I.

THE CONCEPT OF A CONTRACT Three interests to be protected under contract law: Restitution - the plaintiff has, in reliance on the promise of the defendant, conferred some value on the defendant. o The object here may be termed the prevention of gain by the defaulting promisor at the expense of the promisee; more briefly, the prevention of unjust enrichment. Reliance - the plaintiff has, in reliance on the promise of the defendant changed his position. o The object is to put the plaintiff in as good a position as he was in before the promise was made. Expectation - reliance by the promisee or enrichment of the promisor o The object is to put the plaintiff in as good a position as he would have occupied had the defendant performed his promise. o This law of contracts of compensation from loss of expectation is only there because there is a contract in place. This makes it different from the law of torts. o This is the standard damages for breach of contract. The three interests distinguished do not present equal claims to judicial intervention. The restitution interest, involving a combination of unjust impoverishment with unjust gain, presents the strongest case for relief. On the other hand, the promisee who has actually relied on the promise, even though he may not thereby have enriched the promisor, certainly presents a more pressing case for relief than the promisee who merely demands satisfaction for his disappointment in not getting what was promised him. A. FREEDOM OF CONTRACT 1. Liberal Autonomy 2. Contract Distinguished from a Tort The purpose of the contract duty is to secure the receipt of the thing bargained for. The duty in tort is only occasionally to do or refrain from doing a particular thing, and even then the doing or non-doing of the thing is not the end or the purpose of the duty itself. 3. Evaluating Freedom of Contract B. EXPECTATION 1. The Aristotle Method

Hawkins v. McGee (1920), perfect hand case Facts: doctor (1) guarantees 100% perfect hand, and (2) predicts short hospital stay. Disability results from operation. - breach of contract for guaranteed perfect hand. no guarantee, only medical opinion. Holding:1) Perfect hand guarantee was to induce operation => reliance on promise. 2) short hospital stay promise was only medical opinion. Trial ct. erred in trying to restore status quo (ie torts). Contracts is about preserving the expectation: expectation damages (difference between value of perfect hand and hand delivered 2. Doctrinal Indeterminacy II. ENFORCEABILITY Three types of enforceable promises: 1. supported by consideration 2. supported by reliance 3. necessary to avoid unjust enrichment (restitution) Goals: economic efficiency, promote gains of trade, promote deliberation A. CONSIDERATION Performance or the promise of a bargained-for exchange. Use if..then test to make sure consideration exists. First promise induces second promise. If no consideration exists = no remedy look to 2-306 Pre-existing duty is not consideration 1. Donative Promises Gifts promises are unenforceable, because no consideration (no detriment to promisee). Doctrine of substance, not formality. o Past consideration cannot make exchange for something already received. o Nominal consideration not really consideration, just a formality trick Dougherty v. Salt(1919), received promissory note from aunt,, payable at death or before. Holding: Note is unenforceable due to lack of consideration, this was a gift promise. Gift promises are not supported by consideration. What is it about a gift promise that should make them unenforceable: You want to give the person the right to change their mind. Society wants to insure there is gratitude for gifts. Ability to respond to change circumstances. 2. Bargained-for Exchange TEST: Identify the Promise 2

Identify the promisor/promisee Detriment Analysis: o Is there a detriment to the promissee? o Is the detriment bargained for? Is it the thing that induced the promise? o Is the promise bargained for? Is it the thing that induced the detriment? o (Promisor wanted the detriment badly enough to exchange the promise for it.) If answer to any is NO the contract is not supported by consideration!!

Hamer v. Sidway, uncle (decedent) syas hell pay nephew $5000 if he quits drinking,etc. Holding: Nephews sacrifice/detriment = consideration. Forbearance of legal right is sufficient consideration, even if it is beneficial. Uncle didnt have detriment cant say intangible increased happiness of having a clean-cut nephew is enough to support consideration, otherwise all gift promises would be enforceable! Spann thinks this case is wrong and this was donative intent on the uncles part. 17. Requirement of a Bargain. (1) Except as stated in Subsection (2), the formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration. Requirement of Exchange; Types of Exchange. (1) To constitute consideration, a performance or a return promise must be bargained for. (2) A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise. (3) The performance may consist of (a) an act other than a promise, or (b) a forbearance, or (c) the creation, modification, or destruction of a legal relation. Consideration as Motive or Inducing Cause (1) The fact that what is bargained for does not of itself induce the making of a promise does not prevent it from being consideration for the promise. (2) The fact that a promise does not of itself induce a performance or return promise does not prevent the performance or return promise from being consideration for the promise. 3. Adequacy of Consideration Cannot question the adequacy (value) of the consideration must respect the subjective value of parties. Batsakis v. Demotsis, during war, agrees to give $25 for $2000 loan. Holding: Parties are allowed to assign their own values, freedom of contracts. Restatement 79(b) if there 3

71.

81.

is consideration, no requirement of equal value in exchange. This looks like a real bargain, not donative intent. a. Mutuality Need to have agreement of both parties to be bound; otherwise , no consideration. Essentially just another way of saying no detriment to the promisee = illusory contract! UCC 2-306 Output, Requirements and Exclusive Dealings (1) requirement Ks: ok to be indefinite if good faith: the quantity is simply the actual good faith output or requirements of the particular party. However, will not be enforced if the quantity is unreasonably disproportionate to estimate or to normal requirements in industry. Both consideration and mutuality of obligation exist. (2) Exclusive Ks impose an implied duty of good faith on seller to sell the goods and on buyer to promote the sale. Note that mutuality of obligation seems to be a superfluous doctrine. It does not accomplish anything that is not already accomplished by the doctrine of consideration. Wood v. Lucy, Lady Duff-Gordon, contract that would give exclusive right to market her endorsements in exchange for fee form what he sells. Holding: Implied duty of to sell reveals exchange by to pay. Cardozo espouses UCC view, upholding illusory Ks freedom of Ks. b. Undercurrents (1) Fossilization (2) Legitimization Legitimation is the process of making something seem proper or appropriate to the members of a relevant culture. 4. Good Faith There are several common types of contracts in which some variant of the implied obligation of good faith is often used to avoid consideration and mutuality problems. These include exclusive dealing contracts; requirements and output contracts; contracts containing personal satisfaction or termination clauses; and modified contracts. In each type of contract, the implication of a good-faith type requirement provides constraint that might otherwise be absent. 5. The Future of Consideration B. RESTITUTION

