ATTACK OUTLINE

I. VALID and ENFORCEABLE K

a. Valid: Common Law  Mutual assent= Offer + Acceptance
i. Consideration = Detriments on both sides + Reciprocal Inducement
Other Alternatives
- Revoke
o Expressly revoke or perform an action inconsistent
o Methods of hindering revocation
 Option K
 Firm Offer §2-205
 FDR reliance on offer
 Substantial performance (Unilateral K)
- Counter offer *---------- §2-207(1)
- Death/Incapacity
- Lapse
b. UCC
Offer and Acceptance Battle of the Forms
Formation in General
a. 2-207(1)- expressly conditioned acceptance
Merchants treated as proposals in K UNLESS
o Expressly stated acceptance upon certain terms
o Material alteration of the agreement
o Notified objection wi/in reasonable time
2-207(3) when writing don’t form K then conduct  Knockout rule
Incomplete Negotiations  K w/ open term; K to negotiate good Faith; OR preliminary negotiations
Enforceable
Statute of Frauds (MYLEGS)
K evidenced in writing
Signed by party to be charged
Partial performance is a good substitute
II. BREACH
a. FIND THE TERMS
i. Is the Document Fully Integrated?
1. 4 Corners
2. Corbin: 4 Corners Plus
b. INTERPRET THE TERMS
i. ARE THE TERMS OF THE K AMBIGUOUS?
1. 4 Corners
2. Corbin: 4 Corners Plus
a. Party Based v. Objective Evidence
ii. Adhesion K- Reasonable Expectation
iii. Implied Terms  Good Faith (UCC) OR Good Faith & Fair Dealings
 Satisfaction- commercial (objective) & personal (subjective)
iv. Expressed or Constructive Conditions
c. APPLY THE TERMS
i. Partial, Material, or Total Breach
ii. Anticipatory Repudiation
1. Assurances
2. Retraction
IIA. AFFIRMATIVE DEFENSES (only use to challenge mutual assent or breach)
Mental Incapacity: Volition; Cognitive OR alcohol

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 Minor Incapacity: 18+ then K voidable; Necessities; K is void & minor return product
Mistake (mutual or unilateral)
Duress (improper threat)
Undue Influence (over persuasion)
Fraud
Non-Disclosure
Unconscionability---Procedural +Substantive
Against Public Policy: Restrictive Covenants
Modification to the K at an ALTERNATIVE TO BREACH
III. REMEDY
a. Expectation Damages
b. Limits to expectation Damages
i. Foreseeability - reasonable foreseeable OR special circumstances communicated
when K formed
ii. Causation
iii. Prove damages reasonable certainty
iv. Special Circumstances
v. Mitigation: Actual OR Potential
c. Reliance damages
d. Liquidation Damages
e. Specific Performance Equity
Other Causes of actions
- Promissory Estoppel (No consideration) clear &definite promise reliance FDR
- Material Benefit --
- Restitution 

Contract Formation- Common Law

Consideration
RULE: Bargain for exchange is determined by:
o Detriments on both sides
o Reciprocal Inducement or Motivation to engage in the bargain
 Not based on whether exch was fair but was bargain for exch present
 test for consideration =at time the promises are made; contract comes into
existence the moment promises (consideration) are exchanged; promise is
the detriment
o either both parties are bound or neither are bound- mutuality of C
 separates world of contracts into:
 contractual promises (bargained for exchange)
 gratuitous promises (non-enforceable)  Hypo giving a car for
graduation for $10
 unilateral contracts = “reward”; bargain for an outcome/performance of a
promise, not the promise itself (i.e. promise to pay $500 for finding dog)
 substantive interpretation of doctrine of consideration (modern contract
law): circumstances of bargain are important: relationship between parties, is it

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 reasonable to believe that the deal would’ve happened in other circumstance?
(Second Restatement §71)
 formal interpretation of doctrine of consideration (classical contract law):
we don’t test for the adequacy of the deal before we determine that an
agreement has been reached (First Restatement)
Hamer v. Sidway:  promises to give  $5K if  gives up bad behaviors;  seeks to
collect;  doesn’t pay up but adds interest;
  promises to pay $5k to give up bad behavior that benefited  ,  sells debt to a
collector; estate argues no consid by 
 p. 100: “Consideration means not so much that one party is profiting as that the other
abandons some legal right in the present or limits his legal freedom of action in the
future."
 No bargain for exchange b/c woman did all of this on her own, man didn’t agree to
anything but to keep their affair going.
Batsakis v. Demotsis:  sought financial help from  for $2K;  agreed to pay  $2K + 8% int.
o argument over value of 500,000 drachmas which was $25; but  must pay  $2K +
8% int.
o Court didn’t care that exchange wasn’t even, can still make bad deal but a deal
was still made b/c of consideration
Feinberg v. Pfeiffer: company’s motivation to grant promise was a gift to Feinberg for past
service
o normal employee relationships are “at-will” and are illusory promises that lack
consideration; others are “for cause” meaning that the employer can only fire with
good/reasonable cause

HYPO: single mother & married man have an affair; single woman becomes insecure and
wants more security. She wants him to promise to give her a ring every year if she promises not
to call his home; Lady has document drawn up
What is a K? an exchange of promises which creates a set of dutys that, if broken, the
law provides a remedy? (ask Carroll)
 valid enforceable contract
 claim requires: 1. valid contract, 2. breach, 3. remedy
 better remedy than restitution bc always enforceable for full contract amount
 contract starts the moment promises are exchanged and accepted, even if a promise is
conditioned
 promise can be implied (ordering food) or express

Formation: mutual assent Offer

§24 Offer is an objective manifestation of the intent to be bound by no further action
 To determine parties’ intent to enter into a contract: when a reasonable person would conclude
that there was intent to enter into a binding agreement
 the moment someone holds out the deal; objective standard; tested when someone changes his mind
 when an offeror creates an offer, it gives the power of acceptance to the offeree and shifts the power
of making a contract to the offeree; not something you want to do in the early stages of negotiation
 definiteness + intention

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 Lonergan v. Scolnick: Seller communication=” THIS IS A FORM LETTER”; the buyer clearly
manifested an intent to accept but an acceptance isn’t an acceptance if there’s no valid offer
 illustration of the offeror not manifesting his intent to be bound by no further action b/c clearly
stated the advertisement was a “Form Letter” not an offer; sent to many but the  happened to
respond.
Ray v. William G. Eurice & Bros., Inc.: The builders say they never reached mutual assent; but the rule
that comes out of it is that the test for mutual intent is an objective test "; if a reasonable person would have
thought your actions were binding, it doesn't matter if you actually intended to make it or not
  signed and initialed the documents which indicated they accepted the terms of the K even if terms
were not their own.
Izadi v. Machado: When an ad says I am offering this product for this price-- usually isn’t bound
Invitation for offer express terms which they don’t seek to bind themselves to; In this case the Court
wanted the dealer to be held accountable for the “bait and switch” attempt- unambiguous terms and we
are going to treat as an offer b/c use of fine print and sneaky practice

Acceptance and Revocation

Acceptance
Bilateral K: exchange of promises on from parties willing to engage in a bargain
 mailbox rule: acceptance occurs at the time the acceptance is deposited in the mail; on average
protect the offeree bc offeror could’ve changed the terms (email, when acceptance is received by
offeror’s server/system)
Normile v. Miller (1985) pp. 54
 ∆ makes changes to ∏ Normile original offer. Broker Byer tells ∏ Normile about the changes. ∏
Normile says will think about it. ∏ Segal accepts ∆ offer. Broker communicated to ∏ Normile you
snooze you lose then ∏ Normile accept
o Illustration of indirect revocation rule §43 and importance of acceptance within reasonable
mode and time §60 Restatement (Second)of K
 If ∏ wants to restrict ∆ ability to revoke, make an option K.
Once an offer is made there are 6 options:
1. §50Acceptance (binds you into contract): manifestation of assent to the terms
mode by the offeree in manner and mode invited or required by the offeror.
2. §39-Counter offer
a. Common law
i. (1) offer made by the offeree to the offeror relating to the same matter as
the original offer and proposing substitute bargain differing from
proposed original offer.
§59--Mirror Image Rule: A reply to an offer which purports to accept it
but is conditional on the offeror’s assent to additional or different terms
from those offered is not an acceptance but counter offer
Qualified Acceptance: once submit additional or different terms to
an offer then treat those as a counter offer which terminate the
power of acceptance of the original offeree A offer to B B
accepts w/ Add’l terms- offer now counter offer which
requires A acceptance
Last Shot Rule: a party assented to and accepted a counter-offer by
conduct indicating lack of objection to it. (favors sellers over buyers)
b. UCC

