I. REMEDIES (2-700’s)
UCC, Art. II Sale of Goods=things that are moveable, can carry around, NOT real property

3 Types of Remedies

RESTITUTION: $
Restoring those things turned over by one party.
return of goods.

RELIANCE: $$
Idea that party has given something up in reliance upon K.
Return to status before K (status quo ante)

EXPECTATION: $$$
Measuring damages according to what promised
put where would have been if K completed

$= Expectation>Reliance>Restitution

A. EXPECTATION—put where would have been had K been completed

Hawkins v. McGee—hairy hand
Hawkins claimed dr. promised 100% perfect hand, but after surgery disfigured.  Suit in assumpsit—he undertook, promised.  
Warranty- hand would be 100% perfect
Claim- warranty breach
Moral: In contracts, expectation is the standard measure of damages.

EXPECTATION REFINED

TYPES OF EXPECTATION DAMAGES:
DIRECT DAMAGES: Diff. Between K price and price received
INCIDENTAL DAMAGES: Costs incurred in trying to achieve 2nd best outcome, given the breach.  Naturally attributable to the breach.
CONSEQUENTIAL DAMAGES: Prox. Caused by breach—must be foreseeable at the time K is made (UCC 2-715).

2-703: 	when buyer wrongfully doesn’t want or doesn’t pay for goods, seller can withhold, stop delivery, $ (d & e), cancel
2-706:	if good faith and commercially reasonable resale, can get diff. plus incidentals  Failure to be reasonable and act in good faith deprives seller of measure of damages provided in 2-7062-708
2-708:	seller’s damages for non-acceptance or repudiation.  Proptecting expectation, but not reliance.  Diff. b/w orig. price and current price.  If diff. to resell in timely manner2-709
2-709: 	if no way to resell, can recover contract price
2-710:	incidentals= any commercially reasonable costs
market price at time of K doesn’t matter, only what’s in K and market price at time of delivery.

Peevyhouse v. Garland (1963) p. 164 
(Diminution of value=diff b/w current value & worth if K complete)
Did trial court properly instruct jury?
P owned farm with coal deposits and leased to D for 5 years for mining.  D spec. agreed to restorative work at end of lease and conceded work had not been done.  
	Est. cost=$29,000	
	P asked for $25,000	HOLDING: $300
Court told jury must return verdict for P—Q of damages, must consider cost and evidence.  Verdict for $5,000 more than total value of farm after work done.  
P relied on Groves, where cost of performance rule adopted.  There, $60,000 awarded for work to be done, but prop. Only worth $12,160 after work done.  Unusual case where cost of work.value of property w/ work done.  Ususally follow value rule.
Primary purpose of contract was not building and construction, though analogy in opinion to bldg and const. Cases.  
HOLDING: Ord. Remedy is cost of work, but if provision incidental and disproportionate, then damages = diminution in value of property = $300.

Groves v. John Wunder p. 27 handout	
Groves owns, Wunder leases and gets to remove sand and gravel, also gets to operate Groves’ screening plant.  Had been competitors.
Groves gets $105,000 cash and even land level to rr level.  Indication that Groves later would sell for industrial use.
DEPRESSION—contract 1927-1934—made everything worthless.  Wunder breached because no longer could make money.
Trial Court: $15,000=value of land if work had been done plus interest. DIMINUTION OF VALUE
Sup. Court: $60,000=what it would cost to do the work. COST OF PERFORMANCE/COMPLETION
	
DIMINUTION OF VALUE: 
Economic Argument
Peevyhouse v. Garland	COST OF COMPLETION (GENERAL RULE):
Moral Argument
Groves v. John Wunder	
Substitute court’s deal for parties’ deal	loss of flexibility/failure to accommodate unexpected outcomes	
Rewarding willful breach	Overcompensation (Groves)	
Market value rules, no subjective value	Encourages waste or inefficiency	
	Don’t want to reward breachersDeters efficient breach (snowblower—everyone wins)	
Invites disingenuousness	K about people choosing own goals	

Expectation and Mitigation	

Shirley Maclaine Parker v. 20th Century Fox p. 41 EFFICIENT BREACH
$750,000 for role in musical which Fox decided not to make, so offered replacement role in western that Maclaine refused.  She sued and won b/c such diff films. 
Market price for her services—how measure if used in same way, what impact is on career.
Need diff. rule for goods and services.
Duty to Mitigate damages, but must be equivalent—don’t have to take inferior role.
Simple rule for goods, subtle delicate rule for people—have to make reasonable effort to mitigate, but hard to tell what reasonable is.
HOLDING: Test is diff in kind or (and?) inferior? If yes, don’t have to take role
DISSENT: Did act reasonably?  Diff or inferior just one element, complex and fact dependent, should not dismiss on SJ

CA School Employee Association v. Personnel Commisioner (1973) p. 53
School bus driver fired w/o cause and driver didn’t try to mitigate damages because other school systems didn’t have merit based programs.  Court said this wasn’t significant enough of a difference.

Currieri v. City of Roseville (1975)p. 54
Court said police officer reinstated w/o back pay should have tried to mitigate damages, instead went back to school while another officer terminated at same time found a job with another force.

EXPECTATION: MAKING VICTIM WHOLE-- LOST PROFITS

Neri v. Retail Marine Corp. p. 55
P breaches contract to buy special boat when doesn’t have money to buy, so wants deposit back.  Someone else buys boat.  UCC 2-718: buyer’s breach, deposits.  Either $500 or 20% or damages.  Boat Co: entitled to damages at least as large as deposit.  Neri: can’t really fight incidental charges  UCC 2-706: when re-sell entitled to diff. b/w contract and resale prices plus incidentals.  2-708: (1) diff. b/w contract and mkt price; (2) if (1) is inadequate, then can consider profit, incl. reas. overhead.  Boat company worse off b.c didn’t get to sell two boats.  NY common law rule had been if resell, can only get diff b.w contract and mkt price, no incidentals.  Lost volume: lost a sale, or what if had been only boat of its type.

§2-703:  Seller’s Remedies in General:  Provides Sellers options—IMPORTANT!
(a)	withhold delivery of goods
(b)	stop delivery (2-705)
(c)	proceed under 2-704
(d)	resell and recover damages (2-706)
(e)	recover damages for non-acceptance (2-708) or in a proper case the price (2-709)
(f)	cancel

§2-706:  Seller’s Resale Including Contract for Resale:  This inapplicable b/c they are counting it as a new sale, not a resale.  (Thus go to 708)
(1) the seller may resell the goods concerned or the undelivered balance thereof.  Where the reseale is made in good faith and in a commercially reasonable manner the seller may recover the difference between the resale price and the contract price together with any incidental damages…but less expenses saved in consequence of the buyer’s breach.

§2-708:  Seller’s Damages for Non-acceptance or Repudiation: 
(1)	provides that “the measure of damages for non-acceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages…but less expenses”  
(2)	“If the measure of damages provided in …(1) is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the profit…which the seller would have made from full performance by the buyer…with…incidental damages…”
•	Lost Volume Seller—instead of selling “n” boats, they’ve only sold “n-1 boats and made less profit.  2-708(2)

§2-710:  Seller’s Incidental Damage

§2-711:   Buyers Remedies in General:  The two remedies look similar to sellers remedies.  This mentions specific performance. (not in §2-703)

§2-718:  Liquidation or Limitation of Damages; Deposits.  See (3)—Indicates buyer could get deposit back.  Under (2)(a), says buyer gets smaller of 20% or $500 back.  (revised code says get it all back.)

Expectation:  Consequential Damages:  Lose value of goods + ability to do some things

Hadley v. Baxendale p. 95 KNOW BY NAME
Hadley runs mill and shaft breaks.  Baxendale managing partner of business.  Hadley told new shaft would arrive next day, but took several days and mill out of business in meantime.  Co. didn’t know mill was shut down.  Pickford’s was the UPS in Britain at the time.  Breach: took too long.  How to measure damages?  Court used two pronged test for foreseeability: (1) fairly reasonable and arise naturally—kinds of damages anyone could have received as consequence of breach or (2) special features both parties contemplated of both parties as prob.  HOLDING: CONSEQUENTIAL DAMAGES  UCC 2-715 Rule of foreseeability: would a rpp have understood that these kinds of damages would likely flow from breach (a) by ordinary flow/order of things or (b) by specific knowledge of these parties about this situation?  Opposite torts eggshell skull rule, in contracts only get foreseeable damages.  
HOLDING: Ct. restricts expectation damages, b/c they were not foreseeable.

Expectation:  Lost Profits

Evergreen Amusement v. Milstead: (1955)(p. 99) Lost Profits General Rule 
No recovery for lost profits of business that hasn’t started yet.
If contractor did what promised, would have been in business, instead couldn’t open on time.  Court said too speculative to determine damages for new business, but at time of suit had started and clear what lost.  HOLDING: rental value of property, compensated for lost use of property.  
RULE: Established business can recover BUT new business can’t b/c too speculative. 

