Contracts I - Maggs - Spring 2002_3

7/18/2019 Contracts I - Maggs - Spring 2002_3

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Contracts Outline

Introduction

Purpose To assist the private sector in conducting business alone, without the interference ofgovernment. Until the 19th Century, contracts laws were solely founded in Common Law. TheLangdell wrote his first Contracts Casebook.

Restatement Definition

estatement !1. "# contract is a promise or set of promises for the breach of which the lawgives a remedy, or the performance of which the law in some way recogni$es as a duty.

Perspectives on Contract Theory.

Williston – “Letter of the Law”

Law is a set of abstract rules, from which courts deduce the answer to an individual case.%echanical application of rules to reach "correct& decision. 'octrinal, do not let moralityinfluence decisions. (ften called a formalist approach.

Corbin – “Spirit of the Law”

#ttempted to create the "working rules of law.& egarded his role as a legal scholar todiscover how the courts actually worked and weave these findings together.

Legal Realist – “Subjective Case Law”

)iewed court decisions as the end result of a decision making process* in which both thefinding of facts and the application of rules were affected by personalities, points of view,individual interests, and goals of the decision+makers.

Critical of black+letter law.ig influence on the UCC- good faith, unconscionability, etc.

ules should be the end result of a conscious application of relevant human knowledge- political science, psychology, economics, and anthropology.

Economic Perspectives

Focus on the notion of efficiency. fficiency increases when the costs of transactions arereduced through contract enforcement. #ssets are allocated to highly valued issues.

conomic ealists make two claims about law and economics.

/ositive0mpirical Legal ules tend to reach "efficient& outcomes.

"2nefficient& rules should be modified and made more efficient.

/redominant 3ing is the Chicago 4chool 5/osner6.

Courts should not refuse enforcement b0c outcome is unfair or unconscionable.

(nly withhold enforcement when agreement was made under duress or fraud.

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Four Legal Roles of an Attorney.

!vocate"

7ealously representing client without engaging in illegal activities.

Counselor"

#ssist client in identifying the nature and scope of their legal problem.

(b8ectively evaluate the clients legal position.

#rafter"

educe an agreement to written form.

$egotiator"

Understanding the clients needs and working within parameters of agreement.

Framing the Class

%s there a contract"

What !oes the contract mean"&as the contract been breache!"

What are the !amages for breach"

Uniform Commercial Code.

'he (CC is a mo!el set of laws that are bin!ing onl) in those juris!ictionwhere the) have been a!opte! *ever) state but L+"

rticle , – #eals with sale of goods- most important section for Contracts"

%akes Contract Law less technical.

#ttempts to craft laws based on everyday business practices.

/remises rules on good faith business dealings.(CC onl) replaces the common law on those issues which it covers"

%ost provisions are default provisions. i.e., if a contract does not address an issue, then the UCC will supplythat provision.

The UCC is not totally comprehensive* Common Law will fill in the gaps.

Sources of Contract La

(CC

.u!icial /pinions an! the Common Law

Restatements0 Persuasive co!i1cation of the Common Law"

Legal Commentaries

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Mutual Assent.

;or a contract to be formed, the parties must reach an agreement to which there is mutualassent or a Meeting of the Minds. This means that each party must act in such a way as tolead the other to reasonably believe that a contract has been formed.

!"#ective Theory $Classical%

Look at the actual contract to gain intention. /arties are bound by what a reasonable personwould believe the contact says. <ot what one party believes the contract to say.

Unless fraud, duress, or mutual mistake, if one has capacity to understand a written document, and signs thatdocument, they are bound by the =.

3hen there is an written =, you look at the actual words and nothing else. 4ee 5ay v. urice6

3hen there is no e>press written =, look at what offeree would reasonably think was being offered 5ob8ective6,not what the offeror was actually offering 5sub86.

Unilateral mistake as to contents of = doesnt matter

2lliteracy ? misunderstanding is no e>cuse. 5 4t. Landry Loan Co. 6

2f someone signs =, it is assumed that they read it ? know what it says.

#ssumes e@ual bargaining power ? e@ual understanding of terms

Su"#ective Theory $Pre&Classical%

Look at the intent of each of the parties. Looks at the intent of the parties when interpreting the contract. %orefle>ible, interprets contracts on individual basis.

3hy a Trial Court would adopt a sub8ective approachA

They heard the actual witnesses and testimony. Their manner and style willinfluence those around them. /eople will often read into a situation.

Objective Theory Subjective Theory

fficient.

4imple to interpret.

/remised on e@uality.

ncourages Contract nforcement and 4tability.

;le>ibility.

Considers intent.

Bumane. Considers the special aspect of eachcase.

Classical Contract System

Need- (ffer #cceptance Consideration 5(#CD=6

Awards Eeneral measure of damages is ">pectancy.& #ward the difference betweenactually fulfilling the contract, and e>pected costs of original contract.

Modern Approach # combination of the ob8ective and sub8ective theories.

A Contract represents an agreement to e>change something of value from one person toanother* a legally enforceable agreement, involves promise for future performance. CCTdoes not allow for past services.

