to enter into a unilateral K; it is asking for an act and the O’ee did not have to comply, but if he does, then O’er is bound.
Notice:  Here,  did not know of A.  How can an O’ee be bound if he is unaware that the O has been A’d.  Problem in this case is that although notice was sent, it was never rcv’d.  Ct says this is still a K b/c O’ee did all that the law reqs. of him.  Fairness dictates that O pay.
Thus, to satisfy unilateral K:  
	1)  Act requested is done.
	2)  Notice provided to O’ee.  (Implied w/in O is that notice of A will be provided 		w/ due diligence, i.e., w/in reasonable period of time)
Example series of events:  A, revoke, notice sent.  What result?  There is a K so long as the notice of A was sent w/in reasonable time period.
Note:  The usual rule of protecting the O’ee is abandoned w/ uni-K’s.

Foisting Problem:  Generally, mere silence does not constitute A.  [Note however, that when dealing w/ uni-K, silence can mean A, at least until notice is sent.]  So, if you receive something unrequested in mail, you are not forced to A it, or even return it.  However, if you “exercise domain over it” than it is A, and its yours (assuming no consumer protection law to the contrary.)

Petterson v. Pattberg (NY 1928)  [the case that brought disrepute to unilateral Ks]
Facts:  Pattsberg lent $ (mortgage) to .   gave  chance to save $780 by paying off the loan.   got $ together and went to s house to pay.  He tells  through the door why he is there.   tells him that he sold the mortgage to another person (i.e., O is revoked).  The other person refused to give the discount.   sues for “benefit of the bargain,” claiming that when he showed up to s house, that was A.   says no A b/c cash was not tendered, so OK to revoke.
Rule:  Revocation is effective once the O’ee is actually knows (or should have known, i.e. an action inconsistent with the O) of it.  Ct. agrees w/ , says O was never A’d, so revoke was OK.
Dissent:  O’er should not be allowed to prevent O’ee from A’ing deal.

Reaction:  
Restatement §45:  Revocation of Uni-K; Effect of part-performance
Once performance of act requested has begun, O’er is bound and cannot revoke.  The K is not complete and O’ee is not bound to O’er unless act is completed.  But, O’er is bound, i.e., cannot revoke, once the O’ee has begun performance, even if act not yet completed.

B.	Consideration

1.  History of Consideration:  Contracts under Seal

C is the price of a promise, anything given in return for the promise.
If informal promise and not supported by C, K is not enforceable.  If formal K (i.e., under 	seal), no consideration needed.
Formal K (a.k.a. K under seal):  enforceable b/c of its form.  Seal is substitute for C.
	Pretty much a dead issue.  Only recognized in about half of the states.  Also, the 		seal has become much less formal, losing its beneficent effects (see below).
	When used extends statlim from 6 years to 20 years.
	Corporations use seals as substitute for signature.

Functions of Legal Formalities (Lon Fuller):
	Evidentiary Effect
	Cautionary Effect
	Channeling Effect (“marker” telling court whether there is a legally significant 			event.

UCC §2-203:
	Seals are not appropriate and do not apply to Art. 2 sale of goods.  K’s do not 			become formal merely b/c they have a seal.  C is required for 				valid/enforceable K.
	Comment 1:  Seal still allowed to extends statlim from 6 to 20 years.
	Comment 2:  Signature is presumed valid and is presumed to show C.  It is up 			to party trying to defeat K to show no C.

Informal Promise:  Any promise that is not a formal one (most every K).  Not 	enforceable w/o C.  All the remaining discussion of C deals with informal Ks.

Fully Executed K:  All is done except one party has not yet paid.
Executory K:  Something still to be done in addition to payment.

2.  Classical Consideration:  The Benefit - Detriment Doctrine

Benefit/Detriment:  Promise enforceable whenever:
	1) P’ee acts or promises to act in exchange for P’or’s promise AND
	2)  that act or promise is a legal detriment to P’ee or legal benefit to P’or.

Hamer v. Sidway (NY 1891)  [pre-classical law]
Facts:  Uncle promised nephew that if he stopped smoking/drinking until you reach 21 years, he would give $.  
Rule:  P’ee gave up something by agreeing not to smoke/drink - this is a detriment.  He had legal right to smoke/drink, so agreeing not to do it is detriment, i.e., giving up right (forbearance), as opposed to something tangible, is sufficient..  Court also says that law does not req. both a benefit and a detriment for C, either one suffices.
Note1:  Although not dealt w/ b/c Ct. holds either benefit or detriment suffices for C, it says that the uncle also obtained a benefit.
Note2:  This court’s formulation of the benefit/detriment formula does not suffice for long.
*Note3*:  The person bringing the action must show detriment, not necessarily the P’ee.
Note4:  Even though enforceable K here, not enforced b/c statlim had run.  Statlim began to run as soon as performance completed, i.e., when boy turned 21.  (This may not be true, the court may have found that there was a trust and thus found for nephew.  Either way, just get the point about statlim.)
Trust:  Uncle could have set up trust for nephew, that way, no statlim problem.

Pre-existing Duty Rule:  If you promise to do something you are already legally obligated to do (i.e., paying taxes), the promise to do it is a nullity and is unenforceable.

Dougherty v. Salt (NY 1919) [classical law -- Cardozo]
Facts:  Aunt Tillie gives promissory note to nephew Charley.
Rule:  Distinguishes b/w gift and K;  donative promises are tough to prove under evidentiary and cautionary analysis, so they are disfavored by the law.  Even though promissory note said “value received,” included to show consideration, Ct. did no buy it.  Ct. says the note does not suffice to show C.  K’s exist to “protect us from our own emotions.”
Nominal Consideration:  In this context, it’s as good as no consideration.
Executory Gift:  Not only is this a gift, acc. to the Ct. is executory b/c performance by Tillie was never completed, and Ct. has no power to force the giving of a gift.

Rst § 71:  
1)  To Const. C, performance or return P must be bargained for.
2)  Bargained for:  sought by promisor in exchange for promise and given by the promisee in exchange.
3)  Performance:  act or other promise OR forbearance OR creation, modification, or destruction of a legal relation.
Comment B:  a mere pretense of bargain does not suffice where there is a false recital of C.  C must be real, must show value received, can’t just say it.

3.  Classical Consideration:  The Concept of Bargain and the Role of the Court

Batsakis v. Demotis (TX 1949)
Facts:  B/c Batsakis could not get money into Greece, she agreed to pay $2000 for 500,000 drachma (which had a value of only $25).  
Rule:  Unlike Dougherty, here there was insufficient C. not nominal C (“mere inadequacy of C does not void the K).  Law protects your ability to enter into stupid deals, and although this was a really bad deal, there was enough C to show, under evidentiary and cautionary analysis, that there was a K.

Baehr v. Penn-O-Tex Oil Corp. (MN 1960)  [Modern C Law]
Facts:  Kemp owes $ to , so conveys to them his assets.   sues  b/c they now control Kemp’s gas station, which owes him money.
Rule:  Not enough to show that P made, must show that P that is being sought to be enforced was given in exchange for the detriment/benefit.  Had the promise b/w s forbearance and s promise been more explicit, then there would have been C, and thus K.  Ct. agrees that there was a detriment (the  agreeing not to sue for six months), there was no nexus b/w the detriment and s promise (We’ll pay, we’ll pay, let us get things in order here first.)  
Q of Fact/Law:  If P was made is a Q of fact, whether C is Q of law.

Quid Pro Quo:  This for that:  the promised sought to be enforced given in exchange for benefit/detriment.  Note that under Hamer, just either benefit or detriment would have been sufficient.  But by this time, a nexus is also req’d b/w the P and the ben/det.

The Rule:  All three benefit/ detriment/nexus req’d.  The benefit and the detriment must be the same thing.  DESIRE FOR Benefit induces Promise to get detriment.  

Recap of C:  
Formal:  Seals = C, but not for sale of goods.
Informal:  Need C.
	Don’t Work:	Nominal C (although unequal C works just fine (Batsakis).
			Recitation of C (Dougherty)  
Section 71:  Requires that C be bargained for.  Generally benefit/detriment is dead, but can be used if needed.

Williston’s Tramp.  P?  Yes.  Detriment?  Yes (tramp walking to get coat).  Benefit?  NO.  Benefit must arise out of P.  Getting the tramp to get the coat, even though it may provide the P’or good will, is not benefit, b/c benefit and detriment must be the same thing (if good will was sufficient, all gifts would suffice).  The desire for the benefit induces the P’or to make the P.

“Bargained for”:  It is not enough that P induces the conduct of the P’ee or that the conduct of the P’ee induces the P, they must both be present, or no K.

4.  Doctrine of Mutuality:  

Du Pont v. Claiborne Reno (8th Cir. 1933)
Facts:  Du Pont term’d distributorship for no good reason.
Rule:  No K b/c no mutuality.  Reno can be allowed to walk out at any time while Du Pont must stay bound to the K.  Both parties must be bound.
Note:  Du Pont argues K was void b/c it included no set quantities.  Ct. said no, b/c it wasn’t just a sales K, it was an agency K and a factorage K, so same level of specificity not req’d.
New Rule:  After Du Pont, the theory of Mutuality fell in to disrepute, and now, sometimes Ct’s pay attn. to it (mutuality is NOT dead), and other times they don’t.  
Rst § 79:  One type of reaction:  Firms can’t revoke once performance has begun.

5.  Classical Consideration Concluded:  Doctrine of Simultaneity and Intro. to Agency

Plowman v. Indian Refining Co. (EDIL 1937)
Facts:  s thought they were P’d pensions for the rest of their lives, but the  stopped paying.
Rule:  The problem here is that the detriment (working) was not given to get the benefit (the pension was not known about until all the s were let go).  So, the s promise came after the C, this is “past C” and is no good.  Since the P and the benefit did not come at same time, no simultaneity and no K.  (Also, no benefit to  b/c they could have just fired the s, but they gave some pension to be nice.)

Agency:  A conditional, volitional relationship b/w a principal and agent (not necessarily compensated).  The agent binds the principal when she acts w/in the scope of her authority.  Levels of authority include:
	1)  Express:  principal directly tells agent what to do.
	2)  Implied:  when principal gives agent general directive; does not apply to 	extraordinary acts of agent.
	3)  Actual:  encompasses both (1) and (2), authority given by principal.
	4)  Apparent:  comes not from principal, but a third party, as in case where the 	agent behaves in such a way as to make a reasonable third party thinks she has the 	authority.  The principal can be bound under apparent authority.  When there is 	conflict b/w actual and apparent, apparent wins.

III.	Evolving from the Classical Model:  Pressures Changing the 	Doctrine of Consideration

A.	Implied Contracts

1.  K’s w/o bargains:  Implied in Law, Fact Dichotomy, Quasi K, and Restitution

	A.  Ks w/o Bargains:
1.  Implied in Fact:  reasonably implied from parties’ conduct rather than express words
2.  Implied in law (quasi K):  Made up; court holds that one party must pay the other to 	avoid inequity or unjust enrichment; in essence, implying that the benefited party 	has agreed to pay for the benefits she has received.
3.  Restitution:  Idea that one party has given a benefit that should be restored to her.  If 	not restored, the other party is unjustly enriched.
4.  Three basis for K liability (Fuller)
	Bargain (private autonomy)  Although this view took over, the other two came 			back b/c it was too narrow/harsh.
	Unjust Enrichment (for which restitution is remedy)
	Reliance

B.  Restitution
Restitutionary Writs:	quantum valebant:  as much as goods are worth (rare)
			quantum meruit:  as much as the services are worth

Ks Implied in Law
Not based on mutual assent (either expressed or implied), but rather on an obligation imposed by law, notwithstanding lack of assent, in order to prevent unjust enrichment.  The remedy is restitution.
Test:	1) Benefit conferred to  by , AND
	2) appreciation or acknowledgment of benefit by , AND
	3) s accept or retention of benefit.
(see other variations of test below, include. the Rst of Restitution.)

Rescue Cases:
Glenn v. Savage (OR 1887)
Facts:   saved s lumber when it fell in the river and wanted compensation for the svcs.
Rule:  One party can be liable for services he did not request.  One can only be liable for a deal that was voluntarily entered into.  Even if, after the services were provided,  P’d to pay, he would not be liable b/c this would be past C, which is insufficient (see Plowman).
Notes:  Ct. saw this as a foisting type of case, why?  Who knows.  The Ct also raised the floodgates argument.

In re Estate of Crisan (MI 1961) [K Implied in Law]
Facts:  Old women collapsed in grocery store was taken to hospital.  After 14 days, removed to overflow hospital where she eventually died w/o ever regaining consciousness.
Rule:  One who, in contemplation of receiving compensation, renders essentials services to one who can not intelligently consent, may recover reasonable value of the benefits conferred.  This is a K implied in Law (a legal fiction created solely for the purpose of providing a remedy - the promise here is completely made-up).  Note that here there is no express K, nor a K in fact (b/c  never assented to K).  This rule undoes the Glenn Rule above.  Remedy here is quantum meruit

§ 116 of the Rst of Restitution (use by court to find for hospital):
A person who has supplied things/services to another, although acting w/o the other’s knowledge or consent, is entitles to restitution if:  
	a) the actor acted unofficiously and w/ intent to charge, AND
	b) the things/services were necessary to prevent the other from suffering serious 			bodily harm or injury, AND
	c) the actor had no reason to know that the other would/did not consent, AND
	d) it was impossible for the other give consent, or b/c of youth or extreme mental 			impairment, the other’s consent would have been immaterial.
§ 117:  Sets forth a similar rule for property and credit.