EXCEPTION: Chung: Chinese restaurant in mall and mall owner pulled out, but Chung got damages.  Reasons for exception in this case: More extreme loss than in Evergreen; clearer, more serious breach  

Expectation:  Specific Performance

Copylease v. Memorex p. 66
Copylease promised to buy x amount Mem prods and then be exclusive dealer of prods in Midwest, then could inflate prices with monopoly.  Then Mem decides deal not good enough.  Breach: Mem sells to others.  Copylease wants spec perfexclusive control back, injunctive relief to restore monopoly.  Monetary remedy—sales of lost revenues past and future plus profit margin bc prices down since no more monop.  Copy also concerned about other products sell in conjunction, but those damages are hard to measure.  Copylease trying to buy unique market position, no way to be fully compensated by money damages.

2 Hurdles to get to SPECIFIC PERFORMANCE: 
2-716: Buyer’s Right to Spec Perf.: unique goods or in other proper circs

(1) Only award if there is no adequate remedy at law (money remedy), i.e. can’t calculate damages that would put P in position had there been performancethere would be irrep harm that can’t be repaired by money damages, i.e. there is only one Mona Lisa
(2)	Administrability: So very difficult to measure 

Expectation:  Liquidated Damages

Lake River v. Carborundum p. 77 (Posner) NO Penalties—if ct. thinks it’s a penalty, won’t enforce (UCC 2-718)
Lake Riv providing distribution resources to Carb.  Require spec. quantity to make worth while, since had to buy special bagging machine.  Then, demand drops, steel imported in unprecedented amounts.  $533k if had shipped minimum, $292-$241, LR wants $241.  Would actually make them better off since don’t have to pay expenses, but Carb had already agreed to pay the $241.  Court draws distinction b/w penalties and liquidation.  Ill. law says can’t enforce a penalty.  Reasonable estimate?  Is there diff. in proof of loss?  IF yes, liquidation.  If unreas. large, then unenforceable as a penalty. Was Posner right that this was a penalty?  The way the K was written, liquidation will always be more than cost.  Posner says unjust enrichmentpenalty b/c unreasonably large damages that help one party more than hurt another.  2-718: valid liquidation?  Unclear if reas. est. of what damages should be because hard to test.

RELIANCE DAMAGES:

Dempsey supp. Materials
3 agreements: (1) boxing match- Wills (2) promote match (3) boxing match- Dempsey
Dempsey breached b/c wouldn’t box AfAm.  Club formed to put on match and they filed suit.  
Wills signed contract 1 week before Dempsey, so his $ guarantee didn’t depend on Dempsey’s signing.  Expectation: make whole, Reliance b/c can’t measure expectation.  Exp.=cost and profit, but here can’t determine profit (or so they say).  Hardly any recovery offered, major loss of $ and clear racism.  No expectation awarded, too speculative (like Evergreen).  So turned to reliance as 2nd choice.  Expectation =cost+profit; Reliance=cost.  To reward more money would turn into tortpunitive damages.  Tort=where would have been before K (reliance); k=where wd be after k completed (expectation).Clear racism because reliance expenses so small.
Evergreen: lost profits from first time venture too speculative, when try to get courts to figure it out, usually won’t.  
Hawkins: should H get back what paid Dr. or did he expect something else.  

Alpert & Son v. Armstrong p. 125
FACTS: Albert had K to sell Armstrong a machine for recycling rubber.  Machine was delivered late but in meantime synthetic rubber was invented causing the recycling industry to crash.  Had machine been delivered on time, Armstrong would have lost $, but they still try to recover reliance damages for $ they invested.
HOLDING: Ct. denies reliance damages, b/c you can’t award reliance damages ($ invested) when they’d be more than expectation damages (profits). 

Vickery v. Ritchie p. 697 IMPLIED IN LAW K
Architect fraudulently represented amount to each party
Added value=$23,200
What Cost to do=$33,721
HOLDING: $33k—the fair value of the labor and materials.  doesn’t matter parties didn’t agree, clearly work done with reasonable expectation would get paid.  Imposing Quasi K on parties.

Dunnebacke v. Pittman p. 703 QUASI K
Discussion but no real K.  Builder somewhat rashly went ahead and built wall and claimed was a quasi K, court said no.

RESTITUTION

2-601: can reject if goods fail to conform to K (perfect tender rule)
2-606(1)(a): reasonable opp to inspect
2-608: buyer can revoke acceptance if detect substantially impairs value.

Colonial Dodge v. Miller (1982) p. 138
Car missing spare tire and man wants $ back.  
HOLDING: Trial ct: Can’t get $ back b/c under UCC 2-608 doesn’t substantially impair value.  App. Ct: Can get $ back b/c there was no opportunity to inspect—UCC 2-608(1)(a).

Plante v. Jacobs (1960) p. 144
House built not to specifications (minor probs) can’t reject because economic waste.  Builder can’t unscramble the eggs.

Oliver v. Campbell (1954) p. 146
Breached K by firing atty.  Lawyer sued saying D. had to pay fair value of service—$5,000—rather than K price—$850. General rule if breach K can’t use K as defense, but here so close to K completion that held to K price ($850 agreed to rather than $5k of actual work done)

II. FOUNDATIONS OF THE CONTRACTUAL RELATIONSHIP

What is a K? (traditional view):
1.	Offer and Acceptance
2.	Consideration given for the promise
3.	SOMETIMES writing (statute of frauds)

Balfour v. Balfour (1919) p. 202
MUTUALITY FLIP—use it not to talk about things court doesn’t want to talk about.  Here, ct. doesn’t want to talk about whether or not she fulfilled her wifely duties. 
FACTS: H&W on vacation, w sick & remains, h promised to send $, instead rescinds and decides to separate.  W sues and says had oral K.
HOLDING: In trad. fam relationship, formal Ks don’t count—thus, not enforceable.

Miller v. Miller (1887) p. 207
Formal Agreement written and signed between husband and wife get money in return for keeping home.
HOLDING: Court still said no—wife just doing what she should be doing anyway—thus, no consideration.  

Marvin v. Marvin (1976) p. 215
Not married (orig. he married to someone else).  She said she gave up relationship for him.
Three theories for recovery:
1.	Oral K/Express K
2.	Implied K
3.	Quasi K
Lee’s Arg: void as contrary to popular notion.  Underlying relationship condemned by law, so shdn’t honor the K.  Hadn’t wanted to get married b.c of jt. Prop. qwnership, but did file taxes together.  Trial ct. $104,000 what wd have made for 2 yrs as singer b.c she gave up opp for career.  O
HOLDING: Ct. will enforce contract between adults who live together and have sexual relationship, as long as K does not include meretricious sex as consideration. 

Hewitt v. Hewitt (1979) p. 231
Together for 15 yrs. and wife helped build career (neither married to someone else).  
HOLDING: court won’t honor agreements that are supportive of such a relationship—shouldn’t be encouraged.  

CONSIDERATION 
Something that makes K not a gift.  Either a detriment to promisee (e.g. gives $) or benefit to promisor (e.g. gets services) if bargained for or benefit to third party.  Must flow in both directions.  

Hamer v. Sidway (1891) p. 239  V. IMPORTANT CASE
FACTS: Uncle promises nephew promise of $5K if doesn’t smoke or drink.  Hamer bought intangible right to $5,000.
HOLDING: K should be enforced b/c he had given up a legal right.  Giving up that right = consideration.  

Fischer v. Union Trust p. 67 Supp
Father deeds daughter to house for $1.  Court  refuses to view love and affection of daughter as consideration and treats $1 given for house as a joke, but clearly family meant it as a symbol.

Batsakis v. Demotsis (1949) p. 69
FACTS: WWII loan to woman in Greece.  Willing to make horrible deal b.c so needed $.  ($25 for $2k)
HOLDING: Described it as currency sale.  Mere inadequacy of consideration will not void a K.  Q is whether or not there was an exchange NOT whether there was an imbalance.  THIS IS THE BLACK LETTER LAW.

Kirksey v. Kirksey p. 256  Court said there wasn’t any consideration (even though she gave up homestead).  She gave up homestead because brother in law promised place to live.  Stayed for 2 yrs then kicked out.  Ct. said, not a K but a gift.

STATUTE OF FRAUDS deals with evidentiary concerns. UCC 2-201
1.	writing
2.	signed
3.	by party to be charged
4.	writing must be evidence of K

Most Ks not subject to SOF, Only Subject to SOF, if:
1.	conveying an interest in land REAL ESTATE.  Long term lease, future interest, poss. Exception—short term rental.
2.	K to last longer than one year.
3.	2-201: sales of goods for $500 or more (written in 40’s or 50’s now want to replace w/ $5k).

