Select Page

Contracts
University of Georgia School of Law
Baradaran, Mehrsa

 
Contracts – Spring 2013 (Baradaran)
 
I.       The Agreement Process Cont’d
A.      Agreements to Agree
1.      Agreements to Agree can be enforceable depending on the reasonable intent of the parties (Did parties have an understanding that they would be bound?
i.        INTENT OBJECTIVE, NOT SUBJECTIVE (Empro)
2.      2 types:
i.        Memorial of an agreement (BINDING)
ii.      Preliminary negotiation (NOT BINDING)
3.      RST § 27: Manifestations of assents are sufficient to conclude a K even if the parties show an intention to write a written memorial thereof, but the circumstances may also show that the agreements is merely preliminary negotiations.
i.         Comment c: factors in determining whether a k has been concluded (CAN be shown by oral testimony or extrinsic evidence)
a.      Extent to which express agreement has been reached on all terms to be included
b.      Whether k is a type usually in writing
c.       Whether needs formal writing for full expression
d.      Few/many details
e.      $ large or small
f.        common/unusual k
g.      standard form k
h.      any preparation for performance
4.      Cases:
i.        Arnold Palmer Golf Co. v. Fuqua Industries:  letter of intent (in addition to surrounding circumstances) deemed to be sufficient to be binding
a.      Factors that showed letter of intent was binding:
1.      language – “will”
2.      extensive doc
3.      defined terms, most terms agreed on
4.      gen. understanding of how things will go
5.      press release (extrinsic evidence – evidence outside the agreement)
b.      applying RST § 27:
1.      large amt
2.      should fully be in writing
3.      unusual k b/c of 3rd party
ii.       Empro Manufacturing Co, Inc. v. Ball-Co Manufacturing:  letter of intent called for future clarifications and therefore could not show that parties’ intent to be bound. – terms have to be certain.
a.       Empro originally designed K to be non-enforceable, but it was Ball-Co that ended up wanting out
1.       K language:
i.         “Subject to” language — approval by shareholders, board of directions
ii.       Vague “satisfaction of certain conditions” clause
iii.      general terms and conditions lacking
iv.     “return of $5k in the event of no transaction”
b.      Empro’s arg:
1.       we intended (state of minds) to be bound – subjective
2.       Ct response: this isn’t valid – we never look @ subjective
B.      Indefiniteness
1.       UCC § 2-204(3)
i.         Even if one or more terms are left open, K for sale will not fail for indefiniteness if the parties have intended to make K and there is a reasonably certain basis for appropriate remedy.
a.       Cts can fill in gaps in Ks
1.       More likely to fill in price gaps than quantity gaps b/c there is an objective fair market for price, where quantity is more subjective
2.       Exception:
i.         Metro v. May Oil Burner
a.       Ct does fill in quantity b/c they can base off history of conduct
2.       COMMON LAW Indefiniteness
i.         Joseph Martin, Jr. Delicatessen, Inc. v. Schumacher:  renewal clause in a lease “to be agreed upon” was not enforceable b/c of indefiniteness. (FAILED FOR INDEFINITENESS)
a.       Reasoning: Ct can’t step in and determine terms
1.       K too vague (problem of definiteness)
i.         If parties wanted to stay bound even when they can’t agree on rent, could have put a way to determine rent in, such as:
ii.       Appraiser
iii.      FMV
iv.     Arbitrator
v.       Even if the word “reasonable” was used, at least a Ct factfinder would have an objective basis and intent to stay bound would be shown
2.       QUANTITY GAP
i.         Metro v. May Oil Burner
a.       Ct does fill in quantity b/c they can base off history of conduct
3.       Farnsworth: requirement of definiteness poses serious problems if highly relational exchanges are to be forced into the mold of traditional Ks analysis.
i.         “Relational” exchanges occur through time in a process of continuous interaction between the parties.
C.      BATTLE OF THE FORMS
1.       Battle of the forms basics
i.        Occurs when offer and acceptance form K’S have mismatched standard terms
ii.      Only applies in the exchange of goods
iii.    Always governed by UCC
2.       2 Questions to Ask in every battle of the forms:
i.         Was a K formed?
a.       CL
b.      UCC
ii.       If so, what terms govern?
a.       Acceptance or Counter-Offer?
3.       Form K’s create problems of conflicting terms.
i.         To Avoid:
a.       Don’t bury favored terms in boiler-plate clauses;
b.      make acceptance conditional;
c.       communicated w/ other party to ensure forms have identical terms/meanings;
d.       have other party sign specific clause in overall agreement;
e.      return to old school or having K signed by both parties w/ mutually agreed to terms.
4.       Common Law: Mirror image rule! No K formed if offer & acceptance are not mirror images! Not practical so use UCC 2-207
5.       UCC 2-207: Add’l Terms in Acceptance or Confirmation
i.         4 routes to K formation in UCC 2-207:
a.       2-207(1)
Route A: definite expression of acceptance which may have varying terms (offer and acceptance)
Route A1: Oral K + written confirmation which may have varying terms
Route B: Acceptance expressly made conditional by add’l or different terms
b.      2-207(3)
Route C: Conduct sufficient to establish k
ii.       2-207 text:
(1)A definite and seasonable expression of acceptance OR a written confirmation which is sent w/in
a reasonable time operates as an acceptance even though it states terms add’l/different from terms offered/agreed upon, UNLESS acceptance is expressly made conditional on assent to the add’l/different terms.
(2) The add’l terms are to be construed as proposals for addition to the K. Btw merchants such
terms become part of the K UNLESS:
·   Note: 2-207(2) requires that the transaction be b/w merchants and both must be merchants, and if either is not a merchant, end the matter.
(a) offer expressly limits acceptance to the terms of the offer;
(b) terms materially alter offer;
 (c) Notification of objection to terms has already been given or is given w/in a reasonable time
after notice of them is received.
 (3) Conduct by both parties, which recognizes the existence of a K is sufficient to establish a K for
sale although the writings of the parties do not otherwise establish a K. In such case the terms of the particular K consist of those terms on which the writings of the parties agree, together w/ any supplementary terms incorporated under any other provisions of this Act.
iii.      Add’l/Different T

