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89 Cards in this Set
- Front
- Back
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Mutuality of Obligation
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Both parties must give something of legal value in order to get something in exchange
- Unilateral Ks do not require this |
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Illusory Promise
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- Has no legal value for consideration
- Promisor does not assume legal detriment (C&H News Co) - Can be overcome by having the self-interest to use your best efforts to perform |
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Discretionary Promises
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If an otherwise illusory promise seems seriously made and there appears to have a genuinely bargained for it, courts will enforce it by implying an obligation of GF, act rsnbly, some other standard like business efficacy (Lucy)
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Exclusive Dealings + Output Requirements (2-306)
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1. Since one party is always at the mercy of another in these situations, 2-306 implies an obligation on both parties to use best efforts where they agree to deal exclusively
- Output K – buyer agrees to purchase whatever goods the seller produces - Requirement K – seller agrees to provide whatever goods the buyer requires to satisfy its needs |
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Promissory Estoppel Test (90)
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1. There must be a promise (CDE)
2. The promisor should rsnbly expect that promise to induce action/forbearance (Mataraz/Morton) 3. Act or forbearance by the promisee that was rsnbl (Norton) 4. Injustice can only be avoided by enforcing that promise |
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Enforcement by Virtue of Action in Reliance (139)
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A promise which the promisor should rsnbly expect to induce action or forbearance on the part of the promisee or a 3rd person and which does influence the action or forbearance is enforceable irrespective of the SOF if injustice can be avoided only by enforcement of the promise (emphasis on the injustice)
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Promissory Estoppel in the Commercial Context
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When it is 2 business court is less likely to allow PE in lieu of consideration b/c the point of consideration is to make sure both parties wanted to be bound
- Business know better - Business transactions have heavier consequences (Geremia) |
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Test for Option K (87)
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An offer is binding as an option K if it
1. Is in writing 2. Signed by the offeror 3. Recites a purported consideration for the making of the offer, and 4. Proposes an exchange on fair terms w/in a rsnbl time 5. or is made irrevocable by statute (B) An offer that could rsnbly lead another to act/forbear of substantial character before acceptance and is binding as an OpK to the extent necessary to avoid injustice |
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Characteristics of Option Ks
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1. Gives offeree time to consider if they want to accept the deal
2. Insulates the offer from anything that would have otherwise terminated POA 3. Any attempt to revoke will be ineffective, even death/loss of legal capacity 4. Offeree makes no promise to accept it, puts offeror in weaker position 5. Consideration is required in OpKs but only has to be spoken of |
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Promissory Estoppel and Lack of Option Ks
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1. When parties don’t have the foresight to make an OpK, an offer can be freely revoked but this is where PE comes in
2. Rest 45 – offeror of unilateral K is bound to keep it open once offeree begins tender but offeree is not bound to complete (Drennan) |
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Firm Offers 2-205
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An offer by a merchant that gives assurance that it will be held open is irrevocable even though there is no consideration, an offer constitutes a firm offer that is irrevocable if certain requirements are met:
- Only merchants can make firm offers - There is a signed record of the offer - The record says something about holding the offer open for the time stated, a rsnbl time or less than 3mons |
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Unjust Enrichment
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1. Is there an economic benefit received by one party?