Posner/Implied K:  Viewed from the perspective of transaction costs.  The cost of waiting for a bargain is too high.  So, the question is asked is whether, had they had they opportunity, these parties would have made a bargain.  If Ct can assume bargain would have been made, and what the terms would have been, the legal fiction works merely to formalize the agreement.  If trans. costs high, then K implied and quantum meruit provided.  If the trans. costs would have been low, K is not implied.

Pre-existing Duty:  s estate tries to est. that hospital had a pre-existing duty to care for people, regardless of whether they can pay, and thus the  owes nothing.  Ct agrees that the hospital has a pre-existing duty, but that it applies only to those who can not afford to pay, not those with resources.

Construction Case:
Flooring Systems Inc. v. Radisson Group (AZ 1989)
Facts:  SubK installed flooring for hotel.  The general defaulted and the hotel w/held final pmt and  got no $.  SubK sued for $ owed, claiming that  had been unjustly enriched.
Rule:  Ct. found hotel liable b/c it had been unjustly enriched, the duty of restitution was implied.
Note:  B/c the General stands b/w the SubK and the owner, the SubK usually can’t sue the owner, only the General..  But here, the owner directly contacted the SubK and told them that they would be taken care of.
Unjust Enrichment:  Its not important that Ct find that  intended to compensate , or that  intended the  to be the party to make compensation.  Although this differs by state, although that need be shown is:
	1)  did not intend to act gratuitously, AND
	2) the benefit was not conferred officiously, AND
	3)  did not expect that the acts were gratuitous.

These cases also come up quite frequently in the case where the lessor has made renovations to leased properties.  As w/ cases dealing with a SubK and the owner, the results are pretty mixed.

2.  Contracts and Gender:  Were These Rules Built for Men

K Implied in Fact
Like expressed K, require mutual assent and C.  If Ct implies a K in fact, it is treated just like a bargained for K and expectation dmgs (as well a quantum meruit) are available as a remedy
Results from incomplete bargaining.  
Looking at facts, Ct determines what the intent of the parties’ was (using a reasonable person std.).  Then Ct fills in the gap, the parts (which were not bargained for) needed to complete the K.  
Implied in fact is not a made up K (as is implied in law), its a K based on the behavior of the parties and the intent that can be reasonably inferred from that behavior.
Generally, a K will not be implied in fact if it is against public policy.

Watts v. Watts (WI 1987) [Shirley Abramson] [MINORITY POSITION]
Facts:  Unmarried couple separating after 12 years together, she is claiming property rights.  Parties had acted together to create a business, where  spent much time/effort.
Rule:  In a cohabitation case, “money, property or services” (include. housekeeping and childbearing) may constitute adequate C, independent of the parties’ sexual relationship, to support the finding of an agreement.  Joint acts of financial nature can give rise to inference that the parties intended to share equally.
Notes:  s claim of marriage by estoppel failed.   tried to est. that finding a K here would run contrary to public policy, but the judge said no.

B.	“Moral Consideration” (Promissory Restitution)

1.  Promissory Restitution:  A Response to Simultaneity

Mills v. Wyman (MA 1825) [Majority Rule]
Facts:   took in sick sailor (25 yrs old).  The sailor’s father P’d that he pay for the support to the son, but when the son dies, he refused to pay b/c, he says, no C.
Rule:  Insufficient C b/c the P did not induce the  to act (no mutual inducement) b/c the  had acted before the P of compensation was given).The court hold that there can be moral C, but these facts not satisfy its elements:
Moral Consideration makes a later promise to pay (as here) if:
		1) the original K is enforceable, AND
		2) the original K made inoperative by some positive law (i.e., statlim), AND
		3) new P to pay, even w/o C, will be enforceable.
Waiver:  The second P to pay can be seen as a waiver of the rights which had been extinguished by the enforcement of positive law.
Note1:  B/c the sailor was 25 years old, the father was no longer legally responsible for him.  Thus, he received no legal benefit when the  cared for him.  Had the son been of minority status, the father would have had a legal obligation under the necessaries doctrine.
Note2:   argues that express P + moral C = K.  Ct says no, and creates the moral obligation rule above.

Rst §82:  The Mills Rule.  §82(2) indicates that the second P can be either express or implied through conduct.

Webb v. McGowan (AL 1936) [MINORITY (but modern) RULE]
Facts:   saved the life of his employer, but, in doing so, permanently injured himself.  The employer P’d to pay the  for the rest of his life.  Note that P made after the benefit was given.  When the employer died, his estate refused to continue paying and  sued for the continued pmts.
Rule:  Moral obligation is sufficient C to support subsequent P to pay where the P’or received a material benefit, even though there was no original duty or liability resting on the P’or.  Here, the P after the act serves as C.  

Rst §86:  The Webb Rule.  §86(1) creates a presumption in favor of a P.

C.	Promissory Estoppel:  The Doctrine that Ate K

Two general types of cases fall under this category:  promises w/in the family and pledges to charities.  The doctrine began w/ the family cases, moved to charity cases, then to pensions...and finally, its reached the business world.

§90 serves as a substitute for C -- Protection of un-bargained for reliance.

Rst §90:  (written by Corbin, exists in tandem w/ Williston’s §71, bargain theory)
	1) P
	2) Act/forbearance (need not be definite or substantial),
	3) By P’ee (or third party)
	4) Foreseeability
	5) Injustice avoided only by enforcement of P.
	6) Remedy limited “as justice requires.”  The remedy may not be for the entire P, but only 	enough so that no injustice results.
Most agree that only a reasonable probability of reliance is required, not a direct nexus.
Rst §90(2):  No need to show act/forbearance in cases of marriage/charity.

Rst §90 (old) (some states still use):
	1) P,
	2) act/forbearance by P’ee is foreseeable to P’or,
	3) definite/substantial action/forbearance by P’ee, 
	4) injustice avoided only by enforcing the P.

1.  Promissory Estoppel:  The Family Cases

In the family situation, diff. b/w K and gift very murky.  Main Q for Ct is often: is this an incomplete gift or a K.  B/c so many P’s went unfulfilled, the doctrine of PE was brought to these cases.

Kirksey v. Kirksey (AL 1845)
Facts:  After hubby’s death, wife was told by hubby’s brother that she should come live on his, that he would take care of her and the kiddies, but he never said that she should give up her land.  Brother-in-law allowed them to stay on his land for awhile but eventually kicked them off.
Rule:  Ct. found no C, and refused to apply PE.  AT this time, only applied to cases where there was a misstatement of fact.  Ct said that all there was here was a conditional gratuity.  In order to be taken care of, she had to go live on his land.
Benefit:  Maybe:	getting people to work his land
			his family’s reputation
Detriment:  Yes	she gave up homestead
So why no K:  Although P induced detriment, P did not induce benefit.

Rickets v. Scothern (NE 1898)
Facts:  Grandpa P’d granddaughter note for $2000 if she would stop working.  He dies before he paid whole note,  sued the estate for the rest of the $.
Rule:  Ct. says no quid pro quo b/c although she gave up her job, it was a req’d aspect of the bargain, grandpa said “so can stop working” not “so that you do stop,” thus, there was no determinant to her.  But, Ct. says that the assumption of the liability by the donee () on the faith of the P constitutes valuable and sufficient C.  The act of reliance (by ) bound grandpa (and his estate).
Equitable Estoppel (estoppel in pais, ordinary estoppel) is what is actually applied here (as opposed to PE).  Prior to this case, it was generally only applied where one party made a misstatement of fact.  But here, the situation is similar, so the Ct stretches the doctrine to insure that a P that was honestly made is carried out.  How it works:
	1) affirmative misstatement of fact, AND
	2) person to whom P is made detrimentally relies on it.

Greiner v. Greiner (KS 1930)
Facts:  Like Kirksey, mother induces son to move home w/ P of land and so he gives up his homestead.
Rule:  Ct. applies §90 before its actually in the Rst.
Applying the elements:  
	1)  P:  some proof needed, here, there was the written letter.
	2)  Action/forbearance foreseen by P’or:  Did mom foresee that son would act as 			he did.  Yes.
	3)  Action/forbearance by P’ee.  Yes, son moved.
All these elements add up to establish the son’s detrimental reliance.  Although not an element, P’ee must show that she is worse-off in order to establish a detrimental reliance.
	4)  Only way to avoid injustice:  Purely a question for the court.

2.  Promissory Estoppel:  The Charity Cases

How can pledges be Ks and not gifts?  Public Policy

Allegheny College v. National Chautauqua County Bank (NY 1927) [Cardozo]
Facts:  Women P’d donation to college “in consideration of christian education.”  She gives some money now but later revokes the P.  She dies and college submits claim for $.
Rule:  Cardozo brings PE to NY and extends it beyond the family sphere, although he does not actually apply PE in this case.
§90(2):  marriage/charity agreements binding w/o proof of that the P induced action/forbearance.
Note:  Giving to get others to give does not suffice as C.
Dissent:  Says all we have here was an executory gift, which Ct can’t enforce.  At most, it was a unilateral K, but College never did what was req’d of it (est. the scholarship).

Maryland National Bank v. UJA (MD 1979) [the racist case]
Facts:  Pollinger made $200,000 bid, but only paid 1/3 before dying.
Rule:  Ct. rejects the new §90 (2nd Rst), especially as it relates to charities (saying if it is to be accepted, it should be done by legislature.  B/c it rejects new §90, Ct. reqs.  to show substantial and definite reliance, i.e., that others gave b/c Pollinger did.  
Note:  Ct says its applying PE, but really appears to be applying bargain theory.  It really just appears that Ct was trying to screw UJA.

3.  Promissory Estoppel in the Commercial Context:

Katz v. Danny Dare (MO 1980) & Universal Comp. Systems v. Med Serv. (3rd Cir 1980)
Rule:  Although PE began in the family context, and then move onto charities, its now firmly in the business world (which was not a real problem area yet).  W/in the commercial context, the allowance of PE requires Cts to predict what would have happened had the P not been broken in order to calculate dmgs.

IV.	impact of p.e. on offer and acceptance

A.  Revoking Offers

1.  Limits on the Power to Revoke:  How §90 Invaded O & A

If there is pre-acceptance reliance on an O, then the O can been irrevocable.

O’s are good until:
A, rejected, counter-O, expired (either valid for specified time, tied to some external event, or for reasonable period of time), revoked, O’er drops dead.

Revocation:  
Any action inconsistent w/ the O serves as revocation.
O’er can revoke any time up to A; if uni-K, then only up until the point where the act requested has begun see Rst §45; if construction, then up till the subK’s bid is relied on by the General (see below).

James Baird Co. v. Gimbel Bros. Inc. (2nd Cir. 1933) [Hand]
Facts: SubK had made very low bid b/c they made a mistake in their calculations.  They revoked the O before General A’d (although General had used bid in its bid).  General suing to get difference b/w the revoked bid and the bid the general was forced to A.
Rule:  Classical rule of revocation used.  Hand says that unless something out of the ordinary occurs, apply §35 Rst.  Thus, the A was too late. 
The Bid:  Ct. recognizes that the reasonable implication of the O is that it would not be revoked in the case that the General acts upon it.  But, b/c the cost of the flooring was such a small part of the overall bid, it would be an unreasonable hardship on the  to force them to pay for their mistake.
PE:  Hand discusses PE, but says its only used in donative situations and is not ready to bring into the construction context.

Drennan v. Star Paving Co. (CA 1958) [Traynor brings PE to Construction]
Facts:  Same facts as in Baird; subK revoked O before General A’d.
Rule:  Unlike Baird, where the issue was the implied P that the O would not be revoked if the general used it, here the issue is §90 reliance.  Here, the rule is that when the bid was made, the subK should have understood that the General would rely on it, and thus they are bound.  Note that here, reliance is not on promise, but on bid (i.e., O).   
§45:  Traynor takes the analysis of this section (can’t revoke uni-K once performance has begun) and applies it to this situation (which is not a uni-K).  He looks at subsidiary promises (Comment b) and basically says that a subK’s bid to a General has two P’s:  P to do the work and P not to revoke.  Traynor has thus turned an O into a P, which, when relied upon, gives a §90 type claim.
Justifiable Reliance:  If subK’s bid is so low as to seem odd (not w/in 160%) then the General should be suspicious.  If the General then acts, the reliance is not justified and the subK will not be bound.
§87(2) Rst:  The Drennan Rule - §90 clone applied to construction cases, but is reqs. substantial acts/forbearance..

Construction:  Bid = O

2.  How Far Have Things Gone?

Berryman v. Kmoch (KS 1977)
Facts:  Kmoch () is a RE broker.   and  (supposedly) entered into option K for the purchase of the land.  There was a recitation of C (“$10 and other valuable C), but no real C ($10 never paid).  Owner () filed suit to have titled cleared so he could sell to another buyer (i.e., seeking declaratory judgment).
Rule:  Ct holds that there was no C, and thus, that the option was really just an O, revocable at any time before A, so no K ever existed.  An option K is not created just b/c it is relied upon, it must also have:
	Bargain (quid pro quo) w/ mutuality and the P inducing the detriment and the 			detriment is what the P’or wants, OR
	Pre-A reliance that must meet all the elements of PE
PE:  Not available b/c although reliance induced by  promise, the reliance, acc. to the Ct., was not foreseeable.  The real issue is that the Ct thought the reliance was unreasonable, but talks around it by looking at foreseeability,

§87(1) Rst:  Consideration for Option K can be found if:
	1) in writing, AND
	2) signed by the O’er, AND
	3) recites a purported C, AND
	4) proposes a fair exchange w/in reasonable time;
§87(1) Rst not followed by majority of states.
Had §87(1) been applied to Berryman, there would have been a valid Option K b/c there was purported.