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!ffer

Restatement 2 ,3"

"#n offer is the manifestation of willingness to enter into a bargain, so made as to 8ustify another person in understanding that his assent to that bargain is invited and willconclude it.&

Elements

Specific and Definite Terms. nough certainty to clearly determine breach.

2ntentional Communication of offer to offeree.

3ords of promise targeted to offeree.

easonable to conclude that an offer was made.

#ll that the offeree has to do is accept, and there is a valid contract.

%t is $/'0

Preliminary Negotiations !:G. %anifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows that the offeror does not intent to conclude a bargain until hehas made further manifestations of assent.

General Advertisements (nly an invitation seeking offers, further assent is needed.4tatement of 2ntent* 2nvitation to make an offer* (pinion* eassurance* 2n@uiry* etc.

/4er ma) be bilateral or unilateral

ilateral Contracts.

The most common type of contract* it consists of an e>change of promises.

!nilateral Contracts.

2n some instances, the offeror will propose a promise in e>change for an act.

(nly the offeror is legally bound. (fferee does not have to do anything.

Acceptance Traditionally occurs after the desired act is fulfilled by offeree

estatement ! HI.

Offer is irrevocable one offeree begins performance or makes preparations to being performance. There is now

an option contract

Offeror’s performance is conditional upon completion of the invited action or duty.

!ncertainty.

estatement ! F:. (ffers which are not clearly unilateral or bilateral can beaccepted in whichever manner the offeree chooses.

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When an /4er #ies

estatement ! FG. #n offerees power may be terminated when-

Offer is Revoked .

Offer is Rejected .

<ormile # reply to an offer which purports to accept it, but is conditional onthe offerors ascent to the additional or different terms, is not an acceptance but

a counter+offer. "estatement # $%&Offeror dies.

Lapse of time: (ffer is not accepted @uickly.

Non-Occurrence of a condition of acceptance.

/4eree5s /ptions

Accept the Offer.

Reject the Offer.

Make a Counter-Offer.

#'%. # counter+offer is an offer made by an offeree to the offeror relating to the same matter as the original offer, but proposing a substituted bargain which differs from that proposed in the original offer.

#$%. # eply to an offer which purports to accept, but is conditional on the offerors assent to additional ordifferent terms is a not assent, but a counter(offer.

# counter+offer supplants the original offer. The only offer now on the table is the counter offer. 2n order tosign the original offer it must be proposed again.

Acceptance

Restatement 267

#cceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invitedor re@uired by the offer,

JUnilateral K acceptance by performance re@uires that at least part of what the offer re@uests be performed ortendered and includes acceptance by a performance which operates as a return promise,

J ilateral K acceptance by a promise re@uires that the offeree complete every act essential to the making of the promise.

)n *nglish- (nce the re@uested performance in a unilateral contrast has begun the offerormay not revoke the offer.

8irror %mage Rule

Classical Contract Theory- (fferee must agree to the precise terms of the offer.

2f the acceptance varies from, or is not the mirror image of the offer, then the acceptance is considered are8ection of the offer. #nd becomes a counter+offer.

8ail 9o: Rule *See &enthorn v" ;raser+

Acceptance is effective upon sending if sent by authori$ed medium or if no medium is precisely named, thenone which would have been reasonably anticipated. #cceptance effective upon receipt if anunauthori+ed means is used.

Places ,urden on offeror since wont know e>act moment of mailing, but since offeror has power over offer itis only fair that he bears some risk or burden.

An offeror may negate the %ail o> ule by providing in the offer that the acceptance will only be effectivewhen and if received.

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4ituations-

!hen a rejection is sent first " then an acceptance.

#n #cceptance dispatched after a re8ection is sent is not effective untilreceived. #nd only if received prior to the re8ection.

>amples-

R sent, A sent, R received, A received !o "ontract, Answer is a counter#offer.

R sent, A sent, A received, R received "ontract.!hen an acceptance is sent first " then a rejection.

>ample-# sent, sent, received, # received D Contract.

easoning-To not enforce a contract here would allow the offeree to speculate, atofferors e>pense, by seeing how the market goes.

!hen acceptance is lost or dela#ed .

(fferor is not guilty of breach unless offeror receives notice from offereethat a contract has been formed.

/ption Contracts

2f a particular time frame is specified as to how long the offer will remain open, then anoption contract is created. Bowever, there must be consideration given to keep the optionopen. (therwise there is no option contract.

<eneral Rules of cceptance

# '-. (fferees power of acceptance is terminated by re8ection of the offer.

# .'. #n offerees power to accept is terminated when the offeror takes definite action inconsistent with anintention to enter into the proposed contract, and the offeree ac@uires reliable information to thateffect. 4ee <ormile

#cceptance must be unconditional and un@ualified for contract to be formed.

#n offer may only be accepted by a person in whom the offeror intended to create a power of acceptance

(fferor is the "%aster of his (ffer.& Be may prescribe the method of acceptance.