1. Quasi Contracts Quasi contracts are fictitious contracts whose existence the law implies in order to prevent unjust enrichment Cotnam v. Wisdom Doctor who provides emergency treatment to an accident victim is assumed to be responding to the lattes request and can therefore recover the fair value of her professional services. 2. Elements of a Restitution Claim The first three sections of the Restatement of Restitution describe the essence of a cause of action for restitution: 1 Unjust Enrichment A person who has been unjustly enriched at the expense of another is required to make restitution to the other. 2. Officious Conferring of a Benefit. A person who officiously confers a benefit upon another is not entitled to restitution therefore. Exception: Emergency : 1. Immediate action is required. 2. Advance assent is impracticable. 3. The claimant has no reason to believe that the recipent would not wish for the action to be taken. 3. Tortious Acquisition of a Benefit. A person is not permitted to profit by his own wrong at the expense of another. Section 4 of the Restatement of Restitution provides for remedies to effectuate restitution including self help and judicial decrees issued by courts of law and equity. Section 5 of the Restatement of Restitution provides that the proper form of legal action for a restitution claim is an action in general assumpsit, or an action in contract (as opposed to tort), or other appropriate form of action. Restatement (2d) of Contracts describes some of the ways in which restitutionary concepts are incorporated into the law of contracts. 370. Requirement That Benefit Be Conferred A party is entitled to restitution under the rules stated in this Restatement only to the extent that he has conferred a benefit on the other party by way of part performance or reliance.

 371. Measure of Restitution Interest If a sum of money is awarded to protect a party's restitution interest, it may as justice requires be measured by either (a) the reasonable value to the other party of what he received in terms of what it would have cost him to obtain it from a person in the claimant's position, or (b) the extent to which the other party's property has been increased in value or his other interests advanced. 373. Restitution When Other Party Is in Breach (1) Subject to the rule stated in Subsection (2), on a breach by nonperformance that gives rise to a claim for damages for total breach or on a repudiation, the injured party is entitled to restitution for any benefit that he has conferred on the other party by way of part performance or reliance. (2) The injured party has no right to restitution if he has performed all of his duties under the contract and no performance by the other party remains due other than payment of a definite sum of money for that performance. 374. Restitution in Favor of Party in Breach (1) Subject to the rule stated in Subsection (2), if a party justifiably refuses to perform on the ground that his remaining duties of performance have been discharged by the other party's breach, the party in breach is entitled to restitution for any benefit that he has conferred by way of part performance or reliance in excess of the loss that he has caused by his own breach. (2) To the extent that, under the manifested assent of the parties, a party's performance is to be retained in the case of breach, that party is not entitled to restitution if the value of the performance as liquidated damages is reasonable in light of the anticipated or actual loss caused by the breach and the difficulties of proof of loss. 3. Promissory Restitution past consideration, moral obligation, material benefit Mills v. Wyman, sues for promise to pay for caring for dying son. Holding: Past consideration promise given after detriment, promise not relied on. No inducement, no bargain, no reliance. Webb v. McGown, jumps with pine block to save life and promises life payments. Holding: Moral obligation is enforceable when promisor receives a material benefit. Material benefit exception. To avoid unjust enrichment, restitution quantum meruit. Extra: If had chance to bargain for life he would have made this deal.

 86 Promise for Benefit Received (1) A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the extent necessary to prevent injustice. (2) A promise is not binding under Subsection (1) (a) if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or (b) to the extent that its value is disproportionate to the benefit. 4. Non-promissory Restitution Martin v. Little, Brown & Co. - As a general rule, volunteers have no right to restitution C. RELIANCE Promises without consideration can be enforced if they were relied upon. Consideration is not always necessary if the promise was reasonably relied upon. 1. Promissory Estoppel Restatement 90: promises relied upon are enforceable. Bar on denying promise fulfillment. Goal: protect reliance. Its an on-K substitution for consideration, but cant override other doctrines such as parol evidence rule. UCC 2-205 Firm Offers (UCCs version of Promissory Estoppel) (1) An offer (2) by a merchant (3) to buy or sell goods (4) in a signed writing (5) which gives an assurance that is irrevocable cannot be revoked (for maximum 3 months). Intended to modify rule that firm offers must have consideration in order to be binding. Protects general contractors. TEST: 1. Was there reliance? 2. Was the reliance foreseeable? 3. Is the enforcement of promise necessary to avoid injustice? III. MUTUAL ASSENT Mutual assent is the basis of contract. This means that each party must intend to enter a contract and must agree with the other to do so on mutually acceptable terms. A. INTENT OF THE PARTIES 1. Subjective Theory What parties were thinking 2. Modified Objective Theory

If no subjective mutual assent/meeting of the minds, then no K.. unless one person is at fault (ie knows of a usage of trade and doesnt clarify the ambiguity to promote meeting of the minds), then there IS A K and at will be interpreted in favor of the innocent party. Takes into account some subjective issues but encompasses materiality (objective theory what actually happened) Raffles v. Wichelhaus - Averments: that the said goods did arrive by the said ship from Bombay in England, and the plaintiff was then and there ready and willing and offered to deliver the said goods to the defendants, etc. Breach: that the defendants refused to accept the said goods or pay the plaintiff for them. 3. Objective Theory If it looks like a K, it is a K. Goal protect reliance (also 3rd party reliance) What has actually been manifested Look to reasonability: o of the situation o where it occurs Lucy v. Zehmer, and are drinking jokingly sells farm to . Holding: actions manifested intent to sell (2 drafts, signed by wife). Specific Performance = sale of land. a. Context St. Landry Loan Co. v. Avie Promissory note with as maker and illiterate uncle as endorser. Uncle may not have subjectively understood the contract but objectively his is bound. In determining whether to admit the contextual factors you decide whether it would frustrate someone elses reliance. In this situation there is no frustration because the bank officer was there and knew uncles situation. (Duty to Read Rule) B. OFFER Manifestation of intent to be bound without further action by the offeror Creates power of acceptance in offereee Offeror is the master of the offer The offeree's power to accept the offer and thus create an enforceable contract does not continue to exist indefinitely, and may be terminated by (a) the offeror, who can revoke the offer prior to acceptance; (b) the offeree, by a rejection of the offer or a counter-offer proposing different terms; (c) the lapse of time; (d) the death or legal incapacity of either party; or (e) the non-occurrence of any condition of acceptance that the offeror imposed in making the offer. R24 Offer Defined An offer 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.