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 UCC Battle of the Forms
 Normally, there is an exchange of forms: purchase order in exchange
for payment in exchange for shipping the goods and receiving the
good.
 Proposal= Invitation to an offer
 Purchase order= offer
 Order acknowledgement= acceptance
Implied in Fact K: when the court interprets that there is a K b/c of the conduct
UCC modified but doesn’t reject the “mirror Image” (2-207(1)) and “last shot” rules
1. §2-207(1)- offer’s response to an offer as valid acceptance of the offer
even though it contains add’l OR diff terms, the terms of the offer
UNLESS the “acceptance is expressly conditional” on offeror’s assent to
add’l or diff of offeree’s documents
 where offeree’s acceptance is made “expressly conditional” on the
offeror’s assent, the response is a counter offer which must be
accepted by original offeror
 Must state “ acceptance is Expressly conditioned upon acceptance of
these terms ONLY”
2. additional terms are proposals which become a part the merchants’ contract
UNLESS
a. the offer expressly conditioned/ limited acceptance to the terms of the
offer
b. Additional terms material alteration the K look from perspective of
offeror: result in a surprise or hardship if added
c. If the additional terms are rejected within a reasonable time
3. If the parties formed the K by their conduct- offer then counter offer- then
conduct is enough for establish a K for sale although the writings of the parties
don’t otherwise establish a K
- since documents haven’t formed K then actions (shipping and
receipt) establish contractual relationship
Knockout rule: K consist of the terms which the writings of the
parties agree with the implied terms  conflicting/different terms wiped out
(1)(2) OR (1) (3) NEVER (2) (3)
Response w/ add’l or diff terms = counteroffer IF acceptance of the response is made
EXPRESSLY CONDITIONAL upon acceptance of the add’l or diff terms
Brown Machine, Inc. v. Hercules, Inc.
 Initial negotiationsProposal sent w/ Indemnification language phone call where
H sent purchase order but rejected payment term 20% (offer) BM got H purchase
order w/o indemnity BM sent H order acknowledgement H responded w/ letter-
 good shipped and paid for by H(no 20% deposit
 D employee gets hurt using P machine, b/c no indemnification in K P pays for the
damages - P dues D to recover b/c P claims indemnity in K but wasn’t
 BM claims indemnity made it into the K while H says it didn’t b/c expressly
accepts terms in the January written purchase order. Court agrees w/ H
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Paul Gottlieb & Co., Inc. v. Alphs South Corp.
 P supplied D w/ fabric for D’s prosthetic devices but P ran out of yarn and used
identical which cased D fabric uncomfortable.
 No expressly conditioned acceptance or rejection of add’l terms w/in reasonable
amount of time so Limitation of liability materially altered K---NOOO: D failed to
meet burden of proof  no unreasonable surprise

3. § 38 rejection (knocks offer off table)- offeree’s power of acceptance is

terminated by their decision to reject the offer, UNLESS offeror has manifested a
contrary intention. A manifestation of the intent not to accept the offer is rejection
UNLESS the counteroffer manifests a contrary intention by the offeree.
 (withdrawal of the offer; an objective manifestation to no longer be bound; you
can change your mind bc master of contract)
a. §43-Indirect Communication of Revocation: offeree’s power of
acceptance is terminated when offeror takes DEFINITE action
inconsistent with an intention to enter into the proposed K and the
offer acquires reliable information of the actions
 Once the offeree learns the offeror terminated the K by communicating
the revocation through a reliable source (e.g. broker, leasing agent) You
snooze you lose
4. Lapse/expiration: defined as “a reasonable time under the circumstancesIf the
offeree fails to communicate to the offeror in a reasonable amount of time then lapse,
expiration if terms indicate a specific time
5. death/incapacitation of the offeror: offeror no longer in a state of being where he is
capable of being bound: incapacitation: the lack of competency of the parties to
engage in K. (mental OR minority)
6. Revocation
a. Common Law
i. mailbox rule: acceptance occurs at the time the acceptance is deposited
in the mail; on average protect the offeree bc offeror could’ve changed
the terms (email, when acceptance is received by offeror’s server/system
§87 Option Contract: (1) An offer is binding as an option 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 within a reasonable time; or
(b)Is made irrevocable by statute
(2) An offer which the substantial character on the part of the offeree before
acceptance and which does induce such an action forbearance is binding as an
option K to the extent necessary to avoid injustice
b. UCC
i. § 2-205. Firm Offer Irrevocability -----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 and irrevocable for up to 3 months. After 3
mo. the offer is revocable; except if consideration has been given or

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 firm offer extended through renewal- Must explicitly state “This is
a Firm Offer”
7. Acceptance of the offer- was it accepted in the mode and time required by the
offeror
a. § 69 Acceptance by Silence: The silence of an offeree is not considered
acceptance of the offer except in following situations:
1. both parties intend for the offeree’s silence to constitute acceptance,
2. prior dealings between the parties make it reasonable for the offeror to
expect to be notified of a rejection and, in the absence of a rejection, to
conclude acceptance,
3. the offeree exercises dominion over offered property by acting
inconsistently with the offeror’s ownership of that property, or
4. the offeree receives the benefit of services, despite reasonable
opportunity to reject those services, as well as reason to know that the
offeror expects compensation.
HYPO: Homeowner wants a new roof; Get a price quote from a company contractor
makes a promise to do the work but must get signature from the boss before the K can take
affect- reliance on the acceptance of the boss not the homeowner
UNILATERAL K: K where performance is based on the wish, will or pleasure of one
of the parties. (performance based)
1. §32 Invitation of Promise of Performance: in a case of doubt an offer is interpreted
as inviting the offeree to accept rendering the performance of the offer.
2. §45 Substantial Performance: (1) where the offer invites the offeree to accept by
performing and does not invite promissory acceptance, once the offeree has begun
part performance the offeror can no longer revoke the offer. (2) The offeror’s
duty of completion is based on the conditional completion of the performance by the
offeree in accordance with the terms of the offer.
 Substantial performance is needed for to trigger D duty not to revoke BUT
acceptance = full performance
 Can be awarded Expectation Damages, Reliance Damages, Restitution, OR
Specific Performance
Cook v. Coldwell Banker: The ∏ substantially performed the K by remaining w/ the ∆
until January. ∏ was trying to remain w/ ∆ until March to get Bonus $$ at banquet. ∆ owed
∏ damages for unpaid bonuses.

Contract Formation under the UCC

 If for the sale of goods then transaction governed by UCC Article 2 EXCLUDING
THE LEASING OF PROPERTY, INTELLECTUAL PROPERTY, NON-
TANGIBLE AND NON-MOVEABLE GOODS
 Sale of commercial goods (consumer-consumer, consumer-merchant, merchant-
merchant)
 UCC has no definition for offer so we use common law; Doesn’t address
consideration (USE COMMON LAW DEF.)

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§1-103(b)= pre-existing principles of law and equity supplement the code UNLESS
displayed by portions of the code
§2-105(1): Goods defined as tangible, moveable property
§2-201 formal req. for Statue of frauds: See Valid, Is K Enforceable §
K for the sale of goods of $500 or more unenforceable by way of action UNLESS writing
sufficiently indicates sale
a. Partial Performance is a substitute for required memorandum can validate K
only if payment has been accepted.
b. Writing is evidence of the transaction (Pub Policy)
c. Reduces the ability to bring false claims (Pub Policy)
Jannusch v. Naffziger: “PREDOMINANCE PURPOSE” TEST; if the K mostly for sale of
goods or for services? Food truck & supplies; No written evidence by parties but conduct of
exchanging money for goods. (K)
- Partial Performance is a substitute for required memorandum (writing under
SOF) can validate K only if payment has been accepted.
- D attempted to return P truck; they claimed no K; court held there was a K
which D breached; partial performance sub for no formal writing under UCC §2-
201
§2-204---FORMATION
1. K for the sale of goods may be made in any manner sufficient to show agreement,
including conduct by both parties which recognizes the existence of such K.
2. An agreement sufficient to constitute a K for the sale maybe found even though the
moment of its making is undetermined
3. Even though one or more items are left open on a K for sale does not fail for
indefiniteness if the parties intended to make a K and there is a reasonable certainty
basis for giving remedy
HYPO: issue purchase order for a machine; issue final order of sale form w/ new terms and
conditions diff. from previous form. Good purchased; goods exchanged- buyers
conducted treated as an acceptance
EBAY HYPO: Intention of the seller to sell to the highest bidder vs. intention when “Buy it
Now” option
 Buy it Now Option: Form a k right then and there
 Ebay actually stipulates in their agreement that the Seller= Offeror & Bidder
=Offeree
 In a normal setting, you can revoke but after the reservation price is set anything
about the price would be the accepted bid
Mendoza G&P
Materially alter b/c at the moment present Additional terms presented on Oct. 1
surprise or hardship
We paid 10% only wasn’t manifestation of If not, terms of the K formed through
assent to all 6 of the terms b/c silent isn’t conduct
assent
We cant use §2-2-05
No breach w/o justification

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 Relying on the #6 term- not beyond
their control

By paying agreed to all terms not just

some

Electronic and Layering Contracts

CLICKWRAP: must scroll through the Terms & Conds and click “I Agree”
Feldman v. Google case : lawyer claimed didn’t accept terms of online ad agreement
SHRINK WRAP: Purchase product over the phone, internet or email receive product
which comes w/ warranty info or seller K
Acceptance is keeping the product; rejection is sending product back w/ time allotted
BROWSE WRAP: information made available on Internet and you are manifesting
acceptance by browsing on the site. Assent even if no button b/c:
o Required to give user adequate notice of proposed terms
o User has meaningful opportunity to review terms
o User given adequate notice that taking specific action manifests assent to terms
o User takes action specified in latter notice
Hines v. OverStock: P buys vacuum cleaner from D, P returned it but incurred restock fee.
P sues D but D claims accepted terms which req. confidential arbitration in Utah. Holding:
P Had no notice of Terms & Conds b/c D website didn’t prompt P to view it
DeFontes v. Dell, Inc.: courts are motivated to apply the rules creatively for higher
purpose. Justice Easterbrook uses the law to say that the company is the offeror and the
buyer is the offeree
Giving $$- invitation for offer
sent the product (offer) + acceptance (once time expired) (avoid 2-207)

