Contract Terms

Expectation Damages

What do the parties expect to get from the performance of the K

Restitution Damages

How can the parties be restored to their position before the K had been performed

Amount of money someone spends in anticipation of the K being performed

Reliance Damages

What money were spent in reliance of the K being performed

Takes from the breaching party any enrichment they received at the expense of the non-breaching party

Assent Elements

1. inent to be bound

2. everyone wanted to be a party to the K

   1. can be inferred from the conduct (outward manifestations)

Test for Assent

Whether a reasonable person would view the statement as assenting to the contract

Difference between Assent and Acceptance

Intend to be bound to the agreement vs. accepting of terms of agreement

In order to assent one must look at

1. did the parties intend to be bound (subjective)

2. Would a reasonable person find that the parties intend to be bound (objective)

Offer

MUST BE DEFINITE AND SPECIFIC

Things that can be considered an offer

Quote with all the essential terms including price, delivery, and her for immediate delivery

If an ad requires the offeree to accept

Bilateral Contract

Promise for a promise

Unilateral Contract

offer that invites performance

Acceptance

Can be return promise or performance; OFR controls how OFE can accept; if silent OFE may choose

When acceptance is fulfilled

When there is assent, the offer was valid, there was proper consideration, and the it mirrors the offer.

Termination of the Power of Acceptance

1. Lapse of offer

2. Revocation by OFR

3. OFR’s death/incapacity

4. OFE’s rejection/counter offer

Lapse of Offer

• After a reasonable amount of time

• face to face convo — over once walk away

Mirror Image Rule

Acceptance must mirror the offer, cannot add any other terms from the offer (counteroffer)

Mailbox Rule

Acceptance upon dispatch; Rejection upon receipt

Option Contracts

Promise made by OFR that limits their power to revoke the offer. A contract to contract

four ways to create option contract

1. Promise to hold offer open which is supported by consideration

2. Firm offer under UCC

3. Offer seeking performance rather than return promise

4. Reliance by OFE

Firm Offer

1. By merchant

2. signed writing by merchant

3. time state but not more than 3 months OR if no time stated, must be a reasonable amount of time considering the product

Consideration

a promise that is bargained for and exchanged

Satisfaction Clause

dissatisfaction can’t be claimed arbitrarily, standard of a reasonable person if the promisee actually, in good-faith, made in effort

Things that are NOT consideration

Past consideration and moral obligation

Questions to ask to determine if there is consideration

1. What is the promisor seeking in exchange for the promise

2. Did the promisee provide performance or return promise for what the promisor is seeking

Statute of Frauds

MYLEGS

Marriage (promises made in consideration/prenup) Year (Ks that can’t be performed in a year) Land (sale or transfer of real estate) Executor (promises to pay an estate from personal funds) Goods (sale exceeding a certain sum $500) Surety (promises to answer for debt of another =)

Reliance as Basis of Enforcement

Promise which PRO should reasonably expect to induce action/forbearance of a definite and substantial character on the part of the PRE and which doesn’t induce such action or forbearance is binding if injustice can be avoided only by enforcement

Equitable Estoppel

Only representations and inducements (broader range of conduct)

Promissory Estoppel

a clear and definite promise was made (direct promise)

Restitution as Alternative Basis for Recovery

One receives a benefit that would be an unjust enrichment for them at the expense of the other

Parol Evidence Rule

Whether a prior oral/written agreement should be introduced to prove the existence of a term of a K

Framework for PER

1. Look at K - what are the terms

2. Is there a merger clause (if yes, hard stop)

3. If no, then could the term stand as a separate collateral contract OR does it contradict an existing term OR would it normally be put in the K had the parties contemplated it

Extrinsic Evidence

Outside evidence to prove the MEANING of a term or prove an agreement AFTER the signing of the K

Collateral Contract

person’s promise might not form a term of a main K but it can still be treated as binding when:

1. person making promise intended it to be legally binding OR

2. person to whom the promise was made entered into main K in reliance on the statement

Void

can’t be performed no matter what

Voidable

could be performed but the underdog can have the court void it

Legal Incapacity

Legal incapacity; person who lacks the capacity to undertake a legally binding obligation is foreclosed from participating in transactions that may be advantageous or even vitally necessary due to mental incompetence or minor status.