 2-205 Firm Offers 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, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror. 2-206 Offer and Acceptance in Formation of Contract (1) Unless otherwise unambiguously indicated by the language or circumstances (a) an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances; (b) an order or other offer to buy goods for prompt or current shipment shall be construed as inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming or non-conforming goods, but such a shipment of nonconforming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered only as an accommodation to the buyer. (2) Where the beginning of a requested performance is a reasonable mode of acceptance an offeror who is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance. Lonergan v. Scolnick - trying to sell land via form letter. Sold to 3rd party. Holding: seller did not intent to be bound. Letter was a solicitation for offers buyer to make an offer. Lefkowitz v. Great Minneapolis Surplus Store, Inc., refuses to sell $1 fur from newspaper ad claiming reserved for women. Holding: made a clear and definite offer, intended to be bound. had power to accept. C. ACCEPTANCE Manifestation of intent by offeree to bring contarct into existence Offer must be accepted in timely manner to be valid Acceptance must be the mirror image of offer, otherwise, a counter offer. Normile v. Miller - The is selling land. Miller makes an offer the signs the offer but makes changes to the offer by the (counter offer). At 12am Segal (other ) offers to buy the land and the agrees to it. At 2pm the real estate agent informs the that the land was sold. At 5pm the other they sign the counter offer. Both sue to see who owns the land. The courts rule for the Segal. Holding: The counter offer stopped existing when the sells the land to Segal and the agent tells the . Learning that the intent has changed on the part of the offeror, negates the offer

1. Mailbox Rule The Receipt Rule: Legal documents have no effect until they are received Deposited Acceptance Rule (The Mailbox Rule)- a contract is effective once the acceptance is placed in the mailbox Must have postage Must be properly addressed Contract is effective on deposit, not receipt Must be an authorized mode of communication (by the offeror) The Offeror can override the Mailbox Rule, if they say they want the contract to be effective on receipt. If the offer is an option, the mailbox rule does not apply unless the offeror says it does. Morrison v. Thoelke - owns land. mails the offer to the . then calls the attorney and say that they revoke their offer before it got to the attorney. The still records the offer. Makes a contract with the to sell the land. wants to quiet the title and does not want the to claim the land. The counter claim seeking the title to the land. ARGUMENTS ABOUT THE MAILBOX RULE Anti-rule:Under the mailbox rule, during the period between the offerees dispatch and the offerors receipt of the acceptance, the offeror is contractually bound without knowing of that fact, which can prejudice the offeror in practical terms. Pro-rule:A rule making the acceptance effective only upon receipt would prejudice the offeree, who would be unable then to rely on the acceptance and, for example, begin performance. ____________________ Anti-rule:Given the availability of substantially instantaneous means of communication, there is no reason today to protect the offeree who chooses not to use one of them. Pro-rule:Given the offerors unquestioned power to insist on a receipt rule as a condition to the offer, there is no need to protect the offeror who chooses not to impose such a condition. ____________________ Anti-rule:Most offerors are unaware of the counterintuitive mailbox rule, so that the rules actual effect is to give an unfair advantage to the offeree. Pro-rule:The rule is efficient in that it makes the bargain effective at an earlier point, thus enabling the offeree to begin performance earlier, which is ordinarily desirable from the offerors point of view. ____________________ Anti-rule:In using default rules to resolve disputes that the parties have not addressed specifically, courts should select those rules that the parties would have employed if they had thought of the issue. But the mailbox rule is counter-intuitive. Pro-rule:By definition, a court using a default rule is addressing a situation that the parties did not consider, or at least agree upon. In situations such as that addressed by the 10

mailbox rule where the interests of the parties are antithetical, it is meaningless to search for what the parties would have done. 2. Silence (1) Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance in the following cases only: (a) Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation. (b) Where the offeror has stated or given the offeree reason to understand that assent may be manifested by silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer. (c) Where because of previous dealings or otherwise, it is reasonable that the offeree should notify the offeror if he does not intend to accept. (2) An offeree who does any act inconsistent with the offeror's ownership of offered property is bound in accordance with the offered terms unless they are manifestly unreasonable. But if the act is wrongful as against the offeror it is an acceptance only if ratified by him. Hobbes v. Massasoit Whip (1893) - sends eel skins. The keeps them. D does not notify the that he does not want the skins. Lower courts says that whether there was a contract or not, it can not allow the to sit back and do nothing. Rules for the . Keeping the skins and being silent was an acceptance. 3. Unilateral Contracts Formed when a promise for future performance (the offer) is exchanged for actual performance itself (the acceptance) rather than for a promise of future performance. (Ill do this when you do this) used in contexts where the offeror is interested only in performance used when potential offerees might be willing to attempt performance but are not willing to promise performance. common in offering rewards or commissions mailbox rule does not apply Petterson v. Pattberg - owns land. owns a bond given to him by which used the land as collateral. The had agreed to sell the land, without the mortgage, and now he was out $780 per the agreement with the . The lower court rules for the . The offer of the was withdrawn before it ever became a binding contract, no contract was ever made, no breach. D. PRAGMATIC ALTERNATIVES

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1. Options a. Traditional Options An option is a promise to keep an offer open for a stated period of time. To be valid, the option must have its own separate consideration. b. Options Created by Reliance An option is created by law to protect the reliance of the offeree in beginning the combined act of acceptance and performance. -Mailbox rule does not apply James Baird Co. v. Gimbel Bros., Inc. Subcontractors offer looked for an acceptance from the offeree in form of return promise, not merely reliance through submission of a bid Drennan v. Star Paving Co. Stars offer to do paving included a subsidiary promise not to revoke until plaintiff should have at least an opportunity to accept that after the general contract had been awarded to him. 2. Firm Offers In sale of goods 2-205 dispenses with the need for consideration to validate and option, if: 1) the offer made by a merchant, 2) offer is in writing, 3) there is assurance that the offer will be held open, and 4) if assurance is in form supplied by the offeree the offeror must sign the form separately. Limited to a maximum of 3 months. 2-205 Firm Offers 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, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror. E. QUALIFIED ACCEPTANCE 1. Mirror Image Rule Rule that requires an acceptance to match the offer exactly, with no alteration or qualification. If the acceptance deviates from the offer in any way it does not qualify as acceptance but is a rejection and possibly a counterofferor. Exception:

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2-207 Rejects this!!!! (and last shot rule) says that can be considered proposal and that conduct of acceptance is considered. 2-207. Additional Terms in Acceptance or Confirmation. (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms. (2) The additional terms are to be construed as proposals for addition to the contract. 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. (3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms** incorporated under any other provisions of this Act. ** Gap fillers - 2-308 delivery, 2-308 payment, and 2-314,2-315 min. warranties 2. Battle of the Forms 2-207 Additional Terms in Acceptance or Confirmation (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms. [cannot have assent until the other person knows and agrees sale of widget over internet] (2) The additional terms are to be construed as proposals for addition to the contract. Between merchants [2-104] 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.

