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Introduction to Contract Law 1.

. Contract Defined A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty. 2. Promise; Promisor; Promisee; Beneficiary (1) A promise is 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. (2) The person manifesting the intention is the promisor. (3) The person to whom the manifestation is addressed is the promisee. (4) Where performance will benefit a person other than the promisee, that person is a beneficiary. 3. Agreement Defined; Bargain Defined An agreement is a manifestation of mutual assent on the part of two or more persons. A bargain is an agreement to exchange promises or to exchange a promise for a performance or to exchange performances. 4. How A Promise May Be Made A promise may be stated in words either oral or written, or may be inferred wholly or partly from conduct. Background Concepts 1. Analyzing a contract a. Have the parties created legally recognizable expectations? i. Mutual Assent of the Parties ii. Assent is the KIND that the law will enforce b. How should theses expectations be characterized and understood? Are there ambiguities or gaps? What duties and obligations should arise? c. Was the understanding carried out? d. Is there anything the law should do about it? 2. Default Rules a. Try to follow what parties generally expect b. Maximize benefits of contracts by allocating risks and responsibilities in the least costly manner c. Minimize transaction costs d. Can always be bargained around 3. The Bargain (Reaching an agreement) 4. Enforcing the Agreement 5.

6. Requirement for k formation a. Mutual Assent b. Offer and Acceptance c. Quantity d. Indication of how to find a prince e. Identified good (if non-fungible) f. (all subject to context and reasonableness) g. You cant have a remedy unless you know what your obligaitons were 7. what you must have for a contract: a. 1 - bargain b. 2 - manifestation of mutual assent c. 3 - exchange d. 4 - consideration 8. things to consider in determining the manifestation of intent: a. 1 - the words used b. 2 - surrounding circumstances c. 3 - to whom the words are conveyed d. 4 - definiteness of terms e. 5 - whether a written contract is intended

CONTRACT FORMATION 9. Mutual Assent a. Parties must reach mutual assent on all of the essential terms of the agreement: (1) Parties; (2) Subject Matter; (3) Time for performance; (4) Price b. The law follows an objective theory of assent i. Meeting of Minds 1. Offer and Acceptance 2. Revoking an Offer 3. Imperfect Acceptance c. Res. 17: requires a bargain in which there is a manifestation of mutual assent to the exchange and a consideration i. Res. 18: requires that each party either make a promise or begin to render a performance ii. Res 19: Written or spoken words, actions, or omissions can all be acceptances. Party must intend for action to be acceptance and have reason to know that other party will interpret as such

d. Inner intent is irrelevant; intent is determined by conduct and express declarations. i. Embry v Hargadine: Ps contract was about to expire and asked D for renewal. go ahead, youre all rightand dont let that worry you. 1. Reasonability Standard: If a reasonable man would infer from a other parties conduct that the other party was assenting, then other party is bound ii. Lucy v Zehmer: sells farm as joke in restaurant (while drinking) /agreement written on the back of a check. 1. Joking/Pretending is not allowed. If the outward manifestations of assent otherwise create a contract, the law imputes an intent consistent with overt words and acts, a. Otherwise parties could always claim they were not serious to escape. UNLESS party has reason to know the other is joking e. Parties manifested intent towards each other, not towards anyone else is what counts. i. Texaco v. Pennzoil: Secret meeting or privileged documents are irrelevant for the purposes of assent. f. UCC 2-204. Formation in General. i. (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. ii. (2) An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined. iii. (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 g. Differences between UCC and Res. i. Res 33 Contract terms must be reasonably certain; terms are deemed reasonably certain if they provide a basis for determining the occurrence of a breach and an appropriate remedy ii. UCC 2-204(3) Terms can be left open; K formed as long as intent and a reasonably certain basis for giving remedy 10.Offer a. Definition i. An offer is the manifestation of willingness to enter into a bargain that justifies another person in understanding that his assent to that bargain is invited and will conclude it. Res 24 b. Preliminary Negotiations (Res 26)

