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Contracts II
University of Wyoming School of Law
Welle, Elaine A.

1. When K go bad we ask:
A. Questions:
1. Is there a breach of K?
a. There must be a K in existence
b. Was there an obligation that was breached?
2. Is there a basis for rescission of that K?
a. Is there a “doctrine” that allows rescission (fraud, duress, misrepresentation…)?
b. Can we rescind the K as the damage for the breach of K?
i) Must think about “tender” as a practical matter in advising client (this is, what will our client have to do, and what will it mean, for the client to rescind the K and get back to where he started)
ii) Is tender possible? Is tender desirable? Is K executory?
3. Is there a tort that exists?
B. Measure of damages
1. Breach of K = benefit of the bargain
2. Rescission = status quo ante (put parties back to where they were prior to the K)
3. Tort = ALL kinds of ways, looked at a lot more expansively
C. Type of damages
1. Breach of K = recovery largely based on the economic damages
2. Rescission = no damages
3. Tort = all types of damages

1. General principles
A. To make sense of a document a court will imply certain terms from either fact or law, however…
1. Will not destroy fruits of K
2. Will not undermine essence of the bargain
3. Won’t apply terms if they vary they express terms of the K
2. Rationale
A. Common law
1. Enforce intent
a. Used to save deals when both parties have taken the time to set out a formal K but forgot to add a term
b. Court will imply intent and acceptance to certain terms when
i) Bargaining power is imbalanced
ii) There is reliance
iii) To protect the essence of the bargain (fulfill expectations)
a) Basically, if the parties would have thought about it they would have included it
iv) Fairness
a) Never the 1st argument, this is qualified
1. Fairness
a. Codification of what the market has decided as fair over time
2. Business/Economic efficiency
a. To streamline the process so we don’t need a huge document to negotiate every term of the deal
A. A term implicit in the parties’ words or conduct
1. Ex = reasonable efforts: both parties must make reasonable efforts to bring about reasonable expectations of the parties, if not hen no mutuality of obligation and thus no K
B. Implied obligation for just cause employment (implied in fact)
1. There is no law which implied just cause termination, so if there is an implication it must be implied in fact
a. Facts to look for
i) Employee handbooks which imply cause for termination; performance reviews, guaranteed treatment process, etc
ii) Use facts to argue that the “objective expectation” of the K was for X
iii) Courts require fairly explicit statements by employers to imply obligations to just cause employment and many, if all, states resist putting the obligation of good faith into employment K
A. A term made part of the agreement by operation of the rules of law (statutes, common law, precedent) rather than by the agreement of the parties
1. Ex = reasonable notification of termination was required in order to be equitable in an at will employment K
B. Implied obligation of good faith (SEE ALSO NEXT PG)
1. G/R: every K is presumed to have an obligation of good faith
a. UCC § 1-203: every K or duty within this Act imposes an obligation of good faith in its performance or enforcement
b. Rest 2nd § 205: every K imposes upon each party a duty of good faith and fair dealings in its performance and its enforcement
c. NOT necessary in an at will employment K
2. Exception to G/R
a. There can be no varying of the express terms of the K
1. What is good faith?
A. UCC = Good faith means free of forgery or counterfeiting
B. Everyone struggles with this, but generally fulfill the essence of the K
C. Think

s car will do 30 mpg in city driving” is specific enough to amount to an express warranty
2. Disclaimer
A. Seller is free to disclaim express warranties, as long as he does so in a clear and reasonable way
1. This rarely happens – since nothing forces the seller to make an express warranty in the first place, he will usually have no reason to disclaim it after making it

1. Generally
A. Most important warranty given in UCC is this one
B. UCC § 2-314(1) = Unless excluded or modified…a warranty that goods shall be merchantable is implied in a K for their sale if the seller is a merchant with respect to goods of that kind
1. “Merchantable” = no precise definition of merchantable
a. Most important meaning is that the goods must be “fit for the ordinary purposes for which such goods are sold (UCC § 2-314(2)(c)
i) Ex = dealer sells new car to buyer; due to manufacturing defect care cannot go more than 25 mph; since cars are generally sold & used for high-speed highway driving this would be breach of implied warranty of merchantability even though Dealer never expressly promised any particular speed
C. Always given unless disclaimed
1. ALWAYS given by a merchant seller, UNLESS it is expressly excluded by a disclaimer that meets stringent formal requirements imposed by the UCC
2. Disclaimers
A. Must mention the word merchantability” (UCC § 2-316(2)
B. Disclaimer does not have to be in writing
C. BUT if it is in writing, it must be conspicuous
1. Cannot be buried in fine print of K