CONTRACTS I: Summary of 2nd Restatement and UCC

1 2 Contract; Definition Promise; What is a Promise? a contract is a promise that is enforceable under law a. Manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a commitment has been made b. Person manifesting the intention is the promisor c. Person to who manifestation is addressed is the promisee d. If performance benefits a person other than promisee, they are beneficiaries promise may be stated in wordsor may be inferred wholly or partly from conduct

4 UCC2306

Contract; Implied in Fact (conduct is enough) Contracts; Output & Requirements

a. UCC2-306(1): a term which measures the quantity by the output of the seller or
the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded. b. Before the Comma: assumes open quantity term means quantity in good faith. c. After the Comma: says except that it cannot be unreasonably disproportionate to a stated estimate or a prior, normal amount. termination of a K by one party except on the happening of an agreed event requires reasonable notification to be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable. Ks are voidable by reason of mental illness if: i. unable to understand nature and consequences of transaction ii. unable to act in a reasonable manner regarding the transaction and other party has reason to know iii. if contract is made on fair terms w/o other parties knowledge of mental illness, voidability terminates when the contract has been so performed in whole or in part that avoidance would be unjust. Formation of a contract requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration. the performance may consist of (a) an act other than a promise; (b) a forbearance; (c) the creation, modification or destruction of a legal relation. if the manifestation is at variance with the mental intent,it is the expression which is controlling [Lucy v. Zehmer is more backup] 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 invited and will conclude it. a manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent. 1. 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. 2. Counteroffer kills original offer.

UCC2309 15

Contracts; Termination Clauses Incapacity; Mental Incapacity

17 71 20 24 26 39

Bargain/Exchange; Required Bargain/Exchange; Types of Exchange Outward Manifestation of Intent Offer; What is an Offer? Offer; Preliminary Negotiations Offer; Counteroffer

30 50 69

Acceptance; Methods of Acceptance

unless otherwise indicatedan offer invites acceptance in any mannerreasonable in the circumstances. Acceptance; Methods of Acceptance a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer. Acceptance; Silence as Acceptance Silence can be acceptance if i. Offeree takes the benefit of the services offered with a reasonable opportunity to reject them ii. Parties have agreed to such beforehand. iii. Such acceptance is part of a course of dealing.

63 UCC2207

Acceptance; Mailbox Rule Acceptance; Additional Terms

generally, an acceptance is valid when it is sent, whether or not it reaches the offeror. a. UCC2-207(1): acceptance (or written confirmation) will operate as acceptance even though there are additional or different terms UNLESS: i. the acceptance is conditional on assent to the new or additional terms (in which case it is a counteroffer). Note: if conditional, you can still try 2-207(3).

b.
i. ii.

UCC2-207(2): terms if you have a contract under 2-207(1) w/o merchants, new terms become proposals. b/w merchants, terms are incorporated UNLESS 1. the offer expressly limits acceptance to ITS terms. 2. they materially alter the K 3. the new terms are rejected in a timely manner

c. UCC2-207(3): if the writing dont otherwise = K under 2-207(1), but parties

act like they have a K, then there is a K. Terms of K are: i. Terms on which writings agree ii. Supplemented by UCC default gap-fillers 33 Acceptance; Indefinite Contracts 33(1): (RULE: Indefinite Ks cannot be accepted) Even though a manifestation of intention is intended to by understood as an offer, it cannot be accepted so as to form a K unless the terms of the K are reasonably certain. ii. 33(2): (RULE: When are terms reasonably certain?) terms of a K are reasonably certain if they provide a basis for determining the existence of a breach and an appropriate remedy. (NOTE: this is different than UCC because it requires ability to determine a breach) iii. 33(3): (RULE: Open terms is evidence of lack of intent to contract) one or more termsleft open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance UCC2-204(1): K 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 K. ii. UCC2-204(2): an agreement sufficient to constitute a K for sale may be found even though the moment of its making is undetermined. iii. UCC2-204(3): even though one or more terms are left open a K for sale does not fail for indefiniteness if the parties have intended to make a K and there is a reasonably certain basis for giving an appropriate remedy. 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. a revocations is effective when it is received by the offeree an offerees 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. If the requirement of consideration is met, there is no additional requirement of: a) b) Equivalence in the values exchanged c) disparity in valuesometimes indicates that the purported consideration was not in fact bargained for but was a mere formality or pretense. Such sham or nominal consideration does not satisfy the requirement of 71. i. Section 1 a promise made in recognition of a benefit received by the promisor from the promisee is binding to the extend necessary to prevent injustice ii. Section 2: A promise is not binding under Section 1 (a) if the promisee conferred the benefit as a gift

i.

UCC2204

Indefinite Contracts

i.

UCC2205 42 43 79

Revocation; Temporarily Irrevocable Revocation; Mailbox Rule Revocation; Indirect Revocation Consideration: Adequacy of Cons.

79(d) 86

Consideration: Nominal /Sham Material Benefit Rule

90

Promissory Estoppel: Reliance

iii.

Section 1: 1)a promise which the promisor should 2) reasonably expect to induce actionon the part of the promiseeand which 3) does induce such actionis binding if 4) injustice can be avoided only be enforcement of the promise. Section 2: charitable subscription or a marriage settlement is binding under section 1 without proof that the promise induced action or forbearance under 2nd Restatement, no reliance needed for charitable subscription to be binding. Not all jurisdictions apply this rule.

iv.

161

Non-Disclosure

164 174 175

Fraudulent Misrepresentation Duress; Physical Compulsion Duress; Non-Physical Compulsion

Non-disclosure of a fact is the same as making a false misrepresentation when: 1. 2. he knows the disclosure would correct a mistake by the other party and if it amounts to failure to act in good faith and fair dealing 3. 4. where the other person is entitled to know the fact because of a relation of trust and confidence between them. if a partys manifestation of assent is induced bya material misrepresentation by the other party upon which the recipient is justified in relying, the contract is voidable by the recipient. if conduct that appears to be manifestation of assent by a party who does not intend to engage in that conduct is physically compelled by duress, the conduct is not effective as a manifestation of assent. manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, it is voidable by the victim. a. 1. improper threat (defined in 176) b. 2. improper threat induces the promise c. 3. there is no reasonable alternative Threats are improper if: (Motive matters!!) a. Threat is a crime. b. Threat of criminal prosecution. c. Threat is breach of the duty of good faith and fair dealing. d. Threat results in exchange not on fair terms, i. Threatened act would harm recipient and would not significantly benefit the party making the threat. [Wolf v. Marlton do it or well sell to an undesirable] ii. What is threatened is otherwise a use of power for illegitimate ends.

176

Duress; Improper Threats

2-104 2-209 Kills Pre-Existing Duty Rule

a. an agreement modifying a contract within this Article needs no consideration to

be binding.

b.

Note: this means that whether a modification is enforceable turns completely on whether it was made in good faith. (this is important but not mentioned within the section.) c. Comment 2: discusses what good faith means. It says there must be a legitimate commercial reason for requiring the modification.