Contracts Ii

Front 1

Four kinds of illusory promises?

Back 1

1. Promises based on a condition
2. Indefinite duration contracts
3. Indefinite quantity contracts
4. Promises that omit key terms

Front 2

What is an illusory promise?

Back 2

Until both parties are bound, neither party is bound. An agreement to do something that is so indefinite one cannot tell what is to be done or the performance is optional. No commitment, no promises of value.

Front 3

Is an indefinite price term illusory?

Back 3

No. UCC 2-306.

Front 4

What is a condition?

Back 4

An event which triggers the duty to perform?

Front 5

What is an illusory condition?

Back 5

A condition that is in control in one of the parties. Third parties or acts of god okay.

Front 6

How do we get around an indefinite duration?

Back 6

Set a time frame, for both parties, to have consideration.

Front 7

What are the four main rules from Laclede?

Back 7

1. A bilateral contract is not invalid and unenforceable merely because one party has the right to cancel so long as one party has the power to cancel for some stated period of time.
2. When from an intelligent, practical reading of the agreement there is an implied exclusive agreement the quantity term doesn't have to be present.
3. Requirement contracts are routinely enforced when the needs of the buyer are reasonably foreseeable and the time is reasonably limited.
4. UCC 2-305 requires that when no price is stated, that the price be made in good faith.

Front 8

What are the 3 ways to get around an exclusivity requirement when it is not possible?

Back 8

1. Regionalize
2. Purchase by product definition
3. Max and Min

Front 9

Four rules from Wood v. Lucy, Lady Duff-Gordon?

Back 9

1. An implied promise to perform can be sufficient consideration if the intent behind the promise has value.
2. The more specific you get the more likely there will be consideration but it will be hard to get the party to assent.
3. UCC 3-306 A lawful agreement requires that the seller or buyer for exclusive dealing use 'best efforts' to supply the good and to market the sale.
4. Wood's promise to pay 1/2 of all proceeds was not conideration because he could possibly sell nothing. However, the promise had value.

Front 10

Four steps of a contract?

Back 10

1. Parties
2. Capacity
3. Assent/Formation
4. Consideration/Validation

Front 11

Offer?

Back 11

1. Manifestation of intent to be bound
2. Made in a fashion others believe to be invited
3. That other parties assent will conclude.

Front 12

Assent?

Back 12

1. Offer
2. Acceptance

Front 13

How may offer cease?

Back 13

Revoked, terminated by death, retracted, not answered.

Front 14

How must offer be manifested?

Back 14

Outward, manditory verbs, clear and concise language.

Front 15

Acceptance/Formation?

Back 15

Must clearly communicate.
Start performance.
Cannot add more conditions unless clearly stated independent of acceptance.
Conditions or limits are counter offer (unless clearly independent).
Silence is not an acceptance, usually considered rejection.
Accepted within reasonable time.

Front 16

Consideration/Validation?

Back 16

Assent to an agreement (excludes gifts, rewards).
Exchange items of value (doesn't have to be equal value, something must be given; legal rights and promises included).
Bargained for, the exchange is for things sought out in offer and acceptance.

Front 17

Remedies?

Back 17

Breach
Promissory Estoppels
Restitution

Front 18

Promissory Estoppels?

Back 18

Clear and unambiguous promise.
Foreseeability promisor could see promisee relying.
Reasonable reliance.
Hardship or unfairness can be avoided by enforcement of the promise.

Front 19

Restitution?

Back 19

Transferred something of value.
Would be unjust to keep it.

Front 20

Defenses?

Back 20

Duress
Statute of Frauds
Unconscionability

Front 21

Duress?

Back 21

Manifestation of assent
Induced by an
Improper Threat
No reasonable alternative
(Does not include economic distress not caused by parties)

Front 22

Unconscionability?

Back 22

Procedural - Gross inequality of making, absense of meaningful choice or; manner of making is high pressure or hidden terms.
Substantive - Values unfair, unreasonable, partial. Doesn't have just value. Overly harsh, costly, or term (scream test).

