Contracts

Front 1

Bargaining Process - Nature of Assent
(Original Theory)

Back 1

Original theory: (Subjective – meeting of the minds) went too far and was displaced by the current objective test.
a. Criticism: too much stress on subjective intent would destroy legal certainty and stability which modern commercial society demands. Plus new situations arise that parties never contemplated; under the subjective test, courts created legal fictions and imputed intentions the parties didn’t even have to begin with. (meeting of minds approach is unfair) (proving subjective intent can be impossible)

Front 2

Bargaining Process - Nature of Assent
(Objective Theory)

Back 2

(Learned Hand) “will theory” that a contract is an obligation attached by law to certain acts (which are usually words). It has nothing to do with individual intent. Necessary for a free enterprise economic system. Contracts are what the law imputes, not what was intended – but the circumstances are always relevant.
1. Reason: promotes certainty and stability. Only rely on actions words (objective manifestations.)
2. Criticism: tries to treat all contracts the same and tries to exclude any consideration of the actual intentions of the parties.

Front 3

Bargaining Process - Nature of Assent
(2 prong test for mutual assent)

Back 3

good faith offer + good faith acceptance. (if actions of one party can be reasonably interpreted as joking, there is no good faith offer and there can be no good faith acceptance.)

Front 4

Bargaining Process - Nature of Assent
(2 prong test for mutual assent)
(Objective Approach)

Back 4

look at outward expressions rather than secret intentions (words and actions) to find intent to form contract (would a reasonable person think they intended to form contract?)
i. Reason: this allows each party to rely on the promise. Protects there reasonable expectations.
ii. Pepsi Plane offer- Pepsi offered a plane to customers, court said the price was so absurd no reasonable person would think it was a serious offer (even if individual customer did).

Front 5

Bargaining Process - Nature of Assent
(2 prong test for mutual assent)
(Subjective Approach)

Back 5

did the promisee think it was binding?
Lucy v. Zehmer 1954 (p. 120) – both parties had been drinking, P offered D $ to buy his farm. D thought offer was a joke and wrote a memo saying “agree to sell farm for $50,000, title satisfactory to buyer” and induced his wife to sign it. P picked memo off table and offered $5 to D to bind deal. D realized P was serious and said “just joking”. Then Lucy had attorney look over title and got brother to put up ½ $. There was mutual assent:
i. Objective: all of D’s words and actions could reasonably be interpreted as offer. If he was joking, it was not overtly displayed.
ii. Subjective: P thought it was a serious offer and his actions demonstrate that thinking (he called bro and contracted a lawyer)

Front 6

Bargaining Process - Nature of Assent
(Alcohol)

Back 6

since alcohol can inhibit person’s capacity to distinguish between serious and joking, capacity and mutual assent are related. BUT – mutual assent is determined by an objective standard, not under influence of alcohol.

Front 7

Bargaining Process - Nature of Assent
(Dare & Bluff v. Joke)

Back 7

(use the objective test, would a reasonable person have thought it was an offer?) dare and bluff can be offers because they are trying to induce acceptance. Joke if overtly displayed is not an offer.

Front 8

Bargaining Process - Nature of Assent
(Volition)

Back 8

an offeror is drugged so that he can’t create the intent to contract, there is no contract. You have to intend to do the action of signing your name – you don’t have to understand the legal consequences.

Front 9

Bargaining Process - Nature of Assent
(Discerning intent to be Bound)

Back 9

look at content and circumstance of promise. If not sufficiently serious, not binding because a reasonable person would not think binding.
a. Doctors: court says usually doctors don’t intend to be bound when making an optimistic statement.
b. Inmates
c. Married couples – agreements are not contracts because parties did not intend that they have legal consequences.
d. Unmarried couples – regardless of sexual intimacy, ordinary contract principles still apply to unmarried couples living together. (if person can prove he rendered services with expectation of monetary award, recovery can be granted for promise implied in fact)

Front 10

Bargaining Process - Nature of Assent
(Where there is no intent to be Bound)
(Gentleman's Agreements)

Back 10

courts usually will not enforce agreement.
a. Gentleman’s agreements: express provisions that prevent courts from enforcing their promises.
i. Firm commitment underwriting: when underwriters send letter of intent to issuer to set out detailed terms of proposed underwriting (but it states no liability intended)
ii. Bonus and death benefit plans: employer includes plan as inducement to work, but here continued work is reliance.

