Professional Documents
Culture Documents
adequate remedy.
How to we cross the line to having no liability in law to some?
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1.
2.
Bilateral Ks: two promisors and two promises. The K is formed when promises are made.
Unilateral K: Only one promisor and one promise. The K is not formed and the offer has not
been accepted until the offeree completes the performance.
Express K: explicitly manifested in a written or oral agreement
Implied K:
a. Implied in Fact: K inferred from conduct or words. This is a real K based on behavior.
b. Implied in Law: based on unjust enrichment, no promise was ever made or intended.
c. Quantum Meriut: equitable doctrine based on an implied promise that allows recovery for labor
and materials to prevent unjust enrichment.
Elements of an unjust enrichment claim:
a. conferred benefit on the
b. has knowledge of the benefit
c. accepts or retains the benefit
d. it would be inequitable for the to retain the benefit w/o paying fair value
3.
4.
5.
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Offer
Elements of a legally sufficient offer:
1. Intent to be legally bound: Not concerned with subjective intents of the parties, just the objective view of
the reasonable person.
2. Definiteness of terms
a. Circumstances determine sufficient definiteness
b. General: the subject matter, the price, and the quantity involved must be clear.
i. If one or more terms are open, the K does not fail for indefiniteness if the parties have
intended to make a K and there is a RSBLY certain basis for giving an appropriate
remedy.
ii. Curing the omission and UCC Gap Fillers, which state the general principles of
formation where terms are missing.
Duration of Offers:
1. Offers are open for a RSBL amount of time (depends on the circumstances) when expiration date not
specified (and offer is not withdrawn).
a. K expires when Statute of Limitations runs (but not stated in the K and not communicated to the
other party)? NO
i. Can argue no RSBL person would think the offer extended past the statute
ii. Can argue that a RSBL layperson would not know when the statute runs, but what about
the laypersons attorney?
2. Correspondence by mail:
a. Offers made when letter is received, time limits (if any) begin when letter received.
b. Acceptance is effective when sent.
3. Offer is rejected offer extinguishes upon rejection, cannot have a change of heart.
Counter Offers:
1. Common Law Mirror Image Rule: acceptance must exactly match the terms of the offer. If not, the
acceptance is a Counter Offer, which can be accepted by the original offeror and there is no K formed
unless the original offeror accepts.
2. Post Purchase Terms UCC 2-207: Additional terms in Acceptance or Confirmation. Can form K
without a mirror image. Additional terms following acceptance of an offer become part of the K unless.
B/t merchants, such terms become part of the K unless...
a. Ex.
b. The purchaser MUST be aware of the license.
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c.
d.
K is formed when software is purchased but it is conditional on the acceptance of the license
agreement, which occurs when the purchaser does not return the product.
UCC 2-206: a buyer has accepted goods when, after an opportunity to inspect, he fails to make
an effective rejection under 2-206(1).
Objective Theory
1.
2.
3.
4.
The existence of a contract is determined by the legal significance of the external acts of a party to a
purported agreement, rather than by the actual intent of the parties.
Law imputes to person an intent corresponding to the reasonable meanings of his words and actsit is
immaterial what might be the real but unexpressed state of his mind.
Must be a reasonable basis on which to grant a remedy.
CISG note.
6.
Acceptance
Analyzing the Acceptance:
1. Manner of acceptance:
a. UCC 2-206: unless otherwise unambiguously indicated by language or circumstances, an
offer invites acceptance by any RSBL manner.
i. Offeror waives condition of acceptance and other party agrees K can be formed some
other way.
b. Common Law: Acceptance can only be made in the manner of the offer
c. Restatement: if a party solicits and receives an order clearly specifying that there is no K until
assent by some officer or representative of the solicitor, the solicitation is NOT an offer, it is
a request for an offer. The order is the offer, NOT an acceptance. The offer can be accepted by a
person who has apparent authority or express authority to bind the offeree.
i. Cashing a down payment check, does this constitute acceptance? Mere acceptance of the
check does not constitute acceptance of the offer.
ii. Conduct of the parties, does it indicate acceptance?
d. Shipment of Non-Conforming Goods: not an acceptance if the seller notifies the buyer that the
shipment is offered only as an accommodation to the buyer.
e. Silence as Acceptance
ii. General Rule: Silence is not an acceptance
iii. Exceptions:
1. Offeree takes benefits of offered services with RSBL opportunity to reject them
and knows they were offered with the expectation of compensation.