Incomplete K Negotiation and Role of Reliance

Letter of Intent/Memorandum of Understanding prove parties are serious about dealing with
one another:
1. Contract w/ Open Terms (agreement to agree)
a. Deal is done but w/ a few open terms; contemplate a formal written K
b. General application of offer and acceptance
2. Agreement to Negotiate w/ Good Faith- not for the purpose for being a
binding offer or K
3. §24Preliminary Negotiations (no K); a manifestation of the willingness to enter
into a bargain is not an offer if the person to whom it is addressed knows or has
reason to know that the person making it does not intent to conclude a
bargain until he has made a further manifestation of assent.
 Public Policy: Court is bound to allow freedom of K but the legal standard for
interpreting the K is the objective intent of the parties to enter into a K
Incomplete K: when FDR reliance appears can turn the K into a irrevocable offer ---
Hoffman v. Red Owl- measure of damages in PE case is those damages that are
foreseeable to the promisor
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Limitations on the Drennan Rule of FDR reliance on an Offer: When bid” expressly
stated or clearly implied that it was revocable at any time before acceptance”. (can be
subject to limitations)
Baird v. Gimbel Bros. Co. Judge Learned Hand: Rules are Rules VS Judge Trainor: Rules
are tools
 Promissory estoppel, cannot remove power to revoke if FDR reliance; P relied to
his own detriment
 Gen Contr, usually on the hook for risk of relying on a bid when they failed enter
into a K.
 When the mistake is noticeable- reasonableness prong fails
 When not noticeable--- FDR reliance possible
Drennan v. Star Paving Co.: FDR reliance- reasonableness prong when Gen. Contr knows
that the bid is a mistake that was not noticeable  therefore b/c reliance no revocation by
Sub
 Sub contr must claim power to revoke; Loss of the Gen. Contr. Falls on the Sub contr.
 It is never reasonable to rely on an offer except in special circumstances
Berryman v. Kmoch: An option absent consideration = 0; Reliance is useless b/c FDR
unreasonable; P made no legally enforceable promise to D; D failed to give P consideration
needed not to revoke the offer
Quake Construction, Inc. v. American Airlines, Inc.: enforces the need for offer and
expressed acceptance- more ambiguous (finder of fact had to make determination)
 Quake: K w/ open terms because AA manifested intent because major terms were
asked upon and only additional terms remained
 American Airlines: cancellation clause present if terms are not agreed upon: NO
Offer
Pennzoil v. Texaco (note 2-4)
Pop’s Cones Inc v. Resort Intl Hotels, Inc.: Promissory Estoppel and Reliance for Option
K are measures that can be taken w/ o heightened requirement of proof

Enforceable= If Statute of Frauds then is it fulfilled? (MYLEGS)

§2-201 Formal Requirement Statute of Frauds: Requires a Price term of $500 or more
(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 whom enforcement is sought (party to be charged). A writing is not
sufficient b/c 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 writing.
(2) Between Merchants if w/in 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 requirement of subsection
(1) against such party UNLESS written notice of objection to its contents is given w/in
10 days after it received.
 for §2-201(2) to apply, both parties must send written confirmations of the K
§110 Classes of Contracts Covered under SOF
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The following classes of contracts are subject to a statute commonly called the Statute
of Frauds, forbidding enforcement UNLESS there is written memorandum or an
applicable exception:
a. K of an executor or administrator to answer for a duty of his decedent (executor-
administrator provision)
b. K to answer for the duty of another (suretyship provision)
c. K made upon consideration of marriage (marriage provision)
d. K for the sale of an interest in land (land K provision)
e. K time of performance is 12mo. Or longer (one-year provision).

§131 General Requirements for Memorandum (SOF)

Unless additional requirements are prescribed by the particular statute, a contract within the
Statute of Frauds is ENFORCEABLE IF IT IS EVIDENCED BYANY WRITING,
SIGNED BY OR BEHALF OF THE PARTY TO BE CHARGED, which
a. Reasonably identifies the subject matter of the contract,
b. is sufficient to indicate that a K has been made between the parties or offered by the
signer to the other party, and
c. states with REASONABLE CERTAINTY THE ESSENTIAL TERMS of the
unperformed promises in the contract.
The Test to consider
- Does the K fall w/in purview of the Statute of Frauds (SOF)?
- It is a writing (can be more than one document)
- Is it signed to the “party to be charged”?
Policy
- Fear of fabrication or lying about an existing K:
- Concern about the lack of evidence if parties go to trial, need evidence transaction
occurred
 Downside: hinder oral agreements from being enforced UNLESS
partial performance
- Protect the third-party interest
RELIANCE W/IN Statute of Frauds
- If compliance with the SOF is sufficient for enforcement then the promise is
supported by consideration (or some substitute).
- The Restatement (Second) § 139 authorizes courts to enforce the terms of an
oral K to protect reliance on an oral contract, but the Foreseeable,
Detrimental, and Reasonable reliance requirements are more stringent than
for regular promissory estoppel under § 90.
Crabtree v. Elizabeth Arden Sales Corp : K is enforceable b/c 2 year K term+ 2 writings
signed by Comptroller and D manager, mentioned same subject matter and details as the
unsigned; enforceable docs can be in more than 1 writing -At will K can be terminated
anytime by either party
Buffaloe v. Hart: K between P and D for D’s tobacco barns enforceable b/c partial
performance: P reimbursed D for insurance; P offered check to D as partial payment, D
didn’t return the check, P told others about purchase.

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 Was a Duty under the K Breached?
§253 Breach is defined as “any non-performance” of any contractual duty at a time
“when performance of that duty…is due.”

1. FIND THE TERMS (Arg)

i. Parole Evidence Rule
§213 Parole Evidence Rule (PER): (1) A binding integrated agreement discharges
prior agreements to the extent that it is inconsistent with them; (2) A binding
completely integrated agreement discharged prior agreements to the extent they are
w/in the scope; (3) An integrated agreement that is not binding or that is voidable
and avoided doesn’t discharge the proper agreement. But an integrated agreement,
even though not binding, may be effective to render inoperative terms which would
have been part of the agreement if it hadn’t been integrated.

UCC §2-202 Final Written Expression: Parol or Extrinsic Evidence

Terms w/ respect to which the confirmatory memoranda agree or whih are otherwise
set forth in the writing intended by the parties as a final expression of their agreement
w/ respect to the terms included may not be contradicted by evidence of any
proper agreement or of contemporaneous oral agreement but may be explained
or supplemented
(a) by course of dealings or trade usage or course of performance

When the parties to a K have mutually agreed to incorporate all prior oral, written or
contemporaneous oral agreements into a final written version of the entire
agreement, neither party will be permitted to contradict or supplement the writing
w/ extrinsic evidence of prior agreements or negotiations
Fully integrated: merger clause = persuasive and the parties intended for the 4
Corners to me final representation of the terms
Partially Integrated: some of the terms are agreed to orally or via email while
others in the documents.
Parol Evidence Decision Tree
1. Did the parties intend for the writing to fully or partially integrate the terms of
their agreement? (Question of Law)
a. If Yes, PER applies: no extrinsic
i. Merger clause persuasive evidence
ii. 4 Corners vs. Corbin (4 corners Plus)
1. PER doesn’t allow to add duties to the K
b. If No, evidence of intent is admissible as usual
2. What is the purpose of the writing?
If the writing is only partially integrated, does the Parole evidence supplement or
contract the integrated terms? (Question of Law) ---- Fact finder decides if the
additional terms are consistent with the agreement
PER Permitted Purposes (p. 414)

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 1. Explain the meaning of terms in agreement
2. Mutual Assent after fully integrated doc
3. Agreement subject to Condition Precedent (light switch turn on duty)
4. Bargaining Misconduct: duress, fraud, undue influence, incapacity, mistake (§214) -
 clear and convincing evidence standard
5. “Oops” : Written error that court has power to change but not change legal duties
(reformation)
6. Collateral agreement between parties (catering K & Oscars winner)
Thompson v. Libby: Seller sues buyer for the purchase price because D refused to pay
claiming the writing includes a warranty term; “all good wood”; P writing is fully
integrated: PER exclude D testimony. Both sides accusing other of breach
 Option 1: “all my logs marked HCA” (written) “The logs are warranted to be good”
(oral) – PER rejects the oral contract
 Option 2: implied adjective “All my [good] logs”—reading in a term into a writing
 Option 3: but if we find the term “logs” to be ambiguous, then the PER allows us to
use extrinsic
Taylor v. State Farm Auto: P in accident and found guilty; D failed settle the tort policy
claim; P had to pay 2.5 mill in excess of policy; D says P signed release But release is K of
adhesion so PER allows extrinsic.
- Nanakuli: P claims implied term of K (UCC) requires price protection and the
interpretation of agreement is that D provide price protection using Course of Perr, Course
of Dealing & Trade usage. D says previous protections were waivers of the K price term not
performance of the K
- Sherrod: Majority held that §214(d) applies evidence admissible when there is
presence of illegality, fraud, duress, mistake, lack of consideration, or other invalidating
cause

iii. IMPLIED TERMS: Terms the court finds are implicit on the parties’ words or conduct
even though not expressly stated
- Implied in Fact: the parties agreed to the terms which implicit
- Implied by law: made a part of the agreement by operation of the rules of law rather
than by the agreement of the parties themselves
- Illusory promise: a promise, even if bargained for, which requires optional performance
of contractual duty “At Will employment Ks”
- The court devised “default terms” which are made based on hypothetical bargain,
if the parties had agreed to these provisions