Option K:
	Must be attached to a main K.
	Option K is a separate P.
	Always about time - gives you time to decide if you want to enter into main K.
	Removes risk that the O of the main K will not be revoked.
	Cts. willing to accept minimal amt. of $ to est. C.
	Requires its own C.

Hoffman v. Red Owl Stores (WI 1965) [the furthest outpost of PE law]
Facts:  Hoffmans sought to buy franchise from .  After extended negations and a number of actions taken by the s, include. selling their business and moving, the  requested more $ than the s were previously told and were unable to go through on the deal.  Although a quasi P given, it was vague and unspecific, and didn’t even cover all aspects of the deal.  In fact, there isn’t even an O here.  
Rule:  Ct uses §90 to enforce the deal.  This is a very big extension of PE, going back before the time that an O was even made.  
Note1:  Case basically turns §90 into its own COA.  
Note2:  Ct narrowly construed damages to what s actually lost as a result of their reliance, not what they would have earned had the franchise agreement gone through (i.e., no expectation dmgs), thus limiting the remedy to the point required to avoid injustice.

3.  Firm Offers (irrevocability by statute)

Example:  NY State statute says that if I is in writing, it is irrevocable.

UCC §2-205:  Firm Offers:  (Protects the O’er)  An offer by a merchant to buy/sell goods is irrevocable (even in the absence of C) if it is in a signed writing, but only for time stated or for reasonable period, neither to exceed three months.  But, if firm O form is provided by the O’ee, the O’er must sign the firm O clause separately.  (This is basically like an Option K but w/out C.)
Note:  Court will usually, at a minimum, require that the firm O meet the reqs. of an O under the common law.

Merchant (§2-104):  A professional who regularly buys and sells goods; or someone who holds themselves out as having particularized knowledge to the goods involved in the transaction; or a person to whom such knowledge can be attributed by reason of the person’s employment.  

Goods (§2-105):  All things movable at time of K other than money.

Mid-South Packers Inc. v. Shoney’s Inc. (5th Cir. 1985)
Facts:  Mid-South put forth proposal (O) containing a provision that there would a 45 day notice before a price increase.  Shoney’s neither A’d or rejected, but acted as if there was a deal.  Every time pork shipped, invoice shipped too (the O was for sales on a “as ordered” basis).  4 months in, Mid-South raised the price.  Shoney’s objected but paid higher price.  On the last order,  (Shoney) deducted $26,000 from their payment, the amount they felt they had been overcharged since the price increase.
Rule:   says proposal was missing quantity, an essential element.   says it was a requirements K, so indefiniteness OK.  Court holds that at most, the s proposal was a firm O, not a K.  Each PO that was sent by the  was a K.  The firm O then expired in 3 mos., and thus the s provision of a 45 day waiting period before a price increase is null.
Requirements K:  not void for indefiniteness.  The essential element is the P of the buyer to purchase exclusively from the seller the buyer’s entire requirements or up to a specified amount.

§33 Rst:  Certainty of O
	1)  terms must be reasonably certain.
	2)  the terms are certain if they provide a basis for determining the existence of 			breach and an appropriate remedy.
	3)  the fact that some terms are missing may/may not prove existence of O (i.e., 			terms may reveal intent of parties).

§2-309:  Time for shipment or delivery can be left open.

	4 Ways in which an O is Irrevocable: 
1) after commencement of performance by O’ee
2) reliance on O by O’ee
3) if consideration given in return for a promise not to revoke (Option K)
4) it meets reqs. of a firm offer.

4.  Battle of the Forms:  Descent into the Inferno

Poel v. Brunswick-Balke-Collender Co. (NY 1915) [the “Last Shot” Rule in Action]
Facts:   sued for breach when  agreed to A/pay for certain rubber, but then refused.  The order of events is as follows:
	Letter 1:   to , just listed price/lb. -- no legal significance
	Letter 2:   to , said $ due 20 days after delivery.
	Letter 3:   to , same as Letter 2, but incl.;. additional/different terms.  
Rule:  The court held Letter 3 to be a PO, not an A.   could have endorsed its A on s K (the second letter).  The 3rd letter had different terms than s letters and was thus a counter-O, taking over as the ruling document.   letters were all voided at this point. 
Mirror Image Rule:  Common law rule that reqs. the A to be identical to the O.  If it includes new/different terms, it is taken to be a counter-O, (and thus a rejection of the O).  This rule produces the “last shot” result.  This rule still prevails in all non UCC cases.

Forms:	Buyer’s Form:  Usually PO
		Seller’s Form:  Usually Sales Memo or Confirmation
The Typical Process:  PO sent/rcvd  Sales Memo sent/rcvd  goods sent w/ invoice.
The Poel Process:  PO (i.e., O) sent/rcvd  SM (w/ diff. terms, i.e., counter-O) sent/rcvd  Invoice (reiterates SM)  Buyer pays (A).
Why Battle of Forms:  B/c both parties want to be the O’er, thus controlling the transaction.  
Why Forms Used:  Market volatility; differences in bargaining power; easier/more efficient than individualized O’s; and no one pays much attn. to the forms, so why spend much time on them.

§2-207:  Add’l Terms in A or Confirmation:  An answer to the Battle of the Forms
Important:  Deals with A’s and written confirmations, not O.
Applies in two situations:  1) def. expression of assent; 2)written confirmations.
The question under §2-207 is not whether K exists, but what its terms are.
Comment 2:  A proposed deal that in commercial understanding has in fact been closed is recognized as a K.  
The section:
1)  A definite and seasonable expression of assent or a written conf. which is sent w/in a reasonable time operates as an A even though it states terms additional to or different than those offered or agreed upon, unless A is expressly made conditional on assent to the additional or different terms.  (the portion after the unless is = to a counter-O).
2)  The additional terms are to be construed as proposals as additions to the K.  B/w merchants, such terms become part of the K, unless:  
	a) the O expressly limits A to the terms of the O; OR
	b) they materially alter the O;OR
	c) notification of objection to them has already been given or is given w/in a 	reasonable time after notice of them is rec’d.
3)  Conduct by both parties that recognizes the existence of a K is sufficient to est. a K although the writings of the parties do not otherwise est a K.  In this case, the terms of the K consist of those terms on which the writings agree, plus any additional terms included by this statute (i.e., warranty of merchantability).

Purpose:  moves up the creation of the K to an earlier pt. in the process.  Wants to make Ks.
Note:  §2-207 changes common law.  Parties can still use common law, but the burden is on them to do so, and to do so clearly.  The portion of (1) following unless is an example.  
Assumption:  §2-207 assumes A, common law assumes counter-O.

Written Confirmation:  a written memo of the contents of a K (reiterating existing K, the written conf. is not an O, but a recitation of an oral K).  The written conf. often includes add’l terms (specifics).  The add’l are included in K under §2-207.

Comment 3:  Supposedly explains (2) above.  But, it includes “different terms” in its explanation, not just “additional terms.”  Some Cts allow “different terms” to be added to the K, while other restrict it to the words of the actually statute, and limit new terms only to “additional terms.”
Comment 4:  Lists alterations that are PER SE “material alterations,” and, as such, result in surprise and hardship if incorporated into the K w/o both parties’ knowledge.  (In Falconer Glass, the Ct only req’d either surprise or hardship, not both).  Examples of material alterations include:  damage alterations, waiver of warranties, choice of law, choice of forum, arbitration arrangements (sometimes) and attorney’s fees (sometimes).
Comment 5:  Lists alterations that are not “material alterations.”

§2-207 Process:  
	1)  Est. when O was made.
	2)  Apply 2-207(1) test of “assent.”
	3)  If yes, was the A “expressly conditional” (also 2-207(1)).  If NO, then,
	4)  Determine whether A’s add’l terms become part of agreement (2-207(2))
		a) if not b/w merchants, was there assent
		b) if b/w merchants, then YES, unless....

§2-314:  Implied warranty of merchantability
If seller is a merchant, then all goods sold come with a warranty of merchantability, unless the parties explicitly state otherwise.  Even if the parties do so, some 

§2-315:  Implied Warranty of Fitness for Particular Purpose
When the seller knows the purpose the product sold will be used for and knows that the buyer is relying the seller’s expertise, there is an implied warranty that the product is suitable for that purpose, unless the warranty is excluded or modified via §2-316.

5.  Still in the Belly of the Beast

Brown Machine, Inc. v. Hercules, Inc. (MO 1989)
Facts:  Appeal of s verdict of $157,000.  Series of events:
	1) proposal form Brown, incl. boilerplate provisions (one of which was an escape 			from liability clause)
	2) Herecules called and objected to 20% down and Brown refused to waive it and 			parties proceed.
	3) PO rcvd by H that made certain changes to the proposal, incl. a clause that that 			the terms were limited to those incl. in the PO.  The PO also excluded the 			escape from liability clause.
	4) Invoice/deposit request form sent from Brown, reiterating Brown’s proposal 			and telling Hercules to notify them if they object to any 
	5) Brown sent out order acknowledgment.
	6) Hercules resounds that it reqs. one change, but that all other specs. are fine.
	7) Brown sends final invoice.
When an employee gets hurt on machine, Hercules sued Brown for relief.  Brown claims that its proposal was the O, and that it was A’d over the phone, and thus they can not be sued b/c of the hold harmless clause.
Rule:  UCC does not say what an O is, so common law rule of O exists even under the UCC.  Ct. says that Brown’s proposal could not be O b/c it incl. terms like “discuss the quote” and “no order shall be binding unless A’d by Brown.”  Thus, Ct. determines that PO is the O (generally, orders = O’s).  So, then Brown argues that their order acknowledgment was a counter-O (again trying to get the hold harmless clause incl. in the K).  Ct said NO, its an A with add’l terms (under §2-207).  Ct. then does §2-207 analysis to see if the add’l terms can be incl.
	1)  Assent?  Yes
	2)  B/w merchants?  Yes, so incl. unless:
		a)  A expressly limited to O by O’er.  Yes, so Brown’s terms are out.
First Shot Rule:  This case is slightly disturbing b/c it shows how the UCC changes the common law’s last shot rule into the UCC’s first shot rule.  However, this is also the outcome the UCC favors, it seeks to create A.
P Quote:  Generally,  O.

Roto-Lith, Ltd. v. F. P. Bartlett & Co. (1st Cir. 1962):  Held that a response that which states a condition materially altering the obligation solely to the disadvantage of the O’er is an expressly conditional one.  This is a very narrow view that goes against what UCC tried to establish.  It is only followed in the 1st. Circumstances.

6.  Climbing out of the Pit

Most §2-207 cases deal with the issue of material alterations.

Dale Horning v. Falconer Glass (SDIN 1990) [Liability limitation = Material Alt]
Facts:   is glass installer who sub-contracted on construction project.   calls  to buy some glass.  Ea. party send the other its form.  Language of s form is issue of dispute.  Glass recv’d was defective, but  installed it to avoid late charges from General.   agreed to replace glass w/o conflict, but refused to pay for the labor needed to make the replacements. Its form had a limit on liability clause that excluded incidental/consequential dmgs.
Rule:  B/c these damages were the foreseeable result of the breach, the Q is whether there was a §2-719 clause in the agreement.  The Ct. then looks to §2-207(2) to decide whether the s add’l term should be incl. in the agreement.  Under §2-207(2)(b), the Ct looked to Comment 4, which lists per se material alterations.  The rule applied is whether the term would surprise or work a hardship on the other party (a term can be both reasonable and material).  This Ct asks a slightly different question:  would the term catch the buyer unaware.  This is a subjective/objective test.  The Ct decides that the buyer must show a substantial economic hardship resulting from the insertion of the new term.  The Ct is satisfied that the  has done so, thus the term has materially altered the agreement, and is not incl.  Thus, the  can recover for incidental/consequential damages.
Burden of Proof:  The unassenting buyer has burden to est. surprise/hardship b/c §2-207 says terms are in unless...

§2-715:  Buyer’s Incidental & Consequential Dmgs
Seller can be liable to buyer for incidental/consequential damages if it is reasonably foreseeable that these types of damages would occur from a breach.

§2-719:  Contractual Modification or Limitation of Remedy
Parties retain power to limit §2-715, but they must do so actively; otherwise, the presumption is that §2-715 is in effect.

Daitom v. Penwalt Corp. (1984):  Case of different terms, as opposed to add’l terms.  There are three approaches to different terms:
	1) different terms = add’l terms
	2) §2-2-207(2) only applies to add’l terms (but see Comment 4), so if its a 				different term, than its outside of §2-207 and is just a proposal for addition 			to the agreement K. [MAJORITY APPRAOCH]
	3) Knock out Rule:  Conflicting terms simply cancel each other out.  				Commentators love this one b/c it gives the seller some power, but its 			rarely followed.

B.	Agreements to Agree

1.  Common Law and UCC Treatments of Incomplete Agreements

Generally, its a question of whether the court can supply missing the missing terms.  The major issue to the Cts is what the intent of the parties was.  Sometimes, its a Q OD interpreting a vague term (which is more difficult, b/c the Ct can’t just make it up.)

Common Law:  Agreement to agree is not a K.  If not every term is incl., then its not a K, it just a work in progress.  As long as parties know there is an essential element missing, there is no K.  This rule applies, unless the parties, by subsequent conduct, remove any uncertainty.
UCC:  

Walker v. Keith (KY 1964)
Facts:  Parties agreed to terms of lease, which had lease extension provision, w/ rent to be set later.  When time for extension comes, they can’t agree on price.  The landlord says there is no K (for the extension) b/c its to indefinite to have its terms made out.
Rule:  The agreement is to vague to be made out.  The Ct. doesn’t say that the parties should have agreed on a price, but should have at least decided on a formula for calculating the price when the time came.
Cts are very confused in this area.  Some would find this provision had enough certainty for the Ct to inject itself into the matter and interp the K, others, as this Ct, do not.  Its 50/50.

