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Contracts II
University of Alabama School of Law
Henning, William H.

Void- No K was ever formed
Voidable- means injured party can still affirm K if they want
Parol Evidence Rule-when parties have reduced their agreement to a writing which contains the final and complete statement of their agreement, evidence may not be offered to contradict or supplement its terms
·         Unless writing is not intended to be final and complete
·         Unless induced by fraud b/c then K is voidable and it doesn’t matter what K says
      I.            Ch. 4: The Bargain Relationship
1.      Insufficient Agreement: Indefinite, Incomplete, & Deferred Terms
For an offer to exist there must be a manifestation of present intention to contract by the offeror, the terms of the proposed contract must be definite and certain, and the offer must be communicated to the offeree. This section focuses on the certainty requirement.
o        Misunderstanding has to do with differing subjective understandings about meaning of a material term in K
3 Problems w/ Certainty:
1)      Ambiguity
2)      Indefinite Agreements
3)      Incomplete and Deferred Agreements
a.   Defective Formulation and Expression of Agreement (Ambiguity)
· Raffles v. Wichelhaus (Peerless)
(2 equally possible Inconsistent interpretations)
·         Two different ships both named the Peerless that would arrive at much different times
Three options:
·         No K
·         Adopt buyer’s meaning
·         Adopt seller’s meaning
No way to know that a particular ship was meant – only said Peerless
·         Each party meant a different ship
Must determine whether the term at issue is material
If the term is material, then there is no K
·         Probably an immaterial term here – time of delivery did not matter
No contract b/c:
·         There was a latent ambiguity in the contract; it did not indicate which ship was intended, each had a different interpretation, and neither party knew of the other’s interpretation
·         No meeting of the minds (old case)
·         Would have been contract if both meant same ship or if either party knew or should have known it would have been construed against that party
Restatement (2nd) § 20
1.      There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations AND:
a)      Neither party knows or has reason to know the meaning attached by the other; OR
b)      Each party knows or each party has reason to know the meaning attached by the other
2.      The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties IF:
a)      That party does not know of any different meaning attached by the first party, and other party does know what meaning 1st party is thinking; OR
b)      That party has no reason to know of any different meaning attached by the other, and the other has reason to know the meaning attached by the first party
Interpretation of § 20
·         If one party knows and does not say anything, then construe the language against that party
·         Reason to know – reasonable person in the person’s situation would have drawn the conclusion that a fact exists
·         If one party is sloppy and knows that there can be an ambiguity, then enforce the K against that party
·         Common theme of subsection (1) – both parties are at the same level. Either both are at fault or both are w/o fault—NO K (seems a bit like comparative fault—should determine if one is more at fault)
·         2(a) – will have a K and the K will be construed against the seller because the seller had actual knowledge and was cheating the buyer (buyer has reason to know or no knowledge)
·         2(b) – will be a K and will prefer the meaning of the party without the knowledge
·         Term must be material
·         If the meanings are very close but different, then will not use § 20

guous terms
·   Definition – a term that is reasonably susceptible of more than one meaning
·   If there is a material term and the term is fatally ambiguous, then you get the result here (no recovery)
·   Two options
·         Look at a way to determine the terms of the K
·         If there is nothing, then there is a gap
·   Common law judges will not fill the gap (material terms)
·   UCC – typically will not either
·   There is no way to tell the intentions of the parties in this case, would be pure conjecture-fair share can range from a nominal sum to a substantial amount
·   Courts cannot aid parties in such a case when they are unable or unwilling to agree upon the terms of their own proposed contract
·   No K if any material element is open to negotiation
·   For K to be valid, agreement must be certain & explicit, not vague or indefinite, & full intention able to be ascertained to a reasonable degree of certainty
·   If there is fatal ambiguity, that cannot by resort to parole evidence or give the court some reasonable basis for enforcing the contract, then the court will decide no K
·   Words “fair” and “reasonable” can have a definite and enforceable meaning depending on the intent of the parties when using such words and the Subject matter to which they refer. Ex. Like when talking about market price
·   This does not prevent recovery upon quantum meruit by a party for the reasonable value of services rendered in reliance upon the terms of the agreement.
Uncertain term here was price, traditional approach is that such terms must not be too indefinite to determine intent of parties