2. Is there an injustice to keeping the benefit and not paying for it? 3. Did the claimant who conferred the benefit have the intent to charge - Where they a volunteer or officious intermeddler - If we allow the result to stand then have we created an injustice? |
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Exceptions to Unjust Enrichment
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1. Volunteer – someone who acts w/no intent to be compensated, gifts and donations
2. Officious Intermeddler – ppl who give unsolicited benefits that cannot be taken back and then demand to be paid for the service - Exception – hospitals and medical services |
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Volunteer
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Someone who acts w/no intent to be compensated, gifts and donations UNLESS:
1. The payment is made under compulsion of moral obligation 2. In ignorance of the real state of the facts 3. Under an erroneous impression of one’s legal duty |
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Unjust Enrichment + Family Obligations
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Family members are generally precluded from recovering for services b/c the law presumes that the services were a gratuitous part of the relationship (Gorden)
Exceptions: 1. express agreement to pay for the services 2. Circumstances showing that the relative accepting the benefit of the services knew or should have known that the relative performing the services expected to be reimbursed |
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Unjust Enrichment + Restitution
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Once you have accepted the tangible thing, it is ground to enforce payment
1. If it is money payment, money is returned 2. If it is intangible or non-refundable, court determines monetary value - Quantum meruit – as much as deserved [services] - Quantum valebant – as much as they are worth [goods] |
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Implied in Fact vs. Implied in Law
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1. Implied in Fact – OAC = K
2. Implied in Law (Martin v. Little) – the court will base a K off of a K-like relationship in order to help the party that was injured |
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Moral Obligation
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Exception to past consideration, recognized only where a person makes a promise that is in effect a ratification of an existing but unenforceable or voidable legal obligation, a duty that cannot be legally enforced
- Do not need new consideration - Ex – where Stat of Lim has run but debtor makes new promise to pay the debt |
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Material Benefit (86)
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- Widens application of the moral obligation doctrine, courts don’t like it, invented it to get around past consideration
- Webb v. McGowan – wood was going to fall on man and he knocked it out of the way offered to pay him money for rest of his life b/c he saved his life. By saving his life P had conferred a material benefit on D, strength of the promisor’s moral obligation justified the legal fiction that the services were not rendered gratuitously, this got rid of past consideration problem |
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Fraudulent Misrep (162)
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The maker intends his assertion to induce a party to manifest his assent and the maker:
- Knows or believes that the assertion is not in accordance w/the facts - Does not have the confidence that he states/implies in the truth of the assertion - Knows that he does not have the basis that he states/implies for the assertion |
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Material Misrep (162)
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- A rsnbl person under the circ would rely on the statement in making their decision
- The giver knows that the statement will induce that person (particular knowledge) |
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When a Misrep makes a K voidable (164)
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If a party’s manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying the K is voidable by the recipient
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When an Action is an Assertion or Concealment (160)
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Action intended or known to be likely to prevent another from learning a fact is equivalent to an assertion that the fact does not exist (Sarvis)
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When Non-Disclosure is an Assertion
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A person’s non-disclosure of a fact known to him is equivalent to an assertion that the fact does not exist when
1. Where he knows that the disclosure is necessary to prevent some previous assertion from being a misrep or from being fraud or material 2. Where he knows that disclosure would correct the other party’s mistake about a basic assumption that the party is making the K on, and if non-disclosure amounts to a failure to act in GF and in accordance with rsnbl standards of fair dealing 3. Where he knows that disclosure of the fact would correct a mistake of the other party as to the contents or effect of a writing, evidencing or embodying an agreement in whole or in part 4. Where the other person is entitled to know the fact b/c of a relation of trust and confidence between them (Stambovsky) |
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Misrep + Fact, Opinion, Prediction
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Even though a statement is couched in terms of opinion it may constitute a statement of fact if it may rsnbly be understood as implying the existence/non-existence of facts that justify the statement
- Whether, under all the circumstances, the party to whom the opinion is expressed was justified in relying on it as a fact-based assertion - Relationship between the parties is key - Fact that induces justified reliance or is just hype - To make claims asserting that future events will occur when you have no idea of their likelihood or know they are not likely (Rodi) |
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Duress Test (175)
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1. Improper threat that induces the parties manifestation of assent
2. That party had no rsnbl alternative |
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When a Threat is Improper (176)
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1. A threat is Improper if
