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For a free, confidential referral to an attorney in your area, please click here CONTRACTS WHAT PROMISES SHOULD THE LAW ENFORCE? - THE DOCTRINE OF CONSIDERATION
CHAPTER 1 - AN INTRODUCTION TO CONSIDERATION: DONATIVE PROMISES, FORM, AND RELIANCE I. SIMPLE DONATIVE PROMISE A. RESTATEMENTS Sec. 1 CONTRACT DEFINED A contract is a promise or a set of promises for the breach of which the law gives a remedy.
Sec. 17 REQUIREMENT OF A BARGAIN Except as [otherwise provided], the formation of a contract requires a bargain in which there is ... a consideration
Sec. 71 REQUIREMENT OF EXCHANGE To constitute consideration, a performance or a return promise must be bargained for B. Doughterty v. Salt (p. 4) 1. a promise to make a gift is not enforceable a. law does not enforce gifts (donative promises) b. donative promises are not enforceable because the promisee suffers no detriment as a result of the breach 2. A B A gives to B; B must give something back II. THE ELEMENT OF FORM A. Policy reasons for having Consideration 1. EVIDENTIARY a desire to protect both the individual citizen and the courts against manufactured evidence 2. CAUTIONARY emotional altruism cautioned against 3. CHANNELING marked off so know for real 4. INJURY LESS injury is less severe when consideration is given 5. ECONOMIC EXCHANGE want to encourage economic exchange B. SCHNELL V. NELL (p. 11) 1. bargain = substantive transaction a. must have real consideration, not just nominal consideration (1) nominal consideration = in form only (a) ie. one cent for $600 (2) exceptions = option K and guaranties
III. THE ELEMENT OF RELIANCE A. RESTATEMENT 90(1) A promise (1) which the promisor should reasonably expect (2) to induce action or forbearance of the promisee or a third person and (3) which does induce such action or forbearance is (4) binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires. B. KIRKSEY V. KIRKSEY (p. 19) 1. reliance on a donative promise is not enforceable C. DEVECMON V. SHAW (p. 21) 1. promise enforceable if reliance 2. 3 kinds of interests enforced by CONTRACTS a. EXPECTATION court puts party where would have been if the promise were enforced b. RELIANCE court puts victim of the breach back to the position he would have been if the promise had never been made when a person relies, the court grants out-of-pocket costs (the net costs incurred by a promisee in reliance on the promise, less the value produced by those costs that can be realized after the breach) not all reliance enforced - only when promisor expects reliance c. RESTITUTION person must pay for the benefit conferred avoids unjust enrichment D. FEINBERG V. PFEIFFER (p. 23) 1. promissory estoppel a. when a promisor induces reliance, then the promisor is stopped from denying that he ever made the promise b. if A says something and B relies - A can't says what he said wasn't true
CHAPTER 2 - THE BARGAIN PRINCIPLE AND ITS LIMITS I. THE BARGAIN PRINCIPLE A. RESTATEMENTS 71 REQUIREMENT OF EXCHANGE; TYPES OF EXCHANGE 1) To constitute CONSIDERATION, a performance or a return promise must be bargained for 2) A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for his promise - A PROMISE FOR A PROMISE
72 EXCHANGE OF PROMISE FOR PERFORMANCE Except as state in 73 [Performance of a Legal Duty] and 74 [Settlement of Claims], any performance which is bargained for is consideration
79 ADEQUACY OF CONSIDERATION; MUTUALITY OF OBLIGATION If the requirement of consideration is met, there is no additional requirement of 1) a gain, advantage, or benefit to the promisor or a loss, disadantage, or detriment to the promisee; or 2) equivalence in the values exchanged; or 3) "mutuality of obligation" - courts don't want to be paternalistic - parties can best set their values
B. HAMER V. SIDWAY (p. 43) 1. to constitute consideration must be bargained for 2. uncle pay $ if nephew stop drinking 3. newphew restrict legal freedom for promise of $ a. thus, consid. - no evid. that uncle not benefited (warm fuzzy feeling) b. forbearance of legal right = consideration
C. RESTATEMENTS 175 WHEN DURESS BY THREAT MAKES A CONTRACT VOIDABLE If a party's manifestation of assent is induced by improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim
176 WHEN A THREAT IS IMPROPER 1) A threat is improper if a) what is threatened is a crime or a tort 2) A threat is improper if the resulting exchange is not on fair terms, and a) the threatened act would harm the recipient (ie. beating him up) and would not significantly benefit the party making the threat, [or] b) what is threatened is otherwise a use of power for illegitimate ends - if have equal bargaining power and K dictated by general economic forces, OK if A takes advantage of B -- generally held to agreement - also improper if . threaten criminal prosecution . bad faith civil suit (civil suit OK unless bad faith/attaches property) . breach of legal duty K
D. BATSAKIS V. DEMOTSIS (p. 47) 1. Pl loaned D. 500,000 drachma ($25) during war in exchange for $2000 2. held for Pl 3. general economic conditions do not constitute duress a. for duress must have improper threat that leaves no reasonable alternative 4. courts typically won't enforce if have consideration
II. UNCONSCIONABILITY A. UCC 2-302 UNCONSCIONABLE CONTRACT OR CLAUSE (p. A-23) 1) if court finds unconscionable contract or clause, court can a) refuse to enforce the K b) enforce remainder of K w/out the unconscionable clause c) limit the application of any unconscionable clause to the extent that an unconscionable result is avoided 2) in unconscionable suit, parties are given a reasonable opportunity to present evidence of the commercial setting, purpose, and effect to help court in making its determination - purpose = to prevent oppression and unfair surprise B. RESTATEMENT 208 UNCONSCIONABLE CONTRACT OR TERM same as UCC 2-302 - indication of unconscionability = gross inequality in bargaining power + terms unreasonably favorable to 1 side
364 EFFECT OF UNFAIRNESS 1) Specific Performance or an injunction will be refused if such relief would be unfair because. . . a) the K was induced by unfair practices; or b) the exchange is grossly inadequate (substantive) - only applies to SPECIFIC PERFORMANCE
C. WILLIAMS V. WALKER-THOMAS FURNITURE (p. 53) 1. Pl. bought furn. from D. 2. under K, if default, D. can reclaim all furn. every purchased from D. by Pl. 3. stereo = good (something that's moveable - apply UCC) 4. UNCONSCIONABILITY 1) absence of meaningful choice on the part of one of the parties; and 2) a K whose terms are unreasonably favorable to the other party 3) 2 types PROCEDURAL party did not understand the K (ie. fine print/uneducated party) defect in the bargaining process look up REST. 364 SUBSTANTIVE parties clearly understood and volunteered defects in the resulting K - terms unfair/too one-sided 5. to determine unconscionability a. terms of K considered in light of the circumstances when the K made (ie. inequal bargaining power) D. TOKER V. WESTERMAN (p. 62) 1. Pl. sold refrigerator to D. - highly overpriced (two and a half times) -- SUBSTANTIVE 2. held for D. - price so high/overpriced that is was unconscionable -- K unenforceable 3. cooling off period for door to door sales 4. UCCC when inducement by unconscionable conduct a. seller knows consumer can't gain an advantage from the product/services b. gross disparity between price of goods sold and FMV c. seller takes advantage of buyer - ie buyer = illiterate or can't speak English III. FURTHER LIMITATIONS A. RESTATEMENT 74 SETTLEMENT OF CLAIMS 1) Forbearance to assert or the surrender of a claim or defense which proves to be invalid is not consideration unless a) the claim or defense is in fact doubtful because of uncertainty as to the facts of law, or b) the forbearing or surrendering party believes that the claim or defense may be fairly determined to be valid 2) The execution of a written instrument surrendering a claim or defense by one who is under no duty to execute it is under consideration if the execution of the written instrument is bargained for even though he is not asserting the claim or defense and believes that no valid claim or defense exists - QUIT CLAIM DEED
B. NEWMAN & SNELL'S STATE BANK V. HUNTER (p. 68) 1. when D.'s husband died left $3700 promissory note w/ 50 shares of insolvent stock to Pl. 2. D. said since comp. insolvent, no consideration - don't have to pay anything 3. held for D. a. Pl. neither gave up something or lost something if K not enforced -- no consideration b. invalid or worthless claim not worth anything c. must have objective value - not just subjective value (not just worth to one party)
C. SPRINGSTEAD V. NEES (p. 70) 1. no consideration if one party gives up nothing 2. since Pl. had no right to property, he gave up nothing -- NO promise 3. if order for waiver of claim, person must have honest (subjective) and reasonable (objective) belief of claim - then waiver is consideration a. sincere belief = sufficient consideration b. clearly invalid claim = no consideration
D. MILLER V. MILLER (p. 74) 1. Pl. = wife sue husband for enforcement of marriage K 2. husband said in K, wife has same obligations in K as set forth by law -- no consideration a. wife gave up nothing b. wife had legal duty c. bad social policy 3. held for the husband
IV. THE PROBLEM OF MUTUALITY A. DOCTINE OF MUTUALITY 1. promise to do must be real consideration 2. when have mutual promises, both parties are bound or neither is B. mutual promise = consideration 1. BUYER promises to pay $10 for SELLER'S horse SELLER promises to sell his horse to BUYER for $10. C. NO MUTUALITY 1. unrestricted termination clause (must have termination clause with a notice) 2. no quantity specified D. SCOTT V. MORAGUES LUMBER (p. 81) 1. Pl. agreed to buy ship from D. 2. D. agreed to sell ship to Pl. but then sold to someone else 3. held for Pl a. consideration at the outset - D. bound E. WICKHAM COAL V. FARMER'S COAL (p. 83) 1. agreement said buyer could purchase as much as want to purchase 2. held for the buyer a. each shipment and acceptance of carload = independent K b. just cause will furnish what want to buy not = mutuality of agreement - too 1 sided c. buyer not promise to buy exclusively from seller or specify amt which have to buy - only had to buy as much as wanted d. illusory promise - has form of a promise but gave nothing at all -- not enforceable (p. 89) (1) nothing to enforce since he made no commitment (2) a promise which does not limit some future option - subject to wishes or desires of promisee (3) bargaining for a chance is enforceable though. (p. 90) F. WOOD V. LUCY, LADY DUFF-GORDON (p. 92) 1. Pl. given exclusive rights to place D. endorsements and designs 2. Pl. get half of profits and revenues 3. LLD broke K a. claimed no elements of K cuz Pl. not bound to anything 4. held for Pl. a. duties implied that Pl. going to make reasonable efforts to make profits b. gave Pl. exclusive right UCC (p. A-25) 2-306 OUTPUT, REQUIREMENTS AND EXCLUSIVE DEALINGS 1) A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded. 2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.
consideration when say "I buy as much as I require" -gives up right to buy from anyone else -act in good faith
G. LACLEDE GAS V. AMOCO OIL (p. 93) 1. doctrine of mutuality does not mean have equal cancellation rights a. one party can have cancellation clause and another may not b. hwr. cancellation clause must give period of notification to other party
2. K based on requirement is binding when a. needs of buyer are reasonably foreseeable; AND b. time performance is limited H. GROUSE V. GROUP HEALTH PLAN (p. 97) 1. Pl. quit job and forgone other jobs in reliance to D. offer 2. D. then hired someone else a. said since can fire at will OK 3. held for Pl. a. promissory estoppel (1) Pl. relied on D. promise by quitting job and not accepting new ones b. though job terminable at will - must be given good faith opportunity to perform once on the job V. PERFORMANCE OF A LEGAL DUTY AS CONSIDERATION; MODIFICATION AND WAIVER OF CONTRACTUAL DUTIES A. RESTATEMENT 73 PERFORMANCE OF LEGAL DUTY Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not consideration; but a similar performance is consideration if it differs from what was required by the duty in a way which reflects more than a pretense of bargain. - money given for a legal duty = bribe - performance of a preexisting legal duty is not consideration B. GRAY V. MARTINO (p. 99) 1. D. = prosecutor a. D. had access to knowledge concerning theft b. went to Pl. and said if give me $500 will give info. for missing jewelry. 2. held for Pl. a. D. performance = legal duty b. can't receive $ unless special circumstances above and beyond his legal duty c. D. gave up nothing -- no consideration C. LINGENFELDER V. WAINWRIGHT BREWERY (p. 102) 1. Pl. building brewery for D. 2. D. commission Pl.'s competitors to build refrigeration plant 3. Pl. wanted more $ to finish what already obligated to do 4. held for D. a. Pl incurred no new detriment b. cannot demand more $ to complete what already contracted to do = extortion (1) if new circumstances OK - ie. increase cost in building materials (a) not the case here
D. FOAKES V. BEER (p. 107) 1. D. owed Pl $ 2. agreement then that if D. pay 500 now and remainder in installments, Pl. would forgive interest 3. Pl. bought suit - said no consid. cuz D. already bound to pay $ -- gave up nothing 4. held for Pl. a. arg. against Pl - Pl got security of getting $ now -- consideraiton b. remedy (1) void old K and make new one c. SUGARHOUSE V. ANDERSON (p. 127) (1) creditor can accept lower payment if debtor incurred a new detriment (ie pay off old loan with a new loan) d. p. 146 when paying $500 is sufficient consideration to discharge a debt of $1000 - limitation applies only if the debt is 1) liquidated 2) undisputed and 3) due - If any of these factors is absent, the new promise or performance is binding, and the performance effects a discharge.