Front 23

What are the two personal satisfaction clauses?

Back 23

1. Title satisfactory
2. Personal satisfaction
Courts will still enforce but only allow out IF there is an honest and reasonable reason.

Front 24

How to identify a modification?

Back 24

1. Original contract.
2. Neither party has fully performed.
3. Parties agree to change the duties of at least one of the parties.

Front 25

Three modification rules?

Back 25

1. Traditional - Lingenfelder v. Weinright.
2. Restatement 2d 89.
3. UCC 2-209

Front 26

Lingenfelder v. Weinright Brewery Co rules?

Back 26

1. A promise to pay for more for the work already contracted to be done doesn't work. There is not new consideration on one of the parties.
2. New consideration by both protects against duress and fraud. No duress! Austin v. Loral.
3. History of dealing between the parties could serve as consideration.
(Even the changing of building materials could be new consideration, remember, doesn't have to be equal).

Front 27

Restatement 89 Modification?

Back 27

1. Contract.
2. Unfulfilled.
3. Unanticipated circumstances (consider actual knowledge of parties, past experience, records, and similar situations of 3rd parties).
4. Fair and Equitable.

Front 28

UCC 2-209?

Back 28

No new consideration is required. As long as the parties believe they have a modification, they have a modification.
Limited by Roth Steel in requiring;
1. Good faith.
2. Reasonable reason to seek modification.
3. Would cause normal merchant to seek modification.
4. Must meet Statute of Frauds.

Front 29

At-will employment arrangements information?

Back 29

No consideration between parties.
Handbook, does it become part of the relationship? Does it have 'offer language' to provide consideration to employee?
Take each document's by date and see if it creates an agreement or modification. (check for consideration!)

Front 30

Pine River State Bank v. Mettille?

Back 30

Unilateral contracts do not have duration clauses, don't need one.
Handbook may be modification offer accepted by showing up next day.
REMEMBER, this could help or hurt your client. Check if the whole handbook adds or removes contractural rights.

Front 31

Foley v. Interactive Data Corp?

Back 31

General presumption of at-will employment.
Can change by modification in one of following ways:
1. Personnel policies or practices
2. Longevity of service
3. Actions or communications reflecting assurances of continued employment.
4. Practices in industry.

Front 32

Tsotaddle v. Abesntee Shawnee Housing?

Back 32

At-will employment can be changed by handbook but these alterations must not be vague!

Front 33

Remedy for termination?

Back 33

Expectation damages or cost of completion formula.
Damages=Contract price (wage) - substitute price (employee's old wage). There is a duty to mitigate damages.

Front 34

Thompson v. St. Regis Paper Co.?

Back 34

Employee handbook creates promissory estoppels issue.
(Some states require notice of termination - illusory promises, consideration)

Front 35

Option Contracts?

Back 35

Parties agree to keep offer open beyond normal 'reasonable' time. Consideration complicates. To keep it open, technically a second contract is created. Must be consideration for it as well.

Front 36

Ryder v. Wescoat?

Back 36

Option to purchase a home. Rejected purchase before option closed. Came back after rejection and wanted to purchase. Does it terminate option? No, unless offeror has materially changed his position.
1. Bilateral option contract
2. Rejection before deadline.
3. No material change in offeror's position.
4. Accepts before deadline.

Front 37

Restatement 45?

Back 37

Option Contracte created by part performance (unilateral contracts options).
1. Invites offeree to accept by performance, option created when performance begins.
2. Offerors duty of performance only required on completion.
(Beginning to perform opens option contract for performer to complete performance. Upon completion, offeror cannot get out of contract. Preparation for performance is not partial performance).

Front 38

Subcontractor v. General Contractor and options?

Back 38

SC bid to GC is offer and promissory estoppels is consideration (doesn't make sense but is the law) SC can be held liable for not performing if offer is accepted.
GC will not be liable to SC because GC did not accept SC offer. Even if used bid in obtaining higher bid.