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(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act. 2-204 Formation in General (1) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract. (2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined. (3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. **Most issues of standardized contracts of adhesion are resolved by doctrine of unconscionably. A standard contract becomes adhesive and unconscionable only if the doctrines two-part test is satisfied. F. INCOMPLETE AGREEMENTS 1. Agreements to Agree Parties have committed themselves to continue to make honest, good faith effort towards an agreement. 2-204 Formation in General (1) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract. (2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined. (3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. Joseph Martin, Jr Delicatessen, Inc v. Schumacher (1981) - rents space from the . They have a rental agreement that the rent increases over time. At the end of the time period, they agree to rent again under agreed terms. When the time comes to renew, they wants to charge $900 and the wants the market rate of $545. sues for breach.

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Agreements to agree are unenforceable when future terms are not discernable. Courts will not enforce vague promises, in which a material term is left for future negotiations, is unenforceable so as to not interrupt freedom of contract 2. Open Terms and Letters of Intent Pennsylvania Co. v. Wilmington Trust CO. - wants to buy shares of stock from the . Send letter saying that they want to buy. Send letter back and says that the acceptance of the offer is subject to the approval of the board of directors. D then says that they can sell at a higher price. sues for breach. says that there was not a contract, it was an agreement to agree at a later date. The court decided to apply the UCC 2-204 2-204. Formation in General (1) A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of such a contract. (2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined. (3) Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. Will enforce incomplete contracts with open terms If you do not write your contract clearly, the UCC will input GAP FILLER provisions to make your contract for 3. Negotiations Hoffman v. Red Owl Stores - contacts about opening a grocery store. says in order to do so, the PL would have to do some things. He sells his bakery, buys a grocery store, sells store, buys property. Tells the that he is going to sell the franchise for x$ and then after all this stuff happens he says that the price went up. The PL sues under Promissory Estoppel. (most likely because there was not an actual contract) IV. DEFERENCE TO WRITINGS A. STATUTE OF FRAUDS Goal: ensure deliberation, prevent enforcement through perjury or fraud or Ks never made (although sometimes makes it difficult for those w/ valid Ks to win) What does the writing have to contain: parties

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material terms signatures 1. Scope Five types of Ks (and any modification thereof) need a writing in order to be enforceable (Restatement 110) Marriage Suretyship (guaranteeing someones debt) Ks not to be performed within a year of their making Promises made by executors/administrators of estates Sales and interest in land Exception: if there is partial performance on s cannot invoke SoF. Protects reliance. Also promissory estoppel may apply if the party relied on an oral agreement to their detriment.

UCC 2-201 Statute of Frauds (1) goods over $500 need a writing that has a signature (any marking) by the person who it is being enforced against, refers to a K, gives quantity (2) merchants no signature necessary. Enforceable unless party objects to the writing within 10 days (3) or, if doesnt satisfy (1) then also enforceable are: a) goods specially manufactured for b) admission by that K existed c) partial performance (under UCC = full performance of severable part) ** Once found to be unenforceable the remedy is restitution to prevent unjust enrichment. Crabtree v. Elizabeth Arden Sales Corp. - Is the note taken by Elizabeth Ardens secretary an adequate writing? No, there is no signature on the paper. However, had she done so it could have been considered adequate. But to some just having it on the letterhead is enough to equate to having a signature under the UCC. B. PAROL EVIDENCE RULE Bars extrinsic evidence (either oral or written) to a written K when K is a total integration. (Does not affect evidence of agreement claimed to be made after the execution of the writing.) Goal: prevent fraudulent assertion of oral promises not contained in the written K. Promotes certainty, avoids fraud, fallible memories, avoids jury equity. Exceptions: naturally would have been partial agreements and/or collateral agreement ambiguity

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interpretation (reasonably susceptible Trident) -> possible changing circumstances

[Parol Evidence is about TERMS, a contract does exist.] [Statute of Frauds is about ENFORCEABILITY, does a contract exist.] 1. Integrated Writings Total integration indicates that contarct is final and complete expression of agreement. Often includes a merger or integration clause. TEST: 4 corners rule: look only within the 4 corners of K. If it looks like a complete K, it is a complete K. Merger Clause indicates total integration. Partial Integration writing parties intended to be final but not complete expression of agreement. Partially integrated writings can be supplemented, but not contradicted. TEST: Naturally test if collateral agreement would have naturally been made by parties. Cannot contradict but you can supplement the terms in a partial integration. **UCCs certainty test even more permissive. Says you can only exclude evidence if it is certain that the parties would have put it in. Mitchill v. Lath - owns a farm. Sells it to the Says that he will remove the ice house on the land across the street so that will buy the farm. Does not put this into the contract. Never removes the ice house. sues for performance. Oral evidence will not be permitted unless the agreement is a collateral agreement (Collateral Agreement Exception) Test: In order to allow parol evidence, the agreement must satisfy three requirements 1. Agreement must be collateral in form (separate agreement; outside of the actual contract) 2. agreement must not contradict the express or implied provisions in the written contract 3. the promise can not be one expected to be embodied in the contract (Cant relate to the contract) Masterson v. Sine, trying to protect option to purchase w/ in the family. Holding: partial integration, cannot be contradicted but can be supplemented. Can use parol evidence to clarify terms in a contract but not to vary or modify it (Ambiguity exception) 2. Ambiguity and Interpretation Plain Meaning Rule - If a writing appears clear and unambiguous on its face, the meaning must be determined from the 4 corners w/o considering

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extrinsic evidence. Heavy weight given to this: UCC 1-205 (4), UCC 2208 and R203(b) Latent ambiguity ambiguous w/ in context. Careful extrinsic evidence itself may reveal latent ambiguities that were not obvious before. Facial ambiguity unambiguous on its face.