E. DE CICCO V. SCHWEIZER (p. 113) 1. D. agreed to pay daughter $2500/yr once got married 2. paid for 10 yrs. after marriage then stopped 3. for Pl. (daughter) 4. held for Pl. F. STOKES (p. 117) 1. D. promised Pl. (jockey) $1000 if won race 2. Pl. already under a legal duty to make best effort to win race -- NO consideration a. public policy against enforcement -- no bribery G. ANGEL V. MURRAY (p. 119) 1. trash collector asked for and got $10,000 more a year for collecting trash 2. held for the trash collector a. said increase in response to substantial increase in the number of houses b. arg. against was that he already had a legal duty to pick up the trash 3. RESTATEMENT 89(a) does not compel a modification of an unprofitable or unfair K; it only enforces modification if the parties volunatarily agree and if 1) the promise modifying the original K was made before the K was fully performed on either side 2) the underlying circumstances which prompted the modification were unanticipated by the parties 3) the modification is fair and equitable H. CENTRAL LONDON PROPERTY TRUST V. HIGH TREES HOUSE (p. 122) 1. Pl. granted D. 99 yr. lease 2. war depleted economy - D. couldn't fill up apts a. Pl. reduced rent by half 3. after war, Pl. want full payment 4. held for Pl. a. promise understood to be binding only during recession of the war b. once war was over - apts filled up
I. RESTATEMENT 89 MODIFICATION OF EXECUTORY CONTRACT A promise modifying a duty under a contract not fully performed on either side is binding a) if the modification is fair and equitable in view of circumstances not anticipated by the parties when the K was made; or b) to the extent provided by statute (UCC); or c) to the extent that justice requires enforcement in view of material change of position in reliance on the promise
J. UCC (p. A-21) 2-209 MODIFICATION, RESCISSION AND WAIVER 1) An agreement modifying a K w/in this Article needs no consideration to be binding. 2) A signed agreement which excludes modification or rescission except a signed writing cannot be otherwise modified or rescinded, but except as between MERCHANTS such a requirement on a form supplied by the merchant must be separately signed by the other party. (modification needs signature except between merchants) 3) The requirements of the statute of frauds section ( 2-201) must be satified if the K as modified is within its provision. 4) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3), it can operate as a waiver. 5) A party who has made a waiver affecting an executory (unperformed) portion of the K may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view ofa material change in reliance on the waiver. - abandons doctrine of consideration - common law moving away from consideration - good faith 1) required - test = "observance of reasonable commercial stds. of fair dealing in the trade" 2) sometimes requires an objectively demonstrable reason for seeking modification 3) maybe too unforseen market shift that would make performance hard
K. ROTH STEEL V. SHARON STEEL (p. 128) 1. D. sell steel to Pl at very low prices due to deflated mkt. 2. steel industry improved, D. want more $ 3. Pl. could not get enough steel from anywhere else -- had to buy D. steel 4. held for Pl. a. D. threatening w/out any legal right -- extortion L. UCC (p. A-10) 1-207 PERFORMANCE OR ACCEPTANCE UNDER RESERVATION OF RIGHTS A party who with explicit reservation of rights performs or promises performance or assents to performance in a manner demanded or offered by the other party does not thereby prejudice the rights reserved. Such words as "without prejudice", "under protest", or the like are sufficient. - does not apply to conditioned checks - only applies to mid-stream disputes - when can't continue -- reserve rights to pursue later M. FLAMBEAU V. HONEYWELL (p. 136) 1. D. paid last check minus $14,000 of what owed and wrote on the back of the check "payment in full" 2. Pl. cashed the check -- done deal a. accord and satisfaction 3. UCC 1-207 does not apply to conditioned checks a. UCC 1-207 only applies to mid-stream disputes - when can't continue/reserve rights to pursue later N. DOCTRINE OF ACCORD AND SATISFACTION (p. 148) 1. ACCORD = agreement to accept something else as payment 2. occurs when a debt is 1) UNDISPUTED, 2) LIQUIDATED, 3) DUE OR MATURED a. wouldn't MODIFY K if these things existed b. debt is clear -- more likely to accept promise to give something else 3. EXAMPLE accord = saddle - Debtor owes Creditor $50 - Debtor offers to give saddle instead of $50 - Creditor agrees to accept saddle as payment - Thus, if Debtor furnishes saddle, Creditor must fulfill his promise and take it ** - promise to accept saddle (accord) does not discharge original debt but merely suspends it ** - if Debtor breaches the accord, Creditor can sue for either $50 or the saddle 4. MODIFICATION of a K is different a. substituted K b. once Creditor accepts the new promise, the original debt is broken (1) accord/satifaction - original debt not discharged till performance (2) modification of K - original debt is discharged on the new promise c. under modification, if the Debtor breaches, the Creditor can only sue for the saddle (1) differs from accord/satisfaction - Debtor breaches, the Creditor can sue for either $50 (original debt) or the saddle (the new promise) O. RESTATEMENT (p. 156) 84 PROMISE TO PERFORM A DUTY IN SPITE OF NON-OCCURRENCE OF A CONDITION 1) Except as stated in Subsection (2), a promise to perform all or part of a conditional duty under an antecedent K in spite of the non-occurrence of the condition is binding, whether the promise is made before or after the time for the condition to occur, unless a) occurrence of the condition was a material part of the agreed exchange for the performance of the duty, and the promisee was under no duty that it occur; OR
- only non-material condition can be waived b) uncertainty of the occurrence of the condition was an element of the risk assumed by the promisor - material part of K 2) If such a promise is made before the time for the occurrence of the condition has expired and the condition is within the control of the promisee or a beneficiary, the promisor can make his duty again subject to the condition by notifying the promisee or beneficiary of his intention to do so if a) the notification is received while there is still a reasonable time to cause the condition to occur under the antecedent terms or an extension given by the promisor; and b) reinstatement of the requirement of the condition is not unjust because of a material change of position by the promisee or beneficiary; and c) the promise is not binding apart from the rule stated in Subsection (1) ** see examples p. 156-7 P. CLARK V. WEST (p. 151) 1. Pl. signed conditional K w/ D. to write law books a. if abstain from liquor will pay $4 more/page 2. issue: did D. waive intoxication condition in K?
3. since Pl. drank and D. sold copyright of books to someone else = evidence that books were good a. D. knew that Pl. drank - express waiver 4. waiver = intentional relinquishment of a known right 5. can't waive big things - can only waive non-material conditions - does not shift the risk a. waiver of non-material cond. needs no consideration and is enforceable
UCC (p. A-3)
1-207 WAIVER OR RENUNCIATION OF CLAIM OR RIGHT AFTER BREACH Any claim or right arising out of alleged breach can be discharged in whole or in part without consideration by a written waiver or renunciation signed and delivered by the aggrieved party. - written waiver needs no consideration
Q. NASSAU TRUST (p. 157) 1. K Modification requires consideration a. since have consideration, modification can only be w/drawn by agreement 2. Waiver requires no consideration a. once waiver done, cannot recall/expunge b. but if waiver is still unperformed, it can be withdrawn only if the party whose performance has been waived is given notice of withdrawal and given a reasonable time to perform R. WISCONSIN KNIFE V. NATIONAL METAL CRAFTERS (p. 158) 1. buyer and seller of drill bits -- UCC applies 2. no modification binding if not in writing a. delivery dates were modified - not in writing/orally ** 3. MODIFICATION needs CONSIDERATION in the COMMON LAW a. NO CONSIDERATION under UCC 2-209 (1) 4. UCC 2-209 (2) does not apply between merchants a. between merchant and consumer - on modification clause on merchant's stationary, need the consumer to sign (initial) modification clause 5. UCC 2-209 (4) a. "attempt at modification" = waiver b. K modification in writing = enforceable c. when orally - can operate as a waiver d. don't know when "can operate as a waiver" 6. UCC 2-209 (5) a. difference between a modification and a waiver is that a waiver can be retracted if no reliance CHAPTER 3 - PAST CONSIDERATION (INCLUDING THE PROBLEM OF "MORAL OBLIGATION" AS CONSIDERATION FOR A PROMISE) I. RESTATEMENT (p. 171) 82 PROMISE TO PAY INDEBTEDNESS; EFFECT ON THE STATUTE OF LIMITATIONS - exception to the doctrine of consideration 1) A promise to pay all or part of an antecedent contractual or quasi-contractual indebtedness owed by the promisor is binding if the indebtness is still enforceable or would be except for the effect of a statute of limitations. 2) The following facts operate as such a promise unless other facts indicate a different intention: a) a voluntary acknowledgement to the obligee, admitting the present existence of the antecedent indebtedness; or b) a voluntary transfer of money, a negotiable instrument, or other thing by the obligor to the obligee, made as interest on or part payment of or collateral security for the antecedent indebtedness; or c) a statement to the obligee that the statute of limitations will not be pleaded as a defense. - usually must be in writing to be binding unless promise can be inferred from part payment.
83 PROMISE TO PAY INDEBTEDNESS DISCHARGED IN BANKRUPTCY An express promise to pay all or part of an indebtedness of the promisor, discharged or dischargeable in bankruptcy proceedings begun before the promise is made, is binding.