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Consideration.

Purpose

<ot all promises are legally enforceable. The function of the consideration doctrine is todistinguish between those promises that are enforceable and those that are not.

Restatement 2=>

"# performance or return promise is bargained for if it is sought ,y the promisor ine/change for his promise and is given by the promisee in e>change for that promise, mayconsist of- 516 #n act other than a promise* 5:6 # forbearance* 5F6 Creation, modification,or destruction of a legal relation.&

)n *nglish- There must be a promise that induces either a return promise, or performance.The goal is "bargained e>change,& and to avoid enforcing a promise to give a gift.

.ustice Car!o?o5s !e1nition *in lleghen) College+

/romisee must suffer a legal detriment. Be must either do or promise to do something that he is not legallyobligated to do, or refrain from something he is legally entitled to.

The detriment must induce the promise. /art of the promisors motive must be that he wishes to e>changehis promise for the promisees detriment. # "argain&

The promise must induce the detriment. The promisee must suffer his detriment because at least in part because of the promise.

This definition highlights the two very different types of consideration problems that arise.The bargain& aspect is important in situations that do not involve business dealings, such asa promise to give a gift. The "legal detriment& does involve business dealings where it is notentirely clear that one side has really given anything up.

'he 9argain Element"

;or a promise to be supported by consideration, generally, the promisees detriment musthave been "bargained& for by the promisor. The principal reason for this is to prevent theenforcement of promises that in reality are promises to give a gift.

3here there is such a "bargained for e>change,& the fact that the promisor may have hadsome other motive 0 inducement will not defeat the agreement.

0rdinary Gift Cases- unenforceable for two reasons.

The promise was not bargained for.

There is no detriment to the person receiving the gift. 3hat does he give upA

ar$ain vs. Conditional %ift .

2n some cases, however, there is a promise to give a gift if the promisee will undergo some legal detriment. 4ee,e.g., Bamer v. 4idway. 3here the uncle promised MINNN if the nephew gave up smoking anddrinking. The court held that consideration was present because giving up a legal right 5by thenephew6 is sufficient to satisfy the criteria of consideration.

ut if the meeting of these conditions is not "bargained for& then the promise is not really enforceable. 2n other

words, a promise to make a gift is not enforceable unless meeting the conditions is the primarymotive for the promise.

(therwise, these conditions are 8ust the steps that a promisee must take to receive the gift. They are the mannerin which the gift will be given.

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Non-&conomic enefits.

# bargain might be present even though the promisor does not receive any economic benefits from the transaction. ;or e>ample, in Bamer, the uncle received noeconomic benefits from his nephew. The court ruled that the promise was in indeed"bargained for& The nephew received what he wanted 5money6, and the uncle gotwhat he wanted 5nephews morality and health6.

!h# Not &nforce 'onative (romises) 5/olicy Considerations6.

Pro,lems of Proof Too easy for promisee to convince 8ury that a promise was made to him.

*motional State 'onative promises are more likely to involve high emotions and lack ofcalculations0deliberations. ash.

(bligations created by such promises often becomes e>cusable 5e.g., ingratitude6.

9ene1t- #etriment- an! Pre@e:isting Legal #ut)"

Traditional notions of consideration re@uire that the promisees act or forbearance must involve a legal detrimentto the promisee or a legal benefit to the promisor.

ecause there can be a legal detriment to the promisee without a legal benefit to the promisor, focus should ,e

on the presence or a,sence of a legal detriment to the promisee.

Le$al 'etriment 1

'oing or promising to do that which one was not previously obligated to do, or promising to forbear or forbearing from doing that which one had a legal right to do.

Bamer v. 4idway. The nephew gave up a legal right, which is sufficient consideration. %oves beyond simple benefit0detriment, and shows that forbearance of a legal right is sufficient consideration.

Must be forbearance of a legal right * thus refraining from illegal drugs is not consideration.

(re-e*istin$ Le$al 'ut#.

# pre+e>isting legal duty cannot serves as consideration. 3hen a party promises todo something that he is already obligated to do, that person suffers no legaldetriment. The promisors promise is not inducing the promisee to act in thissituation. The promisee already has a legal obligation to act in the same manner, and

will do so regardless of the promisors promise.

Past Consi!eration

"/ast Consideration& does not constitute valid Consideration.

3here the detriment has ,een suffered in the past, the promise is obviously not "bargained for& by the promisor.

These agreements are not valid because the "bargain& is missing.

!eAuac) of Consi!eration

The law does not normally concern itself with the ade@uacy of consideration, provided that

the consideration was truly ,argained for. The recital of purely nominal consideration isusually an indication that there was no bargain at all, but rather a gift.

2n a situation where it is clear from the facts that the promisees nominal consideration is notwhat drives the promise, the promise may be unenforceable. (nly if the facts indicate thatthere was no bargain, 8ust an attempt to make a gratuitous promise enforceable by cloaking itin the form of a bargain. 4ee ! O1 Comment 5d6 and 2llstr I.