Agreement to Agree:  Not a K at the oral stage.
Writing to Follow:  K at the oral stage, the writing is merely a confirmation.
The more complicated the K, the more likely it is that the parties want to see it in writing before agreeing to anything.  Thus, the more complicated it is, the more likely its an agreement to agree.

Pennsylvania Co. Wilmington Co. (DE 1960)
Facts:   suing bank as trustee of seller’s estate.   is seeking specific performance.  Dead guy owned RR that he was trying to sell.  Acc. to . the  agreed to sell RR at set P, but then revoked when it got a better O from another party.   gave  a chance to match the new O, but  refused.  Note that s O contained phrases like “contingent on Board approval” and “details to be worked out.”  Note also that the s did not act in an unequivocatable manner that would have solved the Q for the Ct.
Rule:  Ct applies §2-204(3):  What was the intent of the parties AND is there a reasonably certain basis for giving an appropriate remedy.  Ct says intent was clearly for making K.  And it says that although not enough evidence to make out K, there is enough to make out damages.  Note that is its just the average transaction w/in an industry, that may be enough to give a reasonable certain basis to calculate dmgs.
Note:  §2 of UCC app’d by analogy here. §2 does not apply to sale of stock.

§2-204:
	1)  K may be made in any manner sufficient to show agreement, incl. conduct by 	both parties that recognizes such a K.  (very pr-agreement)
	2)  K can be made even if time of its making is undeterminable.  Looks at the 	whole process.  (very pro-agreement)
	3)  K doesn’t fail for indefiniteness if the parties intended to enter into a binding K 	AND there is a reasonable certain basis for giving an appropriate remedy.
[The more terms that are left open, the more likely is that the parties did not intend to make a K.]

Choice of Law:  Place of the making of the K determines what state’s law is to be app’d (not where performed, not where there was C).  The real Q is usually when was the K made?

V.	Statute of Frauds

1.  Intro. to Statute of Frauds:  When is a K w/in the Statute?

Not a question of whether K was made, but a question of enforcement.
SF passed in 1677 in reaction to the Slades case, which upheld an oral K.
Two of its sections have relevance to K law:  §4 and §17 (which has been superseded by UCC §2-201).
Effect of SF:  Takes certain classes of oral promises and makes them unenforceable.
Purpose of SF:  Evidentiary (main intention), cautionary and channeling (informs Ct of legally significant event that should be recognized, like a seal).
In effect in 49 states (in effect via judicial decision in MD, NM)  States have also added to the SF, i.e., Mills rule, where there is writing, is satisfies C.
 Cts hate the SF b/c it is so easily manipulated and they are likely to be soft in its appl.  How?
	1) Interp SF in “crazy” ways, adding gloss, etc.
	2) Read SF very narrowly.
	3) Create many exceptions.
	4) Allow alternative remedy if K is voided b/c w/in SF.

SF analysis:
	1)  Within?  If no, stop.
	2)  Is SF satisfies:
		a) Exception, out of SF.
		b)  Writing?  Satisfies SF.
	4)  Possibly allow alternative remedy (i.e., performance, reliance). 

The Key Phrase:  No action shall be brought unless the agreement, or some memorandum thereof, is in writing, and signed by the party to be charged.
To get out of the SF only means the  need not show an agreement, or memorandum or note 	thereof, in writing, the  must still prove the existence of the K.

SF, by Section:

4(1):  Promises by an executor/administrator to answer for dmgs out of her own estate.  
This section is really juts a subset of 4(2).
4(2):  Promises of one party to pay the debt of another.
This situation involves three people:  debtor, creditor, and guarantor (surety, P’or).
Where court can, it will construe P’or’s actions as a novation, i.e. one taking over the debt of another.  In such a case, the original debtor is replaced by the new debtor, and there are only two parties involved.  Remember:  the surety situation always has 3 parties.
A P is made w/in this section only if it is made to the creditor.
Main Purpose Rule:  Ex:  If X sells goods to Y and they are delivered to Y.  Z promises X to pay for the goods.  If the goods are for Z’s benefit, even though sent to Y, then, b/c of the main purpose rule, the P is not w/in 4(2).  Under this section, it is critical to look at the relationship b/w Z and the goods.  If Z benefits, then this rule applies.  However, to fit w/in this rule, the benefit to Z must be immediate, direct.  Under Rst §116, the question is whether the C given for the P of the surety is in fact or apparently desired by the P’or mainly for her own economic advantage, rather than to for the benefit a 3rd party.  The main purpose rule generally comes up in two situations:
	1) where P is willing to become a surety in order to save his own land from the 	assertion of a lien that secures the debtor’s obligation; or
	2) where the P’or, who steps forward as a surety, has a pecuniary interest in the 	debtor’s affairs and wishes to procure a “breathing spell” for her (a common 	example being closely held corps.).
Note:  The main purpose rule is an exception to the SF, not a narrowing interpretation it.  A P that satisfies the MPR must first be w/in the SF.
4(3):  Any agreement made upon consideration of marriage.  
This section does not cover agreements b/w “betroved,” but only agreements of say, the potential hubby to the other’s father (i.e., dowry).  
Very narrowly construed.
4(4):  Any agreement concerning the sale of land or interest in or concerning land.
“Interest in or concerning land” covers leases of, usually, more than a year.  A sublease will also be covered, even if the period is shorter than a year so long as the original lease was a year or longer.  Also covers mortgages, easements, options, etc.  An assignment of the right to collect rent is considered w/in the SF by some courts, and not by others.  Those that consider it w/in the SF see it as a “product of the land.”
This section lives large.  There are not as many exceptions to it and it is not narrowly construed.  In fact, some Cts read it quite broadly.
Covers only future sales of land/interest in land.  Usually covers anything attached to the land as well.
Severance:  The question dealt w/ here is whether something is “part of the land” when considering the SF question.  The question is whether the removal of the item has any effect on the land.  If the product is removed w/o damaging the lad, say tomatoes, then its a good, and not w/in the SF.  If you buy something from another, the removal of which from that person’s land causes damage to the land, then that is considered a sale of property, and the agreement is w/in the SF.
4(5):  Any agreement not to be performed w/in a year.
Covers any K not fully performed w/in a year.
The year begins from the making of the K, not from time performance began.
B/c of the Ct’s constant attempts to narrow the SF, if the Ct believes that the K could have been performed w/in a year, it will find that this section does not cover the K (i.e., K not w/in SF).
If a specific date for performance is given, (i.e. a group playing a concert) and that date is not w/in a year, then its w/in the SF.
The question to be asked under this section then, is this:  Is it even remotely possible that the K could have been completed w/in a year (regardless of how improbable)?  If yes, not w/in SF.  In other words, this section is section is very narrowly construed.
See also Rst §130:  If one side has fully performed, no matter when performance took place, the other is bound, and the K is not w/in SF.

17 (UCC §2-201):  Sale of Goods
Unlike §4, which has only one way to enforce (writing), §17 has three ways to enforce:
	1) part delivery,
	2) part payment,
	3) writing.
§2-201 covers both present and future dealings.
17(1):  If agreement is for sale of goods and the value is of $500 or more, then the agreement or some writing sufficient to indicate that a sale has been made must exist, (b/c the sale is w/in the SF), unless satisfies by one the 2-201(3)(a)-(c) options (see below in Cohen).
The writing does not need to purport to be the K, it only need be a memorandum or note thereof.  It must, however, include the ID of the parties, the quantity, be signed by the party against whom enforcement is ought, and be sufficient to show a K of sale. 
The writing is construed very liberally.
17(2):  For merchants only:  if, w/in a reasonable time, a writing in confirmation of a K and sufficient against the writer is sent and received, the party receiving the letter has reason to know its contents, is satisfies 17(1) unless written notice of objection is sent by the receiving party w/in 10 days of receipt.
Ex:  seller sends confirmation memo to buyer.  The memo otherwise meets the requirements of a 17(1) memo.  The buyer is bound by the memo unless objection is sent w/in 10 days.  
Note:  Satisfying this section does not mean that a K exists, it merely means that the SF is satisfied.
17(3):  If agreement is not in writing, it may still be valid if...
See below in Cohen

Cohn v. Fisher (NJ 1972)
Facts:   says he’ll buy boat and offers $4,600;  accpt’d (all oral).   wrote a check for half the amount and, in the “memo” line, indicated what the full amount was.   then refuses to proceed until the boat is checked out and  says pay now.   stops pmt on check.  He then brings the SF as a defense to the making of the K.
Rule:  This is a movable good, and thus w/in Art. 2.  Ct. then applies §2-204 (Formation in General), and says that there was a K here b/c there was “conduct by both parties that recognizes the existence of a K.”  B/c price is over $500, this agreement is covered by §2-201.  (But, a writing is not req’d if there is either part delivery or part pmt.)  Ct. then looks to §2-201 to see what is req.’s from a writing to satisfy the section:
	1) must ID parties,
	2) signed by the party against whom enforcement is sought,
	3) must have quantity
	4) sufficient to show a K for sale.
The court says the s check in this case satisfies all of these reqs.  (The check is not a K, but it is a “memorandum or note thereof.”)  B/c §2-201(1) was satisfies, there was a K.
Note1:  UCC allows for a pretty vague writing, but common law does not.  
§2-201(3):  An oral agreement which is over $500 (not in writing) is enforceable if:  
	a) (1) goods specially mfg’d for the buyer and are not (2) suitable for sale to 	others in the ordinary course of the seller’s business.  Rule only applies (3) so long 	as the seller, before getting repudiation from the buyer, has either made a 	substantial beginning of mfg. or commitments for their procurement.  (4) 	Circumstances must show that the goods are for the buyer.
	b) party against whom enforcement is sought admits in pleading, testimony, or 	otherwise, that sale was made.  But, the K is not enforceable under this rule beyond 	the quantity of goods admitted.  [The admission must be made under oath.  		Common law does not allow for this exception
	c) for goods for which pmt has been made and accepted or for goods received and 	accepted.  [This is the part pmt/part performance section carried over from SF 	§17.]  Note:  Part performance/payment only takes that portion of the agreement 	out of the SF.  If the entire agreement is not in writing, then the remainder of the 	agreement is w/in the SF and cannot be enforced.  This is easy to deal w/ when the 	number of goods exceeds 1 (divisible K), but when only one good is to be 	delivered (indivisible K), as in Cohen, its a bit more tricky.  Cts. will generally say 	that the 1 is not w/in the SF.
Note2:   here also tried to prove no K by showing course of dealing (§1-205(1)), usage of trade (§1-205(2)), and course of performance (§1-205(3)), but failed.

2.  The Statute, Phase Two:  What Sort of Memorandum Will Do?

Crabtree v. Elizabeth Arden Sales Corp. (NY 1953)
Facts:  Two year employment K (“two years to make good”).   Called an A’d,  wired back “welcome.”   claims this was employment at will and that b/c the K is not in writing, it is unenforceable under the SF.
Rule:  Ct applies Rst §133 to find a K that satisfies the SF.
Rst §133:  Memorandum Not Made As Such  This section allows a signature not appearing on a writing, memorandum, or note thereof, but instead on another related document, to be considered along w/ the others so that all the elements of the SF can be met.  Here, the payroll cards had all the needed information, accept for the signature.  The signature only appeared on a memo from the  to her secretary, instructing her to inform other that the  had been hired.  The Ct. combined these documents to find that all the required elements of a “writing” existed.
This section is not as liberal as it appears though.  It is usually applied in 3 ways:
	1) all pieces must be physically attached to be construed together. (strict)
	2) specific reference rule:  the docs must specifically refer to the other before they 		are construed together.
	3) transactional approach:  [MAJORITY APPROACH] (used in Crabtree)  Cts 		allows oral evidence in order to determine if the documents are all part of the same 	transaction.  If so, then they are all construed together.
Note:  These three approaches only come into play if all docs are not signed.  If they are, then there is no problem.
Signature:  Almost anything can suffice as a persons signature as long as it cane be authenticated.  Even a  can suffice.

3.  The Statute, Phase Three:  Defenses, Exceptions and Ways Out of a Jam

Winternitz v. Summit Hills Joint Venture (MD 1987)
Facts:   ran drugstore in mini-mall.  This suits relates to a lease and thus falls under §4(4) of the SF.  He made two claims:   breached K and that  refused to allow assignment (the latter action being what caused the former to occur).
Rule:   does not try to squeeze out of the SF, he uses the exception of part performance.  
Although §17 (§2-201) has such an exception, §4 does not; but Cts have read one into §4 so it now does.
Rst §129:  Part Performance or Reliance Upon Oral K (where land is at issue) (just like §90 reliance):  A K for the transfer of an interest in land may be specifically enforced notwithstanding failure to comply w/ the SF (i.e. oral) if the , in reasonable reliance, changed his position such that justice can be avoided only by specific performance.
Note1:  B/c this section only grants only equitable relief (i.e., specific performance), no $ dmgs. can flow from it (due to separation of law and equity).
Note2:  Although widely followed, not all Cts will apply §129.

SEE STATUTE OF FRAUDS CHART

VI.	the art and science of interpreting contracts

1.  Rules Applied in the Interpretation of Ks

A continuing battle b/w objectivity and subjectivity
Two general questions:
1) Whose meaning is to be given to the K (or communication)?
2) What evidence is allowed to be considered when interpreting the K (or communication)?

The Tools and Process of Interpreting Ks:
1)  Plain Meaning (only if ambiguous, go onto other interpretation tools)
2)  Terms of K (as a whole)
	a) incorporate by reference other docs. 
3)  Trade Usage (BIG under the UCC, much value given to this method)
4)  Conduct
	a) course of dealing:  have parties dealt w/ ea. other in other transactions.
	b) course of performance:  looking a conduct as it relates to the K in question.

