109

Outline

Bargain Contract
-Agreement
Offer + Acceptance
-Exchange
Consideration
Is there a contract?
1.) Was an offer made?
Offer: A promise rises to the level of an offer when it 1.) bargains for a return promise or performance/
forebearance, and 2.) the offeror intends to be bound as viewed by a reasonable person in the position of
the offeree. Intent can be derived from language, conduct, or circumstances such as prior conduct or past
dealings. An offer is valid when it creates the power of acceptance in the offeree. An offer's terms must be
reasonably certain/definite.
The offeror is Master of the Offer.
Objective test: look to language, surrounding circumstances, conduct.
Look for words of promise, undertaking, commitment
Definite parties named
Advertisement is not an offer, generally, but an invitation to make an offer.
Offers can be made to multiple people, but only one can accept.
Becomes effective on receipt
2.)Is the offer still open?
An offer can be terminated any time before acceptance.
Revocation by the offeror
The offeror can revoke his offer at any time prior to acceptance. Offers may be revoked either
indirectly or directly
An indirect revocation occurs when the offeree knows that the offer is no longer open. This
usually occurs when the offeror takes definite action inconsistent with an intent to be bound, and
the offeree acquires reliable information about the action.
An offers may be irrevocable due to the creation of an option K. An option K keeps a valid offer open
for a specified period of time. Option K's may be created one of three different ways.
1.) The traditional option K: An additional promise supported by consideration to keep the offer open for a
set period of time.
2.) Performance only option K: When the offeror specifies the means of acceptance as performance
only, he must hold the offer open for a reasonable period after the offeree begins performance. (R2d §
45)
3.) Option K through Promissory Estoppel; unbargained for reliance on the part of the offeree: Occurs
when the offeree must rely on the offer before they can accept; only to extent necessary to avoid injustice.
(Drennan)
-The power of acceptance under an option K is not terminated by a rejection or counter-offer, by
revocation, or by death or incapacity of the offer.
Rejection by the offeree
Counteroffer: A counteroffer has all the major elements of an offer, but is made in response to an initial
offer. A counteroffer does more than merely reiterate the initial offer; it changes one or more of the
material terms of the contract. Typically, this is price, timing, or another such integral part of the
contract. A counteroffer serves as an indirect rejection of the initial offer and functions as a new offer,
creating the power of acceptance in the initial offeror. Thus, the initial offer may no longer be accepted
when the counter offer is made.
Lapse of time
An offer stays open for length of time stated. If no time is stated, then its open for a reasonable time.
In face to face conversation, an offer stays open for the length of the conversation.
Death of one of the parties.
3.)How was the offeree to accept? Did the offeror bargain for a return promise, or for performance?
To answer this question, the court looks at the language and circumstances to find out what manner of
acceptance is required.
 To answer this question, the court looks at the language and circumstances to find out what manner of
acceptance is required.
Acceptance: An acceptance occurs when the offeree communicates his intent to be bound by the terms of
the offer. All acceptances must be in the form of a return promise or performance/forebearance. While this
can be communicated numerous ways, the communication must comply with the offeror's set means of
acceptance.
The power to create a contract by acceptance of an offer terminates at the time specified in the offer, or, if no time
is specified, at the end of a reasonable time.
If the offeree can accept by performance only [Offeror demanded performance either by language or
circumstances (dean's speech ex.).], then under § 45 an option K comes into existence once he starts
performance. An option K is a promise by the offeror not to withdraw the offer. The offeree is not bound
until performance is complete, at which time the actual K comes into existence.
Flagpole ex: Offeror cannot withdraw the offer once offeree starts climbing, but offeree can get halfway up and
decide he doesn't want to finish.
Traditional rule: K comes into existence when performance is completed.
If the offeree can accept by performance or promise, but freely chooses to perform, then a K is formed
once he begins performance, and both parties are bound.
If the offeree accepts by promise, either because offeror through language or circumstances is looking for a return
promise, or he didn't specify and offeree chose to promise, then a return promise must be communicated
actually or constructively (words or action) unless the offeror dispenses with notice. A K comes into
existence when promise is communicated.
