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Contracts
San Joaquin College of Law
Artenian, Lawrence M.

Artenian – Contracts Spring 2010 Outline
 
 
KEY:        ***            means barf came from prior year exams
                **+           means there are relatively minor changes to the exam barf
           Black           regular BARFS
           dark blue     SUPERBARFS
           green           additional comments or notes
           pink             POLICY statements
           purple          mnemonics
           red               exam tips
 
Where UCC and Common Law Differ  (emphasis on exams!)
K modification
Parol Evidence rule vs. Mirror Image rule
Remedies:
Liquidated Damages
Rescission and Expectancy
Perfect Tender rule
Incidental Damages
 
Contract BARF: A contract is a kind of promise or a set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes as a duty.
 
Good Faith BARF: §1-203 Every K or duty has an obligation of good faith; failure to perform in good faith is breach of K. Common law rule holds an implied covenant of good faith and fair dealing with every K.
 
Breach BARF: Failure or refusal to perform under a binding contract w/o valid legal excuse. ***
 
I.         Choice of Law – UCC or Common Law?
Does the UCC Apply?
§2-102 UCC Applies BARF: The Uniform Commercial Code applies to all contracts involving the transaction of goods.  §2-105: Goods defined
Moveable Goods BARF: Goods are defined as things moveable at the time of identification to the contract other than the money in which the price is to be paid, investment securities and things in action. This also includes the unborn young of animals, and growing crops and other things attached to realty. ***
 
·         §2-107: Goods to be Severed From Realty(“goods” distinguished from interest in real property):
Attached Goods BARF: Minerals or structure to be removed by SELLER (if buyer severs, then not a sale of goods); growing crops or timber severed by either party, unless sold with the land and then is a sale of realty not goods.
 
·         Mixed Contracts – Predominant Factor (“Bonebrake”) Test: Is this a transaction involving goods or services?
Mixed Contract BARF: Majority view: Predominant Factor (“Bonebrake”) Test – Where a contract consists of a mixture of goods and non-goods, most jurisdictions apply the “predominant factor” or “Bonebrake” test to determine whether the goods or non-goods portion of the contract predominates the purpose of the parties in making it. Where the goods aspect predominates, the UCC will be applied; otherwise the common law will be used. ***
Minority view: separated into two contracts, with the UCC applied to the goods portion and the common law applied to the non-goods portion.***
 
·         If UCC applies, is any relevant party a merchant?
§2-104 Merchant:
Merchant BARF: Section 2-104 defines a merchant as a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed because of his employment of such a person. Some special rules of the UCC apply only to merchants, including section 2-105 (the firm offer rule).
§ Watch out! “Merchant” only applies if that party is a merchant in the type of goods of the transaction.
B.       Does the Common Law Apply?
·         C/L Applies – BARF: The common law applies to contracts for services, real property and other non-goods transactions and is governed by rules of common law and statutes other than the UCC.***
II.        Formation
A.       Mutual Assent
 
1.        Offer made?
a.        The offeror’s intent.
·         §24 Offer: 
Offer BARF: An offer is a manifestation of willingness to enter into a bargain, made so as to justify another into believing his assent to that bargain is invited and if given will conclude the bargain. The terms of the proposed contract must be sufficiently certain so as to provide the court with a basis for determining the existence of a breach and an appropriate remedy. This is often described as an objective standard, measuring whether a reasonable person in the offeree’s position would see the expression as an offer.***
 
·         §33(1) Certainty: 
Certainty of Intent BARF: Uncertainty of terms may indicate there is no intention to make an offer (there are no magic words).
 
