Contracts Ucc/restatement/cisg/unidroit Provisions

Front 1

Res 1

Back 1

Contract defined :

Contract = Promise or set of promises for the breach of which the law gives a remedy, or performance of which the law in some way recognizes as a duty

Front 2

Res 2

Back 2

Promise, Promisor, Promisee, Beneficiary

- Promise = Manifestation of intention to act or refrain from acting in a specific way, in understanding that a commitment has been made
o May be made orally or written, or inferred from conduct
- Promisor = person making the promise
- Promisee = person to whom the promise is addressed
- Beneficiary = person who will benefit from the promise, if not the promise

Front 3

Res 3

Back 3

Agreement and bargain
- Agreement = mutual assent by 2 or more people
- Bargain = agreement to exchange promises or performance
- Consideration = something mutually given up with regard to a K

Front 4

Res 4

Back 4

How a promise may be made
- May be stated in words either oral or written, or inferred wholly or partly from conduct

Front 5

Res 178 and 179

Back 5

public policy and enforceability
- K is unenforceable if:
o Legislation provides that it is unenforceable
o Interest in enforcement is outweighed by public policy against enforcement
- In balancing the interests, take into account:
o Expectation of the parties
o What would be lost of enforcement was denied
o Public interest in enforcement
o Strength of the public policy restricting K law
o Whether refusing to enforce K would further the public policy

Front 6

UCC 2-105

Back 6

Goods
All thigns which are movable at time of K

Front 7

UCC 1-103

Back 7

where UCC has not changed common law, common law still applies.

uploading section

Front 8

Res 17

Back 8

Requirements of a bargain
o Formation of a K requires manifestation of mutual assent and consideration

Front 9

Res 18

Back 9

mutual assent requires each party to make a promise or begin or render performance

Front 10

Res 19

Back 10

Required Conduct for Assent
o Assent can be created by written/spoken words, or by acts, or by failure to act
o Conduct ≠ assent, unless the party intends to act and knows or has reason to know that the other party can infer his assent from his conduct
o Conduct can manifest assent, even if the party does not intend to assent

Front 11

CISG Article 8

Back 11

- Subjective/Objective Test:
o If one party knows or has reason to know of the other party’s subjective intent, even if that intent is not externally manifested, then the other party is deemed cognizant of such intent and it counts toward manifestation of K. If not applicable, then Reasonable person standard under all relevant circumstances.

Front 12

Res 24

Back 12

Offer defined
o Offer is manifestation of willingness to enter into a bargain, made to justify another person in understanding his assent to a bargain is invited

Front 13

Res 22

Back 13

Even if you can’t identify the exact moment of offer and acceptance, you can still have a valid K even if no writing exists

Front 14

Res 26

Back 14

Preliminary negotiations
- Offer is NOT manifested if the offeree knows or has reason to know that the offeror does not intend to conclude a bargain agreement until he has made further manifestations of assent
- If the offeree knows that the offeror does not yet have the intent  offer FAILS

Front 15

Res 27

Back 15

Existence of a K where written memorial is contemplated
- Manifestations of assent are sufficient to conclude a K IF the parties have also manifested an intention to prepare and adopt a written memorial
o A draft document can affirm contractual intent, even if the written memorial is pending.
o Exception: if circumstances show that parties are only in preliminary negotiations and parties wish to only be bound by a formal doc.

Front 16

Res 33

Back 16

Certainty.
even though manifestation of intentino is intended to be understood as an offer, it cannot be accepted so as to form a K unless the terms of a K are reason.
(3)The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance.

Front 17

UCC 2-204

Back 17

Formation in general (opposite of res 33)
 Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy

Front 18

UCC 2-305

Back 18

Open price term = reasonable price

Front 19

UCC 2-308

Back 19

absence of specified place for delivery= seller's place of business or residence. or if goods are in some other place, that place.

Front 20

UCC 2-309

Back 20

absence of specified time/ notice of termination
• If there are no time constraints, reasonable time is used unless terminated under contract rules. Must give reasonable notification if terminating

Front 21

restatement 36

Back 21

Methods of termination of power of acceptance:
1. Rejection or counter-offer by offeree
2. Lapse of time
3. Revocation by offeror
4. Death or incapacity of offeror or offeree
5. Offeree doesn’t do anything to accept terms

Front 22

CISG 16

Back 22

(same as unidroit 2.1.4) no consideration needed for option K.
- An offer may be revoked if the revocation reaches the offeree before he dispatched an acceptance. But the offer cannot be revoked if:
o Offer indicates a fixed time for acceptance
o The offeree reasonably relies that the offer is irrevocable

Front 23

Unidroit 2.1.4

Back 23

same as CISG 16. no consideration needed for option K
- An offer may be revoked if the revocation reaches the offeree before he dispatched an acceptance. But the offer cannot be revoked if:
o Offer indicates a fixed time for acceptance
o The offeree reasonably relies that the offer is irrevocable

Front 24

Res 25

Back 24

option K. limits promisor's power to revoke an offer.

Front 25

Res 87

Back 25

option Ks require extra consideration for the option.

Front 26

UCC 2-205

Back 26

Firm offers. Option K. additional consideration is not needed. Must be from merchant with a signed writing. max of 3 months to be held open.

Front 27

UCC 2-104

Back 27

Merchant is person who routinely deals in goods question or has skill or knowledge to that particular trade.

Front 28

Res 43

Back 28

dickinson v. dodds. Power of acceptance terminates when offeree sees notice from indirect means of offeror's intent not to enter the proposed K.

Front 29

Res 42

Back 29

power of acceptance terminated when offeree recieves manifestation of intent not tto enter K by offeror.

Front 30

Res 69

Back 30

Acceptance by silence
- When an offeree fails to reply to an offer, his silence = acceptance ONLY WHEN:
o Offeree takes benefit of offered services with reasonable time to reject, and knowing that they were offered with the expectation of compensation
o When the offeror gave offeree reason to understand that silence may = assent
o When it is reasonable that the offeree should notify offeror if he does not intend to accept

Front 31

Res 39

Back 31

Counter offers
1. offer made by offeree to offeror relating to same matter, and proposing substituted bargain, differing from proposed original offer.
2. Offeree’s power of acceptance is terminated by counter offer

Front 32

Res 59

Back 32

Purported acceptance which adds qualifications (mirror image rule)
Reply to offer which purports to accept it but is conditional on offeror’s assent to additional or diff terms is not an acceptance but counter offer.

Front 33

Res 61

Back 33

Acceptance which requests change of terms
If it does that, then offer is not thereby invalidated unless acceptance is made to depend on an assent to the changed or added terms.

Front 34

Res 30

Back 34

Form of acceptance invited
1) offer may invite or req acceptance to be made by affirmative answer in words, or by performing or refraining from performing specified act, or may empower offeree to make a selection of terms in his acceptance.
2) unless otherwise indicated by language or circumstances, offer invites acceptance in any manner and by any medium reasonable in circumstances.

Front 35

Res 32

Back 35

Invitation of promise or performance. if not clear which one by offer, then offeree can choose either

Front 36

Res 50

Back 36

Acceptance of offer defined.

1. Acceptance is a manifestation of assent to terms of offer in a manner invited or required by offer.
2. Can accept by partial performance.
3. Acceptance by promise reqs that offeree complete every act essential to the making of the promise

Front 37

Res 60

Back 37

Acceptance of offer which states place, time or manner of acceptance.
if it states these things, then must be complied with. If it merely suggest them, another method is not precluded.

Front 38

Res 65

Back 38

default rule for medium. if medium unsepecified. then one used by offeror in original communication or medium used in trade/business.

Front 39

Res 63

Back 39

Mailbox rule. acceptance effective when sent. except for option Ks. they are not effective until actually received.

Front 40

Res 66

Back 40

proper dispatch rule creates obligation for offeree to accept by dispatching the acceptnace properly.

Front 41

CISG 18

Back 41

(2) no mailbox rule. receipt rule. acceptance effective when it reaches offeror.
 If fixed time, acceptance does not reach offeror within that fixed time, or
If no fixed time, acceptance doesn’t reach offeror within a reasonable time.

Front 42

Res 56

Back 42

offeree must notify offeror of acceptance with reasonable diligence and seasonably when acceptance by promise.

Front 43

Res 54

Back 43

Acceptance by performance
- No notification required when offeror invites offeree to accept by performance
- Exception: If the offeree knows that the offeror would not be aware of the performance, the offeror is cleared of contractual duty, unless:
o Offeree reasonably shows diligence to notify offeror
o Offeror learns of performance within a reasonable time
o Offer indicates that notification of acceptance is not required.

Front 44

Res 71

Back 44

Types of consideration –
o Return promise (bilateral)
o Performance (unilateral)
o Forbearance (give something up)
o Creation, modification, or destruction of a legal relationship

Front 45

Res 79

Back 45

Courts do not assess adequacy of consideration, only its existence.
o Only have to prove that something was mutually given up and exchanged
o Exception: nominal consideration/pas consideration
 Courts will not enforce sham contracts, and look at value of consideration to determine whether onerous provision should be enforced
 If consideration is too nominal compared to promise, no valid K
 Can’t agree to sell something to someone already K’d with them upon.

Front 46

Res 74

Back 46

Party can forbear something worthless if in good faith he believed it to have worth.

Front 47

Res 86

Back 47

- Promise made for a benefit that was previously received is binding, unless:
o The benefit was a gift
o The value of the promise is disproportionate to the benefit

Front 48

Res 89

Back 48

Pre-existing duty rule.
promise modifiying a duty under a K not fully performed is binding if it is fair and equitable in view of circumstances not anticipated at time of K; or
extent that justice requires enforcement in view of material change of position in reliance on the promise.

Front 49

UCC 2-209

Back 49

Modification. (more permissive than common law). No requirements for additional consideration for agreemetns that modify an existing contracts.
if under SOF must be modified in writing.

Front 50

Res 352

Back 50

expectation interest must be calculated with reasonable certainty

Front 51

Res 347

Back 51

Expectation damages (the normal rule).

Front 52

UCC 2-713

Back 52

Market value rule - Damages = (market value price at time of breach – contract price)
- Special buyers remedy under the UCC
o Instead of expected profit, we calculate using the market value at time of breach

o Difference b/w Market price at time buyer learned of breach and K price PLUS consequential and incidental damages LESS expenses saved in consequence of the breach.

Front 53

UCC 2-712

Back 53

Cover. basically mitigation and can recover price difference b/w cost of cover and K price together with any incidental or consequential damages but less expenses saved in consequence of seller’s breach. Failure to cover by buyer doesn’t bar other remedy.

Front 54

UCC 2-715

Back 54

Incidental vs. Consequential Damages
- Consequential
o Incurred when non-breaching party is worse off as result of breach
- Incidental
o Expenses reasonably incurred in inspection, receipt, transportation and care of goods in connection with the breach

Front 55

Res 349

Back 55

Reliance interest.
- Protects what the non-breaching party did, spent or gave up in reliance on the K.
- EXCEPTION: losing contracts
o recovery is limited by loss that breaching party can prove with reasonable certainty would have occurred
 if they can prove that the non-breaching party would have sustained a loss from the K, then that amount is reduced from reliance recovery

Front 56

Res 371

Back 56

Measure of restitution interest.
benefit conferred to the other party.

Front 57

Res 351

Back 57

o Damages not recoverable for loss that the party in breach did not have reason to foresee as a probable result of breach when K was made.
o Loss is foreseeable as a probable result of breach if:
 Loss follows in ordinary course of events
 Loss is result of special circumstances that breaching party had reason to know about
o Court may limit damages for foreseeable loss by excluding recovery for loss of profits, by allowing recovery only for loss incurred in reliance if justice reqs.

Front 58

CISG 74

Back 58

Damages cannot exceed what the breaching party ought to have foreseen as a POSSIBLE result of breach. lower threshold than common law. more permissible approach to damages.

Front 59

UNIDROIT 7.4.4

Back 59

o Damages cannot exceed what the breaching party could have reasonably foreseen as a likely result of the breach (more akin to “probable” under Res 351)

Front 60

Res 350

Back 60

Mitigation.. Non-breaching party cannot recover for damages that he could have avoided without undue risk, burden, or humiliation
o But non-breaching party can still collect if his attempts to mitigate were reasonable, but unsuccessful.

Front 61

UCC 2-708

Back 61

Lost Volume Rule. - UCC Exception to Mitigation Rule for high volume players
- Even if a seller mitigates and sells to someone else, he has still lost a sale and can collect his expectancy interest
o Treats players as high volume retailers who will always be able to mitigate

Front 62

UCC 2-710

Back 62

Seller's incidental damages.
- Seller’s incidental damages include any commercially reasonable charges, expenses or commissions incurred by the breach
- In Neri, Δ could collect incidental damages incurred from the boat’s storage

Front 63

UCC 2-719

Back 63

Limits of express limitations
o Cannot agree to an unconscionable limitation on liability or damages
o Limits of consq dmgs for injury to person in consumer goods is unconscionable
o Limit of dmgs where loss is commercial is not.

Front 64

Res 356

Back 64

Liquidated damage clause validity.
 Amount must be reasonable in light of anticipated or actual loss
 Amount of damages must be difficult to prove

Front 65

UCC 2-718

Back 65

For liquidated damages clause to be valid:
 Amount must be reasonable in light of anticipated or actual loss
 Amount of damages must be difficult to prove
 AND, must show inconvenience or nonfeasibility of otherwise obtaining an adequate remedy.

Front 66

UCC 2-302

Back 66

Unconscionable arbitration
- If a K is unconscionable, then courts do not have to enforce it
o Likewise, if arbitration award is unconscionable, courts do not have to enforce it
o Consider cost of arbitration relative to amount in controversy

Front 67

UCC 2-716

Back 67

Specific performance and replevin.
- may be decreed where goods are unique
- buyer has right to replevin for goods identified to K if after reasonable effort he is unable to effect cover or circumstances show cover is unavailable.

Front 68

CISG 46

Back 68

Permits buyer to demand specific performance from seller
o No requirement to show uniqueness

Front 69

CISG 28

Back 69

Deference to national law on specific performance
o If a party’s national court would not enforce specific performance, then breaching party cannot be held to specific performance under the CISG.

Front 70

Unidroit 7.2.2

Back 70

presumption of specific performance
o Non-breaching party can compel specific performance, unless:
 Performance is impossible or burdensome
 non-breaching party can reasonably find cover
 performance is for personal service
 non-breaching party does not ask for specific performance within reasonable time after he is aware of the breach

Front 71

Unidroit 7.2.3

Back 71

right to specific perf can include: repair, replacement or other cure of defective performance

Front 72

Unidroit 7.2.4

Back 72

If ct orders to perform, can impose penalty to be paid to other party if don’t comply.

Front 73

Res 371

Back 73

Party’s restitution interest may be measured by either
o reasonable value to other party of what he received in terms of what it would have cost him to obtain it from a person in the claimant’s position.
o extent to which other party’s property has been increased in value
 value other party received, NOT value of what was given up

Front 74

Res 373

Back 74

restitution for NBP
o non-breaching party can recover benefits conferred by partial performance
o no restitution if performed all duties and other party has nothing left to do but pay him.

Front 75

Res 374

Back 75

o Breaching party entitled to restitution for benefit he conferred on non-breaching party by partial performance, less any loss/damages his breach created (Neri)
o 374(2): BUT – parties can contract around 374(1) through liq. damages clause

Front 76

CISG 81

Back 76

A party who has performed K either wholly or in part may claim restitution for whatever was conferred during performance
o if both parties owe restitution to each other, it must be done concurrently

Front 77

Res 90

Back 77

Promissory estoppel
- If a promisor makes a promise and induces the promisee to reasonably rely on that promise (in terms of action or forbearance), and the promise changes the promisee’s position to her substantial detriment, the promise is binding only if injustice can be avoided by enforcement.
 Loss suffered in reliance must be substantial, and action in reliance must be reasonable

Front 78

Res 766 of torts

Back 78

- It is a tort to interfere with the performance of a contract
- Must show 3 things:
1. Intentional and improper interference (intent and impropriety)
2. With the performance of an existing contract (existence of K)
3. And the interference induced/caused the other party to breach (causal relationship)

Front 79

Res 201

Back 79

Court ascribe's one party's meaning to term:
- Where parties have attached different meanings to a term, courts do NOT invent meaning
- Instead, courts will give term the meaning attached by one of the parties (Party A) if:
o The other party (Party B) knew of that meaning, and
o If Party A had no reason to know that B had a different meaning

Front 80

Res 202

Back 80

Guidelines for Ambiguous Terms
- Provides guidelines for courts to follow (not hierarchical)
o Meaning of words in light of circumstances
o Place disputed term within the framework of the contract as a whole
o Give language is generally prevailing meaning
o Prior performance
o Prior business relationships and dealings, usages of trade, industry norms

Front 81

UCC 1-303

Back 81

Course of performance. Clarifies 1-208/1-205 Hierarchy
- 1. Express terms, if neither ambiguous or vague, plain meaning governs
- 2. Course of performance. (conduct of parties after K has been formed)
- 3. Course of dealing. (what parties did in previous transactions)
- 4. Usage of trade: (practices or methods of dealing that have regularity in industry)
 Common Law (Res 202) only gives guidelines, whereas UCC gives hierarchy!

Front 82

Res 34

Back 82

Certainty and choice of terms; effect of performance or reliance
- 1. Terms of K may be reasonably certain even though it empowers one or both selection of terms in course of performance
- 2. Part perf under agreement may remove uncertainty and establish that bargain has been formed
- 3. Action in reliance on agreement may make K appropriate even though uncertainty not removed.

Front 83

Res 204

Back 83

Supplying an omitted essential term
- Term which is reasonable in the circumstances is supplied by the court.

Front 84

UCC 2-306(1)

Back 84

Requirements Ks
- Contracts that do not stipulate quantity can still be valid as long as:
1. The quantity is based on the buyer’s requirements or the seller’s output
2. The quantity is made in good faith and with reasonable estimates

Front 85

UCC 2-306(2)

Back 85

- When a party for a specified period of time agrees to provide services or sell goods from only one other party.
- One person can be legally bound in an exclusive dealing contract, so long as both parties are acting in best efforts (similar to “good faith”)

Front 86

Res 211

Back 86

Standardized agreements
- When a party agrees to a K he believes to be standardizes, he accepts the terms
o The K is reasonable without regard to knowledge or understanding of terms
- Exception: When one party knows that the other party would not have signed the agreement if he knew of the term that he now disputes

Front 87

UCC 2-207(1)/(2)

Back 87

Additional terms
- (1)definite seasonable acceptance operates as an acceptance even though it states terms additional to or different from those offered or agreed upon,
o unless acceptance is expressly made conditional on assent to those terms
- Additional terms are construed as mere proposals for additional to the contract
o Determining if the proposals are binding depends on course of dealing, course of performance, usage of trade, etc.
- (2) Terms are not included in the K, unless the acceptance is expressly made conditional on approval of the new terms
o If this condition is made, then the acceptance w/ new terms = counteroffer

Front 88

UCC 2-207(3)

Back 88

- (3) If the contract is between merchants, the new terms are automatically integrated unless:
o The original offer says nothing can be added, or
o Additions materially alter the original offer, or
o If the offeror objects to the changes within a reasonable time

Front 89

UCC 2-606

Back 89

what constitutes acceptance of goods.
you accept the goods and reasonable opportunity to inspect goods. fail to make effect rejection

Front 90

Revised 2-207

Back 90

- Responds to some of the confusion of the old 2-207, and is simpler in generality
- When acceptance includes additional terms, the binding terms of the K those that are:
o Terms that appear in the records of both parties
o Terms to which both parties agree whether in a record or not
o Default provisions of the UCC
- Terms that bind parties are the terms that both parties agree to!

Front 91

CISG 19

Back 91

Additional terms
- Additional or different terms that materially alter the original terms = counteroffer
o Material alterations include price, payment, quality, time/place of delivery
- But if the terms do not materially alter original terms, then they = acceptance
o Stricter than the UCC

Front 92

Res 209

Back 92

Integrated agreements

Front 93

Res 210

Back 93

CIA's and PIA's

Front 94

Res 213

Back 94

Effect of integrated agreement on prior agreements (Parol evidence rule)
- (1) binding IA discharges prior agreements to the extent that it’s inconsistent with them
- (2) binding CIA discharges prior agreements to extent they are within its scope
- (3) IA that is not binding or that is voidable and avoided doesn’t discharge prior agreement. But IA even though not binding, may be effective to render inoperative a term which would have been part of agreement if it had not been integrated.

Front 95

Res 214

Back 95

Evidence of prior or contemporaneous agrmnts and negotiations

Agrmnts and nogtiations prior to or contemporaneous with the adoption of writing are admissible in evidence to establish :
a. That writing is or isn't IA.
b. That IA, if any, is completely or partially integrated
c. Meaning of writing, whether or not integrated
d. Illegality, fraud, duress, mistake, lack of consdieration, or other invalidating cause
e. Ground for granting or denyting rescission, reformation, spec perf or other remedy.

Front 96

Res 216

Back 96

Consistent additional terms
1. evidence of consistent additional term is admissible to supplement an IA unless ct finds that agrmnt was completely integrated.
2. Agrmnt is not completely integrated if writing omits a consistent additional agreed term which is
a. Agreed to for separate consideration; or
b. Such a term as in circumstances might naturally be omitted from writing.

Front 97

UCC 2-202

Back 97

Parol evidence rule.
- Parole evidence cannot contradict the writing  heavy favoritism to written word.
o It can only explain or supplement
- Only evidence that can be used as parole evidence is that which relates to:
o Course of performance
o Course of dealing
o Usage of trade

Front 98

CISG 8(3)

Back 98

NO PAROL EVIDENCE RULE
To det intent of party or understanding a reasonable person would have had, due consideration is given all relevant circumstances of the case, including negotiations, practices which parties have established b/w selves, usages and any subsequent conduct of the parties.

Front 99

UNIDROIT 1.2

Back 99

No form required.
o Nothing in principles requires K, statement or any other act to be made in or evidenced by a particular form. It may be proved by any means, including witnesses.

Front 100

UNIDROIT 3.2

Back 100

Validity of mere agreement
o K is concluded, modified or terminated by mere agreement of the parties, without any further reqs.

Front 101

Res 110

Back 101

SOF
The following classes are subject to statute of frauds, so that enforcement is forbidden unless there is a written document:
o K for the sale of land (d)
o K of Executor-administrator to answer for decedent.
o K for which performance isn’t to be completed within a year of K formation (e)
o Several others, including marriage, debts, and time considerations

Front 102

Res 125:

Back 102

Leases are covered under the statute of frauds only when the lease is for 1 year or longer

Front 103

UCC 2-201

Back 103

SOF
Contracts for the sale of goods for $500 or more are subject to S of F
• must be signed by the party against whom the enforcement is sought.
 (3) except, if goods are specially manufactured for buyer and not suitable for sale to others in ordinary course of seller’s business, and seller, before notice of repudiation has made either a substantial beginning of their manufacture or commitments for their procurement.
 Or If party against whom enforcement is sought admits in pleading,etc. that that a K for sale was made, but K isn’t enforceable under this provision beyond quantity of goods admitted
 Or with respect to gods for which payment has been made and accepted or which have been received and accepted.

Front 104

CISG 11

Back 104

NO SOF.

Front 105

UNIDROIT 7.2.3

Back 105

right to performance includes repair, replacement or other cure

Front 106

UNIDROIT 7.2.4

Back 106

if ct orders to perform, may order penalty to aggrieved party if party doesn't comply with that order.

Front 107

RES 131

Back 107

WRITING REQS FOR SOF Ks
- Contracts must be signed and must:
o Reasonably identify subject matter of the K
o Provide subjective manifestation of K
o State with reasonable certainty the promises so that a court can determine what remains unperformed

Front 108

Res 205

Back 108

Duty of good faith when performance starts

Front 109

UCC 1-304/1-203

Back 109

Duty of good faith when performance starts
good faith= honest in fact and observance of reasonable commercial standards of fair dealing in trade.

Front 110

CISG article 7

Back 110

scope of good faith is broad but thin.
duty is not implied and is not required only recommended. extends broadly to pre-contractual negotiations and performance

Front 111

Unidroit 1.7

Back 111

good faith and fair dealing is mandatory and applies to precontractual period.

Front 112

Unidroit 2.1.15

Back 112

party who negotiates in bad faith is liable for losses caused to other party.

Front 113

CISG

Back 113

4 leaves it to common law to determine K defenses. same as ucc 1-103.

Front 114

Res 12

Back 114

Capacity to K.
- Not bound if no capacity. Capacity may be partial and existence may depend upon nature of transaction or upon other circumstances
- Have capacity if not: 1) under guardianship; or 2) an infant; 3) mentally ill; 4) intoxicated

Front 115

Res 15

Back 115

- If an individual enters into a contract incompetently by
o Being unable to reasonably understand the nature of the K, OR
o Is unable to act in a reasonable manner in relation to the transaction,
AND this inability is known to the other party,
THEN the K is voidable at the election of the incompetent party.
-K will not be voided if the other side can prove that the contract was:
o On fair terms AND
o He was not aware, and should not have been aware, of the incompetency if there was partial performance to the point where rescission would be unjust

Front 116

Res 14

Back 116

infants. 18th birthday.

Front 117

Res 159

Back 117

Definition of Misrepresentation
assertion that is not in accord with the facts. Remedy = rescission
o Exception: assertions of opinion: false assertion that expresses only a belief or judgment as to quality, authenticity or value ≠ misrepresentation
- Exception to the Exception: Assertions of Opinion CAN = misrepresentation IF:
o If the parties stand in relationship of trust and confidence
o If the person to whom the opinion is made believes that the stating party has special skill, judgment or objectivity
o If person to whom the opinion is made is particularly vulnerable

Front 118

UCC 2-313

Back 118

SAMPLES
o When offered, creates a basis of bargain and express warranty that all other goods will have same quality and standard as the sample.

Front 119

UCC 2-316

Back 119

DUTY TO INSPECT

- When there is an opportunity to inspect, there is an obligation to do so
o If they are any defects, inspection ought to reveal them, and buyer is precluded from complaining about goods post-inspection
o No warranty anymore with regards to defects that warranty itself ought to have revealed.

Front 120

Res 162

Back 120

When misrep is fraudulent or material
- 1) fraudulent if
o Knows its wrongs,
o doesn’t have confidence that he states or implies truth of assertion
o Or knows he doesn’t have basis that he states or implies for assertion
- 2) material if it would be likely to induce a RP to manifest assent

Front 121

Res 160

Back 121

when action is equivalent to an assertion (concealment)
- 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

Front 122

Res 161

Back 122

when non disclosure is equivalent to an assertion:
- non-disclosure is not actionable unless under certain circumstances:
o (a) knows that disclosure of the fact is nec to prevent some previous assertion from being misrepresentation or from being fraudulent or material.
o (b) knows that disclosure would correct mistake of other party as to basic assumption on which party is making the K and if non-disclosure of fact amts to a failure to act in good faith and in accordance with reasonable standards of fair dealing
o (c) correct mistake regarding the writing
o (d) if relationship of trust and confidence b/w 2 parties

Front 123

Res 164

Back 123

When misrep makes a K voidable
- if fraudulent or material misrep induces assent, which recipient is justified in relying

Front 124

Res 169

Back 124

When reliance on assertion of opinion is not justified
- Not justified unless:
o Stands in scuh a relation of trust and confidence to person whose opinion is asserted that the recipient is reasonable in relying on it, or
o Reasonably believes that, as compared with himself, the person whose opinion is asserted has special skill, judgment or objectivity with respect to the subject matter, or
o Is for some other special reason particularly suscpetible to a misrep of the type involved

Front 125

Res 174

Back 125

Physical duress
- Manifestation of assent compelled by physical duress is invalid.

Front 126

Res 175

Back 126

Duress by threat
- Manifestation of assent is void when compelled by improper threats that leave the victim no reasonable alternative other than assenting.
o Two Requirements for threat to void assent:
1. Impropriety of the threat
2. Victim of the threat has no reasonable alternative but to make the contract
- This rule extends to threats from third parties

Front 127

Res 176

Back 127

Definition of improper threat
1. Threats to commit crime or torts
2. Threat of a criminal prosecution
3. Bad faith lawsuits
4. Threat is a breach of duty of good faith and fair dealing

- If threat does not fall within one of these categories, must show that the effects on the recipient were unfair by showing 1 of 3 things:
1. Threat is harmful and of little use to person making threat
2. Pattern of prior unfair dealing
3. What is threatened is a use of power for illegitimate ends (most important

Front 128

Res 177

Back 128

Unfair persuasion (undue influence)
makes K voidable when:
o Unfair persuasion of a party under the dominion of the persuading party
o Unfair persuasion of a party by another party who, by virtue of relationship is assumed to act in the victim party’s best interest (fiduciary)
- Undue influence can be establish based on:
o Relationship between the parties, OR
o Unfair persuasion by the dominant party over the other party

Front 129

Res 208

Back 129

Unconscionable contract:
may refuse to enforce K, may enforce remainder of K without unconscionable term or may limit application of any unconscionable term as to avoid any unconscionable result.

Front 130

UCC 2-302

Back 130

Unconscionable K or term
may refuse to enforce K, may enforce remainder of K without unconscionable term or may limit application of any unconscionable term as to avoid any unconscionable result.

Front 131

Unidroit 2.1.20

Back 131

Suprising terms

- No unusual term is effective unless it has been expressly accepted by the other party
To determine unusualness, look at content, language and presentation
- Codification of Tilden in international law

Front 132

Unidroit 3.10

Back 132

may avoid K if term gives someone unfair advantage

Front 133

Unidroit 7.1.6

Back 133

exemption clause
- exemption clauses can't be invoked if it would be grossly unfair to do so. lower standard than unconscionability.

Front 134

Res 151

Back 134

Mistake defined: belief that is not in accord with the facts
(different than misrepresentation. which is an assertion not in accord with the facts.)

Front 135

Res 153

Back 135

when unilateral mistake makes K voidable
- Where there is a mistake by 1 party to a K as to a basic assumption that has material effect on the agreed exchange of performances, K is voidable by him if he does not bear the risk of mistake under Res154, AND
o The effect of the mistake is such that enforcement would be unconscionable, or
o The other party had reason to know of the mistake or his fault caused the mistake

Front 136

Res 152

Back 136

Mutual mistake
makes K voidable if it involves:
o Basic assumption on which the K was made
o Mistake has a material effect on performance

Front 137

Res 154

Back 137

When a party bears the risk of a mistake
o Risk is allocated to him under the contract (“as is” in Messerley)
o Party is consciously ignorant
 Aware of limited information of risk, but don’t pursue learning more
o If it is reasonable for the party to bear the burden of risk

Front 138

Res 155

Back 138

when mistake of both parties as to written expression justifies reformation
- K is integrated or restructured by judge so as to erase mistake (ucc-2-302 strike offensive clause)

Front 139

UCC 2-613

Back 139

Impossibility is permitted defense to K if the goods suffer destruction before they pass to the buyer (“casualty”)

Front 140

CISG 79

Back 140

impossibility = “impediment”
o Failure to perform can be excused if that failure is due to an impediment that is beyond control of the non-performing party and that is unforeseeable and unavoidable.
 (industrial disputes, embargos, energy crises)
 Impediment can be faced by 3rd party.

Front 141

UNIDROIT 7.1.7

Back 141

Force majeure
o impossibility = “impediment”
o non-performance is excused if failure is due to an unforeseen and unavoidable impediment beyond party’s control at time of K formation
 if impediment is only temporary, excuse from performance is only temp

Front 142

Res 261

Back 142

discharge by supervening impracticability
o Party’s perf made impracticable without his fault by occurrence of an event the non=occurrence of which was a basic assumption on which K was made, his duty to render that perf is discharged , unless language or circumstances indicate contrary

Front 143

Res 263

Back 143

destruction deterioration or failure to come into existence of thing necessary for performance
o If existence of specific thing is nec for perf of a duty, its failure to come into existence, destruction, or such deterioration as makes perf impracticable is an event the non-occurrence which was a basic assumption on which K was made

Front 144

UCC 2-615

Back 144

Impracticability
Nonperformance is allowed if performance has been made impracticable by the occurrence of an event whose non-occurrence was a basic assumption of the K

Front 145

Unidroit 6.2.2

Back 145

Hardship = fundamental change of circumstances that is deemed to alter the equilibrium of a contract, either because the cost of performance has increased or because the value of performance has diminished (frustration sense)
o Requirements for hardship:
 Events become known after K formation
 Events were unforeseen
 Events are beyond parties’ control
 Party claiming hardship defense did not assume risk of events
o More assertive approach to impracticability than UCC 6-215

Front 146

Unidroit 6.2.3

Back 146

Party seeking hardship defense must first request negotiations w/ other party
o Only if those negotiations are unsuccessful can party seek rescission
o Making half as much as you thought you would (50%) then gives rise to this

Front 147

Res 265

Back 147

DISCHARGE BY SUPERVENING FRUSTRATION
- Contractual duties can be discharged when a party’s purpose for entering into the K is substantially destroyed by an event that is unforeseeable at the time of making the K, and the other side knew of the party’s specific purpose at the time of K formation