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Contracts
St. Louis University School of Law
Bodie, Matthew T.

Bodie
Contracts
Fall 2010
 
 
Does the UCC apply?
UCC § 2-204 – “conduct by both parties which recognizes the existence of such a contract”
UCC § 2-206 – acceptance by any medium reasonable in the circumstances? Conforming goods?
Corinthian Pharmaceutical Systems, Inc. v. Lederle Laboratories: P places an order for 1,000 vials of vaccine, this is offer, then D ships 50 at original price as an accommodation and states this in a letter (raised prices because insurance, and this standard amount P used to buy) and says the rest of order 950 will be priced at new price, but can be terminated.  The 50 vile shipment was not an acceptance, but offered as an accommodation and is treated as a counter-offer which P may accept or reject.
2-205—Firm Offers
Scoular Company v. Denney: have history of interaction/dealings; D says price he wanted for his millet and P said the price wasn’t available to him ; 4 days later P sold millet relying on D’s offer, then P mailed written and signed purchase agreement (confirmation to D); D never signed it and sold millet to someone else – Qs: Was reselling the millet an acceptance? No, P not a broker, also P didn’t start paying for millet so there was no partial performance; Was the offer still  open? Yes, price not currently available not a rejection; Was proposal to P a “firm offer”? No, not in writing or signed, so D could revoke whenever but did not; was method of acceptance here “reasonable under the circumstances? No
2-207 – Additional terms: Conditional? Counter-offer; not conditional? Contract, but additional or different terms are proposals to the contract, unless 1) one party is not a merchant, 2) offer limits acceptance, 3) it materially alters the K, or 4) notification that terms are not accepted
DTE Energy Technologies, Inc. v. Briggs Electric, Inc.: D won bid from P to be a subcontractor; offer was a purchase order from D to P, offer because had specific term, quantity, price, time of delivery and was the initial contact between two parties; a later order acknowledgement from P to D was held to be an acceptance with proposals (including a forum selection clause); court holds the later order acknowledgement not conditional to assent on additional terms, so terms are proposals for additions to the contract
Textile Unlimited, Inc. v. BHM and Company, Inc.: arbitration clause disagreement, P bought goods from D and sent D a PO; D sent back an OA with different terms that were conditional; UCC holds that an acceptance will operate to create a contract even if additional or different terms are stated unless the acceptance is expressly conditioned on assent to the new terms. However, if the acceptance is expressly conditioned on the new terms, the acceptance operates as a counteroffer. If the counteroffer is accepted, a contract exists and the additional terms become part of the contract. To qualify as an acceptance, “specific and unequivocal assent” must be given. Nonetheless, a contract may be formed pursuant to conduct performed. Plaintiff did not give “unequivocal or specific assent” and therefore the new terms were not formed into the contract. Conduct of the parties created a K.
Hill v. Gateway 2000: P ordered computer from D over phone, comp came with a form of terms, including an arbitration clauses, form allowed P 30 days to return comp; arbitration agreement binding? Yes, a contract need not be read to be effective; people who accept take the risk that the unread terms may in retrospect prove unwelcome. “A vendor…may invite acceptance by conduct, and may propose limitations on the kind of conduct that constitutes acceptance. A buyer may accept by performing the acts the vendor proposes to treat as acceptance.” Court found that sending computer offer, and that keeping computer for 30 days was acceptance, said that 2-207 doesn’t apply because “battle of forms” only one form here.
Klocek v. Gateway: same as above but giving only 5 days to return comp; court found that offer was phone call and acceptance was either charging the card or shipping comp; 2-207 does apply here; D’s terms under §2-207 would constitute a counter-offer only if acceptance was conditional on P’s assent to the additional terms, not the case here; P not a merchant so additional terms only become binding if P expressly assents to them, did not do this; D had not informed P of the 5 day review-and-return period as a condition of the sales transaction; sheet is additional proposals and because between non-merchant and merchant buyer has to expressly accept, not part of K
 
II. Was there consideration?
Bargained for and Given in Exchange
Restatement 2d §17 – Requirement of a Bargain
1)       Except as stated in Subsection 2, the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration
2)       Whether or not there is a bargain a contract may be formed under special rules applicable to formal contracts or under the rules stated in §§ 82-94
Restatement 2d §71 – Requirement of Exchange; Types of Exchange
1)       To constitute consideration, a performance or a return promise must be bargained for
2)       A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise
3)       The performance may consist of
a)        An act other than a promise, or
b)       A forbearance, or
c)        The creation, modification, or destruction of a legal relation
4)       The performance or return promise may be given to the promisor or to some other person.  It may be given by the promisee or by some other person.
Note:  Moreover, a mere pretense of bargain does not suffice, as where there is a false recital of consideration or where the purported consideration is merely nominal
Kirksey v. Kirksey – Letter from D to P saying that if P moves into his house with her children, he will take care of them until she could raise her children; she eventually moves; Court says there was no consideration, the land was a gift, the loss and inconvenience which the plaintiff sustained in breaking up and moving to the defendant’s, a distance of sixty miles, is an insufficient consideration to support the promise.
Hamer v. Sidway – uncle tells nephew that if he stops smoking, drinking, etc, U will give N money.  N complies.  U dies without paying.  Court finds consideration in that N suffered the detriment of giving up rights, even if he did benefit from it
Jara v. Suprema Meats – son’s promise was unsolicited and gratuitous; it was neither induced by promises or conduct of his father nor given to induce a return promise or performance; promise constituted a gift (father had already given financial support to company)
Nominal consideration v. the Peppercorn Paradox
–          Nominal consideration – does not cou

aylor – similar to Webb.  P injures hand by stopping axe from hitting D.  D promises to pay, stops after a while.  Court rules this voluntary act is not sufficient consideration for her to recover at law.
 
Promissory Estoppel: Promise Plus Unbargained-For Reliance
1) Promise, 2) expected reliance, 3) actual reliance, 4) injury, 5) injustice
Kirksey v. Kirksey – good case for promissory estoppel, but only on the expense of moving from her house to bro-in-law’s.
Ricketts v. Scothorn – grandfather promises GD money so that she does not have to work. GF dies before paying the principal.  Court awards the amount to daughter. Having intentionally influenced the plaintiff to alter her position for the worse on the faith of the note being paid when due, it would be grossly inequitable to permit the maker, or his executor, to resist payment on the ground that the promise was given without consideration.
Restatement §90 – Promise Reasonably Inducing Action or Forbearance
1.        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.   The remedy granted for breach may be limited as justice requires.
2.        A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance.
Allegheny College v. National Chautauqua County Bank of Jamestown – D promised $5000 to set up fund in her name, pays part of it, then decides she does not want to honor her pledge; judge finds promissory estoppel as school acted as it reasonably would to set-up/maintain the memorial after the first payment was received; K too because namesake was sufficient consideration (her name listed as donor)
Congregation Kadimah Toras-Moshe v. Deleo – oral promise to give money on D’s death bed, P budgets to use money for library, court finds that budgeting the money was not sufficient reliance – did not actually change their behavior. Court said no reliance even though charity Rest 90(2) (some jurisdictions do not like charity rule).
Blinn v. Beatrice Community Hospital and Health Center, Inc. – P is at-will employee.  Gets another job offer.  Boss tells him that there is 5 more years of work to do.  P rejects other job offer.  D not liable for P’s reliance. Court holds promissory estoppel requires only that reliance be reasonable and foreseeable. Court concludes that no reasonable person in the position of the plaintiff could understand that the defendant had promised “at least five more years of work to do” if plaintiff would reject the other job offer and stay with defendant.