Front 11

Bargaining Process - Nature of Assent
(Where there is no intent to be Bound)
(Formal Contracts Contemplated)

Back 11

parties agree on essential terms and leave the rest up to lawyers expecting to sign full fledged contract at later date. (these early stages are ONLY enforceable if the parties intended to be bound prior to the formal contract.
i. Common law principles discerning intent:
1. If no express intent not to be bound, any oral of informal display of mutual assent is enough to be binding.
2. To avoid being bound, at least one party has to express intent not to be bound until written.

Front 12

Bargaining Process - Nature of Assent
(Where there is no intent to be Bound)
(No document, but what else is intent)

Back 12

i. Was there an express intent not to be bound if not written?
ii. Was there partial performance?
iii. Were all the terms agreed upon?
iv. Is this agreement the type that is usually committed to writing?

Front 13

Bargaining Process - Nature of Assent
(Where there is no intent to be Bound)
(Tort remedy- interference with Contract)

Back 13

Pennzoil and Getty shook hands to negotiate sale of Pennzoil stock but then Pennzoil sold it to Texaco. No contract, but successful suit against Texaco for interference.

Front 14

The Offer
(Generally)

Back 14

i. An act where the offeror confers upon another the power to contract.
ii. R24: an offer is the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.
iii. Objective test: Would a reasonable person under the circumstances believe they have been empowered to contract?
iv. Inclusion of word “offer” in document: not dispositive, but carries weight.
v. Not offers: preliminary negotiation, jest, advertisement, quotation

Front 15

The Offer
(No offer, more like Advertisement)

Back 15

a. Owen v. Tunison 1932 (p. 130) – when owner replied to a request to sell for 6,000 saying “because of improvements, it is not possible to sell for less than 16,000 in cash” that was not an offer. General language like an advertisement. (plus, given the disparity in numbers, a reasonable person would not think they have been given the power to contract.)
b. If person knows they are one of many receiving a communication, it is more like an ad.
c. Harvey v. Facey 1893 – telegram was not an offer because it provided the lowest price but did not respond to the inquiry “will you sell”.

Front 16

The Offer
(Requirement of Definiteness)

Back 16

a. Fairmount Glass Works v. Crunden-Martin Woodenware Co. 1899 (p. 134) – it was an offer because it included the price, a definite quantity, encouraged immediate acceptance, and added a disclaimer (subject to accidents beyond our control). If they didn’t mean for it to be accepted, there would be no disclaimer. (Also, the acceptance did not include a new term because the stipulation “that they be first quality goods” was an industry standard…trade usage.
b. Kershaw (p. 137) – not an offer because no limitation on quantity. A reasonable person would not think a business person would give a blank check (because demand cold exceed supply). A business person would not expose themselves to that kind of liability.
c. Estimates as a measure: Past requirements can be used to determine reasonable quantities in requirements/output contracts.

Front 17

The Offer
(Advertisements as Offers)

Back 17

a. General rule: ad is not an offer but an invitation by the seller to the buyer to the buyer to make an offer to purchase.
b. Reason: protect seller because demand might exceed supply.
c. Exception: if ad says first come, first served. (Lefkowitz p. 138 – published ad said ‘first come, first served: it was clear, definite, and explicit, leaves nothing open for negotiation.)
d. Exception: if ad has words of limitation and words of commitment. (an ad for a specific car at a specific price)
e. Consumer protection: (for false advertising) person recovered $50 for misleading ad when store refused to sell plates for advertised price.

Front 18

The Offer
(Invitation to Bid)

Back 18

it is the bidder who makes the offer. (UCC 2-328)
a. Exception: (without reserve sale) where the auctioneer can’t withdraw after the first bid is made, but the bidders are not bound.

Front 19

The Offer
(Mistakes in Offer)

Back 19

a. Rule: If offeree knew of mistake at time of acceptance, the offeror is not bound. (objective test: would a reasonable person in the position of the offeree have reason to know there was a mistake?)
i. Reason: if the other person knew it was a mutual mistake!
ii. Elsinore Union Elementary School District v. Kastorff (p. 143)- Contractor mistakenly calculated his final bid and was awarded contract - since the bid was 10% lower than the others, the owner had reason to know of mistake. It was an honest mistake (in good faith)
iii. context matters when determining if mistake should have been known. (Heifetz p. 150 – binding despite mistake, because a reasonable person might not have known of it…bids can vary for good reason.)

