Johnson
Contracts II
Spring 2011
Definitions
Assignor/Assignee – one who assigns the contract/one to whom the contract is assigned
Output contract – seller will provide buyer with all it manufactures
Requirements contract – buyer will buy all it requires from seller in contract
Illusory promise – promisor doesn’t abide by promise w/o penalty; usually not consideration §77
Past consideration – promisor is seeking to recompense promisee for benefit previously conferred (not sufficient – § 86)
Restatement Sections:
ü Restatement § 1 – A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.
ü Promisor – Person making the promise (person manifesting the intention – § 2)
ü Promisee – Person to whom promise is made (person to whom the manifestation is addressed – § 2)
ü Agreement – manifestation of mutual assent on the part of two or more persons. (§ 3)
ü Bargain – agreement to exchange promises or to exchange a promise for a performance or to exchange performances (§ 3)
ü Promise – may be stated in words (oral or written) or may be inferred from conduct (§ 4)
ü Bilateral contract – Promise à Return Promise + Action
ü As soon as you get that return promise, you are bound immediately to that promise
ü Unilateral contract (§ 45) – Promise à Action or Promise à FB
ü No one is bound until the action is performed
ü Mutuality of Obligation – Promises must be mutual in obligation
ü Offer + Acceptance (Manifestation of Mutual Assent §§ 18, 22, 26 + Consideration § 17) = Contract
ü Conduct as Manifestation of Mutual Assent § 19
ü Offer (§ 24)
ü Offer termination (§ 36)
ü Counteroffer (§ 39)
ü Acceptance (§ 50)
ü Purported Acceptance which Adds Qualifications (§ 59) – Counteroffer
ü Consideration: act, benefit, forbearance (§ 71)
ü Mailbox Rule – § 59
ü Effective on arrival (§ 68) except for acceptances upon mailing (§ 63)
ü Misunderstanding (§ 20)
ü Detrimental Reliance (aka Promissory Estoppel) – § 90
ü Promise
ü Foreseeable Reliance
ü Reliance in Fact
ü Injustice Absent Enforcement
ü Remedy may be limited
ü Option Contract (§§ 25, 87)
ü Quasi-Contract
ü Action + Implied Promise
UCC Sections:
ü 2-102 – Must be a transactions in goods
ü 2-104 – Merchant: person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill
ü 2-105 – Goods: all things (including specially manufactured goods) which are movable at the time of identification (NOT real estate, employment contracts, or loans of money)
ü 2-205 – Firm Offer
Standard Form Contracts for UCC
UCC § 2-204: Formation in General
Contract for sale of goods can be made in many ways, including just conduct.
Don’t have to identify time
Terms can be left open
§ 2-206: Offer and Acceptance in Formation of Contract
(1) Unless otherwise unambiguously indicated by language or circumstance:
(a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances;
Offeror can specify how acceptance occurs; i.e. signing or performance.
If he doesn’t, acceptance can be made in any other way
(b) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship OR by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of non-conforming goods does NOT constitute an acceptance if the seller reasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer.
Sender can put buyer on notice that they are not conforming goods to avoid a suit, but if they send non-conforming good w/o notice, they are in breach
Shipment can be construed as acceptance
(2) Where beginning of requested performance is a reasonable mode of acceptance, offeror not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.
· If not performed for acceptance, the offer goes away.
§ 2-207: Additional Terms in Acceptance or Confirmation
(1) A definite and seasonable expression of acceptance (one possible satisfaction that might not be in writing) or a written confirmation which is sent within a reasonable time (another possible satisfaction) operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms (would be, instead, a counteroffer).
Either forms a contract or doesn’t. IF NOT, go to subsection (3)
Opposite of Mirror Image Rule
(2) [Assuming contract was formed under subsection 1], additional terms are to be construed as proposals for addition to the contract. Between merchants, such terms become part of the contract unless:
(a) The [original] offer expressly limits acceptance to the terms of the offer;
(b) They materially alter it; or
(c) Notification of objection to them has already been given or given within reasonable time after notice of them is received.
SUMMARY OF SUB. 2: K was formed under subs. 1, so there are terms agreed upon by the parties, but different and/or additional terms are only proposals and up to offeror to expressly agree to. They will not be part of the contract unless expressly agreed to. Between merchants are 3 exceptions.
Step-Saver Data Systems, Inc. v. Wyse Technology
Gardner Zemke v. Dunham Bush
(3) Conduct by both parties which recognizes the existence of K is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case, terms of the particular contract 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. (such as 2-202)
Used if documents were exchanged but do not themselves establish a contract
Shows under which terms; if not conditional, based on offeror’s terms b/c that was accepted even though add’al terms were proposed
SUMMARY (march through each one in order)
2-207(1) – forms that do not look the same can be acceptance
2-207(2) – what to do with the additional terms
2-207(3) – K does not form under (1) but conduct can establish K w/ terms only on the writings the parties agreed (rest filled w/ gap fillers)
NOTE: Called “battle of the forms” but may be used for one form
Restatement 2d § 59 – Purported acceptance which adds qualifications is not an acceptance but is rather a counteroffer
Restatement 2d § 211(3): Reasonable expectations doctrine – Where other party has reason to believe that the party manifesting such assent would not do so if he knew that the writing contained a particular term, the term is not part of the agreement
C&J Fertilizer
Key principle governing insurance policy (contracts of adhesion – not freely bargained for) interpretation, but NOT LAW and not followed generally
When drafting, tendency to try to hide the ball when you are trying to get through clearly objectionable terms.