Offeree must exercise reasonable diligence to notify the offeror, or the offeror must receive the acceptance
reasonably.
If you communicate info to your own agent, its not communication to the other party.
-A grumbling acceptance is an acceptance.
Silence is not acceptance, except:
Where the offeree exercises dominion over things which are offered to him, such exercise of dominion in the
absence of other circumstances showing a contrary intention is an acceptance.
Previous dealings make it reasonable.
Under the Mailbox Rule, an acceptance is effective on dispatch. Offers and revocation are effective on
receipt. This is a default rule, and the offeror can specify that acceptance is effective upon receipt.
Under the traditional Mirror Image Rule, Acceptances must be the mirror image of offers; if not, they are
considered counteroffers and destroy the offer. A change in any term creates a counter offer.
The new rule is more lenient and allows small changes as long as they are not of material terms.
Consideration
A promise only becomes enforceable when it is supported by consideration. Consideration is something
bargained for and received. It can be either a benefit to one party or a detriment to the other.
Consideration exists if one refrains from doing anything that one has a right to do.
P's agreement not to go work for a competitor has always been viewed by the courts as a huge detriment.
Forbearance from suing
There are three different tests used to determine whether forbearance from suing is valid consideration:
1.)The person promising to forebear must have a reasonable and honest belief in the validity of their
claim.
Honesty is subjective
Reasonable is objective; what a reasonable person would believe
-has an elementary knowledge of legal principles
2.)He Honestly believed he had a claim (good faith).
3.)He had a Lawful/valid claim.
Agreement Modification
There are three different ways to resolve the Q of whether a promise that modifies an existing K is
enforceable.
1.)Old Rule: Under the Pre-existing legal duty rule, the performance or the promise to perform a pre-
existing duty does not constitute consideration for a modification of the K. Thus, separate and
independent consideration is needed to enforces a modification to an already existing K.
*the promise to pay a lesser amount is not enforceable under the pre-existing legal duty rule
Developed by the courts to protect parties from situation where one party wants more money to do the
same job (Alaska); want to avoid the hold-up game.
2.)Middle Rule (§ 89): Under § 89, a promise modifying a duty under a K not fully performed on
either side is binding:
 2.)Middle Rule (§ 89): Under § 89, a promise modifying a duty under a K not fully performed on
either side is binding:
If the modification is fair and equitable in view of circumstances not anticipated by the parties
when the K was made; or
To the extent provided by statute; or
To the extent that justice requires enforcement in view of material change of position in
reliance on the promise.
Thus, it does not require new consideration
3.)New Rule (UCC): Under the UCC "Good faith" rule, as long as the modification is made in good
faith, the promise is enforceable. It does not require new consideration.
Example:
Creditor and debtor have an agreement for $5,000
Debtor asks if creditor will accept $4900 because he can't pay
Creditor agrees to accept this amount
Can the second agreement (to modify) be enforced? What of the pre-existing legal duty to pay?
Gift Promises
A gift promise with a condition lacks consideration. The condition is not consideration.
Unconscionability
A term is unconscionable when there is both 1.)Procedural and 2.)Substantive unconscionability.
Procedural unconscionability is a gross discrepancy in the power of the bargaining process.
Substantive unconscionability is a gross discrepancy in the actual K terms; unfair oppressive terms.
Both types need to be present, but not in equal strength.
Procedural: Gross inequality of bargaining power.
P claims he was induced to enter into a K w/o really understanding what he was agreeing to (something
egregious tucked away in fine print.)
Substantive/price: Unfair/oppressive terms
P paying $1400 for a $300 freezer
Usually only found when procedural unconscionability is also found
When consumer was so uneducated that he didn't know what he was doing.
Rarely enforced
Difficult burden to meet; P must be truly poor, illiterate, etc.
Almost impossible for a business person to successfully claim a term is unconscionable.
Rarely successful in commercial dealings.
