THE LAW OF CONTRACT

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THE LAW OF CONTRACT by Mind Map: THE LAW OF CONTRACT

1. Blaisdell - No state shall pass any law impairing the obligation of contracts - the reason for this Clause was that the framers didn't want the rich and powerful to be let out of Ks. In Blaisdell, Congress passed legislation extending the period of repayment of mortgages to help people against foreclosures. SCOTUS said that this was okay because of the reasoning behind the Clause and because of exigent circumstances.

2. QUESTION 1: Has there been an agreement or a promise?

2.1. Objective Test

2.1.1. Lucy v. Zehmer: How would a reasonable person interpret the other person's actions?

2.1.2. Embry vs. Hargedine: Inner intention does not matter if outer conduct is sufficient to form a written or oral K

2.2. Possible Stages

2.2.1. Stage one: Was there an offer?

2.2.1.1. First: Content of communication.

2.2.1.1.1. Not all terms must be spelled out or included.

2.2.1.1.2. Watch for vague or ambiguous terms (fair, appropriate, reasonable) --> can be too vague to constitute offer (I will buy some X from you, maybe).

2.2.1.1.3. Look at party intent - would a reasonable person intend to read the communication as an offer?

2.2.1.1.4. Advertisements are generally invitations to offers (Lennard v. Pepsico)

2.2.1.2. Payne v. Cave - Auctioneer "ivnites bids" rather than acceptances. Otherwise, bidder would be bound by his acceptance while auctioneer was not.

2.2.2. Stage two: Was there a Revocation?

2.2.2.1. Revocation of offer

2.2.2.1.1. Revocation communication must constitute c/a notice and must be unambiguous. Words or conduct is sufficient

2.2.2.1.2. Four offers cannot be revoked

2.2.2.1.3. Must respond within reasonable amount of time

2.2.2.1.4. Offeree dies or is incapacitated

2.2.2.2. Acceptance must be reasonably timely, or else offer is revoked

2.2.3. Third Stage: Was there an acceptance or a rejection/counter-offer?

2.2.3.1. Where offer specifies no way of acceptance, any reasonable-under-the-circumstances form of acceptance is is valid

2.2.3.2. Mailbox Rule Question: 1. Two people are making a deal at a distance; 2. Both people use methods of communication that involve delays; 3. Communications are inconsistent, thus it is important to know when what communication became effective

2.2.3.2.1. Adams v. Lindsell: Where Mailbox Rule comes from

2.2.3.3. DIRECT REJECTION - Notice must be given to accept an offer

2.2.3.3.1. Hill v. Gateway (Easterbrook) - Method of acceptance can be specified in offer. Here, it was a unilateral K agreed upon by keeping a computer past 7 days. Also, when there is only one form, 2-207

2.2.3.4. INDIRECT REJECTION can take four different forms

2.2.3.4.1. Counter-offer is a form of rejection.

2.2.3.4.2. I accept IF...

2.2.3.4.3. I accept AND...

2.2.3.4.4. LAPSE OF TIME: Akers v. Sedberry (Felts): Time duration of PoA can be dictated in offer. Otherwise reasonableness.

3. QUESTION 2: Is there a reason why the agreement would not be enforceable? (Consideration & Reliance)

3.1. Consideration - bargained for legal detriment. (No masturbation in contracts).

3.1.1. "PRE EXISTING DUTY RULE. An act that happened previous to the agreement cannot be bargained for.

3.1.1.1. EXCEPTION: "Life saver" scenario

3.1.1.1.1. Webb v. McGowin: Where a person for instance saves another person's life and the savee then promises to pay money, courts will presume that the savee would have made the same bargain if given the chance and that the promise is thus enforceable because of consideration

3.1.1.1.2. EXCEPTION to EXCEPTION - Where its not about life

3.1.1.2. Promises to pay past/pre-existing debt.

3.1.1.2.1. COMMON LAW

3.1.1.2.2. UCC2-209: No consideration necessary for modifications to Ks.

3.1.2. MODIFICATIONS TO CONTRACTS

3.1.2.1. Common Law requires nrew consideration, treating each modification as new K

3.1.2.1.1. Alaska Packers v. Domienico: Corporation and workers agree for workers to work. Workers get there any shit is shitty. Workers axe for more dollar bill y'all. Corporation wins, because workers can't bargain with performance.