LOTS OF LOOPHOLES (anti-classical):
1.	part performance (made a lot of improvement to land, for example), e.g. Estate of Powell (p. 268) promised farm if worked on it until uncle’s death, husband super farmer.
2.	sufficient reliance, estopped Rest. Section 139
3.	Restitution—recovery w/o a K
4.	Confession in interrogatory

PROMISORY ESTOPPEL
4 elements:
1.	promise
2.	promisor reasonably expects reliance on the promise
3.	promisee actually relies
4.	enforcement necessary to avoid injustice

§90 (p. 260): one area where Restatements have largely made law.  Requires: (1) promise, (2) reasonable expectation of reliance, (3) reliance, and  (4) injustice otherwise
Second Restatement has lower threshold for how much reliance has to be expected and how much has to occur.  Remedy may be limited to as justice requires.  Some courts allow less than expectation damages recover reliance only.

TENSION BETWEEN CONSIDERATION AND RELIANCE.
Classical view: need consideration (Kirksey)
Anti-classical: reliance (Rickets)

Gifts to Churches.  Classic example of promissory estoppel: after pledges, church begins construction on new building. 

Rickets v. Scothorn p. 257 Reliance.  Grandfather promised money so didn’t have to work.  Executor didn’t want to pay.  
HOLDING: Having intentionally influenced the plaintiff to alter her position for the worse on the faith of the note being paid when due, it would be grossly inequitable to permit the maker, or his executor, to resist payment on the ground that the promise was given without consideration.  Ct., thus, enforces K using promissory estoppel (sec. 90 Restatement).

Boone v. Coe (1909) p. 272 Courts wouldn’t enforce remedy and said because statute of frauds.  Oral promise to have D’s crops to manage if moved to TX.  There was a promise, promisor reasonably expected reliance, there was reliance and injustice without enforcement (spent $1300 to get to TX).  Perhaps the most extreme example of the hard line on consideration.  Court saying because stopped them from performing the moment they arrived, he didn’t get anything for it, therefore there is no consideration.

Offer/Acceptance—Objective Standard 
Objective theory of K says must look at external factors, what parties led each other to believe, not what’s lurking in one’s head, must look at words used to determine if they would appeal to a rpp in P’s situation.  Most courts prefer the objective approach b/c evidentiary problems with meeting of the minds.  Must look at words w/in context—parties’ history of dealings, standard ways of doing things in business, etc...

Embry v. Hargadine, McKittrick (1907) p. 626
Said would quit, needed time to find new job.  Had series of year long Ks reviewed each Dec and in late Dec. company not in good shape, boss wants him to stay without promising a new K.  Said go back to work and don’t worry.  Classical objective approach to mutual assent-- would rpp have understood to be a K?  Trial court did subjective analysis-- was it intended to be a K?  Appeals Court used objective and held for Embry.

Where is the offer and the acceptance?
Hills v. Kessler p. 815
The combination of best attention to this order and silenceacceptance.  Too late to order suits by the time knew Kessler couldn’t deliver.

Hobbs v. Massasoit p. 73 PM
Holmes: P had delivered numerous eel skins to D in past.  This time delivered, skins destroyed, then D says never had K, doesn’t want to pay.  Holmes says past relations establish standing offer acceptance would be when Hobbs dropped them off (as opposed to dropping off the skins was the offer, conduct which imports acceptance…is acceptance).

Klimek v. Perisich p. 709  Dispute over construction of hotel.  Pretty typical case (says Enrich)-- notion that agreement to agree is not a K.  Choice between intent to create a K and reasonable remedy.
Meeting of the minds.  When difficult for court to determine remedy, more reluctant to call it a K.  Courts don’t like specific performance because calls for close scrutiny of intense complex relationship—materials, # of rooms.  HOLDING: No K, because not a certain agreement and too hard to determine remedy.

Bethlehem Steel Corp. v. Litton Industries p. 713
Bethlehem agreed to purchase one ship.  Letter from Litton to Beth. Offering to sell 1-5 ships at any time in the next 5 years.  Accept your offer for us to be able to buy 1-5 ships.  Option K—commits one party while leaving the other party free.  Late 1973 B ordered ships.  Suing for breach.  Court treats like Klimek again, but really isn’t.  CODE: 2-204=formation in general—Ks exist when intent to be bound, 300s=ways to fill in gaps, 2-305=procedures to set out price, 1-203=obligation of good faith.
HOLDING: don’t have to perform, there was no enforceable K, only preliminary agreement to agree(but so much detail, seems courts concerned just not acting in good faith but won't use that as rationale).

MISTAKE AND MISUNDERSTANDING—bar to meeting of the minds

1.	Raffles: If both parties equally misunderstand, no K
2.	WPC: Comparatively more neg party responsible

Raffles v. Wichelhaus (1864) p. 641 KNOW NAME
K: accept cotton “to arrive ex-Peerless from Bombay.”  2 Peerless ships: Oct. and Dec.  P thought Oct, D thought Dec.  No evidence P said anything when Oct Peerless arrived.
HOLDING:No meeting of the mindsno K.  
RULE: When there is a mutual mistake that goes to the essence of the agreement/makes material diff, then mutual mistake makes K void.  
(Holmes: Problem is not that they meant diff things, problem is they said diff things.  NONSENSE.)

WPC Enterprises v. United States (1964) p. 646 Comparatively More Negligent Party Responsible
WPC won gov’t bid to manufacture generator sets.  WPC suing gov’t b/c govt didn’t originally specify that components were to be manufactured by certain manufacterers, agreed to use alternate suppliers  only if gov’t paid add’l costs. Gov’t said they made it clear wanted certain manufacturers. 
HOLDING: Both parties reasonable, but comparatively more negligent party responsible. Original defect in drafting and gov’t had burden of clearing up ambiguities b/c they wrote the contract. 

Mailbox Rule: acceptances are good when sent/transmitted

Dick v. U.S. (1949) p. 655 REVERSE MAILBOX RULE
Sent acceptance with mistake in it, realized mistake and sent telegram pointing out mistake, which got there b/4 the acceptance.  HOLDING: Ct. said that telegram prevented contract from forming.  This counter-mailbox rule is followed in federal jurisdiction but few, if any, others.

Baird v. Gimbel (1933)  p. 75 supp.  HAND
Subcontractor (Gimble) calculated square footage incorrectly and sent it to Baird, the contractor, sent in bid to government according to mistake.  Gimble called to tell Baird b/4 bid was accepted and became contract, but Baird had already submitted bid to government.  HOLDING:  Can’t hold subcontractor to mistaken bid b/c they corrected b/4 it became a contract.  §90 does not apply because there was no offer and acceptance, just a bid.

Janke v. Vulcan (1974) p. 662 REPLACES HAND VIEW THAT AN OFFER IS NOT A PROMISE (Gimbel) MISTAKE IN JUDGMENT
Mistaken bid (type of pipe) reasonably relied upon can be enforced by Promissory Estoppel even though there’s no offer/acceptance b/c contractor reasonably relied on the promise—that is, the bid.  Not all courts apply PE this liberally, many say Stat of Frauds trumps PE.

Marana Unified School Dist NO. 6 v. Aetna Casualty and Surety Co. (1985)(p. 673)   clerical mistake
D submits bid to build school playground, makes math error of $37K. Sent letter revoking one hour after submitting bid. 
Issue:  Can bidder for public K refuse to enter into K b/c of mistake w/o forfeiting bid bond?
Unilateral mistake, unlike mutual mistake, doesn’t diffuse K.   If technical error and public bidding process, mistake means can rescind w/o penalty. Usually not bound w/ honest mistakes so long as not a gross mistakecourts don’t like to punish innocent mistakes when not a big injury to the other party.
Court’s criteria to avoid forfeiture:
1.	Mistake must be of such consequence to make enforcement unconscionable.  
2.	Mistake must relate to a material feature of the contract.
3.	Whether mistake constituted culpable negligence or violation of positive legal duty.
4.	Whether the appellee suffers no serious prejudice except loss of bargain.
Holding:  Court held for Aetna, said conditions satisfied.  

STS Transport v. Volvo White (1985)(p. 689)  Mistake leading to rescission of K  (Not typical case)
Facts:  P made K w/D re: buying/trading 8 trucks.  D miscalculated deal, P discovered calculations mistake and refused to honor the contract.  D turned in trucks. 
Three conditions for contract to be rescinded:
1.	Mistake must relate to a material feature of the contract.
2.	It must have occurred despite the exercise of reasonable care.
3.	The other party must be placed in the position it was in before the contract was made.
Holding:  K rescinded even though unilateral mistake.  Mistake re: price was material.  Mistake latent so can rescind.  If obvious mistake, couldn’t rescind because burden on other party to notice it.

Vickery v. Ritchie (1909) p. 697  Mistake  leading to restitutionQuantum Meruit
Architect played intermediary role b/w owner (D) and contractor (P), telling owner price would be $23K and contractor price would be $34K.  Presented each with different Ks b/c the value of the bath house was more expensive than the amount it would increase value of the land. 
HOLDING:  Court said no express K b/c no meeting of the minds.  Right of recovery should be based on quantum meruit based on the fair market value of work which was done with reasonable expectation of payment.  Can award restitution based on:  1) increment in value (Restatement §155) or 2) cost of getting there (Peevyhouse problem).