·         Circulars and Advertisements: 
Ads and Circulars BARF: Generally newspaper ads and circulars are invitations to bid; however if the ad is structured in a way that a reasonable person would think it is an offer, then it in fact could be an offer. Advertised terms are impliedly included in the K.
 
b.       Content of offer:
·         §33 Certainty: see above, §33(2)
Certainty of Offer BARF: The offer is required to contain sufficient detail and specificity to enable a court to determine later if the alleged contract has been breached and to fashion an appropriate remedy. ***
 
·         Gap fillers- Restatement §33(2) and UCC §2-208. Gap Fillers BARF: Although the terms of the offer must be reasonably certain, if the actions of the parties show that they intended to enter into a contract, the contract may be found enforceable by filling in the gaps from the following hierarchy:(ECCU)
1.        Express terms of the contract
2.        Course of performance of this contract (i.e. prior conduct under this contract)
3.        Course of dealing in prior business conduct, contracts or dealings defined by §1-205(1) (ex. eel skins)
4.        Usage of trade – what is customary in the industry, locale, etc. defined by §1-205(2)
o    Such gap fillers can include: (QTD PPP)
Ø No quantity gap filler, use hierarchy (above)
Ø §2-305 – Open price = market price (reasonable price at time of delivery), fixed in good faith – price is required in CL (common law) contracts
Ø §2-307 – Delivery in one lot
Ø §2-308 – Delivery FOB unless otherwise specified (seller’s business or residence or where located)
Ø §2-309 – Delivery in a reasonable time; K to continue for a reasonable time (“reasonable” will change with commodity;) Can dispense with notification of termination unless unconscionable. 
Ø §2-310 – Payment at time of delivery unless otherwise agreed
Ø §2-208 – If there is repeated performance then is an implied agreement to continue performance
2.        Has Any Event Terminated Offer Prior to Acceptance?
a.        Duration of offer.
·         Lapse of Time BARF: if no deadline is specified then offer expires in a “reasonable time” under the circumstances.
 
·         Naked promise BARF: a naked promise is a gratuitous promise to hold offer open – not binding because not clothed in consideration.
 
·         §39Counter-Offer Barf: When something appears to be an acceptance but purports to add, subtract, or change a term, it is really a counter-offer terminating the original offer and turning the power of acceptance back to the original offeror. The counteroffer is then measured by the same objective standard as the original offer.
 
·         §38 Rejection Barf: An offeree’s power of acceptance is terminated by his rejection of the offer, unless the offeror has manifested a contrary intention. A manifestation of intention not to accept an o

ffer can only be accepted by the person invited to furnish consideration
 
·         §58 Necessity of Acceptance Complying With Terms of Offer – acceptance must comply with the requirements of the offer as to the promise to be made or performance to be rendered (“master of the offer”)
 
b.       Unilateral – Bilateral Rules
·         Bilateral Contract BARF: A bilateral K is one that can be accepted only by promise to perform the task described by the offeror. Therefore, the offer itself seeks a reply by a promise offered in exchange for a promise. K formed on acceptance (before performance).
 
·         Unilateral Contract BARF: A unilateral contract is one that can be accepted only by performing in full the task described by the offeror. Therefore, the offer itself seeks a reply by actual performance. Where the offer is such that the offeror would not actually see the commencement of performance, the common law rule requires the offeree to provide timely notice to the offeror that performance has commenced. Completion of performance and K formation occur at same moment in time. ***
 
·         Ambiguity Restatement Rules
o    §54 Acceptance by Performance BARF: Notification of commencement of performance of a unilateral contract is not required unless:
§ Required by the offeror; or
§ The offeree knows that the offeror will not know of performance; then the offeree has a duty to use reasonable diligence to provide reasonably timely notice that the performance is being commenced.
 
o    §62 Acceptance by Either Performance or Promise BARF: If a choice is offered as to whether the offer is for a unilateral K or bilateral, and offeree begins performance, this is interpreted as acceptance. Such acceptance operates as promise of complete performance.(bilateral rules apply)
 
o    Choice by Offeree
§ §32 Invitation of Promise or Performance BARF: If the offer is ambiguous as to whether acceptance is required by promise or performance, then the mode of acceptance is what the offeree chooses.
 
o    §2-206 “Ship ASAP” Offer and Acceptance
§ §2-206(1.a)Offer and Acceptance BARF: For ambiguous contract terms, an offer is understood to invite acceptance by any reasonable means under the circumstances.
 
§ §2-206 (1)(b): “Ship as soon as possible” BARF: An order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer. ***(No K is formed. Only applies where buyer makes an offer and is in a hurry.)
§ §2-206 (2): Seasonable Notice BARF: Seasonable notice to the seller is required when the buyer elects to accept by commencement of performance. ***