Requirements and Output Contracts

- Common Law Courts: although previously flexible output K held invalid b/c of lack of
mutuality, too vague for enforcement and lack of consideration
- UCC 2-306 solves problem requested output cannot be

UCC § 2-306: (1) A term which measures the quantity by the output of the seller or the
requirements of the buyer means such actual output or requirement as may occur in good

13
 faith, except that no quantity unreasonably disproportionate to estimate or in the
absence of a stated estimate to any normal or otherwise comparable prior output or
requirement may be tendered or demanded
2) A lawful agreement by either the seller or the buyer or exclusive dealing in
the kind of goods concerned imposes UNLESS OTHERWISE AGREED an
obligation by the seller to use BEST EFFORT to supply the good and by the buyer
to use BEST EFFORT to promote their sale.
“Best Effort” Assessed in terms of reasonableness or diligence
Gap Filling Provisions of Article 2
§2-308: Place of Delivery
§2-309: (1) The time for shipment or delivery or any other action under a K not
provided in this Article or agreed upon shall be a reasonable time. (2) Where the K
provides for successive performance but it otherwise indefinite 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 part except on the happening of an agreed even
requires that reasonable notification be received by the other party and an agreement
dispensing w/ notification is invalid if its operation would be unconscionable.
§2-310 Time of Payment
§2-509 Risk of Loss in the Absence of Breach
§2-513 Buyer’s right to Inspection of Goods

The Implied Obligation of Good Faith (Implied in law)

UCC §1-304 declares that “every contract or duty” within the scope imposes an
obligation of good faith in its performance and enforcement.
Bad Faith Good Faith
Seller concealing a defect in what he is selling Fully disclosing material facts
Builder willfully failing to perform in full, though Substantially performing w/o knowingly
otherwise substantially performing deviating from specifications
Contractor openly abusing bargaining power to Refraining from abuse of bargaining
coerce an increase in K price power
Hiring a broker and then deliberately presenting Acting cooperatively
them from consummating the deal
Conscious lack of diligence in mitigating the other Acting diligently
party’s damages
Arbitrarily and capriciously exercising a power to Acting w/ some reason
terminate a K
Adopting an overreaching interpretation of Interpreting contract language fairly
contractual language
Harassing the other party for repeated assurances Accepting adequate assurances
of performance.
§ 2-103 (1) Good Faith: in the case of merchants means honesty in fact and the
observance of reasonable commercial standards of fair dealing in the trade.
- UCC apply to all parties (merchants or non-merchants) the complementary
concepts of “subjective honesty” and “Objective commercial reasonableness”
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§205 Duty of Good Faith and Fair Dealings----Every K imposes upon each party a duty
of good faith and fair dealing in its performance and its enforcement
*Application of Good Faith Principle*:
1. Business efficacy--- the implied terms are needed
2. Covenant of Good Faith may permit finding of breach even where no express terms
have been violated
3. applied to judge the appropriateness of party’s exercise of some type of discretion
expressly granted to it by some terms in the K.
§ 228 Ratification of the Obligor as a Condition: When it is a condition of obligor’s duty
that he be satisfied with respect to the obligee’s performance or w/ respect to something
else, and it is practicable to determine whether a reasonable person in the position of the
obligor would be satisfied, an interpretation is preferred under which the condition occurs if
such a reasonable person in the position of the obligor would be satisfied. - Good Faith
still applies
- performance w/ personal meaning then subjective
- commercial K then objective standards
Wood v. Lady Duff Gordon: P claims D breached exclusivity of K and took a separate deal
w/ Sears; §2-306 (2) applies- P claims illusory promise to D; D says there is
consideration. Court held that D had an implied in law duty (instinct w/ obligation) to
reasonable effort promote P work or P couldn’t make money which terms dictate D gets ½
income
Leibel v. Raynor Manufacturing Co.: P becomes D exclusive selling, servicing and
installing of D doors; P borrowed substantial capital and had a large amount of product in
his possession when D abruptly terminated the K. D Court held D needed to provide P w/
reasonable notice to terminate an ongoing oral agreement
Morin v. Baystone: P agreed to build a stone wall siding for the D for a GM plant but
condition for GM Chair satisfaction; application of §228 and covenant of good faith and fair
dealings; “aesthetic effect” = subjective satisfaction

2. INTERPRET THE TERMS (Arg)

Principles of Interpretation
- Interpretation: process where the court gives meaning to the contractual language
when the parties attached materially different meanings to the language.
- Construction: the judicial role of determining the legal effect of the language
- Change from subjective standard of “Meeting of the Minds” to Modified Objective
Approach
- Cannons of Construction- help identify the
i. If Ambiguous, then what is the parties’ intent
Corbin always bring in extrinsic evidence (4 Corners Plus)
4 Corners use the doc to identify the ambiguity in the document itself
o Nanakuli latent ambiguity
Evidence illustrating Parties Intent
 PARTY BASED EVIDENCE (start here) §203,
1. Terms of K (plain meaning) + cannons of construction (including price)

15
 2. Negotiation History
3. Transactional Context (purpose of the K)
4. Course of Dealings: Look @ prior deals btwn parties using term
5. Course of performance
 OBJECTIVE
1. Trade usage/ custom
2. Industry Standards
3. Government Regulation
4. Similar K
P can only prevail if the trial court concludes that the D knew or had reason to know of P’s
meaning while P didn’t know of D’s meaning.
§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 the different meaning to a promise or
agreement or a term thereof: it is interpreted in accordance with that meaning
attached by one of the parties if at the time the agreement was made
a. That party didn’t know of any different meaning attached by the other
and the other knew that meaning attached by the first party; OR
b. That party had no reason to know of any different meaning attached
by the other, and the other had reason to know the meaning attached
3. Except as stated in the §, neither party is bound by the meaning attached by the
other, even though result may be a failure of mutual assent
§2-207
2. The terms are proposals for addition to the K. Merchants: terms become
a part of the K unless:
a. material alteration look from perspective of offeror
1. result in a surprise or hardship if added
b. conditional acceptance
c. expressed rejection after receiving notification - still have a K
3. If the parties formed the K by their conduct- offer then counter offer-
 then conduct is enough for establish a K for sale although the writings
of the parties don’t otherwise establish a K
Knockout rule: look at conduct, compare forms, whatever isn’t mirror image gets
knocked out
Joyner v. Adams: P had K w/ Brown; D is substitute contractor; K to leave property so D
could remove buildings, rehab land to prepare for execution of individual leases. Ambiguity
over “complete”; P had reason to know D meaning
Fragaliment Importing Co. v. BNS Int’l Sales Corp: Court looked to industry standard,
course of performance and course of dealings ambiguous term “Chicken”; D new to trade
(German)

i. If ADHESION K
§ 211--Reasonable Expectation standard:
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 (1) Except as stated in Subsection (3), where a party to an agreement signs or
otherwise manifests assent to a writing and has reason to know that the like writings
are regularly used to embody terms of agreement of the same type, he adopts the
writing as an integrated agreement w/ respect to the terms included in the writing
(2) such writing is interpreted wherever reasonable as treating alike all those
similarly situation, w/o regard for the knowledge or understanding of the standard
terms of the writing.
(3) Where the other party has reason to believe the party manifesting
assent would not do so if he knew the writing contained particular terms, the
terms are not a part of the agreement
To determine if the doctrine of reasonable expectation applies if there’s
uneven bargaining power; terms aren’t negotiable + Adhesion K
C & J Fertilizer, Inc. v. Allied Mutual Insurance Co.: P got insurance from D but had a
restrictive definition of burglary; Unreasonable for P to sign policy limiting coverage; D
had fine print

ii. Conditions
- Condition is an event, no certain to occur, which must occur unless its nonoccurrence is
excused, before performance under a K becomes due
o expressed: agreed to by the parties themselves
o implied or constructive “imposed by the law to do justice”
- Conditions Precedent: an act or event, other than a lapse in time, which unless is excused,
must occur before a duty to perform the promises in an agreement arise.
- Condition Subsequent: an act or event, other than a lapse in time, which unless is
excused, must occur after a duty to perform the promises in an agreement occurs.
- Condition Concurrent: simultaneous performance of conditions: failure to perform then
other parties’ duty doesn’t turn on.
- Doctrine of Constructive Conditions: judicially created devices used to determine the
consequences of breach when the parties failed to identify in their agreement
o Arise from the language of the promises
o Constructive condition  then substantial performance  if CC then party
commits a total breach
o SP where variance doesn’t impair the building as a whole
 Public Policy: achieve just results in cases where one party’s lack of performance
seems justifiable for other non-breaching party to withhold performance
- Promissory Condition: Promise + express condition failure to fulfill expressed
condition discharges the obligor’s duty and makes the oblige subject to liability for
damages
- Conditional Promise (IF, UNLESS, UNTIL) means a party’s duty to perform will
be affected by the failure of the condition
o Condition Subsequent: party is presently under a duty, but the duty will be
discharged if condition fails/occurs UNLESS - Waiver or estoppel OR Failure/
Occurrence is excused