Pre-UCC Case:
Frigaliment Importing v. BNS Int. Sales (SDNY 1960) [J. Friendly - What is a Chicken]
Facts:   purchased chickens, thinking “chickens” meant young roasters.   sold chickens, thinking “chickens” meant chickens.
Rule:  Ct takes the following steps to resolve the case:
1)  Plain meaning: Ct. finds that the term “chicken” is, in fact, ambiguous.  
2)  Once the term is found to be ambiguous, the court looks to the K itself to see if it offers any aid in interpretation.  Even incl. all relevant writings, the K itself is of no help.
3)  Trade usage:  But, when one party is new to industry, as is the case here, trade usage is must be proven by other party by showing either that the new firm did have actual knowledge of the usage or that the usage was so generally known in the relevant community so that the new firm’s knowledge can be inferred.
4)  Did the K incorporate other documents by reference.  
5)  Government requirements:  Do they speak to the issue?
6)  The price argument:  B/c the price offered by the  was lower than that of the chickens the  sought to K for,  must have realized that  would not be selling at a deficit and that, therefore,  must have been selling a different type of chicken than  thought.
7)  Conduct of the parties/course of performance:  The relates to the past dealings of these particular parties, which in this case, was none.
B/c none of the above clarify the term, and b/c the  had the burden of proof, he lost.

Plain Meaning Rule:  Although most people recognize that one word can have many meanings, Cts do not.  They apply this rule very frequently.  This rule holds that the plain meaning of a K should govern and that extrinsic evidence is admissible only if the Ct concludes that the K is ambiguous.  

Rst §201:  Whose Meaning Prevails:
1)  If two parties agree on a meaning, then that’s the meaning (completely subjective).
2)  Where different meanings used:
	a) (Innocent party rule):  If parties disagree, but one party knew what the other 			thought, then that meaning prevails.
	b) basically the same as 2(a).
3)  Raffles Rule:  Neither party bound if a different meaning is used, unless otherwise 	req’d.
Cts have great leeway in K interpretation, and many do not follow §201.
Rst §§201-204:  Set out Rules of Interpretation:  writing interp as whole and all writing interp together; plain meaning rule, except where intent was otherwise; technical terms keep their meaning, etc..
Rst §202(4):  This is UCC Art. 2.

Morin Building Products Co. v. Baystone Construction, Inc. (7th Cir. 1983) [Posner]
Facts:  GM (the owner) rejected work, General tore it down, hired another sub to do the work, and refused to be the first sub, who then sued.  Gm’s K with the general contained a satisfaction clause, which is the issue here.  Although these clauses are clearly meant to be left to the subjective satisfaction of the owner, the TC told the jury to view it objectively.  The  lost and appealed.
Rule:  The Ct rule for the .  It says there are levels/variances of satisfaction:
1)  Pure Satisfaction:  Completely subjective, does not need to be reasonable, but it does req. good faith.  This is what GM thought is was K’ing for.
2)  Ct applies Rst §228: uses an objective std - reasonableness.  [MAJORITY RULE]  
The presumption of an objective std. can be overcome when the nature of the performance K’d for is such that there is no objective std to guide the Ct.  
When each std is applied:  The objective std is app’d when the K involves commercial quality, operative fitness, or mechanical utility, things which other people can judge.  The subjective std. (i.e., the “good faith” std.) is applied when the K involves personal aesthetics or fancy.  The court determined that this case fell into the former category.
Note:  The Ct was able to decide the objective/subjective question only b/c it first found an ambiguity in the clause.  Had there been no ambiguity, that would have been the end of it.

C & J Fertilizer v. Allied Mutual (IA 1975) [Insurance case]
Facts:  , owners of fertilizer co., had insurance against burglary.  They got robbed, and shockingly, the insurance co. refused to pay b/c its form K had a clause that req’d there to be outside signs of theft before they would pay (this provision incl. to guard against having to pay for inside jobs).   was not aware of this provision.  TC said the provision incl. was unambiguous, and thus  did not have to pay.  
Rule:  Ct begins by looking at parties and recognizing that they are not on equal terms, and that what is at issue here is an adhesion K.  Llewellyn:  Concerning boilerplate language, he believes only those provisions that are either “dickered with” or reasonable should be incl. in the K.  This is called the Reasonable Expectations Test:  What you get when you buy insurance is what you reasonably expected you were getting.
Dissent:  Says term not ambiguous.  Start w/ plain meaning and no need to go further.
Note:  Many Cts do not follow the reasonable expectations test.

Rst §211(3) Standardized Form Agreements:  Where the party using a form K has reason to believe that the other party manifesting assent would not do so if they knew the writing contained the particular provision, the term is read out of the K.  

Principals of Interpretation:
1)  Noscitur a sociis:  the term is affected by the words around it.
2)  Ejusdem generis:  If specific and general terms used in same sentence, other general terms are taken to incl. only specific terms alike/similar to the specific terms already mentioned.
3)  Expressio unius exclusio alterius:  If only specific terms listed and no general terms incl., then no other specific terms are incl.
4)  Ut magis valeas quam pereat:  Construe the K as valid.
5)  Contra proferentem:  construe against the drafter.
6)  Interpret K as a whole
7)  Purpose of parties:  Apparent intent of parties is given great weight.
8)  Specific provision is exception to general one:  where two provisions contradict, use the specific one.
9)  Handwritten and types provisions control printed provisions.
10)  The interpretation that is best for the public interest is preferred.
11)  Construe the K as lawful, reasonable.

2.  The Parol Evidence Rule

Does not apply to oral K’s, but only to written K’s that are intended to be the final embodiment of the agreement, i.e., an integrated K or integrations.  A memo from just one party can never be an integration.  Integrations are only complete and final K’s.
Integration:  PER can’t come in.
No Integration:  All evidence can come in.
Some docs will be able to satisfy the SF (i.e., a written memo or note thereof) but will still be outside of the PER b/c its not an integration.
Parol:  Words, both oral and written (but not conduct).
Why?	Evidentiary
		Relevance:  if the words were relevant, they would have been merged into the K.
		Channeling:  helps Ct distinguish b/w relevant/irrelevant, and encourages people to 			put things into writing.
Problems:  Very rigid/formalistic.  Bars much evidence that is potentially useful to Ct/jury.  B/c results in such injustice, Cts reluctant to apply it, and frequently do not.  Note however, that the 90’s trend is a strengthening of the rule.

The Rule bars:
1) words
2) prior (only bars words prior to making of K, not subsequent words.  Williston would also exclude words contemporaneous to the making of the K [MAJORITY RULE] but Williston treats contemporaneous words as subsequent).  
3) Contradict Integration 
4) Unless the words go to est. of fraud, OR
5) Unless reformation.

First question asked:
Is the writing a partial or full integration.

Exceptions:  
1) when bank holds title for purpose of getting financing.
2) when trying to show no integration, or partial integration.
3) when trying to show supp. material.

Total Integration:  All prior words thought to contradict the writing and are excluded.  Only proof that can be used is writing and subsequent words.
Partial Integration:  Final stmt. w/ regard to everything covered, but not final w/ regard to entire deal b/w parties.  Can be supplemented with prior and subsequent words.  Parol evidence can only supplement the K, and can not contradict it.
Example:  Person rents space in mini-mall.  As to the rent price, it is fully integrated, but as to whether other stores like yours are allowed to rent in the mall also, in not mentioned in the writing, the writing is partially integrated w/ regard to that issue.
Merger Clause:  (sometimes “entire agreement” clause) Virtually per se full integration, but not always.
Fraud:  Evidence of fraud is always admissible.

Thompson v. Libby (MN 1885) [Four Corners Rule of PER in action]
Facts:  , buyer of logs, claimed seller breached a warranty of quality (note that this is pre-UCC, so no warranties of merchantability or fitness).  The warranty is not writing, so  says evidence of the warranty should be excluded.
Rule:  Ct says that this is a fully integrated K.  In doing so, it uses a very strict test called the “four corners test.”  This test does not look beyond the writing to determine its completeness.  This doctrine lives today.  Under this rule, if the language of the writing imports a complete obligation, i.e., the writing does appear incomplete on its face, it is presumptively complete.  (Examples of writings that would appear incomplete on their face are invoices, promissory notes, etc.)  If complete, PER not admitted.  Whether or not complete is a matter of law for the judge.  
Two exceptions to the four corner rule: (and thus PER is admitted)
	1)  To clarify language used in a writing (to acquire a “more perfect understanding 		of its language”).  This evidence may be admitted only so long as it does 			not change or contradict the writing.
	2)  T apply writing to its subject matter.
Two ways to get PER introduced:
	1)  writing is ambiguous on its face,
	2)  partial agreement (complete w/ regard to what is in writing, but not complete 			w/ regard to the whole deal, i.e., invoice, promissory note).
Reformation:  When Ct adds words to writing that were accidentally omitted, or, sitting in equity, Ct can reform writing to say what would have been there had there been NO fraud.

Approaches to PER:  (listed below from strictest/narrowest to most liberal/broad)
1)  Four Corners:  See above.
2)  Williston’s Rule:  [MAJORITY RULE]  
	a)  Does agreement expressly state that writing is the entire agreement (i.e., merger 			clause). 
	a1)  If YES, total integration, no PER.  
	a2)  If NO, next Q is whether the writing looks incomplete on its face.  
		a2a)  If YES, allow PER.  
		a2b)  If NO, presume total integration, but allow for introduction of evidence of 				agreement that is “naturally collateral” to the writing.
3)  Corbin’s Rule:  [MINORITY RULE]  [Created as reaction to Williston’s Rule b/c the parties’ intent was so often being thwarted by that rule and b/c merger clauses became such a common part of boilerplate language that state’s applying Williston’s Rule never got beyond the first step (see (a) above).]  Let all evidence in.  From this, the court will determine if total/partial.  If total, throw out all the evidence.  If partial, accept the evidence.
4)  Rst §216:  Presumes against full integration.  
	§216(b)(2):  presumes against total integration if the other information might naturally be 		omitted.  This is like Williston’s Rule, but the exact opposite.  (see other Rst sects. below)
5) UCC 2-202:  Presumes partial integration.  When full integration, disallows prior and contemporaneous oral evidence, but allows contemporaneous written evidence.
6)  Collateral Agreement Rule:  If evidence is to show that that collateral agreement existed, then it is admitted.  The collateral P must relate to a subject matter that is distinct from that of the writing.  Evidence allowed under this approach can not change/contradict the writing, it can only supplement it.  (Remember the Car and the Parking Space Problem.  Supp. p. 50.)

Hershon v. Gibraltar Building & Loan Assoc. (DC Cir. 1989)
Facts:  This is a lawsuit about the settlement of lawsuits and the release form that was signed by the parties as a result of the settlement.   says release only referred to the pending lawsuits and  says the release referred to all business b/w the parties.  The TC said the word “Claim,” as used in the release, was ambiguous, and thus allowed in PER to clarify the writing.  It then looked at subsequent conduct and determined that the release only referred to claims meaning law suits, and thus found for the .  (B/c release had a merger clause, the TC must have been applying a more liberal rule than Williston’s.)
Rule:  This court applies a stricter test than the TC, saying PER can be used to determine if ambiguity exists in the first place.  It uses an objective std. (a reasonable person in the parties’ position).  If evidence does not show an ambiguity, or if varies, alters, or contradicts the clear meaning of the writing, it is excluded.  This court goes on to decide that the writing is unambiguous, so no PER allowed.  

Rst §209  Integrated Agreements:  [?? Does this create presumption towards integration??]
An integrated agreement is a final expression of one or more terms of an agreement.  Whether a writing is complete is a question preliminary to interpretation of writing.  Ct decides to apply PER based on completeness and specificity.
Rst §213 Effects of Integrated Agreement on Prior Agreements:
PER may not be admitted to the extent that it is inconsistent w/ a subsequent integrated agreement if it is w/in its scope.  If not integrated, Ct can discharge a term that would have been part of the integration.
Rst §214 Evidence of Prior of Contemporaneous Agreements (The PER)
PER is admissible to est:
	1) that writing is not an integration,
	2) whether the writing is complete or partial,
	3) the meaning of the writing,
	4) invalidating causes (i.e., fraud. illegality, duress, mistake, lack of C)

3.  Implied Terms

Implied in Fact:  Comes from incomplete bargaining.  Parties would have included the terms had they gotten to it.
Implied in Law:  Made up by the law when justice so reqs.  (common law, statute, UCC, or b/c its needed in the particular case). 
Inherent Power:  Court are not limited to statutes or precedent, they have inherent power to create their own remedies when needed.

Wood v. Lucy, Lady Duff-Gordon (NY 1917) [Cardozo]
Facts:   has exclusive K to sell s name and products.    places her name on someone else’s products w/o going through the , and he then sued.   says no K b/c  never P’d to do anything, so she can do whatever she wants.
Rules:  While recognizing that there was, in fact, no P from , it implies one (and in so doing, states that the law is no longer formalistic/primitive).  Ct says that although no P, the whole writing evidences an obligation, albeit imperfectly expressed.  In other words, had there been no intention to make an obligation, why would the parties have entered into this agreement in the first place.
How Cardozo finds a P:  
1)  This is the business the  is in, so its implied that he will do so.
2)  This was an exclusive P;  would go broke if  didn’t do his job by getting her name on products, so obviously, parties intended that  would make an effort to sell s name.
Note:  The  admits that she made a P here, but she is refusing to abide by the K by saying  didn’t P.  However, the  performed and she did not.  So, its pretty easy for Ct to imply the s P, and so it does.