UCC 2-202 Parol or Extrinsic Evidence Expressly throws out the plain meaning rule bends over backwards to let evidence in! Certainty test even more permissive than commons laws Naturally test. Says you can only exclude evidence if it is certain that the partied would have put it in. Terms may be explained or supplemented by: 1. Usage of Trade 1-205 (general practice in industry) 2. Course of Dealing 1-205 (tradition b/t parties before this K) 3. Course of Performance 2-208 (practice b/t parties since this K) 4. Gap Fillers throughout article 2 of UCC Pacific Gas and Elect. Co. G. W. Thomas Drayage & Rigging Co: Was indemnified against all damage, or just 3rd party damage? Holding: Rejects plain meaning rule. No plain language, no meaning absent context. Lets in parol evidence, obviate 4 corners rule. Trident Center v. Conn.General. Life Insurance - and enter into a contract for a loan. can not prepay the loan. Interest rates go down and the wants to prepay. says no. says that he can prepay per a parol agreement. V. BARGAINING AND INFORMATION A. MISCONDUCT 1. Fraud Misrepresentation of fact = equitable estoppel. Could have been no mutual assent The elements are: 1. A false representation of fact; 2. made with knowledge of its falsity and intent to induce the other party to enter the contract (scienter); 3. which does in fact deceive the other party; 4. to the other partys injury or detriment. Vokes v. Arthur Murray, Inc. (1968) The plaintiff was made to believe under false pretense that she had hope as a dancer and invested over 31,000 in lessons. Even in contractual situations where a party to a transaction owes no duty to disclose facts within his knowledge or to answer inquiries respecting such facts, the law is if he undertakes to do so he must disclose the whole truth.

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UCC2-721 Remedies for Frauds => all remedies 2. Nondisclosure Disclosure is only required if it would correct a known mistaken assumption of the other party and then only if disclosure is compelled by reasonable standards of fair dealing. 3. Duress There has to be no alternative and a threat Austin Instrument, Inc v. Loral Corp. - The defendant, Loral Corporation, seeks to recover payment for goods delivered under a contract which it had with the plaintiff Austin Instrument, Inc., on the ground that the evidence establishes, as a matter of law, that it was forced to agree to an increase in price on the items in question under circumstances amounting to economic duress. 4. Undue Influence Describes persuasion which tends to be coercive in nature, persuasion which overcomes the will without convincing the judgment. The pattern usually involves several of the following elements: (1) discussion of the transaction at an unusual or inappropriate time, (2) consummation of the transaction in an unusual place, (3) insistent demand that the business be finished at once, (4) extreme emphasis on untoward consequences of delay, (5) the use of multiple persuaders by the dominant side against a single servient party, (6) absence of third-party advisers to the servient party, (7) statements that there is no time to consult financial advisers or attorneys. Odorizzi v. Bloomfield School Dist. - Appeal from a judgment dismissing plaintiff's amended complaint on demurrer. We agree with respondent's contention that neither duress nor menace was involved in this case, because the action or threat in duress or menace must be unlawful, and a threat to take legal action is not unlawful unless the party making the threat knows the falsity of his claim. B. MISTAKE 1. Mutual Mistake arises before, or during contract A shared erroneous assumption about a material fact. Only mutual mistakes concerning substance of K are rescindable (ie: vendor makes mistake in delivering an article other than the one sold), not those having to do with value/quality (parties assumed that risk). Test: o Shared Mistake o Must be material

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o Risk must not have been assumed by the party seeking rescission Restatement 152 When Mistake of Both Parties Makes a Contract Voidable (1) Where a mistake of both parties at the time a contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of the mistake under the rule stated in 154. (2) In determining 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. Lenawee County Board of Health v. Messerly - buys land from the . Soon after, the land is condemned due to a sanitation problem. Neither party knew of the problem with the sanitation at the time of the sale. wants the contract for the sale of the land to be rescinded. The parties allotted the risk to the PL by inserting the as is clause in the contract 2. Unilateral Mistake An unshared erroneous assumption of fact Basis of rescission because there is no mutual assent 2 types o Palpable Unilateral Mistake one parties knows, of the other parties mistake and can tell that the other party does not know but does nothing to correct the mistake (fraud by non-disclosure) will not enforce the contact o Mistake by Unilateral Mistake No scienter The other party does not know that the other party was mistaken Test: The person looking to uphold the contract has not reason to know of and doesnt cause the mistake of fact, the contract can be rescinded if: o The made a mistake of fact regarding the basis for the contract o Material effect o does not bear the risk of the mistake o The effect is such that enforcement would be unconscionable Large amount of loss

Restatement 153 When Mistake of One Party Makes a Contract Voidable Where a mistake of one party at the time a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake under the rule stated in 154, and (a) the effect of the mistake is such that enforcement of the contract would be unconscionable, or

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(b) the other party had reason to know of the mistake or his fault caused the mistake. 5 Conditions for non-palpable unilateral mistakes: 1. if mistake material to K 2. if mistake not result of neglect of legal duty 3. if enforcement would be unconscionable 4. if other party can be placed in status quo 5. must give prompt notice of desire to rescind Donovan v. RRL Corp - advertises a Jag for $26,000 in the paper. The tries to buy the car at that price. The says that the price was a misprint. The wants the contract enforced. The wants the contract to be rescinded. Lower court rules for the . C. CHANGED CIRCUMSTANCES 1. Impossibility Can rescind when: 1. objective impossibility of performing (no one can perform) 2. problem arose subsequent to making K 3. neither party is at fault for problem Use only when you think the parties didnt allocate the risk if they didnt dont rescind UCC 2-613 Casualty to Identified Goods - K may be avoided if, through no fault of either party, goods suffer casualty. Buyer may cancel K or accept the damaged goods at lesser price. UCC 2-614 Substituted Performance If there is a commercially reasonable substitute (ie: different carrier, loading dock or delivery place), both parties must use and accept it. Taylor v. Calwell (Doctrine of Impossibility) - contracts to use s music hall and garden. The building burns down. wants out of the contract. The intentions of the parties were contingent on the performance of the contract being possible. 2. Frustration Can perform, but no longer want to The purpose of the performance has been frustrated The value of performance has been frustrated o Must be a big reduction in the value Basis of rescission because of mutual assent Test: o Is the event foreseeable? 21