"estatement # 2%& 2f the re@uirements for consideration have been met-

There is no additional need for an e@uivalency of the values e>changed.

There does not also have to be a detriment to the promisee or benefit to promisor.

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;unctions of Consi!eration

Cautionar#.

eminds the parties that their promises will be legally enforceable* and forces themto be cautious about what terms are included in the final contract. They will be lesslikely to include bad bargains, thoughtless clauses, or mistakes.

&videntiar#.

Belps provide ob8ective evidence that the parties intended to make a bindingagreement. #lso allows the court to differentiate between those promises which the parties intended to make legally binding and those agreements which the partiesintended merely as obligations of honor.

Channelin$ .

#llows the court to look at a situation and know what to do with it. Like what bodyof law to apply, and what type of @uestion is really at issue. #gency and emedies

Agency.

What is genc)

#gency is a consensual relationship in which one person, the agent, agrees to act on behalf

of, and sub8ect to the control of another person, the principal./2<C2/#L 5oss6 #E<T 5epresentative6.

')pes of uthori?ation"

Actual 3 */press /rincipal e>pressly tells agent what to do and he0she does it.

Apparent 3 )mplied #uthority is not e>pressly stated by the principal, but implied from the agents actions.Third party reasonably believes that agent has necessary authority.

"atification ++ /rincipal approves the actions of the agent afterward.

Remedies for 'reach.

Speci1c Performance"

#ctual performance of a contract in full. Eenerally available when there are no otherremedies available under the law.

%njunction"

)ery rare. 2t commands a party to refrain from doing something.

E:pectation #amages"

/uts the plaintiff in the position that he would have been in, had the contract been performed.The net value of what the plaintiff e>pected from due performance.

Reliance #amages"

/ut the plaintiff back in the same position as he was in before entering into the contract.

/laintiff acted in reliance on defendants commitment perform.Restitution"

;ocus is on any un8ust enrichment obtained by the defendant. /uts the defendant back in hissame position as before he entered into the contract.

$o Punitive #amages are allowe!"

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Obligation in the Absence of Exchange

Three Theories of Contract (nforcement (Lon Fuller, Pg. 135)

Private utonom)

This is the traditional approach to contract law. /rivate individuals possess the power, with

certain limitations, to affect their legal relationships. The man who enters into a contract ise>ercising this power. 5Classical Contracts6

(njust Enrichment

The in8ustice resulting from the breach of a promise relied on by the promisee is aggravated.;or e>ample, the in8ustice is aggravated because not only has # lost five dollars, but hasgained five dollars un8ustly. 5estitution6

Reliance

The breach of a contract may work an in8ury to one who has changed his position in relianceon the e>pectation that the promise would be fulfilled. 5/romissory stoppel6

Restitution.%n <eneral

+ntroduction.

estitution aims to prevent un8ust enrichment where non bargained+for benefits have been conferred.

2t is an action for recovery when there is no formal contract between the parties. Usually because there is anelement of a formal contract missing, like restitution.

estitution has no basis in statutory law. Comes from a <atural 4ystem of Qustice.

%odern 'octrine has two lements-

$nrichment of the %efendant.

$nrichment must be un&ust.

!h# restitution)

Mostly for policy reasons. 3e want to encourage people to help each other, but not necessarily at their ownrisk and e>pense. 3e want to be able to help the emergency room victim, or the man whos boat hascome loose from its mooring, or the business whos lumber has fallen into the river.

!T, we also recogni$e that there are ways in which this can be abused and situations in which it would beunfair to impose restitution. 4o there are re@uirements set up to limit the application of restitution.

%eneral &lements.

# person is generally entitled to restitution when-(ne party provides a benefit to the other party.

There was a reasonable e>pectation of compensation for the benefits.

There was an e>pressed or implied re@uest for the benefit.nriched party would have promised to pay, or, based on community standards should be forced to pay.

Restitution bsent a Promise

The court implies defendants assent from the facts of the situation. 2n reality this is a 8udicially constructed contract. The contract is implied from the actions of the parties.

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enefit to ,hird (arties Construction Cases .

Courts generally deny claims by a sub+contractor against an owner, when the owner has fully paid the generalcontractor. There is no un8ust enrichment because owner has fully paid for all services rendered.The negligent party is really the general contractor.

*/ception- 2n ;looring 4ystems the defendant withheld M:I,NNN from the general contractor and was forced to pay. 'efendant was un8ustly enriched because they received more than what they paid for.

4owever- %ost courts are split on what to do in situations like ;looring. (utcome depends on the state.

Non-%ratuitous /ervice or Action %lenn v. /ava$e.

&mer$enc# /ituations.

3here there is an immediate danger to ones life or health. Crisan held that acontract can be implied for a victim in such a situation.

estatement of estitution ! 11G, restitution is proper when plaintiff-2ntends to charge for his services from the start.

Bis goods or services were necessary to prevent further harm.

Be is unaware that if conscious, the victim would not want this done.