Highly contextual inquiry, no accepted definition of what's unconscionable.
Courts look at the sophistication of the parties.
*Has to exist at the time the K was made [critical point]. Cant be based on events that occurred after the K
was executed.
Remedies
Striking the offending clause
Reforming (modifying) the offending clause
Refusing to enforce the entire K
Very occasionally
Make it reasonable, then enforce that new reasonable K
Money damages not available, only modification to reasonable terms.
Jones v. Star Credit---Unconscionable K may be denied enforcement by the courts.
Court may look at such factors as value disparity, unequal bargaining power, and a seller's knowledge
of a buyer's limited fiscal resources.
Moral Obligation: Can a promise made after someone saved your life be enforced?
Under the Traditional Rule, moral obligation is not consideration. (Dealing w/ past consideration ex:
promise you made after someone saved your life; emergency situations).
Under the New Rule found in § 86, A promise made in recognition of a benefit previously received by
the promisor from the promisee is binding unless a.) promisee conferred the benefit as a gift of for
other reasons the promisor has not been unjustly unriched; or b.) to the extent that its value is
disproportionate to the benefit.
Nominal consideration
Nominal consideration exists when what is being exchanged is vastly unequal in value.
Consideration deemed nominal consideration by the trier of fact is not consideration.
$1 for a Van Gogh painting is not consideration.
 Illusory Promise
An illusory promise is not consideration, nor is it a promise. It gives a party a free way out because
there is no commitment. Therefore, to determine whether a promise is illusory, determining whether a
promise was illusory requires determining whether there was a commitment.
Insufficient Agreements
If the terms of a K are ambiguous/incomplete, the court will try to fill in terms if the parties intended to
contract.
Court may impose a K, choosing one meaning over the other if:
1.) One of the party's definition was not reasonable.
2.) One party had reason to know what the other party meant.
1.) Defective Formulation
Where the parties have different understandings of a K term, and the term is subject to two or more
equally possible interpretations, this may prevent the necessary meeting of the minds. (Peerless
Problem)
As long as neither party knew of the other party's interpretation nor had reason to know thereof.
If either party had known of the ambiguity or should have reasonably known of it, K would have been
construed against that party and would have been valid.
2.)Indefinite agreement
An agreement is indefinite when a specific term is so ambiguous that its plain meaning is unclear. ("fair
percentage of the profit.)
3.) An agreement is Incomplete when an otherwise enforceable K leaves out material terms for future
negotiations.
When rectifying insufficient agreements, the court will look at:
1.)Actual K language, conduct, and the performance under that specific K.
2.)Plain meaning rule: K will be construed strictly based just on the express terms.
3.)Past performance of different K's between the parties. (Maybe they did business for years; this would give
meaning to any terms that are ambiguous.)("course of dealing")
4.)Objective trade customs both parties are aware of or should have been aware of at the time they made the
agreement: (what does the industry regard as "chicken" for example?) Considered part of the K even though its
not stated.
5.)Gap fillers
Courts will look at market price, reasonable times for delivery based on circumstances, or trade customs to fill
in gaps. (some circumstances where court will fill in a gap by going to an objective standard (ex: market
price))
6.)If all of these fail, the court will likely find no K.
May argue Quasi K; ***typical remedy granted when a 1.)bargain K fails and 2.)one party has been unjustly
enriched.
-Used when court cant give meaning to words
100 million times easier to establish a quasi K when a BK fails as opposed to when there is no BK and you
just took action; court more likely to look at you as a volunteer.
Other Ways to Enforce (an otherwise unenforceable promise)
Quasi K (aka: quantum meruit, or implied-in-law K) is a K created by court to prevent unjust enrichment.
A quasi K requires:
1.)Unjust enrichment
2.) The benefit was bestowed with expectation of compensation (didn't act as a volunteer.)
3.) The party against which relief is sought had the opportunity to decline the benefit, and did not, or
there is a reason for not having that opportunity.