- What is threatened is a crime or a tort - The threat itself would be a crime or a tort if it resulted in obtaining property - What is threatened is criminal prosecution - What is threatened is the use of the civil process and the threat is made in bad faith - The threat is a breach of the duty of GF and fair dealing under a K with recipient 2. A threat is improper if the resulting exchange is not on fair terms, and - The threatened act would harm the recipient and would not significantly benefit the party making the threat - The effectiveness of the threat in inducing the manifestation of assent is significantly increased by prior unfair dealing by the party making the threat - What is threatened is otherwise a use of power for illegitimate ends |
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Market or Circumstantial Pressure
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1. When one of the parties commits an unlawful act or threat that deprives the other of his unfettered will, the wrongfulness of the pressure is decisive
- Doesn’t have to be criminal/tortious - Fine line between hard bargaining and duress (Quigley) |
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Duress + BF in K Modification
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Cannot use duress to get K modification, bad faith, economic duress: taking advantage of someone’s financial situation to force them to agree to the K modification
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K Modification + UCC 2-209
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- An agreement modifying a K within this article needs no consideration to be binding
- An agreement in a signed record which excludes modification or rescission except by a signed record may not be otherwise modified or rescinded, - but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party - The requirements of section 2-201 must be satisfied if the K is within its provisions |
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Supervening Difficulties for Upholding K Modification
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After K is made, the performance of the K is subject to substantial and burdensome difficulties not anticipated when the K was made
- Not so severe that they would allow the party benefitting from the modification to be excused, but can't just be an error/lapse in judgment - Benefiting party must conform to standards of honesty/FD - Clear that he is not trying to take advantage of the needs of the other party or to coerce a promise for more money (protects payer) - The change in performance of the party who assumes the increased obligations must be rsnbly fair in view of the changed conditions (protects performer) (Empire Paving) |
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Undue Influence (177)
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Has to be a special relationship of dominance-submissiveness, fiduciary relationship, special relationship of trust such that your guard is down (Noureyeva/Tinney)
- The victim can avoid a K induced by UI of a non-party unless the other party to the K in GF and w/o reason to know of the UI gives value or relies materially on the K |
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Procedural Unconscionability
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The way the K was formed, tactics used, disparity of power, things that made it possible for one party to take unfair advantage of the other
- Lack of meaningful choice considering the circumstances 1. Manner in which K was entered 2. Whether each party had rsnbl opportunity to understand the terms of the K 3. Whether the important terms were hidden in a maze of fine print |
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Substantive Unconscionability
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Actual terms of the K, whether the obligations assumed are fair
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Unconscionability + Remedies
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If a K or term is unconscionable at the time K is made a court can
1. Refuse to enforce the K 2. May enforce the remainder of the K w/o the unconscionable term 3. Or limit the application of the term to avoid an unconscionable result |
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Unconscionability + UCC 2-302
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1. If the court finds as MOL the K or any clause to have been unconscionable at the time it was made the court can
- Refuse to enforce the K - Sever the unconscionable clause - Limit the application of any unconscionable clause to avoid an unconscionable result 2. Parties will have rsnbl opportunity to present evidence regarding the commercial setting, purpose and effect of K to aid the court in making its determination (SW Pet Products) |
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Adhesion Ks
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- Any K in which one of the parties having superior bargaining power is able to dictate the terms of the K to the other on a take-it-or-leave-it basis
- Consumer gives blanket assent to ONLY rsnbl terms, but duty to read does not apply to unrsnbl terms (Atwater) |
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Illegality
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Public policy overrides purpose of K if it is about something illegal (Sahn)
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Void Against Public Policy
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1. The behavior is detrimental to society as a whole
2. Benefit to society outweighs the harm of benefiting P by enforcing the K (Stevens Rooks) |
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Mental Incapacity (15)
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A person can void their contractual duties if by reason of mental illness or defect (Farnum)
- He can’t understand the nature and consequences of the transaction (motivational) or - He can't act in a rsnbl manner in relation to the transaction and the other party has reason to know of his condition (volitional) |
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Sources of Interpretation
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1. The K itself
- Special definitions the parties attached - Dictionary definition, ordinary meaning 2. Context of the K, why was the K made - Culture, language differences in regards to interpretation and meanings, negotiation history 3. Course of performance – an implied meaning based on past demonstration 4. Course of dealing – an acknowledged or explicit previous meaning 5. Industry Custom (Frigaliment) |
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Interpretation + UCC 2-208
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1. Any course of performance accepted or acquiesced in w/o objection shall be relevant to determine the meaning of the agreement