i. No 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. ii. A mere statement of the price at which property is not an offer. 1. Nebraska Seed Co. v. Harsh: (D) sent a letter to P stating he had 1800 or thereabouts bushels of millet he wanted to sell for $2.25 per hundred weight. P wrote back accepting and sued when Harsh did not deliver. 2. thereabouts language tipped the scales. If this offer could stand everyone who responded to the letter would have a claim, regardless of the quantity. iii. An advertisement of a product is not an offer if it contains general, nonspecific terms. 1. Leonard v. Pepsico: Leonard (P) saw a commercial in which Pepsi offered a Harrier Fighter Jet for 7 million Pepsi Points which he proffered to Pepsico as an acceptance of its offer. 2. No objective reasonable person could have considered the commercial a reasonable offer. Absence of any words of limitation renders the offer sufficiently indefinite. Also, commercial reserves details to a separate writing. c. Written Memorial Contemplated (Res 27) i. Manifestations of assent that are in themselves sufficient to conclude a contract can bind parties although they may have intention to prepare and adopt a written memorial thereof 1. Empro v Ball-Co: Empro and Ball-Co signed a letter of intent containing general provisions of the sale of Ball-Cos assets to Empro. Several clauses indicated Empro was free to walk and Ball-Co had stated some clarifications were needed. 2. Letters of intent isnt binding agreement, but an agreement to agree. Public policy requires business to be able to conduct deals in stages. Empro was taxed with nothing beyond normal negotiations and cant get reliance ii. If parties have agreed upon all substantial terms, then an informal agreement can be binding. 1. Texaco v Pennzoil: Pennzoil (P) and Getty Oil entered into a merger agreement whereby Pennzoil would acquire Getty and signed a Memorandum of Agreement subject to the approval of each board and issued a press release. Texaco (D) made an alternative offer to Getty.

2. FACTORS: *Expressly reversed the right to be bound only when a written agreement is signed; *Partial performance by one party that the party disclaiming the contract accepted; *All essential terms of the alleged contract had been agreed upon; *Complexity or magnitude would normally require writing d. Enforcing the Contract to Bargain (Perspectives pg. 106) i. Common law-contract to make a contract is no contract at all. No duty to go forward w/ contemplated transaction. Should there be a duty to bargain in good faith if you signed a LOI? ii. Contract to Bargain is a proposed middle ground 1. Agreement to Agree a. Full agreement on most terms plus realization agreement should and probably will be reached 2. Formal Contract Contemplated a. Most terms reached but parties expect to sign a more detailed and formal document later. iii. Parties have intent to be bound 1. Found in words of writing or surrounding circumstances 2. Willingness to be bound must also appear 3. Burden on Proof on the proponent of K. iv. If there is a contract to bargain must have good faith bargaining 1. Must be demonstrated agreement clearly could have been reached and the claim is beyond question. 2. MAJOR PROBLEM: How do you determine whether there was good faith bargaining? Depends on view. v. Remedies 1. At least reliance and in special case expectation or specific performance if terms of exchange are detailed 11.Revoking an Offer a. An offeree's power of acceptance is terminated when the offeree receives from the offeror a manifestation of an intention not to enter into the proposed contract. Res 42. i. Policy: Offeror can make any sort of offer and can contract around default rules: Mailbox rule, Allow revocation w/o notice, account for fluctuating prices, etc. b. Dickinson v. Dodds: Dodds (D) offered in writing to sell real estate to Dickenson (P) until Friday. D learned P sold property to another and still tried to accept prior to deadline. i. Party can find out from a 3rd party. Offeror can make any type of offer. Knowledge effective upon receipt.