3.1.2.1.2. EXCEPTION: Where there modification is made in response to a new situation. No attempt of coercion

3.1.2.2. UCC makes a modification to an existing K enforceable without consideration if the modification is in writing.

3.1.3. Non-consideration. Love and affection, a penny, or a prior act cannot constitute consideration, even if it is purported to be.

3.1.3.1. Schnell v. Nell - Dude inherits a bunch of dollar bills. Wants to do the right thing and give it to his kids. HELD, void.

3.1.4. Bargained-for forebearance from a legal right iconstitutes causation.

3.1.4.1. Dyre v. National Byproducts - A good-faith belief that one is refraining from a legal right is sufficient. HERE, iP thought he was forebearing from suit even though works comp. was his only remedy anyway.

3.1.4.2. Hammer v. Sidway - Uncle asks nephew that if you stop smoking I'll give you $$$. Nephew stops smoking. --> Nephew limited his freedom enough to constitute legal detriment.

3.1.5. Best efforts can be implied.

3.1.5.1. Wood v. Lady Duff Gordon - W and LDG agree for LDG to exclusively endorse W's products. LDG claims that is is unenforceable because of lack of consideration. HELD that there is an implied good faith effort consituting consideration from W.

3.1.6. ACCORD IN SATISFACTION - Common Law and UCC3-311 agree

3.1.6.1. CHECK CASHING PROBLEM - UCC3-311: Usually, a person cashing a check for less than the full amount due will lose. EXCEPT where 1) check is accompanied by a conspicuous writing saying that the instrument is tendered in full satisfaction; 2) claims was either unliquidated or subject to a good-faith dispute; 3) debtor acted in good faith.

3.1.6.2. IFC Credit Corp v. Bulk Petroleum - A owes money to B. A and B agree for A to pay less than the full amount that is due. A sends check to C and explanation to B. B is bought out by C, so C receives the new letter. B receives explanation, then C cashes check and gives B money. HELD that this is okay because there was accord in satisfaction because check was cashed knowing of the explanation/intent to tender in full satisfaction.

3.2. Detrimental reliance

3.2.1. Promissory Estoppel under R2d90

3.2.1.1. Where there is a promise, and the promisee has foreseeably relied upon that promise in a reasonable/foreseeable way, the Court should enforce the promise to the extent of preventing injustice.

3.2.1.1.1. Knott v. Racicot - Detrimental reliance can substitute in option Ks, too. Even if it was not meant as an option K, it will be treated as one.

3.2.1.1.2. Early Cases

3.2.1.1.3. Retirement cases

3.2.1.1.4. Contractor/Subcontractor

3.2.1.1.5. EXCEPTION: Gifts to charities are binding even in the absence of consideration.

3.2.1.2. POLICY: Began as an R2d invention, and now applies in pretty much every state.

3.2.2. C.V v. Drake - Doctrine of Reliance is created - Court states that expenditure and effort by promisee in response to promise should be consideration in equity.

3.3. DOES THIS K FALL WITHIN THE STATUTE OF FRAUDS? - concern with Ps fraudulently alleging the existence of a K.

3.3.1. TRANSFER OF INTEREST IN REAL ESTATE falls within SoF

3.3.2. LEASES FOR ONE YEAR OR LESS fall within SoF

3.3.3. A K FOR A SERVICE THAT IS TRULY IMPOSSIBLE TO PERFORM WITHIN A YEAR falls within the SoF. NOTE: One year period begins at time agreement is made.

3.3.3.1. Note: Any task with no time indication will fall into this box - test is theoretically possible with unlimited resources. A K to tour the country for 18 months is not possible to do within 12 months even with unlimited resources.

3.3.4. MARRIAGE or Ks WHERE MARRIAGE IS CONSIDERATION fall within SoF

3.3.5. SALE OF GOODS FOR $500 OR MORE

3.3.6. EXECUTION OF A WILL falls within SoF

3.3.7. THERE MUST BE A WRITING (=Evidence of a K) SATISFY THE STATUTE OF FRAUDS (and render the K enforceable)

3.3.7.1. Under Common Law, the writing must meet the ALL MATERIAL TERMS test. That is, the writing must identify the parties and what the parties agreed upon and be signed by the party against whom enforcement is sought.

3.3.7.1.1. Radkey v. Brennan - Writing mustn't necessarily be a K, just has to evidence that there existed a K. HERE, it was a K for the sale of land. And the requirements were 1) express statement of consideration, 2) description of the land, 3) signed by the party to be bound, 4) must identify all parties to the K.