- Ks that involve repeated performance by either party w/knowledge of the performance and opportunity to reject it 2. All things should be construed consistently together, but where unrsnbl express terms trump course of performance, which trumps course of dealing/usage trade 3. Course of performance is relevant to show a waiver or modification of any term inconsistent w/such course of performance |
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4 Corners Approach
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1. Court first looks to plain meaning
- Whether language is ambiguous on its face - Tries to understand the language of the written agreement (Guilford) |
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Modern Approach
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1. Less about the four corners, more about context
2. Allows more extrinsic evidence 3. Only problem is court might make an agreement that the parties didn’t want, construe it improperly (Drayage) |
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Interpretation + Standard Form Ks
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1. Accounts for the fact that parties can’t read/understand all the terms in standard forms
2. Rsnbl Expectations – where there is unequal bargaining power between the parties so that one controls all the terms and the other is at take it or leave it basis, K will be strictly construed against the party that drafted it - Even though there is a duty to read and parties should be free to K to protect/limit potential liability it is important that parties that parties receive what they rsnbly expected the K to give them (forced entry definition of burglary - Maze of fine print, common ppl don’t understand boilerplate language (Atwater) |
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Gap Fillers (204)
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When the parties to a K have not agreed on an essential term, the court supplies a rsnbl term
- Court avoids frustrating the parties’ expectations (Family Snacks) Won’t be used if - The parties have explicitly agreed to a diff K term - The circumstances indicate they rsnbly intended something else |
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Gap Fillers + UCC 2-311
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A K is not made invalid by the fact that it leaves particulars of performance to be specified by one of the parties. Any such specification must be made in GF and within limits set by rsnbl commercial standards
Unless otherwise agreed, - Buyer - specifications about assortment of goods - Seller - specifications or arrangements relating to shipment (Family Snacks) |
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GF + Interpretation
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1. A K is not made invalid by the fact that it leaves particulars of performance to be specified by one of the parties. Any such specification must be made in GF and within limits set by rsnbl commercial standards
2. Unless otherwise agreed, - Buyer - specifications about assortment of goods - Seller - specifications or arrangements relating to shipment (Saucy Sisters) |
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3 Types of Parole Evidence
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1. Contradict – never admitted
2. Supplement (Myskina) - Is it a side agreement that would typically be put in writing - Must not be extremely connected to the principle transaction 3. Clarify (Yocca) - Court considers whether the term is ambiguous in the first place which means it is susceptible to more than one meaning - Modern vs. classical JX determines whether PEV can be admitted to clarify |
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Process of Admitting Parole Evidence
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1. Judge is initial gatekeeper
2. Have to have a valid written K executed by both parties 3. PEV includes evidence up to and during the moment of execution 4. Everything after is K modification and new consideration is needed |
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Parole Evidence + UCC 2-202
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Terms written by the parties as a final expression of their agreement cannot be contradicted by any prior agreement or by contemporaneous oral agreement but can be supplemented by evidence of:
1. Course of performance, course of dealing, usage of trade (always admitted) 2. Consistent additional terms unless the court finds the K to be fully integrated |
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Full, Complete, Unambiguous + Clear
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Full – no supplemental/collateral agreements/missing terms
Complete – this is all there is, nothing else Unambiguous – is there a term that is susceptible to more than one meaning Clear – not vague |
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JX Approaches to Parole Evidence
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- Classical/4 Corners – the writing appears complete on its face (full/complete/clear)
- Modern/Contextual – have to take a sip of evidence, step outside bounds of K to determine if it is fully integrated |
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Exceptions to Parole Evidence
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1. Writings induced through misrep
- Where evidence exists that the writing truly doesn’t represent the contractual intent of one of the parties b/c it was procured through egregious misrep/fraud by the other, PEV does not bar that evidence - Misrep makes a K voidable only if is fraudulent or material, if it induces the other party’s assent, if the other party is justified in relying on it - Integration clauses do not shield D from fraudulent misreps (Sound Techniques) |
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Misunderstanding (20)
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1. There is NO manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and
- Both or neither party knows or has reason to know the meaning attached by the other, or 2. The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if - That party does not know of any different meaning attached by the other and the other knows the meaning attached by the first party, or - That party has no reason to know of any diff meaning attached by the other, and the other has reason to know the meaning attached by the first party |
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Impracticability Test (261)
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1. There is a supervening event after K formation
2. Make’s X’s performance unduly burdensome 3. It is not X’s fault 4. The K was based on the assumption that the event was unforeseen (obj test) 5. The language or the circumstances do not indicate that X still has a duty 6. Only OBJ impracticability relieves a party from the K (Clark) - OBJ – It cannot be done - SUBJ – I Cannot do it (Ling) |
