K

just some bullshit

Promise, what happens if broken, and remedy

“I will do X”. Broken = br/K. Remedy = damages. BUT the other party still has to perform usually. Promises are MODIFIED

Condition def, what if not satisfied

“You only have to perform if X happens.” Not satisfied —> no duty to perform. NOT A. BREACH. CONDITIONS ARE WAIVED.

Output K. What is quantity based on?

buyer agrees to take seller’s output of a certain good. Ex. “I will buy all the bread you bake this year.” Quantity is tied to seller’s production

Requirements K. What is quantity tied to?

Seller agrees to supply the buyer’s req of a specific good. Ex. “I will sell you all the fuel you need this year.” Quantity depends on buyer’s needs.

Condition precedent

Event that has to happen before party’s contractual duty becomes due. Condition not happen —> duty never arises. Condition does happen —> duty triggered. Ex. “I will pay you 10k if you obtain a building permit.” Can be waived by the party that benefits

Condition Subsequent

An event that, if it occurs, terminates a duty that has already arisen. Duty exists immediately. If condition occurs, duty discharged. Ex. “I will pay you 10k, but if you fail to obtain financing, my duty ends.” Condition occurs —> no further performance needed. Condition not occur —> duty continues

Condition Precedent vs Subsequent

Precedent: must happen before duty arises. Subsequent: cuts off an EXISTING duty.

How will a court interpret ambiguous language that could either be a condition or a promise?

Prefer to do condition

Restatement §261: interp of doubtful words as promise or condition

Promise

Waiver by election/voluntary waiver

party knowingly chooses to continue the K despite a failed condition

Waiver by estoppel

A party cannot insist on a condition if their words or conduct led the other party to reasonably believe the condition would not be enforced, and the other party relied on that belief.
-reliance is REQUIRED

-can’t “take it back”

-Ex. “payment only if inspection passes” buyer says “don’t worry about inspection. Seller relies & closes deal. Buyer estopped from later saying “i’m not paying bc inspection failed”

Stees v. Leonard Rule (quicksand case)

Rule: K party assumes the risk that they will be unable to perform

3 circumstances that excuse a party’s K obligation to perform

1. act of god

2. legal prohibition

3. other party’s interference w/ performance

Eastern Air v. Gulf (gas case) Rule:

Under UCC, very high standards for declaring performance commercially impracticable. Has to be more than just bad economically

UCC § 2-615 (Impracticability) Definition

K won’t be impracticable just bc performance has become econ burdensome.

Impracticability requires an unforeseeable hardship so great that it would be unjust to hold the parties to the agreement

Which party has burden of demonstrating impracticability?

The party seeking to avoid performance, duh.

UCC § 2-306: Requirements/output Ks

Must be in GF and not unreasonably disproportionate to expectations

Wood v. Lucy, Lady Duff-Gordon rule

To understand scope & validity of a K, need to look at surrounding circumstances

UCC § 1-201(19) (good faith—gen def)

Subjective standard. focus on what the party actually believed. Were they honest, even if unreasonable?

UCC § 2-103(1)(b): Good faith for MERCHANTS (2 elements)

Honesty in fact AND observance of reasonable commercial standards of fair dealing in the trade

UCC § 2-213: 3 ways a seller can provide a buyer w/ an express warranty as to the quality & performance of goods

1. affirmation that the goods conform to a fact/promise (& part of the BoB)

2. description of the goods (& part of BoB)

3. sample or model of the goods (& part of BoB)

Sessa v. Riegle rule (lame fucked-up horse)

statement of opinion is not an express W as to the good’s quality & performance

Flippo v. Mode O’Day Frock Shop rule (spider-pants)

For warranty to be applicable, injury must be from a defect in the product itself

Pelc v. Simmons rule (stupid car)

Expressions like “as is” or “w/ faults” exclude all implied Ws

Express W—need to be merchant? is reliance req’d?

No and no

Implied W of M—need to be merchant? reliance req’d?

Seller, no

Implied W of FPP—need to be merchant? reliance req’d?

No, YES

3 types of warranties

Express, implied W of M, implied W of FPP

Express warranty

• statement made by seller as basis of the bargain guaranteeing goods conform to stated fact/condition

• even something like “my cell phone has a battery life of 15 hours”

Implied W of M

Guarantees that goods are merchantable. automatically created when seller is a merchant of those goods.

• merchantable: fit for the ordinary purposes for which good is usually used

Implied W of FPP

guarantees goods are fit for the buyer’s particular purpose

• automatically created when buyer relies on seller’s skill/judgment

• seller also has to know of the buyer’s purpose & reliance

• buyer has to actually rely

2 kinds of disclaimers for warranties

• explicit:

  • express W can only be explicitly disclaimed. by seller’s clear & reasonable words/conduct

    • ex. Sean could say “I can only guarantee battery life of 15 hours for the first 3 months of use”

  • implied W of M can only be explicitly disclaimed by seller’s explicit lang which MUST use the word merchantability!!!!