-Get only "reasonable value" of enrichment; not necessarily the attempted K price. Measure of recovery is the
value of the benefit conferred on D, and not the detriment incurred by P, or necessarily the reasonable value
of P's services.
No agreement whatsoever; implying a legal fiction to create a K so somebody doesn't get screwed.
Ex: P starts taking care of D's horse out of nowhere.
Promissory Estoppel
Under Section 90, a promise may be enforceable without consideration if: 1.)the promisor should
reasonably expect the promise to induce reliance, 2.) it does induce reliance, and 3.) injustice may be
avoided only by enforcing the promise. In other words, reliance must be actual, reasonable, and
foreseeable.
 Charities need not prove reliance.
Never applies to employment at will.
§ 87---For offers; (reasonable reliance creates an option K, so that's how courts make the promise that the
offeree reasonably relied on enforceable.) Drennan
§ 90---Promissory estoppel does not require that the promise sued upon, aside from the lack of consideration,
must be able to sustain a cause of action under a breach of contract. (Hoffman)
***Promise does not have to rise to the level of an offer. allows court to apply promissory estoppel to the
negotiations.
***Red owl represents an extreme view of what you can do if an agreement fails.
§ 139---For oral K's (Statute of Frauds)
Examples:
Promises or gifts (including among family members)
Doesn't mater whether it's risen to the level of an offer or not.
Promises of charitable contributions
Contractor making cost calculations based on a sub-contractor's bid
Revoking an at-will job offer before the employee starts the job
Promises of franchise awards
Damages
Only those damages necessary to prevent injustice are awarded.
Only reliance damages
Whatever is necessary to place promisee in position prior to the promise
General Rules
If a bargain K has come into existence between the parties, promissory estoppel cannot be used as an
alternative claim for recovery. [P should not get another bite at the apple.] A way of protecting the sanctity of
the bargain K; courts don't want PE to overtake the traditional rules of K.
If provide services to a family member, courts say that service was intended as a gift w/o expectation of
compensation. PE doesn't apply because no injustice occurred.
Avoidance of K's
Capacity to K
Infants/minors
Minors do not have the capacity to K. A K with a minor is voidable by the minor until he reaches the
age of majority. Once the minor becomes an adult, he must affirm or disaffirm the K in a reasonable
time. However, minors must pay when the K for goods/services that are necessities (food, shelter)
Upon disaffirming, a minor can get restitution of payments already made, but must return goods to the seller.
Intended to prevent unjust enrichment, but doesn't protect the seller against loss.
Defects in the Bargaining Process
Ambiguity (see above)
Mistake: A mistake is a belief that is not in accord with the facts.
Mutual Mistake: Where a mistake of both parties at the time a K was made as to a basic assumption on
which the K was made has a material effect on the agreed exchange of performances, K is voidable
by the adversely affected party unless he bears the risk of the mistake.
To determine whether the mistake has a material effect on the agreed exchange of performances, account
is taken of any relief by way of reformation, restitution, or otherwise.
When a party bears the risk of a mistake
The risk is allocated to him by agreement of the parties, or
He is aware, at the time the K is made, that he has only limited knowledge w/respect to the facts to
which the mistake relates but treats his limited knowledge as sufficient, or
The risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do
so.
A mistaken party's fault in failing to know or discover the facts before making the K doesn't bar him from
avoidance or reformation unless his fault amounts to a failure to act in good faith in accordance w/
reasonable standards of fair dealing.
Unilateral Mistake: When one party makes a mistake, to get relief, the mistaken party must show:
1.)The mistake relates to a material element of the K, and
2.)Enforcement of the K would be unconscionable, and
3.)Mistake is not one of legal duty, and
4.)Non-mistaken party will not be harmed, and
 5.)Prompt notice is given
Traditional rule: No relief; party shouldn't get the privilege of voiding K because of their own mistake.