o If the event is foreseeable then you should have guarded against it in the contract (assumed the risk) o Is the event the basis of the contract o The reduction in value of the other partys performance must be great Can rescind: 1. purpose of performance has been undermined b/c value of counter-performed has been destroyed/rendered valueless 2. frustrating event is not foreseeable. If foreseeable, parties probably allocated the risk. Krell v. Henry - rents room from to see the coronation of the king. The coronation does not happen and the does not want to pay for the room. The wants the room paid for. Is the contract rescinded? yes 3. Commercial Impracticability Easiest method of rescission only few conditions. Impracticable = at excessive or unreasonable cost. Relief: When impracticability fully defeats the feasibility of performance by a party, it is a complete defense to that partys failure to perform, relieving him of the duty of performance and liability of damages. UCC 2-615 Excuse by Failure of Presupposed Conditions applies when a contingency, non-occurrence of which was a basic assumption of the K, fails. Ie: war, embargo, local crop failure UCC 2-616 Procedure on Notice Claiming Excuse Only applies to sellers (buyers cannot invoke doctrine). When buyer is notified by seller of 2-615 condition, he has choice of canceling K or accepting goods in modified condition. Dilutes impossibility and frustration requirement. Section 2-613 deals with the situation in which identified goods are destroyed before they are delivered to the buyer. The rule of 2-613 is that Where the contract requires for its performance goods identified when the contract is made, and the goods suffer casualty without fault of either party before the risk of loss passes to the buyer then (a) if the loss is total the contract is avoided . D. MODIFICATION 1. Pre-existing Duty Rule A modification that lessens one partys obligation must be supported by some new consideration or the new contract is void.

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Common Law No consideration when one party promises something he is already obligated to do, because no detriment to promisee! Goal- prevent extortion. Modifications need consideration. UCC 2-209 Modification, Rescission, and Waiver No pre-existing duty rule. Modifications for goods Ks do not need consideration, they just need to be made in good faith. Good faith rule is guard against extortion (like common laws voluntary mutual rescission) Alaska Packers Association v. Domenico - hires to work on a fishing boat under a contract. While out on the boat the says that they want their contract to reflect an increase in pay or they will not work. The finally agrees. When they get to land, the sues to get the money back, wants to enforce the first contract without the modifications. When the contract is not voluntarily rescinded or modified, the contract can not be enforced despite the partys reliance on it 2. Exceptions Unexpected difficulty: Test 1. Modification made perform contract fully performed 2. Underlying circumstances (difficulties) must be unanticipated 3. Modification must be fair and equitable

Angel v. Murray city made a modification to a contract and the question is whether said modification is enforceable. The trial court feels that it is enforceable the Supreme Court reverses. The court does this because the exception to the preexisting duty rule only comes into play when there has been an unexpected difficulty. Also, no extortion (concern of pre-existing duty rule), so legit increase. Contract revisions are enforceable if they are: 1. Voluntary, and 2. Mutual E. PUBLIC POLICY 1. Good Faith 1-201 (19)"General DefinitionsGood faith" means honesty in fact in the conduct or transaction concerned

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 2-103 (b) Definitions and Index of Definitions "Good faith" in the case of a merchant means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade. 2. Form Contracts **Most issues of standardized contracts of adhesion are resolved by doctrine of unconscionably. A standard contract becomes adhesive and unconscionable only if the doctrines two-part test is satisfied. 3. Unconscionablity shocks the conscience Contracts entered into under these circumstances are known as contracts of adhesion as the weaker party has just adhered to the choice of terms of the stronger one. TEST: 1. Procedural prong is there unequal bargaining power/absence of meaningful choice? 2. Substantive prong are the terms unreasonably favorable to one party(excess profits)? UCC 2-302 Unconscionable Contract or Clause (1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result. (2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination. Remedy: Avoidance and restitution Eliminate the unconscionable aspects VI. CONDITIONS Condition an event, the non-occurrence of which precludes duty to perform. If you dont put the condition in, you assume the risk convenient way of allocating risk. Condition subsequent non-occurrence of which discharges existing obligation Condition precedent condition must be met to create obligation of performance

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Concurrent precedent both parties must meet conditions A. EXPRESS CONDITIONS Express condition one that is expressed in the K Promissory condition a term that is a promise and a condition Ways to get out of express conditions: (1) say its a promise and not a condition (2) waiver or excuse (3) say its constructive condition and has been satisfied by substantial performance. 1. Strict Enforcement Rule: Express conditions are strictly enforced. TEST: 1. Look at intent of the parties (ie: if one party wouldnt have made the K had the statement been put in, its probably a condition.) 2. Look at language words like as long as, provided that etc denote express conditions Exceptions: Frustration Impracticability Impossibility 2. Personal Satisfaction If one party has control over the condition, he has a good faith obligation to ensure that the condition is satisfied, If not, we will treat conditions as if it were satisfied. (subjective standard) Standard for commercial property is objective standard. Avoid by putting in condition of satisfaction which specifies the condition is to be done prior to performance, this chances allocation of risk. 3. Mitigating Doctrines Two Exceptions to the rule that strict conditions are strictly enforced. a) Excuse Strict performance is excused to prevent forfeiture (disproportionate losses) or extreme penalty (but make sure the losses are disproportionate to the others losses) Watch out excuse often upsets risk allocation! freedom of Ks. b) Waiver & Estoppel Waiver

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Party voluntarily relinquishes its right to terminate the K because of nonoccurrence of condition Waivers can be retracted (but watch out this may frustrate reliance) Is it a waiver, or a modification (new deal, dont need consideration if made in good faith cant be retracted, cant go back to old terms because they no longer exist!)

Equitable Estoppel A party may be precluded by his acts or conduct from asserting a right to the detriment of another party, who was entitled to rely on such conduct and has acted upon it Can be undone Waiver v. Estoppel Estoppel is more appropriate if detrimental reliance can be shown and there is some question about whether the right relinquished is material enough to require consideration. Waiver is a better argument if no prejudicial reliance can be established, but there is argument that the abandoned right is ancillary, not central to the exchange. B. CONSTRUCTIVE CONDITIONS One partys promise is a condition of others performance (vs. express condition). Not expressed in the K. Can be satisfied by substantial performance. Constructive conditions are NOT strictly enforced. 1. Substantial Performance Constructive conditions can be satisfied by substantial performance (as long as breach was unwillful, ie: negligent) Goal avoid forfeiture ( freedom of Ks!). But although condition is considered met, there is still breach of promise, so can still sue for expectation damages. Teaches you to use express conditions if you want something strictly enforced! Constructive conditions are not strictly enforced. Jacob and Young v. Kent (constructive conditions) - PL builds a house for the saying that he would use a certain type of pipe. The fails to use the pipe, and the refuses to pay. PL sues to get paid. claims the PL breached the contract because the PL did not use the right pipe. The use of the pipe was a condition for payment. substantially performed the condition, must pay. 2. Material Breach (total breach) non occurrence of a constructive condition 26

gives non-breaching party option to rescind contract and walk away from deal (he has no obligation to perform if other party commits a material breach), or continue to perform as though it were a partial breach and later sue for expectation damages. Off-K or On-K. substantial performance is not a material breach dangerous, because if you think other party has materially breached and you walk away, you might be guilty of material breach if other partys breach wasnt material!

