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Contracts II
Stetson University School of Law
Fox, James W.


K Law terms

Firm Offers

Option K

Letters of Intent

Problem in offer/acceptance law b/c it is not clear what Ps agreed to

UCC (Uniform Commercial Code)

§ 2-207

Traditional view of Battle of Forms

i. Last Shot/Mirror Image Rule

Offer/acceptance has to mirror each other, and if it doesn’t it it’s a counter-offer, and the “last one” must be the K

ii. § 2-207 does not agree

Ps agreed on what they focused on and the specific terms were not decided yet
Enforces things they actually agreed on, not the other things OR there is no K on the writing b/c you stated you did not want to K with each other, and then you performed, so we will just tell you what your contract is (default rules)
Adapts to way people behave

§ 2-205: Firm Offers

Option K

i. Unable to revoke offer

Even if no consideration is present:

“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 is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror.”

§ 2-305: Market Price (standard default provision)

Does not require Ps to set reasonable price (can be unreasonable and still enforceable)
States that in the absence of setting a price, the market price will apply (default)

i. Quantity and price treated differently under UCC

Price can be set to default, but quantity must be specified

§ 2-202: UCC PER

allows explanation or supplementation of extrinsic evidence by use of the following:

i. Course of performance, course of dealing, or usage of trade (§ 1-303); and
ii. Evidence consistent additional terms unless the ct. finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement

Course of dealing & Usage of trade: Tells cts. to Read terms of K and rules consistently with one another (“reasonably construed”)

If unable to, then express terms of K will trump everything else (has to be clear)
Draft around UCCà use language of UCC to do that (i.e. disclaiming a warranty)

Illusory Promise/K

Makes agreement unenforceable for lack of mutuality of obligation (no performance required).
Be careful b/c sometimes language appears illusory, but circumstances demonstrate that promisor really did intend to commit themselves (Wood v. Lucy, Lady Duff-Gordon: fashion endorsement case).

“a promise may be lacking, and yet the whole writing may be ‘instinct with an obligation,’ imperfectly expressed. If that is so, there is a contract.” -Cardozo, J.

3 Situations (issues in traditional view of consideration doctrine):

Distributorship Agreement:

i. One way on side of drafter and lack of consideration from one party

Tension between commitment and flexibility

ii. See in franchiser agreements mostly

Involves long term relationship (consideration doctrine points out issues with this)

Output K:

i. Does not state a specific quantity to be sold/purchased, but stated it in terms of output of seller

Seller unsure of how much it will be able to produce
Argument: no consideration for seller b/c not obligated to do anything
UCC 2-306(1): makes quantity subject to obligation of good faith

Requirement K:

i. Buyer does not know for sure how much of product they will need (risk taken by both Ps)


Penalty defaults (when to use?)

Ex ante cheaper than ex post (social cost) (sometimes)

Ex ante would be the cost to the Ps

Figure out costs between the Ps prior to finalizing K

Ex post would be the cost to the Ps and ct.
NOT applicable to price situation b/c they are objectively determinable (cheap for ct. to determine) (i.e.: market value)
Quantity question is more expensive b/c there needs to be more investigation into what Ps wanted and is more of a subjective determinable (extensive and costly litigation).

Only applicable to situations where K has broken down

Impose all costs of transactions, so prepared for costs that go bad.

Imbalance of info (require disclosure info)

i. If party is going to be penalized for withholding info, they will make sure they disclose that information to the less informed P.
ii. Effects

Gets info out

i.e.: re: default rules
i.e.: Real Estate Broker commission for selling house

Fact or law
Share of pie

Ps trying to increase value created by K
Withholding info that will increase value b/c portion will be greater for that P when the info is withheld
Sometimes this is okay when the information is free to know and one P has made the effort to inform themselves

Cts. do not want to penalize Ps in these situations