Leibel v. Raynor Mfg. Co. (KY 1978) [Art 2 case]
Facts:  Oral K (exclusive) about distributorship of garage doors.   gets product at wholesale and sells it and installs it.   ended the relationship and changes to another distributor in the area (basically killing the s business).   moved for SJ, saying that the K was for an indefinite period and that either party could end it any time (i.e., at will).  
Rule:  TC found for ; it said it was not an Art. 2 case; it also said that even if Art. 2, still would find for  b/c §2-309 only reqs. actual notice, not reasonable notice.  
App. Ct rev’d:
1) As to whether case is w/in Art. 2, Ct says must look to the “real purpose” of the agreement was, based on the intent of the parties, to decide whether under Art. 2.  If real purpose was to sell goods, then its w/in Art. 2.  App Ct says this agreement was for sales b/c the  didn’t just sell the doors for , but purchased them from the  and re-sold them.  
2) As to actual v. reasonable notice, this Ct says the TC was wrong, that §2-309(3) reqs. reasonable notice (except when parties agree that K will term. upon happening of an event).  If term. is pegged to a specific happening, one party must still term. the K, it will not likely just end on its own.  If the event occurs, the terminating party may term. at will, w/o giving reasonable notice.)
Thus, §2-309 allows for two ways to term. at will:
	1) pegged to certain event
	2) reasonable notice
Note1:  As to whether this case was under Art. 2,  should/could argue that  was merely an agent, so the relationship was not one of sales, but of services and installations.
Note2:  This Ct wanted to find for the distributor b/c they are often the little guy w/o much bargaining power and these Ks are often oral.  It gives the distributor better protection to put the transaction under Art. 2.  

Good Faith:  

§1-203:  Obligation of Good Faith (same as Rst §205)
This is the most important implied term.  It covers every K or duty w/in the UCC.
Note:  This obligation works an “excluder,” excluding bad faith conduct.  The obligation is often employed in cases where the conduct, although not violative of the K, appears to undermine the spirit of the K.  In this way, the good faith req. protects the bargain that the parties agreed to from one of the party’s attempt to undermine it.

Employment:  Good faith comes up in the employment context a lot.  Is still at will most of the times (except where expressly forbidden by statute, i.e. those protecting whistle-blowers).  And, probably, must be w/in the bounds of the employee handbook.

VII.	DEFENSES TO CONTRACT (Affirmative Defenses)

Very particularistic, like old writs (which is what they stem from).
Don’t forget that SF is an affirmative defense.
Defenses:  B/c of some problem, no K ever formed (note that these are different than defenses to failing to perform).

1.  Duress and Undue Influence

As duress law has narrowed, UE has widened to fill in the gaps.

Duress:  All about Coercion
	1) At Common Law:  Has changes significantly over time.  In common law times, it was available only if the party was actually imprisoned, or in cases of threats to life, limb.  In other words, it was not duress if the law could make it up to you (i.e., damages) w/o the help of a really good surgeon.  Under this narrow definition, threats to property, threats of assault, etc., were not good enough to est. duress.
	2) Today:  any wrongful act/threat which overcomes the free will can be considered duress.  This test is a subjective std., from the point of view of the involved party, not a reasonable person std.  Although in practice, its really a mix of subjective/objective.
	3)  Economic Duress:  Today, unlike the above two notes, most cases involve economic duress.  When econ. duress /coercion is used, the Ct applies a stricter std, most objective, w/ a little subjectivity thrown in for good measure.  
	The test:  Did the party have any (reasonable) alternatives.  
	The Rst §175 Test:  The party attempting to prove duress must show:
		1) she has been the victim of a wrongful of unlawful act or threat, AND
		2) the act was one that deprived the party of her unfettered will.
	This test is sometimes phrased as:
		1) one party involuntarily accp’d the terms of another, 
		2) circumstances permitted no other alternative,
		3) such circumstances were the results of the coercive acts the other party
	Free will/Wrongful acts:  
		Rather than voluntariness, free will is measured by whether assent was obtained via 		a wrongful act (did wrongful act induce the K?).

Hackley v. Headley (MI 1881) & Headley v. Hackley (MI 1883) [Old Rule]
Facts:   was in need of money and  was aware of this.   said that he would only pay part of the K price and that if the  didn’t like it, he could sue.  The  needed the $, so he assented to the lower pmt.
Rule:  Threat to breach K is not duress b/c there is always a legal remedy.  This Ct. applies a very objective std: it does not care what s predicament was, it asks only what were the s reasonable alternatives.  
2nd Case:   comes w/ another theory:  that there was no C for the money not paid by the .  This time, Ct agrees.  

Totem Marine Tug & Barge v. Aleyska Pipeline Svc. (AK 1978) [Modern Duress Law]
Facts:   transporting pipeline materials for  to AK.  Spent a huge amount of $ to be able to perform.  Many problems caused delays and  term’d the K.  B/c the  was in such huge debt,  signed release, accept less than owed.  Next day,  sued for rescind release, claiming econ. duress.
Rule:  Appl. of §176(1)(d) is  only argument.  Econ duress can not be argued merely b/c person has been the victim of a wrongful act, the  must also show that it had no other choice but to agree or face serious financial hardship.   must also show that they had no reasonable alt. but to agree, or, as it is sometimes said, the  would have had no remedy had the threat been carried out.  

Rst §176  When a Threat is Improper:
1)  A Threat is improper if:
	a) what is threatened is a crime or tort
	b) what is threatened is criminal prosecution
	c) what is threatened is the use of the civil process and the threat is made in bad 			faith, or
	d) the threat is a breach of the duty of good faith and fair dealing under a K w/ the 			recipient (see Totem)

Undue Influence:  Unfair Persuasion (unlike duress, which is about coercion)
Two Types:
	1) psychological dominance (Odorizzi)
	2) confidential relationship (not necessarily legal) (most frequent type)

When looking for undue influence, Cts look to see if (any) of these factors are present:
	1) susceptibility
	2) opportunity
	3) benefit (to )
	4) Independent advice
(see also the list of factors used in Odorizzi)

Odorizzi v. Bloomfield School District (CA 1966) [UE despite lack of conf. relationship]
Facts:  Man “outed” is forced to resign by the school board.
Rule:  UE involves use of excessive use of pressure to persuade one vulnerable to such pressure, pressure applied by dominant subject to servient subject.  It involves undue susceptibility in the servient person and excessive pressure by the dominating person.
Ct. looked to these factors to decide if UE: (facts of this case in parenthesis)
	1) discussion of trans. at inappropriate time (here, late at night)
	2) discussion of trans. at inappropriate place (s kitchen)
	3) insistent demands that business be finished at once (yes)
	4) extreme emphasis on untoward consequences of delay (public humiliation)
	5) multiple persuaders (yes)
	6) absence of third-party advisers (yes)
	7) statements that there is no time to consult w/ an attorney (yes)
Note:  these are indicators, not elements.  Not all 7 need be present to show UE.

2.  Misrepresentation and Nondisclosure

Misrepresentation:  
More common than duress/UE.  Same roots as fraud.  Fraud is a tort, misrep. is a K defense.  	Both come the old writ of deceit.
Usually brought simply to get out of K, although dmgs. sometime are awarded.

Rst §164:  When Misrepresentation Makes a K Voidable
A K is voidable if:
1) if a parties manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified on relying.  

Misrep. (K defense):						Fraud (Tort):	
1) false stmt.							1) false stmt,
2) negligence as to falsity of stmt.				2) known to be false (i.e., a lie),
3) told to some and believed					3) told to someone, and believed,
4) hearer acts (enters into K)					4) hearer acts, and
5) hearer suffers loss.						5) hearer suffers loss.

Notes on elements of Misrep:
1) Culpability:  Notice that (2) in misrep only reqs. negligence.  In other words, misrep. can be unintentional.  However, the more culpable the speaker, the more likely the court will find misrep.
2) Materiality:  Even if there was misrep., the lie must be material, it must be related to why the hearer acted, before the court will void the K.  Like culpability, the more material the misrep., the more likely a court is to void the K.  
3)  Inverse Relationship:  the more culpability, the less materiality the court will req., and vice versa. 
4) Cause:  The hearer must be able to prove that she acted as she did b/c of the lie and that the lie was believed.
5) Burdens:  Generally, they are split:  the  will have to show the misrep. and its materiality.  If shown,  is assumed to have misrepresented.   then burden to show no misrep., no reliance.
6) Subjective/Objective:  Usually related to the forth element (hearer acted b/c of the lie).  Here, as w/ materiality, the more culpable the , the less objective the Ct. will be (i.e., the less it uses the std of reasonableness), and vice versa.  
7)  Loss:  Cts more willing to accept pecuniary loss, but some now willing to accept psychological loss as well.  Loss generally works out in three ways w/ misrep. claims:
	a) got what bargained for, but its worth less than thought (results in voided K or making 			up in difference in values).
	b) got something different than bargained for (results in K being voided)
	c) got what bargained for, worth what though it was worth (this comes up often in cases 			involving racial issues.  If race is not issue, Cts generally will ignore the claim.
8) Misrep. of Fact:  A misrep. must be a misrep. of fact, not opinion.  Misrep. of opinion is usually not actionable.
9) Misrep. of Law:  The old maxim “ignorance of the law is no excuse” is still alive and well, but its not absolute.

Sysester v. Banta (IA 1965)
Facts:  The old women and her 4000 hours of dance lessons.  She signed release.
Rule: Release was fraudulent overreaching.  Ct. did not think the misrep. here was of opinion (i.e., puffing), but of fact.  This Ct. pretty much ignored the PFC of misrep. and found for the old bag b/c they felt bad for her (esp. considering that if there was a misrep. of fact, it does appear that it was material (i.e., relied upon) b/c the old women was in it for companionship, not dancing.
Punitive Dmgs:  not usual in K law.  If they are incl. in case, likelihood is that there is a tort claim mixed in somewhere.

Rst §168:  Reliance on Assertions of Opinion
One can not state an opinion that is not a true belief (i.e., a baseless opinion is no opinion at all and can be a misrep.)

Rst §169:  When Reliance on an Assertion of Opinion is Not Justified
Experts are held to a higher std.  
One cannot rely on an opinion, but if the relying party was particularly susceptible (169)c)), or speaker is a position of confidence (169(a)), or if speaker is one of supposed skill, the speaker will be held to a higher std.

Non-Disclosure:  

All about when the party w/ info. must share it w/ the other party.  Disclosure is not always req’d.

Laidlaw v. Organ (US 1817) [granddaddy of ND cases]:  Here,  (buyer) knew the war (civil) was over, knew seller did not know it was over, and did not tell him even the news would have greatly affected the price of goods sold.  Ct holds that  did not have to disclose unless it had a duty to do so, and here, no such duty existed.  Note:  This is before there was a req. of good faith.  The result may have been different today.

The General Rule w/ regard to Disclosure (Laidlaw):  One party is not required to disclose information that may effect the bargain.  But, as always, there are exceptions:

Statutes:  truth in lending, full disclosure acts, etc. (mostly came about in the 60’s consumer revolution).  Why?  B/c information is readily available to the party that also has the bargaining power, so statute req.’s disclosure.
Common Law:  had several exceptions
Active Concealment:  Actively hiding truth by one party from another.
Partial Disclosure:  Half truth is worse than no truth at all b/c party hearing information assumes they have been told the whole truth.
Knowledge of Misunderstanding:  If one party knows the other is misunderstands the transaction, the first party has a duty to set the other straight.  Note:  Some Cts req. that the misunderstanding be basic/material before one has a duty to disclose.
UCC:  Much of this is unimportant b/c of implied warranties.  
Certain Industries:  Medical, fiduciary, insurance, etc., are held to higher levels of disclosure.

Proprietary Information:  This is information gathered via market research, R&D, etc.  This type of information is very protected, NO disclosure req’d.

Hill v. Jones (AZ 1986)
Facts:  The sale of a house involving termite infestation.  s brought case under both active concealment and partial disclosure doctrines.  TC dismissed active concealment claim, and SJ’d the other.  Note that TC excluded evidence of ND b/c of PER.
Rule:  Caveat Emptor is DEAD (mostly).  Ct. applies Rst §161 and says party had an affirmative duty to disclose.  AZ adopts this rule:  where the seller of a home knows facts materially affecting the value of property which are not readily observable and are not known to the buyer, the seller is under a duty to disclose to the buyer.  Also, if an inquiry is made by the buyer, the seller must disclose.  
Note:  There is a balancing test at work here b/w the buyers rights of parties and the duty to disclose.
Materiality:  This rule req.’s that the ND be material to the deal.  A matter is material if it is one to which a reasonable person would attach importance in determining his choice of action in the transaction in question.  Materiality is a Q of fact.
Causation:  The seller’s ND must have been a cause (or at least one of the causes) for the buyers actions.
Merger Clause:  Almost always, a claim of fraud, misrep., or fraud will push the court to look beyond a merger clause.

Rst §161  When Non-Disclosure is Equivalent to an Assertion:
(a), (c), and (d) call for recission in certain limited circumstances.
(b) states a broader basis for relief:  when the ND amounts to failure to act in accordance w/ standards of good faith and fair dealing.  Several factor may considered in applying this section:
1) difference in intelligence of the parties,
2) relation parties bear to ea. other,
3) manner in which the information is acquired,
4) nature of fact not disclosed,
5) more likely that seller, not buyer, will be req’d to disclose, 
6) nature of the K itself,
7) importance of the fact not disclosed,
8) any conduct of the person not disclosing something to prevent discovery.

3.  Unconscionability

Uncons. is the PE of defenses, b/c once it was put into the UCC, it took over the scene (even though it has been around forever).

