Topic Definition Prewrite

Formation and Determining whether a

Enforceability: contract was formed
determines its enforceability

UCC The UCC applies to the sale

applies to the sale of goods
Moveable goods
Common Law Contracts for services, real
estate (land), insurance,
intangible assets, and
employment.
Mutual Assent and Mutual Assent
Consideration
______________________
of goods (moveable goods)
and since this is for the sale
of goods, the UCC applies
For contracts that are for the
sale of Land or services
(other than the sale of goods)
the common law applies
Mutual Assent is the meeting
of the minds.
_____________________

Offer Offer is defined as is the

manifestation of willingness
to enter into a bargain, so
made as to justify another
person in understanding that
his assent to that bargain is
invited and will conclude it.
______________________
Consideration: Consideration is described as
bargain for exchange. It has
to be reciprocal of
inducement. Each party
wants what the other has and
giving what we have to get
what they have. There is
Quid pro quo/ exchange
going in both directions

Steps for Determining
consideration.
In determining consideration,
one must ask:
First, has there been
bargained-for-exchange?
Is there something that both
sides are giving in exchange
 for what the other has?

Second, one must think of

the potential wrinkles

And third, ask whether the

things that are claimed to be
consideration sufficient
enough.
A conditional gift occurs
when a party places a
condition on how the other
party can receive gift
When dealing with
Potential Wrinkles: conditional gifts an
additional step to ask is
Conditional gifts whether condition will
benefit promisor? If it does
that will move it from
conditional gift and create
valid consideration.

Illusory promises
Illusory promises are when
the promisor obtains full
discretion to perform.
Illusory promises do not
create valid consideration
Past and moral Past consideration is when a
consideration party takes action before they
knew about inducement.
Courts will not allow
recovery on past
consideration because if the
thing/action has already
taken place it could not have
induced action (Reciprocal
inducement)
Moral consideration is when
 a party points to moral
obligation to try to make
promise enforceable.
Courts have however
_____________________ regarded these as generally a
Nominal consideration losing argument.

While The general rule is

that courts don’t inquire into
the adequacy of
consideration. Courts have
determined that Nominal
Such as $1 to bind promise
or for a particular item like
car or house are not
sufficient
_____________________
______________________ Recited consideration is
_ something in the agreement
Recited consideration itself that says this is our
consideration such as value
received.
Bare or generic recitals that
there has been consideration
would just be disregarded by
courts.
It is only if you do have
actual recital that’s valid you
can use to create presumption
of basis and enforce contract.

Types of contracts Bilateral In a bilateral contract each

party makes a promise that
induces the other and both
parties perform.

Unilateral In a Unilateral contract one

party makes promise and the
other renders some sort of
performance. Acceptance in
a unilateral contract is
effective only among
completion.
______________________ ______________________
_ An option contract is offer
Option which could delay accepting
w/out losing the power of
acceptance even if the offeror
should attempt to revoke it in
the meantime.
Usually, the offeree gets
some option to purchase held
for some compensation to
offeror.

You can create an option

contract with ordinary valid
consideration as well as with
nominal consideration, if an
amount is actually paid.

You can also create through:

Rest. 87(1), UCC 2-205 and
Rest. 45.

the power of acceptance

under an option contract is
not terminated by rejection or
counteroffer, by revocation,
or by death or incapacity of
the offeror, unless the
requirements are met for the
discharge of a contractual
duty.

In an option contract offeree

reliance insufficient

In an output contract one

Output party agrees to buy
everything and the other
agrees to supply everything
to that party. Courts will
uphold/recognize these
contracts and if the contracts
don’t specify good faith
courts will imply it
 themselves
___________________

Under the firm offer rule

Firm offer Rule there is an offer by a
merchant to buy or sell goods
in a signed writing which by
its terms gives assurance that
it will be held open is not
revocable.

The key elements for a firm

offer rule : Person making
the binding option is a
Merchant, it gives assurance,
is signed writing (no
consideration needed) and
time stated or reasonable
time, but never longer than 3
months

Acceptance Definition: Acceptance of an offer is a

manifestation of assent to the
terms thereof made by the
offeree in a manner invited
or required by the offer.
An offeree's power of
Termination: Restatement acceptance may be
36 terminated by either rejection
or counteroffer by the
offeree, lapse of time,
revocation by the offeror,
and death or incapacity of the
offeror or offeree.