I. JONES V. JONES (p. 167) A. husband sent letter, after the statute of limitations, which promised to pay old debt B. husband waived defense to statute of limitations by sending new letter C. past consideration = consideration II. 3 Situations in which a Promise to Discharge an Unenforceable Obligation is Binding. A. The 3 Situations: 1. Promise to Pay a Debt barred by the Statute of Limitations a. partial payment = consideration and statute of limitation starts running from that point on 2. Promise to Pay a Debt which has been Discharged in Bankruptcy. a. can choose who want to pay back and amount to pay back 3. A person who entered into a K while under the legal age (so that the K was not enforceable against him) promises to perform the K after becoming of age. B. Explanations 1. Moral obligation from the beginning = consideration for the later promise. a. When the debtor recognizes this moral obligation by making a promise, he becomes liable. 2. Initially the legal claim is barred by statute of limitations, bankruptcy, and infancy. a. new promise "waives" these defenses against the pre-existing legal right. b. the new promise does not create a new legal right but merely removes a defense to an existing legal (and not merely moral obligation). III. MILLS V. WYMAN (p. 177) A. Facts: 1. Wyman = sick/no longer member of dad's family 2. Pl. took care of him till he died 3. Wymans' dad found out and promised to pay for expenses incurred - broke promise B. NOT ENFORCEABLE 1. no original consideration 2. promise made here without pre-existing legal consideration 3. no legal obligation for son once son leaves father's family 4. taking care of son was a gift. a. no material benefit conferred IV. RESTATEMENT (p. 185)
86 PROMISE FOR BENEFIT CONFERRED 1) A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice. a) if the act is officious b) if most people would want it done c) look at the circumstances 2) A promise is not binding under Subsection (1) [EXCEPTIONS] a) if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or b) to the extent that its value is disproportionate to the benefit. - denied many times if benefit thrust upon them (MILLS V. WYMAN p.177) - SEE ILLUSTRATIONS p. 185-87
V. WEBB V. MCGOWIN (p. 180) A. FACTS: 1. Pl., to avoid dropping block on D., fell w/block and sustained permanent injuries. 2. D. agreed/promised to pay $15 every 2 weeks for the rest of his life. 3. D. died - payments stopped 2 weeks later 4. Pl. want $ B. held for Pl. 1. When the promisee care for, improves, and preserves the property of the promisor, though done without his request, it is sufficient consideration for the promisor's subsequent agreement to pay for the service, because of the material benefit received. a. moral obligation = sufficient consideration to support a subsequent promise to pay where the promisor has received a material benefit, although there was no original duty or liability resting on the promisor. ** 2. subsequent promise is equivalent to a previous request VI. ESEINBERG, THE PRINCIPLES OF CONSIDERATION (p. 188) A. A confers a benefit on B without B's prior request: 1. B is legally obliged to compensate A under the law of restitution, as where A has paid B money by mistake. a. B's subsequent promise to compensate A = unenforceable 2. B is morally but not legally obliged to compensate A, as where A has suffered a loss in rescuing B. a. subsequent promise = ENFORCEABLE 3. B is neither legally nor morally obliged to compensate A, as where A has given B a wedding gift. a. subsequent promise = unenforceable
REMEDIES FOR BREACH OF K CHAPTER 4 - AN INTRODUCTION TO K DAMAGES I. RESTATEMENT (p. 192) 344 PURPOSES OF REMEDIES Judicial remedies under the rules stated in [the Restatement of K] serve to protect one or more of the following interest of a promisee: a) his "expectation interest" = his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the K been performed. b) his "reliance interest" = his interest in being reimbursed for loss caused by reliance on the K by being put in as good a position as he would have been in had the K never been made. - out-of-pocket costs c) his "restitution interest" = his interest in having restored to him any benefit that he has conferred on the other party. ** victim can only collect one of them II. HAWKINS V. MCGEE (p. 192) A. FACTS: 1. Pl. went to doctor to get skin graft from chest to hand to remove scar as result of severe burn. 2. doctor said "I will guarantee to make the hand 100%" 3. hand was damaged even more B. lwr court wanted to grant him reliance damages 1. reliance damages = difference between present condition and prior condition prior condition - present condition = amt injury C. Proper assessment of damages = Expectation Damages 1. expectation damages = difference in value of good hand and hand in present condition promised condition - present condition = damages D. Promised condition greater than prior condition -- expection measure of damages is greater than reliance III. REASONS FOR EXPECTATION OVER RELIANCE A. easier to establish in court the value of performance than the extent of reliance 1. reliance = forgone cost which is speculative 2. expectation = K price which is known B. expectation damages create incentive for promisor to deliver promise 1. K law not designed to punish but to preserve K. IV. POSNER'S EFFICIENT BREACH THEORY Seller has an original K with the Buyer - buyer can get widgets for $11 - seller agrees to sell widgets go $10 - third party needs widgets right away -- willing to pay $15 - seller should breack K with buyer and sell to third party for $15 - seller then pays original buyer compensatory damages of $1/widget
- seller has $4/widget profit - buyer can get widgets at regular mkt price of $11 -- put where would have been had K been performed (expectation damages) - third party has widget
reasons against - litigation costs on both sides - buyer and seller general Am. rule = each side must pay attorney's fees (transaction costs) - seller's reputation is hurt - encourages seller to breach K -- undermines the stability of K (inefficient)
CHAPTER 5 - THE EXPECTATION MEASURE I. DAMAGES FOR BREACH OF A K TO PERFORM SERVICES A. BREACH BY PERSON WHO HAS CONTRACTED TO PERFORM SERVICES 1. LOUISE CAROLINE NURSING HOME V. DIX CONSTUCTION (p. 209) a. FACTS: (1) LCN sue Dix for K breach of K to build nursing homes ** b. MEASURE OF DAMAGES (breach to perform services) (1) Pl. = FMV Promised Condition - FMV Present Condition (2) Court gives cost of completion measure: ** Cost of Completion - Balanced Owed to K-1 (3) EXAMPLES (a) - K-1 price = $100,000 - no work done by K-1 - nothing paid to K-1, owner still owes $100,000 - K-2 charges $125,000 - cost of completion damages = $125,000 - $100,00 = $25,000 (b) - K-1 price = $100,000 - no work done - owner paid $75,000 - still owes $25,000
- K-2 = $125,000 - cost of completion damages = $125,000 - $25,000 = $100,000 (c) - K-1 price = $100,000 - some work done - need $50,000 to complete by K-2 - owner paid $75,000 - still owes $25,000 - cost of completion damages = $50,000 - $25,000 = $25,000
2. PEEVYHOUSE V. GARLAND COAL & MINING (p. 211) a. FACTS: (1) Pl. enter in K w/ D. to lease land for coal mining (2) D. breached K by failing to perform restoration services to land (3) cost to restore land = $29,000 (4) promised cond. (FMV) = $300 b. judgement given to Pl. only $300 = value of land if K not breached ** c. basic measure of breach of service provider usually = COST OF COMPLETION but where cost of completion = unreasonably disproportionate - economic waste - DIMINUITIVE VALUE THEORY problems = this particular consumer places higher value on land than the FMV & D. knew that Pl. would not enter into K. unless land restore (bad faith on part of the D.). ** courts should enforce K, not alter to benefit 1 party.
B. BREACH BY A PERSON WHO HAS CONTRACTED TO HAVE SERVICES PERFORMED 1. AIELLO CONSTRUCTION V. NATIONWIDE TRAILOR (p. 222) a. FACTS: (1) Pl. enter into K w/D. to level D.'s lot (2) D. had to stop payments due to lack of $ (a) breack of K by the recipient of services (3) Pl. stopped work and sue to damages b. 2 formulas for damages * (1) K-1 price - cost saved by not completing - installments paid - materials on hand example K-1 = $100,000 cost to build = $80,000 owner paid = $10,000 no performance by builder before breach by recipient of services $100,000 - $10,000 -$80,000 = $10,000 to builder
(2) Profits + cost incurred - installments paid - materials on hand example K-1 = $100,000 cost to build = $80,000 (profit = $100,000 - $80,000) owner paid = $10,000 no performance by builder before breach by recipient of services $20,000 + 0 - $10,000 = $10,000 * different numbers in this formula if have loss instead of profit on original K.
I. DAMAGERS FOR BREACH OF A K TO SELL GOODS A. BREACH BY THE SELLER 1. buyer's remedies fall into 2 broad categories a. specific relief (Chapter 6) b. damages (1) buyer's remedies when the seller fails to deliver or the buyer properly rejects the goods or rightfully revokes his acceptance (UCC 2-712, 2-713). (2) buyer's remedies when the buyer has accepted the goods, and cannot or does not want to rightfully revoke his acceptance, but the goods are defective (UCC 2-714). 2. UCC (p. A-54 to A- 56) 2-711 (1) BUYER'S REMEDIES IN GENERAL Where the seller fails to make delivery or repudiates or the buyer rightfully or justifiably revokes acceptance then with respect to any goods involved, and with respect to the whole if the breach goes to the whole K ( 2-612), the buyer may cancel and whether or not he has done so may in addition to recovering so much of the price as has been paid a) "cover" and have damages under the next section as to all the goods affected whether or not they have been identified to the K; or b) recover damages for non-delivery as provided in 2-713
2-712 "COVER"; BUYER'S PROCUREMENT OF SUBSTITUE GOODS 1) After a breach within the preceding section the buyer may "cover" by making in good faith and without reasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller. 2) The buyer may recover from the seller as damages the difference between the cost of cover and the K price together with any incidental or consequential damages as hereinafter defined in 2-715, but less expenses saved in consequence of the seller's breach. 3) Failure of the buyer to effect cover within this section does not bar him from any other remedy. - as long as buyer acted in good faith and in a reasonable manner - immaterial if not cheapest method
- SELLER'S BREACH (buyer does cover) Cover Price - K Price + C + I - Expense Saved
2-713 BUYER'S DAMAGES FOR NON-DELIVERY OR REPUDIATION 1) Subject to the provisions of 2-723 (respect to proof of mkt price), the measure of damages for non-delivery or repudiation by the seller is the difference between the mkt price at the time when the buyer learned of the breach and the K price together with any incidental and consequential damages provided by 2-715, but less expenses saved in consequence of the seller's breach. 2) Mkt price is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival. - SELLER'S BREACH (buyer does not cover) Mkt. Price - K Price + C + I - Expense Saved
2-714 BUYER'S DAMAGES FOR BREACH IN REGARD TO ACCEPTED GOODS 1) Where the buyer has accepted goods and given notification, he may recover as damages for any non-conformity of tender the loss resulting in the ordinary course of events from the seller's breach as determined in any manner which is reasonable. 2) The measure of damages for breach of warranty is the difference between value of the goods accepted and the value they would have had if they had been warranted, unless special circumstances show proximate damages of a different amount. 3) In a proper case, any incidental and consequential damages under the next section may also be recovered.
2-715 (1) BUYER'S INCIDENTAL AND CONSEQUENTIAL DAMAGES 1) Incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach. B. BREACH BY THE BUYER 1. UCC (p. A-50 to A-54) 2-703 SELLER'S REMEDIES IN GENERAL Where the buyer wrongfully rejects or revokes acceptance of goods or fails to make payment due on or before delivery or repudiates with respect to a part or the whole, then with respect to any goods directly affected and, if the breach is of the whole K, then also with respect to the whole undelivered balance, the aggrieved seller may 1) withhold delivery of such goods; 2) stop delivery by any bailee as hereafter provided in 2-705; 3) proceed under the next section respecting goods still unidentified to the K; 4) resell and recover damages as hereafter provided 2-706; 5) recover damages for non-acceptance ( 2-708) or in a proper case the price ( 2-709); 6) cancel.
2-704 (1) SELLER'S RIGHT TO IDENTIFY GOODS TO THE K NOTWITHSTANDING BREACH 1) An aggrieved seller under the preceding section may a) identify to the K conforming goods not already identified if at the time he learned of the breach they are in his possession or control; b) treat as the subject of resale goods which have demonstrably been intended for the particular K even though those goods are unfinished. 2-706 SELLER'S RESALE INCLUDING K FOR RESALE (p. A-52) 1) Under the conditions stated in 2-703 on seller's remedies, the seller may resell the goods concerned or the undelivered balance thereof. Where the resale is made in good faith and in a commercially reasonable manner the seller may recover the difference between the resale price and the K price together with any incidental damages allowed under 2-710, but less expenses saved in consequence of the buyer's breach. BUYER'S BREACH (resale of good) K Price - Resale Price + I - Expenses Saved
2-708 SELLER'S DAMAGES FOR NON-ACCEPTANCE OR REPUDIATION (NERI V. RETAIL MARINE P. 231) 1) Subject to subsection (2) and 2-723, the measure of damages for non-acceptance or repudiation by the buyer is the difference between the mkt price at the time and place for tender and the unpaid K price together with any incidental damages provided in 2-710, but less the expenses saved in consequence of the buyer's breach. BUYER'S BREACH (no resale - use mkt price) K Price - Mkt Price + I - Expenses Saved
2) If the measure of damages provided in subsection (1) is inadequate to put the seller in a good a position as performance would have done then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in 2-710, due allowance for costs reasonably incurred and due credit for payments or proceeds of resale. - seller gets PROFIT
2-709 ACTION FOR THE PRICE (when seller can't resell) 1) When the buyer fails to pay the price as it becomes due, the seller may recover, together with any incidental damages, the price a) of goods accepted or of conforming goods lost or damaged within a commercially reasonable time after risk of their loss has passed to the buyer; and b) of goods identified to the K if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing. 2) Where the seller sues for the price, he must hold for the buyer any goods which have been identified to the K and are still in his control except that if resale becomes possible, he may resell them at any time prior to the collection of the judgement. The net proceeds of any such resale must be credited to the buyer and payment of the judgement entitles him to any goods not sold. 3) After the buyer has wrongfully rejected or revoked acceptance of the goods or has failed to make a payment due or has repudiated 2-610, a seller who is held not entitled to the price under this section shall nevertheless be awarded damages for non-acceptance under the preceding section.
2-710 SELLER'S INCIDENTAL DAMAGES Incidental damages to an aggrieved seller include any commercially reasonable charges, expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the buyer's breach, in connection with return or resale of the goods or otherwise resulting from the breach.