e for sub-sale, providing for inspection by the sub-purchaser
iii.      clause providing for interest on overdue invoices; fixing the seller’s standard credit terms where they are w/in customary trade range, do not limit any credit bargained for
iv.     clause limiting the right of rejection for defects which fall w/in the custom of trade “w/ adjustments” or otherwise limiting remedy in a reasonable manner (see also 2-718 – liquidating damages and 2-719 – K modification)
b.      Ex.
1.       Step-Saver Data Systems v. Wyse Tech., Inc. (pg. 518): (add’l term, materially alter case)
i.         Π S-S bought computer software from Δ. Printed on the package of each copy of software is a box-top license
a.       Issue: do the disclaimer of warranties and limitation of remedies printed on the package containing software = terms of agreement?
ii.       HELD:
a.       Π buyer never expressly agreed to terms of the box-top license
b.      terms should be treated as add’l terms; 2-207(2)(b) governs     
1.       since they would materially alter, they don’t become a part of the agreement
iii.      Note: Also may have been found to fall out under 2-207(3) as buyer had already paid for software and tried to use it.
a.       However, Too much agreement on basic terms to form k under conduct as under 2-207(3)
v.       Conduct sufficient to establish sale:
a.       Under 2-207(3) a K is recognized on the terms on which the writings agree (description, quantity, price, delivery, and payment), other terms not agreed upon falls out
1.       See HYPO – price of tractor, delivery, etc. remains if agreed to and arbitration clause will fall out.
b.      When gaps in k, gap Fillers when parties do not agree
1.       2-308: delivery must takes place at the seller’s premises
2.       2-310: requires payment on delivery
3.       2-314, 2-315: provide for minimum warranties
vi.     Was there an acceptance?
a.       Hill v. Gateway 2000 (pg. 515):
1.       Π Hill bought computer over phone from Δ Gateway that had arbitration clause in terms (unless buyer returned computer w/in 30 days); hill kept for more than 30 days
2.       HELD: by keeping computer beyond 30 days, Hills accepted Gateway’s arbitration clause
i.         Rule: ProCD rule: terms inside a box of software bind consumers who use the software after an opportunity to read the terms and to reject them by returning the product
a.       Policy: efficiency
3.       NOTE: this was not a traditional battle of the forms case since a phone convo is not really a “form” but then again, 2-207(3) applies when the parties’ conduct indicates that a K has been formed but fail to adopt expressly a particular writing so unclear