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Contracts II
Elon University School of Law
Gabriel, Henry Deeb

Contracts II Outline
Gabriel- Spring 2012
Chapter 2: Creating Contractual Obligations
Section 5: The Battle of the Forms and the Uniform Commercial Code (UCC)
·      Common law- Mirror Image Rule- new or different terms is a counter offer
·      UCC 2-207: Additional Terms in Acceptance or Confirmation- new or different terms is acceptance
·         UCC § 2-207(1): An expression of acceptance may indeed operate as an acceptance even though it states terms additional to or different from those offered and agreed upon
·         UCC § 2-207(2): Additional terms are to be construed as proposals for addition to the contract.  Between merchants such terms become a part of the contract unless (a) the offer expressly limits acceptance to the terms of the offer, (b) the additions materially alter it, or (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received ((if the offeror objects to the additions w/in a reasonable amt of time))
·         UCC § 2-207(3): Even when the parties’ writings do not establish a contract, a contract may be found through conduct by both parties that recognizes the existence of a contract; in such a case, the terms consist on which the writings of the parties agree together with any supplementary terms incorporated under any other provisions of this Act
·         (3) discusses different terms- if terms of both parties' are different, they cancel each other out- no basis for picking one over the other
·         UCC 2-204(1): Formation in General: A contract may be formed in any reasonable manner
·         Notice on the outside of a box, terms on the inside, and the option to return for a refund if the terms are dissatisfactory is an acceptable means of doing business
·         Therefore, the acceptance of certain terms occurs not at the time of purchase, but after the buyer has had a chance to review the terms and after the 30 day return-period has passed
·         This is not the standard method of contract formation- an exception to the rule
·         The standard mode of contract formation is that the contract is formed at the time of purchase
·         Reasons why be bend the laws of contract here:
·         1) It is an efficient means of doing business; it is not practical to have the seller’s agent read all of the terms and conditions at the time of purchase
·         2) In cases of buying software and computers, the buyer should expect that there will be additional terms included in the packaging
·         3) It benefits both the buyer and seller; if businesses couldn’t have terms of agreement, they would be taking a much greater risk and prices would skyrocket
·         Rolling Contract Formation- when acceptance does not occur on all of the terms at the same time; a reasonable person would assume you have already accepted the terms that were known at the time of purchase (ex. The price, the size, the color, etc); rolling contract formation is the law in about ½ of courts
Section 6: Precontractual Liability
·         Restatement 87-2: Option Contract: An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice
·         This was applied to the case of a general contractor and a subcontractor; the court decided that because of this rule, the subcontractor accepted the contractor’s offer when he affirmatively gave the contractor his bid
·         This is because the subcontractor should have reasonably expected the contractor to rely on his bid in order to make his complete bid
·         General Rule- When negotiations fail, there is no liability because there is only liability if a contract is formed; but there are exceptions and this is one of them
·         In situations such as these, the court may look at it like there is a contract to continue negotiations in good faith
·         Restatement 90(1): Promise Reasonably Inducing Action or Forbearance: A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise
·         Restatement 90= Promissory Estoppel= Detrimental Reliance; equitable relief
·         Normally when negotiations fail, no obligations from either party
·         RULE- Look to (1) the intent of the parties (by looking at the surrounding circumstances) (2) are there definite terms that can be enforced? And (3) was there consideration?
Chapter 7: Remedies for Breach
Section 1: Specific Relief
·         Specific performance is not the preferred remedy in contract law, but courts will award it in certain circumstances
·         The presumption is monetary damages
·         Specific performance is not a remedy in law; it is an equitable remedy
·         General Rule- Where monetary damages can be calculated, they should be rewarded; specific relief should only be rewarded if the situation is “unique” in that a monetary amount cannot be estimated
·         Rule for awarding specific performance: A party is entitled to specific relief when there is no adequate remedy at law- When the subject of the contract is unique, and because of this monetary damages cannot be allocated, you are entitled to specific performance
·         Example- a guy raises a horse and he is promise he’ll get the horse; he develops a sentimental attachment to the horse; he’s not given the horse
·         There is no adequate remedy at law because of the unique nature of the contract- the boy developed an attachment- can’t put a price on sentimental value
·         Some courts have defined “unique” to mean that you can’t put a monetary value on it
·         The question becomes not whether the goods are unique or not, but whether there is a monetary remedy?
·         The court will not award specific performance if it cannot award specific performance (for example- for a car which is “scarcely unavailable”)
Sufficient Terms
·         The terms of any contract must be sufficiently certain to allow the court to grant an appropriate remedy
·         The terms may be certain enough to allow the court to calculate damages, but not to award specific performance, or vice versa
·         Example- Where in a contract for the sale of goods, the court cannot determine what the price of the goods would be, what the quantity is, and for how long, specific performance may be granted because damages cannot be assessed
Service Contracts
·         It is very unlikely that a court will award specific performance to a service contract
·         The courts have the power to do so, but 2 problems: (1) Harder to enforce; For example, police officers would have to supervise construction workers all day to make sure they are performing and (2) You can make someone do something, but you can’t make them do it well
Other Theories on Specific Performance
·         International courts are not as anti-specific performance; they generally see no reason not to award specific performance if the duties of the

ment but only at an amount which is reasonable in the light of the anticipated or actual harm caused by the breach.
If buyer breaches, seller will go back and re-sell to someone else
Re-sells for 85; seller says you forced me back into the market and I sold them for 85; you ought to pay me 15; buyer says no, at the time we entered into contract, market price was 90 at the time that the contract was tendered and that was the risk I assumed; I don’t assume more than that; I owe you 10; this argument is infallible
Seller got screwed
Reliance and Restitution
·         Reliance- puts you in the position you would be in had you never entered the contract
·         Restitution reimburses what you have paid
·         Restitution- not a legal remedy; an equitable remedy
·         Example- Contract price is $1,400,000; Market Price is $1,100,000
·         Buyer got themselves into a bad bargain
·         Expectancy is -300,000
·         But buyer already paid $500,000
·         So expectancy is 500,000 + -300,000 = 200,000
·         Restitution would be 500,000, but restitution is capped at expectancy damages
·         So restitution is $200,000
·         Buyer would want restitution because restitution reimburses the buyer’s 500,000
·         A court in equity may award restitution
Section 3: Limitations on Damages
(1) Avoidability
·         Restatement 350- An aggrieved promisee is not allowed to recover loss that it could have reasonably avoided
·         Mitigation principle: you should avoid those damages that you can reasonably avoid
·         A plaintiff cannot hold a defendant liable for damages which it could have reasonably avoided;
·         The plaintiff must mitigate the damages caused by the defendant’s wrongful act (as long as it doesn’t result in a loss to himself)
·         Example- You contracted to build a bridge for $100; Performance costs $75
·         If the other party breaches and tells you not to perform before you have begun performance, what are your damages?  Expectancy
·         You expected to gain $25 from the contract
·         What if you completed the bridge and the other party breached?
·         You would get $100
·         What if you are mid-way through constructing the bridge and have spent $40 when the other party breaches?  Then you would get $65
·         In any position, you expected to gain $25, so you should get $25 more than what you have spent
·         Example- as a result of breach, you are unemployed
·         Do you have a duty to mitigate your damages and take the first job you can find? No
·         You do not have a duty to take a job but if you could easily mitigate and you don’t, then you can’t recover damages
·         The question is how substantially similar is the other job opportunity
·         Mitigating principle- you have to avoid those damages that you can reasonably avoid