§2-302  Unconscionable K or Clause
1) If Ct finds that, as a matter of law, that at time of making, the K or any clause w/in the K, to have been uncons., the Ct may (1) refuse to enforce the K, (2) enforce only the remainder of the K w/o the uncons. phrase, or (3) it may limit appl. of any uncons. clause as to avoid an uncons. result.
2) Parties shall be afforded a reasonable opp. to present evidence as to its commercial setting, purpose and effect to aid the Ct (the judge, not the jury) in making a determination.
The basic test is whether, in light of the general commercial background and the commercial needs of the particular trade or case, the clauses involved are so one-sided as to be uncons. under the circs. existing at the time of the making of the K.  
Used to police oppressive Ks.  Big changes from old days (think Batsakis).  This section makes it so Cts no longer need to manipulate O, A and public policy to kill a K.  It can do so simply by finding the K or clause uncons.
The principle of the statute is to prevent oppression and unfair surprise, not to redistribute power among the parties.
Substantive Unconscionability:  The K itself, i.e., the result of the bargaining, is uncons.  (Does the K meets the stds. of the particular time/place.)
Procedural Unconscionability:  The making of the K, i.e. the bargaining process itself, was uncons. 

Williams v. Walker-Thomas Furniture Co. (DC Cir. 1965)
Facts:   sold home furnishings on pmt plan.  The K had a clause, the effect of which was to keep a balance due on all items, whenever purchased over the years.  Thus, when a buyer defaulted on one pmt, seller was able to repo. all goods purchased over the entire relationship, not just the most recent.  TC refuses to act, says consumer protection is for the legislature and even encourages them to act.
Rule: Even though UCC not in effect in DC at time, the Ct pulls out the common law uncons. and applies it here to kill the uncons. K clause.  
Ct adopts a test for Uncons.:
	1) absence of a meaningful choice (procedural uncons.)
	2) K terms that are unreasonably favorable to other party (substantive uncons.)
Meaningful choice:  determined by consideration of all the circs. surrounding the trans.  In many cases, the meaningfulness of the choice is negated by gross inequalities in bargaining power.
Gross inequalities in bargaining power:  (all about procedural uncons.) 
Factors to be considered:  
	education of parties
	reasonable opportunity to understand/evaluate K
	were important terms hidden in fine print or unrelated clauses
	deceptive practices
	commercial needs of trade
Some other factors to consider:
use of printed form w/ boilerplate.
significant cost/price disparity or excessive price
denial of basic rights/remedies to buyer of consumer goods
inclusion of penalty clauses
circumstances surrounding creation of K, incl. commercial setting, purpose, effect
hiding of clauses in fine print, etc.
phrasing clauses in language comprehensible only to a lawyer
an overall imbalance in the obligation of the parties
exploitation of the underprivileged, and 
inequality in bargaining or econ. power.

Ahern v. Knecht (IL 1990)
Facts:  Repairman knew  needed to have unit fixed and charged outrageous amount.  Repairman also knew that  did not know what the hell was going on.
Rule:  Some say price alone can never be uncons.  In this case, however, there was more.  The  was scared of the repairman and felt intimidated.  W/o these added factors, it would have been a much tougher case for the , and in some states, it clearly would have been insufficient to est. uncons.

Zapatha v. Dairy Mart (MA 1980)
Facts:  Franchise case.  Company ended relationship and franchisee sued.
Rule:  Court refuses to use uncons. in the franchise context.  Cts feels much safer using Uncons in the consumer context (mostly due to the fact that in the consumer context, significant inequalities in bargaining power exists, whereas in the franchise context, no such disparities exist (at least not acc. to this Ct)).

4.  But We Agreed to Change the Deal:  The Rules of K Modification

Basically, its a question of Consideration

Alaska Packers’ Assoc. v. Domenico (9th Cir. 1902) [No Modification w/o C]
Facts:  Company hired fishermen to come up to AK for fishing season, to be paid a set price.  When the fishermen got to AK, they demanded a higher wage (presumably b/c the fishing nets were in bad shape, making their jobs more difficult).  They threatened to walk if the company did not meet their demands.  If the fishers walked, the company would have failed (for various reasons).
Rule:  No Modification w/o C, unless under Art. 2.  The K to pay a higher wage (the modified K), is null for lack of C.  The Ct. found that the fishers had a pre-existing duty to perform (the first K) and that they had not given anything new to the company to get the higher wages (other than coercion).  The fishers argue that the company agreed to cancel the first K and that, as a result, this was not a modification, but a new K, which their worked served as the C for.  Ct disagrees.

Scwartzreich v. Bauman-Basch, Inc. (NY 1921)
Facts:  Employment K.  Employee was offered new job and went to present employer, “as a friend” and asked his advice on whether he should accept better pay.  Employer offered higher wage if employee would stay, and he did.  Employer then fired employee before the term of the employment K had expired.
Rule:  Modification is allowed b/c the court believed that the original K was canceled by the employer (who “ripped it up” upon the signing of the new K).  So, here, as above, the court did not any new C for the modification, it merely found that the first K had been canceled, and thus the C that went towards that K was “transferred” to this K.  

Note:  The only difference b/w Alaska Packers’ and Scwartzreich is that in the latter, the Ct. believed the employee, whereas in the former, it did not.  This goes to show that this doctrine is very malleable, and the court can use to it to achieve the result it desires.

United States ex rel. Crane Co. v. Progressive Enterprises Co. (ED Va. 1976) [Art. 2]
Facts:  Crane (seller) gave bid to Progressive, who let it expire.  Progressive then accepted the bid w/ its PO.  Progressive argues that the PO was the final doc. in the K, and that the price change afterwards was a modification that occurred w/o C.  Progressive never intended to pay the higher price.
Rule:  Ct agrees w/ Progressive that the price change was a modification w/o C, but Progressive still uses b/c Ct applies UCC §2-209, which allows for modification w/o C.  
§2-209  Modification, Recission, and Waiver:  No Consideration required for modifications.
Does not apply to unilateral modifications.
Recognizes that prices tend to fluctuate.  Thus, when both parties agree to the change in price, as here, the new price is valid.  So, when Progressive went back on the new price, it was liable for the amount agreed.
In order to get out of this section, the non-agreeing party (in this case, Progressive) must show at least some signs that it contested the modification.
A modification must meet all SF requirements.

BIG NOTE ON MODIFICATION:  UCC and common law are opposed to each other.  UCC allows modification w/o C, and the common law does not.

VIII.	BREACH OF CONTRACT

1.  Conditions

Classical Definition of Condition:  an act/event not certain to occur that must occur or a duty to perform will not arise or will be discharged.  A condition focuses on whether its time for the parties to perform.
Rst §224:  A condition is an event, not certain to occur, which must occur, unless its non-performance is excused, before performance under the K becomes due.
Substantial performance:  Even though the exact letter of the condition was not met, it was substantially performed, and this will often times suffice.
Anticipatory Breach:  When one party makes it very clear the she will not perform, the other party can end the K.  This is a very narrowly construed doctrine.  
Failure of Condition v. Breach of promise:  When a condition does not occur, the K is basically dead, the other party’s duty to perform ends.  However, when the K is breached, the K is still alive and the other party’s duty does not (usually) end.
Materiality of Conditions:  Many court will only strictly enforced conditions that are material to the K.  In such a Ct., the failure of a non-material condition will not excuse the other party’s duty to perform.  Childres points out two types of conditions:  substantive conditions and procedural conditions.  The former tend to be material, but the latter tend to be “technical” and relatively immaterial, like the condition in Inman (below).  Note the court there did not agree.
Conditions cover Rst §§224-229.

Types of conditions:

	by Time					by Source
	1) precedent					1) express (in the K)
	2) concurrent					2) by construction (implied in law)
	3) subsequent

Express conditions give rise to questions of excuse and waiver:

Inman v. Clyde Hall Drilling Co. (AK 1962)
Facts:  , employed under a written employment K, was fired and sued for breach.  The K req’d employees to file notice w/ the company before suit was filed (this is an express condition).   did not do this, and, as a result (acc. to ),  owes no damages.
Rule:  Ct. says that the req. for notice is an (express) condition precedent, the condition must occur before the other party is duty bound to perform (the condition precedes the obligation to perform).  
Burdens:  The condition is not an affirmative defense, its part of s case that must be plead and proved.  So, even if  does not bring it up, its not waived.  

Jones Associates, Inc. v. Eastside Properties, Inc. (WA 1985) [Condition or Promise]
Facts:   Jones was to do development analysis for  and submit it to County Supervisor for approval.  The K contained this language:  “Jones shall be responsible for obtaining approval of all of its plans from the County.”  This approval was never obtained and , claiming this was a condition precedent, refused to pay the remaining owed.   claims that this language evidences a P, not a condition.  In the alternative,  argues that if it was a condition, it did all it could, that it had no control over the County.
Rule:  Ct’s presumption is towards P, not condition (to keep K alive).  To determine whether P or condition, court looks first to the language of the K.  Here, it finds no words that would evince a condition, such as “provided that,” “when,” “so that,” “while,” “as soon as,” or “after.”  Since intent is thus unclear from the language of the K, Ct. goes on to look at the entire K, circumstances surrounding the K’s formation, parties’ subsequent conduct, and the reasonableness of the parties’ respective interpretations.  
Note1:  As said above, the Ct. prefers the interpretation that keeps the K alive (forfeitures are not favored unless the right to it is clear).  (see Rst §227)  This section of the Rst goes on to point out that if the condition is not one that is fully w/in the control of the obligated party, it is not likely to be a condition at all (as that party was not likely to assume such a risk), but a P (as was the case here).  However, where the obligated party has full control of the occurrence of the condition, the Ct. is more likely to construe it as a condition as opposed to a P.  
Note2:   is arguing that it breached a promise as opposed to a condition.  If breach of P, then  can probably still get at least partial payment (for services rendered), but it condition, then s duty to perform is excused and the  gets nothing.  

US Fidelity and Guaranty v. Bimco Iron and Metal Corp. (TX 1971)
Facts:  Acc. to  (insurance co.), insurance policy only covered damage caused by burglar, did not cover items stolen.  However,  acted is if it would cover such loss.
Rule:  Conditions can be waived, w/o consideration, via either language or conduct.  The liberally construed law of waiver, just like the presumption towards promises and away from conditions, helps to alleviate the harshness of conditions and favors keeping the K alive.
Waiver:  An intentional relinquishment of a known right, but may occur when a party does not know his legal rights or foresee the legal effect of his actions.  But a waiver will not occur unless the party at least has reason to know the essential facts.
As the rule above states, waiver is valid w/o C or reliance.  However, this rule does not hold if the condition was a material part of the performance to be rendered by the obligated party.  So, conditions that can be waived tend to be those that are considered procedural or technical.
Prevention:  Like waiver, this doctrine holds that a condition is excused if the other party wrongfully hinders or prevents the condition from occurring.  Rst §245.
Waiver is found in Rst §84 and §2-209.

J.N.A. Realty Corp. Cross Bay Chelsea, Inc. (NY 1977)
Facts:   sought to renew lease, but did so late.   landlord tried to kick them out and  brought this suit to prevent eviction.  
Rule:  Ct. sitting in equity has inherent power to provide relief from inequity.  It balances loss due to forfeiture against refusing to enforce the condition.  This rule exists to relieve from the harshness of conditions, just like waiver and the presumption towards P.  B/c the condition was not waived, the Ct. just decided to ignore it b/c it was relatively unimportant, and the damage done to the  would be great.

2.  What is a Breach

Before considering breach, must figure out what’s been P’d, what’s been done, and what’s due.
Rst 235:  Effect as Performance as Discharge and Non-Performance as Breach
	1) Full performance of duty  discharges duty.
	2) When performance is due, and non-performance  breach.

Jacob & Youngs, Inc. v. Kent (NY 1921) [Cardozo]
Facts:  The “Reading Pipe” case.   (General K) is suing for remainder due on K.
Rule:  The big debate:  Reading Pipe, a condition or a P.  Cardozo says P and forces owner to pay.  Why?  B/c the defect in the s performance was insignificant, trivial, innocent.  Cardozo goes on to say that damages are allowed for the breach of the P, but those damages are only for the difference b/w what the  wanted and what the  got, which is nothing (of value anyway).
Independent/dependent Promises:  If a P’s are independent of ea. other, then the breach of one does not allow the party to stop performing.  If the P’s are dependent of ea. other, then the breach of one P excuses the duty to perform another.  How do we tell if P’s are independent/dependent?:  
	1) If breach is substantial, material, then P’s are dependent.
	2) if breach is insubstantial, not material, then P’s are independent.
There are two approaches to figuring out whether a P’s breach is substantial or immaterial:  Intent of the parties and justice/equity of enforcing the P helps determine whether the P is material or not.  In this case, forcing the  to comply would have been very expensive for a relatively small benefit to the .  Thus, the clear intent of the parties towards Reading Pipe was overwhelmed by the great injustice that would occur by enforcing the P.  And, thus, the P’s are independent of ea. other, and the s duty to perform (pay) is not excused.  (Note:  where intent is not clear, it will be presumed that is a reasonable and probable one.)
Sum Up:  In these types of cases, the goal is to figure out whether independent/dependent.  This is done by figuring out how great the harm would be by holding the P’s to be independent.  If the harm is great, then its not independent.
Substantial Performance:  Note how this all relates to substantial performance.  “Nearly” turns out to be good enough.  
Express Condition v Constructive Condition:  Express conditions must (usually) be followed to the letter, whereas the latter, construed into the K by the Ct., do not have to be followed to the letter.  Cardozo says the condition here is the latter.
Dissent:  The dissent is all about intent; would have found for owner.  Whether s mistake was intentional or negligent is immaterial.  The owner has the right to what he K’d for and shouldn’t have to pay unless he gets it.