2. Offeror has given the offeree reason to understand that silence may = acceptance
and the offeree intends to accept the offer.
3. b/c of previous dealings, it is RSBL that the offeree should notify the offeror if
he does not intend to accept.
2. Counteroffer: Does the acceptance deviate from the offer? If it does deviate, then it is considered a
counteroffer unless
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a.
b.
3.
4.
It explicitly says that the offer is accepted regardless of the acceptance of the additional terms or
The transaction involves a contract for the sale of goods. The response may be an acceptance even
though it differs from the offer under UCC 2-207. Additional terms following acceptance of an
offer become part of the K unless. B/t merchants, such terms become part of the K unless...
Time of acceptance.
a. Offeror specifies time limit for acceptance or
b. if not specified, acceptance must be made within a reasonable time.
Has the offer been revoked? See irrevocable offers.
Possibilities:
1. Completed Sales Agreement: Fixed K, deal closed.
2. Agreements to Negotiate:
a. Some courts will not enforce
b. Some courts will enforce a K to negotiate in good faith. BUT, what is good faith, how to
calculate damages for breach? The K to negotiate in good faith does not guarantee that a K will be
formed. Courts will enforce if they want to set a good faith standard for negotiations.
3. Agreements to Agree: we have a K but we agree to produce formal documentation, we still have a K if no
documentation. Need very detailed statements.
a. Depends on:
i. Conduct of the parties
ii. Performance
b. Ex. Dynegy and Enron, agreement, $, method of sale
i. Dynegys behavior indicates that there was a K, they made public announcements, etc.
ii. Enron would argue reliance, they stopped negotiations with other companies, they
obtained loans based on the agreement.
4. Agreements based on Conditions: the final K is conditional to agreeing on warranties, etc. If no
agreement NO K.
5. Negotiations only, no enforceable K.
a. Implied-in-Fact: Real K based on behavior, mutual assent is inferred from conduct.
b. Implied-in-Law: Based on unjust enrichment. Fictional implication of a promise to pay for
benefits or services rendered even though no promise was ever made or intended. The remedy of
unjust enrichment is unavailable when an express K governs the dispute (restitution remedy).
c. Quantum Meruit: equitable doctrine, based on an implied promise, allows recovery for labor
and materials without a K so that one party will not be unjustly enriched.
d. Elements of an Unjust Enrichment:
i. The conferred a benefit on the .
ii. The has knowledge of the benefit.
iii. The has accepted or retained the benefit conferred.
iv. It would be inequitable for the to retain the benefit without paying fair value.
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Validation:
1.
2.
3.
2.
c.
If Contract
1. offer/acceptance
2. consideration
No Contract
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1.
2.
2.
Remedies
The law protects:
1. Expectation Interests: places the injured party in the position they would be in had the K been performed.
The damages are measured by the value (of performance) to the , i.e. what would the party have gotten if
the other party performed?
a. In terrorem clauses unenforceable
b. Cover Remedy- the buyer can cover through any RSBL substitute purchase. The buyer must act
in good faith, the cover does not have to be the most RSBL cover.
2. Reliance Interests: actual loss suffered
3. Restitution Interests: unjust enrichment
4. Consequential Damages- foreseeable losses resulting from breach that could not be prevented by cover.
5. Limitations on Recovery:
a. NO punitive damages for breach of K
i. Exception: when there is proof of an independent, willful tort, beyond mere breach of
contractual duty. Intentional breach is NOT a tort.
ii. Rationale: We want efficient breach, which occurs when occurs when the breaching
party will still profit after compensating the other party for its expectation interest.