Duress
Undue influence
Impermissible terms in the agreement (see Unconscionability)
Fraud
Inducement: Fraud in the inducement is when there is a misrepresentation of a fact which 1.)induced
reliance, 2.)reliance is reasonable, and 3.)injury occurs. A misrepresentation is an assertion not in
accord with the facts. Statements of opinion, value, and sales puffery are not considered statements
of fact. The misrep. may be fraudulent or innocent.
Whether reliance was reasonable: Big battle between whether we look at what a reasonable person would
do; or do we look at what this person did and did they act in a reasonable way?
Exceptions (not considered statements of fact for purposes of determining whether fraud occurred)
Statements of opinion [but can rise to the level of fact if the person making them is an expert]
Sales puffery
Statements of value
There is generally no duty to disclose, so not saying anything is not misrepresentation.
Exception: Other person is entitled to know the fact because of a relationship of trust and confidence
(called a fiduciary relationship)
Effect of a misrepresentation by one party inducing another to enter a K may be that the aggrieved party
may sue to rescind the K.
Execution: Fraud in the execution is when the character of the content of the document is
misrepresented.
K is void.
No relief is granted if the parties' failure to know what they signed is their own negligence/fault. Courts not
sympathetic if you don't read the K.
Under the Statute of Frauds, certain types of oral K's must be memorialized in a writing.
1.)Do I have an oral K (remember, still have to prove this)
2.)Does it fall within the Statute?
One year clause: Any K which by its terms or necessary construction, is to endure beyond a year from
the time of its making, falls within the statute.
Necessary construction--doesn't explicitly state it will go over a year by its terms but it will.
K that take 100 years to perform doesn't necessarily mean it falls w/in the statute. Don't actually look at how
long the performance takes, look at what the terms say. (person could just drag their feet.)
Exceptions
Rightful termination
If either party can rightfully terminate the K at any time or at least within a year, then not within
the statute. The right itself, even though it is not exercised, is enough to take the K out of the
statute
Breaches do not count; there has to be a rightful termination.
1 Sided Rule
If 1 party completely performs what he promised to perform in less than 1 year, then doesn't fall
within the statute.
1 party completes performance at any time, even if its been over a year.
Death
Any interest in real estate
Doctrine of Part Performance: Once inducing or knowingly permitting another to perform in part an agreement, on the
faith of its full performance by both parties and for which he could not well be compensated except by specific
performance, the other shall not insist that the agreement is void.
(1) The parties did enter into a contract; (2) that the party seeking to enforce the contract partially performed the
contract; and (3) that the performance was induced by the other party’s misrepresentations, which may include
acquiescence or silence.
Sale of goods over $500/$5000 (based on K price, regardless of actual value)
Exceptions
A specially manufactured goods most likely indicates a K.
If someone receives the goods the K is enforceable.
Surety K's---promise to answer for the debt of another
 Exceptions
If guarantor's main purpose is to benefit himself, then K doesn't fall within the statute. There is
evidence the K would logically be entered into.
Executors of wills
If an executor promises to pay the debt of the estate out of his own pocket, falls w/in the statute.
3.)Which clause does it fall under?
If the K falls under multiple clauses, use the one that is the seminal purpose of the K.
4.) Is there an exception?
5.) If not, is there a memo?
A valid writing must contain the subject matter, parties, essential terms, and a signature by the party to
be charged. Anything can be a signature as long as the party intended it to be. Signed and unsigned
documents can be combined as long as they refer to the same subject matter and transaction
6.)Promissory Estoppel Under Section 139.
Under Section 139, An oral K is enforceable notwithstanding the Statute of Frauds if it 1.)should
reasonably be expected to induce reliance, 2.)does induce reliance, and 3.) injustice can be avoided
only by enforcement. The reasonableness of reliance, extent to which it was foreseeable, and extent to
which it evidences the terms of the K are significant circumstances.
The following circumstances are significant:
-Availability of other remedies
-Extent to which the reliance corroborates evidence of the terms of the K
-Reasonableness of reliance
-Extent to which reliance was forseeable
6.)Equitable Estoppel
The doctrine stops a person from denying their statements.
