I. General Definitions and Promises:
a. Kelly Outline:
i. Identifying a promise:
1. Promise must be manifest: words and actions can constitute promises; unexpressed intentions cannot.
2. No magic words available.
ii. Jest: if indications would warn a reasonable observer that the promisor did not intent a commitment, the words or actions do not constitute a promise.
1. Restitution is available for mistakes here.
2. Objective standard: This is a reasonable person standard – just because YOU didn’t discern the jest doesn’t mean a reasonable person would not.
3. Subjective knowledge: if YOU know that it’s a joke, but a reasonable person would not – then it doesn’t count either.
b. Evidentiary obstacles: only the parties know what they REALLY meant.
c. §1: Contract Defined: A contract is a promise or set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes a duty.
d. §2: Promise; Promisor; Promisee; Beneficiary
i. (1) A promise is a manifestation of intention to act or refrain from action in a specified way, so made as to justify a promisee in understanding that a commitment has been made.
ii. (2) The person manifesting the intention is the promisor.
iii. (3) The person to whom the manifestation is addressed is the promisee.
iv. (4)Where performance will benefit a person other than the promisee, that person is a beneficiary
e. §3: Agreement Defined; Bargain Defined
i. An agreement is a manifestation of mutual assent on the part of two or more persons. A bargain is an agreement to exchange promises or to exchange a promise for a performance or to exchange performances.
f. §4: How a promise may be made
i. A promise may be stated in words either oral or written, or may be inferred wholly or partly from conduct.
g. §7: Void v. Voidable: Voidable: one where one or more parties have the power, by a manifestation of election to do so, to avoid the legal relations created by the K, or by ratification of the K to extinguish the power of avoidance.
II. Illusory Promises: §34
a. Illusoriness or conditional promises:
i. Effect of illusoriness:
1. Illusoriness prevents enforcement of duties under an agreement. The party whose words were illusory made no promise, so there is no promise to enforce.
2. Also, the party who received an illusory promise – received no promise and therefore no consideration.
3. Both parties can refuse to perform.
4. Inconsistent cases: No enforceable K can exist w/out a promise, but overzealous application of illusoriness might prevent enforcement of agreements that seem to deserve enforcement. Thus, courts often are reluctant to deny enforceability on the ground of illusoriness—particularly on technical grounds.
ii. Definition!: If the promisor remains completely free to change her mind about the deal, any commitment is illusory and no promise exists. A promisor who can w/draw from the transaction on a whim w/out paying damages for breach has made no commitment.
iii. Conditional promises:
1. They generally bind: almost any limit on the promisor’s ability to change her mind may satisfy the requirements of commitment. As long as the promisor remains bound to perform under some circumstances, the fact that the other circumstances would permit the promisor not to perform does not negate the commitment.
2. Promisor’s control over c
yer really needs breaches the promise to act in good faith.
iv. UCC prohibits excessive demands: measured by estimates or prior performance.
v. Not illusory: The ability to produce or to demand too much is not the ability to back out of the deal. Thus, the absence of a specific quantity would not make the agreement illusory.
vi. Best efforts: an exclusive dealing K implies best efforts by the UCC §2-306 and not just good faith. Can be two-way best efforts or just one way.
b. UCC §2-306 Output, Requirements and Exclusive Dealings
i. (1) A term which measure the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tenders or demanded.
ii. (2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.
c. R2d: §205: Duty of Good Faith and Fair Dealing
i. Every contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement.