Dunnebacke v. Pittman (1934) p. 703  Mistake leading to restitutionary considerations
Worker went ahead somewhat rashly since because never expressly told to do work.
HOLDING:  No meeting of the minds, assumes landowner’s story is correct so no K.  No restitutionary recovery b/c she did not want wall there in the first place and showed no evidence of liking the wall there.   No unjust enrichment b/c no meeting of the minds.

UNILATERAL V. BILATERAL Ks:

Davis v. Jacoby (1934) p. 79 PM and 276 book
Letter sent from uncle asking them to come take care of aunt until she dies for estate $ in return.  Neice comes from Canada to take care of her aunt and uncle.  Uncle commits suicide and aunt dies soon after.  Uncle’s estate to wife and wife’s to nephews.  There was no K.  The promise was to care for them and compensation in return.  Ask for specific perf (but that’s not really right).  They want the estate.  The offer: sending letter to Davis asking for care.  Davis claim bilateral K so acceptance = return promise to perform.  Nephews argued unilateral—no contract until performance is complete.  
RULE: Unilateral K = No binding contract until performance is complete. Bilateral K = Binding contract once promise has been made.  To determine whether a K is bilateral or unilateral, must determine how a reasonable person would interpret the offer.  Default position—bilateral K (if can’t determine what it is) because this offers some protection to both parties.
HOLDING: Bilateral K made when Mr. Davis sent return letter saying they were coming. Ct. said that performance would not be complete until aunt dies, and then it would be impossible for her to leave the $. 
 
Ks FOR PERSONAL SERVICES
TWO APPROACHES: 
Brackenbury (K for personal services upheld) 
Fitzpatrick (No K for pers. Svs). 

Fitzpatrick v. Michael (1939) p. 296  V. INFLUENTIAL CASE
Wife died and H asked her nurse to remain as nurse and companion.  Not much $, but free room and board and would get house and car.  Then he fired her and she asked for restitution.  Specific performance claim is  most plausible argument and best chance.  
HOLDING: She can’t be forced to work, so he shouldn’t be forced to pay for her services (mutuality flip).  Unique services like what a housewife would do.  Looking for doctrinal category and none fits.  P not entitled to any relief in equity because K for personal services.  

Brackenbury v. Hodgkin p. 302
Mom asked daughter and son in law to move to ME—trade help for home.  Then mom deeds house to son.
HOLDING: Court calls this a unilateral K, but acts as though it is bilateral.  If unilateral, no breach, but court says there was a K.  Mom’s offer was in writing and Ps accepted by moving, so Ps entitled to equitable interest in land.  Ps can get equity remedy rather than $ because full equity jurisdiction.  Seems court can’t make up mind because partial performance, can’t withdraw offer until given reasonable opportunity to perform.  Once start then rely on the offer can’t revoke offer under §45 of  Restatement.  So court says son must deed back to mom and she must hold and Ps must continue to perform and uphold their end of the deal.
  
K LAW IN THE FRANCHISE RELATIONSHIP

Hoffman v. Red Owl (1965) p. 320 Use of promissory estoppel (§90 Rest.) in franchise case 
D (store) told P (franchisee) would give $18k, encouraged P to quit job and open store.  NO K  
ISSUE: Should courts recognize causes of action based on §90?
HOLDING: No K—neither party reasonably thought they had arrived at an agreement.  But, turned to promissory estoppel to award relief.  
CONDITIONS NECESSARY FOR PROMISSORY ESTOPPEL (§90):
(1) Was there a promise? (Yes)
(2) should reasonably expect to induce action?  (Yes, D made promises and encouraged prelim steps)
(3) Did promise result in action taken by promisee?  (Yes)
(4) Injustice? (Yes)

Collins Drugs v. Walgreens (1982) p. 337 Court regulating (Termination of franchise agreement)
P uses D’s trademark in exchange for output of goods.  Walgreens terminates franchise agreements for economic reasons.  
ISSUE: Can dealer under WI law cancel all dealerships for econ reasons?
HOLDING: Must have “good cause” to terminate which D’s termination lacked.  Got damages but not injunctive relief.

K LAW IN EMPLOYMENT RELATIONSHIPS

Forrer v. Sears (1967) p. 365 Employment Ks almost always seen as at-will
P worked at Sears for 18 yrs, back p/t and offered permanent employment as mgr of hardware dept, then fired 4 mos later.  K? Yes, offer = perm FT job w. spec. salary.  Consid=$8/hr Reliance=Sold farm.  Expectation: salary/job for rest of life.  .
HOLDING: “Permanent” still means at will of employer (basic presumption of employment).  At will—what’s fair for the employee is fair for the employer.  Plus, liquidity in market.  Formal equality v. diff. from fundamental inequality.  EXCEPTION: when additional consideration has been given, no longer at will, must have reason for discharge.  Can P say selling farm was additional consid?  Court says it wasn’t part of the bargain, though it was the only way to employ him.  Consideration has to be bargained for as part of an exchange and a benefit or a detriment.  

McIntosh v. Murphy (1970) p. 358 FACILITATION
P moved from CA to HI to work at Chevy dealership under one yr. contract, but fired 2.5 mos later with no cause.  D says no K b/c it began two days b/4 he started when he accepted and, thus, as a 1 year plus 2 day K, had to be in writing under statute of frauds.  
HOLDING: P’s reliance was such that injustice could only be avoided by enforcement of K§139 Restatement: promissory estoppel for Statute of Frauds Cases (offspring of §90).  

McDonald v. Mobil p. (1991) 85 Supp.  At-will Employment Modified by Employee Handbook
P challenged dismissal, claiming employment was modified by handbook which laid out a progressive discipline schedule.  
ISSUE: Were the promises in employee handbook sufficient to create a K?
HOLDING: Q of material fact regarding whether handbook and Ds course of dealing modified the K.  Court said disclaimer in handbook not conspicuous, so P wins.
Enrich says: Mobil trying to avoid union activity by using handbook with collective bargaining type rights, so court (unusual) holds to high burden.  Essentially turn handbook into something never intended to be.

Tameny v. Atlantic Richfield Co. p. 373
Salesperson with big commission, co. thought too much, so fired before deal closed.
HOLDING: used power to terminate in way that violates basic fairness duty—violates pub pol  .

Foley v. Interactive Data Corp. (1988) p. 393
Reported to boss that man hired to be his supervisor under investigation by FBI, then was transferred from LA to Waltham, MA.  
HOLDING: (1) employee had no cause of action for tortious discharge in contravention of public policy; (2) employee's cause of action for breach of an implied-in-fact K promise to discharge him only for good cause was not barred by the statute of frauds; and (3) there is no tort cause of action for breach of the implied covenant of good faith and fair dealing in an employment contract to employees who alleged they have been discharged in violation of the covenant.

Monge v. Beebe Rubber Co. (1974) p. 383
P fired for not being “nice” to supervisor.
Issue: Can P recover for wrongful discharge?
HOLDING: Although no existing sex. harassment laws at the time, court holds there was breach of the promise of good faith and fair dealing implied in all Ks.

SALES CONTRACTS AND WARRANTIES
When and how are warranties typically created?

2-313(1)(c): express warranties
2-316: No warranty
2-719: (2-718): Limiting remedies for breach of warranty.
TWO STEPS FOR WARRANTY ANALYSIS:
(1)	Was warranty created?
2-313, 2-314
(2)	Was it limited? 
2-316, 2-719, 2-718

Glyptal v. Engelhard p. 93 PM  314, 315, 316 close reading
First batch of pigment had wrong viscocity, second batch faded.  Claims: breach of express and implied warranties.  
HOLDING: Reversed SJ: Glyptal had sufficient evidence to show buyer relied on sellers' expertise and product should have conformed to sample.
Different warranties on different theories.  Applying v. spec lang of code in pretty rigorous way.  Express: sample and reliance on it; statements
Implied arise based on ordinary purpose or expertise

2-316: can disclaim implied warranties, but tricky to disclaim express warranties.  
What warranties are created? 314, 315, 316—if disclaimed effectively, don’t need to figure out:
What limitations are there on remedies? 2-718, 719

Hunt v. Perkins (1967) p. 559
Boat’s motor produced a lot of smoke, making it unbearable to use.  Implied warranty of merchantability claim under UCC 2-314.  Clause on back of K said no warranty of merchantability.
HOLDING: Limitation not valid b/c not conspicuous as required by UCC 2-316 and limitation made warranty fail in its essential purpose. 