2t was impossible for the other to grant consent.2s providing the service of his trade 5i.e. / must be a doctor, not a plumber.6

Promissor) Restitution

'eals with promises made after a benefit is conferred. Under Classical Contract Theory,these promises are unenforceable for want of consideration 5was in the past6

%oral (bligations.

#s a general rule, moral obligations alone are insufficient to support a promise.Bowever, /re+e>isting legal obligations that are now obsolete may be opted back into. 2n effect, the previous consideration is revived for the new contract.

%aterial enefits ule.

estatement ! PG- /romise for enefit eceived./romises made in recognition of a benefit received are binding to the e>tent necessary to prevent in8ustice.

ut, such a promise is not binding if-

'enefit received was a gift, or promisor was not un&ustly enriched.

(f the value of the benefit received is disproportionate to the benefit.

Summar)0

No (romise- Courts imply a promise only to prevent Un8ust nrichment.

/romise-

"/re+>isting 'uty ule.&

"%aterial enefits ule.&

Promissory (stoppel

%n <eneral

A doctrine of e5uity that is used to enforce otherwise unenforceable promises. stopps the promisor from asserting that no consideration was giver. /rotection from the unbargained+for reliance on the e>pectation that a promise would be fulfilled.

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Critics fear that promissory estoppel will swallow up consideration, and allow all sorts ofunreasonable claims into court. Bowever, in reality 8udges are very careful not to e>pand thedoctrine too far. 2t must be a reasonable reliance to be enforced.

Restatement 2B7"

678 # promise which the promisor should reasonably e>pect to induce action or forbearance

on the part of the promisee or a third person and which does induce such action orforbearance is binding if in8ustice can be avoided only by enforcement of the promise. Theremedy granted for breach may be limited as 8ustice re@uires.

698 # charitable subscription or marriage settlement is binding under 4ection 1 without proof that the promise induced action or forbearance.

'he Elements"

%ust be a promise.

%ust be reasonably foreseeable that promisee will rely upon the promise.

/romisee does rely on the promise.

%ust be un8ust not to enforce the promise.

emedy may be limited as 8ustice re@uires.

Charitable Subscriptions"

! 9N5:6 states that charitable donations are binding without proof that the promise induced action or forbearance.ut has yet to ,e adopted ,y the courts.

Traditional view prevails that charitable subscriptions cannot be enforced because there is no consideration. 4ee#llegheny College.

Courts are not willing to bend the rules of CCT, and e>pand promissory estoppel.

Commercial pplications

∆ 5boss6 offers Π 5worker6 a pension to induce him to retire on his own volition. 2f Π accepts, ∆ owes Π the

pension, regardless of whether Π would have been put in same position5fired6 had he not accepted pension. y giving Π choice of what to do, ∆ bound himself to that promise* even if the Π would

have been fired if he re8ected the offer. (therwise we have detrimental reliance. =at$ v. 'anny 'are.

Agent of company, who has apparent authority, makes a promise to Π. /laintiff relies on this promise to his

detriment, believing that agent has authority to act. The principle company must compensate Π under

/romissory stoppel to avoid in8ustice. Π relied upon ∆s promise to his detriment. 4ee Universal

Computer.

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Obligation in the Absence of Comlete Agreement

)ntroduction to Pre&Acceptance Reliance.16 #t Common Law an offer was revocable unless and until it was accepted by the offeree.

ven if the offer e>pressly stated that it would remain open indefinitely.

:6 Bowever, the Common Law did recogni$e that an offer could be made irrevocable bycontract, if separate consideration is given to do so 5an (ption Contract6.

F6 2n the absence of an option contract, Classical Contract Theory provides no remedy for theofferee who relies on an offer that is not yet accepted.

H6 %odern contract law has gradually moved away from these concepts. 2n many settings, anoffer that is reasonable to be relied upon may be enforced.

!ption Contracts.

Restatement 2=*>+0 /ption Contracts"

#n offer is binding as an option contract if it is-

2n 3riting.

4igned by (fferor.

ecites a purported consideration for making the offer.

/roposes an e>change on fair terms, within a reasonable time.

%ade irrevocable by statute.

Consi!eration

)alid consideration may be the specific performance or forbearance of an action. The only valid considerationis not the e>change of money.

'oes not re@uire actual consideration, 8ust a purported consideration.

2n order for an option contract to be valid, purported consideration that is money must be paid. 4ee errymanwhere the = was invalid b0c M1N not pd.

8iscellaneous

#n (ption Contract consists of two parts-

# contract stating the conditions of the offer.

The offer itself.

Counter Offers do not terminate the ori$inal offer , because there is a "contract& to keep it open for a certain period of time.

Promissory (stoppel.

The most common e>ample of an offer inducing pre+acceptance reliance is the constructionindustry. ECs rely on bids they receive from 4ub+Contractors to be binding. Bowever, at

common law these bids are not binding because there is no consideration. To avoid thisin8ustice, the estatement uses /romissory stoppel to limit an offerors power to revoke.

Restatement 2=*,+

#n offer which the offeror should reasonably e>pect to induce action or forbearance ofsubstantial character on the part of the offeree before acceptance, and which does inducesuch action or forbearance is ,inding as an option to the e>tent necessary to avoid in8ustice.