2. NERI V. RETAIL MARINE CORP (p. 231) a. FACTS: (1) Buyer entered into K to buy boat from Seller (2) Buyer gave D. $4250 for immediate delivery (3) Buyer then breach and want $ back b. for Seller (1) $3,253 = lost profits + incidental damages c. lost volume seller (1) seller has inexhaustible supply of replaceable (fungeable) goods (2) seller would have had 2 sales instead of one --measure of damages = inadequate to put seller in as good as position if performance was done (a) entitled to profit [UCC 2-708 (2)] (b) profit (includes reasonable overhead) = sale price - cost II. MITIGATION; CONTRACTS FOR EMPLOYMENT A. ROCKINGHAM COUNTY V. LUTEN BRIDGE CO. (p. 236) 1. FACTS: a. Pl. contracted w/ D. to build bridge b. after D. spent $1900, Pl. breached K c. D. kept on building the bridge 2. held for County (Pl.) a. though County had no right to breach, D. must stop work once County breached and mitigate damages (1) Luten can't continue working on bridge and make damages greater on County 3. DAMAGES K Price - Cost Saved - Amt Paid by the Owner - Materials on Hand or Profit (Loss) + Costs/Expenses - Amt Paid - Material on Hand 4. UCC (p. A-51) 2-704(2) SELLER'S RIGHT TO SALVAGE UNFINISHED GOODS (exception) Where the goods are unfinished, an aggrieved seller may in the exercise of reasonable commercial judgement for the purposes of avoiding loss and of effective realization either complete the manufacture and wholly identify the goods to the K or cease manufacture and resell for scrap or salvage value or proceed in any other reasonable manner. - manufacturer of goods given a choice
- sometimes efforts to mitigate damages is better if can sell to someone else - EXAMPLE K Price = $10,000 Cost to Build = $8,000 Builder already spent $4,000 Expenses Saved = $4000 Resale of Scrap = $2,000 Resale of Scrap K Price $10,000 - Resale $ 2,000 + I - ES $ 4,000 ________ $ 4,000
B. SHIRLEY MACLAINE V. TWENTIETH CENTURY FOX (p. 241) 1. FACTS: a. Fox enter into K w/Shirley who was to receive $750,000 to play in a musical b. Fox negated K-1 and offer Shirley same salary to appear in dramatic western w/no director and screenplay approval rts. 2. held for Shirley a. second movie = inherently different 3. Rules a. Pl. must DILIGENTLY seek other employment b. alternative employment must be comparable and substantially similar c. when an employer wrongfully discharges the employee, the employee has the duty to exercise reasonable diligence to locate and accept similar and comparable employment in the same local. (1) if new job has a reduction in salary - employer who breached must pay difference
III. FORESEEABILITY A. HADLEY V. BAXENDALE (p. 249) ** landmark case 1. FACTS: a. Pl. broke his shaft b. Pl. took it to the D. who said would be delivered the next day c. delivery of the shaft was delayed -- Pl. did not receive his shaft for several days d. Pl. sued for lost profits cuz mill was delayed without the shaft 2. held for D. 3. RULE a. can only have damages for those consequences that arise naturally b. Hwr, if special circumstances were communicated and thus known to both parties, D. would be liable for the damages that arose from these special circumstances. B. VICTORIA LAUNDRY (p. 254) 1. delay of delivery of professional size washer caused loss of profits 2. held for Pl. a. damages were foreseeable even though not specially communicated because they arose naturally (1) why else buy huge washer except for commercial use C. KOUFOS (p. 256) 1. D. liable for delay in delivery of sugar 2. D. knew that sugar is dependent on mkt price a. though D. did not know mkt price would go down - foreseeable mkt condition b. foreseeability factor (1) must have substantial possibility w/in contemplation (2) 2% not compensable under HADLEY - 25% is compensable D. UCC (p. A-56) 2-715 (2) CONSEQUENTIAL DAMAGES Consequential damages resulting from the seller's breach include a) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise (must cover) - A buyer does not have to cover under UCC 2-712 (3) - if buyer does not attempt to cover, consequential damages, including loss of profits, cannot be recovered. b) injury to person or property proximately resulting from any breach of warranty. E. RESTATEMENT (p. 259) 351 UNFORESEEABILITY AND RELATED LIMITATIONS ON DAMAGES 1) Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the K was made. 3) A court may limit damages for foreseeable loss by a) excluding recovery for loss of profits b) by allowing recovery only for loss incurred in reliance c) or otherwise if it concludes that in the circumstances justice so requires in order to avoid disproportionate compensation.
- exclude recovery under certain conditions a) extreme disproportion between the loss and the price charged by the party whose liability for that loss is in question - small price to great liability i) since price relatively small = evidence that it wan not intended to cover such liability b) informality of the dealing (absence of written K) i) no careful attempt to allocate risks
IV. UNCERTAINTY A. FREUND V. WASHING SQUARE PRESS (p. 262) 1. FACTS: a. Pl. give D. manuscript to publish b. D. could terminate w/60 days - if didn't had to publish and give Pl. royalties c. D. breached - didn't publish 2. held for Pl. but only given nominal damages of six cents a. rule (eroding) (1) damages must be reasonably certain (a) royalties were only speculative - can't ascertain -- only nominal damages (2) maybe here could have been certain but he did not prove it b. specific performance denied (1) service K here -- bad to force unwilling parties to work c. new business rule (1) uncertainty (also speculative) prevents recovery of damage for new business when leasor breaches (2) don't know how much new business would have made (3) also eroding - now use mathematical analysis of similar restaurants 3. UCC (p. A-3) 1-106 (1) REMEDIES TO BE LIBERALLY ADMINISTERED The remedies provided by this Act shall be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed but neither consequential or special nor penal damages may be had except as specifically provided in this Act or by other rule of law. - damages do not have to be calculated with mathematical accuracy - only approximate
V. DAMAGES FOR MENTAL DISTRESS A. VALENTINE V. GENERAL AMERICAN CREDIT (p. 268) 1. FACTS: a. Pl. sue D. for mental distress damages for breach of employment K b. Pl. claims under K, she was entitle to job security 2. affirmed for D. a. employment K = economic/not for mental well-being (1) policy reasons for business risks (2) always have emotional distress when lose job b. instead of foreseeability - law will grant emotional damages for breach of K, only if K has personal element (1) delivery of baby (2) marriage K (3) exception (a) bad faith breach of insurer's duty to defend (insurance company) (b) can get punitive damages in a breach (c) insurance company has a special relationship with their client
VI. LIQUIDATED DAMAGES A. TRUCK RENT-A-CENTER V. PURITAN FARMS (p. 274) 1. FACTS: a. D. lease trucks from Pl. b. had liquidated damage clause where if D. breach, would pay Pl half of rent that would have due c. arg. against (1) don't anticipate mkt failure (2) never know what damages at time K made - go with time K was made 2. held for Pl. a. 3 conditions for liquidated damages to be enforceable (1) Actual damages are difficult to estimate (unascertainable) at the time the K was made (2) liquidated damages are a reasonable estimate (bears a reasonable proportion) to the anticipated loss (3) liquidated damages can not be grossly disporportionate to the probable loss (actual damages) (a) can not be unconscionable or contrary to public policy - if all 3 conditions are not satisfied, liquidated damage clause will not be enforced and there will be a penalty 3. UCC (p. A-58) 2-718 (1) LIQUIDATION OR LIMITATION OF DAMAGES Damages for breach by either party may be liquidated in the agreement but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach, the difficulties of proof of loss, and the inconvenience or nonfeasibility of otherwise obtaining an adequate remedy. A term fixing unreasonably large liquidated damages is void as a penalty. - broader than the common law B. LAKE RIVER CORP. V. CARBORUNDUM (p. 282) 1. FACTS: a. Pl. build new bagging system ($89,000) to new K with D. to bag b. liquidated damage clause (1) if default D. pay Pl. difference between quantity bagged and quantity guaranteed c. entered into volunatarily - both knew about consequences before making K. 2. damages too much a. fails # 2 & 3 of rule in TRUCK RENT-A-CENTER (p. 274) (1) liquidated damages are unreasonable in relation to the antipated loss (2) liquidated damages are grossly disproportionate to actual loss
CHAPTER 6 - SPECIFIC PERFORMANCE I. LONDON BUCKET V. STEWART (p. 288) A. FACTS: 1. D. didn't complete installation of a heating system in a large motel 2. Pl. wants specific performance B. NO SPECIFIC PERFORMANCE GRANTED 1. only specific performance is other rememdies by law are inadequate a. rule = can not get specific performance if have adequate damages 2. Situations and Specific Performance a. Construction K (1) general rule = no specific performance (2) damages = adequate rememdy (3) courts unable to superintend b. K for sale of land (1) buyer can get specific performance when the seller breaches (a) land is unique c. Employment K (1) no specific performance unless the job is unique (ie professional athlete) d. other kinds of personal service (1) usually no specific performance - don't want to force people to work together I. RESTATEMENT (p. 290) 359 EFFECT OF ADEQUACY OF DAMAGES 1) Specific performance or an injunction will not be ordered if damages would be adequate to protect the expectation interest of the injured party.
360 FACTORS AFFECTING ADEQUACY OF DAMAGES In determing whether the remedy in damages would be adequate, the following circumstances are significant: a) the difficulty of proving damages with reasonable certainty (ie royalties) b) the difficulty of procuring a suitable substitute performance by means of money awarded as damages (thus specific performance); and c) the likelihood that an award of damages could not be collected - give nominal damages when can not prove - many times sentimental attachment and unique situations make it hard to prove damages II. UCC (p. A-54, A-57)
2-709 ACTION FOR THE PRICE (seller's remedies when buyer breaches) 1) When the buyer fails to pay the price as it becomes due, the seller may recover, together with any incidental damages under the next section, the price... a) of goods accepted or of conforming goods lost or damaged within a commercially reasonable time after risk of their loss has passed to the buyer; and b) of goods identified to the K if the seller is unable after reasonable effort to resell them at a reasonable price or the circumstances reasonably indicate that such effort will be unavailing. 2) Where the seller sues for the price, he must hold for the buyer any goods which have been identified to the K and are still in his control except that if resale becomes possible he may resell them at any time prior to the collection of the judgement. The net proceeds of any such resale must be credited to the buyer and payment of the judgement entitles him to any goods not resold. 3) After the buyer has wrongfully rejected or revoked acceptance of the goods or has failed to make a payment due or has repudiated 2-610, a seller who is held not entitled to the price under this section shall nevertheless be awarded damages for non-acceptance under the preceding section. - seller gets damages 2-716 BUYER'S RIGHT TO SPECIFIC PERFORMANCE OR REPLEVIN 1) Specific performance may be decreed where the goods are unique or in other proper circumstances. 2) The decree for specific performance may include such terms and conditions as to payment of the price, damages, or other relief as the court may deem just. 3) The buyer has a right of replevin for goods identified to the K if after reasonable effort he is unable to effect cover for such goods or the circumstances reasonbly indicate that such effort will be unavailing or if the goods have been shipped under reservation and satisfaction of the security interest in them has been made or tendered.
III. LACLEDE GAS V. AMOCO (p. 295) A. FACTS: 1. Amoco breached K to sell propane to Laclede B. specific performance for Laclede 1. difficult for Laclede to secure long-term K as they had with Amoco -- specific performance 2. long-term special services K = unique -- specific performance
CHAPTER 7 - THE RELIANCE AND RESTITUTION MEASURES I. RELIANCE DAMAGES IN A BARGAIN CONTEXT A. SECURITY STOVE V. AMERICAN RYS EXPRESS (p. 301) 1. FACTS: a. Pl. rented space in exhibit b. since Pl. stove couldn't be sent in time by freight, Pl. hired D. (1) D. expressly promised that it would get there in time (2) special circumstances were communicated c. everything got there except for the main part - Pl. exhibit was futile 2. for Pl. a. only give expenses to Pl. which are foreseeable to the promisor (1) example $1000 expenses - $200 would have lost if K performed _______ (expenses incurred before K) $800 give b. parties can ask for reliance or expectation (1) expectation is usually greater than reliance Expectation (foreseeable cost + profit) > Reliance (foreseeable costs) ** (2) expectation measure = ceiling on reliance damages (a) never put party ahead of where would have been if K performed I. THE RESTITUTION MEASURE A. INTRODUCTION 1. 2 types of restitution a. Substantive (1) the recapture of a benefit conferred on the D. by the Pl. through which the D. has been unjustly enriched. b. Remedial (1) recoveries that are measured by the amount of a D.'s unjust enrichment. 2. Indebitatus assumpsit a. Pl. could sue on a new promise to pay a pre-existing obligation. 3. Implied-in-Fact a. real K made with conduct instead of work (implied K through conduct) (1) examples (a) go to restaurant - no express promise to pay after eat (b) go to doctor's office - implied promise pay after doctor examines you b. EXPECTATION DAMAGES 4. Implied-in-Law a. not a real K (1) ie get a check in the mail by mistake (a) can not keep money (b) unjust enrichment (2) quasi-contract (a) D. has received a benefit (b) retention of the benefit is inequitable ** b. quantum meruit (1) "as much as he deserves" (2) recovery for the reasonable value of work, labor, and services performed at the request of the defendant. (3) must have a benefit conferred upon the D. c. gift does not equal unjust enrichment d. if someone without asking paints our house - not unjust to retain e. RESTITUTION DAMAGES
B. RESTITUTIONARY DAMAGES FOR BREACH OF K 1. OSTEEN V. JOHNSON (p. 309) a. FACTS: (1) Pl. pay $2500 to D. (2) D. would ... (a) advertise Pl. daughter music for 1 yr. (b) pay for recording studio (c) press and mail records - do second one if first one successful (3) D breached b. restitution damage to Pl. = $2500 - amount of work D. already had done c. service K - normally get cost of completion + profits d. Pl. want $ back (1) wants rescission of K (2) restitution e. minor breach only get expectation (1) if material breach ... (a) then can rescind K and get restitution (rescission and restitution) (b) must go to the essence of the K to be a material breach. 2. RESTATEMENT (p. 311)
344 PURPOSE OF REMEDIES Judicial remedies under the rules stated in this Restatement serve to protect one or more of the following interests of a promise ... c) his restitution interest = his interest in having restored to him any benefit he has conferred on the other party.