1. Parties have the option to breach a K and pay damages if it is more efficient to
do so.
2. Result: increased production of goods and services at a lower cost to society.
3. Specific performance would preclude efficient breach.
b. Hadley v. Baxendale:
i. General Damages: arise naturally from the breach can always recover.
ii. Special: not within common experience, resulting from the buyers particular
circumstances. Can only be recovered if at the time the K was made, the seller has
reason to foresee that the damages were the probable result of the breach, special
circumstances must be communicated to the .
c. Restatement 2nd:
i. Damages are not recoverable if the breaching party did not have reason to foresee
damages as a probable result of the breach when the K was made.
ii. Loss may be foreseeable as a probable result of a breach b/c it flows from the breach
1. in the ordinary course of events, or
2. as a result of special circumstances, beyond the ordinary course of events, that
the party in breach has reason to know.
iii. A court may limit damages for foreseeable loss as justice requires to avoid
disproportionate compensation.
d. When parties enter into a K providing the time for performance to be set at a later date, the
knowledge of the consequences of failure to perform is imputed to the defaulting party at the time
the parties agree on the date of performance.
e. New Business Rule:
i. Foreseeability: breaching party is liable for damages, including lost profits, which may
RSBLy been within the contemplation of the parties at the time the K was made as a
probable result of breach.
ii. Lost profits must be established with RSBL certainty.
1. yardstick method: compares profits of similar businesses
2. Comparison with profit history of s successor
3. Comparison of similar businesses owned by the
4. Use of economic and financial data and expert testimony
f. Employment and Mitigation of Damages:
i. General Rule: An employer is entitled to a reduction in the amount of the recoverable
wage loss of a wrongfully discharged employee if the evidence establishes that the
employee made no RSBL effort to seek or accept similar employment.
1. Need not accept employment of a different or inferior kind, or in a different
locality.
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Miscellaneous
Duty to read: Common law -- if consumer has read the contract, he has agreed to all terms.
If consumer has signed contract, he has read it he agrees to all terms (barring reasonable
expectations, unconscionability etc.).
Which law applies ?
UCC or Common law ?
Look to predominant purpose of contract:
If goods dominate, then UCC.
If services/information, then Common law.
If computer, then UCITA.
Offer
Objective Offer: Offer valid only if reasonable person would think so.
Doctor cannot offer warranty to cure patient:
Not a true offer but physician cant terrify patient.
Definiteness: Offer must be clear, definite and explicit and leave nothing open for negotiation. The
following must be closed terms:
Subject matter: What is being bought.
Quantity: How many.
Price: must be certain or ascertainable.
Time: When (not always necessary).
If vague:
Cant Objectively manifest intent.
Difficult to find a remedy if breach.
Offeror is master of the offer.
Can specify manner of acceptance.
Can specify time that offer is open.
UCC & common law -- If no specified time, offer is good for a reasonable time (which
depends on the circumstances).
Offer expires once rejected cannot accept after rejecting.
Option contract is irrevocable promisee pays (consideration) for irrevocability.
Firm/irrevocable Offer: If no time stated, valid for reasonable time not exceeding 3 months UCC.
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Acceptance
Contract can be conditioned on event which depends on the will of a party. (even though the party has the
choice whether to do the condition or not).
Input/Output Contracts: UCC:
Good faith contracts to buy/supply as much as can produce/sell.
Good faith that neither side will buy/supply amount unreasonably disproportionate to estimate
e.g. course of dealings.
UCC: Good faith means honesty in fact and the observance of reasonable commercial standards
of fair dealing.
Consideration is offer to buy/supply for offer to produce/sell.
Common law: seller assumes the risk of all variations.
Employer-Employee Contracts:
Mutual consideration: If both parties have equal power to terminate, then theres consideration.
At-Will contract: Common law if no explicit contract, either party may terminate without
consequence.