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Is the duty subject to a condition? If yes, then did condition occur? If no, equitable reasons
to excuse the failure of the condition:
o Waiver: Non-breaching relinquished the right of the condition
 2d: §84(1) no consideration needed only if condition waived
wasn’t either material term to performance or material party of
risk assumed
o Estoppel: non-breaching parties conduct induced reliance that the
condition won’t be applied
o Excused
o Forfeiture: lose all of the investments (no prejudice to non-breaching
party)
§229 Excuse of a Condition to Avoid Forfeiture: to the extent that the non-occurrence of
a condition would cause disproportionate forfeiture, a court May excuse the non-
occurrence of that condition UNLESS the occurrence was material part of the agreed
exchange
Policy: promote freedom of K within broad limits, the agreement of the parties
should be honored even though a forfeiture results
§225 Effects of Non-Occurrence of a Condition: (1) Performance of a duty subject to a
condition cannot become due UNLESS the condition occurs or its non-occurrence is
excused. (2) Unless it has been excused, the non-occurrence of a condition discharges the
duty when the condition can no longer occur. (3) Non-occurrence of a condition is not a
breach by a party UNLESS he is under a duty that the condition occurs.
§227 Standards of Performance with Regards to Conditions

§234 (2) Order of Performance: Except as stated in Subsection (1), where the
performance of only one party under such an exchange requires a period od time,
performance is due at an earlier time than that of the other party. Longer period before
shorter  employment or work before payment

§237 Effect on other Party’s Duties of a Failure to Render Performance: Except as

stated in §240, it is a condition of each party’s remaining duties to render performance to be
exchanged under an exchange of promises that there be no uncured material failure by
the other party to render any such performance due at an earlier time.

§238 Effect on Other Party’s Duties of a Failure to Offer Performance: Where all or
part of the performances to be exchanged under an exchange promises are due
simultaneously, it is a condition of each party’s duties to render such performance that the
other party either render or with manifested present ability to do so, offer performance
of his part of the simultaneous exchange.
Oppenheimer & Co. OppenHeim, appel, Dixon & Co.: K for the sublease of P prior
building; P failed to D with two written agreements by certain dates; D duty discharged b/x
P didn’t fulfill conditions precedent. ARG: Substantial performance not an excuse to
nonoccurrence of expressed conditions precedent

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JNA Realty Corp v. Cross Bay Chelsea Inc: D failed to renew lease according to the T&C;
Ct. excused condition b/c D suffer $65K forfeiture if condition enforced but must show P
not prejudiced the P; act resulted from honest mistake or similar fault not willful or gross
neglect
Dissent: In NY, the law allows the court to step in to prevent loss when the tenant
can show that an excuse by fraud, mistake or accident individual investment is not
enough to justify intervention - Tenant gambling b/c landlord could put the property back
on market and obtained another tenant

3. APPLY THE TERMS Obligation to Perform K (Arg)

Breach of Contract: means breach of a duty to perform imposed by the contract
Does one party’s breach discharge the other party from a duty to perform OR must the other
party perform and then sue for damages? (it depends)
§243 (1) Partial: Does not discharge the non-breach party of their duties
With respect to performance to be exchanged under an exchange of promises, a
breach of non-performance gives rise to a claim for damages for total breach only if it
discharges the injured party’s remaining duties to render such performance, other than a
duty to render an agreed equivalent under §240.
- Substantial Performance: Got most of the performance although small
discrepancy
Material: Allows non-breaching party to suspend and will discharge if not cured w/in
reasonable time
§241: In determining whether a failure to render or offer performance is material, the
following circumstances are significant:
a. the extent to which the injured party will be deprived of the benefit which he
reasonably expected;
b. the extent to which the injured can be adequately compensated for the part of that
benefit of which he deprived;
c. the extent to which the party failing to perform or to offer to perform will suffer
forfeiture;
d. the likelihood that the party failing to perform or offer to perform will cure his
failure, taking account of all the circumstances including any reasonable
assurances;
e. the extent to which the behavior of the party failing to perform or to offer to
perform comports w/ standards of good faith and fair dealings
If there is a material Breach then- (1) reasonable time to cure & (2) if breaching
party fails to cure w/in reasonable time then breach BECOMES a total breach
§ 241 Total: discharges non-breaching party’s duty
o This isn't automatic; the non-breaching party has the opportunity to try to work it
out or to discharge their duties (except in the anticipatory repudiation context)
 Innocent party gets actual and future damages, the breach triggers the action
for damages
 Legal effects: allows non-breaching party to void contract and sue for breach
and you measure damages from that point

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 §2-609 Right to Adequate Assurances of Performance:
(1) A K for the sale of goods imposes an obligation on both parties that the other’s
expectation of receiving due performance will not be impaired. When reasonable grounds
for insecurity arise regarding performance of either party’s duties then the other may in
writing demand adequate assurances of performance and until the party received
assurances may if commercially reasonable suspend any performance which s/he
hadn’t already received the agreed return
(2) Between merchants-- commercial standards determine reasonable grounds
insecurity and adequacy
(3) Acceptance of improper delivery or payment doesn’t prejudice the non-breaching
party’s right to adequate assurance of future performance
(4) After receiving the demand, failure to provide assurances w/in reasonable
time not to exceed 30 days is treated as repudiation of K - total breach*

§2-610 Anticipatory Repudiation: When either party repudiates the contractual duties not
yet due the loss can substantially impair the value of the K for the non-breaching party who
may (a) for a commercially reasonable time await performance by the repudiating
party;
(b) resort to remedy for a breach in good faith, even though notified the
repudiating party that s/he will await performance and urged a retraction
(c) Suspend s/he own performance

§2-611 Retraction of Anticipatory Repudiation: (1) Until repudiating party’s next

performance is due, s/he can retract their repudiation UNLESS the non-breaching
party has since cancelled or materially changed his position or considered the
repudiation final (2) may be made in any method which clearly indicates to the non-
breaching party that the repudiating party intends to perform, but MUST include any
assurance justifiably demanded under the provisions of the §2-609. (3) retraction
reinstates the repudiating party’s rights under the K w/ due excuse and allowance for non-
breaching party for delay occasioned by repudiation.
Jacob & Young, Inc. v. Kent: D failed to build home “w/ all Reading pipes” built home
w/ 2/3 reading pipes. Holding: Remedy limited to loss in market value rather than substitute
performance where substitute performance would involve “waste” (Market value of
property when Full performance MINUS market value at partial performance)
Dissent: D had right to contract he wanted. P didn’t provide valid excuse as to their
reason for not using the Reading pipes for 4/5 of the house; P not entitled to recovery
Sackett v. Spindler: Exchange of $85 K (D)  Shares of P news company; D $52K
bounce check and failed to cure breach in reasonable time; Partial – paying late, material
bounce check & waiting for D which caused P to lose $$--> total when D failed to cure

IIA. AFFIRMATIVE DEFENSES

Voidable K: Lack of Ability to Bargain
§14: Minor (In just a kid rule) (VOIDABLE)
- Minor may disaffirm up to reasonable amount of time after “adult age”
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 - EXCEPTION in Necessaries (items need to live: food, clothing, shelter)
 Minor is liable for restitution after disaffirming
 Policy: encourage merchants to provide to minors especially those
emancipated or in foster care system etc.
 When minor reaches age of majority (18 or 21), can ratify K and it becomes
binding (see Restatement §86)
 Dodson reflects modified infancy doctrine
- If minor disaffirms then must return the detriment provided by the adult party
 Some states req. disaffirming minor to pay restitution for the net benefit
conferred. Ex. Difference btw: Value of the car at purchase and value
of the car after adult party received.
- Releases from tort liability Courts divided: some permit minor to disaffirm a
release signed by parents while others uphold agreement
§15 Mental Incapacity----Issue: whether a party has the emotional and intellectual capacity
to enter into the binding agreement
o 1(a) Cognitive incapacity--unable to understand the nature of the transaction or
its consequences”
o 1(b) Volition incapacity: understands the terms but “unable to act in a
“reasonable” manner in the transaction” AND the other party HAS REASON TO
KNOW
o 2: where the K is made on fair terms and the other party is without knowledge of a
mental illness or defect, the power of avoidance under subsection (1) terminates
when the K has been so performed in whole or in part or the situation changes
where avoidance would be unjust. IN SUCH CASES A COURT MAY GRANT
RELIEF IF JUSTICE REQUIRES.
o Intoxication/addiction §16: K is voidable if the other party has reason to know
that the person is temporarily cognitively incapacitated
Overreaching or Improper Terms
Change in Circumstances: occur between the time K made and time of
performance (§§ 261, 263, 251) (§2-615); questions of law made by the
judge
 If the risk is not allocated by the parties or the court, the K is voidable by
the party whose performance has been rendered impossible/impracticable or
whose purpose is frustrated.
 Defense rarely used and enforced
Impossibility: UCC 2-613 & §262
 defense to a duty to perform. Non-performance is actionable because the D
didn’t perform the K because it was impossible. (damage to product,
death/incapacity of person).
 (objective standard- cannot be performed AT ALL)
Impracticability: §§261, 266
 extreme increase in price or change in making performance impractical.
 Generally for CA law
Frustration of Purpose:
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  Exchange called for by K had lost all value to the D b/d of
Elements of Impracticability and Frustration of Purpose
1. Substantial reduction of the value of the K
2. b/c of the occurrence of an event, non-occurrence of which is the basic assumption
3. w/o non-faulted party
4. the party seeking relief doesn’t bear the risk of the occurrence