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(se of a Sub@Contractor5s 9i!

!hen indin$ -

4ub is bound when his bid is used by the EC.

!hen NO, indin$ -

2f EC looks for another bid, after using ∆s bid in his proposal.

2f the EC makes a counter+offer.

2f EC knows that the subs bid is mistaken, but uses it anyway.

2f the terms of the subs offer specifically state that the bid is revocable.

/ummar#-

The law clearly favors the EC that is relying on a subs bid.

Bowever, there are time when a subs bid may be revoked.

rguments against using PE to maDe an o4er bin!ing"

asic issue of fairness. /romissory stoppel makes the offer binding to only one side, the sub+contractor. The

EC is not bound to use ∆s bid if his proposal is chosen, this is unfair.

Threat of e>panding /romissory stoppel too far. Courts simply may not want to e>pand promissory estoppel tocover offers as well as promises.

rguments for using PE to maDe an o4er bin!ing"

The subs offer is like a unilateral contract. There is an implied promise that once the EC uses the bid in his proposal, the sub will not revoke the bid.

EC can suffer a financial detriment if he relies on the subs bid, and then the sub revokes the bid. %ust preventthis in8ustice and risk, where the sub faces no financial risk if he decides to withdraw the bid.

Promises *ot Definite as to All Terms

# promise does not have to be certain as to all terms to constitute an offer. 2t must only

induce reasonably foreseeable reliance on the promise 5i.e., have the effect of meeting all ofthe elements of promissory estoppel6.

&o4man v" Re! /wl"

This case is basically the furthest e>tent to which the court is willing to apply /romissory

stoppel. /laintiff followed 'efendants instructions on how to open up a franchise. ∆

promised that it would cost M1P,NNN, the deal fell apart when final cost rose to M:G,NNN.

There was no signed agreement* but Π relied e>tensively on ∆s promises.

The promises were not formal, but court focuses on the defendants assurances and their relative bargaining power.

Court applied promissory estoppel for the first time in 3isconsin

'amages are limited only to that amount necessary to prevent in8ustice.

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!irm Offer.

)n +eneral

The UCC allows the formation of an in irrevocable offer under certain circumstances, even if there is no consideration e>changed. !:+:NI modifies the rule that re@uires "firm offers& to be sustained by consideration in order to bind. <ow they must be characteri$ed as such ande>pressed in signed writings.

Purpose

To give effect to the deliberate intention of a merchant to make a current firm offer binding.The is a fundamental shift from the common law re@uiring consideration.

UCC , -&-/

#n offer by a merchant to buy or sell goods in a signed writing which by its terms givesassurance that it will be held open is not revocable, for lack of consideration, during the timestated or if no time is stated for a reasonable time, but in no event may such period ofirrevocability e>ceed F months, but any such term of assurance on a form supplied by the

offeree must be separately signed by the offeror.

Re0uirements

'here must be an /4er-

8a!e b) a 8erchant-

'o 9u) or Sell <oo!s-

Signe! an! in Writing-

n! assuring that the o4er will remain open"

Satisfying the Re0uirements

/4er"Common Law 'efinition is used, an assurance of price is usually re@uired.

8erchant"

The (fferor must be a %erchant, as defined in !:+1NH-

/erson who deals in goods of the kind or otherwise by his occupation holds himself out ashaving knowledge or skill peculiar to the practices or goods involved in the transaction or towhom such knowledge or skill may be attributed by his employment.

<oo!s"

#ll things which are movable at the time of identification to contract for sale. UCC :+1NI

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Signe!"

Can be something less than a formal signature.

Usually a minimum re@uirement of initiali$ing the clause involved.

# hand written letter on the writers letterhead will suffice.

;orms prepared by the offeree must be separately signed by the offeror on the clause indicating the offer.

4ee UCC ! :+:N1.

'ime Limit"

(ffers remain irrevocable for a ma>imum of F months if no shorter time period is stated.

/romises to keep an offer irrevocable for a longer period than this must be supported by consideration, and thuswould not be covered by ! :+:NI.

3hen the period of irrevocability e>pires, the offeror has the right to revoke the offer. The offeror does not haveto revoke, and the offer doesnt e>pire.

Differences 'eteen ,12 and , -&-/.

Consi!eration

#n option contract must recite purported consideration, while consideration is irrelevant to afirm offer.

'ime Limits"

#n option contract may be irrevocable for however long the parties decide. # firm offer isirrevocable for no longer than three months.

pplicabilit)"

# firm offer is applicable only for the sale of goods, on offers made by a merchant. #noption contract may be for any type of good or service, between any two parties.

uthorit)"

The UCC is a statue where the code has been adopted, and therefore binding.

The estatement is mainly persuasive authority, e>cept in the few instances where it has been adopted by a local 8urisdiction.

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"ualified Accetance.2n some situations the offeree wishes to accept the offer with certain modifications. 3hen the acceptance differsfrom the offer it is often difficult to tell if a contract e>ists. 2t is also difficult to determine what the terms of thatcontract are.