III. LAW AND SOCIAL ORDER THE PARADE OF HORRIBLES: Ks AGAINST PUBLIC POLICY 

ILLEGAL Ks

Karpinski v. Collins (1967) p. 438 
CA set price for milk, too much milk.  Created K with kickbacks for “feeding charges.”  Then had a loan and to repay loan would reduce kickback, P eventually stopped paying kickback and said K void because illegal and sued for restitution for kickback and loan money.  D said, but they were in it together.
HOLDING: K is null and void, so restitution would put P where would have been had there never been an illegal K.  Usually when both parties acting illegally courts abstain, but if one party not equally at fault or sufficiently compelling reason, then court might actrestitution. 
IN PARI DELICTO: If in it together, equally at fault.

Carroll v. Beardon (1963) p. 429  Exception: if illegality in wings, K upheld.
Sale of property, but was really sale of prostitution business, stops making mortgage payments.  In the absence of active participation, the defense of illegality is ord not available to the party who has breached where the fault and illegality are unilateral on her side of the transaction.  The bare knowledge of purpose for which prop sold is not enough to raise the valid defense of illegality.  Essential K is for property not the illegal business, so upheld.  Is the illegality part of K or in the wings?

Gates v. Rivers Construction (1973) p. 434
Canadian working in AK, $ into acct until resident, refuse to give him money once gets visa.  
K not nec. legal—illegal to enter US, so D said K not valid.
HOLDING: statute to protect american workers, already had worked so doesn’t aid statute.  K enfored, (unjust enrichment) and gets money.  NOT IN PARI DELICTO—here really not equally at fault.  Contrast with Karpinski.

Ks AGAINST PUBLIC POLICY

Fullerton v. Torberg (1955) p. 441
No Compete Provision in K if he ceased to be employed with P: wouldn’t work for competitor w/in 15 miles for 10 years.  D quit, set up own business, took employees w/him.
P seeking what remedy?:  negative injunction to prevent D from taking his clients (recall Fitzpatrick); also monetary damages b/c financial impact on P’s business.
HOLDING:  10 years too long.  Court says 3 years reasonable b/c that is how long it took D to build up his business.  Court is essentially rewriting the contract.
Rule:  Covenant not to compete won’t be enforced if it is more than what is necessary to protect the economic interests of the employer.

Blue Pencil:  look in the contract itself and throw out provisions that are invalid—then the court looks to see what is left.  (Here, not really blue pencil because didn’t just take out terms, put new ones in).

SOCIAL CONTROL, CONTRACT AND CHOICE

Capacity to Contract

Infancy: K is voidable at minor’s election (if enter into K as a minor, can repudiate even when become an adult).

What if kid pretends to be oldertort solution: misrepresentation.

Halbman v. Lemke (1980) p. 457
Kid bought car, it blew a rod, took to mechanic who fixed it, kid refused to pay for repairs and then kid allowed to void contract and kid gets his money back even though car trashed and worthless.

Duress

Requirements for Duress:  
(1) Threat of unlawful (“wrongful” in most contemporary jurisdictions) action that
(2) overcomes the will.  

§175: When Duress by Threat Makes a K Voidable
(1) If a party’s manifestation of assent is induced by an improper threat by the other party that leaves the no reasonable alternative, the contract is voidable by the victim.

Mitchell v. CC Sanitation (1968) p. 459
Mitchell signed release to cap amt of injuries from car accident only because boss threatened with his job.  Co. couldn’t get $ for trashed truck until he signed.  HOLDING: Was duress.  Where there is such an inequality in the terms, sacrifice of benefits and rights on the part of the employer, inadequacy of consideration, and advantage taken of the weaker party, we cannot conclude that no fact situation of duress or coercion exists.  Ct. requires wrongful rather than unlawful action.

Selmer v. Blakeslee (1983) p. 481 POSNER
Tort action but based on alleged oral promise to pay extra because of delay in delivering concrete.
HOLDING: Don’t want to undermine the ability of parties to settle their disputes.  Will only allow duress in EXTREME circs.  General tendency is to let agreements stand.
Contrasts to Alaska Packers: modifications during the course of K—short season for salmon, at sea, workers demand higher wages and boss agrees, but when back don’t pay extra because: (1) consideration: workers weren’t agreeing to do anything more than original promise to do so no consideration not enforceable  (IF NO ADDITIONAL CONSIDERATION, CHANGE TO K WON’T BE ENFORCED) and (2) Duress: threat of unlawful conduct overcame will of boss.

Wurtz v. Fleischmann (1979) p. 472
Hotel on water trade for McDonalds and warehouse.  Delays in closing and W knew F would lose $150,000 to lender if deal didn’t go through, so said had to pay addition $50,000 to him.
DISTRICT COURT: Economic Duress does equal duress.  Because didn’t have any other remedy, it was duress
SUPREME COURT: “Threats to do what the threatening person has a legal right to do, do not constitute duress.”     HARSH TRADITIONAL STAND, Restatement softer.
Cites Williston: merely driving a hard bargain or taking advantage of another’s financial difficulty is not duress.

Two Approaches:
(1) Tort style reasonableness—Duty to reasonably use bargaining power and to provide reasonable choices.  (esp. if superior bargaining position)  Court said unreasonable in Wurtz.
(1)	Standard contract treatise.  Just b/c you take advantage of someone doesn’t necessarily make it duress. 
	
UNDUE INFLUENCE
Odorizzi v. Bloomfield School District (1966)(p. 487)  Undue Influence
Odorizzi was a teacher w/ K thru next year (not an at-will employee).  Arrested for homosexual activity, principal and superintendant came to house just after he got out of jail and hadn’t slept.  They said, resign or we will commence termination.  He resigns but then charges are dropped.  Claims undue influence, fraud, duress, mistakecourt picks undue influence.

UNDUE INFLUENCE:
(1)	vulnerability or lessened capacity—no sleep, charges
(2)	Excessive pressure or OVERPERSUASION—serious threat to long term employment

Diff b/w Undue Influence and Duress: Undue Influence sensitive to vulnerability of party and power relationship b/w parties

Odorizzi Factors (commonly found around undue influence):
1.	Discussion of K at inappropriate time
2.	In unusual place
3.	Demand K be made at once
4.	Emphasize consequences if delayed
5.	Multiple persuaders
6.	Absence of advisors to party
7.	Say no time to get financial advisors or an atty.

MISREPRESENTATION 
(fraud is parallel tort action)

4 Elements:
(1)	intentional misrepresentation 
(2)	of a material fact 
(3)	upon which the party reasonably relies 
(4)	causing injury

Options for Dealing with Misrepresentation: 
(1) Agreement obtained by means of fraud voidable at election of victim—entitled to full restitutionary remedies
(2) It is also a tort and allows for whole range of tort remedies
(3)	Treat fraudulent statement as an element of the contract and allow for recovery for any breach of it.  

Obde v. Schlemeyer (1960) p. 494
Termites—didn’t tell Obdes about latent defect.  Breach of duty to tell?
HOLDING: Duty to inform buyer of any dangerous conditions.  “[I]f either party to a contract or sale conceals or suppresses a material fact about which he is in good faith bound to disclose then his silence is fraudulent.” (took rule from LL/T law)

Dee-Witt, Sperau v. Ford Motor Company p. 111 supplement NOT MAJORITY LAW
Taking fraud doctrine and stretching it in creative new way.
2 Af Am purchasers of Ford Dealership during minority franchise owner push.  Ford failed to share info showing that minority franchises failed at a high rate.
HOLDING: Fraud: Ford had a duty to give info.  A stretch because sophisticated businessmen, so courts usually treat as on equal footing with companies and do you really have an obligation to tell every single fact.  

Vokes v. Arthur Murray (1968) p. 515 LOOK AT NOTES FOR FULL DISCUSSION
Fraudulent statement about woman’s abilities as a dancer, but fraudulent is really the most correct label, not nec. correct more about the relationship—she was clearly reliant on their guidance and advice.  
HOLDING: was fraud, though Arthur Murray argued was opinion, not statement of fact.

ADHESION CONTRACT (take it or leave it)

McCutcheon v. David Macbrayne, Ltd. (1964) p. 526
K to ship car, on day sent, office worker didn’t have him sign no liability/no risk forms, but had shipped with them several times before and always signed forms.  Really a technicality that didn’t sign it.
HOLDING: Would have been bound if signed, but lucky day.  Court will act as though read and agreed to everything.  Court holding company to same arbitrary standard consumers always held to.

Pro-CD v. Zeidenberg (1996) p. 123 supp. Easterbrook, 7th Circuit
CD wrapper with terms and conditions inside, then to start up must agree to terms.
2 prices—commercial and individual use.  Zeidenberg buys at individual price and then uses for commercial purposes.  
ISSUE: When was offer and acceptance?
HOLDING: (1) offered and bought at store and license is modification
(2) acceptance after read license at home and agree to keep or return Also, he bought two    additional upgrades, so weak claim that didn’t understand terms.
Decision allows companies to hold customers to contracts they have no notice of until after purchase.