Duress §175: K is voidable, If the duress is induced by:

o Improper threat; AND Threated party has no reasonable alternative but to manifest
assent; AND Threat induces manifestation of assent
o Threat doesn’t induce assent if the party had independent reasons for agreeing and
the threat did not contribute
o Economic Duress
§176: When a Threat is Improper A threat is improper if
(a) What happened is a crime or a tort or the treat itself can be a crime or tort
(b) What is threatened is criminal prosecution
(c ) What is threated is use of civil process and threat made in bad faith
(d) what is threatened is breach of a duty of good faith and fair dealings under the K
Arguments: Never had a valid K b/c lack of mutual assent and reciprocal inducement OR
There was a K BUT mutual assent was falsely obtained under duress
- Threat coerced me into the deal and I could not refuse
Undue Influence (UI) §177
K is voidable, if the UI is induced by
o Unfair persuasion of a party who is under the domination of the person
exercising the persuasion or by virtue of the relationship between them
o If manifestation of assent is induced by one who isn’t a party to the transaction,
the K is voidable by the victim UNLESS the other party to the transaction in
good faith and w/o reason to know of undue influence either gives value or
relied materially on transaction
Elements of Overpersuasion pp. 567
1. Discussion at an unusual time 5. Multiple parties
2. Discussion at an unusual place 6. Absence of third party
3. Insistent demand to do business 7. No time to consult a financial
at once advisor or attorney
4. Extreme emphasis on
consequence of delay
Odorizzi v. Bloomfield School District: D tried to over persuade P to resigns b/c of sexual
orientation; Court held P faced undue influence of the D for his job

Fraudulent or material misrepresentation §164: K is voidable if the manifestation of

assent is by recipient of fraudulent of material misrep who FDR reliance on fraud or
material misresp of fact(s) UNLESS other party in good faith and w/o reason to know
of the misrep either gives value or material on it

22
 o Fraud in the inducement: If a party knows they are making a fraudulent
statement - must be causation present
o Material Misrepresentation: if a party doesn’t know they’re lying but told
someone something to make a deal but misrep isn’t a term to the K; it focuses on
the value or consequences of the K
Non-Disclosure §161- facts around a K that force party to enter into the K
o If the manifestation of assent is induced by non-disclosure of a material fact,
contract is voidable if:
o Nondisclosure makes a prior representation into a misrepresentation (in
general no hurricanes; do a deal and know a hurricane is coming) OR
o Nondisclosure is of a fact the other party is assuming AND failure to
disclose is a failure to act in good faith OR
o Nondisclosure of a fact that would correct the other party’s mistake about
the content of a writing evidencing the agreement, OR
o Nondisclosure is of a fact the other party is entitled to know b/c relationship
or trust
§152: Mutual Mistake- Voidable K
o Mistake made at the time the K was made which is a basic assumption of the parties
o K is voidable by either party UNLESS one of them bears the risk of Mistake
§154: When the Party bears the Risk of a Mistake
a. The risk is allocated to a party by the agreement of the parties, or
b. A party makes an erroneous assumption is aware s/he has limited knowledge and
treats that as sufficient
c. Risk is allocated by the court b/c it is reasonable to do so.
Restatement §153, unilateral mistakes- : objective theory of K and “duty to read”
= knowing what is intended in K even if there is ignorance
 Same kind of risk allocation analysis, same reasonable test
 Step 1: show mistake then Step 2: who was risk allocated to
 Argument 1: whether contract is unconscionable to enforce after knowing about mistake
that was made—how mistaken party will argue that they are not bound
 Argument 2: mistake was made, will be unconscionable, and other party knew they were
mistaken
 i.e. buyer buys HDTV for mistaken list price of $10
 First argument by seller: it was not a valid offer, any reasonable person would understand
that it was not an objective manifestation of an intent to be bound
Sherwood v. Walker: K for sale of a barren cow; the cow was pregnant- risk not
allocated so the court allocate risk to the owner of the cow b/c owner should have known
Notes Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Serv. Co: Parties agree to
make changes if no pay then no bankruptcy shipping company agrees to lower cost and
perform - obtained under duties b/c if they didn’t agree then go bankrupt
Lenawee County Board of Health v. Messerly: risk allocation present in the K when
Pickles bought the property  D sold house to others not knowing bad septic system

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Unconscionability: where the terms of the agreement are so egregious and one sided in
favor of the party with the superior bargaining power §2-302; §208
Elements of Unconscionability and The Test
Procedural: adhesion, lack of choice by one party or some defect in
bargaining process; “take-it-or-leave-it” method
Substantive: terms so unfair and one sided that it could shock the court’s
conscience to enforce the agreement
Meaning Full Choice (test):
1. gross inequality of bargaining power
2. manner in which K entered
3. did both parties reasonable understand the K
4. were there hidden terms in the K
Terms of K are to be considered “in the light of the general commercial background and the
commercial needs of the trade of the case.”
Williams v. Walker-Thomas Furniture: D seized P furniture after she defaulted on
payments; took all furniture though she paid for 5 yrs and would have paid most off. Terms
either more proc or subst unconscionable; Ct. held wrong to enforce b/c of education and
status
Higgins v. Superior: P were young kids who has suffered severe trauma, D used the
Leomitis to play on their witness--- K of adhesion which didn’t put emphasis on
miscellaneous Section; arbitration clause hidden; Substantive: arbitration only required for
the P not D, D claim clause was bilateral but it wasn’t

Against Public Policy: Terms of private agreement have broader concerns which are more
important than the private agreement; want people to feel safe and willing to enter into
marketplace --K is void if it violates public policy

§178 When a term is Unenforceable on Grounds of Public Policy

1. A promise or other term is unenforceable if the legislature that it is unenforceable or
the interest in its enforcement is clearly outweighed by in a circumstance by public
policy against enforcement of the terms
2. In weighing the interest in enforcement of the terms, account is taken of
a. The parties’ justified expectations
b. Any forefeiture that results if the enforcement is denied
c. Any special public interest in enforcement of particular term
3. In weighing the interest against enforcement of the terms, account is taken
a. The strength of the policy manifested by legislature or judicial decision
b. The likelihood that a refusal to enforce the term will further that policy
c. The seriousness of any misconduct involved and the extent to which it was
deliberate, and
d. The directness of the connection between the misconduct and the term
§179 Bases of Public Policies against Enforcement: A public policy against enforcement
of promises or other terms may be derived by the court from
a. legislation relevant to the policy OR

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 b. the need to protect public safety as is in the case for judicial policies against,
e.g.
a. restraint of trade
b. impairment of family relations and
c. inference w/ other protected interests
Covenants Not to Compete:
1. Unreasonable Unenforceable
a. Enforceable if parties have valid, protective interest & restrictions are
reasonable
2. Blue Pencil  strike certain words and phrases
3. Contextual Approach reduction of time, scope or type of activity
Restraints of trade are unenforceable b/c restrain competition and harm public interest
Covenant not to compete are unenforceable UNLESS it is ancillary to the valid
transaction.
§188- A promise by a seller of a business not to compete w/ the buyer so as to injure
the business sold, a promise by an employee or agent not to compete w/ his/her
employer or principal; and a promise by a partner not to compete w/ the partnership

Modification to the K at an ALTERNATIVE TO BREACH

 Common Law: Modify w/ new detriments on both sides
 UCC: No new consideration as long as modified w/o Faith---§2-209 (1)
 Pre-existing Duty Rule: No consideration when withhold duties established in
existing K
Alaska Packers Association v. Domenico: P entered K w/ D to do fishing work, D refused
to continue work unless get higher pay no modification on already existing duty
Kelsey-Hayes Co. v. Galtaco Redlaw Casting: P purchases casting from D (P’s sole
distributor) for P’s clients. D financial harships- asks P for 2 increases each 30%- P
fails to accept some orders from D; Modifications to original K  economic duress

REMEDIES
§347 Measures of Damages in General: Subject to the limitations in §§350-53, the injured
party has a right to damages based on his expectation interest measured by (a) the loss in the
value to him of the other party’s performance caused by its failure or deficiency, plus ; (b)
any other loss, including incidental or consequential loss, caused by the breach, less (c ) any
cost or other loss that he has avoided by not having to perform

1. Expectation Damages (forward looking remedy): the amount of money the needed
to put the non-breaching party in the position they expected to be in if the K has been fully
performed at the least cost to the breaching party
General/ Incidental Damages
a. Damages arising directly in connection w/ the breach
 Substitute performance- the cost of getting someone else to finish the job
 If buyer is breach, builders’ expectation the K price MINUS cost of full
performance at the time of breach.