Two statements a party can be held to:
1.)A statement saying they would not rely on statute of frauds; or
2.)A statement saying they would send a signed memo and then never actually sending the memo.
Using equitable estoppel can make an oral K enforceable because it's simply unfair to allow a party to make
these kinds of representations and then use the statute of frauds as a defense.
8.)Quasi K
Issues
Does K fall w/in the statute?
Is there an exception, can I get it out of the statute?
If not, is there a memo?
Do I need to connect different pieces of paper?
Do they all refer to the same transaction?
If no memo, look for equitable estoppel.
If can't find EE, look for §139 PE.
Prove that relied on K
Last ditch effort of quasi-K
1 party unjustly enriched.
How should the K be interpreted?
Fact pattern: additional "agreements" "assurances" etc. made before or during the drafting the written K but not
included in the writing. Can these be made part of the K so as to be supported by consideration?
Under the Parol Evidence Rule, If an agreement has been reduced to a writing which the parties intend to be
the final and complete expression of their mutual agreement, then any evidence of a related earlier or
simultaneous oral or written expression of agreement is not admissible in court to vary, alter or amend the
terms of the writing.
1.)Is there any indication of the outside assurance in the writing?
If this is not present, it is likely that the oral assurance will not be let into the K.
2.)Is there separate consideration for the outside assurance?
Outside consideration makes it further unlikely that the outside assurance was intended to be included in the K.
3.)Is the K final or not final
Question for Finality is whether the parties intended the writing to be final K; usually does not become an issue,
we are talking about final written K's.
4.)Is the K complete or incomplete? [up to the court; always will be arguable]
Old test: four corners, intent
 Naturally Included Test (middle-ground CL test): If the term in question would naturally be included in the K, and
it's not, then court will infer that the parties didn't intend to have it in the K.
Would the assurance have naturally been included in the writing; is this the kind of clause or statement that
would naturally have been included in this particular subject matter K. *If they would have naturally included it
and they didnt, they must not have wanted it there
Certainly included term (UCC test, more modern/majority view): If the term in question would certainly be
included, and it wasn't, then usually it means the parties didn't intend to have it there.
Ask: would this particular promise be the kind that would certainly be included?
P would rather argue under this test, easier to get by.
Since the K is Final and Incomplete, the assurance may be added but it cannot vary the written K.
5.)Does the evidence add or vary.
Under the Express contradiction test, an assurance varies the writing if it expressly contradicts a term of the K.
Under the Reasonable harmony test, an assurance varies the writing if it is not in reasonable harmony w/ the
writing and the terms in it.
*You won't have enough info to answer the Q's for parol evidence rule, you just have to say "if a court decides" and
moves on
*Parol evidence rule & Statute of frauds never cross paths; wouldn't make sense.
Conditions to Performance (Dealing w/ bilateral K's; promise for a promise+ extra language)
What is the extra language?
I.D. the basic promises of the K; the extra things are what we dealing with here.
To determine the meaning of extra language in a K and hence who had the duty to do what, the court will
try to determine what the parties intended. Extra language can be either an ECP, Promise, Promissory
condition, or an ECP w/ a promise to bring it about.
To determine this, courts look to a number of factors (what did the parties intend)
Language of the K itself
Whether payment precludes further performance
Good faith of the parties
Reason for delay or lack of performance (emergency, unforeseeable condition)
An Express Condition Precedent is a condition expressly written into the K that must occur 100% in
order to trigger the duty of performance in the other party. A party can waive an ECP if it operates in
their favor. If it does not occur, no duty is triggered, and the K is over.
"IF" likely indicates an ECP
Ex: "Providing the records is an ECP to my duty."
A promise is a clause in which one party promises to bring about a result. If the party fails to do so, it is
a breach, and the court must decide whether it is material or immaterial. If it is material, the non-
breaching party can cancel and sue for remedy. If it is immaterial, they must continue performance, but
can sue for damages.
Is the breach material or immaterial? (remember court decides this too)
Always ask how serious the breach is. Can't go anywhere without knowing this.