Front 39

Drennan v. Star Paving?

Back 39

Restatement 90, promissory estoppels provides consideration. This is an implied option. Unless the SC stated clearly offer was revocable or gave a time frame.

Front 40

Restatement 87?

Back 40

1. Offer is binding as option if
(a). is in writing, signed, gives consideration, reasonable time
(b) revocable by statute.
2. Offer which should expect to induce action or forbearance of such nature before acceptance.
Reliance is NOT part performance~!

Front 41

Holman Erection v. Orville?

Back 41

SC sued GC. Lost. There are also public policy issues besides non-acceptance of offer. Provide certainty, avoid bid-shopping, formality and commercial context, allows negotiation of open terms.

Front 42

UCC 2-205?

Back 42

Firm Offers.
An offer may remain open without consideration for any time (or reasonable time if one not given) but never past 3 months. Option must be separately signed.

Front 43

Battle of the Forms - GL of Contract?

Back 43

Mirror Image Rule - identical terms, new terms are counter offer, if performance last terms apply, performance or silence is acceptance of last terms.
Last-shot rule - whatever offer was last will be binding.

Front 44

UCC 2-204 v. 2-207?

Back 44

204 sets rules of general offer and acceptance, 207 governs for purchase orders and phone conversations confirmed by written correspondence.

Front 45

Steps under 2-207 for written confirmations?

Back 45

1. Was there an offer and acceptance prior? (No goes to acknowledge form steps)
2. Acceptance made conditional on assent? (Yes, no acceptance! If parties have performed or paid go to 2-207(3)).
3. Are the terms written additional or different (to phone conversation)? If yes, four questions:
I. Between merchants? (No=not binding).
II. Material alter contract? (Yes=not binding).
III. Offer limit acceptance to its terms? (Yes=not binding).
IV. Offeree object to terms? (Yes=not binding).

Front 46

Steps under 2-207 for acknowledgement forms?

Back 46

1. Document accept offer, at least major terms? (No=no contract)
2. Acceptance made within reasonable time? (No=no contract).
3. Are the terms written additional or different (to phone conversation)? If yes, four questions:
I. Between merchants? (No=not binding).
II. Material alter contract? (Yes=not binding).
III. Offer limit acceptance to its terms? (Yes=not binding).
IV. Offeree object to terms? (Yes=not binding).

Front 47

Under UCC 2-207, what does 'a definite and seasonable expression of acceptance' mean?

Back 47

Definite=clear and unequivocal.
Seasonable=within reasonable time (see last semester's reasonable time)
Expression of Acceptance=agreed to all the terms which are major and the parties are aware

Front 48

Under UCC 2-207, what does 'operates as an acceptance' mean?

Back 48

Written confirmation is acceptance. The writing requirement is satisfied as long as within reasonable amount of time.

Front 49

Under UCC 2-207, what does 'even though it states terms additional to or different from those offered or agreed upon' mean?

Back 49

Additional=nothing on first form and something on second,
Different=buyer says one year, seller says 90 days or other terms.

Front 50

Under UCC 2-207, what does 'UNLESS acceptance is expressly made conditional on assent to the additional or different terms' mean?

Back 50

Counteroffer.
How? Warning clause on one of the forms. Normally doesn't change results because the normal duty to read doesn't exist in these transactions (industry standard). Normally only look at big terms.

Front 51

What happens when there are two written confirmations?

Back 51

We look at both forms. Which terms are additional on both forms from the original offer (phone). Any terms additional may be enforced (EXCEPT warranty because it is a material change)
Where terms conflict assume the parties would have objected. The only terms that become part of contract are those not in conflict.

Front 52

What does UCC 2-207(2) assume?

Back 52

A contract is already recognized by the court. Recognize this section does not use the term 'different terms'. Cover both on exam.
Majority=mistakenly left out different, terms are allowed. Leads to overextending the comments and overriding the statute.
Minority=intentionally left out 'different' and different terms are not part of contract.