3.3.7.1.2. Consider whether not enforcing the agreement woudl bring undue hardship upon P.

3.3.7.2. LOOSE REQUIREMENTS - Under UCC2-201, the writing must 1) contain quantity of goods to be sold (doesn't have to mention price); 2) be signed by the party against whom enforcement is sought EXCEPT where both parties are merchants.

3.3.7.2.1. EXCEPTION GENERALLY UCC2-201(3): Specially manufactured goods: No writing is required is goods are 1) specially manufactured for the buyer, 2) are not suitable for sale to others, AND 3) the seller has made either a substantial beginning of the manufacture or commitments for the procurement.

3.3.7.2.2. UCC2-201(2) EXCEPTION - A memo can be enforceable even against the party who does not sign it, when both parties are merchants AND the recipient does not object within 10 days. In such a case, both the sender AND the recipient are bound. Sender must dispatch "within reasonable time."

3.3.7.2.3. DETRIMENTAL RELIANCE EXCEPTION: Cloudcorp v. Hasbro, POSNER - complicated facts, bus essentially there was an oral agreement and no written K. HELD that (private/Kal) SoF can be waived by either 1) detrimental reliance (like HERE, on the other party's silence when P send modifications to them), and 2) clear and unequivocal waiver.

3.3.7.2.4. MODIFICATIONS

3.3.7.2.5. FLORIDA EXCEPTIONS

3.3.7.2.6. EXCEPTION: ESTOPPEL

3.3.7.3. CISG (Article 11) does not have a SoF provision, and thus no writing requirement for oral Ks. Can be proved by any means (incl. witnesses). Article 12 says that if you've made an Article 96 declaration, Article 11 is not enforced.

3.3.7.3.1. EXCEPT where a country has made an Article 96 declaration (the US has). In such case, the state's version of the UCC's SoF would govern. Where the country has NOT made an Article 96, a K may still opt out of the CISG. To so, the K must say "This K is governed by the laws of [state], NOT byt the CISG."

3.3.7.4. RELIANCE EXCEPTION: Reliance can be a substitute for writing. But this is not as universally adapted as the general PE doctrine.

3.4. IS THIS K BARRED BY THE STATUTE OF LIMITATIONS?

3.4.1. Florida SoL

3.4.1.1. Periods of time

3.4.1.1.1. Written K: 5 Years

3.4.1.1.2. Oral K: 4 Years

3.4.1.1.3. To sue for rescission: 4 Years

3.4.1.1.4. K guaranteeing the outcome of a medical procedure: 2 Years

3.4.1.2. Limitation starts running at the time the breach occurs, rather than when damages occur. The end date is the date of filing the suit.

3.4.1.3. Private, Kal, extensions of the SoL period are permissible. Privately, Kally, reducing the SoL is not permissible.

3.4.2. In most/other UCC states, in UCC-cases, SoL

3.4.2.1. Private, Kal, extension of SoL period are permissible. Private, Kal, reductions of the SoL to no less than 1 year (1 year minimum) are permissible.

3.5. OTHER REASONS FOR NON-ENFORCEABILITY

3.5.1. Duress

3.5.2. Sometimes, economic duress, but generally not.

3.5.3. Capacity / infancy

3.5.4. Misrepresentations

3.5.4.1. Before agreement, one party makes to the other party a knowingly false statement. The second party then reasonably relies upon that statement. These facts make the agreement unenforceable / basis for rescission.

3.5.4.2. In contract law, bona fide misrepresentations as to a material fact are still a basis for rescission for the misrepresented-to party.

3.5.5. Generally, no obligation to disclose. However, the relationship between the parties can be such that the court would find a fiduciary duty to disclose.

3.5.6. Void as against public policy.

3.5.6.1. Two traditional scenarios

3.5.6.1.1. Exculpatory Ks - where a person is King away her liability for torts.

3.5.7. Unconscionability

3.6. THE DOCTRINE OF MISTAKE, AND MISUNDERSTANDING - All about a person, on her own, getting a wrong idea (not because of what the other party said, which is misrepresentation.)

3.6.1. MUTUAL MISTAKE - Where there is a mutual mistake about a material term and the people think they know what's up.

3.6.1.1. Sherwood v. Walker - A cow is sold for a beef-cattle price. Both parties thought they knew that the cow was barren. Before delivery date, seller discovers that cow was preggers. COURT held that the K was not enforceable under the mistake doctrine, because of a mutual mistake as to a material Kal term (the nature of the thing to be sold).