345 JUDICIAL REMEDIES AVAILABLE The judicial rememdies available for the protection of restitution interests include a judement or order ... c) requiring restoration of a specific thing to prevent unjust enrichment, d) awarding a sum of money to prevent unjust enrichment
370 REQUIREMENT THAT BENEFIT BE CONFERRED A party is entitled to restitution under the rules stated in this Restatement only to the extent that he has conferred a benefit on the other party by way of part performance or reliance. * see examples on p. 312
371 MEASURE OF RESTITUTION INTEREST If a sum of money is awarded to protect a party's restitution interest, it may as justice requires be measured by either a) the reasonable value to the other party of what he received in terms of what it would have cost him to obtain it from a person in the claimant's position (reasonable value to the party to whom restitution is sought), or - cost-of-completion from someone else - cost to get someone else to do it b) the extent to which the other party's property has been increased in value or his other interests advanced (addition to his wealth). - increase in value - usually a) > b) -- give more $ to the innocent party
3. UNITED STATES V. ALGERNON BLAIR (p. 314) a. FACTS: (1) Blair K w/ Coastal to help Blair w/ construction (2) Blair refused to pay for crane as was required in K (material breach) (3) Trial court found $37,000 due Coastal for completed work (a) Coastal would have lost $37,000 if K not breached. b. held for Coastal - quantum meruit c. material breach -- Coastal can have either restitution or expectation (1) chose restitution - can get more $ with restitution than with expectation - K were performed, Coastal would have lost money (2) restitution = mkt value of services performed 4. IMPORTANT PRINCIPLES a. restitution for benefit conferred and unjust enrichment
(1) quantum meruit - restitution for service K (as much as they deserve) b. if benefit thrust upon you, don't have to pay c. when use restitution (1) no K, but a benefit conferred (2) K is not enforceable (3) when damages are too speculative (4) MATERIAL BREACH (goes to the essence) + PART PERFORMANCE (a) NON-BREACHING party has a choice of RESTITUTION AND RESCISSION of K or EXPECTATION (b) MINOR breach only get EXPECTATION d. once work is finished - only get K price, no restitution ** e. for the non-breaching party, expectation is not a ceiling for restitution ** (1) expectation hwr is a ceiling for reliance for the non-breaching party f. restitution v. reliance (1) restitution based on the benefit to the defendant (2) reliance damages based on cost to the plaintiff
C. RESTITUTION IN FAVOR OF A PL. IN DEFAULT 1. BRITTON V. TURNER (p. 318) a. FACTS: (1) Pl. performed $95 of $120 K of employment for 1 year (2) Pl. breached without D.'s consent (3) Pl. want money for work done b. for Pl. (1) D. can't receive unjust enrichment (2) even though Pl. breached, worse if D. unjustly enriched (3) if D. receive benefit, must pay for it 2. PRINCIPLES a. a breaching party can only get RESTITUTION - EXPECTATION is the CEILING (1) increase in value to the property or substitute mkt value (a) breaching party gets the lower one (b) K price = $100,000 increase value = $ 50,000 mkt value services= $ 60,000 - breaching party gets $50,000 (2) no encouragement to breach b. DOBBS MEASURE (1) contractor = breaching party K-1 = $50,000 K-2 = $20,000 (cost of completion) $30,000 = damages for benefit conferred paid by contractor (breaching party) - K-1 ($50,000) paid to original contractor - he breached - costs landowner $20,000 to have someone else do it - breaching contractor pays $30,000 to landowner - landowner now has house for $50,000 (K-1) c. UCC (p. A-58)
2-718 LIQUIDATION OR LIMITATION OF DAMAGES 2) Where the seller justifiably withholds delivery of goods because of the buyer's breach, the buyer is entitled to restitution of any amount by which the sum of his payments exceeds a) the amount to which the seller is entitled by virtue of terms liquidating the seller's damages in accordance with subsection (1), or - liquidated damages = ceiling - seller gets to keep if have liquidated damage clause b) in the absence of liquidated damages clause, 20% of the value of the total performance for which the buyer is obligated under the K or $500, whichever is smaller. - 20% of K price or $500, whichever is smaller - rest goes to the buyer - if seller damages are greater, get that too 3) The buyer's right to restitution under subsection (2) is subject to offset to the extent that the seller establishes a) a right to recover damages under the provisions of this Article other than subsection (1), and b) the amt or value of any benefits received by the buyer directly or indirectly by reason of the K. 4) Where a seller has received payment in goods, their reasonable value or the proceeds of their resale shall be treated as payments for the purposes of subsection (2); but if the seller has notice of the buyer's breach before reselling goods received in part performance, his resale is subject to the conditions in 2-706.
ASSENT CHAPTER 8 - AN INTRODUCTION TO INTERPRETATION I. LUCY V. ZEHMER (p. 330) A. FACTS: 1. Pl. and D. entered into a written K where Pl. was to buy from D. his farm for $50,000 2. both were drunk at the time 3. Pl. was serious 4. D. said it was a joke but did not manifest his outward intentions B. for Pl. 1. if words or actions have one reasonable meaning, then the undisclosed intent = immaterial unless unreasonable 2. specific performance - land unique I. RAFFLES V. WICHELHAUS (p. 334) A. FACTS: 1. Pl. agreed to sell to D. cotton on ship named Peerless from Bombay 2. hwr, there were 2 ships named Peerless and D. meant a different one B. for D. 1. ambiguity does not make a K binding a. since ambiguity, no consensus -- no binding K II. FRIGALIMENT V. BNS SALES (p. 335) A. FACTS: 1. D. entered into K where it would ship "chicken" to Pl. a. did not specify what type 2. Pl. wanted young broiling chicken 3. D. sent older fowl B. complaint dismissed for D. 1. just like PEERLESS - attach a different meaning 2. buyer (Pl.) knew or should have know of seller's (D.) definition 3. seller = innocent party -- choose his definition and he wins III. RESTATEMENT (p. 340) 20 EFFECT OF MISUNDERSTANDING 1) There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and a) neither party knows or has reason to know the meaning attached by the other; or b) each party knows or each party has reason to know the meaning attached by the other. 2) The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if a) that party does not know of any different meaning attached by the other; and the other knows the meaning attached by the first party; or b) that party has no reason to know of any different meaning attached by the other, and the other has reason to know the meaning attached by the first party.
201 WHOSE MEANING PREVAILS 1) Where the parties have attached the same meaning to a promise or agreement or a term thereof, it is interpreted in accordance with that meaning. 2) Where the parties have attached different meanings to a promise or agreement or a term thereof, it is interpreted in accordance with the meaning attached by one of them if at the time the agreement was made a) that party did not know of any different meaning attached by the other; and the other knew the meaning attached by the first party; or b) that party had no reason to know of any different meaning attached by the other party, and the other had reason to know the meaning attached by the first party. 3) Except as stated in this section, neither party is bound by the meaning attached by the other, even though the result may be a failure of mutual assent. IV. EMBRY V. HARGADINE (p. 342) A. FACTS: 1. Pl. = employer of D. 2. written K expired on 12/15 a. went to D. to request new K or else wouldn't work b. D. said "Go ahead, you are all right. Get your men out, and do not let that worry you." 3. Pl. said cmmt = new oral K 4. D. fired Pl. in February B. for Pl. 1. does not matter what inner intentions are a. if outward manifestation/conduct = so that reasonable man would believe he was assenting - K b. objective std - not subjective std of employer's intent c. if subjective - anyone could get out of K ** (see examples p. 346- 349) V. HAINES V. NEW YORK (p. 351) A. FACTS: 1. D. to build and maintain sewer system 2. Pl. want to build more house -- want city to expand sewer system which is already operating at max. capacity B. for D. 1. D. must maintain, not expand 2. 3 ways to interpret a. actual intent b. hypothetical intent c. fair and reasonable 3. rule a. where the parties have not clearly expressed the duration of a K, the courts will imply that they intended performance to continue for a reasonble time. VI. RESTATEMENT (p. 354)
204 SUPPLYING AN OMITTED ESSENTIAL TERM When the parties to a bargain sufficiently defined to be a K have not agreed with respect to a term which is essential to a determination of their rights and duties, a term which is reasonable in the circumstances is supplied by the court.
VII. SPAULDING V. MORSE (P. 354) A. FACTS: 1. mom and dad got divorce 2. divorce agreement said dad pay mom $1200/yr till son got into college a. once son in college - dad pay $2200/yr b. trust to provide son w/financial security to maintain education 3. after high school, Richard went to join the army cuz of WWII. 4. mom still want dad to pay $1200/yr B. for dad - don't have to pay $ while son in army 1. instrument interpreted as to what intent was through the words a. must not be inconsistent to law/repugnant to other terms of the agreement. b. since intent of trust for financial stability in son's education and son not getting educated while in army - dad relieved of payment (1) in addition, son being supported by the army
CHAPTER 9 - THE MECHANICS OF A BARGAIN (I) -- OFFER & REVOCATION I. WHAT CONSTITUTES AN OFFER A. RESTATEMENT (p. 359)
24 OFFER DEFINED An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it. - offeree must think all have to do is say yes to have acceptance
- look to see if reasonable person would think his acceptance if invited and will conclude it B. LONERGAN V. SCOLNICK (p. 359) 1. FACTS: a. seller placed ad in paper for land b. seller wrote form letter describing property c. buyer sent letter to seller asking for description of land and see escrow agent OK d. seller wrote to buyer said must act fast and escrow agent OK e. buyer did not act fast so seller sold to someone else -- buyer sue 2. for seller a. each letter further assent was needed to make acceptance C. LEFKOWITZ V. GREAT MINNEAPOLIS SURPLUS STORE (p. 362) 1. FACTS: a. see ad on p. 362 b. D. place add in paper which said would sell fur coat for $1 c. Pl. went to buy and D. would not sell to him (1) said offer only open to women (2) D. said ad = invitation to make an offer not automatic K once accepted 2. for Pl. ** a. rule Where the offer is clear, definite, and explicit, and leaves nothing open for negotiation, it constitutes an offer, acceptance of which will complete the K. b. normally ad not an offer (1) usually invites someone to take further action for further negotiation. (2) sent out to too many people - everybody can't accept c. reasonableness for offer (when reasonable person thinks offer) (1) manifestation of present K intent (2) must have definiteness of terms D. advertisements must be in stock or have reasonable amt - not hook and bait
I. TERMINATION OF THE OFFEREE'S POWER OF ACCEPTANCE: LAPSE, REJECTION, AND COUNTER-OFFER A. AKERS V. J.B. SEDBERRY (p. 368) 1. FACTS: a. Pl. worked for D. b. Pl. offered to resign (1) D. did not accept resignation (2) D. cont. to talk business (3) D. sent Pl. back to work c. following Monday - D. said accept Pl.'s resignation 2. for Pl. ** a. offer can be terminated by . . . (1) being rejected (2) not accepted w/in the specified time or w/in a reasonable time (a) usually offer made during a conversation ends at the end of a conversation (3) revocation (a) offer can be revoked any time before accepted (4) counter-offer B. RESTATEMENT (p. 372)
41 LAPSE OF TIME 1) An offeree's power of acceptance is terminated at the time specified in the offer, or, if no time is specified, at the end of a reasonable time. 2) What is reasonable time is a question of fact, depending on all the circumstances existing when the offer and attempted acceptance are made. 3) Unless otherwise indicated by the language or the circumstances . . . an offer sent by mail is seasonably accepted if an acceptance is mailed at any time before midnight on the day on which the offer is received. - considerable longer time may be reasonable C. ARDENTE V. HORAN (p. 373) 1. FACTS: a. Pl. agreed to buy D. residential property b. Pl. sent letter to D. w/$20,000 deposit (1) want certain patio furniture to remain (2) confirm as part of transaction (3) would be difficult to replace 2. for D. a. letter was a counter-offer (not a acceptance coupled with an inquiry) -- killed the offer b. to be an effective acceptance must be definite and unequivocal (1) conditional acceptance = counter-offer (rejection of the original offer) (a) kills the offer (b) counter-offer requires acceptance by the original offeror (2) acceptance coupled with an inquiry = acceptance (3) condition implied in the offer = acceptance - basically the same offer D. RESTATEMENTS (p. 376)
39 COUNTER-OFFERS 1) A counter-offer is an offer made by an offeree to this offeror relating to the same matter as the original offer and proposing a substituted bargain differing from that proposed by the original offer. 2) An offeree's power of acceptance is terminated by his making of a counter-offer, unless the offeror has manifested a contrary intention or unless the counter-offer manifests a contrary intention of the offeree. - counter-offer = rejection - hwr. counter-offer = offer -- still can be accepted by the offeror -- carries negotiations on rather than cutting them off ** - see examples p. 376
59 PURPORTED ACCEPTANCE WHICH ADDS QUALIFICATIONS A reply to an offer which purports to accept it but is conditional on the offeror's assent to terms additional to or different from those offered is not an acceptance but is a counter-offer. (CONDITIONAL ACCEPTANCE)
E. RYDER V. WESCOAT (p. 378) 1. FACTS: a. Wes gave Ryder option K b. Wes thought Ryder rejected before end of option K 2. for Ryder ** a. option K not killed by a rejection (1) person has paid for the right to keep the offer open for a certain amt of time (2) can enforce rejection when other party has relied (3) death of either party usually kills an offer - not terminated an option K b. RESTATEMENT (p. 381)
37 OPTION K The power of acceptance under an option K is not terminated by rejection, or counter-offer, by revocation, or by death or incapacity of the offeror, unless the requirements are met for offer and discharge of a contractual duty.