Front 53

What is an additional term?

Back 53

Generally, and additional change if given reasonable time to ojbect and while acceptable under local trade practices becomes part of the contract.

Front 54

Is an interest rate for late payments an additional term?

Back 54

Yes. And will be ginding unless original offer limited terms to that offer or the additional terms materially alter the original contract terms.

Front 55

What is a material alteration?

Back 55

Anything that results in surprise or hardship (like unconscionability).
ANY change or addition in warranty is a material alteration.
If close to trade standards, term is not material.
A clause reserving power to cancel upon buyer's failure to meet any invoice when due is a MA.
Complaint period is materially shorter than customary or reasonable is MA.
Obviously and generally, anything close to industry standards is probably okay or if the new terms are relatively unimportant.

Front 56

What is meant by 'conduct' in 2-207(3)?

Back 56

Communication does not equal conduct. 1-303. Pretty much any performance.

Front 57

Interpretation of 2-207 under different types of transactions?

Back 57

Sec 1. Telephone agreement with 2 written confirmations. Cmt 6: conflicting forms - assumeed both parties object to those terms and do not become part of contract.
Sec 2. Forms only -
I. Read literally (only save terms additional, rejects terms different).
II. cmt 3 - expansive view implies additional and different are part of ss2 and suggests this ss covers additional and different.
III. cmt 3 - descriptive view implies additional term is viewed as objection to sellers form.
IV. cmt 6 - conflicting terms are considered objected to. Gap filler used.
Sec 3. Cmt 7 - Conflicting fill in blank terms with shipment and payment terms of the contract include only those to which both parties agreed.

Front 58

Agreement to Agree & Liability based on preliminary negotiations?

Back 58

Freedom of contract - free to walk away before bound or to be bound to whatever conditions the parties desire. Caveat emptor - Let the buyer beware!

Front 59

Rules concerning agreement to agree.

Back 59

General - Missing a term, no contract. No we will decide this term later.
Modern - Inadvertant omitted term still may be enforceable.

Front 60

What about missing terms in service contracts - General Law?

Back 60

Reasonably Certain Test
Academy Chicago Publishers v. Cheever 1) Must be so definite as to material terms that promises and performances are reasonably certain. 2) The court must be able to determine under rules of construction what the parties have agreed to. 3) A court should not fill in missing terms unless subject matter has been decided amount. (Missing terms could be illusory promise).
Rego v. Decker - Courts should fill in gaps to ensure fairness where reasonable expectations are fairly clear. Cannot negotiate and draft solutions to all problems that may arise.
Saliba-Kirnglen v. Allen Eng. - Contract to agree to agree. Customary practice overwrites any common law rule that does not like agree to agree contracts.
Crook v. Mortenson-Neal - Should have realized at time of bid that was bound by reasonable additional terms implicit in the relationship. INdustry custom and circumstances of the project dictate the kinds of provisions that are reasonable.

Front 61

What about missing terms in service contracts - UCC?

Back 61

2-201(1) - Must have quantity (see below), Statute of Frauds.
2-204 - If parties intended contract, a contract despite missing terms.
2-305 - If price is missing, court will fill in according to good faith.
2-306 - Quantity may be in output or some general term, but must not be unreasonable.
2-307 - Delivery of all at same time, payment at same time. If circumstances and parties intend otherwise, can be delivered in parts or paid in increments (what a waste of space!)
2-308 - Place of delivery
2.309 - If time of delivery not agreed, reasonable time allotted. Reasonable time for rejection of offer and performance also.
2-314 - Implied warranty provision - usage of trade.
2-315 - Implied warranty provision - fitness for particular purpose.

Front 62

Missing terms in real property leases? Renewable lease but new rent not listed?