ii. Promise to hold till 9am is a promise without consideration, therefore its not binding c. Option Contracts - protects an offeree from an offeror's ability to revoke the contract. Res 25 i. Consideration for the option contract is still required by paying money for the contract or by providing value in some other form such as by rendering other performance/forbearance. 1. Ex: A offers to sell B Blackacre for $5,000 at any time within thirty days. Subsequently A promises under seal or in return for $100 paid or promised by B that the offer will not be revoked. d. UCC 2-205 i. An offer by a merchant to buy or sell goods in a signed record that 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 the period of irrevocability exceed three months. Any such term of assurance in a form supplied by the offeree must be separately signed by the offeror. 12.Acceptance a. Acceptance of an offer is a manifestation of assent in a manner invited or required by the offer. Res 50. i. Form? - Res. 30 1. Offeror can insist on acceptance by promise or performance (unilateral contract) or leave it up to offeree. 2. In any manner and by any medium reasonable in the circumstances. ii. Promise or Performance? - Res. 32 1. Where either acceptance by performance or acceptance by promise is reasonable, the offeree may choose between them. 2. BUT language or circumstances sometimes make it clear that the offeree is not to bind himself in advance of performance (unilateral contract). 3. If the offeree can choose between the two, the tender or beginning of the invited performance is an acceptance by performance. Res. 62. a. Such an acceptance operates as a promise to render complete performance. b. Ex: A, a regular customer of B, orders fragile goods from B which B carries in stock and ships in his own trucks. Following his usual practice, B selects the goods ordered, tags them as A's, crates them and loads them on a truck at

substantial expense. Performance has begun, and A's offer is irrevocable iii. Who may accept? Res. 29/52 1. An offer can be accepted only by a person whom it invites to furnish the consideration. iv. Notification? 1. When offer invites acceptance by performance, notice is not necessary unless demanded. Res. 54 a. BUT when offer does not explicitly invite acceptance by performance and offeree knows offeror has no adequate means of learning of the performance/acceptance; i. (a) offeree exercise reasonable diligence to notify offeror; or (b) offeror learns of the performance/acceptance in a reasonable time; or (c) offer indicates that notification of acceptance is not required. b. White v Carlies and Tift: D sought furnishing for offices. P had given an estimate and D sent a note that upon agreement in two weeks P could start work at once. P purchased lumber and commenced. c. Ps purchase of the lumber and work on it was part of his regular conduct. Such an action doesnt communicate his acceptance. 2. When offer invites acceptance by promise, essential that the offeree exercise reasonable diligence to notify the offeror. Res. 56. b. An acceptance must be definite and unequivocal. (Mirror Image Rule). Res 59/61 i. Ardente v Horan: P bid on Ds home which D accepted and then forwarded a written agreement. P signed and returned with $20,000 check and a request that certain items of furniture would be included in the transaction. D refused and P sued for specific performance. ii. Acceptance that imposes additional conditions on the offer is a counteroffer and requires acceptance by the original offeror 1. BUT if the acceptance is clearly independent of the condition then K is formed. c. Silence/inaction cannot operate as acceptance unless: (Res. 69) i. the offeree takes the benefit of offered services knew of expectation of compensation.

ii. the offer a) states that it may be accepted by silence, and b) the offeree remains silent with c) the intention of accepting. iii. previous dealings make it reasonable that the offeree should notify the offeror if he does not intend to accept. 1. Hobbs v Massasoit Whip: P sent some eel skins to the D who kept them without saying anything or paying for them and they were destroyed. D was in the business of buying eel skins and did so regularly. Both knew this, so it was reasonable for the D to either speak up or accept the skins. a. Policy: These types of offers are costly to reject; invites bad faith and strategic behavior. BUT subscription services OK. d. Acceptance by Correspondence Mailbox rule i. Acceptance is effective upon dispatch regardless if it reaches the offeror. Res. 63 ii. Acceptance by telephone/teletype is same as in person. Res 64 iii. Acceptance must be properly dispatched. Res. 66. e. Acceptance by Performance Unilateral Contracts i. Generally, only completed performance creates K. 1. Petterson v Pattberg: D wrote P and said that he would discount Ps mortgage. P made the April payment on time and went to D's house in late May. D refused to accept payment from P bc he sold mortgage. 2. The offeror can say I revoke before the offeree accepts (i.e. performs. Thus, P couldnt perform by Ds revocation. 3. Dissent: if a promisor causes the failure of performance, he cannot take advantage of the failure. (Res. 45) ii. Types: 1. Only one person can perform. Ex: reward contract 2. Multiple people can perform. Ex: advertisement iii. If offeror doesnt require promissory acceptance, an option K is created when the offeree tenders or begins the invited performance. Res. 45 1. Ex A writes to her daughter B, living in another state, an offer to leave A's farm to B if B gives up her home and cares for A during A's life, B remaining free to terminate the arrangement at any time. B gives up her home, moves to A's farm, and begins caring for A. A is bound by an option contract. 2. What is begun or tendered must be part of the actual performance invited, rather than preparation for performance. Res 45. iv. Notification is unnecessary to create K unless the offer requests such a notification. Res. 54.