Indirect Revocation An offeree’s power of

acceptance is terminated
when the offeror takes
definite action inconsistent
with an intention to enter into
the proposed contract and the
offeree acquires reliable
information to that effect.
Counteroffer

A counteroffer is an offer
made by an offeree to his
offeror relating to the same
matter as the original offer
and proposing a substituted
bargain differing from that
proposed by the original
offer. An offeree's power of
acceptance is terminated by
his making of a counteroffer,
unless the offeror has
manifested a contrary
intention or unless the
counteroffer manifests a
contrary intention of the
offeree.

______________________ ______________________
Mirror Image Rule
In the mirror image rule
acceptance must mirror the
offer exactly. Any change,
even minor will be viewed as
a counteroffer not an
acceptance.
However, when it is a mere
request to change terms in
the contract, the mirror
image rule does NOT apply
and will be treated as
acceptance.

______________________ ___________________
_
Under the UCC the Last shot
Last Shot Rule (UCC) rule holds a contracting party
who makes no objection
impliedly accepts any
additional terms contained in
the final counteroffer, which
 is typically last form sent
between the parties in the
“battle of the forms.”
Battle of the forms:
In the battle of the forms if
both parties are merchants,
the forms battle unless
explicitly stated otherwise by
one of the parties
If one of the parties is not a
merchant then no battle of
the forms and the additional
terms will be mere proposals
unless accepted by non-
merchant.

Between merchants such

terms become part of the
contract unless:(a) the offer
expressly limits acceptance
to the terms of the offer;(b)
they materially alter it; or
(c) notification of objection
to them has already been
given or is given within a
reasonable time after notice
of them is received

Promissory Estoppel When lacking consideration Promissory estoppel is

essentially about enforcing
promises based on reliance
when there is no
consideration.
For there to be Promissory
Estoppel there MUST be: a
promise and reliance that is
reasonably foreseeable,
actual, and detrimental
(injustice)
Certainty When applying certainty
even though a manifestation
of intention is intended to be
understood as an offer, it
cannot be accepted so as to
form a contract unless the
terms of the contract are
 reasonably certain.
The terms of a contract are
reasonably certain if they
provide a basis for
determining the existence of
a breach and for giving an
appropriate
____________________

Postponed Bargaining is
Agreements to agree at a
later time.
_______________________
The Causes and Types of
Uncertainty are ambiguity,
where a term has two clear
meanings but don’t know
which one should apply or
syntax where a sentence
could be read two different
ways.
The second type is vagueness
and in occurs in a situation
where word is general, and
meaning is unclear around
term

Interpretation & Terms For interpretation of terms

first look at intrinsic
evidence (four corners of the
contract, dictionary
definitions, the parties’
purposes if evident) to
determine interpretation
term.
If none is established then
they will look at reason to
know, actual knowledge, or
no reason and know about
the other parties attached
meaning.

Look for actual knowledge

first, then reason to know
because the underlying
 principle is to determine the
more culpable party.

As a practical matter, it is
very rare that neither
meaning would prevail

The parties if they so intend

Open price term can conclude a contract for
sale even though the price is
not settled. In such a case
the price is a reasonable price
at the time for delivery if
1.nothing is said as to price;
or 2.the price is left to be
agreed by the parties and
they fail to agree
Intrinsic is the plain meaning
Interpretation tools of a term. Context
(surrounding language,
reading contract as a whole)
and the purpose.

Extrinsic Evidence has two

types of approaches.
First the Classical approach
required courts to establish
ambiguity before considering
extrinsic evidence.

The Modern (and for

purposes of this class
majority) approach lets
extrinsic evidence in to
establish the ambiguity

Formation Defenses: Statute of Frauds The Statute of Frauds

requires that certain types of
contracts be in writing to be
enforceable.
And is typically asserted as a
defense against enforcement
The Statute of frauds applies
 to land and one-year
provisions.
Three questions to ask to
determine if the statute of
frauds is established:
Does the statute of frauds
apply? If so, is the statute of
frauds satisfied? Meaning
that it must be in writing
signed by the party to be
charged. And Is there an
exception that allows
contract to be enforced
despite a lack of writing

Reliance or complete
performance (for one-year
provisions) will be
considered to satisfy statute
of frauds.

The UCC Statute of Frauds

UCC Statute of Frauds Applies to sale of goods over
$500 and one-year provision
does not apply to the UCC
statute of frauds.

To satisfy the UCC statutes a

fraud there must be a writing
signed by the party to be
charged (only has sufficient
to indicate contract made
between parties, but don't
need specifics except for
quantity terms)

There are exceptions to UCC

statute of frauds which are:

If there is a Special
manufacture and goods have
been set aside for buyer or
specially made
Admissions (which does not
apply to common law)
satisfies the UCC statute of
 frauds if the party who
enforcement is being sought
against admits contract was
made

Part or complete
performance

Under UCC statute of frauds

there is a special rule for
merchants which states that
either party can sign the
written agreement and it will
be deemed satisfied as long
as the other party knows of
the signed writing.