Material Breach:

Sackett v. Spindler (CA 1967)
Facts:   is buying stock from .  The third installment check (the bulk of the $ owed) bounces.   says he will pay, and  says OK, but  never does.  B/c of  woes,  is forced to sell to another buyer, for substantially less.   thus declares the K dead for s failure to perform.  However, the  says that he had not breached, and that s renunciation of the K was actually the breach, and thus he should get damages.
Rule:  The P to pay was unconditional and the s failure to pay was a total breach of the K, thus discharging  from his duty to perform.  Applying the factors below, the Ct. determined that the s breach was material and thus total (and even though the  kept saying he was going to pay, he never did, so the was justified in repudiating the K).
Rst §275:  Whether a Breach is Total or Partial:  
Whether a breach is total or partial depends upon materiality.  In determining materiality of a failure to fully perform a P, the following factors should be considered:
	1) extent to which injured party will obtain the substantial benefit which he could 	have reasonably anticipated;
	2) extent to which the injured party may be adequately compensated in dmgs. for 	lack of complete performance;
	3) extent to which the breaching party has already performed or made preparation 	for performance;
	4) the greater or less hardship on the breaching party in terminating the K;
	5) the willful, negligent or innocent behavior of the breaching party; and
	6) the greater or less uncertainty that the breaching party will perform the 	remainder of the K.
Repudiation of K:  Constitutes a total breach of the K unless the other party had already committed a total breach.  In other words, in this case, had  been wrong about s non-payment being a total breach, his repudiation of the K would have constituted a total breach and  would have been able to recover dmgs.  Had s conduct constituted anything less than a total breach, i.e., a partial breach or no breach at all, then  would have been screwed.

IX.	DAMAGES

Damages (mostly) come from law, not from the agreement b/w the parties.
Compensatory Damages:  
General assumpsit:  used when the K is fully executed (i.e., fully performed except for payment) and quantum meruit (like a fully executed K, i.e. fully performed except for payment, but there is no K, no agreed upon price.
Special assumpsit:  used when the K is executory (i.e. performance not completed).  Damages here are compensation for loss (like Tort).
Non-Compensatory Damages:
Nominal Damages:  Cts give small amount of $ to show a breach in cases where there are no actual damages.  Largely symbolic.
Punitive Damages:  Questionable whether they are ever available for K damages.  Under such doctrines as good faith, fair dealing and reliance, there has been substantial recent pressure to give punitive damages.  Punitive damages may be given in three situations:
	1) where breach of K is accompanied by a tort claim;
	2) fraud, oppression etc., mingled w/ the breach; and
	3) cases where s are insurance companies.

1.  Expectation Damages:  What They Are, Why We Give Them, How to Measure Them

Benefit of the Bargain/Expectation Damages:  Law puts  where she would have been had the breach not occurred (as opposed to tort, which makes the  whole again).

Farnsworth Expectation Damages Formula:  
	Loss in Value + Other Loss - Cost Avoided - Loss Avoided = Expectation Damages

Loss In Value:  the difference b/w value that  should have received and what  actually received.  This is a (supposedly) subjective measure;
			PLUS
Other Loss:  two types:
	Incidental loss:  add’l costs incurred after breach in an attempt to minimize loss.
	Consequential loss:  losses suffered because of the breach.  
(if the costs is avoidable, even though it is beneficial, its probably an incidental loss);
			LESS
Cost Avoided:  costs saved by the  b/c the breach of the  prevented the  from continued spending that would have been required under the K;
			LESS
Loss Avoided:  money spent on this K (that can be app’d to another K (i.e., lumber for building a house can be app’d to another construction deal);
			EQUALS
Expectation Damages.

Example 1:
Construction price:	$200,000
Cost of construction:	$180,000
Owner has paid:	$70,000
Builder has spent:	$95,000
Unused materials
	resold		$10,000

Loss in value:		$200,000 - 70,000 = 		$130,000
Other Loss:  		None				$0
Cost avoided:		$180,000 - 95,000 =		$(85,000)
Loss Avoided:		$10,000			$(10,000)
Expectation damages:					$35,000

To check:   spent $95,000  and received only $70,000, for a difference of $25,000.  Subtract from this the $10,000  got for reselling some goods, and the difference becomes $15,000.   Add to this s expected profit of $20,000, and the total = $35,000.

Example 2:  
2 yrs at $50,000/yr.	$100,000
Paid:			$25,000
Paid for employment
	agency:	$1,000
New Salary:		45,000

Loss in Value:		$100,000 - 25,000 = 		$75,000
Other Loss:		$1,000				$1,000
Cost Avoided:		$45,000			$(45,000)
Loss Avoided:		$0				$(0        )
Expectation Damages:					$31,000

Kemp v. Gannett (IL 1977)
Facts:   Realtor told builder that he would sell his house w/in 90 days or buy it himself.  He also guaranteed to pay the mortgage payments over that time.   did neither, and  eventually sold the house a year later a price less than that guaranteed by the .
Rule:   has the burden to prove damages and  said this was not done b/c the market price of the house was not ascertainable.  Ct. substituted the resale price of the house as a substitute for the market price.  It concluded that this was an adequate measure so long as the two were w/in a reasonable time of ea. other.   was also forced to pay for consequential damages, such as real estate taxes.  
Note1: If the  would have been able to put the property use during the time it was waiting to be sold, his damages would have been reduced by any use he received.  But b/c he merely built the house to sell, not to live in, he received no benefit from the property while awaiting the sale.
Note2:  Any expenses  would have had to incur regardless of the breach, i.e., realtor fees, are not included in the damages calculation.
English Rule:  If seller is unable to convey a property, the only damages are the return of the deposit.
American Rule:  [MAJORITY RULE] Return of down payment plus any damages  can prove resulting from the breach.
Uniform Land Transfer Act:  Middle of the road rule:  like the American rule, but does not grant damages beyond return of the down deposit if the inability to convey title results from a failure to clear title.

Handicapped Children’s Education Board v. Lukaszewski (WI 1983)
Facts:   was in an employment K w/ school.  She got better offer but  would not let her out the K.  She got really stressed out and went to a Dr. who told her she needed to get away from whatever was causing her stress.  So she quit her job and took the better offer.   hired a new teacher to replace her, but, b/c the new teacher was better qualified, the school is forced to pay her more.  They sue for the difference.
Rule:   says that even though she breached, no damages b/c even though  is paying more, they are getting more too.  Ct disagrees, and says even though  may be getting more, they are entitled to the benefit of their bargain, which was paying the amount they had agreed to pay the .
Note:  Obviously, Ct. does not buy the Dr.’s note.  Had it believed it, the s performance would have been excused (for impossibility) and no damages would have resulted.

American Standard Inc. v. Schectman (1981)
Facts:   agreed to take down foundations to one foot below grade for the right to remove certain articles from the s land.  It took the articles, but did not take the foundations.  The  sold the land, but only for $3,000 less than it would have had there been no breach.  They sue for damages.
Rule:  The question faced by the court was which measure of two measures to calculate damages should be employed.
	1) Difference in value (what  wanted).
	2) Cost of Completion (what  wanted).  Note that here, this amount was 	$110,00 (even though the benefit to the  had the K not been breached would have 	only been $3,000.
In trying to get Ct. to apply the difference in value rule, the  argues the doctrine of economic waste:  when the value that would be added is so small, and the cost of completion is so large (i.e., Jacob & Youngs), look to substantial performance of the , say K is completed, and only force  to pay difference in value.
Ct. refuses to apply the economic waste doctrine b/c it says the diminution approach (difference in value) only gets applied when s actions were unintentional and substantial performance was done in good faith (a la J & Y).  This was not the case here.

2.  Limitations on Recovery (foreseeability, certainty, causation)

Hadley v. Baxendale (Eng. 1854)
Facts:  The ol’ shaft case.   miller shipped shaft via .  s mill was closed while the shaft was being repaired.  It said that the  knew this,  said it did not know this.  Question is what should be included in the s dmg. award.
Rule:  The court rev’d the juries huge dmg. award.  It said there are two types of damages:
	1) those which arise naturally from the breach, and
	2) those that may reasonably be considered by the parties. (special circs. rule)
These two types added together = expectation damages.  In most cases, a  is only liable for (1) unless the  has made the  aware of special circumstances (i.e., that the mill is shut down, so hurry the hell up).  (2) is basically the rule for consequential damages.
Note:  This case marks a big shift in law of damages.  Prior to this case, damages were at full discretion of the triers of facts.  Jury awards were getting huge and the Ct. sough to protect industrialization by instilling limits on the calculation of dmgs.
Consequential damages:  how far do they go?
	1) Tacit Agreement Rule (strictest) (Holmes):  One can only extend dmgs. 	beyond those that arise naturally when there has been a tacit agreement by the  	that he would take on such damages.
	2) Foreseeability Rule (most lenient):  [MAJORITY RULE]  is liable for 	consequential damages when they are reasonably foreseeable at the time of the 	making of the K.
Rst §351:  Unforeseeability and related Limitations on Damages
	1)  is liable for damages reasonably foreseeable at the time of the making of the K.
	2) Loss is foreseeable if:
		a) it follows in the ordinary course of events (Hadley Rule 1), or 
		b) as a result of special circumstances, beyond the ordinary course of 			events, the  had reason to know (Hadley Rule 2).
	3) Ct. can disregard foreseeable dmgs. if justice so req.’s (in order to avoid 	disproportionate compensation.

Expectation Limitations (sum up plus):
1) Foreseeability/consequential/Hadley
2) Mitigation:  Before  can get dmgs., she must do that which she can do to mitigate the dmgs. w/o undue burden, risk, or humiliation.  
Usually, the  is not req’d to mitigate by dealing w/ the .
Exclusive/Non-Exclusive K:  Generally, it turns on whether the services provided were personal, or other.  If person, it is not likely that the  could have had both a new job and the job from which she was fired.  Thus, wages from the new job go towards (mitigate) the damages of being fired from the first job.  Outside of employment, most Ks are not exclusive.  In the case of construction, for instance, a contractor is picks up a new job after being one owner refuses to pay is not mitigating damages b/c it is expected that he could have had both jobs.  Thus, the contractor’s damage award is not decreased.  B/w exclusive and non-exclusive, the preference is towards non-exclusive.

Wired Music, Inc. v. Clark (IL 1960)
Facts:  The Muzak case:   had a K for three years to receive piped in music; no assignments allowed.   moved and broke K w/ .  A new tenant moved in and signed a K w/ the , but only for one year (but at a higher price).   claims the new tenant mitigated the damages.
Rule:  The Ct. holds that the Ks were non-exclusive, that b/c the  had a limitless supply of Muzak, it could have both supplied the  (had he not broken the K) and the new tenant (the theory being that if the new tenant had moved into a different office, he would have ordered Muzak there too).  Note that the Ct’s outcome is slightly bogus b/c both the  and the new tenant occupies the same space.  The Ct thus relies on the presumption that the new tenant would have signed up for Muzak regardless of where he rented space.)

3) Certainty:  (relates to both expectation and reliance)

Wartzman v. Hightower Productions, Ltd. (MD 1983)
Facts:  The Woody Hightower/pole-sitting case:  s lawyer (the ) screwed up (by failing to comply w/ SEC rules) when he created a corp. for the s.  This screw-up ended up killing the entire enterprise.  
Rule:  Jury gave dmg. award approx. $170,000, = to what s spent on the brilliant venture.  Note these are not expectation dmgs, but reliance dmgs.  
Note:  The likelihood is that this deal would actually have lost money -- if so, then no expectation dmgs. can exist, so reliance dmgs. given.  Note this also happens when expectation dmgs. are incalculable.  

3.  Non-Expectation Recoveries:  Reliance, Restitution, and Agreed Remedies

1) Expectation Damages:  see above.
2) Reliance Damages:  If Ct cannot determine value of the bargain (expectation dmgs.), then reliance dmgs. may be available.  What is provided:  out-of-pocket expenses of the .  Note that even though reliance basically equals out-of-pocket expenses, it is possible for reliance dmgs. to exceed actual out-of-pocket costs.
3) Restitution:  Restores parties (both  and ) to where they would have been had the K never happened.  

United States ex rel. Coastal Steel Erectors v. Algernon Blair, Inc. (4th Cir. 1973)
Facts:  Coastal subcontracted to do steel erection work for the  general K.   refused to pay for the crane rental  needed to do its work, so  ceased performance and sued for the value of work already done.  
Rule:  The question was whether a subK, who justifiably ceases work under a K b/c of the General’s breach, may recover in quantum meruit, for the labor and equipment already furnished irrespective of whether he would have been able to recover in suit on the K (b/c the subK would not have made any money from the deal).  The answer is yes.
Quantum Meruit:  Allows a P’ee to recover the value of services he gave  regardless of whether he would have lost $ on the K (and thus been unable to recover in a suit for expectation dmgs.).  The measure of quantum meruit is the reasonable value of the performance, see Rst §347, and recovery is undiminished by any loss which would have been incurred by complete performance.  This is also called “market value restitution.”  See Rst §373.
Note:  The choice to elect dmgs. in quantum meruit (as opposed to expectation dmgs) is the choice of the .  Such choice is made freely in all situations, w/ one exception:  if the non-breaching party has fully performed his duties under the K and the breaching party’s only remaining duty is payment, the non breaching party may not elect restitution and is limited to expectation dmgs.

4) Agreed Remedies (penalty clauses):  Cts do not liked agreed remedies (those incl. w/in the K itself).  They are leery of these agreements b/c they tend to result in situations where there is an inequity in bargaining power.  Generally, Cts. feel free to ignore these clauses.