1. Carlill v. Carbolic Smoke Ball: D placed ad in leading newspaper promising 100 to anyone using the ball properly and still came down with the flu. Stated they put 1000 in the bank to show sincerity. 2. BUT if an offeree has reason to know that the offeror wont find out with reasonable promptness and certainty, then no K unless (a) the offeree tries to notify the offeror of acceptance, (b) the offeror learns within a reasonable time, or the offer indicates that notification is not required. f. UCC 2-206 i. (1)(a) An offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances; Same as Res. 30 ii. (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 nonconforming goods. Same as Res. 32 iii. (2) If the beginning of a requested performance is a reasonable mode of acceptance, an offeror that is not notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance. iv. (3) A definite and seasonable expression of acceptance in a record operates as an acceptance even if it contains terms additional to or different from the offer. Rejects mirror image rule 13.E-Commerce and Mutual Assent a. Specht v Netscape: P downloaded free software that asked user to read license agreement on same page as download link. Browse wrap refers party to terms and conditions but requires no affirmative action i. For inquiry notice? Reasonable person may not have seen additional writing or assumed it was a licensing agreement. ii. Downloading alone doesnt manifest assent to enter contract only to obtain product. Click wrap is generally enforceable because it requires assent by clicking on icon b. Register.com v Verio: D used Ps search query to mine data from site contrary to terms and conditions. Terms and conditions appeared after search query. i. D used search query daily for a long period of time and was on notice after first use ii. D doesnt have to click and I agree box or say; when offeree makes a decision to take a benefit with knowledge of the terms of the offer, the taking constitutes an acceptance of the terms

DISCERNING THE AGREEMENT 14.Interpreting the meaning of the words a. Ambiguity (Misunderstanding - Res. 20) i. No K if the parties attach materially different meanings to manifestations AND neither party knows that other party attaches different meaning or both know that other party attaches different meaning. ii. Raffles v. Wichelhaus: A offers to sell B goods shipped from Bombay ex steamer Peerless. There are two steamers of the name Peerless, sailing from Bombay at different times. 1. If both parties intend the same Peerless, there is a K, and it is immaterial whether they know or have reason to know that two ships are named Peerless. 2. If neither A nor B knows or has reason to know that they mean different ships, or if they both know or if they both have reason to know, there is no K. 3. Beware of strategic buyer iii. Oswald v Allen: P tries to buy Ds Swiss coin collection. D had two coin collections, Swiss and Rare. P believes Swiss collection refers to both collection. 1. If neither party can be assigned the greater blame for the misunderstanding, the parties are allowed to abandon the contract without liability iv. Whose meaning prevails? Res. 201 1. (1) If same meaning attached, interpreted with that meaning 2. (2) if different meanings attached, interpreted in accordance with the meaning attached by one of them if at the time the agreement was made a. that party did not know (or have reason to know) of any different meaning attached by other, and other knew (or had reason to know) meaning attached by first, or b. Except as stated in this section, neither party is bound by the meaning attached by the other, even though the result may be a failure of mutual assent. 3. Examples v. How to interpret? Res. 202 1. Words interpreted in light of circumstances, intention of parties is given much weight 2. Writing interpreted as a whole