Classical Approach.

8irror %mage Rule"

#t Common Law, the offerees response is an acceptance only if it is a precise mirror image of the offer&

2f the offerees response differs at all, then it is not an acceptance, but a re8ection and counter+offer.

%njustice"

This strict interpretation frustrated many commercial transactions, and fre@uently led to un8ust results.

The "mirror image& rule often let one party slip out of a deal for reasons that have nothing to do with offer andacceptance. 4ee /oel v. runswick, et. al.

“ Last Shot"”

3here written proposals are e>changed, the Common Law rule also gave an unwarranted advantage to the partythat fired the "last shot.&

2f the writings were not sufficient to form a contract, but the re@uested actions were performed, the last written proposal was deemed the contract.

UCC3 The 'attle of Forms.(CC 2 ,@,7=0 !!itional 'erms %n cceptance /r Con1rmation

16 # definite and seasonable e>pression of acceptance or a written confirmationwhich is sent w0in a reasonable time operates as an acceptance even though it statesterms additional to or different from those offered or agreed upon, unless

acceptance is e>pressly made conditional on assent to the additional or differentterms

:6 #dditional terms are construed as proposals for addition to the contract. *T:**N

M*"C4ANTS these terms become part of the contract unless1

a6 offer e>pressly limits acceptance to terms of offer. b6 materially alter it.c6 notification of ob8ection to them has already been given or is given within reasonable

time after notice of them is received.

F6 Conduct by both parties 0hich reco$ni1es the e*istence of a contract is sufficient to esta2lish a

contract for sale although the writings of the parties o not otherwise establish a contract. 2n such casethe terms of the particular consist of those terms on which the writings of the parties agree, togetherwith any supplementary terms incorporated under this #ct.

%n <eneralThe purpose of !:+:NO is to answer to @uestions-

2s there a ContractA

2f so, what are the terms of the ContractA

The (olic# %oals of !:+:NO are-

/revent the in8ustice of one party slipping out of a contract, as he was able to do under common law, for reasonsunrelated to offer and acceptance.

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#ttempts to deny any unwarranted advantage to the party who fires the "last shot.&

To create statutes that understand the actual day to day practices of the business community. %ost transactionsdeal with pre+printed forms and boiler plate language and there are no problems. 2n addition, almostall parties to such agreements intend to be bound to some contract.

#i4ering 'erms

34nockout Rule.5

The general rule with differing or conflicting terms is that they "knock each other out,& so that neither clause

enters the contract. 2nstead, a UCC "gap filler& provision is used if applicable* otherwise thecommon law controls.

Criticism1 (ne argument against use of the knockout rule is that it deprives the offeror of the right to set theterms of the offer. The offerors view on a ma8or issue can be knocked out, an he will be bound to acontract where UCC "gap fillers& are ma8or terms of the contract.

Alternate 6ie0.

Under this approach, the clause proposed in the acceptance or confirmation simpl# fails to have an# effect .

The result is that the original clause enters the contract.

8aterial an! %mmaterial lterations Material Alterations Not added.

3ould result in surprise or hardship if incorporated without e>press awareness by the other party 5#s viewed bythe Comments6.

>amples-

"lause negating standard warranties where one is normally attached

"lause re)uiring a guarantee of *+ or -++ deliveries in a case where usage of trade allows greater leeway.

"lause giving the seller the power to cancel upon the buyer’s failure to meet any invoice when due.

"lause re)uiring that complaints be made in a time materially shorter than customary or reasonable.

+mmaterial Alterations Added.

Clauses which involve no element of unreasonable surprise, and which therefore are to be incorporated in thecontract unless notice of ob8ection is reasonably given 5#s viewed by the Comments6.

>amples-

"lause for interest on overdue invoices within range of trade practice.

"lause fiing in advance any reasonable formula of proration.

"lause setting forth or enlarging the seller’s eemption due to supervising causes beyond his control.

"lause fiing a reasonable time for complaints w/in customary limits.

"lause limiting the right of re&ection for defects which fall within customary trade tolerances.

Summar)0

!:+:NO makes three ma8or changes to the common law approach-

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*T:**N M*"C4ANTS; additional terms proposed in the acceptance can become part of the contract incertain circumstances if the other part# remains silent. asically eliminating the common law rulethat a proposal for a contract cannot be accepted by silence. !:+:NO5:6

2t provides that a document can constitute an acceptance even though it states "terms additional to or differentfrom those offered or agreed upon.& Thus a2olishin$ the common la0 mirror ima$e rule. !:+:NO516.

liminates the "last shot& doctrine. Contracts based upon performance are interpreted based on those pointswhich the parties agree upon.

Agreement to Agree# $ostoned %argaining./arties may form a contract with an essential term unfulfilled, intending to agree upon that term in the future.4uch "agreements to agree& were formerly held to be fatally flawed.