II. TERMINATION OF THE OFFEREE'S POWER OF ACCEPTANCE: REVOCATION A. DICKINSON V. DODDS (p. 382) 1. FACTS: a. D. said offer to Pl. open till 6/12 9AM b. Pl. on 6/11 knowing D. had changed his mind, left formal acceptance w/D.'s mom c. 7AM 6/12, agent gave D. acceptance - D. said already sold property 2. for D. a. since seller made offer, must revoke it - can't just sell to someone else (1) revocation can be direct or indirect b. if buyer knows seller does not intend to sell to him - equivalent to a revocation (1) RESTATEMENT (p. 385)
43 INDIRECT COMMUNICATION OF REVOCATION An offeree's power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter into the proposed K and the offeree acquires reliable information to that effect. B. PAYNE V. CAVE (p. 386) 1. FACTS: a. Pl. = auctioner D. = buyer b. D. offered 40 for worm (1) when Pl. said would not weigh it, D. retracted the offer befored the hammer went down 2. for Pl. a. buyer gave bid to auctioner (1) bid = offer (2) since it is an offer - can revoke (a) if bid is an acceptance - can't revoke cuz have K now 3. UCC (p. A-33)
2-328 1) In a sale by auction, if goods are put in lots each lot is the subject of a separate sale 2) A sale by auction is complete when the auctioneer so announces by the fall of the hammer or in other customary manner. Where a bid is made while the hammer is falling in acceptance of a prior bid, the auctioneer may in his discretion reopen the bidding or declare the goods sold under the bid on which the hammer was falling. 3) Such a sale is with reserve unless the goods are in explicit terms put up without reserve. In an auction with reserve, the auctioneer may withdraw the goods at any time until he announces completion of the sale. In an auction without reserve, after the auctioneer calls for bids on an article or lot, that article or lot cannot be withdrawn unless no bid is made within a reasonable time. In either case, a bidder may retract his bid until the auctioneer's announcement of completion of the sale, but a bidder's retraction does not revive any previous bid. 4) If the auctioneer knowingly receives a bid on the seller's behalf or the seller makes or procures such a bid, and notice has not been given that liberty for such bidding is reserved, the buyer may at his option avoid the sale or take the goods at the price of the last good faith bid prior to the completion of the sale. This subsection shall not apply to any bid at a forced sale (foreclosure). C. SHUEY V. UNITED STATES (p. 387) 1. FACTS: a. Pl. gave info. that led to arrest of Surrat b. $25,000 reward for arrest of Surrat was w/drawn 5 months earlier 2. for the D. a. Pl. only gave info. - offer for apprehension -- only liberal damages b. offer revoked in the same manner it was given
c. offer here = unilateral K (1) unilateral K - want act/performance as acceptance (2) bilateral K - offer and acceptance both are promises - a promise for a promise D. PETTERSON V. PATTBERG (p. 392) 1. FACTS: a. D. agreed to accept $ for mortagage less $780 b. when Pl. came by to D.'s with money, D. sold mortagage to someone else c. Pl. had relied on D.'s promise (1) made promise to sell land to third party free and clear of mortgage 2. for D. a. an offer to enter into a unilateral K can be withdrawn before act requested is done b. Wormser (1) why should A be bound but not B (2) can revoke any time before action completed c. McGouney (1) 2 promises in a unilateral K (a) promise to pay for completed act (b) implied collateral promise to keep offer open for reasonable time (2) consideration given by starting performance (a) return promise = to hold offer open for a reasonable time (b) arg. against - no consideration - bargain for completed act (3) Restatement adopted McGouney's reasoning E. RESTATEMENT (p. 398)
45 OPTION K CREATED BY PART PERFORMANCE OR TENDER 1) Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option K is created when the offeree tenders or begins the invited performance or tenders a beginning of it. 2) The offeror's duty of performance under any option K so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer. - get money when complete - offeree is not bound to complete performance - offeror is bound to pay if offeree does complete performance F. MARCHIONDO V. SCHECK (p. 400) 1. FACTS: a. seller agreed to Pl. to pay % commission to broker b. offer open for six days c. seller revoked in writing on day 6 before the acceptance. 2. did not decide issue a. unilateral K for Pl. to perform sale (1) until performance received - no consideration -- no K (2) does not matter if offer is exclusive (3) Once partial performance is begun pursuant to the offer made, a K results. This K = K with conditions or a option K. G. DRENNAN V. STAR PAVING CO. (p. 403) 1. FACTS: a. Pl. = contractor D. = subcontractor b. Pl. submitted bid for work need to D. c. D. supplied bid to Pl. d. Pl. relied on D.'s bid to make offer e. Pl. got the job f. D. then said it would cost twice as much for his part g. Pl. went and got somebody else and sues for the difference 2. for Pl. a. D.'s action induced Pl. (1) injustice can only be avoided by enforcement of the K ( 90 of Restatement) (2) option K - keep open for a reasonable time b. D. had reason to expect and want Pl to rely on bid c. Pl. acted reasonably to mitigate damages 3. UCC (p. A-18)
2-205 FIRM OFFERS An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed 3 months; but any such term of assurance on a form supplied by the offeree must be signed separately by the offeror. - no need for consideration with a firm offer
1-201 (39) p. A-7 Signed includes any symbol executed or adopted by a party with present intention to authenticate a writing.
RESTATEMENT (p.409)
87 OPTION K
1) An offer is binding as an option K if it a) - is in writing and signed by the offeror, - recites a purported consideration for the making of the offer, - and proposes an exchange on fair terms with a reasonable time 2) An offer (doesn't have to be a promise) which the offeror should reasonably expect to induce action or forbearance of substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option K to the extent necessary to avoid injustice. - Restitution of benefits conferred may be enough, or partial or full reimbursement of losses may be proper. - foreseeable action and substantial forbearance
CHAPTER 10 - THE MECHANICS OF A BARGAIN (II) - CONTRACTS CONLUDED BY CORRESPONDENCE I. INTRODUCTION A. common law Acceptance effective on dispatch. Revocation effective on receipt. B. ADAMS V. LINDSELL (p. 414) 1. FACTS: a. Pl. = wool manufacturer b. D. = wool dealer c. D. wrote letter to Pl. offering to sell wool (1) letter went the wrong way and took a long time to get there (2) consequently Pl. acceptance was delayed d. D. sold to someone else 2. for D. a. rule (1) acceptance takes effect on dispatch (2) this is the mail-box rule (3) provides offeree reasonable grounds to decide if have K (a) once mailed - definite acceptance on the offeree's part (4) offeror can specify that acceptance is effective only upon receipt C. RESTATEMENTS (p. 418)
30 FORM OF ACCEPTANCE INVITED 2) Unless otherwise indicated by the language or the circumstances, an offer invites acceptance in any manner and by any medium reasonable in the circumstances.
60 ACCEPTANCE OF OFFER WHICH STATES PLACE, TIME, OR MANNER OF ACCEPTANCE If an offer prescibes the place, time, or manner of acceptance, its terms in this respect must be compiled with in order to create a K. If an offer merely suggests a permitted place, time, or manner of acceptance, another method of acceptance is not precluded. - can proscibe any offer (does not have to be reasonable) - "I am the master of my offer!!!" ** see examples p. 418
63 TIME WHEN ACCEPTANCE TAKES EFFECT (MAILBOX RULE) Unless the offer provides otherwise, a) an acceptance made in a manner and by a medium invited by an offer is operative and completes the manifestation of mutual assent as soon as put out of the offeree's possession, without regard to whether it ever reaches the offeror.