Front 20

The Offer
(Rescission b/c Unilateral Mistake)

Back 20

i. General Rule: contracts are not rescinded for unilateral mistake.
ii. Exception: some courts (CA) would grant relief if this test is met:
1. enforcement of the contract would be unconscionable.
2. the mistake has to be a clerical, mistake it can’t be a mistake of judgment
3. mistake has to be material
4. there has to be prompt notice to the other party.
iii. Reason: strict test because the other party may have relied on the bid and it would be unjust to make them absorb the cost.
iv. R153: (liberalized the rule to follow the trend allowing avoidance for unilateral mistake)
1. if the unilateral mistake is material, the other party has reason to know about it, and enforcement of the contract would be unconscionable, then contract is voidable.

Front 21

The Offer
(Revocability)

Back 21

an offer is revocable before acceptance
a. Exception: bid for government contract is not revocable.

Front 22

The Offer
(Online Offer and Error)

Back 22

online proposals to sell are more likely to be treated as offers than printed ads. But errors on internet might be difficult for seller to discover and correct.

Front 23

Acceptance
(Generally)

Back 23

i. Corbin: an acceptance is a voluntary act of the offeree whereby he exercises the power conferred upon him by the offer, and thereby creates the set of legal relations called a contract.

ii. Power of acceptance can’t be transferred to another person when the contract depends on a certain individual as offeree.

iii. Offeror is the master of the offer because he is the only one who can set the terms for the acceptance
a. Manner of acceptance (by promise or by performance?)
b. Means of acceptance (by email, letter, telegram, etc)
c. Stipulate whether notice of acceptance is necessary

Front 24

Acceptance
(If Manner Unspecified)

Back 24

the offeree can choose. (The presumption is that the offeror doesn’t care whether acceptance is through promissory words or acts.)
a. If the offeror does want to stipulate manner or, it has to be unambiguously stated. (Otherwise it will be interpreted as a suggestion.)

i. Allied Steel v. Ford Motor 1960 (p. 162) – offer merely suggested a method of acceptance (“should be…”) so Allied’s partial performance was acceptance.

Front 25

Acceptance
(Means of Acceptance)

Back 25

even if the means of acceptance is specified, any reasonable means will do as long as it arrives in a timely fashion. (if offeror only wants a specific means it has to be explicitly clear in the contract that no other means will suffice.)

a. City of Calhoun v. North Georgia Electric – ordinance granted utility 90 days to give written acceptance. The electric co. said it would never accept, but continued to use the lines. There was no contract when written acceptance was explicitly required.
b. Brophy v. City of Joliet – proposal to buy bonds included line for Mayor’s signature, even though city council passed the proposal, there was no acceptance without the mayor’s signature.

Front 26

Acceptance
(Notice Requirement Performance)

Back 26

a. First look at contract to see if it expressly requires or dispenses with notice requirement.
b. Rule: If offer invites acceptance via performance – notice is not required.
c. Exception: if offeror would have no way to know of acceptance then offeree needs to diligently give notice.

i. Bishop v. Eaton (p. 161) – friend signed surety for the other’s son, but far apart so notice was required.

Front 27

Acceptance
(Notice Requirement Performance)

Back 27

a. First look at contract to see if it expressly requires or dispenses with notice requirement.
b. Rule: If offer invites acceptance via promise – offeree must be reasonably diligent in providing notice within a reasonable time.

Front 28

Acceptance
(Offeror Dispenses with Notice)

Back 28

i. International Filter Co. v. Conroe Gin 1925 (p. 151) – according to the unambiguous terms set forth in the offer, Filter’s exec officer’s ‘OK’ was sufficient acceptance of the contract and no notice was necessary.

ii. Carbolic Smoke Ball 9p. 160) – the ad was an offer and acceptance was the use of the product. No notice required…offer can dispense with notice requirement.

Front 29

Acceptance
(Contract Before Notice)

Back 29

Contract arises before notice, and then if notice is not given in reasonable amount of time – the duty is discharged. (UCC 2-206 says lapses, but not correct.) It doesn’t have to be received, just attempted.
i. Reasons: the time allowance of time between acceptance and notice protects an offeree’s reliance. Offeror is protected by the requirement that offeree be reasonably diligent in their attempt to notify.