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  Look at the position of the non-breaching party @ breach
 If cost of building house went up then the breach is saving
builder money
 Allowed to argue for market value because the fear we don’t want the non-breach
to get windfall
Remedy= fair market value of full performance – substantial performance;
Market value= price of buyer and the willing seller agree to.; Reasonable buyer
b. If no SubP, then the economic value of full performance MINUS the economic
value of non-breaching party current position
 Only when believe non-breaching party cared about market value
 Good/perfect hand now –(Minus) the hairy hand
o Goal is compensation NOT punishment
General Measure: Loss in value + other cost (Minus) cost avoided (minus) loss avoided
 Loss in value: difference btwn value to injured P
 Other costs: Incidental or Consequential Damages
 Cost Avoided: beneficial effect of the breach
 Loss Avoided: Further beneficial effect on party saving it further expenditures
Policy: to encourage contracting. Contracting parties have some assurance that they
will receive the money equivalent of what they from the K.
Consequential damages not awarded when loss profit is too speculative. Damages must be
specifically proven AND caused by the breaching party.
Crabby’s Inc. v. Hamilton: P seller of restaurant which D offered 290K but D had to get
conventional loan which the seller never waived & gave buyer two extensions; reselling 11
mo later is reasonable market value which can be included in calculation: (K price MINUS
Market Value)
Handicapped Children’’s Edcuation Board v. Lukaszewkib: K for employment which D
exits b/c “health issues” she takes other job. Holding D must pay school system cost of
getting another teacher which more than D previous salary D breach caused cost
American Standard v. Schectman: P sue D for failure to complete grading and remove
foundations and subsurface structures; what D left was material not trivial so P awarded the
cost to complete the project (substitute performance)

1. Limitations on Expectation Damages

a. Foreseeability: §351--- Damages are not recoverable for the loss the breaching
party “did not have reason to foresee as a probable result of the breach when
the Contract was made”
a. Reasonable foreseeability means that either (1) the loss the nonbreaching
party suffered would typically result from the breach or (2) the breaching
party was aware of unique circumstances that would permit a reasonable
person to foresee such losses (consequential damages).
b. Reasonable Certainty: In order to recover damages, the P must prove the damages
with a “REASONABLE CERTAINTY.” Courts hesitant to give future lost profits as
hard to measure.

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 a. Reasonable certainty means that the non-breaching party can establish
both the amount of the loss and that the loss was actually caused by the
breach
c. Causation: A defendant can defend themselves by proving that the loss P wants to
recover could have happened even if D didn’t breach.
d. Mitigation: take any reasonable measures to reduce the damage w/o taking undue
risk
i. §350 (1) except as stated in subsection (2), damages are not recoverable for
loss that the injured party could have reasonably taken to avoid loss w/o
undue risk, burden or humiliation. (2) The injured party is not precluded from
recovery by the rule stated in § (1) to the extent that he has made reasonable
but unsuccessful efforts to avoid loss.
ii. No official provision in UCC BUT §2-715(2)- the buyer is not entitled to
consequential damages UNLESS loss couldn’t have been reasonably
prevented by making “cover” or substitute contract
Types of Mitigation
- Actual: any benefit or money that the non-breaching party could make BUT FOR
the breach (deducted from the damage)
- Potential: the non-breaching failed to mitigate
 Breaching party must submit evidence that there was a comparable employment
to prove the
Legal standard for firing “with just cause” including failure to perform or disciplinary issues
Arguments
1. I didn’t cause the damages (Causation)
a. Show that the variable costs can’t be proven
2. You can prove the amount of damages with a reasonable certainty
a. evidentiary basis to show that should be awarded damages (expert witness to
show the trends within the market).
b. Opposing counsel show that the averages may not meet the reasonable certain
standard b/c not reflective of that particular mall
3. §351(b): Consequential damages that my breach caused were not foreseeable at the
time the K was formed
a. Ordinary type of damages is normally expected with type of breach OR
b. B/c of Special circumstances which must special circumstances communicated
at the time the K was formed then the damages would be recoverable
4. Did mitigate or you failed to mitigate  D can deduct from their liability
a. duty only comes into play when calculating the damages
Hadley v. Baxendale: Consequential damages regarding the loss of revenue from the shaft
not being sent to be repaired in time. The court held that if there are special circumstances,
the circumstanced need to be communicated at the time of the breach for the injured party
to recover damages
Florafax v. GTE Market Resources: P has K w/ Bellarose to provide services which req. P
and enter K w/ D to their services. D performed subpar services causing Bellarose end 16 yr

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 business relationship w/ P; loss future profits calculated b/c of projects and previous
revenue
Maness v. Collins: Employment Mitigation case regarding P selling his business to D and
remaining as an employment. D argued that the P failed to mitigate; The court held the D
still had to prove that there was comparable suitable employment. But covenant not to
compete restricted his jobs for 5 years in the US; Ignored the acknowledgement of
mitigation in K and D still have to prove whether comparable employment is available

Categorical Exclusions from recovery

1. Attorneys’ Fees: American Rule- Each party must pay for their own attorney’s
fees UNLESS statutory provision allows, or sale of goods between two
American companies which fees may be obtained, FRCP Rule 11 (sanction),
28 U.S.C. § 1927, if K requires a certain party to pay or collateral litigation
 Policy: fails to provide full compensation to prevailing party & hinders
small claims brought forth
2. §353 Loss Due to Emotional Distress: Recovery for emotional distress will be
excluded UNLESS the breach also caused bodily harm OR the K or breach is
of such a kind that serious emotional distress is “particularly likely” result.
3. Punitive Damages: No Unless breach also considered Tort  not goal of K law
- Exception----Insurance Companies liable for bad faith refusal to honor 3rd or 1st
party claims  amount dishonored + punitive damages

Problem 11-1 p. 941- $4.5 million MINUS $2.5 million= $2.0M

Pre-judgement interest:  foreseeable that Tans invest $ in US Treasury Bonds
No inclusion of investment appreciation b/c no articulated when K made or to the D
Commission of broker is possible but not likely b/c P expected to pay cost (actually payed
less than expected)  No Attorney’s fees, damages for emotional distress or punitive
damages
Expected cost in broker fees $225,000 minus $181, 250 (actual cost broker) = $43750
2.0M minus $43,750= $1,956,250 minus $250,000 (payout given by D) = $1,706,250

2. Reliance Damages as an Alternative Measure of Compensation

§349 Damages Based on Reliance Interest: As an alternative to the measures of damages
stated in §347, the injured party has a right to damages based on his reliance interest,
including expenditures made to preparation for performance or in performance, minus any
loss that breaching party can prove w/ reasonable certainty the non-breaching party
would have suffered if the K had been fully performed
a. Put the non-breaching party in the position he or she was in at the time K was
formed
b. Backward looking remedy
c. Elect to choose expectation or reliance damages; can’t have both
a. When damages expectation damages are too speculative then court considers
reliance damages.

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 b. Expectation D in the negative (K performance result in loss for non-
breaching party
d. All expenses that can be proven to have been made in reliance in the K are
recoverable
a. Usually means recovering any expenses paid by the promise in the course of
performing her part of the bargain
Wartzman v. Hightower Productions Inc.: P sought D help to incorporate “man on a pole”
venture; P must sell stock to public to fund project; D failed to file paperwork properly--co.
“structurally wrong”; P didn’t have $$$ for security specialist; D could have mitigated

3. Liquidated Damages: specific amount stipulated to and agreed upon by the parties at the
time they entered into the K, to be paid to compensate for injuries if a breach occurred
- Whether a K provision is a penalty or valid liquidated damages clause is a question
of law (judge)
- When breaching party seeks to set dismiss the determined amount, breaching
party has burden of proving clause isn’t enforceable.
- If liquidated damages clause not enforceable then shift to regular damage rules
no duty to mitigate when liquidated damages
- Bad defense: non-breaching p doesn’t need the $$$ because they suffered no
damage or able At time K made, agreed to terms which breach so breaching
should pay for liquidated damages not as penalty but b/c agreed to it
Consumer Contracts: state statutes regulate in “layaway” sale cases
Construction: damage for delay in completion are common and daily or weekly rate
Employment: K may contain liquidated damages clause b/c court doesn’t like to award
specific performance  Must survive test of whether clause is a penalty provided for
both employer and/or employee
Real Estate: req. buyer to provide earnest money deposits jurisdictions divided

§ 356 Liquidated Damages and Penalties: (1) Damages for breach by either party may be
liquidated in the agreement but only at an amount that is reasonable in the light of the
anticipated or actual loss caused by the breach and the difficulties of proof of loss. A term
fixing unreasonably large liquidated damages is unenforceable on ground of public policy
as a penalty. (2)
Step 1: Is the promise one to pay liquidated damages?
- Evidence that parties intended to fix damages
- Uncertainty of foreseeable damages
- Amount reasonable in light of foreseeable damages
Step 2: If yes, is it enforceable?
- Reasonable in light of anticipated OR actual harm
 Traditional: measured at the time of contracting
 Modern: time of contracting + after the breach
OR
AND
- Reasonable in light of “difficulties proving loss”

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 - Promise isn’t for “unreasonably large liquidated damages”
- How should the court apply the “unreasonably large” test?
Penalty Clause: Used to be never enforceable & Now enforceable if reasonable in light of
actual damages
UCC 2-718: damages may be liquidated “only at an amount reasonable in the light of
anticipated or actual damage, the difficulties of proof of loss, and the inconvenience of not
feasibility of otherwise obtaining adequate remedy