65 REASONABLENESS OF MEDIUM OF ACCEPTANCE Unless circumstances known to the offeree indicate otherwise, a medium of acceptance is reasonable if it is the one used by the offeror or one in similar transactions at the time and place the offer is received. - mail = customary
67 EFFECT OF RECEIPT OF ACCEPTANCE IMPROPERLY DISPATCHED Where an acceptance is seasonably dispatched but the offeree uses means of transmission not invited by the offer or fails to exercise reasonable diligence to insure safe transmission, it is treated as operative upon dispatch if received within the time which a properly dispatched acceptance would normally have arrived. - as long as gets there in same amount of time - acceptance is OK - this is only where the method of acceptance is suggested - not proscribed
D. UCC
2-206 OFFER AND ACCEPTANCE IN FORMATION OF K (p. A-18) 1) Unless otherwise unambiguously indicated by the language or circumstances a) an offer to make a K shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances; b) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming OR non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the SELLER seasonably notifies the buyer that the shipment is offered only as an accomodation to the buyer. - no more unilateral K trick 2) Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance. - different from Restatement (UCC no K at all)
E. LEWIS V. BROWNING (p. 419) 1. FACTS: a. Pl. wrote letter concerning lease to D. b. in Pl.'s letter - said acceptance dependent on receipt 2. for Pl. a. lease gave specific provisions that acceptance must be received (1) no mailbox rule (2) clearly specified otherwise - "master of offer" F. WITHDRAWAL OR REPUDIATION OF A DISPATCHED ACCEPTANCE OR REJECTION (p. 422-423) 1. Acceptance sent first then rejection - have K (mailbox rule) a. Estoppel if other party relies on the revocation b. Repudiation of K c. Offer to rescind 2. Rejection sent first, then acceptance. a. no mailbox rule -- whichever arrives first G. FALCONER V. MAZESS (p. 423) 1. FACTS: a. buyer withdrew offer before seller's actual receipt of the acceptance but after the acceptance had been mailed 2. held for seller a. buyer's letter did not expressly state how to be accepted (1) no requirement for receipt unless expressly provided for. b. under circumstances - mail is OK -- mailbox rule c. 5 day period begins on the receipt of the offer (1) must mail within 5 days of receipt of offer (2) if says must mail within 5 days hereof (like here) - must mail within 5 days of the date in the letter H. IMPORTANT PRINCIPLES 1. Everything effective upon receipt except acceptance a. acceptance = effective on dispatch b. mailbox rule c. offeree can protect himself by . . . (1) certified mail 2. acceptance can be known by any reasonable method a. same method which offer was made b. method that is customary for the trade 3. offeror may proscribe any manner of acceptance a. can be unreasonable b. offeror = master of his offer c. sometimes only suggestions -- offeree not compelled to perform as offeror wishes 4. if method suggested but use wrong method a. as long as gets there in same amount of time - OK b. offeror is not hurt c. exception to the mailbox rule ** (1) option K - must actually notify offeror 5. Offer and Acceptance sent at the same time a. no K (1) can't have acceptance of a non-existent offer 6. Acceptance sent first - then revocation (rejection) of acceptance a. there is a K - acceptance effective on dispatch b. if offeror relied on the revocation . . . (1) estoppel - only if reliance (2) repudiation - breach of K (3) offeror can offer to rescind the K 7. offeree sends rejection - then sends acceptance a. no mailbox rule b. whichever one gets their first I. RESTATEMENT (p. 425)
63 TIME WHEN ACCEPTANCE TAKES EFFECT Unless the offer provides otherwise . . . b) an acceptance under an option K is not operative until received by the offeror. - offeree takes the risk of loss or delay in the transmission of the acceptance and remains free to revok the acceptance until it arrives - must be communicated for acceptance - no mailbox rule CHAPTER 11 - THE MECHANICS OF A BARGAIN (III) - MODES OF ACCEPTANCE I. DAVIS V. JACOBY (p. 428) A. FACTS: 1. Pl.'s uncle and aunt requested that Pl. come out and help cuz sick 2. said if do, Pl. will inherit everything B. for Pl. 1. uncle wanted promise to come out -- bilateral K a. since bilateral K - get specific performance cuz damages would be insufficient b. if unilateral K - Pl. would get nothing cuz uncle died before full performance could be done by Pl. c. old rule (1) if ambiguous - bilateral K d. present rule (1) ambiguous - either bilateral or unilateral K (a) against person who drafted it I. RESTATEMENT (p. 434)
32 INVITATION OF PROMISE OR PERFORMANCE In case of doubt, an offer is interpreted as inviting the offeree to accept either by promising what the offer requests (bilateral K) or by rendering the performance (unilateral K), as the offeree chooses - ambiguity by the offeror - offeree can choose either bilateral K or unilateral K ** - if clearly unilateral K, does not have to finish performance once started (no implied promise to finish - p. 398 45) . differs from ambiguous offer cuz offeree once start performance has implied promise to finish [p. 434 62(2) ] - see examples p. 434
62 EFFECT OF PERFORMANCE BY OFFEREE WHERE OFFER INVITES EITHER PERFORMANCE OR PROMISES 1) Where an offer invites an offeree to between acceptance by promise and acceptance by performance, the tender or beginning of the invited performance or a tender of a beginning of it is an acceptance by performance. - if ambiguous offer by offeror - begin of performance by offeree = acceptance - begin of performance = implied promise by the offeree to finish 2) Such an acceptance operates as a promise to render complete performance - not apply to option K - see examples on p. 435 ** UCC 2-206 (1) II. EXAMPLE A. FACTS: 1. buyer tells seller to send him 1000 hr. light bulbs 2. seller sends instead 500 hr. light bulbs B. ambiguous cuz seller sends back non-conforming good 1. seller never promised anything - no bilateral K 2. buyer offered a unilateral K - but seller did not perform -- no unilateral K ** 3. known as the unilateral K trick C. UCC 2-206 (1)(b) ** 1. UCC treats seller performance as a breach unless seller clearly notifies that he is sending non-conforming goods III. KLOCKNER V. GREEN (p. 435) A. FACTS: 1. decedent told Pl. that if she cared for her would leave property to her a. however, her new will by decedent was never executed b. only drafts were written up 2. decedent died - old will gave property to D. B. for Pl. 1. does not matter if Pl. would have cared for decedent anyway a. decedent got what she bargained for 2. oral K enforceable a. if one party perform - enforced so as not to leave him hanging IV. GORDON'S THEORY A. must look at all circumstances to see if have implied promise V. CARLILL V. CARBOLIC SMOKE BALL CO. (p. 440) A. FACTS: 1. D. placed ad that said if use prod. and catch cold - will pay 100 2. 1000 deposited in bank as sign of sincerity 3. Pl. got sick - want $ B. held for Pl. 1. offer for a reward 2. D. was sincere - deposited $ into bank 3. offer made to anyone who performs a. performance = acceptance -- unilateral K b. notice given to D. when told them of performance 4. consideration a. D. got product used b. Pl. was inconvenienced in some way VI. BISHOP V. EATON (p. 442) A. FACTS: 1. D. told Pl. to give his brother $ and "he will see to it that it is paid" 2. Pl. gave D.'s brother $ - D. never fulfilled promise B. held for Pl. 1. D. gave Pl. offer to guarantee = unilateral K 2. Pl. did notify D. seasonably a. Pl. sent letter = OK (1) letter = how offer was made VII. RESTATEMENT (p. 444)
54 ACCEPTANCE BY PERFORMANCE; NECESSITY OF NOTIFICATION TO OFFEROR 1) Where an offer invites an offeree to accept by rendering performance (unilateral K), no notification is necessary to make such an acceptance effective unless the offer requests such a notification. 2) If an offeree who accepts by rendering a performance has reason to know that the offeror has no adequate means of learning of the performance with reasonable promptness and certainty, the contractual duty of the offeror is discharged unless a) the offeree exercises reasonable diligence to notify the offeror of acceptance, or b) the offeror learns of the performance within a reasonable time, or c) the offer indicates that notification of acceptance is not required VIII. UCC (A-18)
2-206 (2) OFFER AND ACCEPTANCE IN FORMATION OF K Where the beginning of a requested performance is a reasonable mode of acceptance, an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance. - differs from Restatement - no K at all
IX. WHITE V. CORLIES (p. 445) A. FACTS: 1. Pl. = builder D. = merchant who requested Pl.'s services 2. D. furnished Pl. with specification and then later changed specifications a. then told Pl. "can begin work at once" 3. Pl. then bought lumber and began work on it 4. D. revoked his offer B. held for D. 1. D.'s letter does not = agreement a. only offer b. must have performance to have an agreement 2. rule a. offer must be accepted by appropriate act b. Pl. did not act in any way to show acceptance to D. (1) lumber could have been bought and work done on it for anyone c. if amibiguous - 62 beginning performance = promise to finish
d. RESTATEMENT (p. 447)
56 ACCEPTANCE BY PROMISE; NECESSITY OF NOTIFICATION TO OFFEROR Except as stated in 69, or where the offer manifests a contrary intention, it is essential to an acceptance by promise (bilateral K) either that the offeree exercise reasonable diligence to notify the offeror or that the offeror receive the acceptance seasonably. - bilateral K ( 56) - must reasonably communicate promise - see example p. 447
X. HOLMAN V. MADSEN (p. 450) A. FACTS: 1. Pl. = subcontractor D. = contractor 2. D. used Pl's sub-bid a. listed Pl. as sub-bidder 3. D. chose different co. cuz had to use minority business B. for D. (contractor) 1. general contractor relies on subcontr. bid - subcontr not rely on general's bid a. subcontr. has no further expense until work started 2. give general more leeway and flexibility C. RESTATEMENT 19 (p. 452) 1. The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or by failure to act 2. The conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the conduct and knows or has reason to know that his conduct may cause the other party to understand that he assents. XI. PHILLIPS V. MOOR (p. 459) A. FACTS: 1. D. bought hay from Pl. 2. Pl. accepted but D. never picked it up 3. hay burned down B. for seller (Pl.) 1. seller made acceptance w/an inquiry 2. buyer knew had deal cuz making provisions to move hay 3. once struck K, ownership rights passed a. today, if seller has possession of the good, must take care of the good. 4. rule a. When acceptance sent, and reasonably thinks in reasonable time, other party has obligation to notify that acceptance is too late (1) silence = waiver of right to object to acceptance 5. UCC 2-509 (3) the risk of loss passes to the buyer on his receipt of the goods if the seller is a merchant; otherwise, the risk passes to the buyer on tender of delivery 6. RESTATEMENT (p. 460)
70 EFFECT OF RECEIPT BY OFFEROR OF A LATE OR OTHERWISE DEFECTIVE ACCEPTANCE A late or otherwise defective acceptance may be effective as an offer to the original offeror, but his silence operates as an acceptance in such a case only as stated in 69 (p. 468). XII. MCGLONE V. LACEY (p. 461) A. FACTS: 1. Pl. = injured party seeking D.'s legal services 2. Pl. sent letter requesting services 3. D.'s partner sent back letter to Pl. saying D. in legislature - will contact when he returns 4. D. did not do anything a. statute of limitations ran out B. for D. (lawyer) 1. ACCEPTANCE MUST BE UNEQUIVOCAL IN ORDER TO CREATE A K a. see example p. 463 b. silence will not of itself constitute an acceptance 2. since contingent fee a. D. had to present counter-offer discussing % of his cut 3. lawyer's liability limited to duty owed to client a. since no duty owed here, no liability XIII. COLE V. HOLLOWAY (p. 465) A. FACTS: 1. Pl. sent his agent to solicit ofers 2. D. wanted order of 50 barrels 3. Pl. said had to be approved by Memphis office a. done deal if buyer does not hear otherwise 4. Pl. had plenty of chances to tell D. order wasn't accepted - told after few months when price went up B. held for D. 1. Pl.'s delay of notice to D. is unreasonable 2. silence can not = acceptance unless acts of Pl. can infer acceptance 3. up to merchant who solicits orders for goods to notify with reasonable time that the orders were not accepted a. if had ample opportunity, silence for unreasonable time = acceptance if D. has relied 4. offer is irrevocable a. firm offer by a merchant open for a reasonable time or 3 months b. on seller's form - has buyer's offer as irrevocable c. UCC 2-205 (p. A-18) (1) today - must have separate signature of Buyer on the irrevocable clause XIV. RESTATEMENT (p. 468)
69 ACCEPTANCE BY SILENCE OR EXERCISE OF DOMINION 1) Where an offeree fails to reply to an offer, his silence and inaction operate as an ACCEPTANCE in the following cases only: a) Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation. b) Where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer. c) Where because of previous dealings or otherwise, it is reasonable that the offeree should notify the offeror if he does not intend to accept. 2) An offeree who does any act inconsistent with the offeror's ownership of offered property is bound in accordance with the offered terms unless they are manifestly unreasonable. But if the act is wrongful as against the offeror, it is an acceptance only if ratified by him. - see examples on p. 468-469
CHAPTER 12 - IMPLIED-IN-LAW AND IMPLIED-IN-FACT CONTRACTS; UNILATERAL K REVISITED I. DIFFERENT TYPES TO K A. Express K 1. K made with words 2. real K 3. EXPECTATION DAMAGES B. Implied-in-Fact- 1. made with conduct 2. real K 3. EXPECTATION DAMAGES C. Implied-in-Law 1. not a real K 2. quasi-K - "as if a K" 3. legal fiction 4. RESTITUTION DAMAGES a. unjust enrichment b. benefit conferred I. IN RE CRISAN ESTATE (p. 471) A. FACTS:
1. 87 yr. old woman collapsed while shopping 2. spent 14 days in one hospital and then 11 months in another 3. never regained consciousness and died 4. hospital wants her assets to pay hospital bills B. for hospital 1. person who gives services to another without consent entitled to restitution if . . . a. acted with the intent to charge after b. services necessary to avoid others pain c. other person would not not consent d. impossible for other to give consent cuz unconscious (probably would have given consent if awake) II. DAY V. CATON (p. 474) A. FACTS: 1. Pl. built wall on D.'s property 2. wall benefitted D. 3. Pl. want D. to pay half B. held for Pl. 1. rule - silence could be implied-in-fact K if . . . a. Pl. has expectation of payment b. if D. has reason to know of (a) c. D. did not object d. D. availed himself to benefit 2. if a party voluntarily avails and accepts services rendered for his benefit, when given ample time to let other party know he does not want it, even if no consent given, consent can be inferred. a. Pl. must expect payment III. BASTIAN V. GAFFORD (p. 476) A. FACTS: 1. G asked B to draw up plans for office building 2. B orally agreed and began drafting 3. B would only due on cost-plus basis 4. G hired another architect 5. B. sued for benefit conferred by implied-in-fact K B. for G - architect loses 1. trial court failed to distinguish between quasi-K and implied-in-fact K a. quasi K - need unjust enrichment and benefit conferred for recovery (1) here owner did not use those plans -- no benefit conferred b. implied-in-fact - unjust enrichment is irrelevant (1) owner tells him to draw up plans (a) not necessary that G used B's plans or derived any benefit from them (b) enough that G requested and received them under circumstances which implied that G would pay for them (2) really this kind of K here (3) real K -- EXPECTATION DAMAGES IV. PINE RIVER STATE BANK V. METTILLE (p. 477) A. FACTS: 1. Pl. given job by D. 2. Pl. fired cuz messed up on job 3. Pl. contends that employee handbook = new K a. employee handbook provided measures that must be taken before an employee is discharged. B. for Pl. 1. promise of employment on particular terms of unspecified duration (in form of offer) = unilateral K. a. consideration for indefinite term = continued performance despite freedom to leave 2. no mutuality of K with unilateral K - only with bilateral K a. here, handbook has definite language of offer of a unilateral K for procedures to be followed in job termination b. Pl. continused job performance despite at will = consideration 3. presumption that an employment = at will (can terminate any time) a. exceptions ** (1) employment handbook (2) can imply through working relationship a K not to fire except for a good cause -- no longer at will (a) good cause = employee screw up or economic recession
CHAPTER 13 - PRELIMINARY NEGOTIATIONS, INDEFINITENESS, AND THE DUTY TO BARGAIN IN GOOD FAITH I. MARTIN DELICATESSEN V. SCHUMACHER (p.491) A. FACTS: 1. Pl. = tenant D. = landlord 2. Pl. rented from D. retail store 3. at the end of 5 years, Pl. could renew with the new rent to be agreed upon 4. D. wanted $900 a. Pl. got appraiser who said FMV = $545 b. Pl. wanted specific performance for reasonable rent B. for D. (landlord) 1. historically agreements to agree are not enforceable a. trend today is to enforce if parties intended to be bound and wanted to settle details later b. if parties intended to be bound - court can fill in gaps if gaps are not too big c. gap fillers (1) majoritarian view - what would most people do (FMV) (2) use what is most economically efficient (3) default standards (a) like computer default - set up own parameters but if default go back to what computer had I. UCC (p. A-17)
2-204 FORMATION IN GENERAL 1) A K for sale of goods may be made in any manner sufficient to show agreement, including K, by both parties which recognizes the existence of such a K. 2) An agreement sufficient to constitute a K for sale may be found even though the moment of its making is undetermined. 3) Even though one or more terms are left open, a K for sale does not fail for indefiniteness if the parties have intended to make a K and there is a reasonably certain basis for giving an appropriate remedy.