These are unilateral contracts coz accepted by performance.
Promise lacks consideration if theres a pre-existing duty to perform.
Only if promise changes/adds to duty (even if change is miniscule), is there consideration.
Unenforceable Elements
Penalty: There can be no penalty for breach of contract. If there is, term not enforceable.
Double Recovery: A party cannot recover twice for the same wrong imposes a penalty for breach.
Cannot enforce contract/promise if economically better to breach. Cannot hold promisor in terrorem.
Modification
UCC Modification:
doesnt require consideration to be binding.
Modification must be made in good faith.
Modification only enforceable if 4 things (garbage collection case):
1. Parties agree voluntarily.
2. Modification made before completion of performance by either party.
3. Modification made because of unanticipated circumstances.
4. Modification is fair and equitable.
Modification is a substitute contract for original, and discharges original contract.
If modification occurs after performance, called an accord and satisfaction original contract is postponed
until accord is satisfied.
Mistake
Mutual mistake: Theres no contract if:
1. Both parties (mutual) make mistake of fact.
2. Mistake is of material fact i.e. basis of contract.
3. Because of mistake, each party does what neither intended
Unilateral mistake i.e. only one party makes mistake, doesnt avoid contract.
Unless other party caused mistake or had reason to know of mistake. (Then theres no contract).
Party assumes risk of mistake if:
1. Contract allocates risk to him.
2. He knows he only has partial knowledge, but treats it as sufficient.
3. Court finds it reasonable.
4. Relies unreasonably on certain representations cannot recover for want of due diligence (dredge
digger didnt do).
Mistake in offer:
If offer raises presumption of error, offeree has duty to inquire.
Offeree cannot snap up offer thats too good to be true not enforceable i.e. offer not valid.
Non-disclosure by offeror may be misrepresentation.
Only care about mistake in subject matter not price (uncut diamond stone).
Which Terms Apply
Battle of Forms:
Last Shot Rule: Common law
Buyer sends offer to buy.
Seller sends acceptance (different)
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UCC -- Course of performance and dealings can always be included (even if integrated).
Except if they contradict an integrated term.
Parol evidence rule doesnt apply:
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Unconscionability:
UCC Court may refuse to enforce contract that was unconscionable at time of making.
Contract is unconscionable if extreme according to business practices of the time and
place.
To be unconscionable, must have 2 things:
1. Procedural Unconscionability: Bargaining didnt proceed as it should e.g.
o Unfair surprise.
o Fine print clauses.
o Mistakes.
o Ignorance of important facts (if understood, wouldnt have consented).
o age, education, intelligence, business knowledge and experience, bargaining
power, who drafted contract, whether terms explained to weaker party,
whether alterations to terms were possible, whether alternative sources to
get goods.
2. Substantive Unconscionability: Unjust or one-sided contract considers fairness of
terms.
Contract of adhesion: When gross inequality of bargaining power between parties.
Typically standard-form contracts by corporations on take-it-or-leave-it basis, with no
opportunity to change contracts terms.
Adhesion contracts are enforceable unless unconscionable. For unconscionability, must
consider:
1. Whether weak party was on notice of harsh term.
2. Whether strong party got agreement by fraud or overreaching.
3. Whether weak party had alternatives.
For unconscionability, one party doesnt have meaningful choice i.e. terms unreasonably
favorable to other party.
Meaningful Choice: Must consider:
1. Surrounding circumstances.
2. Inequality of bargaining power.
3. How contract created:
1. Partys level of sophistication.
2. Opportunity to understand the terms Did party read it?
3. Were terms hidden e.g. in fine print ?
4. Did party have alternatives?
5. Was behavior consistent with trade practice ?
6. Is there a valid business explanation?
Reasonable Expectations Doctrine:
Reasonable expectations of buyers apply to insurance contracts even though contract may negate
expectations.
If insurer creates reasonable expectation of coverage, but contract doesnt cover, expectation
prevails over contract language.