Performance and Breach Parol Evidence Rule

Parol Evidence Rule governs
when extrinsic evidence is
allowed in to contradict or
supplement a final writing

To determine first ask How

complete is it on its face?

Certainty of terms and the

intention of the parties are
key to determining whether
or writing is fully or partially
integrated

Where are writing is fully

integrated , no extrinsic
evidence of contradictory or
supplemental terms may be
admitted.

Where are writing is partially

integrated extrinsic evidence
may be admitted regarding
supplemental terms, but not
contradictory terms.
A writing is partially
integrated where it is
intended to be final but is not
 complete

A writing is partially
integrated where a term is
left out which might
naturally be omitted from the
writing or is agreed to for
separate consideration

Then ask does it include a

merger clause?

A merger clause makes clear

that the written contract is
the complete agreement
between the parties as to a
specific transaction, and any
other agreement between the
contract parties is superseded
by the written contract.

A merger clause states that

are writing is intended to be
final and completed but it is
not necessary for writing to
be considered completely
integrated

Then consider extrinsic

evidence, including any
consistent additional terms

Is there separate
consideration?
Is there an explanation for
why the term might naturally
have been omitted?
Implied Obligation of The basic concept of implied
good faith obligation of good faith is
that courts want people to be
honest and fair
rule statement: there is in
every contract an implied
obligation good faith and fair
dealings that can't be
 disclaimed
To prove bad faith there must
be ill intent/ill motive and
trying to deprive the other
party of the fruits and
benefits of the contract
Minority Voidable Contracts with minors are
voidable (can be voided or
confirmed at age of majority)

The Infancy Doctrine was

meant to protect minors from
their lack of judgment &
squandering their wealth
through unfair contracts with
adults who take advantage.

Courts now use then Dodson

Exception which states that if
a minor is
returning/rescinding a
contract, the minor’s
recovery is subjected to the
minor’s use of items.

This exception is only if

there was no fraud or
misrepresentation.

Further Exceptions:
D For necessities: rescission
not allowed, but price will be
set at reasonable value

For misrepresentation:
rescission not allowed

For willful damage:

rescission allowed, but
damage must be paid for
(even out of pocket)
Mental Capacity Analyze both Under the Volitional Test a
person lacks capacity to
contract if they are unable to
act in a reasonable manner in
and the other party is aware.
 Volitional test Requires
reason to know.

Under the Cognitive Test the

person lacks sufficient
mental ability to understand
the nature and consequences
of the transaction.
Under the cognitive test the
other party does not have to
know

Both tests require proof

person was too weak in mind
to execute deed with
understanding it’s meaning
and courts will usually accept
proof only through medical
experts.
The burden of proof falls on
the party seeking to avoid
contract
Duress In order to meet the elements
of Duress, there must be an
Improper threat , no
reasonable alternatives and
the victim is actually induced
to enter into contract because
of duress

Misrepresentation A misrepresentation is an
assertion that is not in accord
with the fact

Fraud includes intent to

induce and consciousness of
falsity (either the party
making the claim knows it to
be true, or don't have the
actual confidence they
imply)
Materiality is either likely to
induce a reasonable person or
likely to induce a particular
recipient (person who really
 cares about the specific
object //thing etc.)
Conditions Express conditions are held
by the court to be of strict
enforcement (substantial
performance will not suffice)
and plaintiff must suffer
damage or harm to sue and
recover

Promissory conditions
involve making a promise to
make a condition happen
ii. Example: I promised
that I would deliver the items
on Sunday at 7:00 PM

While ordinary conditions

performance just has to
happen
Material breach
Material Breach is about the
gravity /seriousness of the
breach

A total breach is when a

material breach occurs but
the breaching party has not
cured it
Repudiation A repudiation is
A statement by the obligor to
the obligee indicating that the
obligor will commit a breach
that would of itself give the
obligee a claim for damages
for total breach . . . , or a
voluntary affirmative act
which renders the obligor
unable or apparently unable
to perform without such a
breach.

Anticipatory repudiation
requires the party saying they
are unable to perform and it
must be clear and
 unequivocal
Modification Modification is a change in a
contract that was previously
formed under different

Elements to modification
First check for new
consideration first. Then look
for unanticipated
circumstances (common law)
or legitimate commercial
reason (UCC)

Consider duress defense

when you see a modification
in response to a threat statute
of frauds
Changed circumstances Unconscionability In order to satisfy
unconscionability there needs
to be both procedural and
substantive unconscionability
and courts look at them as a
sliding scale. Meaning the
more you have of one the
less you need of another.