3. Unless different intention manifested a. language interpreted with general meaning b. technical terms given technical meaning when interpreted in technical field 4. When agreement calls for repeated performance with opportunity for objection, any course of performance/negotiations accepted without objection will be given great weight in interpretation 5. Wherever reasonable, manifestation of intention are interpreted as consistent with each other and with any relevant course of performance, course of dealing, or usage of trade. vi. Preferences in interpretation Res. 203 1. (a) an interpretation which gives a reasonable, lawful, and effective meaning to ALL the terms 2. (b) express terms > course of performance > course of dealing > usage of trade 3. (c) specific terms and exact terms > general language; 4. (d) separately negotiated or added terms > standardized terms b. UCC i. 1-205(303) Course of Performance/Dealings and Usage of Trade 1. Course of performance = repeated conduct relating the same transaction and the other party accepts the performance w/o objection. 2. Course of dealing = conduct concerning previous transactions that establishes a common basis of understanding for interpreting 3. Usage of trade = any regular practice in a place, vocation, or trade ii. 2-208(303) Practical Construction 1. Prefer interpretation where express terms consistent with course of performance/dealing or usage of trade 2. Priority same as Res. 203 c. Vague Terms i. Weinberg v. Edlestein: 2 stores in mall. One has restrictive covenant to sell dresses; other store sells blouse/skirt combos. 1. Industry defines skirt/blouse combos as interchangeable. Two piece dresses as designed to be worn together. ii. Frigaliment v. B.N.S: Contract for chicken. Seller sold stewing chickens, but buyer wanted and intended to request broilers. 1. Buyer failed to prove that the word chicken in contract referred only broiling/frying chickens, not stewing chickens

2. Trade usage was not of such long continuance, so well established, so notorious, so universal and so reasonable in itself. Chicken often qualified in practice. iii. Interpreting Assent: 1. Do both parties attach different meaning to terms in the contract? a. Yes No K bc misunderstanding. R20, 201(3) b. If the same meaning K is formed. R201(1) 2. Does one party know/ have reason to know that other party (x) has attached a partic. meaning to term? a. YES if A is clueless, there is an agreement subject to the meaning of the term as believed by A. R201(2) 3. No? Can objective meaning of term be determined? (consider course of performance, course of deal, usage of trade 202, 1205, 2-208 a. YES If As interpretation is objectively reasonable and can be determined (by course of performance, dealing, or usage in trade), As interpretation prevails even though B subjectively meant something else b. No K not formed 15.Gap-filling a. When? i. When the parties to a bargain sufficiently defined to be a contract have not agreed with respect to a term which is essential to a determination of their rights and duties, a term which is reasonable in the circumstances is supplied by the court. Res 204 1. Texaco v. Pennzoil: Ds attempts to create additional essential; terms from the mechanics of implement agreement are unpersuasive. b. How to fill: i. Implied-in-fact terms terms that parties actually, albeit implicitly, have agreed to ii. Implied-in-law terms imposed on parties without their consent 1. Default rules legal rules that the parties can avoid or vary by means of an express clause that differs from the term a court will otherwise supply by default 2. Immutable rules may not be varied by consent and will override any express clause to the contrary c. An agreement to agree on a term at later date cant be filled in unless enough specificity exists

i. Contract can be binding even if it involves choice of terms by one party. Past performance and reliance give courts reason to enforce uncertain contracts. Res 34 ii. Sun Printing v. Remington: P agreed to buy paper supply from D, future price of paper and length of time which price should apply were to be agreed upon by parties at a later date. Max on price set by external standard but term intervals for setting price left unfulfilled. 1. No basis to determine what time element should be. Price could be set at max or set at the time intervals. 2. Modern trend: Fill in. Res33,204; UCC 2-204, 3. Debate: a. Freedom FROM contract: We are not at liberty to revise while professing to construe. b. Freedom TO contract: We must start the examination of this agreement by believing iii. UCC 1. 2-305 Open Price Term a. Can create a K w/o price term settled which is the reasonable price at the time for delivery if (a) nothing is said; (b) parties fail to agree; (c) the price is to be by a standard a 2. 2-308 - Absence of specified place for delivery 3. 2-309 - Absence of specific time provisions, notice of termination d. Illusory Promises = A promise that is unenforceable due to indefiniteness or lack of mutuality, where only one side is bound to perform. i. Ex: "agrees to sell all of the ice cream he wants to" to the buyer. ii. Requirements contracts-one party promises to furnish all the product that the other party needs at a fixed or fixed-variable price in return for a set % (usually 100% ) of the buyers business 1. New York Central Iron Works v US Radiator: D had an open K for set price with P for the quantity of goods D was to deliver. Price on radiators soared. Ps order exceeded the usual amount and D refused to deliver. a. D relied on prevailing market conditions to act as a natural limit on Ps orders. But this reliance is outside the K b. Although K wouldnt allow any limit, the parties were bound to act in good faith (cannot be speculative and for ordinary business purposes)