Requirements: 1) Close to complete deprivation of expected benefits. 2) Can be adequately compensated for the breach by money damages 3) The breach was willful 3. Restitution Britton v. Turner Rule: restitution can be claimed by the party in breach. (Employed for a certain period of time you should be paid for that period of time) 4. UCC Perfect Tender Rule (2-601 lots of ways to get around it!) Beck & Pauli Litho. Co. v. Colo. Milling & Elev (1892) (timely delivery in sale and service contracts) Facts: PL agrees to make stationary for the with specific designs. The Pl does not deliver all the goods in the time frame stated in the contract. When he delivers the goods, the refuses to accept the goods and refuses to sell. PL sues to enforce the contract for payment. Lower court finds for the stating that nt delivering on time was a material breach of the contract. appeals. The has to pay because this is a contract for the skill and labor. 1. In contracts for the sale and delivery of marketable goods within a time limit, the performance of the contract within the time is a condition precedent to the enforcement of the contract. a. Failure to meet this condition is a material breach b. Buyer can repudiate the contract 2. In contracts for work or skill, time is not of the essence, and a short delay will not justify the repudiation of the contract. **If more than one item and unhappy with results of PTR look to installment contracts** a. Failure is not a material breach a) Scope Under UCC, every breach is a material breach. For sellers: UCC 2-703 Sellers Remedies in General allows seller to cancel if no payment = PTR.

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For buyers: UCC 2-601 Buyers Rights on Improper Delivery if the goods fail in any respect to conform to K, buyer may reject the whole. Its a material breach, so can walk away from deal! Freedom of Ks. Watch out some may exploit rule to get out of the deal. UCC 2-602 Manner and Effect of Rightful Rejection rejection accomplished through giving notice to seller within reasonable time. Cannot exercise any dominion over goods they still belong to seller. UCC 2-606 What Constitutes Acceptance of Goods acceptance accomplished by notice to seller. Notice can be (1) words or (2) action (ie: dominion after inspection). Inspection alone is not acceptance. Precludes rejection under UCC2-601 Can still recover for damages for nonconforming tender under UCC2714 UCC 2-607 Effect of Acceptance acceptance of goods precludes rejection If already accepted (Remedy still exists): 2-714 Buyer's Damages for Breach in Regard to Accepted Goods (1) Where the buyer has accepted goods and given notification (subsection (3) of Section 2-607) he may recover as damages for any non-conformity of tender the loss resulting in the ordinary course of events from the seller's breach as determined in any manner which is reasonable. (2) The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount. (3) In a proper case any incidental and consequential damages under the next section may also be recovered. Limitations: Revocation of Acceptance Cure Installment Contracts Anticipatory Repudiation b) Mitigating Doctrines (1) Cure

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UCC 2-508 Cure by Seller of Improper Tender or Delivery: Replacement seller gets a second chance to undo the breach by sending a replacement delivery within a reasonable time. Equity way of tempering harshness of PTR, prevent forfeiture. (2) Revocation of Acceptance UCC 2-608 Revocation of Acceptance in Whole or in Part revocation of acceptance gives buyer all the same rights as if he had rejected the goods, but its only allowed if the defect substantially impairs the K value (whereas under rejection, buyer allowed to reject for any reason at all) Substantial impairment = material breach, so back to common law idea of material breach. (3) Installment Contracts UCC 2-612 Installment Contract; Breach (2) can only reject an installment if defect substantially impairs the value of that installment. Substantial impairment test, not PTR. (3) says can breach whole K if defect of installment affects whole K. **If you want to preserve deal and use the substantial impairment test instead of the PTR, make an expansive reading of what an installment K is. If you prefer PTR, construe definition of installment Ks narrowly.** C. UNCERTAIN BREACHES 1. Anticipatory Repudiation UCC 2-610 Anticipatory Repudiation future breaches treated as present breaches so no wastes of human resources. UCC incorporates substantial impairment test, so many ways to trump the PTR! Also, if a buyer demands more than adequate assurance or performance prior to ascertaining whether seller intends to breach, this unauthorized demand constitutes anticipatory repudiation substantially impairing value of K to seller under 2-610, which permits seller to cancel under 2-610b and 2-703f Can go to breach remedies: Seller - 2-703 Buyer - 2-711 2. Adequate Assurance of Performance UCC 2-609 Right to Adequate Assurance of Performance when reasonable grounds for insecurity arise as to one partys performance, the other party may get demand adequate assurance in writing and suspend performance until he gets it. If not a reasonable demand, the demanding party may be guilty of anticipatory repudiation (see above) this may substantially impair value of K to other party and allow him to completely cancel the K. VII. Remedies

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Threshold for Equitable Remedy (Equitable remedies of are of last resort and are discretionable) 1. Legal Remedies are inadequate (When the injury is irreparable) Example: Breach of contract for the sale of land. Land is considered unique and therefore the breach is irreparable. 2. Sound discretion of the court. Court must balance the equities. A. EXPECTATION INTEREST 1. Expectation Damages Put in position he would have been in had K been performed. Includes profits. Two methods: 1. expenses party incurs on the other partys performance 2. value of lost opportunities not taken in reliance on K.

Limitations: Foreseeability Mitigation Causation (only damages from the breach) Certainty (breach must have resulted in a fiancial loss which can be shown) Sellers 2-709. Action for the Price - Allows the seller to claim the price of the goods only when the goods have been accepted by the buyer or they are incapable of being resold because they have been lost or damaged or are just not resalable. 2-706. Seller's Resale Including Contract for Resale Permits an aggrieved seller to either substitute transaction by reselling the goods and, provided that the resale is made in good faith and in a commercially reasonable manner, to recover the shortfall between the contract price and the resale price. 2-708. Seller's Damages for Non-acceptance or Repudiation recognizes that the damages may be based on based on hypothetical resale as an alternative to actual resale. (Contact price market price) Buyers 2-712 & 2-713 Specific performance by 2-716 (all below) a) Measurement per restatement, use cost of performance unless economic waste would result, apply diminished value only. Economic waste = inefficient expenditure of $. Permits efficient breaches- chooses economic efficiency over parties valuation.