Front 30

Acceptance
(Preparation v. Performance)

Back 30

Rule: if offer is indifferent as to manner of acceptance, the commencement of performance is acceptance (serves as promise to complete performance) R62

Preparation is not acceptance: if it is ambiguous, part of everyday routine, it is not performance.
i. White v. Corlies & Tuft 1871 (p. 156) – offer was pretty specific about asking for a promise, but even if the builder accepted through promissory acts, buying wood was preparation. A letter would have sufficed as notice.
ii. Ever-Tite Roofing Corp v. Green (p. 158) – driving to jobsite seen as performance and thus acceptance before Greens could revoke offer.

Front 31

Acceptance
(Shipment of Goods)

Back 31

a. UCC 2-206 (1)(b) – an offer to buy goods for shipment (order or prompt shipment) means the acceptance can be either by prompt promise to ship or prompt shipment (conforming or even non-conforming goods) unless it is accommodation.
b. Preparation for shipment – not performance. Has to be actual shipment…buyer would have no way of knowing about preparation for shipment.
c. Ministerial act is not acceptance – (Corinthian) the provision of a tracking number for the order was not acceptance, it was a ministerial act
d. Acceptance by nonconforming goods = contracts + breach. (but right to cure under 2-508 if tender of conforming goods is within a reasonable time)
e. Accommodation – when nonconforming goods are accompanied by notice of accommodation this is a counter offer.
i. Corinthian Pharmaceutical v. Lederle 1989 (p. 166) –since Lederle’s shipment of nonconforming goods was accompanies by notice of accommodation, it was a counter offer and there was no contract. (UCC exception)

Front 32

Acceptance
(Silence as Acceptance)

Back 32

(Offeror can’t say unless I hear from you within 48 hours, you will be deems to have accepted my offer) EXCEPTIONS:
a. The offeree retains the goods (takes benefit of offered services) with reasonable opportunity to reject them and reason to know they were offered with expectation of compensation.
i. Course of dealing can prove reason to know compensation expected.
ii. Retention of eel skins for unreasonable amount of time. (Hoobs v. Massasoit Whip)
b. if offeror has stated or given reason to believe that silence is acceptance AND offeree intended to accept by remaining silent.
c. If, because of previous dealings, it is reasonable that the offeree should notify offeror if he doesn’t intent to accept.
i. Twenty years of ordering by phone led offeror to justifiably assume acceptance unless he heard otherwise. (American Bronze v. Streamway)

Front 33

Acceptance
(Mailbox Rule)

Back 33

response to offer becomes acceptance when placed in the mail (even if it never gets to offeror)
a. Dispatch of acceptance = contract made. (terminates power to revoke and power to reject, and places risks of transmission on offeror)
b. Traditional reason: once mailed the letter is irrevocably out of offeree’s control
c. Modern reason: provides a dependable basis for offeree to accept (doesn’t have to worry about offeror revoking before receiving acceptance.) It doesn’t matter if lost or delayed – creates clear simple rule. The offeror is more likely to inquire if no response to offer.
d. Criticism: risk should be placed on offeree (it is easier for sender to take precautions to ensure receipt.)

Front 34

Acceptance
(Exceptions to Mailbox Rule)

Back 34

i. under option contract, acceptance forms contract only upon receipt.
ii. Does not apply to performance (like payment due by certain date – has to arrive by date)

Front 35

Acceptance
(Electronic Communication)

Back 35

i. Dispatch rule is usually chosen (definition of electronic receipt is unclear)
ii. However, any substantially instantaneous 2-way communication is treated like face-to-face conversation (IM, blackberry, phone)

Front 36

Termination of Power of Acceptance
(Four Methods)

Back 36

Four methods: lapse, revocation, death or incapacity of offeror, and rejection.

Front 37

Termination of Power of Acceptance
(Exceptions, Option Contracts)

Back 37

Option Contracts (a promise made by an offeror that effectively limits the offeror’s power to revoke. Sets a fixed period of time within which the offeree must exercise or pick up the option. During that time, power of acceptance can’t be terminated by revocation, death, rejection.)

Front 38

Termination of Power of Acceptance
(Option Contracts)
(How to Create)

Back 38

consideration, firm offer, reliance.

Front 39

Termination of Power of Acceptance
(Option Contracts)
(Without Consideration)

Back 39

Without consideration (one of those 3 things) any restriction on power to revoke is nudum pactum (bare agreement with no consideration). (Dickinson v. Dodd – not option contract because no consideration to keep offer open. Notice of offeror’s subsequent sale to third party is adequate revocation because obj. test – reasonable person would know offeror no longer consented to sale of property.)