Exception to Minor’s getting out of a K

Contracts for necessities or if the legislation deems so or if after turning 18 and the minor makes no affirmative action to disaffirm, it is affirmed

Duress

Threats to business interests, life and limb. Showing a lack of meaningful choice

Undue Influence

Under pressure; pregnant woman at husband’s funeral

Pre-Existing Duty

performance of a legal duty owed to a promisor which is neither doubtful nor subject of honest dispute is NOT consideration

Concealment

hide or fail to disclose but typically it is buyer beware

π must establish that ∆ made the misrepresentation knowing it to be false or with reckless disregard

Misrepresentation

False statement made purposefully — must be a material and one of FACT. HOWEVER, if the parties are not dealing at arms length and the PRO is an expert, misrepresentation of opinion can be deemed this

Promissory Fraud

Promise that at the time of making a promise they never intended to perform

Unfairness

Typically used when cannot prove unconscionability. Consideration was grossly inadequate or terms; Enforcement cause unreasonable hardship/loss to ∆; or K was induced by some sharp practice, misrep or mistake

Unconscionability

Must show both Procedural and Substantive

Procedural Unconscionability

Refers to unfairness in the negotiation process or contract formation, such as lack of meaningful choice or disclosure in terms.

Substantive Unconscionability

Involves the actual terms of the contract being overly harsh or one-sided, leading to an absence of a fair exchange.

Mutual Mistake

Both parties to the K are mistaken about the same basic assumption the contract was based on — may undermine assent and the very basis of the K

Unilateral Mistake

Only one party is mistake; a problem when one is purposefully trying to get one over

Impossibility

A doctrine allowing for the discharge of a contract when an unforeseen event makes performance impossible, thus fulfilling no contractual obligation.

Impracticability

Does not make commercial sense to follow through with the K

Frustration of Purpose

An outside circumstance changed the fundamental reason for entering the K; even though it is possible to complete the K, the expected value of the contract is significantly undermined, making performance pointless.

Questions to Determine Frustration of Purpose

1. Was the contingency which developed one which the parties could reasonably be thought to have foreseen as a real possibility which could affect performance

2. Was it one of that variety of risks which the parties were tacitly assigning to the promisor by their failure to provide for it explicitly?

   • if it could not be consider, performance excused

Force Majeure Clauses

When during a negotiation of a K, party may anticipate one or more events that it can’t readily prevent and that might impede its performances. Introduce a term intended to excuse it from performing if this impediment arises

Unexpected drop in market prices are not covered

defeats frustration of purpose

Substantial Relief

Judgment awarding money damages to be paid to aggrieved promisee

Specific Relief

Court order directing promisor to perform its promise (injunctive)

Cover

buyer finds another party to provide sought after performance

Common Law Formula for Damages

A + B - C

a=loss of expected return/K as promised

b=other losses

c=any costs/losses avoided

If seller breaches and buyer covers

Cover - cost of K + b - c

If seller breaches and buyer does not cover

Market price at the time breach learned - K price + b - c

If buyer breaches and seller resells

K - resale price + b - c

If buyer breaches and seller not resell

Market price at time of breach - K + b - c

Loss Value Seller

When a seller has an unlimited supply and they would have made 2 sales had buyer \ not breached

Loss Value Seller Formula

Gross price - net cost = profit +b - c

Net cost (cost to manufacture) + expected profit = cost of item

Duty to Mitigate

Non-breaching party has duty to not incur additional harm to themself. Stop performing when they learn of the breach

Foreseeability

If it is reasonably foreseeable for a breaching party to have known the extent of the damages. If it is not, then the breaching party may be limited in the amount they must pay

Test if foreseeable of damage

Fairley and reasonably could be considered either arising naturally OR breaching party is aware/had reason to know

Damages can’t exceed what parties foresaw what would happen if there was a breach

Liquidated Damages Clause

Parties may negotiate their own damages if there is a breach but can never be a penalty

Test to see if liquidated damages clause is a punishment

1. damages are difficult or incapable of an accurate assessment or to quantify

2. are somewhat fair. Parties have to negotiate

3. reasonable relation to the damage