Select Page

University of California, Davis School of Law
Joo, Thomas W.

a. Mutual Assent:
i. Focuses on procedure
1. Whether the parties fairly came to a bargain
a. Was there Offer and Acceptance?
2. Ignores substance of the agreement
a. Doesn’t matter if K of adhesion
ii. Traditional K analysis—start w/ this approach
1. Example—Hill v. Gateway
2. So long as there was no fraud the K will be enforced
b. Magnuson-Moss Warranty Act (federal law)
i. Goal is to regulate consumer-manufacturer relationshipà based on status concern
ii. Regulates disclosure, does not regulate written warranties, but if warranty is written it must be available to consumers
1. Manufacturers are required to make consumers aware of important provisions like an arbitration clause—more than just providing information
a. Under-enforced b/c not widely known and understood
2. Focuses on status and behavior, not substance
c. Unconscionability:
i. First find a K of adhesion (unequal bargaining power)
1. Status
a. Relative bargaining power of the parties
2. Behavior
a. Did the parties understand what they we’re agreeing to at time of K formation?
ii. Second focus on the substance of the agreement
1. Is it fair?
2. Is it “commercially reasonable?”
iii. Example—Williams v. Walker-Thomas Furniture Co.
1. The party of little bargaining power, and hence any real choice, signed a commercially unreasonable K w/ little or no knowledge of its terms
iv. Unconscionability argument is hard to win
1. If all you have is unequal bargaining power or unfair substance it won’t work
2. You need a little bit of each element
v. UCC § 2-719 limits the remedies available for breach of K, but limitation are only enforced if K is not unconscionable
d. Public Policy
i. Even if the parties intended the K to be enforceable and it’s not an illegal K, the court may refuse to enforce it on the ground that it violates “public policy”
1. Focuses on substance
2. Usually invoked if the K furthers some activity that is illegal or disfavored by the courts
ii. In operation this issue only presents itself in situation where one of the parties is trying to get out of the K
1. Modern approach to pre-nuptial agreements is to only require full disclosure (not fairness)
a. Public policy—promoting gender equity
i. Fairness requirement was viewed as implying that woman was too weak/stupid to demand fair terms
b. Mutual assent analysis
i. Focuses only on procedure
a. Expectation damages
i. Pe gets what he would have gotten had the promise not been broken, but he also has to give up what he would have given up if the K had been performed as planned
ii. Formula A:
1. Loss in value + other loss – cost avoided – loss avoided

∏ gets cost of repair or cost of making performance of the K perfect
i. This is probably the proper measure if the breach was willful
2. Market value w/ performance
a. ∏ gets difference b/t market value “as is” and market value if K had been performed perfectly
i. This is probably the proper measure if ∆’s breach was incidental to the fundamental purpose of the K
1. Problem—value to owner may not be market value (esp. when talking about land)à market value is measured more subjectively
d. Restitution damages
i. Losing Ks
1. Sometimes a party will enter a K expecting to lose money on it
2. If the other party breaches the K it doesn’t seem fair to still make the non-breaching party incur the loss
a. Doesn’t get other benefits from performance of the K
ii. Notion is not to punish the breaching party
1. Rather, in the interest of fairness, we want to prevent the breaching party from being unjustly enriched
a. Unjust enrichment turns on the idea that non-breaching party would have gained something of non-monetary benefit from performance of the K
e. Limitations on damages: