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321 Cards in this Set

  • Front
  • Back
The Function of Contract Law
-Contracts create expectations as to how parties to agreements will conduct themselves in the future
-If a party to a valid contract does not carry out a promise, a court will enforce the contract and provide some form of relief or remedy to the non-breaching party
-Contract law provides stability and predictability and is the foundation upon which more specialized areas of the law are built.
Definition of a Contract
An agreement that can be enforced by law
between two or more parties
who promise to perform or not perform some act
now or in the future.
Objective theory of Contracts
The apparent intention of a party to enter into a contract is determined by the objective, measurable, outward manifestation of his or her assent as it would be interpreted by a reasonable person.
Objective (theory of Contract) factors include:
1. Actions
2. Words
3. Circumstances
Requirements of a Valid Contract
Agreement
Consideration
Contractual Capacity
Legality
Requirements of a Valid Contract: Agreement
The mutual assent and agreement of the parties must be evidenced by an OFFER and an ACCEPTANCE
Requirements of a Valid Contract: Consideration
-Legally sufficient and bargained-for consideration must be exchanged for contractual promises
-Each party has to be giving and receiving something.
Requirements of a Valid Contract: Contractual Capacity
Each party to a contract must be recognized as being legally competent to enter into contracts.
-Age
-Something that affects consciousness
Requirements of a Valid Contract: Legality
The purpose and subject matter of the contract must not be contrary to law or public policy
Defenses to the Enforceability of a Contract
1. Genuineness of Assent - Didn't voluntarily enter into contract because didn't genuinely understand it.
2. Form - Certain contracts must be written.
Types of Contracts
Bilateral Contract

Unilateral Contract
Bilateral Contract
Reciprocal promises are exchanged by the parties so that the promise of one party is exchanged for the promise of the other.
-Promise for a promise. Legally binding.
When is the contract formed in Bilateral Contracts?
Contract formed when promises are exchanged.
Offeror
makes the offer
Offeree
accepts/rejects the offer
Unilateral Contract
One party makes a promise in exchange for the other party's actually performing some act or refraining from performing some act.
-Promise for an act; whole action has to be completed
When is the contract formed in Unilateral Contracts?
Contract is formed when action is complete
How do we know when a breach occurs?
Have to know the moment of formation in contract!
Revocation of Offers for Unilateral Contracts means...
Offeror tries to revoke before the offeree has fully performed
2 types of Revocation of Offers for Unilateral Contracts
1. Traditional View
2. Modern View on Revocation - offer become irrevocable once performance has begun. Doesn't change when contract is formed. Offeror cannot take offer back/stop you once performance has started. If that happens, partial payment is at least required.
Anthony is confined to his bed. He calls a friend who lives across the street and offers to sell her his watch next week for $100. If his friend wishes to accept, she is to put a red piece of paper in her front window. The next morning, she places a red piece of paper in her front window. Has a bilateral or unilateral contract been formed? Explain.
?
Sara contacts Joe, who does lawn maintenance work, and makes the following offer: "After my lawn is mowed, I'll pay you $35". Joe responds by saying, "I accept your offer." Is there a contract? Is this an offer to forma a bilateral or unilateral contract? What is the legal significance of the distinction?
?
Contracts will be 1 of 3 things:
1. Express
2. Implied
3. Quasi
Express Contract
The terms of the agreement are fully and explicitly stated in oral or written words
Implied Contract
The terms of the agreement are inferred from the conduct of the parties
3 Steps to establish an implied contract:
1. The plaintiff must furnish some good or service.
2. The plaintiff expects to be paid and defendant knows or should know plaintiff is expecting payment
3. Plaintiff had chance to reject goods/services and didn't.
Quasi-Contract
-Quasi-contracts usually involve avoiding the unjust enrichment of one party at the expense of another.
-Utilizes doctrine of quantum meruit ("as much as he deserves")
-There are limitations on the doctrine of quasi-contract.
Executed vs. Executory Contracts
Executed Contracts: Those that have been fully performed

Executory Contracts: Anything prior to complete performance
What type of Contract fixes the inadequacies of black letter law?
Quasi-contract
4 types of Contracts:
Valid
Void
Voidable
Unenforceable
Valid Contract
All elements that are necessary to form a contract are present.
Void Contract
-Agreement has no legal effect and is not really a contract.
-No legal obligation exists on the part of either party
(no contract at all)
Voidable Contract
-A valid contract exists but one or more of the parties has the option of avoiding his or her contractual obligation
-The party with the option can elect to void the contract or ratify it.
(Valid, but 1 or more parties has the option of getting out of it...issue with capacity)
Unenforceable Contract
A valid contract that cannot be proven in the manner required by law
Everett McCleskey, a local businessperson, is a good friend of Al Miller, the owner of a local candy store. Every day on his lunch hour, McCleskey goes into Miller's candy store and stays about 5 minutes. After looking at the candy, and talking with Miller, McCleskey usually buys one or two candy bars. One afternoon, McCleskey goes into Miller's candy shop, looks at the candy, and picks up a $1 candy bar. Seeing that Miler is very busy, he waves the candy bar at Miller without saying a word and walks out. Is there a contract? If so, classify it within the categories presented in this chapter.
Implied
Bilateral
Executory
Valid
Agreement
Offer & Acceptance
Requirements of the Offer
1. Serious Intent
2. Reasonably certain terms
3. Communication
Requirements of the Offer: Intention/Serious Intent
The Offeror must manifest his or her objective, serious intention to be bound by the terms of the offer.
Lucy v. Zehmer
*Landmark Case
=case of Serious Intent
Lucy v. Zehmer: Reading notes
Plaintiff=Lucy
Defendants=Zehmer
About: Sale of Ferguson Farm for $50,000
-Lucy sued Zehmer to compel him to go through with the sale. Zehmer argues that he had been drunk and that the offer had been made in jest and hence was unenforceable. Trial court agreed with Zehmer, and Lucy appealed.
-Appearance of contract, 40 minute discussion, wanted a redraft for wife to be entered into it, what was to be included in the sale, provision for examination of the title, completion, and not asking the napkin be returned=furnish persuasive evidence that the execution of the contract was a serious business transaction rather than a casual, jesting matter the defendants contended
-in the field of contracts, we must look to the outward expression of a person as manifesting his intention rather than to his secret and unexpressed intention.
-Whether honestly or deceptively, it constituted a binding contract of sale between the parties.
*Ruled an enforceable contract, and reversed the ruling of the lower court. Zehmers were required by court order to follow through with the sale of the Ferguson Farm to the Lucys.
*Classic contract law case. Illustrates so clearly the objective theory of contracts with respect to determining whether a serious offer was intended.
-routinely cited as precedent in the area of objective theory of contracts
Lucy v. Zehmer: short notes
=Serious intent
Lucy wants Ferguson Farm from Zehmer
Form contract on napkin
where serious intent?
Lucy wins, Zehmer forced to sell land
It is necessary to distinguish offers from:
-Expressions of opinion (looking for a statement of intent)
-Statements of intention to make an offer in the future (hasn't been decided yet)
-Preliminary negotiations, requests to negotiate, and invitations for bids (building a pool example)
-Advertisements, catalogues, circulars, and price lists (viewed as "invitation to negotiate")
-Agreements to agree at a future date
Requirements of the Offer: Definition of Terms/Reasonably certain terms
An offer must have reasonable definite terms so that a court can determine if a breach has occurred.
In general, the following terms are required:
-Identification of parties (buyer-seller-offeror-offeree)
-Identification of subject matter (car-pool-etc.)
-Consideration (could be price)
-Time of payment, delivery, or performance (when)
Courts are willing to supply missing reasonable terms when:
the parties have clearly manifested their intent to form a contract
But, when the parties have tried to use a term, but the meaning is vague...
courts will NOT supply a "reasonable" term in its place.
Requirements of the Offer: Communication
-The offeror must have the intention of making the terms known to the offeree, and those terms must be received by the offeree
-The offeree must have knowledge of the terms of the offer (if not, technically no offer was ever made...can't be accepted if no contract was created.)
-An offer may be made to a specific offeree to whom it is communicated. (not required though)
The offeree must have knowledge of the terms of the offer: Example
Post a sign for reward, $500 to return my lost dog
-Dog is returned, but Mary didn't see the reward offer.
=I am not legally required to pay her.
Termination of the Offer
Termination by actions of the parties
Termination by Operation of Law
Termination by actions of the parties
Revocation of the offer by the offeror
Rejection of the offer by the offeree
Counteroffer by the offeree
Termination by actions of the parties: Revocation of the offer by the offeror (1)
(Offeror is changing their minds, and revoking the offer)
-In general, an offer may be revoked by the offeror at any time before acceptance: Expressly OR By acts that are inconsistent with the offer and are known to the offeree.
Example: Roommate1 wants to buy a puppy. Seller sells the last puppy in the litter to the roommate2, and roommate1 is told about the selling of the last puppy by (the purchasing) roommate2.
Termination by actions of the parties: Revocation of the offer by the offeror (2)
-A revocation is effective when received.
Termination by actions of the parties: Revocation of the offer by the offeror - Irrevocable offers
=Can't revoke them, and nothing the offeror does can revoke them.
Irrevocable offer...
Not even death can terminate it!
2 Types of Irrevocable offers
Options Contracts
Detrimental Reliance
Options Contracts
An option contract is a separate contract that exists when an offeror has promised to hold the offer open and the offeree has given consideration for this promise of the offeror.
-The offer is irrevocable for the period of time that is stated, or if no period is stated, for a reasonable period of time.
*Have to see payment!
Classic Option Contract:
Want to buy a house. Standard real estate contract has an option clause, that gives the buyer 3-5 days of thinking time, in exchange for a $200 fee to hold this deal in limbo. (Can't sell it to someone else in that 3 days) Seller keeps the $200.
Detrimental Reliance
Because of the doctrine of Promissory Estoppel, an offeror may be estopped from revoking an offer when an offeree detrimentally changed his or her position in justifiable reliance on the other
Doctrine of Promissory Estoppel
An offeror is prevented from revoking an offer.
Examples of Detrimental reliance:
1. I'm building you an office building, and 6 months before I'm done, I demand more money or I won't finish the building (=extortion).
2. Commercial land lord. You sign a 5 year contract. You want to go to a cheaper rental space, but the land lord offers to lower rent, but actually raises it.
Detrimental Reliance occurs when...
you have detrimentally relied upon the offeror's offer
If revocation occurs first...
no contract is formed
Termination by actions of the parties: Rejection of the offer by the offeree
1. Offeree demonstrates his or her intention not to accept offer.
2. Rejection is effective when received*
3. An inquiry made by an offeree is distinguishable from a rejection and does not terminate offer. (an inquiry is not a rejection! Example: Selling a car for $15,000..."is that your best offer")
Termination by actions of the parties: Counteroffer by the offeree
A counteroffer is a rejection of an offer and the simultaneous making of a new offer; the counteroffer may be accepted by the original offeror
- Example: Selling a car for $15,000..."Throw in 4 new tires, and okay"
A counteroffer terminates
the original offer
Mirror image rule:
-Offeree's acceptance must exactly match the offeror's offer
-A communication from the offeree which contains a material change in addition to the terms of the original offer is a counteroffer, which terminates the original offer
Termination of the Offer: Termination by Operation of Law
-Lapse of Time
-Destruction of the subject matter of the offer
-Death or incompetency of the offeror or offeree
-Supervening illegality of the proposed contract as a result of legislation or judicial decision
Termination by Operation of Law: Lapse of Time
If the duration of an offer is stated in the offer, the offer terminates after expiration of the stated period of time.
-If duration of an offer is not stated in the offer, the offer lapses after a reasonable period of time.
Termination by Operation of Law: Destruction of the subject matter of the offer
Example: Offered to sell your house - and it burns down. Can't sell a house that has been destroyed
Termination by Operation of Law: Supervening illegality of the proposed contract as a result of legislation or judicial decision
="something illegal has intervened"

-the law changed
Acceptance
The offeree accepts the offer when the offeree unequivocally manifests his or her willingness and intention to assent to the terms of the offer.
Acceptance must be:
unequivocal

=Mirror image rule
Acceptance: Silence as Acceptance
Ordinarily, the offeree must exhibit his or her agreement to be bound with words or other overt conduct.
Exceptions to this:
1) The offeree accepts the benefit of the offered services or goods when the offeree had an opportunity to reject the offered services or goods, and know that such services or goods were offered with the expectation of compensation
2) There was a similar prior course of dealings
For implied contracts...
look at actions when trying to establish silence as acceptance.
Communication of Acceptance
-If a unilateral contract is contemplated, acceptance is effected when the performance is completed; notification of the acceptance is not necessary.
-If a bilateral contract is contemplated, acceptance is effective when the offeree gives the requisite promise.
How do you accept a unilateral contract?
DO the action
"Received" really means
It is AVAILABLE to you
-On my desk
-In my mailbox
-In Inbox
Mode and Timeliness of Acceptance in Bilateral Contracts
-An acceptance is timely if it is sent prior to the termination of the offer ("Mailbox Rule")
-Express means of acceptance
-Implied means of acceptance
Example of "Express means of acceptance"
(Buying a watch from bedridden neighbor example)

=Putting a red piece of paper in the front window.
Mary makes a valid offer in writing on 4/15/10 to sell Blackacre to John. The offer says, "I, Mary, will sell you, John, Blackacre for $100,000.00, if you accept by 5/1/10. John receives the offer on 4/18/10. Upon reading the offer John immediately decides to accept and writes a letter of acceptance with all the requisite parts, and mails it on 4/18/10. Mary realizes on 4/19/10 that she miscalculated how much the property is worth. She immediately calls John and revokes her offer. Can John enforce the offer and bind Mary to the contract.
Yes, because the acceptance was SENT before the revocation was received.
In the above problem, why was the answer not "Yes, because an acceptance is valid when received and revocation is valid when sent"?
TOTALLY BACKWARDS FROM THE RULE!

=Misstates the law
In the above problem, why was the answer not "Yes, because it is irrelevant that Mary miscalculated the worth of the property"?
Because while this is true, this answer choice is not the best legal explanations.
In the above problem, why was the answer not "No, because Mary validly revoked the offer"?
Because this misstates the law.
Revocation is valid when...
Received (by the offeree).
Book explanation of above example:
-Revocation is valid when received by the offeree = 4/19/10 by phone
-Acceptance is valid when sent by the offeree to the Offeror = 4/18/10 by mail.
*The acceptance by an authorized means was sent before the revocation was received, therefore, an agreement was formed to which the Offeror is legally bound.
Mode and Timeliness of Acceptance in Bilateral Contracts (2)
1. Offeree uses the same mode of communication as was used by the Offeror for communicating the offer OR a faster means of communication
2. Offeree uses any customary or reasonable mode of communication.
If the acceptance is sent in a manner that is not expressly or impliedly authorized...
Acceptance is not effective until the acceptance is received by the Offeror
Consideration
Legally sufficient consideration exists when either:
-the promise incurs a legal detriment;
-the promisor receives a legal benefit; or
-both
A promise can incur a legal detriment in one of 2 ways:
1) By doing or promising to do something that he or she (the promisee) had no prior legal duty to do
or
2) By refraining or promising to refrain from doing something that he or she (the promisee) had no prior legal duty to refrain from doing.
A legal benefit is received by a promisor if:
the promisor received something to which he or she is not entitled, but for the contract.
What is not necessary in consideration?...???
-economic or material loss be incurred by the promisee
or
-economic or material benefit be received by the promisor
Hamer v. Sidway
=Classic case holding that a person's promise to refrain from using alcohol or tobacco was sufficient consideration.
-Took place in the 1800s between a wealthy man and his nephew. Old man lived a righteous life and goes to his nephew and says if you don't do this list of things, he will pay the nephew $5,000. At 21, the nephew goes gambling, runs up a debt, and signs the rights of the account with $5,000 to the creditor.
Hamer v. Sidway applied to my life now
I am not entitled to this money, because I did not give up something I was legally allowed to do.
Adequacy of Consideration
In general, because of the doctrine of freedom to contract, the relative value of the consideration given by contracting parties is not examined by the courts.
Exceptions to the rule that adequacy of consideration will not be examined by a court:
-Fraud, duress, undue influence, or lack of bargained-for exchange. (Things that are legally unfair)
-Incompetency of one party
Agreements that Lack Consideration (Contracts that are missing consideration)
=Pre-existing Duty Rule
-Doing something that one already has a legal duty to do or promising to do what one already has a legal duty to do is not legally sufficient consideration for anther person's promise.
-If a party is already bound by a contract to perform a certain duty, that duty cannot serve as consideration for a second contract.
Why are gifts not contracts?
Because BOTH parties have to be giving and receiving something.

*Look at BOTH sides!
Example of NOT having consideration in my life
-I had a pre-existing duty not to drink at age 15 = not consideration
-Reward for catching a criminal is $1,000...but if the Sheriff catches him...he does not get paid. It is his pre-existing duty!
Past Consideration (Past action)
is NOT consideration.
*Have to agree to do something right now, or in the future.
Detrimental Reliance or Promissory Estoppel
1. Clear and definite promise
2. The promisee must justifiably rely upon the promise
3. The promisee must reasonably rely upon the promise in a definite and substantial manner
4. Justice would be better served by enforcement of the promise
*Used when lacking consideration, but it's just not fair for there to be no contract.
Example of Detrimental Reliance or Promissory Estoppel:
Man gave promise to donate to a charity.
As a result, charity went out and spent money.
Man takes statement back
Charity sues him.
Viewed as a gift, but that wasn't fair, so promissory estoppel.
Capacity
Each party has to have contractable capacity, if both do not, we have a voidable contract.
General Rule for Capacity of Minors
A minor can enter into any contract an adult can, as long as it is not illegal for the minor.
-Alcohol, cigarettes, etc.
Any attempts = void
Minor's right to disaffirm
(General Rule: A minor can enter into any contract an adult can, as long as it is not illegal for the minor.)
BUT
Minor has the right to disaffirm while they are a minor, and for a reasonable amount of time thereafter.
A "minor" =
someone who is under 18.
Ways to become emancipated from being a "minor" are:
-Fully support yourself
-Get married
Disaffirmance of minors in general:
1. Words or conduct can be used by minor to express intent not to be bound.
2. Minors may disaffirm contracts during minority and for a reasonable period of time after attaining the age of majority.
3. A minor who is exercising his or her right of disaffirmance must disaffirm the entire contract.
4. The contract is voidable by the minor, but not by the adult.
Minor's right to disaffirm are...
designed to by as unfair as possible to adults, to protect the kids from the over-reaching/big bad adult...but there are some pretty smart kids out there...
Minor's obligation on disaffirmance:
-Generally, if a minor disaffirms, each party must make restitution by returning the consideration received from the other party. (all great, as long as they still have it/not damaged)
Majority view of Minor's right to disaffirm
Minor must only return goods that are in minor's possession or control. Even if goods are damaged, minor still has right to disaffirm.
Minority view of Minor's right to disaffirm
If goods are damaged, the minor is required to compensate adult with a "reasonable" amount.
Intoxication
-ANY substance that can effect judgment
-A condition that effects your judgment and comprehension
-any factors that can show diminished capacity.
-Not about amount of drinking--about the effect of drinking, drugs, etc. on judgment.
*You can claim it - but you have to prove it.
Intoxicated Persons:
A contract is voidable if it was made by a person who was so intoxicated that his or her judgment was impaired, and he or she did not comprehend the nature of the transaction and the legal consequences of entering into the contract.
If the contracting party understands the consequences of the contract, even if he or she is intoxicated...
the contract will not be voidable
The contract will be voidable...
if the other party to the contract fraudulently induced the person to become intoxicated.
A contract may be disaffirmed while:
A person is intoxicated or within a reasonable time after he or she becomes sober
-Restitution must be made.
-An intoxicated person must pay the reasonable value for necessaries that were furnished.
Mentally Incompetent Persons
A person is considered mentally incompetent if his or her judgment is impaired because he or she cannot understand or comprehend the nature and effect of a particular transactions.
-similar to intoxicated idea.
2 Classes of Mentally Incompetent Persons:
1. Some have been adjudicated/judged in a court of law. Have a guardian, and capacity has been legally taken from them by a judge. No capacity-period. Contract with this class is VOID.
2. People who have not be adjudicated incompetent. Have moments of good and bad judgment.
-Contract occurs in a moment of lucidity = VALID
A contract made by a person who is mentally incompetent (but has not been so adjudicated)
is VOIDABLE by the mentally incompetent person while he or she is mentally incompetent, or within a reasonable time after regaining mental competency
or
by his or her guardian or other representative, when one is appointed.
Ratification can occur:
After a person is adjudged mentally incompetent and a guardian is appointed and ratifies the contract.
A contract for necessaries may be disaffirmed...
But the mentally incompetent party is liable for the reasonable value of necessaries furnished.
Usury
(Every state has this.)
-Sets the ceiling interest rate that can be charged in a contract for a loan of money.
Usury Statuetes:
fix the maximum lawful contract rate of interest that can be charged for a loan of money. The rate varies from state to state, and over time.
Exceptions to Usury Statutes:
1. Have a corporation as the borrower
2. Loan of small amount (Usually small loans like this are to people with credit problems)
-If more than the statutory lawful maximum rate is charged:
[Ceiling is 10%, contract says 12%]
The effect varies from state to state.
-In some states, the transaction is void as to the excess interest only. applicable to 2% excess
-In some states, the transaction is void as to the interest but not the principal
-In some states, the entire transaction is tainted by usury and void as to principal and interest
General Rule of Gambling:
-All gambling is illegal, and thus void.
-then the state can decide what specific types of gambling are legal within their state. Example: Casino gambling is illegal in Texas, but Horse racing, scratch offs, etc. are not. All states have statutes that regulate gambling, but in a few states, gambling is lawful.
Gambling (or wagering) definition:
The creation of risk and distribution of property by chance among persons who have given consideration in order to participate.
Sadri case example
-Gambling was done in Nevada, by a California resident
-Casino filed suit in California
*Gambling is illegal in California = Void & Not-Enforceable
Licensing Statutes
1. Generate income/purely revenue
2. Protect the public from unauthorized practitioners

Example: Yearly education and training for Texas Attorneys
Licensing Statutes (2)
All states have statutes that require licenses to be obtained in order to engage in certain trades, professions, or business.
Enforceability of contracts made by unlicensed persons:
-Some statures expressly provide that contracts which are made by unlicensed persons are void & unenforceable
-If the object of a statute is regulatory (to protect the public from unauthorized practitioners), contracts are void and unenforceable.
Contracts to Commit Crimes
-Agreements are VOID.
-If the purpose/performance of the contract becomes illegal because of the enactment of a statute after the contract has been entered into, the parties are discharged from their obligations by operation of law.
Contracts contrary to Statue:
Usury
Gambling
Licensing Statutes
Contracts to Commit Crimes
Contracts for the Commission of a Tort
Public Policy
=What is good for a society to follow
-rules/philosophies
Contracts contrary to public policy
An agreement which injures an established interest of society or which has a negative effect on society is Void and will not be enforced.
Types of Contracts Contrary to Public Policy
1. Contracts in Restraint of Trade
2. Unconscionable Contracts
3. Exculpatory Clauses
Contracts in Restraint of Trade
If two or more parties enter into an agreement in which they exchange mutual promises not to compete with each other, and their only objective is to restrict competition, the agreement is VOID because it is against a strong public policy favoring free, fair competition.
Non-Compete Agreement
You are agreeing not to compete with your current employer
Ancillary =
Subsidiary = "secondary"
Contracts in Restraint of Trade: Ancillary
An ancillary covenant not to compete will be enforced if the promise is reasonable.
1. The covenant not to compete must be secondary to the contract. (Restrain trade in a reasonable manner.)
2. It must be no more extensive than necessary under the circumstances to protect the property or other valuable interest of the promisee.
"no more extensive than necessary under the circumstances to protect the property or other valuable interest of the promisee" is based on 3 things:
-Time (duration) of the non-compete -- 1-2 years is mostly reasonable, except with technology, which is normally 6 months.
-Geographic area--Even the world can be reasonable, depending on the situation. Example: Nike v. Reebok
-Scope (what is it exactly that the person signing this can't do?)
Contracts in Restraint of Trade: Contract for the Sale of a Business
-The seller of a business agrees not to open another competing store within the area of the store that he is selling
-The reasonableness of an ancillary covenant not to compete is determined by the nature of the business, period of duration, and geographic area covered.
Contracts in Restraint of Trade: Employment Contracts
-A covenant that an employee will not start a competing business for a certain period after termination of employment.
-Such covenant is legal so long as the time period and geographical area restrictions are reasonable.
Unconscionable Contracts (my definition)
-Shocking to you character.
-SO unfair and ridiculous, it's shocking.
Unconscionable Contracts (note definition)
-A contract may be unconscionable if a party who is receiving an unusually greater benefit has superior bargaining power (a "take it or leave it" situation)
-A contract may be unconscionable if it "shocks the conscience" of the court
Exculpatory Clauses (my definition)
=attempts to release one party from any and all liability
Exculpatory Clauses (notes definition)
-In general, an exculpatory clause is not enforced when the party seeking its enforcement engages in a business that is important to the public. Examples: banks, utility, etc. (We need access to this business, but they should not be allowed to never be liable.)
Exculpatory clauses have been enforced:
-When parties seeking their enforcement are not engaging in businesses that are essential to the public.
Examples: Amusement parks, health clubs, etc.
Other exculpatory clauses that will not be enforced:
1. Employment contracts relieving employer or liability for employee's on-the-job injury
2. Rental of commercial property
3. Residential property leases
Voluntary Consent
(Defenses)
Mistakes (Legal Mistakes)
Fraudulent Misrepresentation
Undue Influence
Duress
Mistakes
=An error or unconscious ignorance or forgetfulness of a past or present material fact.
General rule for Mutual/Bilateral Mistakes of Material Fact
In general, the contract is voidable at the option of either party.
*Examples:
-Think you're selling a quartz, and it's a diamond.
-Think you're buying a Vango original for $millions. If you can prove that we both misunderstood a fact. **Fraud cannot be used here!**
If a term in the contract is subject to more than one reasonable interpretation, and the parties each attach materially different meaning to the term:
The mutual misunderstanding may allow the contact to be rescinded.
Raffles v. Wichelhaus case
(During American Civil War...Blockade of the South caused the English buyers to go elsewhere)
-Wichelhaus (English merchant) agreed to buy a shipment of Surat cotton from Raffles (Indian cotton farmer) "to arrive 'Peerless' from Bombay". (telegram message)
-there were 2 ships names Peerless:
Wichelhaus referred to ship sailing in October
Raffles meant ship sailing in December.
-When Raffles tried to deliver goods in December, Wichelhaus refused to accept them.
*Court held in favor of Wichelhaus, concluding that a mutual mistake had been made because the parties had attached materially different meanings to an essential term of the contract.
=understandable mistake, contract is rescinded.
General Rule for Unilateral Mistakes of Material Fact
When only 1 party misunderstands a fact, it is NOT a basis for rescinding the contract.
Exceptions to the General Rule for Unilateral Mistakes of Material Fact
1. The other party knew of the mistake or should have known of the mistake and failed to correct the mistake, or
2. The mistake was made because of an inadvertent mathematical error and the mistaken party was not grossly negligent
Mistakes of Value
-Are subject to opinion, time, value, price, etc.

***are NEVER a basis for recision of a contract.***
Why? - Because you have to misunderstand a fact. It is not about value or money.
3 Basic elements of fraud
1. Misrepresentation of a past or present material fact.
2. Intent to deceive
3. Plaintiff justifiably reliable on the misrepresentation.
Example of fraudulent misrepresentation that is not reasonable:
A reasonable person would not believe that a 1970 Cadillac gets 50 miles to the gallon.
Undue Influence (my definition)
-Requires you to see a relationship based on trust and confidence.
Undue Influence (1)
-When a party, who is in a dominant position because of a confidential relationship, secures an unfair advantage in a contract of a weaker, dominated party, the contract is Voidable and may be disaffirmed by the dominated party.
Example of "The Dominating Party taking advantage of the other, because of the relationship"
Nephew forces Uncle to sell land, or he won't take care of him. (?)
-Only has power because of the relationship
Undue Influence (2)
-There is a rebuttable presumption of undue influence when the parties are in a familiar or fiduciary relationship based upon trust and confidence, and the contract is extremely unfair to the dominated party.
-The presumption may be rebutted by showing that a full disclosure was made, the consideration that was received was adequate and/or competent, and independent advice was received by the weaker party.
Duress
-In general, if a party is forced into entering into a contract by threatening a wrongful act, the contract is Voidable. Example: "if you don't do this - I'm going to kill your family."
-The act threatened must be wrongful or illegal
Economic need and Duress
-Economic need is generally NOT duress, even when one party demands a very high price for an item that another party needs.
Exception to economic duress:
Party enacting high price is also the party creating the need.
Undue Influence and Duress
Both involved the same element of trying to take advantage of someone.
Examples: Extortion, Blackmail, etc.
Statue of Frauds causes:
Enforceability
Statute of Frauds is designed to:
Prevent Fraud
Statue of Frauds:
-In order to be enforceable, some contractual promises must be evidenced by writings that are signed by the parties against whom the promises are being enforced (or their authorized agent).
-Rule does not say both sides have to sign it to be enforceable.
Contracts that Must Be In Writing
=Contracts that "fall under" or "fall within" The Statute of Frauds
Contracts that Must be in Writing/Contracts that "fall under" or "fall within" The Statute of Frauds:
1. Contracts involving Interests in Land
2. The "one-year" rule
3. Collateral Promises
4. Promises Made in Consideration of Marriage
5. Contracts for the Sale of Goods under the UCC
Contracts that Must be in Writing/Contracts that "fall under" or "fall within" The Statute of Frauds: Contracts involving Interests in Land
-Real property includes: The land itself, and anything permanently attached to it. Examples: Mineral rights, houses, etc.
-Other interests in land include: Mortgage, contract, leases, Easements (access rights)
Contracts that Must be in Writing/Contracts that "fall under" or "fall within" The Statute of Frauds: The "one-year" Rule
-Possibility of performance: If performance is possible, even if it's improbable, an oral contract is enforceable.
-Even if performance actually takes more than one year, an oral contract is enforceable as long as performance was possible within one year.
Example of Possibility of Performance:
Offered job for life:
-Remote chance that you could die tomorrow --> Oral contract is enforceable.

Offered job until Retirement:
-Cannot be performed in 1 year. -->Has to be WRITTEN to be enforceable.
One-Year Rule (my definition):
Contracts that cannot by their own terms be performed within 1-year, must be in writing and signed to be enforceable.
-Looking for a negative.
*Less than a year==Oral contract is enforceable
Contracts that Must be in Writing/Contracts that "fall under" or "fall within" The Statute of Frauds: Collateral Promises: Promise
A promise is within the Statute of Frauds and must be in writing if:
1) The promise is made to the obligee (rather than the principal obligor) by a person who is not presently liable for the debt or who does not have a present duty to perform.
2) The liability of the guarantor is secondary and collateral to that of the principal obligor.
2) The liability of the guarantor is secondary and collateral to that of the principal obligor.
Contracts that Must be in Writing/Contracts that "fall under" or "fall within" The Statute of Frauds: Collateral Promises: Secondary Promise
If a secondary promise of a third person (guarantor) is made to the person to whom the primary obligation is owed (the oblige or creditor), the promise is within the Statute of Frauds.
-If, however, the secondary promise is made to the primary obligor (debtor), the promise is not within the Statue of Frauds (does not have to be in writing)
Creditor
Obligee
Principal Debtor
Obligor
Secondary Promisor
Guarantor
Collateral Promises - graphically
Creditor <-Direct, original PPTP Principal Debtor
Obligee Obligor

^
Secondary, collateral PTP if principal obligor does not perform as promised

Seconday Promisor
Guarantor
(P) PTP
(primary) promise to perform
Contracts that Must be in Writing/Contracts that "fall under" or "fall within" The Statute of Frauds: Promises Made is Consideration of Marriage
Unilateral promises to pay money or give other property in exchange for promises to marry, and prenuptial agreements must be in writing in order to be enforceable.
Contracts that Must be in Writing/Contracts that "fall under" or "fall within" The Statute of Frauds: Contracts for the Sale of Goods under the UCC:
In order for a contract for the sale of goods for a price of $500 or more to be enforceable, there must be writing indicating that a contract was made by the parties and the written agreement must be signed by the party to be charged.
Rule of Privity:
="private agreement"
-We only have rights and duties under that contract
Third Party Rights: Assignments
1. A party to the contract (assignor) assigns his rights under the contract to a third party (assignee).
2. The assignor's rights are extinguished upon assignment.
3. The assignee may enforce the contract against the other original party (obligor)
Third Party Rights (graphically)
Obligor promise to perform -> Obligee/Assignor
John <- Original Contact Bank 1
I I
I subsequent transfer of right
I to receive performance
I V
I___________performance to be rendered-> Assignee
Bank 2
In class example of Third Party Rights - Mortgage
John monthly payments, 30 yrs-> Bank 1
<- $ to purchase a house I
I
Flips the loan
V
Bank 2
now collects the money from John.
Typically, Bank 2 sends John a
letter telling him they bought his
loan, and he owes them now.
Rights that Cannot be Assigned
-Statutes expressly prohibit certain assignment of rights to payments of money. Ex=Worker's compensation Insurance Program
-The right to receive personal or confidential services may not be assigned without consent of the person who is performing the services (the obligor) Ex=Slavery, indentures servitude)
-A contract right cannot be assigned if the assignment will materially increase or alter the risk of the obligor. Ex=Bank 2 cannot change the loan amount for John/length of loan/interest rate, etc.
-"Reasonable contractual prohibitions in anti-assignment clauses." (If you don't want your contract to be assignable, you can include this clause. Ex= leases)
-Anti-assignment Clauses
Worker's compensation Insurance Program
Designed to compensate injured workers. Statute says you cannot assign your rights to other businesses.
Anti-assignment Clauses
Restriction on the power to assign contract rights operate only against the parties; these restrictions are not effective to prevent assignment by operation of law.
-There are exceptions to the enforceability of anti-assignment clauses
Delegation of Duties
A party to a contract may transfer, or delegate, his contractual obligation to perform an act.
Delegation of Duties (graphically)
Obligor promise to perform -> Obligee/Assignor
Delegator <- Original Contact I
I I
I I
delegation of duty I
I I
V I
Delegatee V
Bob performance to be rendered-> Assignee
Bank 2
Delegation of duty does NOT mean:
(Delegation of duty does NOT mean):
Delegation of Liability
Delegation of Duties graphical example from class
Jim monthly & --> Land Lord
I <-- rent apartment
I
Duty to pay is delegated
I
V
Bob
Delegation does not:
Relieve the delegator (party making the delegation) of the obligation to perform in the event the delegatee (party to whom the duty has been delegated) fails to perm.
Delegator
party making the delegation
Delegatee
party to whom the duty has been delegated
Is a special form required to create a valid delegation of duties?
No, no special form is required to create a valid delegation of duties.
-The delegator must only express an intention to make the delegation.
Duties that Cannot be Delegated:
-Personal duties that depend upon the skill or talents of the obligor may not be delegated without the assent of the party to whom performance is to be rendered.
-When special trust has been placed in the obligor, the obligor may not delegate his duties.
-When performance by a third party will materially vary from the performance expected by the obligee, duties may not be delegated.
-When the contract expressly prohibits delegation.
Third Party Beneficiary Contracts
(Designed to benefit 3rd party)
-The third party beneficiary is a stranger to the contractual relationship of the parties to the contract.
-The third party beneficiary makes no promises and gives no consideration to the promisor who is to render performance.
-The intention of the parties to the contract is to confer a benefit upon the third party beneficiary. (Intended Beneficiary...not incidental beneficiary)
"Valid"
4 elements of a contract are present.
Agreement
Consideration
Contractual Capacity
Legality
For our purposes, all of the talked about contracts are:
"informal"

very few contracts are "formal"
Third Party Beneficiary (graphically)
Third Party Beneficiary
^
I
I
I
NY Life IC <--Premiums on LIP Husband
Life Insurance -->
Third Party Beneficiary example in class: Life Insurance
Wife = Donee Beneficiary
^
I
Performance to be rendered
I
I
Promisor <--Consideration Promisee
Donee Beneficiary
someone who receives a gift
Intended Beneficiaries
An intended beneficiary has rights and therefore, may enforce contractual promises, even though not a party to the contract.
Orr v. Orr case
Daughter is suing father, because he is refusing to pay for college.
-Did the divorce contract intend to benefit the kids?
-YES.
Incidental Beneficiary
A person who is to receive an incidental benefit from the performance of a contract may not enforce the contract if there was no intent to confer a benefit upon him.
-Courts apply the "reasonable person" standard
Discharge means:
To terminate contractual duties
OR
To be finished with the duties
OR
To no longer be required to perform
Performance and Discharge: Conditions
A possible future event, the occurrence or non-occurrence of which will 1) Trigger the performance of a legal duty OR 2) terminate an existing duty.
Performance and Discharge Conditions categories:
Conditions Precedent
Conditions Subsequent
Conditions Precedent
A condition precedent is one that must be fulfilled before a party's performance can be required.
-If the condition precedent does not occur, the parties are discharged from their contractual obligations
Example of Condition Precedent:
Financing, is a condition precedent in a house-buying contract.
*If no financing can occur -> discharged from the contract
Parking Co. of America v. Wilson case
=case of Conditions Precedent
Wilson is an employee. He signs a contract with them for 36 months, and within the contract, it says if either quit within 30 months, Wilson gets paid 1 year of salary, IF written notice is given 2 weeks ahead of time.
-On day, Wilson ups and quits, doesn't do it in writing, and doesn't give 2 weeks, so he gets no money.
"subsequent" means:
"After"
Conditions Subsequent
A condition subsequent is one that operates to terminate a party's absolute promise to perform.
-The occurrence of the conditioning event extinguishes an existing contractual duty, so that the parties are discharged.
Example of Conditions Subsequent:
Employee of a law firm loses their law license.

Discharged/Performance not required, contract over.
Types of Performance:
-Full complete performance in the manner prescribed by the contract discharges the performing party
-Tender of complete performance
-Complete (strict) Performance
-Substantial Performance
Types of Performance: Full complete performance in the manner prescribed by the contract...
=discharges the performing party
Tender of complete performance:
=An unconditional offer to perform by a party who is ready, willing, and able to do so.
-1 party is ready to perform and the other side does not accept the tender.
-The tendering party is discharged if his tender is not accepted.
-Complete (strict) Performance:
Complete performance includes strict compliance with any express conditions.
-Failure to comply with an express condition and render the exact performance may discharge the party receiving the defective performance.
Substantial Performance:
Performance which does not greatly vary from the performance that is promised in the contract, but is slightly less than that which reasonably could be expected.
-If performance is substantial, the other party's duty to perform remains absolute, less damages for the deviation.
Substantial Performance (my definition)
slightly less than expected, but performed.
Jacobs & Young, Inc. v. Kent

*Landmark case! *Book notes
"an omission, both trivial and innocent, will sometimes be atoned for by allowance of the resulting damage, and will not always be the breach of a condition.
-Court ruled the allowance is not the cost of replacement, which would be great, but the difference in value, which would be either nominal or nothing.
-In most cases, the cost of replacement is the measure, except when the cost of completion is grossly unfair and our of proportion to the good to be attained, then the measure is the difference in value.
Jacobs & Young, Inc. v. Kent

class notes
Jacobs & Young, Inc. = building
Kent = home owner
-Construction financing, builder uses different pipe manufacturer. Builder argues and court agrees this is substantial performance. Court does not see a difference in value.
A Breach of Contract
The non-performance of a contractual duty
A "material" breach
Performance is not at least substantial.
=When we get damages
If there is a minor/nonmaterial breach of contract:
the breaching party is liable for damages if the breach is not cured.
-The nonbreaching party is not discharged and is required to perform
Anticipatory Repudiation
Treated under the law as a present, material breach, and effectively, it means one party saying prior to the due date "I can't perform the contract."
-Nonbreaching party can:
1) Seek fulfillment of the contract somewhere else right now OR
2) Sue right now and get compensation.
Time for Performance
-If time for performance is not stated, performance is to be rendered within a reasonable period of time.
-The time requirement must be complied with if parties stipulate that time is of the essence (vital)
-If time for performance is specified, but not vital, performance prior to or within a few days of the stated time satisfies the contract.
Discharge by Agreement
4 ways. New contract (agreement) has to fulfill the elements of a contract.
-Mutual Rescission
-Discharge by Novation
-Substitute Agreement
-Discharge by Accord and Satisfaction
Discharge by Agreement: Mutual Rescission
-Agreement to undo a contract = Return to original state.
Either Executory on both sides, or Executed on one side
Executory on both sides:
We give up the right to perform, on both sides
Executed on one side:
They have to be given something new to have consideration.
If TIME is an issue for either party...
it needs to be put in the contract

it's often forgotten
Discharge by Agreement: Discharge by Novation
=a way to remove/fix the remaining liability issue
-The third person is substituted for one of the original parties with the consent of the party entitled to receive the performance.
-The original obligation of the prior party is extinguished and the prior party is discharged.
Discharge by Agreement: Discharge by Novation (graphically, delegation example revisited)
Jim monthly & --> Land Lord
I <-- rent apartment
I
Duty to pay is delegated
I
V
Bob

*If the landlord will do a whole new contract with Bob = Novation. Now Bob <--> Land Lord
Discharge by Agreement: Substituted Agreement
Entering into a settlement of a claim
Discharge by Agreement: Discharge by Accord and Satisfaction
-An accord is an executory contract to perform some act in order to satisfy an existing contractual obligation.
-Satisfaction is the performance or execution of the accord agreement
-Used between a debtor and a creditor
(Example: Debtor paying more that they want to satisfy the creditor)
If there is not a clear amount...
="unliquidated amount"
Discharge by Operation of Law:
1. Alteration of the Contract
2. Statutes of Limitations
3. Bankruptcy
4. Discharge by Impossibility or Impracticability of Performance
Discharge by Operation of Law: Alteration of the Contract
-If there is a material alteration of a written contract without consent, the contract is Voidable by the party who was unaware of the change.
(3 options actually: 1) Treat contract as over, 2) Go ahead on original terms, 3) Accept new terms)
-The party unaware of the change has the option of treating the contract either as discharged or as enforceable in accordance with the original terms or with the terms as altered.
Discharge by Operation of Law: Statutes of Limitations
-Statues provide that a person who has a cause of action must bring his action or lawsuit within a specified period of time.
-Failure to commence an action or suit within the period of limitation bars access to judicial remedies but does not extinguish a debt or underly obligation.
*Statute of Limitations does NOT discharge the debt.
Even if a case is NOT heard, because time has expired from the court's perspective...
that does not mean the debt is extinguished.
-A partial payment/promise to pay starts the 4 year time period over, and they can come after you all over again.
Typical Statute of Limitations:
4 years from a breach/discovery of a breach.
Discharge by Operation of Law: Bankruptcy
-A discharge in bankruptcy operates as a release of a debtor from most debts and contractual obligations.
-After a decree of discharge in bankruptcy is issued by a Bankruptcy Court, a partial payment by a debtor will not revive the obligation.
*Debts ARE discharged by bankruptcy.
What discharges Debts?
Bankruptcy
Discharge by Operation of Law: Discharge by Impossibility or Impracticability of Performance
Impossibility of Performance
Commercial Impracticability
Frustration of Purpose
Temporary Impossibility
Discharge by Operation of Law: Discharge by Impossibility or Impracticability of Performance: Impossibility of Performance
Situation that makes it impossible...it cannot be done.
Not just made it harder or cost more money, it has to be impossible.
1. Death, serious illness, or incapacitation of a party who was to render personal services.
2. Destruction of specific subject matter of contract.
3. Change in law making performance illegal
Discharge by Operation of Law: Discharge by Impossibility or Impracticability of Performance: Commercial Impracticability
-Extreme change in circumstances making performance extremely more difficult, burdensome, or costly.
-AND extreme change must be unforeseen.
Discharge by Operation of Law: Discharge by Impossibility or Impracticability of Performance: Frustration of Purpose
An unforeseen event, but this time it frustrates the purpose both parties has in mind in the contract.
-Have to be able to prove the other party's purpose was frustrated too
Discharge by Operation of Law: Discharge by Impossibility or Impracticability of Performance: Temporary Impossibility
1. An occurrence or event that makes it temporarily impossible to perform the act in the contract will suspend performance until the impossibility ceases.
2. When the impossibility ceases, the parties must ordinarily perform the contract.
3. If the lapse of time and change in circumstances make the contract substantially more burdensome to perform, the parties will be discharged.
Discharge by Operation of Law: Discharge by Impossibility or Impracticability of Performance: Temporary Impossibility (my definition)
Suspend performance for a short period of time.

Example: Actor is under contract, and is then drafted in WWII.
Uniform law:
is a Federal Statute, put together at the federal level, and states can adopt it in part or in whole.
Example = UCC
The Scope of Article 2
The Sale of GOODS
If Article 2 does not provide a rule regarding a particular issue...
another statute or the common law of contracts will apply.
Article 2 deals with goods, but NOT with:
real property, services or intangible personal property
Intangible personal property
Bank accounts, stocks, bonk, copyrights, patents, etc.
In some cases, the rules provided for by Article 2...
vary, if the buyer or seller is a merchant
Title
=Ownership
What is a sale?
=Passing of title from a seller to a buyer, for a price (not a gift or bailments(pawnshop) )
What are goods?
Tangible (have physical existence, touchable) and they moveable in the course of business.

Example: Car
What is a merchant?
3 definitions:
1. Deals in goods of the kind involved in the sales contract; selling regularly to the public, or have these items in their stone to sell.
2. Holds himself out, because of his occupation, as having knowledge and skills peculiar to the business or goods involved in the transaction; don't necessarily have to be regularly selling, but if you have special skills people rely on = merchant. Examples: Beautician, Optometrist
3. Employs other people who are merchants to act on his behalf.
Lease Agreement
Agreement to lease the good we're talking about
Lessor
Selling the right to possession of use of good
Lessee
Recipient of the item for lease
Formation of Sales and Lease Contracts
Offer
Acceptance
Consideration
Statute of Frauds
Offer
An agreement sufficient to constitute a contract can exist even if the moment the agreement is formed is not determined.
Offer: Open terms
A contract will not fail for indefiniteness because some terms are left open, as long as:
-the parties intended to make a contract; and
-there is a reasonably certain basis for the court to grant a remedy.
Open Terms:
Open Price Term
Open Payment Term
Open Delivery Term
Open Quantity Term
Open Price Term
1. If the parties intended to form a contract, but did not set a price, the price will be the reasonable price at the time of delivery.
2. If the buyer or seller is to set the price, he must do so in good faith.
3. If the price is not fixed through the fault of one party, the other party may treat the contract as canceled or fix a reasonable price.
Open Payment Term
-if the terms of payment are not specified, payment is due at the time and place at which the buyer is to receive the goods.
-May or may not work to the seller's benefit
Open Delivery Term: 2 parts
1) When the place of delivery is not specified
2) When time for delivery is not specified
Open Delivery Term: When the place of delivery is not specified -
-When the place of delivery is not specified:
a) the goods are to be delivered at the seller's place of business
b) if the sell has no place of business, the goods are to be delivered at the seller's residence.
c) if the goods are at a location other than the seller's place of business, and both parties know this, the goods are to be delivered at that location.
Open Delivery Term: When time for delivery is not specified -
When time for delivery is not specified, the good are to be delivered within a reasonable time.
Open Quantity Term
*Quantity is an essential element!
1. Requirements Contracts: Where the buyer buys all he requires. May or may not be the whole seller's supply.
2. Output Contracts: Agreeing to buy all the seller's [crop]
Merchant's Firm Offer
a. Offer for the sale of goods made by a merchant (Offeror must be the merchant)
b. in which the merchant gives assurances in a signed writing;
c. that the offer will remain open for the stated period (or if not state, for a reasonable time).
d. No consideration is necessary
e. The merchant's firm offer is irrevocable for the period stated (or if not stated, for a reasonable time)
HUGE different from Common Law Option Contact and Merchant's Firm Offer =
NO consideration is necessary.
Means of Acceptance
If no method for communication of acceptance is specified, any reasonable means of communication may be used.
In general, an acceptance is effective:
when it is SENT.
Promise to Ship or Prompt Shipment:
An offer to buy goods for current or prompt shipment is accepted when the seller promises to ship or promptly ships conforming goods.
If seller is shilling conforming goods
= Acceptance
Conforming Goods
=Exactly what the buyer wants (customized)

Example: 1000 maroon pens with white writing example.
If the seller does not promise to ship, but accepts by shipment...
the shipment of nonconforming goods constitutes both an acceptance and a breach of contract.
If the seller, however, notifies the buyer that nonconforming goods are being shipped as an accommodation...
the shipment is a Counteroffer.

Example: 900 maroon pens with white writing, and 100 white pens with maroon writing
Communication of Acceptance
If an offeree to a unilateral contract does not notify the Offeror within a reasonable period of time that the offeree is beginning performance, "the Offeror may treat the offer as having lapsed before acceptance." = COMPLETELY opposite of Common Law
Battle of the Forms
When the offeree communicates that the offeree intends to accept an offer but adds different or new terms
When Battle of the Forms happens:
-If offeree's response indicates a definite acceptance of the offer, a contract is formed, even if the acceptance includes additional or different terms. *OPPOSITE COMMON LAW
-It is not an acceptance if the modifications are conditional on the offeror's assent
-Different rules exist depending on whether the buyer or sell is a Merchant or Nonmerchant.....
Rule when Seller or Buyer is a Nonmerchant:
If there is a nonmerchant anywhere in the problem, then the new terms are views as PROPOSALS, and the offeror gets to decide if they want to accept the proposal or not.
Rule Between Merchants:
General Rule:
Offeree's changes ARE in the contract, unless
1) the offer limits acceptance only to these terms
2) the new terms materially change/alter the offer= unreasonable surprise
3) Offeror notifies the offeree of an objection to these new terms within a reasonable amount of time.
Formation of Sales and Lease Contracts: Consideration
It is not necessary for a modification of a contract if it is made in good faith.

(Office building/extortion example is not applicable here)
Formation of Sales and Lease Contracts: Statute of Frauds
If the price of the goods is $500 or more for a sale ($1000 or more for a lease), a contract is not enforceable unless there is a writing that is signed by the party against whom it is sought to be enforced.
Written Confirmations Between Merchants:
Creating an exception to the signing.
-The buyer and seller are both merchants and have entered into an oral agreement
-One of the merchants sends a signed written confirmation to the other;
-The written confirmation must indicate the terms of the agreement;
-The merchant receiving the confirmation must have reason to know of its contents;
-The receiving merchant does not object within TEN days after receiving the confirmation, then
*The contract is enforceable against both parties, even though the receiving merchant has not signed anything.
Exception to the Formation of Sales and Lease Contracts:
Specially Manufactured Goods:
1) A contract for goods to be specially manufactured for a particular buyer
2) When goods are not suitable for resale in the ordinary course of business
3) the seller has begun production
Disclaimer of Warranty of Title
"I sell to you whatever interest I have in these goods."
=Way to not be bound by the promise
Warranty
Guarantee or promise about good, quality, etc.
5 Warrantees under the UCC
?
Express Warranties
Express warranties arise when the seller indicates any of the following:
-The goods will conform to an affirmation or promise of fact which relates to the goods.
-The goods will conform to a description of the goods
-The goods will conform to a sample or model of the goods
Basis of the Bargain
An affirmation or promise becomes the basis of the bargain if it comes at such a time that the buyer could have relied on it when he agreed to the contract.
-The buyer does not have to show that he actually relied upon the affirmation or promise
Example of Express Warranty:
Picture and Label on the outside of a shoebox
Puffery
Reasonableness of buyer's reliance
Written more reliable than oral
Implied Warranties
Implied Warranty of Merchantability
Implied Warranty of Fitness for a Particular Purpose
Implied Warranties: Implied Warranty of Merchantability
=Goods are merchantable if the goods are "reasonably fit for the ordinary purposes for which they are used."
-A merchant seller is absolutely liable for breach of the warranty of merchantability, without regard to whether the seller knew of or could have discovered a defect which caused the goods not to be reasonably fit for the ordinary purpose for which they are used.
Merchantable Food
if it's naturally occurring in the food - it is merchantable
Example of Merchantable Food
Biting into a cherry pit in a cherry pie.

A pit is naturally occurring in a cherry, so it is merchantable.
Key to remember in Implied Warranty of Merchantability
a merchant seller.

A seller who is a merchant!
Implied Warranties: Implied Warranty of Fitness for a Particular Purpose
The implied warranty of fitness for a particular purpose is made by a seller who has reason to know (but not necessarily actually knows) the particular use for which the buyer is purchasing the goods and that the buyer relies on the skill and judgment of the seller is selecting suitable goods.
-Implied warranties of fitness for a particular purpose and merchantability may both be included in a contract for the sale of goods.
Warranty Disclaimers
Warranties may be excluded, disclaimed, or modified by the parties
Types of Warranty Disclaimers:
Disclaimers for:
Express Warranties
Implied Warranties
Warranty Disclaimer: Express Warranties
A seller can avoid making any express warranties.
-A seller may effectively disclaim those express warranties which the seller has mad with unambiguous language to that effect in the contract for the sale of goods.
Warranty Disclaimer: Implied Warranties
Warranty of Fitness for a Particular Purpose may be disclaimed or modified by:
1) Using expressions such as "as is" or "with all faults"
2) A written, conspicuous disclaimer

Warranty of Merchantability may be disclaimed or modified by:
1) Using conspicuous language which much include the word "merchantability"
2) Need not be in writing
E-Contracts
Online Contract Formation:
-Online Offers
-Online Acceptances:
Click-On Agreements
Browse-Wrap Terms
E-SIGN Act
Electronic Signatures in Global and National Commerce Act of 2000
E-signatures
-No contract, record, or signature may be denied legal effect solely because it is in electronic form.
-Parties must have agreed to use electronic signatures
-Contract must be in a form that can be retained and reproduced
Exceptions to applicability of E-SIGN Act:
1. Court Papers
2. Divorce decrees
3. Evictions
4. Foreclosures
5. Health insurance terminations
6. Prenuptial agreements
7. Wills
UETA
The Uniform Electronic Transactions Act of 1999
E-SIGN Act says if a state has adopted UETA without modification...
then that state law stands.
If state has modified UETA...
then E-SIGN prevails if state law is inconsistent with it.
UETA of 1999 elements:
-E-Signature - "an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record."
-Record - "information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form"
-Applies only to electronic records and signatures "relating to a transaction"