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Contracts
SUNY Buffalo Law School
Su, Rick

 
Contracts
Professor Rick Su, Spring 2013
Textbook: Contracts and Sales: Contemporary Cases and Problems, 2nd Ed.
 
Pleading in contracts: P + D + {Offer + Acceptance + Consideration} + Performance of Condition + Breach + Injury + Damage à $$$
Contract = Offer + Acceptance + Consideration. ß This is up to interpretations (what you see or hear, and what you are given.)
Pleading of a modern Contract:
Backbone of a Contract:
Plaintiff
Recitals
Defendant
Recitals
Formation of Contract
(Offer + Acceptance + consideration)
Definitions:
·         What are the special meanings of words
Terms:
·         Who is doing what, to whom, for how much
Representation and warranties:
·         Look backwards (and affirm at present)
·         Statement of past or existing facts
·         Establishes a state of affairs at closing
Contracting is done around this point
Performance of Condition
Covenants
·         looks forward
·         promise a state of affairs after signing
·         “We will/we will not be/do…”
Breach
Default
·         If you do…., then you have fouled up
Damages
Remedy
·         If you fouled up, then we may do…..
$$$$$
 
Tools of Contracts:
·         Interpretation: comes down to word, action, and context.  Studying the document and surrounding circumstance to decide the documents meaning.
o   Ambiguity: it is an answer to the question “should we let evidence in?”
§  When there is ambiguity: we should let in evidence to resolve the issues.
·         We let in parol evidence
§  When there is no ambiguity: we shouldn’t let in evidence.
Uncertainness; the possibility that something, often the text of a document, can be interpreted in more than one way
o   Intent: the resolve or purpose to use a particular mans (in this case a K) to reach a particular result. Usually explains how a person want to do something and how that persons wants it done.
o   Trade usage: everyone in the trade does thing a certain way.  A general uniform well known course of conduct followed by a geographical area or type of business or trade.  This is important for interpretation ambiguous contract. (most general)
o   Course of dealing: this is how we handle contract after contract, precedent, what we have been doing all along in our business relation.  The history of business between two persons before the current business deal.  The relationship between the two.
o   Course of performance: over time we did things a certain way.  The way each side carries out the business deal. (less general)  Look at each side individually to see how they have handled the contract.  Consists of relations between the parties prior to signing the contract
o   Integration: an attempt to exclude all things before it.  To make whole or complete’ the process of makings something whole or complete, bring together different group or combining businesses.  If a contract is integrated, no parol evidence.  Non-integrated you allow parol evidence.  All persons’ previous discussion, promises, writing, and statements are said to be merged into the agreement, therefore we don’t need parol evidence since everything we discuss is already included into the K. (Universal Film Exchange v. Viking Theatre Corp. page 143)
o   Promissory estoppel/reliance: A makes promise to B, and B relies on A’s promise and acts.  A can’t take the promise back after B has acted. 
The principle that when Person A makes a promise and expects Person B to do something in reliance upon that promise, then person B does act in reliance upon that promise, the law will usually help person B enforce the promise because Person B has relied upon the promise to his or her detriment. Person A is stopped from breaking the promise even when there is no consideration to make the promise binding as part of a contract.
·         Subjective tools: can’t win the case with these tools but will help you.
o   Misrepresentation:
§  Innocent misrepresentation: is a false statement not known to be false.
§  Negligent misrepresentation: is a false statement made when you should have known better.
§  Fraudulent misrepresentation: s a false statement known to be false and meant to be misleading
§  Restatement (second) of contracts: A misrepresentation must meet 3 requirements: (1) the misrepresentation must have been either fraudulent or material; (2) the misrepresentation must have induced the recipient to make the contract; (3) the recipient must have been justified in relying on the misrepresentation.  Page 223
o   Good faith: honest and honesty in fact.  Bad faith is easier to prove then good faith. Good faith is similar to intention.
§  Merchant: the observant of reasonable commercial standard of fair dealing in the trade (UCC)
§  Bargaining power: the obligation of an employer to hold honest negotiations about wages, hours, and employment conditions with the union that has been certified to rep its employees
§  Purchaser: a person who buys something, honesty pays good value, and knows of no one else claim to the thing they brought
o   Reasonableness: a board flexible word used to make sure that a decision is based on the facts of a particular situation rather than on abstract legal principles, it has no exact definition but can mean fair, appropriate, moderate, and rational.  When reading the following examples, remember that the definitions tend to be circular and depend on the actual situation not on the precise words used.
o   Unequal bargaining power:  If a company has a large market share they can negotiate contracts in their favor. 
o   Is where one party to a “bargain”, or some kind of contract or agreement, has more and better alternatives than the other party. This results in one party having greater “power” than the other to choose not to take the deal and makes it more likely that this party will gain more favorable terms. Inequality of bargaining power is where freedom of contract ceases to be real and markets fail.
·         Contracts parts – express (agreed upon by the parties), Implied (put into contract by courts or parties). RULE: IF you… (condition)…then I will…(promise)…..
o   Promise: Oral or written statement from one person to another given in exchange for something of value, it binds the person making the promise to do something and may give the other person the legal right to demand that it be done.  If there is a promise you must still perform your promise and then sue for damages.  Consist of terms, warranties (merchantability and fitness), and covenants.  A promise to the answer to what a party must do.  Promise is mostly payment.
o   Term: word of phrase; a fixed period of time set for something to happen; a part of agreement that deals with a particular subject.  Who is doing what to whom and for how much?
o   Warranties: guarantee or promise which provides assurance for one party. Any promise that certain facts are true, a promise or grantee especially in a contract.
§  Merchantability: goods purchased conform to ordinary standards of care- same grade, quality and value as similar goods.  Is a product good enough pass without objection in the trade?  Merchantability is not to state the use must meet the needs of the buyer but must meet the standard of the trade that the seller is in.  Can’t judge based on buyers perspective but by sellers; if product meets the seller’s standard then it is merchantable. 
§  Fitness: The buyer does not know which product is better but relies on the seller’s knowledge to pick the one that would work best.  Seller possesses knowledge or expertise on which the buyer may rely. 
o   Covenants: (1) a formal promise agreement or restriction usually in a deed or K; or it can just be a K itself; (2) it can be a treaty; (3) to promise or agree formally. Covenants promise a state of affairs after signing. Covenants look forward – we will or not do something.
·         Condition: Condition conditions a promise.  If you do something I will follow with my promise. A future uncertain event that creates or destroy rights and obligations, for example a K may have a condition in it that if one person should die, the K has ended.  Condition can be express or implied, for example condition for employment is a requirement for keeping a job, such as a requirement o