Look to purpose of K; did breach frustrate the purpose? The more willfull/intentional the breach is the more
likely it will be found material. Was there a reason for it?
Ex: K to install brown roof, but some shingles are yellow. Court finds material breach. Doesn't mean that the
court is going to look into subjective concerns; look for an economic reason. Wont base it on likes/dislikes.
Ex: "You promise to install a brown roof on my house."
Promissory condition
Combination of promise and ecp, not only is one party making the event an ecp, but making the other party
promise to bring it about. court doesnt even have to go into the q of how serious the breach is, because the
other party is already out of the K. Only used where the event is critical to the one party's performance. Also
critical to the party's ability to make money.
Ex: "I will do x on the ECP that this result occurs, and you promise to bring it about."
-Have to look at language and context, it can give you a clue to what the parties intended.
-Just because one party had control over the event doesn't mean its automatically a promise.
If the parties are of some sophistication and understand the difference between a promise and a condition, court
will not disturb the parties' intent. If there is language indicating their intent, court will go with that
Only run into ECP when there is two basic promises + additional language. have to have a K first, then when you
start adding things this issue is created.
What is the order of performance?
Constructive Conditions of Exchange
Constructive Condition Precedent (Different fact situation & totally different issue than ECP v. Promise)
Bare promise to perform for a bare promise to perform; What is the order of performance?
Constructive= court imposed; imposed because parties failed to specify who goes first.
Under the doctrine of Constructive Conditions Precedent, unless expressly stated, the performance
that takes time goes first before the performance that can be performed in an instant. Either complete or
substantial performance will trigger the other parties duty to pay.
If substantial performance---> immaterial breach--->duty to pay is triggered, but may sue for damages.
Less than substantial---> material breach--->duty to pay is not triggered.
The court determines materiality by looking at the level of performance, reasons for the breach, and the
apprehension created in the mind of the non-breaching party.
Ex: Promise to paint the house, promise to pay. "Performance of the promise to paint is a CCP to the
performance of the promise to pay
Paints the whole house except one railing.
Breach of K
If painting the house is substantial performance, then the duty to pay is triggered and the customer
must pay.
If painting the house is not substantial performance, then the duty to pay is not triggered and the
customer does not have to pay.
For paying a material breacher, depends on if the breach was willful, deliberate, or intentional, and if
you were unjustly enriched.
If we decide a material breacher shouldn't be payed on the K, Should we allow a material breacher to
recover anything? the only way we can do it is with quasi K.
Would only get reasonable value of your services; does not include profit.
Under the doctrine of Constructive Conditions Concurrent, unless expressly stated, when both
performances may be instantaneous, the tendering of performance triggers the other parties performance.
Tendering is being ready, willing, and able. If a party is unprepared to perform at tender, they are in
breach.
1 big K with progress payments along the way
Many parts to the performance, money payed along the way. Money paid is not an agreed equivalent to the
work being done.
Divisible or installment (usually sale of goods) K's
Payments made as agreed equivalents to the performance completed thus far. Basically a bunch of smaller K's.
[Performance] [Payment=to that performance]
If one party fails to perform a portion of the K, its a breach:
But ***Is the breach a material breach of the whole K.
Other party can't walk away unless it was a breach of the entire K.
If one payment wasn't made, was there a material breach?
Look to whether contractor needed money to perform, whether it seemed indicative that no further money was
forthcoming, etc.
Changed Circumstances; Defenses to breach of K.
Impracticability: If the existence of a specific thing is necessary for the performance of a duty, its failure
to come into existence, destruction, or such deterioration as makes performance impracticable, is an
event the non-occurrence of which was a basic assumption on which the K was made.
Question boils down to what is required in the contract. Is it really essential to the K or can it be replaced?
Was a music hall's existence required by the K?
Was a particular cow's existence required by the K?
K to sell a cow
All cows killed in flood.
Must go out and buy a cow or respond in damages.