DIFFERENT APPROACHES TO LIMIT BASIC LIABILITY TO READ
(1)	ticket cases—courts split about whether terms are binding, token or real K
(2)	ok to put terms in writing, but will be held to higher std, i.e. conspicuousness, or clear statements for layperson
(3)	will construe terms literally, high standard of precision, will be construed to protect consumer against drafter
(4)	particularly unfair, unreasonable, onerousvoid against public policy

Restatement §211(3) if one party knows other party wouldn’t sign if knew about some aspect, that term is not valid—reasonable expectation of parties.  IF specific discussion, then on notice.

C&J Fertilizer v. Allied Mutual Insurance Co. (1975) p. 540
Insurance company defined burglary as requiring evidence on outside of building of break-in.  
HOLDING: Insurance company liable, but court pushes §211 of Restatement beyond where most courts will go.  Most courts use it only when terms totally at odds with rest of deal and bargaining that occurred.  Restatement says will ignore where so shocking wouldn’t have signed, here unfair, but not nec so shocking wouldn’t have signed.

UNCONSIONABILITY
§2-302:  Unconscionable Contract or Clause

Williams v. Walker-Thomas Furniture (1965) p. 582
Need substantive and procedural—two prong test.  
Substantive Aspect of K:  Term of agmt so one sided that no reasonable party would be expected to have agreed to it.
Procedural Aspect of K:  Something seriously wrong in way K arrived at by parties (going into homes)
Unconscionability Two-prong test:
1.	Absence of meaningful choice:  disparity in bargaining power—lack of education, etc.
2.	Shocks the conscience.
	
Patterson v. Walker-Thomas Furniture (1971) p. 589
Tried to use price alone (substantive unconscionability) and court rejected.  The problem with Williams rule is that it requires a lot of proof, need lawyer, very burdensome to prove procedural too.

Frosti-fresh v. Reynesco (1966) p. 594
Charged $1100 for fridge.  
Trial Court—only have to pay what the co. paid for the fridge ($348) 
Appeals—$348 plus reasonable profit and service charge
2-302 terms are very permissive about what can do.  If unconscionable, strike unconsc. clause or refuse to enforce K or limit clause so no longer unconscionable.

IV. PROBLEMS OF K FORMATION, INTERPRETATION, & PERFORMANCE

FLEXIBLE AGREEMENTS

Blanket Order: will notify each month how much will need and you must supply (purchaser controls quantity)
Standing Offer: seller controls quantity
Requirements K: you will sell and we will buy.  It is a K in ways tho operates like a blanket order
Output K: purchaser agrees to buy however much seller produces, i.e. apples from an orchard.

Empire Gas Company v. American Bakeries (1988) p. 753  Posner
Propane v. gas.  Never bought conversion units, because wouldn’t have saved money, but didn’t articulate that.  Requirements K so falls under 2-306(1) did they vary unreasonably from stated estimate?  
HOLDING: If American Bakeries can articulate a legit business reason, then they win, but they didn’t so couldn’t say failing to order was in good faith or reasonable.  BIZARRE RESULT.  
NOTE: Posner arguing for more rational reading of 2-306—this is a requirements K and so the point is to allow for real variation in quantity requested so long as acting in good faith.

2-204(3): even if one or more terms left open, K for sale doesn’t fail for indefiniteness, if parties intend to make K and reas certain basis for giving appropriate remedy.
2-305: open price term how to deal w/ contract for sale when price is not settled
2-306(1) requirements k: if have term that measures quantity by output of seller or requirements of buyer, such actual output as may occur in good faith, except can’t be unreasonably disproportionate.  Comments say if range named, clear intent to set outer boundaries.
(2) exclusive dealings: obligation by seller to use best efforts to supply goods and best efforts to promote their sale.

BATTLE OF THE FORMS 

§2-207:    Additional Terms in Acceptance or Confirmation—First Shot Rule (OPPOSITE OF COMMON LAW LAST SHOT RULE)
(1)	When is a K formed?  A definite and seasonable expression of acceptance or a written confirmation which is sent w/in a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.
(2)	What do you do w/the add’l terms? The additional terms are to be construed as proposals for addition to the contract.  Between merchants such terms become part of the contract unless:
(a)	the offer expressly limits acceptance to the terms of the offer;
(b)	they materially alter it; or
(c)	notification of objection to them has already been given or is given within a reasonable time after notice of them is received.
(3)	When no K is formed.  Conduct by both parties which recognizes the existence of a K is sufficient to establish a K for sale although the writings of the parties do not otherwise establish a K.  In such case the terms of the particular K consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act.
 Note:  See definition of “merchant” in §1-204

Idaho Power v. Westinghouse (1979) p. 131 SM
Kind of situation in which 2-719 means to be permissive.  
K for voltage regulator for power plant-probably could cause fire.
Traditional problem of offer and acceptance—here sent back purchase order which says nothing about damages but says supercedes all previous agreements.  W ships power regulator which Idaho receives and install sand then there is a fire.  Westinghouse says will pay damages-- will pay to fix regulator, but Idaho wants $ to re-build power plant.
HOLDING: 2 large corps with relatively equal bargaining power.  Westinghouse wins because disclaimer allowed, FIRST SHOT RULE (UCC Rule, as opposed to common law Last Shot Rule)—when accepted regulator accepted Westinghouse’s terms.
Contrast to Glyptal: at same time sent goods, sent form, but form arrived after paint, so terms did not apply.  If had arrived at same time, then would have been a 2-207 question.
	
	Steiner v. Mobil (1977) p. 787 Example of using 2-207 as flexible tool—here no battle of forms
P gas station operator sues D who offered to help P buy property w/ gas discount for 10 yrs.  Got form letter saying discount terminable at any time, he said it had to be irrevocable and D’s employee told him it would be, P submits proposal w/change to central office, they approve (maybe didn’t notice Steiner’s request), then sent check to S but forms had old revocability term. Mobil then reduced discount, says legal b/c of revocability provision.
Issue:  Are the revocability provisions imposed on D binding?
HOLDING:  Steiner wins.  There has been offer and acceptanceK, but what are the terms? Parties are merchants, so no first shot rule … but turn to 2-207(2):
(d)	his offer expressly limits acceptance to the terms of the offer YES
(e)	terms materially alter it YES
(f)	notification of objection to them has already been given or is given within a reasonable time after notice of them is received YES
Thus, no modification.

Klocek v. Gateway (2000) p. 137 supp
Conditions said had five days to return, but inside box.  Otherwise agreed to arbitration in Chicago
2-204: K can be made in any manner sufficient to show agreement-- reasonable expectation of parties
2-207: additional terms have to be really agreed to by non-merchant
HOLDING: Klocek didn’t agree to additional terms, so didn’t apply
DETERMINING OFFER AND ACCEPTANCE.  Opposite holding of Pro-CD:
(1)	catalog purchase—buyer makes offer v. in store purchase, Pro-CD makes offer
(2)	Gateway terms inside, Pro-CD warning outside to agree to terms inside, must sign off to use software
(3)	Merchant v. private consumer.

Itoh & Co. v. Jordan International Co. (1977)(p. 798)
Contract for steel coils.  Offeree sent acceptance letter saying that acceptance was conditional on offeree’s assent to an arbitration term and said that they should notify if it is not acceptable.   
HOLDING: Ct. refused to treat silence as assent.  Thus, b/c Itoh didn’t assent to this change, there was no offer/acceptance for it.  But b/c both sides acted as though there was a contract—delivered goods, accepted goods, etc—it is treated like one (2-207(3)) but without the arbitration clause.  
If they had just put the term in w/out conditional language, the term may have become part of the contract b/c both are merchants and term arguably doesn’t materially alter the agreement.    

IV. PROBLEMS OF K FORMATION, INTERPRETATION AND PERFORMANCE

PAROL EVIDENCE RULE
(1)	Writing (that is final)
(2)	Evidence of an agreement that predates writing (PER has nothing to do with agreements made after the writing)

§2-202:  Final Written Expression:  Parol or Extrinsic Evidence
Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented
(a)	by course of dealing or usage of trade (§1-205) or by course of performance (2-208); and
(b)	by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.  

Two Approaches to the Parol Evidence Rule:  

1.  Willistonian Approach: Look at 4 corners of document.  Merger clause?  Drafted to be comprehensive?  Drafted to be final?
Document treated as the end of the story.  Look at writing to determine if complete integration.
Give writings their full authority as definitive statements by allowing parties to rely on them .  Look to the document to determine if the writing intended by the parties as a complete integration.  If it looks like a complete integration, will not need to delve further to find intent.  If writing looks like it intended to be contract, will give it substantial authority.  Four corners approach.  

2. Corbinian Approach:  Won’t know if complete unless understand negotiations
(UCC intended to get to fairly Corbinian rule, though doesn’t mean all judges read it that way)
Look at parties intent, look at writing in the context of the larger agreement.
PER about figuring out what the parties intended.  If they intended the document as a complete and final agreement then they wanted to exclude other prior agreements.  Can’t tell what people meant by solely looking at the writing, must ask parties.  Court should be able to look at other evidence to determine what was meant by the agreement.  Cautious about determining that the document is the end of the story.

