Contracts II Outline

K II Outline
 
 
 
Implied Terms & Implied Obligation of Good Faith
 
General: The  K obligations are  more than just what the parties actually “agree” to; the obligations also includes what the parties have “implied” through words and conduct or obligations that the law( statute, common law, court) imposes. Parties must use good faith and fair dealing in carrying out/terminating a K. Good faith can be applied to one parties discretionary power.  
 
LAW
U.C.C. 2-309: No time specific time provisions; notice of termination
 if K does not specify time for shipment or delivery or other action then it
is a reasonable time. If K provides for successive performances but it is indefinite in duration it is valid for a reasonable time but unless otherwise agreed may be terminated by either party. If one party wants to terminate the K, except on happening of an agreed event the party must give reasonable notification; an agreement that dispenses of duty to notify is not valid if it would be unconscioinable.
                  1. have to notify other party
2.      notify with enough time to be reasonable. (can’t just say you are no longer
my exclusive distributor and close up shop today, unless K says so.)
 
 UCC 2-306(2): imposes a “best efforts” obligation in cases where the K for sale calls
 for “exclusive dealing”.
 
 UCC 1-304 : every K or duty imposes an obligation of good faith in its performance or enforcement. If you don’t perform or enforce in good faith a specific obligation under the K then you breach the L and your remedial rights are no longer available. 
 
 UCC 1-201(20) – good faith means “honesty in fact and the observance of reasonable commercial standards of fair dealing; can only breach this once performance begins
 
 S 205: duty of good faith and fair dealing to every K
 
 
 
 
 
 
 
 
 
 
 
Road Map
 
Wood v. Lady Duff
a)      A promise may be lacking and yet the whole writing may be instinct with
            obligation imperfectly expressed. If that is so, this is a contract. In determining the
             intention of the parties, the promise has a value. It helps to enforce the conclusion
            that the plaintiff had some duties. Consideration = promise by plaintiff to use
            reasonable efforts to bring profits and revenues into existence. Wood’s implicit  
            obligation of good faith is to use reasonable efforts to exclusively market her
            products
b)      Is a promise implied from the writing?
Are there any promises to act which could be used as consideration?
Does the K call for exclusive dealing?
 
Libel v. Raynor
       a) Court says distributorship agreement is an agreement for the sale of goods. By not
           establishing a length of time for the K to exist, either party may terminate the
           relationship at will, but without a requirement for good faith and fair play either
           party may be severely damaged… reasonable notification should be the minimum 
           amount of protection.    
b)      If one party terminated the at will K, did they give reasonable notice? 
 
Seidenburg v. Summit Bank
a)      The covenant of good faith may permit a finding of breach even where no express term of the agreement has been violated (Thunder)Equal bargaining power is not determinative.Claim summit failed to perform in promised areas which impacted reasonable expectations of compensation and future involvement. Claim bad faith: summit never had any intention to perform to begin with, never committed to developing business with plaintiff. Summit terminated plaintiffs.
c)      was there a breach of good faith
·         inadequate bargaining power?
·         financial vulnerability?
·         expectations of the parties when agreed to K? *
·         defendant’s bad faith or outright dishonest?
·         What was the purpose of the K?*
 
Lock v. Warner Bros
a)      Good faith has often been applied to judge the appropriateness of a party’s exercise of some type of discretion expressly granted to it by the terms of the K.
        WB did not really consider/ no real intention of hiring her as a director. Didn’t  
         choose in Good faith b/t a and b( where the K gave WB discretion). Good faith
         applies to the use of discretion
b)Did the K give the party discretion in making decisions?
           Did a party frustrate the other party’s right to receive the benefits of the K?
          Did the party really intend to follow through with part of the agreement? Evidence?  
 Interpreting the K and the Parole Evidence Rule
 
General: PER determines whether evidence is admissible to the court for the purpose of explaining the terms of the K. There is a preference for an agreement expressed in formal writing. Are oral agreements or informal writings admissible as evidence? The PER excludes evidence that might be used to explain the K. When the parties have agreed to integrate a final versi