    • Ex. sean sells phone to becky & says “phone isnt merchantable bc unable to make calls”

  • Implied W of FPP can be disclaimed by the seller’s written lang. HAS TO BE CONSPICUOUS!!

    • Ex. Sean sells phone to Becky and adds in the K “phone doesn’t have a camera”

2 kinds of implicit Ws

merchantability, FPP

• both types can be implicitly disclaimed by language of the sale or buyer’s examination of the goods

• seller can indicate to buyer during the sale in plain lang that there is no implied W like “as is” or “w/ faults”

• no implied W for any defects that a buyer’s examination would have revealed

Hadley v. Baxendale rule (foreseeability)

consequential damages are foreseeable if they arise naturally or if they arise from special circumstances that P communicated to D when K formed

Express warranties

• created through representation . must

  • be part of basis of barg

  • be more than “puffery”

• 3 ways:

  • Affirmation of fact/promise

  • description of goods

  • sample/model

When is affirmation part of the basis of the barg?

buyer has to rely on seller’s statement in deciding to buy the goods

Implied W of M—3 elements of breach

• meet acceptable trade stds & would be regarded as adequate by member of trade

• there is an implied W of M in all SoG by a merchant

• elements for breach:

  • goods sold by merchant

  • W was breached (not fit for ordinary purposes)

  • breach proximately caused damage

Implied W of FPP (3 elements)

• seller bears risk that products won’t suit a particular purpose if:

  • has reason to know purpose, and

  • seller has reason to know of buyer’s reasonable reliance on the seller’s skill in selecting goods

  • buyer actually relies

Exclusion of Implied W of M

• must mention “merchantability”

• if in writing —> must be conspicuous

Exclusion of Implied W of FPP

• in writing

• conspicuous

3 other ways to disclaim warranties

1. “as is”/”with all faults”

   1. buyer takes the risk. automatically excludes implied Ws.

2. Buyer inspection: if buyer

   1. examines goods, or

   2. refuses to examine

   3. then no W for defects that

      1. a reasonable inspection would have revealed

3. Course of Dealing/Trade Usage

   1. Ws can be excluded based on:

      1. past dealings b/w parties

      2. industry norms

Output K

ex. “Ford will buy all the steel that US Steel makes in 2023”

Requirement K

ex. “US Steel will supply all the steel that Ford requires in 2023”

UCC § 2-306(1): Quantity in Output and Requirement Ks

• BIG IDEA: quantity = whatever the party actually needs or produces in GF, BUT there is a limit on extreme changes.

  • GF controls

  • no unreasonably disproportionate changes

    • Can’t suddenly demand way more or way less if wildly out of line w/ expectations

• What to compare it to?

  • if K gives an estimate, compare w/ that

  • if no estimate, compare to:

    • prior output/requirements

    • normal business levels

Stees v. Leonard rule (quicksand case)

Contracting party assumes the risk that they will be unable to perform

Promise or condition?

if lang doubtful, courts favor interpreting it as a promise, especially when interpreting it as a condition would cause forfeiture

• if you just want damages, use promise

• if you want an escape hatch, use condition

UCC § 2-209: Modification

A K for SoG can be modified w/o consideration as long as the mod is made in GF

if >= $500, falls under SoF —> must be in writing

What does it mean for a condition to be excused? What result?

1. law ignores the requirement that the condition happen

2. if condition is excused, duty still exists

R § 225: Effects of conditions (3)

1. condition does not occur —> duty never triggered

2. condition occurs —> duty becomes due

3. condition excused —> duty still arises

R § 226: How Conditions are Created (2)

1. express agreement

2. implied by court (based on intent)

R § 230: Event That Terminates A Duty

1. if duty is subject to a condition and that condition fails —> duty is terminated

2. BUT: courts can excuse the condition if avoiding it would prevent disproportionate forfeiture

R § 237: Effect of Failure of Performance

1. a party’s duty to perform is conditioned on the other party’s substantial performance

   1. other side materially breaches —> you don’t have to perform

   2. other party substantially performs —> still have to perform but can get damages

2. Material breach —> excuses your performance

3. minor breach —> still perform & sue for damages

UCC § 2-511(1): Tender of Payment

buyer’s tender of payment is a condition to the seller’s duty to tender & complete delivery

buyer has to offer to pay before seller is req’d to deliver goods & complete performance

UCC § 2-612: Installment Ks

1. installment K: K that req’s or authorizes delivery of goods in sep lots to be accepted separately

2. Rules:

   1. rejection of a single installment: buyer can reject an installment ONLY IF

      1. nonconformity substantially impairs value of the installment, AND

      2. cannot be cured

      3. Stricter than perfect tender rule

   2. Seller’s right to cure:

      1. if defect can be fixed —> seller can cure

      2. buyer has to accept after cure

   3. buyer can cancel the whole K ONLY if the breach substantially impairs the value of the whole K

What if a promise fails? what if a condition fails?