Front 40

Termination of Power of Acceptance
(Option Contracts)
(How to Create)
(Consideration)

Back 40

ex. for real property, offeree can give a nominal sum in exchange for a irrevocable promise.

Front 41

Termination of Power of Acceptance
(Option Contracts)
(How to Create)
(Firm Offer)

Back 41

(UCC 2-205) for sale of goods only, merchant can make irrevocable offer by means of a signed writing. The firm offer clause has to be signed separately. (some jurisdictions have statutes expanding firm offers to other sales.)
1. merchant – a person who deals in goods of a kind and who by his occupation holds himself out as having knowledge or skill peculiar to practices or goods involved in the transaction. (can be specialized knowledge of goods or biz practices)
2. Recitals will suffice as consideration provided the terms are otherwise fair.

Front 42

Termination of Power of Acceptance
(Option Contracts)
(How to Create)
(Reliance)

Back 42

Partial Performance

1. (R45) if offer invites acceptance via performance, option contract is created by partial performance. Offeror’s duty to perform is conditioned upon completion of performance.
2. Reason: protects the offeree’s reliance interest.
3. But the performance has to have been bargained for! (Ragosta v. Wilder p. 181) – financing began before the offer was made so it is not performance/it was preparation.

Front 43

Termination of Power of Acceptance
(Lapse)

Back 43

if no period of times is specified in offer, it lapses after a ‘reasonable time’ which is define according to circumstances.
a. In an industry of rapid fluctuation, the reasonable time is short.
b. Objective test: what time would be though satisfactory to the offeror by a reasonable man in the position of the offeree?
c. An acceptance that arrives too late becomes a counteroffer.

Front 44

Termination of Power of Acceptance
(Revocation)

Back 44

an offer is revocable until it is accepted. Any restriction on the power to revoke is nudum pactum (unless consideration makes it option contract).

a. Reason: protects offeror so offeree can’t take advantage of changing economic conditions at expense of offeror.
b. In the essence of clarity, whichever comes first (acceptance or revocation) holds.
c. When is communication a revocation? When a reasonable person in the position of the offeree believes they no longer have the power to accept.
d. (revocation is effective upon receipt!) if offeree accepts before hearing of revocation, contract is formed.
e. Direct communication: manifestation of intention not to enter into proposed contract
f. Indirect communication: (offeror’s act + offeree’s knowledge from reliable source) when offeror takes definite action inconsistent with an intention to enter into the proposed contract AND the offeree acquires reliable information to that effect.
i. Reason: to protect offeror when they changes their mind.
g. Even a definite offer to another or a binding contract is subject to any rights arising from an outstanding offer.
h. Revocation of general offers – impossible to communicate revocation to all offerees in a general offer (advertisement) so offeror is required to give notice of revocation in a public manner similar to the offer. Even if the offeree doesn’t hear of revocation, the offeror is NOT bound. (as long as no better means of notice is reasonably available.)

Front 45

Termination of Power of Acceptance
(Death of an Offeror)

Back 45

(even if unknown to offeree) terminates oferee’s power of acceptance (unless option contract). Effectively a revocation.
a. Reason: remnant of the meeting of the minds theory (if dead, there can be no meeting of the minds)

Front 46

Termination of Power of Acceptance
(Rejection)

Back 46

if offeree rejects the offer, it terminates the power of acceptance. Acts as a counter offer (offeree can’t change mind and accept).
a. Reason: this protects the offeror’s reliance on the rejection.

Front 47

Termination of Power of Acceptance
(Mirror Image Rule)

Back 47

Mirror image rule: acceptance must be in terms stipulated by offer with no variation. Anything else is a rejection of offer and acts as a counter-offer.
i. Ardent v. Horan – buyer signed an agreement and sent check but included letter with further condition that given items remain in property. No contract because acceptance added a condition and was a counteroffer.

Front 48

Termination of Power of Acceptance
(Mirror Image Rule)
(3 Ways to Mitigate Mirror Image)

Back 48

1. a different term could be found to have been implied in the offer (because of industry custom like the “first quality goods” Farimount)
2. a different term could be found to have been precatory (just a wish, suggestion for modification that is in negotiation after contract if formed.)
3. Battle of forms: parties often assume they have made a contract and follow through (even though no contract in law).