YES

INTEGRATION?

NO, then  P. Evid. Rule doesn’t apply

Partial: Binks—can’t be contradicted by parol evidence.
But can bring in evidence of additional terms.

Complete (comprehensive and final).  Mitchell v. Lath—bar against all additional terms.  Evid. For interpretation is okay

Exceptions to P. Evid. Rule:
(1)	Usage of Trade (Nana)
(2)	Conditional Delivery (Merritt)
(3)	Fraud (Anderson)
(4)	Reformation (Johnson)

TWO CASES WITH DIFFERENT APPROACHES TO DIRECT CONFLICT BETWEEN ORAL AND WRITTEN AGREEMENTS:

Binks v. National Presto (1983) p. 861 Willistonian approach.
Question about why product doesn’t work—improper use by Presto or defect by Binks?  2-202: terms set as final agreement may not be contradicted by other evidence.  (1) Was this intended to be a final statement (integration)?  (2) Is Presto seeking to contradict a term?  
HOLDING: Integration and prior evidence contradicts.  Can’t bring in the evidence.

MCC v. D’Agostino (1998) p. 141 Supp.  UCC v. CISG No PER under CISG
CISG has no PER—allow in evidence of K written on the back of standardized form.  Clearly parties did not intend the standardized terms to apply, but why would a sophisticated businessman have made such a mistake as sign a form that says (in Italian) I agree to all these terms?
HOLDING: Parol evidence admissible so not bound to all terms.

Mitchell v. Lath (1928) p. 868
Two agreements: one for purchase of property (written) and another for removal of ice house (oral).  Ice house not removed.  
The Oral Promise is Separate and Enforceable if:
(1)	If it is collateral in nature,
(2)	Doesn’t contradict writing’s terms, and
(3)	Isn’t a term parties ordinarily would put in writing?
HOLDING: Fails #3—long list of terms in K suggests could have added ice house, also maybe not collateral (no additional consideration), but sep enough that court doesn’t officially say fails.   Also, may be a contradiction.
DISSENT: Need parol evidence to decide.
UCC Comments to §2-202: If additional terms are such that they would certainly have been included, evidence must be kept from the trier of fact.
ENRICH SAYS CLOSE CALL ABOUT WHO’S RIGHT.

Masterson v. Sine (1968) p. 874  TRAYNOR’S CORBIN APPROACH—very permissive re: parol evid.
Keep the property in the family.  Written K does not specify if property is assignable.  When M goes into bankruptcy wants to claim not an asset that can be taken from him (M has first right of repurchase if S sells).  Presumption in CA, though, is that option to purchase can be sold to a third party.  Risk of fraud, because if not in bankruptcy could be very lucrative to sell.  
FAILS MITCHELL V. LATH TEST:
(1)	Collateral? No
(2)	Contradict? Maybe
(3)	Expected to be embodied in K? Probably
FAILS INTEGRATION TEST:
(1)	Integration? Yes  
(2)	Complete?  Probably, but disputable
(3)	If partial, does it contradict?  Maybe
Traynor says have to look at whole picture all the facts and circumstance.  These show that the parties all say the same thing and therefore this does not represent the complete agreement.  Therefore can allow parol evidence unless contradictory.  Traynor also says that the implicit contradiction (an option that cannot be alienated) is not enough of a contradiction and therefore admissible.

Enrico Farms v. HJ Heinz, Palladino v. Contadina (1980) p. 887
Oral assurances not admitted b/c directly contradictory to the K.
CA Tomato Growers negotiate agreements (so impact on more than parties involved here).  Output K where D agreeing to buy all of Ps harvest.  Term in K says D can decrease quotas when experience a glut. P is worried about the term, D says b/c P a good customer, does not apply to him. Then, quota imposed.  P wants oral assurances to be used as parol evidence.  
HOLDING:  PE cannot be admitted if directly contradictory to written K.
Note:  Masterson different b/c there was nothing contradictory, whereas here there was.  

EXCEPTION TO PER: USAGE OF TRADE
Nanakuli Paving and Rock Co. v. Shell Oil Co. (1982) p. 892
Long term (7 yr) K under which Nan. purchases its requirements of asphalt from Shell.  K said: posted price at the time of delivery.  Shell’s standard language that used for wide range of asphalt Ks.  In HI since basically just selling to Nanakuli, didn’t really post a price.  In the time of oil embargo, Shell announces virtually a doubling of price of asphalt.  N didn’t think it applied to them.  Price protection—when prices go up, get to use up old price until orders filled.  Twice before, under this agreement and since it was the custom for other asphalt co. that worked with Chevron, Nan thought still under price protection.  The other major component in asphalt bus—stone producers had standard practice of same kind of price protection.   
NANAKULI’S ARGS:
1.	2.02 specifically introduces the right of a party to explain interpretation based on USAGE OF TRADE.  COURSE OF DEALINGS: relationship between buyer and seller prior to this particular K.  COURSE OF PERFORMANCE: relationship between these parties during the course of performing this particular K.  Evidence of any of those is always highly relevant in interpreting what parties meant by agreement.  (POINT OF READING THIS CASE FOR PAROL EVIDENCE IS THIS ARGUMENT REGARDING INTERPRETATION EXCEPTION)
2.	Second not relating to PER: K essentially with an open price term—at a price to be determined by Shell from time to time.  2-305 sets the rules, including that must be set in good faith, one reasonable standard here is price protection.
SHELL’S RESPONSE:
1.	WAIVER: Course of performance: in two prior cases, they were really waiving their right, not really performing according to a price protection part of K.  Course of Perf must be repeatedly and consistently.  Court ultimately says, no, this is really evidence of performing K.
2.	WASN’T EVIDENCE OF USAGE OF TRADE: Relevant trade is asphalt, not asphalt paving industry.  Too little evidence to prove relevant usage of trade.  Court says, no can look broadly, but have to ask what would businesspeople reasonably think is usage of trade.
3.	USING PAROL EVIDENCE RULE TO CONTRADICT, NOT TO EXPLAIN:EXPRESS PROVISION IN K THAT PRICE =TIME OF DELIVERY: Using Parol Evidence to contradict, not to explain.  Like Masterson: saying that  just introducing another boundary about how option works, not contradicting, just adjusting.  People at Shell HQ have no idea about special HI circs.

EXCEPTION: CONDITIONAL DELIVERY 
Merrit v. Walter Pocock Associated Brokers, Inc (p. 887): group of people who own the building and one goes to broker re: selling building.  Says only will be effective when all my partners have signed as well.  Don’t want to be bound unless all are in.  Nonetheless, broker doesn’t get other signatures, but goes ahead and acts according to agreement.  Court puts under the CONDITIONAL DELIVERY EXCEPTION.  Evidence isn't being brought in to vary or alter terms, it is being brought in to show there wasn’t an agreement in the first place.   

EXCEPTION TO PER: FRAUD
Anderson v. Tristate Home Improvement Co. p. 912 aluminum siding case
Co. prohibits the making of any promises unless they are inserted in writing in this agreement before signing and nothing inserted.  That clause is a wishy washy example of merger clause (language in a writing whose purpose and effect is to say the writing contains the full agreement of the parties) Salesman said guaranteed for 30 years.  Then when try to sue on oral promises, Tristate said this agreement was complete, nothing you can do to supplement or change agreement.  BUT, fraud is an exception to the parol evidence rule.  There was no fraud (knowingly false statements).  President hoped everything he was saying was true.  Irresponsible—grossly negligent, though not fraud.  Most courts regard that as close enough to fraud to count as fraud.  When there’s fraud, we generally let evidence in.  (Remember Sperau v. Ford)  What does a business do to get the other side to say not relying on any prior assurances?   It usually matters whether or not the parties are on equal footing.  
COMMON USES OF FRAUD:
1.	Want to prove fraud usually to say there was a tort committed.  Want damages.  Getting to fraud as a tort isn’t really an exception to the PER.  Of course you can bring in parol evidence to prove fraud. 
2.	Another use of fraud is to justify rescission.  We only got into this mess because we were misled.  Bringing evidence in to show that we didn’t knowingly assent to the agreement that we entered into.  Not bringing it in to supplement, explain…fits within same logic as conditional delivery exception.  
3.	Third, treat fraudulent assurances as if real, and treat as warranties.

EXCEPTION TO PER: REFORMATION
Johnson v. Green Bay Packers (1956) p. 920
Negotiate terms of agreement, look at form and Johnson says can’t agree to certain terms—broad power to terminate.  Coach says we’ll fix it.  Comes back and term still in there.  Trying to use prior negotiations as evidence to say terms are wrong.  Invokes the Reformation.  When by clerical error, writing fails to reflect what parties really agreed, can go to judge acting within her equitable jurisdiction and ask to change to reflect real agreement of the parties.  (Never get to a jury.)  
HOLDING: not clerical mistake, intentional, noticed before signed, told and then acquiesced.  
Typically these will be clearly clerical errors—mis-typed numbers with clear prior evidence that had always been talking about different terms.  Trying to change more complex terms much harder to show.