2-305 OPEN PRICE TERM 1) The parties if they so intend can conclude a K for sale even though the price is not settled. In such a case the price is a reasonable price at the time for delivery if a) nothing is said as to price; or b) the price is left to be agreed by the parties and they fail to agree; or c) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded. 2) A price to be fixed by the seller or by the buyer means a price for him to fix in good faith. 3) When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of one party, the other may at his option treat the K as cancelled or himself fix a reasonable price. 4) Where, however, the parties intend not to be bound unless the price be fixed or agreed and it is not fixed or agreed, there is no K. In such a case the buyer must return any goods already received or if unable so to do must pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on account. - issue is did they intend to be bound
2-308 ABSENCE OF SPECIFIED PLACE FOR DELIVERY Unless otherwise agreed a) the place for delivery of goods is the seller's place of business or is he has none, his residence; but b) in a K for sale of identified goods which to the knowledge of the parties at the time of contracting are in some other place, that place is the place for their delivery; and c) documents of title may be delivered through customary banking channels
2-309 ABSENCE OF SPECIFIC TIME PROVISIONS; NOTICE OF TERMINATION 1) The time for shipment or delivery or any other action under a K if not provided in this Article or agreed upon shall be a reasonable time. 2) Where the K provides for successive performance but is indefinite in duration, it is valid for a reasonable time but unless otherwise agreed may be terminated at any time by either party. 3) Termination of a K by one party except on the happening of an agreed event requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable.
II. LEE V. JOSEPH SEAGRAM (p. 497) A. FACTS: 1. D. orally agreed that if Pl. sell him his liquor distributorship - would relocate Pl. with new one 2. D. said too vague and damages too speculative -- can't be enforced B. held for D. 1. parties intended to be bound and Pl. conditioned his sell to D. if D. would relocate -- should fill in gaps a. Pl. had good faith duty to accept any comparable distributorship b. since parties had intent to be bound -- should just fill in gaps 2. like UCC 2-204 (apply by analogy) p. A-17 III. ARNOLD PALMER V. FUGQUA (p. 503) A. FACTS: 1. Pl. and D. signed letter of intent to work together 2. all they had to do was have lawyers draw up papers and have the board approve it 3. even gave a press release that said that the 2 companies "agreed to cooperate" B. reversed - must find out intent 1. 2 possibilities of intent when have an oral K followed by a written K a. - intended to be bound by the oral agreement - written K just a memorialization of the agreement
b. - parties reach a oral agreement but the parties don't intend to be bound until have a written K - written K = consummation of the oral agreement
(p. 508) 6 Ways to Determine if Parties Intended to be Bound (in reality - each factor given different weight) 1) whether this class of K usually in writing 2) whether it needs a formal writing for its full expression 3) few or many details required - if K needs more details - usually a written K needed - if there are a lot of details in the oral K (like ARNOLD PALMER) - oral K may be sufficient 4) whether amount involved is large or small - larger amount usually need written K 5) whether the type of agreement is common or unusual 6) whether a written K is coming - if yes -- need written K IV. HOFFMAN V. RED OWL STORES (p. 508) - FAMOUS CASE A. FACTS: 1. D. told Pl. that if he had $18K would furnish him with a store 2. D. then kept on pushing $ required higher and higher B. for Pl. - reliance damages 1. UCC 2-204 (3) by analogy a. parties intend to have K b. reasonably certain basis for an appropriate remedy ** 2. preliminary negotiations can create reliance liability ( 90 RESTATEMENTS) a. arg against expectation costs - would have put Pl. ahead of where would have been (don't have to work for $ and can still go out and earn $ from another store) V. CHANNEL V. GROSSMAN A. FACTS: 1. Channel wanted to lease space in mall from Grossman 2. Grossman said if signed letter of intent would keep space off the mkt - letter of intent to secure financing from bank 3. Channel only needed final approval from headquarters & time to get inside of store ready 4. Grossman breached and leased to someone else B. for Channel - EXPECTATION DAMAGES [lots of $] 1. letter of intent not illusory promise (thought it was cuz could revoke at any time) a. Grossman got consideration for it because he now could secure financing now that he had a corporate lessee 2. though no K - agreement to negotiate in good faith 3. UCC 2-204 (3) by analogy a. parties intended to be bound to negotiate in good faith b. reasonably certain basis for remedy = EXPECTATION DAMAGES (1) circumstance here to negotiate in good faith (2) though not certain that negotiating in good faith would have completed the K - bad faith precluded completion of the K (a) therefore - EXPECTATION DAMAGES [millions and millions of dollars] ___________________________________________________________________ STATUTE OF FRAUDS I. PRINCIPLES A. to prevent fraud and perjury B. certain type of K must be in some form of writing (CATEGORICAL) C. functions 1. EVIDENTIARY a. evidence of K thru writing 2. CAUTIONARY (some scholars) a. make sure that people act deliberately by writing certain types of K D. courts generally not favor the Statute of Frauds 1. courts have tried to construe it narrowly
4 And be if further enacted . . that . . . no action shall be brought 1) upon any K or sale of lands, tenements, or hereditaments, or any interest in or concerning them; or - important to have a clear line of title - includes easements - granting easements must be in writing - short-term lease = oral K is acceptible - long-term lease (usually over 1 yr) = need written K 2) to charge any person upon any agreement made upon consideration of marriage; or - marriage settlements (dowry) - pre-nuptial agreements P $ | | M1-----M2 3) upon any agreement that is not to be performed within the space of one year from the making thereof; or - aimed at fading memories - hwr real problem is not how long it takes to perform but that it takes forever to get it to trial - must be CAPABLE of being performed within 1 yr. - K for 1 yr. and a day need writing -- promise for the rest of your life does not need writing (oral OK) 4) whereby to charge the D. upon any special promise to answer for the debt, default, or miscarriages of another person; or Creditor ------- Debtor | | | Surety - surety liable only if Debtor can't pay - consideration problem a) there exists consideration from Creditor to Debtor b) but there is no consideration between Surety and Creditor - inapplicable when the promisor undertakes to a Surety to advance some business advantage of his own 5) whereby to charge any executor or administrator upon special promise to answer damages out of his own estate; - another example of Surety unless the agreement upon which such action shall be brought, or some memorandum or note thereof (some form of writing - ie letterhead), shall be in writing, and signed by the party to be charged therewith, or some other person thereunto by him lawfully authorized.
17 [The "sale-of-goods" section] And be it further enacted . . . that . . . no K for the sale of any goods, wares. or merchandises for the price of 10 pounds sterling or upwards shall be allowed to be good, except a) the buyer shall accept part of the goods so sold and actually receive the same; or b) give something in earnest to bind the bargain or in part payment; or c) that some note or memorandum in writing of the said bargain be made and signed by the parties to be charged by such K or their agents thereunto lawfully authorized. - monetary base - must be above ten sterlings - K to make a will easy to perjure - person who left it is dead and can't testify - want writing for broker commission to be in writing - or else everybody would say get commission for sale
UCC 2-201 FORMAL REQUIREMENTS; STATUTE OF FRAUDS 1) Except as otherwise provided in this section, a K for the sale of goods for the price of $500 or more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that a K for sale has been made between the parties and signed by the party against whom enforcement is sought or by his authorized agent or broker. A writing is not sufficient because it omits or incorrectly states a term agreed upon but the K is not enforceable under this paragraph beyond the quantity of goods shown in such writing. - over $500 needs to be in writing - only some writing (letterhead OK) - only party to be charged is bound hypo B and S agree orally agree to 200 videos for $10 each written K = "I agree to B. to sell 100 videos. signed by S." - only B. can enforce K - only S. signed K (letterhead might be enough - no price is required on the K - if have incorrect quantity (here only 100 instead of 200) - can only enforce up to the quantity written [only evidence of 100 videos agreed upon] - if wrote too much on K (said 500 instead of 200) - only enforce on how much agreed upon (200) - quantity agreed upon is the CEILING
2) Between merchants if within a reasonable time a writing in confirmation of the K and sufficient against the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of (1) against such party unless WRITTEN NOTICE of objection to its contents if given within 10 days after it is received. - between merchants - if S. sends letter to B to confirm K - B must give written notice within 10 days to repudiate - goes against the policy that we don't want to have to make people repudiate K thrust upon them - different here because just confirming a pre-existing K 3) A K which does not satisfy the requirements of (1) but which is valid in other respects is enforceable a) if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the ordinary course of the seller's business and the seller, before notice of repudiation is received and under circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning of their manufacture or commitments for their procurement; or - no need for writing for specially manufactured goods - people don't make specially manufactured goods for no reason - specially manufactured goods are evidence in itself of a K - undue hardship to the seller if the buyer breaches (what is the otho. going to do with a specially made retainer) b) if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a k for sale was made, but the K is not enforceable under this provision beyond the quantity of goods admitted; or - if D. admits there was a K - no need for writing (admission gives proof that K was made) c) with respect to goods for which payment has been made and accepted or which have been received and accepted. - arg against seller that there was a K if he shipped the goods already - arg against buyer that there was a K if he accepted the goods already
3 THINGS NEEDED TO SATISFY FRAUD (UCC) 1) evidence of a K for a sale of goods 2) signed by the party to be charged 3) quantity
4 THINGS NEED TO SATISFY FRAUD (REGULAR STATUTE OF FRAUDS) 1) identify the parties 2) must have the basic terms (price/quantity) 3) subject matter 4) signed by the parties to be charged
1-206 STATUTE OF FRAUDS FOR KINDS OF PERSONAL PROPERTY NOT OTHERWISE COVERED 1) Except in the cases described in subsection (2) of this section, a K for the sale of personal property is not enforceable by way of action or defense beyond $5000 in amount or value of remedy unless there is some writing which indicates that a K for sale has been made between the parties at a (1) defined or stated price, (2) reasonably identifies the subject matter, and (3) is signed by the party against whom enforcement is sought or by his authorized agent. - differs from 2-201 cuz . . . 1) must have a price 2) if no writing - maximum remedy is $5,000 - only enforceable up to $5,000 - 2-201 sale of goods above $500 not enforceable if not in writing 2) Subsection (1) of this Section does not apply to K for the sale of goods nor of securities nor to security agreements. - personal property that are not goods are . . . . patent . copyright . trademark . right to sue . royalties PART PERFORMANCE EXCEPTION TO THE STATUTE OF FRAUDS - evidence of K - wouldn't perform is no K - increase hardship if don't apply K 1) Surety A) part performance is not an exception to the Surety K 1) part performance by the creditor a) part performance is always already done by the creditor - has always given $ to Debtor which is why he wants to be repaid by the Surety 2) part performance by the Surety a) no rational reason why not exception to Statute 2) Marriage A) fact that marriage occurs is no evidence of a K 1) people would get married anyways cuz of love B) part performance does not make an exception to the Statute 3) Real Estate (B - 30) A) have part performance is exception if have reliance 4) 1 yr. provision A) part performance is exception when 1 side has fully performed 1) irrational 2) person would have relied even if only partial performance
RESCISSIONS GENERALLY rescission can be oral - even within the Statute of Frauds
ORAL ALTERATIONS ** for a modification - must have writing if K as modified comes within Statute - hypo 1 i) seller sells goods for $300 ii) buyer wants $300 more goods iii) new K for $600 -- needs writing - hypo 2 i) original K for $600 ii) want modification to $300 iii) since $300 < $500 -- no need for writing ** once deal is done - done -- can't do anything about it ** failure to plead affirmative defense -- deemed WAIVED ** if know client enter into K - can not ethically plead Statute |
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