iii. UCC 2-306(1) parties must act in good faith and cannot tender/demand a quantity unreasonably disproportionate to stated estimates OR normal/comparable output 1. Eastern Air Lines v. Gulf Oil Corp: D contracted to supply P with petrol under a requirements K. Price of petrol skyrocketed. D wants P to pay the higher market price. D claims K not binding because of want for mutuality and commercially impracticable a. "Fuel freighting" was a well known and accepted practice, and as such did not violate good faith dealing. " Requirements Outputs Good Protects sellers, buyers Protects buyers, can Faith cant ask for refuse to buy disprop. Increases disproportionately more Increase in tendered output Good Protects buyers, who Protects sellers, can Faith can ask for disprop. tender disprop. Less if decreases in good faith iv. UCC 2-306(2) exclusive dealing in the kind of goods concerned imposes an obligation by the seller to use best efforts 1. Wood v Lucy, Lady Duff-Gordon: P contracted with D for exclusive right to put Ds endorsements on sales or marketing. D began to put endorsements on other things. No term in the K required P to do any affirmative act only share profits. a. A promise to pay one half of profits contains an implied promise in fact to use reasonable efforts to bring profits and revenues into existence 16.Identifying the Terms a. Form Contracts (Contracts of Adhesion) = form contracts offered on a take-it-or-leave-it basis by a party with a stronger bargaining power to a party with weaker power. i. Res. 211 1. If party signs or manifest assent he adopts the writing 2. Knowledge/understanding of the standard terms is irrelevant 3. An unconscionable term is not part of the agreement ii. courts are hesitant to enforce adhesion contracts because of: 1. lack of assent; disparity in bargaining power creating constructive coercion if not real coercion, and unconscionability 2. pros - standard practice improves operations, reduced transaction fees, decreases litigation

3. cons disparity in bargaining power, eliminates alternatives, inconvenient to weaker party, temptation to overdraw in the interest of drafting party iii. Subject to limitations 1. standard terms may be superseded by separately negotiated or added terms ( 203), they are construed against the draftsman ( 206), and they are subject to the overriding obligation of good faith ( 205) and to the power of the court to refuse to enforce an unconscionable contract or term ( 208) and interpretation in favor of public ( 207). iv. Carnival Cruise Lines v Shute: Cruise line tickets had a forum selection clause. Ticket is received after payment. P argues not the product of negotiation and thus unenforceable 1. Reasonableness-OK: D wants to limit for a and clause eliminates wasteful litigation over forum (save money results in cheaper tix) 2. Fairness-OK: No bad faith motive (no fraud or overreaching), Given notice 3. P conceded they had notice. But this was their best arg. v. Caspi v Microsoft: D had forum selection clause in terms and conditions of membership contract for MSN. o Digital medium OK. Writing was reasonably conspicuous. Offered a chance to reject agreement. b. Which terms were agreed to? Battle of the Forms i. If not merchant, additional terms are not binding or are a counter offer. ii. UCC 2-207. 1. 2. New terms are binding unless a. Original offer that contract could not be annotated b. Material Alteration c. Raised timely objection to new terms 3. If terms differ, but conduct manifests a K. Then knock-out differing terms and interpret K according to rules of interpretation iii. A term that materially alters K doesnt invalidate K but term is not effective unless consent exists 1. Union Carbide v Oscar Meyer: P sold plastic casings to D did not charge the sales tax at the time of sale. P tried evading sales tax to charge lower price. D printed on the back of invoices that Seller should be required to pay taxes 2. There was no showing that D consented to term expressly or by silence based on the background of the course of dealings