3.6.1.2. Distinguish WILLING IGNORANCE - If one or both parties know that they do not have full/sufficient information on what was to be sold, the K is still valid because one should not incentivize willing ignorance.

3.6.1.2.1. Wood v. Boynton - Rock is sold, turns out to be a diamond.

3.6.1.3. A seller should know what she is selling. A court would allocate the risk of mistake to a seller as the least-cost avoider.

3.6.2. MISUNDERSTANDING - where a K term is ambiguous (has two meanings) and the two parties have different meanings in mind. Neither party has a/c knowledge of the other party's differing understanding. In such a case, the court would not find a K.

3.6.2.1. Raffles v. Wickelshouse - Peerless case. There are two ships named Peerless, P had a different one in mind as D. HELD that no meeting of the mind had occurred and thus there was no K.

3.6.2.2. Oswald v. Allen (2nd Circuit, Moore) - No K exists where there was a genuine mutual misunderstanding as to what was agreed upon.

4. QUESTION 3: What are the terms of the agreement?

4.1. Have the parties signed a single contract?

4.1.1. If YES

4.1.1.1. Under both UCC and Common Law

4.1.1.1.1. PAROLE EVIDENCE RULE = applies to written Ks.

4.1.2. If NO

4.1.2.1. UCC2-207

4.1.2.1.1. UCC2-207(1) - Even where an acceptance has different or additional terms than the offer, a K is formed.

4.1.2.1.2. First situation/2: Parties reach oral agreement, and one party sends WRITTEN CONFIRMATION

4.1.2.1.3. Second situation/2: Parties have exchanged writings that are not the mirror image of another.

4.1.2.2. Common Law

4.1.2.2.1. Mirror Image Rules means that a purported acceptance with different or additional terms is NOT an acceptance, but RATHER A COUNTER-OFFER.

5. QUESTION 4: PERFORMANCE, CONDITIONS, EXCUSES

5.1. Common Law - a MATERIAL BREACH EXCUSES the other party from performance. The CONDITION upon which performance (i.e. payment) depended was not met.

5.1.1. An improper performance excuses another party from performance only if the impropriety rises to the level of MATERIAL BREACH.

5.1.1.1. Under K law, there is no recovery for the party materially breaching

5.1.1.2. In equity, there may be recovery for the party materially breaching on a quasi-K theory.

5.2. Common Law - a NON-MATERIAL BREACH does NOT EXCUSE the other party from performance. It must perform, and can then sue for damages. The CONDITION upon which performance (i.e. payment) depended was still SATISFIED.

5.3. ANTICIPATORY REPUDIATION - where one of the two King parties unambiguously indicates that she is unable or unwilling to perfom.

5.3.1. Unambigous

5.3.1.1. Under Old Rule, the non-repudiating party would have to wait until AFTER the due date of performance to bring a suit.

5.3.1.2. Under Current Rule, such an unambiguous statement constitutes a breach sufficient to sue.

5.3.1.2.1. Can wait until performance is due to sue

5.3.1.2.2. Can cancel and sue for breach

5.3.1.2.3. Can urge to perform in spite of AR

5.3.2. Ambiguous

5.3.2.1. Under UCC

5.3.2.1.1. Where there are reasonable grounds for insecurity regarding the ability of the other party to perform, one can demand an adequate assurance of ability to perform and can withhold payment until such adequate assurance is received.

5.4. UCC

5.4.1. Under UCC - PERFECT TENDER RULE governs.

5.4.1.1. Under PTR, buyer can REJECT delivery on ANY insufficiency, not matter how small.

5.4.1.1.1. Seller then has the opportunity to REMEDY THE BREACH within a reasonable time.

5.5. CONDITIONS

5.5.1. A K must contain language of condition for this to be relevant.

5.5.1.1. Express condition

5.5.1.1.1. Perfect compliance is required for condition to be satisfied.

5.5.1.2. Implied condition

5.5.1.2.1. Perfect compliance is required for condition to be satisfied

5.5.1.3. Constructive condition

5.5.1.3.1. Substantial compliance is required for condition to be satisfied.

5.6. IMPOSSIBILITY AND FRUSTRATION OF PURPOSE - Some unanticipated post-agreement occurrence that affects a party's ability to perform.