1. Promise: breach —> damages

2. condition” no duty —> no breach

Modification & waiver

• waiver: intentional relinquishment of a known right

• promises are modified, conditions are waived

Waiver by election (voluntary waiver)

party knowingly chooses to continue the K despite knowledge of a failed condition

• no reliance needed

• about choice

  • you had a right that you intentionally give up

• Ex. “payment only if inspection passes.” inspection fails. Buyer says “whatev i’ll still buy it.” buyer waived the condition

• Effective @ time waiver is made

Waiver by Estoppel

Party is prevented from enforcing the condition bc the other party relied on their conduct

• reliance is required

• focus is on fairness

• can’t “take it back”

• Ex. “payment only if inspection passes.” buyer says “don’t worry about inspection.” seller relies & closes deal. Buyer is later estopped from saying “i’m not paying bc inspection failed”

What is an unconscionable agreement? 2 criteria

Agreement that is oppressive or unfairly favors one party

1. unequal bargaining power & lack of meaningful choice of 1 party

2. K terms unreasonably favor the other party

2 types of unconscionability

1. Procedural (HOW the deal was made): focus on barg process

   1. Factors:

      1. un= barg power

      2. fine print/complex terms

      3. no meaningful choice

      4. deception/pressure

      5. Ex. hidden terms in a long K, consumer not understand legal language

2. Substantive (WHAT the deal says): focus on the terms themselves

   1. terms unreasonably 1-sided or oppressive

      1. ex. warranty disclaimer that leaves buyer w/ no protection

      2. extreme limitation of liability

TRADITIONALLY you need both, but sliding scale: more unfair terms —> less need for bad process

Howard v. FCIC rule (crops)

When K is unclear about whether a provision is a promise or condition, courts disfavor construing it as a condition

Clark v. West rule (alcoholic writer)

A condition can be waived w/o additional consideration

Bell v. Elder rule (Bells will get building permit & elders will furnish drinking water)

Assume related obligations be performed concurrently if no order of performance specified

When does the Parol Evidence Rule apply?

1. written K, and

2. party tries to introduce prior evidence from outside the written K regarding the obligations of the parties

   1. evidence of oral agreement that is either prior or contemporaneous, or

   2. evidence of a prior written agreement

PER & SoF

1. SoF: whether K exists

   1. when is oral evidence sufficient to show a K was formed & when is writing req’d for K to be enforceable?

   2. PER: what are the TERMS of the K?

      1. when do we consider oral evidence to add terms to a written K? also prior written evidence in addition to oral evidence

If written agreement has integration/merger clause, does that mean it is fully integrated?

NO! Unless court taking conservative, 4-corners approach, presence of this clause does NOT necessarily mean the K is fully integrated.

Steps in Parol Evidence Analysis (4 steps)

1. CL or UCC?

2. is there a parol evidence issue?

   1. written agreement

   2. party wants to introduce evidence from outside the K concerning additional terms

      1. earlier oral/written evidence

      2. contemporaneous oral evidence

3. is the K fully, partially, or not integrated?

   1. does it seem complete? Merger clause? Natural/certainty tests?

4. Does the extrinsic evidence conflict w/ the terms of the written K?

When is collateral agreement doctrine admissible?

1. separate agreement

2. does NOT contradict the writing

3. would naturally be omitted

What is an “inconsistent” term under the UCC?

term contradicts/negates a term of the writing

Plain Meaning Rule

courts interpret Ks using the plain meaning of the words, but if a term is ambig, then all courts will look beyond the K to understand meaning.

Under restatement, when are consistent additional terms allowed?

1. agreement not completely integrated

   1. key idea: if term would naturally be included —> prob barred

   2. if term is collateral —> allowed

2. AND term is consistent

Under Frigaliment, what do courts look at to interpret an ambiguous term?

1. plain meaning

2. negotiations b/w parties

3. other K provisions

4. market factors

5. course of dealing

6. trade usage

PER under UCC (§ 2-202)

Even if writing looks complete, courts allow additional terms unless they find that the writing was intended to be complete & exclusive statement

• difference from CL: outside terms allowed unless they would certainly have been included

  • easier to introduce additional terms

Order of fact pattern

1. terms of K

2. course of performance

3. course of dealing

4. trade practice

Defenses to K formation

1. SoF

2. capacity

3. duress

4. mistake

5. fraud

6. illegality/pub policy

7. unconscionability

Rolling K

K that occurs before all terms known to the parties

R § 152: Mutual Mistake—4 elements (NEED ALL OF THEM)

1. mistake

   1. both parties wrong about a fact at the time of contracting

2. basic assumption

   1. mistake goes to a core assumption of the deal

   2. must be fundamental to the bargain

3. Material effect

   1. significantly changes the value/exchange

4. Risk allocation

   1. party seeking to void must NOT bear the risk

R § 154: when do you bear the risk? (3)

1. K assigns it

2. you were aware of uncertainty & proceeded anyway

3. court says reasonable to assign risk to you

R § 153: Unilateral Mistake

A unilateral mistake makes a contract voidable only if

1. the mistake is material,

2. the party didn’t assume the risk, and

3. enforcement would be unconscionable or the other party knew/caused the mistake.