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Guaranteed Supervening Events
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- Death of person necessary for performanc
- Destruction of a specific thing necessary for performance - Prohibition by law |
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Impracticability + UCC 2-615
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Delay in delivery or non-delivery in whole or in part by a seller who complies with B and C is not a breach of his duty if performance has been made impracticable by the occurrence of a contingency
- The non-occurrence of the contingency was a basic assumption that the K was made on - Or by compliance in GF with an applicable foreign/domestic gov regulation or order - Where only part of the performance is affected, he must allocate production and deliveries among his customers in a fair and rsnbl manner - Seller must notify the buyer seasonably that there will be delay or non-delivery and of the estimated quota made available for the buyer |
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Frustration of Purpose
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The event occurs after the K is formed, the expected value of performance to the party seeking to be excused has been destroyed by a supervening event
1. The Party will be excused if - There is a supervening event after K formation - It is a principle purpose that is substantially frustrated - The non-occurrence of the event was a basic assumption of the K - The principle purpose has to be understood by both parties - The language or circumstances do not indicate that his duties still stand (Scottsdale v. Kuhn) |
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Condition (224)
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An event that is not certain to occur which must occur before performance under a K becomes due (includes nonevents)
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Condition Precedent
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Must be satisfied before the next condition or performance is due
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Express Condition
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Language clearly making it a condition, subject to, if and only if, conditional upon
- Must be satisfied in full technical detail (Oppenheimer) |
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Implied Condition
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Can be inferred from the language and context that it is meant to be a condition
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Construed Condition
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Implied in law, where there is not enough evidence to draw a factual inference, but a rule of law recognizes a condition under the circumstance or the court concludes as a matter of law that it is rsnbl/fair based on the K and the parties’ expectations
- Courts can construe a term to be a condition and can use discretion to decline to construe it in a way that requires exact compliance (Oppenheimer vs. Jacobs Young) - Where something is not an express condition, innocent omission is ok 1. Purpose to be served 2. Desire to be gratified 3. Excuse for deviation 4. Cruelty of enforced adhesion |
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Condition Subsequent
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Duty is excused by the failure of the existence of something or a condition
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Concurrent Condition
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A set of dependent promises that have to happen at the same time
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Pure Condition
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Not a condition of anything else, no further performance under the K is contingent on it happening
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Promissory Condition
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A condition and a promise, if it is not fulfilled then it is a breach
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Conditions as Escape
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- Non-fulfillment of a condition permits a party to escape a promise that would have had to be performed had the condition been satisfied
- In this context, it is more explicitly used to allow a party to extricate herself from the transaction under defined circumstances that make the K undesirable |
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Satisfaction Clauses
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Allows one of the parties to exercise judgment by making that party’s performance contingent on her being satisfied with the specified outcome
- Can be illusory – is there a measurable standard for determining satisfaction Artistic – subj GF Technical – obj GF (Thermo-Spa/Martin) |
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Conditions + Alternative Performances
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Non-fulfillment of a condition does not have to terminate the K, it can be used to determine whether one performance happens or another
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Conditions + Sequencing Performances
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- Distributes the risk of who performs first
- If they are concurrent conditions neither party assumes the risk of performing first - Where one or both performances cannot be completed instantaneously there is a strong incentive for the parties to spread the risk of nonperformance by breaking up performances into sequenced events - If a K is silent on the sequence of performance a court is likely to construe the performances as concurrent if they can be performed instantaneously/simultaneously -- Longer performances are construed as condition precedents to instantaneous ones |
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Waiver (Conditions)
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Knowing and voluntary abandonment of a right, express or implied
- If it is material, has to be changed through K modification w/new consideration - If the waived condition only protects the violated parties’ interests and they were the one who waived it, they cannot raise this as a defense - Manifests the intention through words or conduct that he will not require the condition to be satisfied as a prerequisite to his performance (Benz Credit Corp/Gould) |
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Estoppel (Conditions)
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The beneficiary of a condition indicates by words or conduct that he will perform the contingent promise despite non-fulfillment of the condition