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b) Efficient Breach 2-712 "Cover"; Buyer's Procurement of Substitute Goods (1) After a breach within the preceding section the buyer may "cover" by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller. (2) The buyer may recover from the seller as damages the difference between the cost of cover and the contract price together with any incidental or consequential damages as hereinafter defined (Section 2-715), but less expenses saved in consequence of the seller's breach. (3) Failure of the buyer to effect cover within this section does not bar him from any other remedy. 2-713 Buyer's Damages for Non-delivery or Repudiation (1) Subject to the provisions of this Article with respect to proof of market price (Section 2-723), the measure of damages for non-delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental and consequential damages provided in this Article (Section 2-715), but less expenses saved in consequence of the seller's breach. (2) Market price is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival. 2. Limitations a) Consequential Damages Only recoverable if was given notice (contemplated) of them. (1) Forseeability An event or consequence is foreseeable when a reasonable person would have realized the likelihood of its occurrence. Hadley Rule recovery only allowed for damages that: 1) naturally arise or 2) are contemplated by parties (foreseeable) at time of contract. Exceptions: Seller is not authorized to recover consequential damages under 2-710 2-710 Seller's Incidental Damages

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Incidental damages to an aggrieved seller include any commercially reasonable charges, expenses or commissions incurred in stopping delivery, in the transportation, care and custody of goods after the buyer's breach, in connection with return or resale of the goods or otherwise resulting from the breach. Buyer may not be able to make a substitute transaction 2-714. Buyer's Damages for Breach in Regard to Accepted Goods. (1) Where the buyer has accepted goods and given notification (subsection (3) of Section 2-607) he may recover as damages for any non-conformity of tender the loss resulting in the ordinary course of events from the seller's breach as determined in any manner which is reasonable. (2) The measure of damages for breach of warranty is the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted, unless special circumstances show proximate damages of a different amount. (3) In a proper case any incidental and consequential damages under the next section may also be recovered. 2-715. Buyer's Incidental and Consequential Damages. (1) Incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection, receipt, transportation and care and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach. (2) Consequential damages resulting from the seller's breach include (a) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and (b) injury to person or property proximately resulting from any breach of warranty. (2) Certainty Rule: You only get the foreseeable subset of expectation damages that are certain b) Mitigation has burden of proving that he abided by the duty to mitigate. If yes - s damages reduced

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goal: 10 reduces chances of an inefficient breach, 2) prevents under compensation any incidental damages incurred in seeking other work are recoverable determining comparability: objective or subjective standard?

Duty to Mitigate (UCC 2-704 (2)) 1. Negative aspect: make sure you dont do anything to make the damages pile up, ie: incur unnecessary expenses. Only reimbursed for expenses up to breach. 2. Affirmative aspect: take affirmative action to keep expenses from piling up, ie: take comparable work. Main Question: what would have happened if contract wasnt breached? => second contract (substitute work) mutually exclusive from breached contract? If no, then mitigating, if yes, then not mitigating Lost Volume Seller breach reduces total volume of the seller, not mitigating. If the sales are mutually exclusive, the seller is not a lost volume seller. UCC 2-718 Liquidation or Limitations of Damages; Deposits allows a defaulting buyer to get his deposit back from seller by allowing seller to collect that amount as extra on his damages. A non-refundable deposit (expressed in K) is a liquidated damage that seller can retain. 3. Alternate Expectation Remedies a) Specific Performance Specific performance is only allowed when personal property has a unique, sentimental or irreplaceable value (ie land). Otherwise $ damages are the general rule. Public Policy Must be only means because courts have to expend energy to enforce and supervise TEST: 1. Personal property must have unique, sentimental, or irreplaceable value 2. cannot be a service contract (ie construction K) or personal service unless unique UCC 2-716 Buyers Right to Specific Performance or Replevin somewhat more liberal than common law, because UCC says that specific performance is appropriate where goods are unique or in other proper circumstances b) Liquidated Damages Common Law: Pre-specified damages put into K by parties themselves. Advantage- not risking jury equity giving you lower damage reward. If you really want Reading pipe, put very high liquidated damage provision in to deter other party from breaching. However, have to fulfill test,

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because cts want to avoid unreasonably high liquidated damages (=penalty damages in disguise). If provision is unreasonably high, courts will simply award ordinary expectation damages. TEST: - liquidated damages enforceable when: 1. Difficult calculation if the harm caused is difficult to calculate accurately, ie: lots of intangibles 2. Reasonable forecast if the forecast provides reasonable amount of penalty for the anticipated loss. Reasonable at the time of contracting, not after loss has occurred. ** test is internally inconsistent: the better you do satisfying one prong, the worse you do at satisfying the other. UCC 2-718 Liquidation or Limitation of Damages: Deposits makes it easier than in Common Law to enforce liquidated damages, because party has 2 chances (instead of 1) to show damages were reasonable. They are reasonable either at the time of contracting or at the time of actual harm (so even if actual loss is less afterwards, party can still get higher amount that was thought to be reasonable at time of contracting). If made a deposit, can get deposit back (except for anything is supposed to keep) UCC 2-719 Contractual Modification of Limitation of Remedy imposes a limitation on remedies B. RELIANCE INTEREST (On-Contract) Restore to position he was in before K was entered. Includes out-of-pocket costs. Its the second alternative- when cant get expectation damages because theyre too speculative, he gets reimbursed for expenditures, because they are easily quantifiable Compensation for expenditures on reliance of contract => restore status quo ante Deduct provable losses (under both expectation and reliance damages) Pre contract Reliance doesnt matter when reliance came into existence (before or after K) When contract comes into existence, breaching party assumes foreseeable reliance on contract, even if contract is made after reliance. All that maters is whether or not reliance is paid off. [Off-Contract Promissory Estoppel] C. RESTITUTION INTEREST must pay amount equal to benefit he received from s performance. Also called: Quantum meruit, quasi-contractual damages Goal=prevent unjust enrichment. benefits so allow to recover expenses.

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If made a BAD DEAL, its better to sue for restitution. If you sue for reliance you will only get the K price. In a bad deal under reliance, if profit would have been negative (and no reimbursement for losses) then the recovery would be zero! If he sues under restitution, he can get reasonable value of whatever services he rendered to

Exception: you cant get restitution damages if performance has already been fully performed. Then, get only K price. Not just unjust enrichment, because hes getting what he bargained for. He allocated the risk in the K so have to stick to on-K damages. Reliance is on-contract => have to deduct provable losses from damages Restitution is off-contract => DONT deduct losses from damages

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