Insurance contracts are construed against insurer.
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Material Breach: Breach so important that brings transaction to an end. Factors to consider:
Detriment of breach to injured party.
Extent to which injured party can be compensated.
Extent of forfeiture to breaching party from rescission.
Probability that breaching party will cure.
Extent to which breaching party acted in good faith.
UCC makes contracts hard to unwind should proceed, not be litigated.
Common law: If other partys breach is material, you can stop performing.
If not material breach, you can sue, but must continue performing.
Conditions:
Condition is event, not certain to occur, which must occur to activate performance.
2 types:
Waiver:
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If duty to perform is dependent on other partys performance, can waive dependence i.e. can
make duty independent.
Can retract waiver until other has materially relied unless waiver is binding promise.
If duty depends on material performance, waiver of dependence requires new contract.
Equitable Estoppel: Partys conduct induces other party to believe incorrect facts and to act on
them to his detriment.
To claim equitable estoppel, must show:
1. Exercised due diligence to know truth AND
2. Didnt know truth AND
3. Lacked reasonable means of knowing truth.
Impossibility
Non-performance not breach if made impractical by event which parties assumed wouldnt
happen.
If performance is impossible, performance is excused.
If performance depends on existence of a thing which perishes (through no fault of the
parties), then performance is excused (fire burnt hall).
UCC: Performance need not be impossible need only be impractical to be excused.
Impractical means unreasonable cost.
3 requirements for impossibility:
1. Something unexpected must occur.
2. Risk of unexpected occurrence not allocated in contract.
3. Performance commercially impracticable because of occurrence.
If performance impossible, but reasonable substitute available, must accept substitute (ship round
Africa).
Tender:
If no express order of performance, parties must perform simultaneously.
For a party to claim breach, it must first have tendered its own performance (otherwise the other
guy hasnt breached).
Whichever partys performance takes longer, is due first, unless contract says otherwise.
Doctrine of Substantial Performance: If party performs essential part of contract in good faith
but performance not perfect, performance considered complete.
Perfect tender: Common law & UCC Goods must comply exactly or seller is at fault.
Before acceptance, buyer can reject goods for any non-conformity -- UCC.
But seller has unconditional right to cure until performance due.
After acceptance, buyer may reject only if non-conformity material -- UCC.
Common law: Can only reject for material non-conformity.
To determine if non-conformity is material consider:
1. Express term, saying its a non-conformity.
2. Trade usage.
If seller doesnt cure in reasonable time, can cancel contract.
Accord:
Contract where obligee promises to accept substituted performance.
If obligor breaches accord, can enforce either original duty or accord duty.
Provided obligors breach is material.
Repudiation
Repudiation = Breach
Doctrine of Anticipatory Repudiation: requires clear manifestation of intent not to perform on
due date.
Retraction of Anticipatory Repudiation:
UCC: Party can retract anticipatory repudiation until performance is due. Cannot retract
if:
1. Other party cancelled OR
2. Other party materially relied OR
3. Other party indicated that he considers repudiation final.
A partys expectation of receiving performance may not be impaired -- UCC.
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If reasonable grounds for insecurity, can demand assurance that other will perform and
if reasonable, can suspend performance not already due until assurance received.
Must provide assurance in reasonable time within 30 days.
Assumption of Risk:
If goods damaged (without fault of parties) before risk of loss passes to buyer:
1. If total loss, contract cancelled.
2. If partial loss, buyer chooses:
a) Nullify contract.
b) Accept goods with right against seller.
If seller need not deliver goods to buyer at particular destination, risk of loss passes to buyer
when carrier receives goods.
Remedies
Cost/Reliance:
loss for relying on promise i.e. actual loss.
Return party to previous position i.e. past.
Restitution:
Return/restore to rightful owner; prevent unjust enrichment.
Return party to previous position i.e. past.
Can receive restitution if cover for breach in any manner reasonable at time, as long as in good
faith (regardless of hindsight).