K to sell Betsy the cow
Betsy struck by lightening and dies
Can use defense of impracticability because its a specific thing; no way K can possibly be fulfilled now.
Who assumed the risk?
Wegematic: Seller assumed the risk of producing a computer when they put it on the market; buyer just
wanted to buy a computer.
Frustration of Purpose: After a K is made, a party's principle purpose is substantially frustrated without
his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the
 Frustration of Purpose: After a K is made, a party's principle purpose is substantially frustrated without
his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the
K was made, his remaining duties to render performance are discharged, unless the language or
circumstances indicate the contrary.
Performance can still occur, its just, why bother? Purpose the K was executed to achieve no longer exists.
Change in price not frustration because it's merely a risk of the marketplace.
An Anticipatory Repudiation can be made with words by an 1.)Express, 2.) unequivocal statement by a party
that she will not perform the K 3.)made before the performance date. Or it can be 4.)implied by conduct
whereby the party puts it out of their power to perform the K.
Non repudiating party has two options:
1.)Cancel immediately and sue for damages, or
2.)Wait until the performance date and sue for breach.
Works best if unsure if its actually a repudiation.
Court does not look at material vs. immaterial
May give the right to cancel immediately
Revocation
Can be withdrawn unless the other party relied on the repudiation.
*Issue that still troubles the courts: Whether Non-repudiating party has a duty to mitigate damages.
Most courts prior to code: No obligation
*Breach occurs on the performance date; Repudiation occurs before.
Remedies for Breach of K
Damages: The purpose of damages is to put damaged party in a position that full performance of the K
would have.
Two types
1.)General (direct)---> Flow naturally from the breach
2.)Consequential (indirect): Arise from a.)special circumstances existing b.)at the time the K is entered into.
*May not always be able to tell which kind of damages it is.
All damages must be 1.)foreseeable, 2.)certain, and 3.)mitigated.
1.)Foreseeable
General damages are always foreseeable (flow naturally from the breach).
For consequential damages to be foreseeable, the breaching party must know of have reason to know of
the special circumstances existing at the time the K was entered into.
2.)Certain: 3 components
1.)Damage actually occurred
2.)The breach caused the loss
3.)You have to approximate the amount lost; don't have to have to be down to the penny.
*New business rule: New business could not establish damages (lost profits) with certainty; loss could be
caused by any number of things. Impossible to determine.
Old: Strictly applied
Now: Much more flexible; can use profits you make at a later point to establish damages you suffered
when you were not open.
3.)Mitigated
Must use reasonable efforts to keep damages to as minimal as possible given your knowledge and the
circumstances (market conditions)at the time the breach occurred.
-cant sit around and watch damages pile up because you want to get revenge.
Formulas-Seller's breach
Traditional: KP v. MP
KP: $1.00/widget, 1000 widgets
Buyer------------------Seller (Deliver on May 1); No delivery, seller in breach
Buyer goes out and buys widgets for 95 cents each. Buyer doesn't get damages; he's actually in a
better position than had the K been performed.
-Time for determining market price was as of the date of performance. Puts the buyer in a position that
performance would have.
UCC: KP v. CP
Buyer buys widgets for $1.10<----cover
Damages would be .10/widgets
*Formula is difference between K price and cover price
-Cover has to be done within a reasonable time
 -Cover has to be virtually identical to the goods you K'd for.
*Both formulas are available. But if a buyer has covered, must use UCC. Unless sellers breach was
egregious and willful.
Buyer's breach-basically the same
KP v. MP
KP v. Resale price
Specific performance is available as a remedy when the remedy at law is inadequate, i.e. damages would
not be sufficient. This is the case when the subject matter is unique, or in other proper circumstances,
meaning it would be difficult, expensive, time consuming to find a similar K elsewhere in the marketplace.
-Real estate K's
-Crops
Equitable remedy, meaning:
1.)Will not specifically enforce a K they think is unconscionable
2.)Generally won't grant specific performance if it means that they would have to monitor the performance.
3.)Will not enforce personal service K's; otherwise it would be involuntary servitude.