5.6.1. Where there is a post-K occurrence that negates the ability of a party to perform, then performance is excused

5.6.1.1. Taylor v. Caldwell - P and D enter into K for P to rent the operahouse in July. In June, the operahouse burns down. P sues D for non-performance. HELD in favor of D because his performance was rendered impossible by the fire.

5.6.2. Where there is a post-K occurrence that makes the performance of a party more expensive, performance is NOT excused. Court would hold that the party assumed this risk.

5.6.3. FRUSTRATION OF PURPOSE - A post-K unanticipated event that does not affect the ability of the parties to perform, but rather the reason why the party would want to perform.

5.6.3.1. Coronation cases

5.6.3.1.1. 1. After the K was formed, but before the coronation, the King got sick. It was still possible to perform the K by renting the room, but the MUTUALLY UNDERSTOOD PURPOSE WAS FRUSTRATED. Thus, parties were excused from performance.

5.6.3.1.2. 2

5.6.3.1.3. 3

5.7. EXCUSES

5.7.1. Carrol v. Bowersock - P is contracted to put floors into a warehouse. P is halfway done. Warehouse burns down. D refuses to pay. HELD that D has to pay for whatever part is completed and is thus only partially excused from performance.

6. QUESTION 6: CONTRACT REMEDIES

6.1. Remedies as EQUITY

6.1.1. SPECIFIC PERFORMANCE

6.1.1.1. Only if money damages would be inadequate.

6.1.1.1.1. NEVER specific performance in service Ks.

6.1.1.1.2. Under UCC, specific performance is available where GOODS ARE UNIQUE, rather than fungible. (Example: Rembrandt painting).

6.1.1.1.3. In Real Estate Ks, issue depends on whether seller then sold it to another BFP instead.

6.2. Remedies at LAW

6.2.1. MONEY DAMAGES

6.2.1.1. PUNITIVE DAMAGES

6.2.1.1.1. Where the breaching conduct rises to the level of a tort, punitive damages are appropriate. Generally, however, they are not

6.2.1.2. LIQUIDATED DAMAGES

6.2.1.2.1. Where the K itself indicates what the damages are for breach.

6.2.1.3. EXPECTATION DAMAGES

6.2.1.3.1. BENEFIT OF THE BARGAIN - An expectation interest is the dollar position P had been in if there had not been a breach.

6.2.1.4. CONSEQUENTIAL DAMAGES

6.2.1.4.1. DAMAGES THAT FLOWED FROM BREACH - Consequential damages are the dollar amount that was lost to P by the breach.

6.2.1.5. RELIANCE DAMAGES

6.2.1.5.1. DAMAGES INCURRED BY RELYING ON K are awarded in order to "make whole" the P.

6.2.1.6. RESTITUTION DAMAGES

6.2.1.6.1. DOLLAR AMOUNT OF BENEFIT INCURRED BY D that is given back to P so that D did not unjustly enrich itself.

6.2.1.7. AVOIDABLE DAMAGES

6.2.1.7.1. Cannot recover for damages that could have been avoided. Two possible questions.

6.2.2. POLICY: The purpose of remedies at law, and also of remedies at equity, is to compensate.

6.2.3. POLICY: The purpose of remedies at law is to protect P's monetary expectations.

7. UCC - Different versions of UCC adopted in 49 states.

7.1. Applies to goods (not land) of $500 or more, not sales

8. CHOICE OF LAW

8.1. Predominant purpose test as per BMC Indus. Inc. v. Barth Indus. Inc.

8.1.1. What is the predominant purpose of the transaction? Service or good?

8.1.1.1. UCC applies where the good is the dominant aspect of the transaction

8.1.1.1.1. A specially manufactured good, like a painting, is a K for a good.

8.1.1.1.2. UCC governs software licensing.

8.1.1.1.3. Sale of a dog (pet)

8.1.1.2. UCC does not apply where the goods are furnished incidental to a service.

8.1.1.2.1. Buying a bar is not a sale of goods where the a lot of what is sold is the good-will, liquor license, assignment of lease etc. are central ot the K.

8.1.1.2.2. Adoption of dog (pet) is a service

8.2. CISG applies where CISG governs contracts made between parties who are residents of different countries who are signatories to it.

8.2.1. EXCEPTION: CISG applies unless the parties have EXPLICITLY excluded its application.

8.2.2. Travelers Prop. Cas. Co. v. Saint-Gobain Technical Fabrics Canada, Ltd.

8.2.3. Article 95 declaration (US has made one) means that CISG will only govern where BOTH parties to the contract are headquartered in signatory states.