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Contracts
University of Florida School of Law
Dawson, George L.

I. FUNDAMENTALS; WHICH PROMISES DO WE ENFORCE AND WHY. 2
Donative Promises. 2
Consideration: The Bargain Principle. 2
Reliance. 2
Unconscionability. 3
Mutuality & Illusory Promises. 3
Legal Duty; Modification. 4
Past Consideration. 5
II. INTERPRETATION.. 5
Subjective & Objective Interpretation & Purposive Language. 5
Usage, Course of Dealing, & Course of Performance. 6
Parol Evidence. 6
Interpretation of Written Contracts. 8
III. THE “MECHANICS” OF CONTRACT FORMATION.. 8
Offer. 8
Lapse, Rejection, Counter Offer. 8
Revocation. 8
Acceptance. 9
Form Contracts. 10
Interpretation & Unconscionability in Form Contracts. 10
Negotiations; Bargaining in Good Faith. 11
Implied in Law; Implied in Fact Contracts. 11
IV. REMEDIES & DAMAGES. 12
Damages. 12
The Expectation Measure. 12
Mitigation. 14
Foreseeability. 15
Certainty. 16
Liquidated Damages. 17
Specific Performance. 18
Reliance Damages. 19
Restitution. 20
V. MISTAKE. 20
Mistake & Misrepresentation. 20
Unexpected Circumstances; Excuse. 24
VI. PERFORMANCE & BREACH.. 26
Good Faith Performance. 26
Breach & Response. 28
Conditions. 29
Material Breach. 33
Substantial Performance. 36
Anticipatory Breach (Repudiation)39
 
I. FUNDAMENTALS; WHICH PROMISES DO WE ENFORCE AND WHY
Donative Promises
Restatement: §1, 2, 17, 71, 72
A promise to make a gift (donative) not enforced by the courts.
·         A promise needs consideration to be enforceable… unless it does not need consideration to be enforceable.
·         COMPLETED gift is valid, cannot be reversed (in absence of fraud)… No Indian Giving
Ø A promise with no consideration is an executory promise and is unenforceable.
Requires a bargain IN FACT rather than in FORM. *post Rstmt2
·         A transaction is said to involve nominal consideration when it has the form of a bargain, but not the substance of a bargain, because it is clear the values of what is exchanged or promised are not equal.
Ø Nominal consideration is consideration in form rather than in substance and will not create a legally enforceable contract.
Consideration: The Bargain Principle
Restatement: §70, 73, 79
To constitute consideration, a performance or a return promise must be bargained for.
·         If consideration is met, no additional requirement for equivalence of values exchanged
·         Policy of enforcing the voluntary exchange on the terms agreed by the parties
·         You get what you bargain for. Court does not inquire into value in relation to the promise.
·         Forbearance is valid consideration
·         Benefit to the promisor does not matter.
Although Consideration is the basis of a decision, the Ct is really concerned with the LEGITIMACY of the TRANSACTION in issue.
Reliance
Restatement: §90***
The promisor is affected only by reliance which he does or should foresee, and enforcement must be necessary to avoid injustice. 
Equitable Estoppel- Δ makes statement of fact to Π… Π relies on fact
Promissory Estoppel- Δ makes promise to Π… Π relies on promise
·         Focuses on promisor’s conduct/intent
·         Promise INDUCED action/forbearance… reliance must be JUSTIFIED
·         Enforcement is necessary to avoid injustice
·         DETRIMENT suffered by promise b/c of reliance is a CRUCIAL FACTOR
A promise binding under this section is a contract, and full-scale enforcement by normal remedies is often appropriate. 
·         May enforce the promise but not to its full extent- Court has flexibility
·         §90(1) Remedy granted… limited as justice requires
Relief may sometimes be limited to restitution or to damages or specific relief measured by the extent of the promisee’s reliance rather than by the terms of the promise.
·         Unless there is unjust enrichment of the promisor, damages should not put the promisee in a better position than performance of the promise would have put him. 
·         In the case of a promise to make a gift it would rarely be proper to award consequential damages which would place a greater burden on the promisor than performance would have imposed.
Expectation Interest- what you should have received had the promise NOT BEEN BROKEN what is expected at the outset of a promise 
Reliance interest- putting the injured party in as good of position had the promise not made
·         Out of pocket expenditures: Damages hard to calculate
Unconscionability
Restatement/UCC: §208***, 280, §2-302***
The principle is one of prevention of oppression and unfair surprise and not of disturbance of allocation of risks because of superior bargaining power.
2-302 | By an adverse construction of language, by manipulation of the rules of offer and acceptance, or by a determination that the term is contrary to public policy or to the dominant purpose of the contract.
·         the term or contract involved is so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract.
Absence of meaningful choice & terms unreasonably favorable to the other party 
·         Inequality of Bargaining Power?
·         Manner in which contract was entered into?
·         Reasonable opportunity to understand terms of contract?
·         Important terms hidden and/or minimized?
Court should determine if the terms of the contract are so unfair that enforcement should be withheld.
·         If person has little bargaining power (or real choice) AND signs an unreasonable contract with little or no knowledge of its terms
·         Court may refuse to enforce a K which it finds to be unconscionable at the time it was made.  UCC §2-302
·         Considered in light of the circumstances existing when contract was made.
Inadequacy of consideration does not of itself invalidate a bargain, but gross disparity in the values exchanged may be an important factor in a determination that a contract is unconscionable and may be sufficient ground, without more, for denying specific performance.
Theoretically it is possible for a contract to be oppressive taken as a whole, even though there is no weakness in the bargaining process and no single term which is in itself unconscionable. 
Particular terms may be unconscionable whether or not the contract as a whole is unconscionable. 
·         Some types of terms are not enforced, regardless of context (ex unreasonably large liquidated damages)
Factors which may contribute to a finding of unconscionability in bargaining process include:
·         Belief by stronger party that there is no reasonable probability that weaker party will fully perform the contract
·         Knowledge of stronger party that weaker party will be unable to receive substantial benefits from the contract
·         Knowledge of stronger party that weaker party is unable reasonably to protect interests by reason of physical or mental infirmities, ignorance, illiteracy or inability to understand the language of the agreement, or similar factors
Where a term rather than the entire contract is unconscionable, the appropriate remedy is ordinarily to deny effect to the unconscionable term. 
Substantive Unconscionability i.e. grossly-excessive price
Procedural Unconscionability i.e. Harsh security terms
Cross-Collateral Clause- Seller retains interest in goods until paid in full; and right to retake them; Not illegal – “but unconscionable”
Novation- Valid novation requires previously enforceable debt, the agreement of all parties to a new K, the extinguishment of the old debt, and the validity of the new one.  §280
Mutuality & Illusory Promises
Restatement/UCC: §77, §205, §2-306
Both parties must be bound, or neither is bound. (in bilateral K’s)
·         Exchange of Mutual Promises
·         Doesn’t apply to unilateral contracts where only one party is bound or to cases where both parties make promises but one party isn’t bound (such as fraud)
Every Contract imposes Duty of Good Faith/Fair Dealing §205
·         Commercial value or quality, operative fitness, or mechanical utility… Dissatisfaction can’t be claimed arbitrarily, unreasonably, or capriciously
·         Fancy, taste, or judgment… MUST BE IN GOOD FAITH
You can make conditional promise, but acceptance is unconditional.
Illusory Promises- form of a promise, but not the substance of one
·         K to sell property is void for want of mutuality if the quantity to be delivered is CONDITIONED entirely on the will, wish, or want of the buyer.
·         Really a unilateral K designed to increase the probability of exchange (ex: book clubs offer free books for opportunity to sell future books)
·         It is difficult to make a K for something that is unstable or in flux in the future.
·         Applicable to commercial transactions in which one party, A, makes a real promise, which the other party, B, uses an expression that seems to be a real promise, but is not b/c it doesn’t shrink the realm of B’s choices.
·         A would not be bound even though A did make a real promise b/c there is no consideration
Express Condition- Neither party bound until condition fulfilled
·         Breach occurs only if the condition is fulfilled.
·          Performance of condition is in the power of the promisor.
At-Will Contracts- an employer can discharge an employee at will at any time without cause and an employee is free to leave at