Front 49

Termination of Power of Acceptance
(Mirror Image Rule)
(Problems w/ Mirror Image)

Back 49

1. if applied strictly, parties can get out of bargains when the market changes to their disadvantage!
2. Since all agree that contract is formed after commencement of performance: so then there is dispute over whose terms control.
3. Last shot rule: the last counter-offer before performance controls. (MPS v. Dresser-Rand p. 188)

Front 50

The Battle of the Forms & UCC
(Typical Transaction)

Back 50

Typical transaction: request for quotation, quotation form, purchase order (offer), sales acknowledgment (counter offer), sending goods, buyer’s acceptance of goods.

Front 51

The Battle of the Forms & UCC
(Boilerplate Provisions)

Back 51

Boilerplate provisions: standard clauses drafted by I house counsel, that are cut and pasted into new contract. Salespeople are unaware of fine print.

Front 52

The Battle of the Forms & UCC
(Problems)

Back 52

Problem: when buyer and seller each use their own forms, the terms on the front correspond while the fine print on the back is different. The parties think they have made a binding contract but they haven’t.

Front 53

The Battle of the Forms & UCC
(UCC 2-207)

Back 53

UCC 2-207: wanted to terminate the mirror image rule and move away from gamesmanship behind the battle of the forms and the last shot rule. (but it is a difficult and contested provision, poorly drafted). Also wanted to prevent unfair surprises and hardships. (under common law, offeror was surprised).

Front 54

The Battle of the Forms & UCC
(UCC 2-207)
(Subsection 1)

Back 54

Subsection (1) – distinguish between acceptance and counteroffer. (Before the comma, it’s saying even if you have different/additional terms, there is contract if the intent to contract is manifested. The proviso after the comma says there is no contract if there is an explicit counter-offer..i.e. if acceptance is expressly conditional to assent) If a counter offer is found, move to (3)

Front 55

The Battle of the Forms & UCC
(UCC 2-207)
(Subsection 2)

Back 55

Subsection (2) – if it is not a counter offer (1), then the additional terms are to be construed as proposals to contract. (it would have to be consented to) (comments: drafting mistake not to include different here, see Northrop) But, if merchants, such terms automatically become part of the contract unless:
i. the offer expressly limits acceptance to the terms of the offer.
ii. They materially alter it (if so they become proposals for amending contract)
iii. Notification of objection to the terms has been given within a reasonable amount of time after notice of them was received.

Front 56

The Battle of the Forms & UCC
(UCC 2-207)
(Subsection 3)

Back 56

Subsection (3) – if no contract was formed by writings, here contract is recognized in actions. The agreed upon terms become contract and they are supplemented by UCC gap-fillers. (disputed terms drop out)
i. Helps limit surprises (controlled by neutral UCC)
ii. C. Itoh v. Jordan International 1977 (p.210) – Jordan’s acknowledgment form (with arbitration clause) triggers proviso and is counter offer, then there is performance which indicates contract under (3). The contract is agreed upon terms plus gap-fillers and since there is no arbitration clause in gap-fillers it is not a part of the contract.
iii. Opposition to C. Itoh: 1-103 says unless displaced, common law will come in play. Here no UCC provision trumps about arbitration clauses. If common law comes in play the last shot rule would mean the arbitration clause was in. Policy in support: 2-207 is to prevent unfair surprises and this is not an unfair surprise. By their nature, clauses that trigger the proviso are explicit!

Front 57

The Battle of the Forms & UCC
(Knockout Doctrine)

Back 57

v. Knock-out Doctrine: if there is a material difference between the buyer and seller’s terms, the two terms cancel each other out and the contested term is supplied by UCC gap-filler.
a. Arg for – UCC is seen as the best neutral source of terms given its commitment to good faith, fairness, conscionable conduct. If seller is not willing to negotiate important terms then he should be willing to abide by gap-fillers (article 2 rules).
b. Arg against – sellers are then driven to use forms in a way that avoids imposition of gap-fillers (because seller’s think gap-fillers unreasonably favor buyers)

Front 58

The Battle of the Forms & UCC
(Best Shot Rule)

Back 58

alternative to knock-out doctrine – best shot rule
a. on the basis of fairness, the court must chose 1 of the 2 forms to enforce in it’s entirety. This would induce each party to take account of the other party’s concerns when drafting it’s form.