iv. Last shot rule 1. It assumes that by choosing to commence performance, that party is implicitly accepting the terms conveyed by the last communication received v. Terms that follow later Shrinkwrap license 1. ProCD v Zeidenberg: P sold phonebook software at consumer and corporate prices. D purchased software and used it contrary to terms and conditions in shrink-wrap license a. Many transactions occur where terms are communicated after sale because impractical to put terms on box b. 2-207 irrelevant because no other form. 2-204(1) seller may request acceptance by performance and interpret performance as acceptance. 2-206(b) buyer inspects goods and does not reject them constitutes acceptance. 2. Key Pay Now, Terms Later Question: Does seller make clear no contract until new term accepted/not accepted? 3. Hill v Gateway: P purchased a computer from D. The list of terms included a provision requiring that disputes be resolved exclusively through final and binding arbitration. a. Additional terms included in a box shipped by the seller do become part of the K between the parties, because P was on notice that terms would be coming in box and could reject them by returning in 30 days 4. Klocek v Gateway: Klocek brought charges alleging Gateway made false promises of technical support. Gateway moved to enforce their arbitration clause in this case the terms were accepted if the product was not returned in 5 days a. No notice that terms would be accepted unless returned in 5 days. This is a counteroffer rather than additional terms 17.Written Manifestations of Assent a. If something is not in the four corners of the contract, then you have to get around the parol evidence rule to get something else included b. Parol Evidence Rule i. Was the writing total or partially integrated? 1. Total integration document that is intended as a complete expression of an agreement. No evidence of a prior or contemporaneous agreement or negotiation (oral or written) may be introduced that contradict or add to the agreement. (215/216) 2. Partial Integration documents intended as final, but not complete, expression of an agreement. No evidence of prior or

contemporaneous agreements or negotiations (oral or written) may be introduced that contradict the agreement ii. Res. 214 Parol evidence ok when use to establish: 1. (a) whether written agreement is integrated; (b) completely or partially integrated; (c) the meaning of the writing, whether or not integrated; (d) illegality, fraud, duress, mistake, lack of consideration, or other invalidating cause; (e) ground for granting or denying rescission, specific performance, or other remedy. iii. UCC 2-202 (More permissive than Res.) 1. ...[terms of contract] may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented: 2. (a) by course of dealing or usage of trade (1-205) or by performance (2-208), and 3. (b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms and agreement c. Traditional Majority Application (Strict/Plain Meaning) i. Thompson v Libbey: P sold logs to D and wrote an agreement. P claims he received a verbal warranty as to quality of logs ii. PE not allowed because the written contract seems complete fully integrated therefore any PE evidence that alters or adds to contract is inadmissible d. Modern Trend Application (Broad) i. Brown v. Oliver: Parties discussed sale of hotel to include furniture but final contract did not include it. ii. Was writing intended to cover all subjects or just some subjects? (depends wholly on parties intent determined by conduct and surrounding circumstances) iii. Does the writing deal with element of the alleged extrinsic negotiation? When the writing is completely silent, then probably writing not intended to cover that and PE is admissible. e. California Application i. Pacific Gas: D agreed to indemnify P against all loss resulting from injury to property. D sought to offer evidence that the indemnity clause was only to cover damages to third parties. 1. Extrinsic evidence is admissible to explain the meaning of a written agreement if the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible.