Procedural
unconscionability:
Involves a lack of
meaningful choice or defect
in bargaining process
(Confusing or hidden terms
or deceptive practices )

can possibly apply to both

the duress / fraud claims and
unconscionability. If
combining/applying both,
then make sure the main
elements of duress/fraud are
satisfied and the non-
important factor(s)either
one's not satisfied then you
go to unconscionability and
run the test.
 Substantive
unconscionability is about
the fairness in the terms,

Courts do have to take into

account business
justifications for the terms
which can be that the unfair
terms are the best way for
sellers to protect themselves.

______________________
______________________
_ Impossibility
Traditional Impossibility
Impossibility began with supervening
illegality, death or disability
of essential actor, and
eventually destruction of
essential thing

Unique vs. fungible goods

Unique -Unique piece of art,
rare one of a kind, specified

Fungible- Have to
distinguish between general
quantity of goods versus
specified quantities

Literal impossibility- The

thing that is promised simply
could not be performed at all
Objective impossibility- No
one could do it
Subjective impossibility- I
cannot do it

Impracticability occurs when

the burden of performance
has become more extreme
Impracticability
Impracticability is typically
asserted by sellers because
they won't be able to perform

Elements:
Remoteness of event, Party
seeking excuse not at fault,
and Nothing in the particular
language and circumstances
puts burden on this party.

Frustration of Purpose
Is when nothing about the
performance or not being
Frustration of purpose able to perform, there just is
no more value because
circumstances have changed.

Frustration of purpose is
Typically asserted by buyer
Because courts usually aren't
sympathetic to buyer raising
impracticability claim

For frustration Determine:

Is there a shared purpose?
and if so that purpose has to
be virtually worthless

*They would more remote

the more courts will say that
you can satisfy the second
element*

Force Majeure clauses are

used when an unforeseeable
circumstance that prevents
Force Majeure clauses someone from fulfilling
contract, and the parties have
a clause that determines what
they will do if a breach
 happens
Four elements as test:
Performance is impracticable
/ purpose substantially
frustrated, Nonoccurrence of
event was a basic assumption
on which contract was made,
Not the fault of the party
seeking excuse, Party
seeking excuse has not
agreed to perform despite the
impracticability or frustration

Remedies Specific Performance Courts use discretion and

weigh three factors to
determine specific
performance: the Uncertainty
of terms, hardship on the
defendant, and the burden of
supervision on the court

Expectation Damages Expectation damages are

enough damages so you can
get substitute performance
They involve reliance + lost
profits

Reliance Reliance involve out of

pocket expenditures and are
typically sought if lost profits
are too speculative.
They are samages that put
plaintiff back to the position
they would have been if the
contract was never breached.

Consequential Damages can

Consequential be recovered only if at the
time of the contract being
made a reasonable person
would have foreseen the
damages of the breach
 when one party breaches a
contract and the non-
breaching party now cannot
fulfill a different contract that
they have with another party
because this contract was
breached.

_______________-______
Incidental Incidental damages are
typically for the sale of
goods and involve the cost a
party had to incur for goods
because of the breach but
didn't expect to incur them

Liquidated damages are

Liquidated awarded when is a provision
agreed to by both parties
That covers the cost/results if
one party breaches.

Provision that determines

what happens if a party
breaches and court will look
at reasonableness

Restitution requires looking

for value in the contract
Restitution And are awarded Defendant
was unjustly enriched
because of the breach

Losing contracts-
*For purposes of this class:
No recovery for precontract
reliance or forgone
opportunities

If awarded Recission the

Recission parties are left as if the
contract had never been
made. Goes hand and hand

Mitigation of Damages
with restitution.
Mitigation of damages
occurs when the non-
breaching party acts
reasonably to avoid extra
costs/ substituting

Determine what would be

reasonable for the non-
breaching party to do
Lost Volume Sellers UCC a seller can use Lost volume
sellers against the buyer that
refuses goods because
although seller is able to
resell goods they lose profit
because of the breach.

If it had not been for the

breach they would have been
able to sell 2 instead of 1
or make twice the amount of
profits
Two-part test involves
satisfying that the Seller had
capacity to perform both
contracts and that the Seller
probably would have entered
the second contract even if
original buyer hadn’t
breached
Formulas A. The General Formula
i. Direct damages +
consequential damages +
incidental damages – avoided
or avoidable losses =
ANSWER

Substitute Calculations
For injured sellers:
Contract price – substitute
price
OR
Contract price – market price
For injured buyers:
Substitute price – contract
price
OR
Market price – contract price