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SUNY Buffalo Law School
Schlegel, John Henry

Contracts Outline
Professor Schlegel
Spring 2011
*read for facts, procedure, knowledge, good faith and ambiguity*
I. Meaning: the Central Problem
Class 1. Interpretation
PROCEDURAL POSTURE: Plaintiff, a foreign corporation, brought an action for breach of the warranty (in trial court), alleging that goods sold should correspond to the description in two contracts with defendant, a state sales corporation.
OVERVIEW: Defendant states that the sales corporation had two contracts with plaintiff foreign corporation for the sale of “chicken”. After plaintiff received one shipment of stewing chicken and another was stopped, plaintiff brought a breach of warranty action, alleging that the goods sold should have corresponded to the description because the chicken was not suitable for broiling and frying. In dismissing plaintiff's complaint, district court held that plaintiff's reliance on the fact that the contract forms contained words with a blank not filled to negate agency was wholly unpersuasive where the clause's purpose was to permit filling in an intermediary's name to whom commission would be payable. Defendant's subjective intent that it could comply with the contracts by delivering stewing chicken coincided with objective meaning of “chicken,” which had at least some usage in the trade; and plaintiff did not sustain its burden that “chicken” was used in the narrower rather than in the broader sense.
OUTCOME: Plaintiff foreign corporation's complaint was dismissed where plaintiff did not sustain its burden of persuasion that the contract with defendant state sales corporation used the word “chicken” in the narrower sense and defendant's subjective intent coincided with an objective meaning of “chicken.”
Outlet Embroidery
PROCEDURAL POSTURE: Plaintiff seller sought damages resulting from defendant buyer's refusal to perform under a contract. The buyer appealed an order of the Appellate Division of the Supreme Court in the First Judicial Department (New York), which affirmed an order of the trial court denying the buyer's motion to dismiss the complaint.
OVERVIEW: The buyer refused delivery of goods, claiming that the agreement was inchoate and abortive because it stated that the contract price was subject to change pending revision of the tariff. The appellate court certified the question whether the amended complaint stated facts sufficient to constitute a cause of action. The court answered the question in the affirmative. The court took judicial notice of the fact that at the time of the contract, Congress was debating a new tariff, and it was uncertain as to whether the goods would arrive before or after the change. The court held that the only interpretation possible for any reasonable mind was that the buyer would have to take the risk that the price could be increased by the measure of the duty added if the tariff was revised. There was a valid 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.
OUTCOME: The court affirmed the order of the appellate court affirming the trial court's denial of the buyer's motion to dismiss the complaint.
Class 2. Interpretation
PROCEDURAL POSTURE: Plaintiff appealed a decision from the Circuit Court, Multnomah County (Oregon), which sustained defendant's motion for judgment on the pleadings in a contract case.
OVERVIEW: Plaintiff and defendant entered into a contract, whereby plaintiff would sell, and defendant would purchase, meat of a certain grade at a certain price. The contract also provided for a discount if the meat was not of the specified grade. A laboratory provided analysis certificates and their findings were final. Meat was delivered and paid for, with some amounts paid at the discounted price. Plaintiff brought an action claiming that there was a custom and usage of trade, well known to both plaintiff and defendant, as to the meaning of the terms used in the contract which meant that despite the figures stated on the analysis certificates, meat of the lower grade by the analysis certificate was actually payable at the higher rate. The court reversed the judgment of the lower court. The court found that plaintiff should have been allowed to bring in information of trade usage of the business in which both parties were engaged. Despite the plain meaning of the terms, the evidence should have been allowed to prove the meaning of such terms in relation to the contract.
OUTCOME: The court reversed the decision of the lower court.
PROCEDURAL POSTURE: Appeal from judgment of the St. Louis City Circuit Court (Missouri) for the employer on an alleged breach of an employment contract.
OVERVIEW: Appellant employee of respondent continued working for respondent after the expiration of his written contract of employment. Appellant alleged that when he asked respondent's presi

TCOME: The court affirmed the judgment in favor of appellee seller because appellee believed that it was dealing with appellant as an individual when it sold the merchandise to appellant.
Class 4. Business practice
Macaulay Article
Wisconsin Knife Works
PROCEDURAL POSTURE: Plaintiff manufacturer sought review of an order of the United States District Court for the Western District of Wisconsin that dismissed plaintiff's breach of contract suit following a jury verdict that the contract between plaintiff and defendant metal supplier had been modified but not broken and awarded defendant counterclaim damages.
OVERVIEW: Plaintiff contracted with defendant to provide raw materials for the manufacture of spade bits. Plaintiff's purchase orders stated that a contract modification was not binding on plaintiff unless it was made in writing and signed by plaintiff. Defendant failed to deliver on time. Plaintiff issued new purchase orders and nearly two years later terminated the contract where only half of the purchase orders had been delivered. Plaintiff brought a breach of contract suit claiming that defendant violated the terms of delivery. The trial court gave jury instructions that the parties could modify the contract orally or by conduct. The court dismissed plaintiff's claims upon a jury verdict in defendant's favor. On review, the court reversed and remanded for a new trial, holding that where modification could only be effectuated in writing the jury instruction that modification could occur otherwise was erroneous. On remand, the trial court was free to consider the alleged waiver of delivery and damages.
*Story telling. 2 law profs arguing USC.
OUTCOME: The court reversed the trial court's entry of judgment in favor of defendant and remanded for a new trial where the jury instruction indicating that a modification of contract could occur in a manner other than by writing was erroneous where the contract indicated that modification could only occur by writing.