Escape Hatches from the Parol Evidence Rule (PER):
Binks: parol negotiations take place before K
Palladino—talks about how certain provisions would or wouldn’t apply
Parties could say signed K in reliance on prior conversation.
Can promisory estoppel be used to overcome parol evid rule when one has reasonably relied on pre-agreement negotiations in signing agreement?  Answer is unclear, but it is an argument that can be used.

WHAT HAPPENS AFTER PARTIES HAVE A K?

1.	Adjust to changed circs—HOW TO FIX THINGS AS YOU GO?
2.	At what point do changed circs provide a reason for bailing out and when they do, how deal with fall out of parties abandoning K duties—WHAT HAPPENS WHEN CAN’T FIX AS YOU GO?

HOW FIX AS GO ALONG: DIFF B/W MODIFICATION AND WAIVER

Universal Builders v. Moon Motor Lodge (1968) p. 931 
Universal has K to do major renovation on Motor Lodge Blgd.  2 provisions in agreement: (1) subsequent changes have to be in writing and approved/signed by authorized agent and (2) specified completion date and damages, but could agree to change, though must be requested in writing.
WHAT ACTUALLY HAPPENED: Repeatedly Moon reps requested add. work done and on many (all?) occasions Universal said ok but will up the cost and Moon said go ahead.  Nothing in writing.  Project not completed by deadline (maybe because of those changes).  

3 Kinds of approaches/strategies Univ could take:
(1)	Modification: a) agreement (offer and acceptance) b) consideration 2-209(1) don’t need consid when within UCC, but outside usually do, tho courts might be creative about it. and c) writing (if Statute of Frauds applies)
(Alaska Packers—fresh consideration to modify)
No formal offer and acceptance? Maybe implied, but thin arg b/c total silence
Consideration? Benefit of changes and also easier to make changes on the spot—more efficient service than going through normal process
Statute of Frauds?  Doesn’t apply—no interest in land, no more than a year (In 2-209(2)—hatch about when writings are required—at least between merchants, if have agreed certain provisions can only be modified by writing, then that holds) change order have to be in writing, never said changes to this provision don’t have to be in writing (doesn’t really apply here, but could be arg in sim case)
NO MODIFICATION
(2)	Waiver—won’t insist on one of our rights/forgo one of our rights—here right that change order must be written
How different from modification?
a) waivers done unilaterally—so don’t need offer and acceptance 
b) waiver never requires consideration, each party can choose to do at any time 
c) often done by silence/implication, when the failure to assert the right at that time would reasonably lead other party to believe that choosing to waive
d) the agreement is actually changed with a modification—rights and duties are altered and agreement is a diff agreement.  With a modification, can’t go back later and say oh yeah, we do require changes to be in writing, but with a waiver, can go back and unilaterally reinstate requirement.  Under 2-209(5), waivers can be terminated with regard to future parts of k to extent that doesn’t prejudice other party TERMINABLE v. FINAL CHANGE IN K
(3)	Espoppel—would be fraudulent to say go ahead and then insist be in writing.  Other party reas acts in reliance on it, then other party estopped from assertion (we’ll pay for extra work) 

Waived by implication because otherwise Moon’s agent acting in fraudulent way and getting Universal to do work for free.  V. Circular argument. 
What about extensions in time be in writing—why doesn’t Universal get out of that one as well?  Never discussed.  Strange opinion because clearly Moon rep knew about delay and could have used same argument to say this didn’t have to be in writing too.  
HOLDING: waived right to not pay for changes in K, but didn’t waive right to reduce payment based on delay (hard to understand how court could say didn’t waive both).

Clark v. West (1908) p. 937  LIMITATION ON WAIVER
DEAL: $6/pg for book, $2 as an advance and $4 at completion on condition that remain sober throughout time of writing.
WHAT HAPPENED: drank some, but West agents assured him wouldn’t be penalized and told to keep working.  BUT THEN, said wouldn’t pay the rest of the $4.
ISSUE: Did they WAIVE their right to insist on his sobriety?  (Not a Q of modification because no consideration)
WEST’S ARG: There are certain things that simply cannot be waived, including the primary consideration for the agreement.  
HOLDING: Wasn’t primary consideration for K, writing the book was.  West wasn’t paying for sobriety, paying $6 for manuscript, but if don’t stay sober, we can penalize you.  Sobriety was a secondary piece to it.  Goes back to trial to see if really was waived.  

WHEN K ARRIVED AT AND THEN SOMETHING CHANGES THAT REALLY DISRUPTS?
3 Kinds of Args:
(1)	Impossibility (old school) or impracticabality
(2)	Frustration of Purpose (Mass takes it seriously)
(3)	Mutual Mistake (not Raffles which ship is which, but is the stone really a diamond)
There are doctrinal differences, but all about saying something fundamental difference in reality than what we contemplated when entered into K and has such a radical effect court says can’t enforce.  

Taylor v. Caldwell (1863) p. 1084
Amusement park and concert operators (Caldwell) and Taylor want to use property for concert.  Taylor collects admission at the gate and Caldwell gets 100 pounds.  Caldwell provides the cheap stuff and Taylor provides the headline entertainers (complicated transaction).  Only one implicit reference in K re music hall use at night.  Seems like Caldwell only to make grounds and facility available.
WHAT HAPPENS?  Fire and concert hall burns down.
WHO SUES?  Caldwell says deal is off, Taylor says ok but you owe us damages.  Ask for expectation—lost profit would have made on 4 galas.  Have track record can show how much $ made in past. 
K has failed through no one’s fault.
Usually, would require insurance against fire loss to cover out of pocket, though not lost profits.
Parties neglected to specifically allocate losses or anticipate risks in agreement.
DOCTRINE OF IMPOSSIBILITY: When there is a failure of implied (assumed/nec) condition that was assumed as nec to perf of K and fails thru no one’s fault all parties excused from obligations under K.  Almost like illegality.
Was it really impossible?  Could Caldwell have rebuilt in time?  Probably, so emphasis isn’t really on it being literally impossible, but basic assumption has failed so burden of performing has radically changed.

FRUSTRATION OF FUNDAMENTAL PURPOSE OF K
When because of a failure of basic presupposition, doesn’t become impossible, just becomes pointless (singer could climb over embers and sing in burnt building, but why?)

MUTUAL MISTAKE
Fire burned building just as signing K.  Both parties excused.

IMPRACTICABILITY (§2-616)
Lukaszewski (1983) p. 1092
Breaches K because of hypertension.  When offered better job, should have been efficient breach—offer to pay school damages, since she was going to get $3k more and not have to commute.  Instead, went to a doctor to get justification for medical reason to depart.  Her theory is impossibility based on health concerns, couldn’t do it.  Brought it on herself and foreseeable, so she can’t claim impossibility.  That’s not a failure of presupposition of K.  If treat impossibility too loosely, will allow people out of Ks when other reason really want out.  THIS IS WHY COURTS HAVE RIGID VIEW OF IMPOSS.

Transatlantic Financing Corporation v. US (1966) p. 1118
K: ship from TX to Iran by usual and customary routes.  Because of invasion of Egypt and blocking of Suez Canal, must take long route (3,000 extra miles).  Trans. Says impossible to perform.  Quantum meruit—did something for benefit of other party.  Court says even if it was a good arg that closing of canal made this impossible, shouldn’t entitle you to recovery.  If k is impossible, no right to recover under K at all.  Should have said this is the wrong amount and put the whole K into dispute.  Unsympathetic court, but inconsistent pursuit.  As the shipping company, you are the ones responsible for knowing the risks in volatile areas.  
Factors routinely considered to discern if there is impracticability or frustration (2-616):
(1)	unexpected contingency
(2)	no allocation of risk
(3)	renders performance commercially impracticable
Court says none of these apply.    

Eastern Airlines Inc. v. McDonnell Douglas Corp. (1976) p. 1123
Delay because of Vietnam War defense needs.  Impracticability Defense.
2-615: contingency unexpected by either party rendering completion commercially impracticable.  
Would 2-615 justify delay in delivery in this case?
Not unexpected—Vietnam build up clear and operating with substantial risk.  If parties foresee problem, then can’t use impracticability as excuse, instead must bargain and allocate risk.  
Excusable Delay Clause.  There are often boilerplate provisions in Ks that courts typically construe as adopting 2-615, but not here—aware of Vietnam War and this clause was intentionally addressing that, and nothing about unforeseen circs.  This is interpreting parties’ agreement, not a 2-615 Q.   

The Impracticability Question: Is this a risk the parties anticipated and allocated?