Resist, in general, b/c law might require it to be enforceable and may avoid dispute/lawsuits in the future
Limitation of liability, exclusions, etc.
· Types of clauses included in standard form contracts
o Choice of law = state, federal, UCC, etc.
§ How to interpret the contract
o Choice of forum = where
§ Carnival Cruise Lines v. Shute
o Method of dispute resolution
§ Arbitration is most common; advantages vs. litigation
Gardner Zemke v. Dunham Bush: Standard ack. containing different terms not discussed. Expressly conditional nature of the acceptance must be predicated on the offeror’s (seller) assent to those terms. Whether an acceptance is made expressly conditional on assent to different/additional terms is dependent on the commercial context of the transaction
Terms? Here, *Different terms cancel each other out* from Cmt 6. Art. 2 warranties (default rules) apply if nothing was previously agreed upon.
Step-Saver Data Systems, Inc. v. Wyse Technology: On packages, D printed form language (“box top license”). Rejection of last-shot rule: unfair to bind the buyer of goods to standard terms of the seller who sent the last form. Here, K was formed on the phone before box-top license was sent. Therefore, box-top license did not govern because a contract was already formed. They were proposed additions only if they don’t change the contract. (2-207(2))
Hill v. Gateway 2000: Customer is bound to terms added to K after its formation inside the box, after customer has a chance to inspect item and terms, no matter if
Is there a contract?
If yes, apply parol evidence rule. (continue on)
If no, then no need to apply the rule
2nd: Is there some writing that amounts to a “final expression” of the parties’ agreement?
If no, parol evidence rule is not applicable – they can still change K if no final expression
If yes, parol evidence rule must be used if either party seeks to prove terms agreed upon outside of that writing.
3rd: Is there any prior agreement (oral or in writing) that contradicts the writing constituting a final expression?
If no, may be admissible evidence or not necessary to address (if prior agreements supplement/explain)
If yes, parol evidence rule keeps out any and all evidence of it. (contradictory terms NOT allowed)
4th: Are there any agreements orally and contemporaneously made with the writing that constitutes a final expression that contradict it?
If no, may be admissible or not necessary to address. (if agreements supplement/explain)
If yes, parol evidence rule keeps out any and all evidence of it. (contradictory terms NOT allowed)
5th: Does the evidence from 3rd or 4th explain the final expression of the agreement or supplement it?
If no, it is not admissible if it contradicts it. (contradictory terms NOT allowed)
If yes, may be admissible if terms are unclear or agreement is silent on a particular matter.
– But what extrinsic evidence is admissible depends on a further determination.
6th: Is the writing that amounts to a final expression of the parties’ agreement “complete and exclusive”? Merger clause?
If no, writing that constitutes a final expression of agreement to be explained and/or supplemented by:
(1) course of dealing, course of performance, and usage of trade, and (2) evidence of consistent additional terms
– Can be prior, contemporaneous, oral or written.
If yes, writing that constitutes a final expression of agreement to be explained and/or supplemented ONLY by
(1) course of dealing, course of performance, and usage of trade.
– Even evidence of consistent additional terms is excluded when agreement is complete and exclusive.
Note: Presence of merger clause is not dispositive to finding complete agreement, but may help
Restatement 2d § 210:
(1) A completely integrated agreement (complete and final embodiment) is an integrated agreement adopted by the parties as a complete and exclusive statement of the terms of the agreement.
Parol evidence cannot be used to add to or vary its terms
(2) A partially integrated agreement is an integrated agreement other than a completely integrated agreement.
May look to collateral agreements, circumstances at the time of the writing, and extrinsic evidence
However, some courts will look straight to the contract
(3) Whether an agreement is completely or partially integrated is to be determined by the court as a question preliminary to determination of a question of interpretation or to application of the parol evidence rule.
Note: Pros and cons for having evidence admitted
Pro: other intentions come through
Con: can’t rely on contract created; discourages careful reading
Baker v. Bailey: No Assignment Clause; Ds thought per discussions that if ps approved of “reasonable purchasers,” they would be provided with the water. In the absence of fraud, duress, or mutual mistake, all extrinsic evidence must be excluded if the parties have reduced their agreement to an integrated writing.
Masterson v. Sine: The option clause for repurchasing home here did not provide that it was a complete agreement (no merger/integration clause) and it is unlikely all terms were included.