and perfected contract, whether it was interpreted to mean that the buyer could cancel if the tariff had been followed by a price change, or that the buyer assented by implication to the payment of another price. Subject to change would not mean subject to cancel, the reasonable  man would no understand this case to be control this way.  “ In that view of the meaning, there was a valid and perfect contract, thought subject to privileged of cancelation in a specific contingency.”
–          Whatever loophole was left, whatever chance that the buyer might use the privilege of cancellation harshly, was of the seller's own creation, since the form of the agreement had been drafted by its agents. Theirs, and not the buyer's, is the blame, if there was improvidence or folly.
Reasonableness: Here a Contract was changed in three days. Defendant canceled its acceptance  notified the plaintiff that it would refuse to make a delivery three days after he originally agreed to make the delivery. Refused because the price of the goods chagned. What would the reasonable business man do? “There is a still contract, whichever shade shall be accepted”- reasonable business man would rely on the contract. Even though the wording was a little confusing it should still be honored
Embry v. Hagardine, McKittrick Dry Goods (did the employer intend to rehire the employee? Employee says “I wont’ work until you renew contract.” Employer said “go back to work”) p.19
Facts:  The Plaintiff, Embry (Plaintiff), worked for the Defendant, Hargadine, McKittrick Dry Goods Co. (Defendant). The Plaintiff’s contract expired in December and he met with Defendant’s President to renew it for a year. The President said “go ahead, you’re all right; get your men out and don’t let that worry you.” The contract was terminated a few months later. The Plaintiff brought suit based on breach of contract.
Rule: If a reasonable person would understand the oral promise to be an agreement for employment, then it is a valid contract.
Held:  The answer was unambiguous, and we rule that if the conversation was according to appellant's version and he understood he was employed, it constituted in law a valid contract of reemployment, and the court erred in making the formation of a contract depend on a finding that both parties intended to make one. It was only necessary that Embry, as a reasonable man, had a right to and did so understand.
Tool:
Reasonableness: The judge tried to move away from ambiguity by stating that we should look at the conversation the way a reasonable man would.
Intent: The primary object of construction in contract law is to discover the intention of the parties. This intention in express contracts is embodied in the words used and is deduced therefrom. This rule applies to oral contracts and contracts in writing, and it is recognized by courts of equity.
 
o   “a promisor may be bound to perform something which he did not intent to promise, or a promisee may not be entitled to require that performance which he understood to be promised to him”. Such intention always be determined by the conduct, acts, and express declarations, of the parties and not by the secret intention existing in the mind or minds of the contracting parties. “The law imputes to a person an intention corresponding to the reasonable meaning of his words and acts”