tive intentions
4 Principles for Interpretation:
1.      The two meanings are not equally reasonable, the more reasonable meaning prevails.
·         based on concept of liability for fault
2.      The two meanings are equally reasonable, neither meaning prevails.
·         Both parties are equally fault-free or equally at fault, no reason why one meaning should prevail over another
3.      If the same meaning, that meaning prevails even if it is unreasonable.
4.      If the parties attach different meanings, and A knows that B attaches his meaning, while B does not know that A attaches diff meaning, B’s meaning prevails even if it is less reasonable than A’s meaning. (Lucy v Zehmer)
Distinction between literal meaning of words and ulterior meaning intended to be conveyed by the speaker, or the meaning attributed by a hearer of the speaker
·         The Ct looks at WHY we have the agreement, and to interpret the agreement
If parties dispute a term, the court will supply reasonable term (with qualifications) §204
Usage, Course of Dealing, & Course of Performance
Restatement: §202(4) [performance], §203, §222 [usage], §223 [dealing] UCC: §1.205(4) [Dealing/Usage], §1-303, §2-202 §2.208 (2) [Performance] PRIORITIES: Express terms à Performance à Dealing à Usage
Course of Performance- Conduct in performing the K after it was formed
·         Repeated occasions for performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other, any course of performance accepted or acquiesced in without objection shall be relevant to determine the meaning of the agreement
Course of Dealing- Conduct in prior comparable transactions with each other
·         Sequence of previous conduct between the parties to a particular transaction which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct
Usage- Customs and usages of the market in which they are dealing with each other
·         any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question
o    If part of the industry, hold you to the standards. Newcomers, not as often
Trade usage and course of performance will be implied into contracts if there is evidence that it is not inconsistent with the terms of the contract, and they are so prevalent that the parties would have intended to incorporate them.
Parol Evidence
Restatement/UCC: §209/210 [integrated], §213[parol], §215/216, §2-202 [Parol] Parol Evidence Rule: Evidence of prior agreements cannot be admitted if it will contradict or supplement a completely integrated agreement. If partially integrated agreement, can only admit evidence to supplement, not contradict the writing.
§213 | Essentially when a written contract is modified by an oral agreement 
PE is outside the scope of the writing, whether it is oral or written. (prior agreements can be oral, but contract has to be in writing)
·         Contemporaneous Writing may be allowed as evidence: may be supplementary, more reliable.
If an agreement is complete, PE cannot be used to vary, contradict, or add to the terms of the contract
·         Protects integrity of writing
If an agreement is partial, PE can be shown to prove the elements of the contract not reduced to writing
·         Can’t make the breach argument successfully if can’t prove prior oral agreement
Is oral agreement officially part of the contract, or just part of its “negotiating history”?
·         Last thing they put together as final expression of agreement controls previous agreements.