- The party to be estopped must have known or had reason to know that his words or conduct were likely to have been relied on by the other party - They must in fact have been relied on by that party to her detriment - If the condition is material, it can be excused only if estoppel can be est. by showing conduct of the party to be estopped that is justifiably relied on by the other party to be estopped that is justifiably relied on by the other party to her detriment - Does not have to meet same standards of knowing and voluntary abandonment of a right |
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Uncooperative Conduct (Conditions)
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Implied in every K is a condition to cooperate, implied promise to not prevent or hinder performance of the condition (Sullivan)
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Unfair Forfeiture
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1. Based on the court’s determination that enforcement of the condition would result in undue and unfair hardship to the party to whom the performance is due
- A forfeiture that is unduly harsh and disproportionate - Enforcement of the condition will allow the promisor to benefit from a technicality that will deprive the promisee of valuable rights and give the promisor a windfall 2. Have to look at - Whether the complaining party has invested a lot into the transaction that they would lose, such as improvements to property - Whether failure to exercise/adhere to the option was honest and inadvertent - The other party has not been harmed by the delay in exercising/fulfilling the option (JNA v. Cross Bay) |
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Material Breach
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1. Total – a breach that is significant, substantial and cannot be cured, halts everything
- Relief – terminate the K, hire another person to fix it - Breacher cannot claim under the K for the work/materials they supplied - May have a restitutionary claim under unjust enrichment 2. Partial – It is a significant and substantial breach but there is still time for the party to cure the breach |
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Immaterial Breach/Substantial Performance
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- Benefit of the bargain has not been completely dissolved
- Cannot be on purpose, has to be GF mistake, inadvertent - What did the complaining party want and did they get what they want |
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The Perfect Tender Rule
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1. An obligation of perfect performance to have the goods delivered exactly to K specifications
- Any deviation is a breach - Substantial performance does not apply 2. Limitations - There has to be time for the nonconforming party to cure, sometimes even after the delivery date has passed - The court can invoke an obligation of GF where the defect is trivial and the buyer uses its right to rejection as a way to get out of an unfavorable K |
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UCC 2-508 + Seller's Right to Cure
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1. If the buyer rejects the goods before the agreed delivery date:
- Seller can substitute a conforming tender before the delivery date expires - Seller must have acted in GF in making the mistake - Seller must give the buyer timely notification of its intent to cure - Seller must pay the expenses for curing - Seller must compensate the buyer for any loss caused by the breach 2. If seller wants to cure a non-conforming tender after the agreed delivery date - In addition to 1-5 above, the cure must be timely and appropriate under the circumstances - Must show that the cure will give the buyer its contractual expectations notwithstanding the delay in completing proper performance (Ramirez v. Autosport) |
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Anticipatory Repudiation
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When someone preemptively breaches a K, allows victim to bring suit w/o having to wait for their performance to become due
- Manifestation of intent to repudiate can be made by words or conduct that must be definite, unequivocal and absolute (Wholesale Sand & Gravel) |
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When an Act is a Repudiation (250)
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- A statement by the obligor to the obligee indicating that the obligor will commit a breach that would of itself give the obligee a claim for damages for total breach, or
- A voluntary affirmative act which renders the obligor unable or apprently unable ot perform w/o such a breach |
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Effect of Repudiation on the Victim's Performance
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When either party repudiates and the loss of that performance will substantially impair the value of the K to the other party, they can:
- Await performance by the repudiating party for a rsnbl time - Resort to any remedy for breach even though he has notified the repudiating party that he would await their performance and has urged retraction - In either case, suspend his own performance |
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Expectation Interest
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DIRECT + CONSEQ + INCIDENTAL - AVOIDED COSTS
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Direct Loss
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Loss flowing fromt he K itself
- When there is partial performance it is the difference between what P wanted and what P got |
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Consequential Loss
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Damages that arise as a consequence of the breach such as lost profits, property damage or personal injury
- Does not relate to the value of the K |
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Incidental Loss
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Costs relating to comping with the breach such as inspecting the damaged goods or arranging substitute performance
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Lost Profits
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Direct - the loss of all or a portion of the profit the victim hoped to gain under the K
Conseq - additional profits not flowing directly fromt he K that would have been gained like exposure to new clients that would yield new business |
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Damages + P's BOP
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- Damages within a rsnbl certainty
- The Damages were within the contemplation of the parties at time of K (Hadley v. Baxendale) - Overcome objection that they should or could have mitigated - They are not recovering more than they would have gained had the K been performed (Freund) |