What is “material effect”

One party knows the other would not agree if that other party

knew the truth

What party usually bears the risk?

Risk usually falls on the party who controls the source of the problem or is best positioned to insure against it.

SoF vs. PER

• SoF: whether a K exists

  • when is oral evidence sufficient to show a K was formed, and when is a writing req’d for the K to be enforceable?

• PER: what are the terms of the K?

  • when do we consider oral evidence to add terms to a written K?

What does it mean for a K to be integrated?

parties intend for the writing to be the final & complete statement of their agreement

Partially integrated K

• if parties intended for the written K to be a full & complete statement of their agreement w.r.t. some terms (but not all terms) then K is partially integrated

• if K partially integrated, then parties can use parol evidence of additional terms to the extent that the evidence does not conflict with the terms of the written K

Parol evidence does not bar evidence related to:

• subsequent modification of K

• illegality, fraud, duress, mistake

• lack of consid

• oral condition precedent

R § 164: general rule—fraud/material misrep

if assent justifiably induced by a statement that is either fraudulent or a material misrep, then it is voidable by the disadvantaged party

What kinds of statements fall under the doctrine of fraud/material misrep?

1. knowing misstatements

2. negligent misstatements—should have known

   1. person knows the basis for the statement is false

   2. person lacks sufficient confidence in the statement

3. Innocent but material misstatements

what if party knew statement was false?

K is only voidable on basis of fraud/material misrep if the statement actually induces reliance

difference b/w concealment & nondisclosure

• concealment = active hiding

• nondisclosure: silence in special situations

R § 161: Non-disclosure: what are the 4 situations in which failing to speak = lying?

1. half-truths

2. basic mistake + unfairness

3. mistake about the writing (1 party misunderstands)

4. special relationship (trust)

Elements of fraud (5)

1. false rep or concealment of material fact

2. made w/ knowledge of falsity or w/o sufficient info to warrant a positive rep

3. intended to induce the other party to act

4. other party justifiably relies

5. damages

R § 160: Concealment

• Action intended or known to be likely to prevent another from

learning a fact is equivalent to an assertion that the fact does not

exist.

Material effect

would RPP still have made a deal on these terms?

R § 153: Unilateral Mistake (big idea)

Big idea: if only 1 party is mistaken, K is usually enforced unless there is serious unfairness or the other party knew

R § 153: Unilateral Mistake (5 elements)

1. m,istake by 1 party

   1. about a fact @ time of K

2. Basic assumption

   1. goes to a core part of the deal

3. Material effect

4. No risk assumed

5. One of these:

   1. unconscionability, OR

   2. other party’s knowledge or fault

R § 155: Reformation

if parties agree but writing is wrong due to mistake, court can reform (fix) the K

requirements:

1. prior agreement existed

2. writing does not reflect it

3. due to mistake (often clerical)

2 kinds of duress

1. Physical (MAKES IT VOID)

2. Duress other than physical compulsion (usually economic)

   1. voidable

   2. threat

   3. threat is improper

      1. improper:

         1. crime or tort

         2. crim prosecution

         3. use of civil process & threat is made in bad faith, or

         4. breach of the duty of GF & fair dealing under the K

   4. Induces apparent assent

   5. inducement is reasonable (i.e., leaves vic w/ no reasonable alternative but to agree)

R § 73: pre-existing duty rule

if you’re already legally obligated to do something, can’t do that thing as consideration for a new promise

R § 89: Modification of Executory K (CL exception to pre-existing duty rule)

a promise modifying a duty under a K not fully performed on either side is binding if:

• fair & equitable in light of circumstances not anticipated by parties when K was made, OR

• it is enforceable under a statute, OR

• justice requires enforcement bc of material reliance on the promise

R § 176: when a threat is improper

• automatically improper:

  • threat of crime or tort

  • criminal prosecution

  • bad-faith civil process

    • threatening to sue when you know you don’t have a valid claim/using it to extort

  • breach of duty of GF, OR

  • resulting exchange is unair, AND

    • threat harms recipient w/o significant benefit to threatener, OR

    • prior unfair dealing, OR

    • use of power for illegit ends