Barrie School v. Patch: Patch wanted enroll daughter in P school; K signed agreed to pay
$1000 deposit and $13,490 in 2 payments, Patch still have to pay if didn’t cancel in writing
by 05/31/04 Patch called on 07/14. Liquidated damages clause pay $$--> no duty to
mitigate (for actual damages)
4. Specific Performance Equity: When damages are inadequate remedy, the non-
breaching party may pursue the equitable remedy of specific performance
§360 Factors Affecting Adequacy of Damages
In determining whether the remedy in damages would be adequate, the following
circumstances are significant:
a. The difficulty of proving damages would be adequate;
b. The difficulty procuring suitable substitute performance by means of money D
c. The likelihood that award of damages couldn’t be collected
No adequate remedy at Law AND
Injunction would be (1) Manageable (not futile, enforceable) AND
Not inequitable (didn’t cause disproportionate harm) AND
Satisfy other fairness considerations (effect on third Party)
- UCC §2-716: Specific performance maybe declared for buyer where the good are
“unique” or “in other proper circumstances”
§364-Effect of Unfairness: (1) Specific performance refused if relief unfair b/c K induced
by mistake or unfair practices; relief cause unreasonable hardship or loss to breaching party
or 3rd person, exchange is grossly inadequate or terms of K unfair (2) Specific performance
or injunction granted if denial would be unfair b/c cause unreasonable hardship or loss to
injured party or 3rd party.
Personal Service: §367 no specific performance b/c forcing parties to do business w/ one
another when the business relationship was soured
City Stores Co. v. American: Company negotiating lease into agreement w/ developer
building Tyson’s Corner agreement for P help get D zoning in area in exchange then
agreed store could get similar K as other department stores - Specific P granted b/c P
performed preconditions (2) and D made promise although D promised Sears could have 3rd
spot
HYPO: Alicia Problem-- Losing K then go for Reliance Damages OR Restitution- if
you can prove the loss BUT Expectation Damages----

Promissory Estoppel
§90 Restatement: (1) A promise for which the promisor should reasonably expect to
induce action or forbearance on the part of the promisee or a third party and which does
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induce such action or forbearance IS BINDING IF INJUSTICE CAN BE AVOIDED
ONLY BY ENFORCEMENT. The remedy granted for breach MAY BE LIMITED AS
JUSTICE REQUIRES.
 If promise is CLEAR & DEFINITE Promise induces reliance reliance
is Foreseeable+ Detrimental + Reasonable (FDR) p. 238- If yes, then
promise is binding and look at what damages can get - Starting with the
Expectation Damages and lower bound is generally reliance damages
Oral agreement w/in SOF even w/ lack of signed docs; PER doesn’t always bar extrinsic
evidence that P detrimentally relied on promise; Gen Contr doesn’t accept sub contr. bid
unless use they use the bid in the gen. cntr numbers; can’t revoke the bid--
Kirksey v. Kirksey: Court held that D’s Promise lacked consideration (No RI) D motivated
help P b/c of family ties MERELY GRATUTITOUS
o present day= Promissory Estoppel; D made promise P + Kids live with him P
relied on promise by not pursuing title to land (Homestead Act)
o Detriment because she gave up rights and opportunity to own her land, previously
public land under Homestead Act
Harvey v. Dow: D told P she could build on the D land; D gets permit for instruction in his
name; allows P to build home for $200,000 then says P can’t have deed to home; court says
words + conduct= promise which  relied on to her detriment Specific Performance P
gets title
Aceves v. US Bank:  falls behind on mortgage for home and attempts to file CH. 7 and
have transferred to CH. 13 Bankruptcy;  tells  they will help her get loan reinstatement
and modification;  changes mind;  discharged Bankruptcy. Court says  relied on the
promise which  clearly made to work with  therefore  can bring PE claim
Remedies Under PE
Why is breach of contract better as the first argument for restitution?
o With promissory estoppel damages can be limited as justice requires and the
court isn't the one choosing between expectation or reliance damages; in
promissory estoppel, the court has discretion over both of these aspects
o Also, binding of the promise is stronger with breach of contract; here, the
court makes a discretionary judgment as to what happens when someone relies
on a promise
- Purchase price minus market price
- Preliminary negotiations ripening into letter of intent which has some conditions to be
met; If the conditions are satisfied, then the application can be approved by Toyota
- “You’re our dealer” = FDR reliance or waiver of the condition
- FDR reliance= when the promise should be enforceable by court
Walser v. Toyota Motor Sales, Inc.: give the P reliance damages- out of pocket costs not
including capital b/c P took the risk for the capitalization (Would have already made
anyway
 What is the flaw in the argument for this, was there a valid contract?
o Rule: offer (manifest intent), acceptance (mutual assent to same terms)
o Application/analysis: offer was the dealership submitting themselves to be
reviewed, so then the acceptance was the letter of intent and then the phone
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 call--this is the strongest manifestation and gives the words "you're our dealer"
the strongest characterization
o Toyota counterargument: if you characterize that as an offer, fine, but it
wasn't fully accepted because not all of the conditions were met
HYPO: Woman goes to a jeweler requesting that he hold some antique jewelry for her
while she is out of the country. The P is to pay storage fee as consideration but doesn’t. D
holds jewelry which is stolen in a bank robbery. P had a claim for PE b/c she FDR reliance
despite no consideration (PE substitute COA to K when no consideration)

Material Benefit
§86 Promise for Benefit Received
1. A promise made in recognition of a BENEFIT PREVIOUSLY RECIEVED by the
promisor from the promise is binding to the EXTENT NECESSARY TO PREVENT
INJUSTICE.
2. A promise is not binding under subsection (1)
a. If the promise conferred the benefit as a gift or for other reasons the promise
has not been unjustly enriched; OR
b. To the extent that its value is disproportionate to the benefit
3. Remedies: Expectation Damages but limited as “Justice so requires” discretion by the
judge
Webb v. McGowin:  saved  life from being hit with large wood block  was lowering
(while @ work) when  stepped in the way.  agreed to pay  $15 every 2wk for life: Estate
of  refuses to pay b/c says there is no K w/o consideration.; Court consider a moral
obligation sufficient consideration to support a subsequent promise to pay where the promisor
received a material benefit (his life)

Restitution
LIABILITY UNDER IMPLIED CONTRACT THEORY: rests on the legal fiction arising from
consideration of justice and the equitable principles of unjust enrichment

Quasi Contact: 4 ELEMENTS of implied in Law

1. benefit conferred - proof that a benefit completed or service performed at the request of
the other
 benefit – plaintiff must prove that he conferred a NET benefit (when one party in
better position expected to be in) on the other party
2. Circumstances where $$$ is expected - under circumstances in which the beneficiary
should have expected to pay or where payment is expected
 the easy case is when the parties have a contract
 not to be confused with an officious intermediary (acting like have a right to do
something when you really don’t and you weren’t asked to)
 don’t want to place non-breaching party in better position than expected
3. it would be unjust enrichment if there’s failure to pay

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 Def. of Unjust enrichment: person shouldn’t receive property or benefit w/o
properly compensating other party
4. promise to pay the reasonable value of the benefit that’s given
- Market value of the reasonable value of the project (pro rata shares %)
- Costs of producing the benefit
- Contract Price: no longer binding b/ K rescinded
When the breaching party bringing restitution claim, the K price is the upper limit  Don’t
want to incentivize the breaching party to breach
Exception: if the party seeking restitution has fully performed under the K, then they
cannot get Restitution but get Expectation Damages
Pay for the cost of the performance rendered - go off K by rescinding the K and
then bringing the Restitution claim  breaching party has to pay for reasonable value
of the breach
Quantum Meriut: Restitution
HYPO: Law student turned over to publisher a marked up copy of a book which contained
copyright infringement; Publisher sued writer in large copyright suit; Beneficiary didn’t
expect to pay because P (Officious intermeddler or volunteer) failed to request money for
the copyright infringement suit

Commerce Partnership v. Equity Contracting Co. (1997): should the landlord be made to
pay for the stucco done by Equity?
 fact that Equity hasn’t been paid isn’t important if Commerce paid the contractor
since they aren’t being unjustly enriched; we have to look at the net value gained
by Commerce in calculating amount owed to Equity by the principle of restitution;
how much was Commerce unjustly enriched? it looks like they weren’t

Watts v. Watts (1987): woman sues unmarried bf of many years for restitution when they
split up bc she relied on his promise that they should act like a family and husband/wife;
she claims breach of contract and restitution
 breach – implied promise based on his conduct, she seeks 50% of wealth
 restitution – her role in relationship was to his benefit
 jury refused to award on breach, but awarded on restitution an amount that was
less than 50% she wanted
United States ex rel. Costal Steel Erectors, Inc. v. Algernon Blair: Gen Contr (P)agreed to
erect steel beams and pays for the crane rental; Sub contr (d) said they weren’t obligated to
pay for the steel crane; D says no pay so P walks off the job;
P only did 28% of work which the D did not have to pay for then they had substitute
performance for remainder
 Policy Concern: Do we let the breaching general contractor walk away w/ benefit
of work w/o fully paying OR non-breaching party gets paid
Lancellotti v. Thomas: Claim for Restitution by the breaching party the sellers would
have ended up with a windfall; it is legally available to the breaching party to get restitution

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  Policy Concerns: Not distinguishing between the amount of performance;
Incentivizing a breach by the non-breaching party which causes other party to breach;
Change in attitudes about breach

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