Front 59

The Battle of the Forms & UCC
(Materiality of Terms)

Back 59

Materiality under UCC (for merchants)
a. If term is deemed material under 2-207 (2) (b) the offeror would have to expressly assent to the terms. (silence/failure to object can only be acceptance if offeror can show prior dealings that make it reasonable to infer consent)
b. If term is deemed immaterial under 2-207 (2) (b) they are incorporated into contract unless notice of offeror’s objection has been given in reasonable time. (silence is acceptance)
c. What is material and who has burden to prove? Depends on jurisdiction.
i. Price is usually material
ii. Industry custom – a term divergent from industry custom is evidence of materiality (whereas a term in line with industry custom may permit inference of consent)
iii. Length of warranty – if there is not industry custom to the contrary, any limitation to length of warranty is material
iv. Arbitration clause – depends on choice of law determination of the given state. (depends upon industry custom and prior dealings)
1. NY said arbitration term is material

Union Carbide v. Oscar Meyer (p. 203) – even though prior dealings with indemnity clause, (not reasonable to infer consent to a term placing liability for an incalculable amount of back - taxes)

Front 60

The Battle of the Forms
(Different v. Additional Terms)

Back 60

a. Majority view: (knock-out doctrine) – discrepant terms drop out, replaced by suitable UCC gap-filler.
b. Leading minority view: discrepant terms in acceptance are ignored, terms in OFFER are binding
c. CA view – (equates different with additional and looks to whether they are a material alteration.)

Front 61

The Battle of the Forms
(In Practice)

Back 61

may not be as ferocious as defined because parties use strategies to avoid it.
a. If parties have an on-going relationship, they can negotiate an overriding master agreement to govern dealings
b. Trade associations can work out standard terms to which members then agree
c. Electronic data exchange inherently reduces terms to an agreed upon set.

Front 62

The Battle of the Forms
(Pre-Contractual Liability)

Back 62

iii. Today: an offer may not be freely revocable if the offeree has substantially relied on the offer.
a. R-90 – promissory estoppel (reliance)
b. R-87 – preparation for performance by offeree requires the offeror to keep the offer open
c. R-45 – partial performance as picking up offer in option contract.
iv. Option contract created by reliance (i.e. preparation…)
a. R87(2) – an offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option contract to the extent necessary to avoid injustice.
i. Once a contractor uses a sub’s bid, he is relying on the offer and an option contract is created (irrevocable).

Drennan v. Star Paving Co. 1958 (p.225) – general uses bid (just preparation) but sub tried to revoke before general could accept. Held: sub is estopped from revoking because the offer was made irrevocable when the contractor relied on it.

Opposite treatment for General contractor

a. A general contractor is not bound to hire a sub whose bid is listed under the contractor’s bid, but subs are bound to their bids when used by contractors. (Holman p. 231)
b. Sometimes it is not good policy to treat parties equally.
i. This is required because general contractor bears risks (once the general is awarded the contract, he is bound, so he has to rely on the subcontractor’s bids. If they could revoke, the general wouldn’t be able to operate at cost.
ii. But the subcontractor doesn’t rely on the general, and they don’t suffer detriment because the time and $ that go into preparing bids is cost of business…submits bids to many generals.
iii. Plus, in Holman, if general was bound to accept sub’s bid, the contract might be lost (failure to comply with minority business enterprise regulations.

Front 63

The Battle of the Forms
(Requirement of Definiteness)

Back 63

i. This requirement makes sense in light of the doctrine’s objective theory of consensual contract formation, hence we look for an objective manifestation of assent.
ii. It is required that Ks be definite for 3 reasons:
a. To help determine assent (the fewer the terms the less likely the person intended to be bound. Esp. if major terms are missing)
b. To determine if there was breach (you have to look to the definite terms)
c. To determine damage award (you have to look to the terms)
iii. But an agreement can pass the ‘indefinite test’ with a lot of seeming holes. You can even have a contract if there is a hold on price (2-305 is the appropriate gap filler for that).
a. To fill holes and make sufficiently definite, court looks to
i. Circumstances surrounding the K
ii. Course of dealing
iii. Course of performance
iv. Usage of trade
v. Reference to government regulations
vi. Imply terms like “reasonable efforts” or “good faith”
iv. UCC 2-204(3) – agreements with seeming holds can be contract is reasonably certain basis for remedy. (open terms filed by gap-fillers)