Recovery only denied if cover unreasonable or in bad faith.
Expectation:
what guy expects; seeks to make the party whole.
Put party in position it would have been in if performance had occurred i.e. future.
Damages not measured according to cost to measured by value to .
Damages must be foreseeable at time of contracting can only recover for whats expected.
Punitive damages: Not recoverable for breach cannot impose penalty for breach.
Consequential Damages: (UCC) Loss reasonably considered as consequence for breach at time of
contract.
Includes loss which cannot be prevented by cover or otherwise.
What losses are recoverable for breach (Common law)?
1. Losses caused by breach.
2. Foreseeable losses (at time of contract).
To be foreseeable, must be:
1. Ordinary: happen in ordinary course.
2. Special/Specific losses: foreseeable if party had reason to know.
If time of performance to be decided later, damages for breach foreseeable at time when performance date
is decided are recoverable.
Buyers damages for breach with cover (UCC):
Contract price +
Incidental damages (e.g. fly somewhere to buy) +
Consequential damages
Amount made from cover.
Buyers damages for breach -- NO cover (UCC):
Market price -- Contract price +
Incidental damages +
Consequential damages.
If buyer accepts goods, owes full price but:
1. Can get damages for non-conformity +
2. Incidental + consequential.
Sellers damages for breach with cover if cover in good faith and reasonable (UCC):
1. Contract price Resale price +
2. Incidental damages.
Sellers damages for breach NO cover (UCC):
A. Either:
1. Contract price Market price +
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2. Incidental damages.
B. OR if above is inadequate:
1. Profit +
2. Incidental Damages.
To recover for lost profits, must be proved with reasonable certainty.
To estimate profits, can consider:
1. Compare to businesses of similar size, nature & location.
2. Profit history.
3. Compare to persons similar businesses.
4. Economic & financial data & expert testimony.
Seller cannot get consequential damages.
Can disclaim consequential damages (if not unconscionable).
Avoidable consequences: Cannot recover for foreseeable harm that can be avoided without undue risk,
expense or humiliation.
Lost Volume Seller: If buyer breaches and seller makes independent sale, can recover for full breach if
unlimited capacity. Must show:
1. Seller had capacity to make another sale.
2. Profitable to make another sale.
3. Would have made additional sale absent buyers breach.
Advent Case
1. A to modify software and hardware and icense U to sell systems with them
A. U to purchase systems for marketing
B. A provides services
C. Substantive issue is whether UCC 2 stature of frauds applies
i. Is this a goods contract?
2. Trial Court- this is not a transaction in goods, but primarily in services; APP Ct disagrees
A. Advent argument
B. What does software mean to APP court?
i. Program transposed onto medium
ii. Policy basis
3. Computer programs are the product of an intellectual process, but once implanted in a medium are widely
distributed to computer owners. An analogy can be drawn to compact disc recording off an orchestral
rendition. The music is produced by the artistry of musicians and in itself is not a good, but when
transferred to a laser-readable disc becomes a readily merchantable commodity. Similarly, when a professor
delivers a lecture, it is not a good, but, when transcribed as a book, it becomes a good.
4. Is the overall transaction goods?
A. What to look at:
1. Cost
2. Language
3. Compensation Structure
B. What gave U the right to sell copies of As software?
Archetectronics
1. Agreement involves 2 licenses
2. One is to use, copy for development
a. Is this a transaction in goods
b. Not a bargain to install delicered copies
c. Second: to make and distribute copies.
Arbitron
- License to use data- single station A can increase if additional stations.
- Indefinite term?
- T gets new stations, but no notice to A; When A discovers, it multiplies by number of new stations and does
discount.
- T pays old fee and then stops paying; A sues
- Ts defense? LC holds?
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- The escalation clause is not an agreement to agree, but a mechanism for objectively setting material terms in
the future without further negotiations
- Standard for enforceability?
- Is this an article 2 case? Good faith means?
- Would clause be enforceable if it said parties would agree on new price?
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