2. Judge hold preliminary hearing on parol evidence ii. Trident Center: P trying to escape a mortgage which they Kd to pay for 12 years without the ability to prepay unless in case of default. 1. Parol evidence is admissible to raise an ambiguity in a contract that is unambiguous on its face and by the admission of the parties. iii. Pacific --encourages costly, protracted litigation; more work for courts; oral testimony less trustworthypossibility of bias and taint of hazy memory. must allow objective meanings to prevail, otherwise no contract is safe and parties f. Reforming a Writing Mistakes in Integration i. Three requirements for reformation 1. Must have made an agreement 2. Parties must have agreed to put the agreement in wirting 3. Must have a discrepancy between what was agreed on and what was written ii. The Travelers Insurance Company v. Bailey / error in recording agreement / use outside evidence to show what it should have been 1. Contract gets reformed as it should have been originally iii. When can you justify reforming? 1. Mistake in good faith 2. Cant reform if 3rd party relied on it! (no reliance here by anyoneeven the parties) 18. Statute of Frauds a. Certain contracts are never enforceable without writing signed by person against whom enforcement is sought. i. Critics point out that the statute may unwittingly provide a defense otherwise unavailable to someone who regrets an oral contract - making this a trap for the unwary who dont get everything in writing b. What contracts are subject? Res. 110 i. Land contracts ii. Contracts not to be performed until > one year beyond contract date iii. contracts for sale of goods > $500 c. Requirements? Res. 131 i. (a) reasonably identify the subject matter of the contract; ii. (b) be sufficient to indicate that a contract has been made between the parties; and iii. (c) states with reasonable certainty the essential terms of the unperformed promises in the contract. d. UCC 2-201

i. (1) any sales of goods for more than $500 must have a signed written agreement behind it. ii. Exceptions 1. Written confirmation sent within reasonable time 2. Specially manufactured goods 3. Admitted to contract in pleading 4. Goods already made and accepted e. Action In Reliance is an exception. Res 129. i. if P in reasonable reliance on the contract and on the continuing assent of the party has so changed his position that injustice can be avoided only by specific enforcement. 1. Boone v. Coe: Family travels to TX from KY after promising to work on persons land in exchange for % of crops and land to live on. Other side decides to renege on offer. SOF applies because contract was to be performed more than one year from date of agreement. 2. No breach because under SOF there was no contract. P conferred no benefit on owner, so they are entitled to no recovery. f. Partial performance of a contract doesnt convert an invalid SoF contract into a valid one. i. Riley v Capital Airlines: P sells water methanol to D and claims it was given a five year contract. ii. Was it executable within one year? No, because the P mixed product whenever the D requested so each order was a unique transaction and was enforceable but the five year contract was unexecutable in less than a year. iii. Exception: if seller makes product specifically designed for the buyer g. May be a written contract, but any writing, formal or informal, may be sufficient. Neither delivery nor communication is essential. i. Cloud v. Hasbro: P made a unique mixture of chemicals for D. P made a large quantity in anticipation of a receiving a formal purchase, but D refused delivery of packets. P sent an order of acknowledgement but D did not respond to it. However, P and D had email exchanges referencing the quantities of the new order. 1. Primary purpose of the Statute is evidentiary, to require reliable evidence of the existence and terms of the contract and to prevent enforcement through fraud or perjury of contracts never in fact made 2. Senders name on email can satisfy siganture

h.

. Subjective v. Objective of Assent Subjective theory - Mutual assent requires the meeting of the minds, i.e. same subjective intent on minds of both parties - Used in subculture or trade where language is used differently than it would be understood by a reasonable person - Problem indeterminacy and invitation for fraud objective theory of assent - this places the risk on the low-cost bearer/best evaluator - interpretation based on the reasonable meaning of the actions of the two parties - theory is subjectivized to the extent that circumstances are taken into consideration when determining the objective meaning of the partys actions - encourages clarity - Problems cannot be as clear as one may want, reasonableness can differ with different levels of sophistication, so the objective theory also subjectivizes in this department as well reasons that favor objective over subjective: - demands for security in business transactions, - protecting reasonable expectations - encouraging exchange of information Design new contract rules for a new city in development 1. One policy maker argues that it doesnt matter what the damages are set at, expectation, reliance, restitution so long as everyone has public knowledge that the new damage interest is default damages. This will still guarantee everyone the benefit of the bargain.

2. For: a. The public knowledge aspect increases certainty about what damages are to be expected, therefore b. reduce transaction costs because of less bargaining time c. people can contract around default rules if they want something in particular incentivizing more clear contracting d. courts often confuse the analysis and often the damage awards are the same. 3. Against a. Denies judges the discretion to do whats fair based on the circumstances and having multiple remedies to do this b. people should have the ability to contract what they want