Back 62

Joseph Martin v. Schumacher rules.
1. What the pparties are promising to do must be clear so the court doesn't have to create the contract.
2. The renewable lease clause was not binding because of indefiniteness.
(Commercial Lease. Dissent - If tenant can establish entitlement to renewal it would not be too indefinite. This would keep unfair prices forced by landlord).

Front 63

What is misrepresentation?

Back 63

Must prove:
1. The other side made an untrue assertion of fact.
2. Untrue assertion was fraudulent (maker knew it was false at the time of making)
3. Victim must have relied on the misreprestantion in deciding to agree to the contract.
4. Reliance must have been justifiable.
Failure to disclose a fact is NOT a misrepresntation UNLESS:
1. Parties have a relationship of trust and confidence (fiduciary or familiar relation).
2. Failure to disclose a fact that contradicts a statement made in earlier negotiations.
3. Fact not disclosed affects a basic assumption on which one party is agreeing.

Front 64

When can a party terminate negotiations?

Back 64

Majority rule - either part can terminate at any time with or without reason.
Exceptions - 1) Cannot do so on gender, race, religion, etc. 2) National Labor Relations Act requires parties to negotiate in good faith. 3) If walking away with significantly harm the other party (usual exception). 4) If both parties agreed to negotiate in good faith.

Front 65

Channel Home Centers v. Grossman?

Back 65

Negotiating lease in mall. Prospective tenant begins preparing and expending to enter contract. Meanwhile, mall leases to other tenant. Mall didn't act in good faith.
1. Both parties manifest intention to be bound.
2. Terms were sufficiently definite to enforce.
3. Consideration was given (letter stated option remained open until negotiations are finished).

Front 66

10 Canons of Interpretation

Back 66

1. The meaning of a word in a series is affected by others in the same series.
2. A general term joined with a specific one will be deemed to include only things that are like the specific one.
3. If one or more specific items are listed, without any more general or inclusive terms, other items, although similar in kind, are excluded.
4. An interpretation that makes the contract valid is preferred to one that makes it invalid.
5. If a written contract contains a word of phrase with two reasonable meanings, one that favors one party and the other meaning the other party, the interpretation which is less favorable to the party who drafted.
6. A writing or writings that form part of the same transaction should be interpreted together as a whole.
7. Apparent purpose of the parties is given great weight in determining the meaning to be given their manifestations of intention.
8. A specific provision controls over a general one. If two provisions are inconsistent with each other, if one is general enough to include the specific situation, then the specific provision will be deemed to qualify the more general one, that is, to state an exception to it.
9. Handwritten language is closest to the parties. A handwritten clause in a document indicates the parties added the language together as they were signing.
10. If a public interest is affected by a contract, then the public interest interpretation is preferred.

Front 67

Steps of Interpretation of a document?

Back 67

1. Quote the exact language, verbatim, that is being interpreted.
2. Consider the following;
I. Meaning - What do the words of the parties mean?
II. Timing - When must the parties act on that meaning?
III. Which words - Which words can we use to determine the meaning? Are we limited to express words? Can we use the words the parties used while they were negotiating? Can the words of prior contracts be used?

Front 68

Five main issues of interpretation?

Back 68

1. Vagueness. What do the words mean? Not work on Sabbath? Work? Sabbath?
2. Ambiguity. More than one meaning?
3. Uncertainty caused by unexpected circumstances. Starting fire used to be work. Jews not turn on lightswitch?
4. Incompleteness. President must be 35 years. When? Election? Inauguration? Candidacy?
5. Inconsistency. Two clauses appear to contradict.

Front 69

UCC & Interpretation?

Back 69

1-103 - Liberally construed and interpreted to comply with its purposes and policies.
1-303(b) - Borrowing from the canons of the GL of contract
1-303 - Usage of trade, course of prior dealing, course of performance.

Front 70

Resolving Ambiguity: Frigaliment Importing Co. v. B.N.S. International Sales Co.? (What is chicken?)

Back 70

1-303 - course of performance, course of dealing, and usage of trade can provide interpretation of a contract.