Classical 4ie

'o be bin!ing- an agreement must be sucientl) !e1nite to enable a courtto give it an e:act meaning"

s long as the parties Dnow that there is an essential element not )etagree! upon- there is no contract"

%n an agreement where the sale price will be !etermine! at a later !ate-unless there is a ver) speci1c an! e:act manner b) which the price willbe !etermine!- the agreement is not vali!" Stating “fair marDet value”woul! be too vague"

5odern or UCC Approach

%n <eneral

The UCC provides that as long as the parties intend to make a binding contract, their "agreement to agree& doesnot make the contract fatally indefinite, at least if it is the price term left open.

2n general though, the more indefinite that an "agreement to agree& is, the less likely it is that a court will

enforce it.

(CC 2 F76

16 The parties if they so intend can conclude a contract for sale even though price is not

settled. 2n such a case the price is a reasonable price at the time for delivery if-

<othing is said about price* or

The price is left to be agreed by parties and they fail to agree* or

The price is to be fi>ed in terms of some agreed market or other standard as set or recorded by a third person oragency and it is not so set or recorded.

F6 3hen a price left to be fi>ed otherwise than by agreement of the parties fails to be fi>edthrough fault of one party the other may at his option treat the contract as cancelled or

himself set a reasonable price.

H6 3here, however, the parties intend not to be bound unless the price be fi>ed or agreed andit is not fi>ed or agreed there is no contract. 2n such a case the buyer must return any goodsalready received or if unable so to do must pay their reasonable value at the time of deliveryand the seller must return any portion of the price paid on account.

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“ #o the Parties %nten! to be 9oun!G”

The /arties do not intend to obligate themselves, therefore no contract.

/arties have obligated themselves to complete e>change, enforcement is proper.

/arties obligated themselves to do their best to complete an agreement, but they dont have to come to anagreement as long as they deal in good faith.

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Statute of !rauds.

#ny statute that re@uires a transaction to be memoriali$ed in writing for legalefficacy is referred to as a "statute of frauds.&

%n <eneral"

The 4tate of ;rauds is a defense to enforcing a contract.

2t re@uires certain contracts to be in writing to be legally binding.

Three Ruestions dealing with 4(;-

2s the contract one which is sub8ect to the statute of fraudsA

'oes the contract satisfy the statute of frauds re@uirementsA

2f not, is there an e>emption to the 4(; that may be appliedA

Rationale for Retention of the Statute to!a)"

4erves an evidentiar# function. Lessens the threat of per8ured testimony.

Bas a cautionar# effect. Causes the parties to reflect on the importance of the agreement.

%atekeeper 0 Channeling function. #llows the court to easily distinguish between an enforceable contract andone which is not enforceable.

When the Common Law pplies S/;"

There are five types of contracts that must be in writing to be enforceable-

&*ecutor-Administrator .

#ny contract for an e>ecutor of an estate to settle a debt of the deceased.

/uret#ship.

# contract to answer for the debt or duty of another.

Marria$e.

Contracts made upon the consideration of marriage. Bowever, there must be

consideration e>changed for the contract to be sub8ect to 4(;.

Land Contract .

# contract for the sale of interest in land.

One 7ear .

Contract that is not to be performed within one year of the making. (nly applies tocontracts in which complete performance is impossible within on year. The fact that performance is highly unlikely is not enough.

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Common Law in <eneral"

#7'9. Ma# consist of several 0ritin$s, if one writing is signed and the others clearly indicate that they relate tothe same transaction.

#7'7. # writing must contain the following to satisfy 4(;-

easonably identifies the sub8ect matter of contract.

4ufficiently indicates that a contract has been made between the parties, or at least offered by the signer to theother party.

4tates with reasonably certainty the essential terms of the unperformed contract.

Doctrine of Part Performance.

2f the writing establishes that the party seeking enforcement relied on the writing,and on assent of the party against whom enforcement is sought, to such a detrimentto herself that in8ustice can only be avoided by specific enforcement, then thecontract may be enforced.

Unlike (romissor# &stoppel8 this is 2roader . 'efendant does not have to reasonably foresee that plaintiffwould reasonably rely on the promise.

(nly able to grant e@uitable estoppel relief, or part performance. asically limited to "as 8ustice re@uires.&

What Contracts are Subject to the (CC StatuteG

The five Common Law categories are covered by the 4tatute.

2n addition, the 4tatute also applies to any contract for the sale of goods valued at MINN or more.

(CC E:ceptions"

4pecially %anufactured Eoods.

#dmission that an oral contract e>isted.

/artial /erformance.

2t might also be possible to use a theory of promissory estoppel to get around the 4tatute of ;rauds. That onerelied upon an oral agreement to his detriment. ut this would be an e>tra+UCC court ruling.

What is a Writing un!er (CCG

#ll that is re@uired is that the writing afford a basis for believing that the offered oral evidence rests on a realtransactionS

The re@uired writing does not have to be an actual contract.

The terms do not have to be precisely stated.

/rice does not have to be mentioned.

3B#T 24 RU2'-

%ust vidence a Contract for the 4ale of Eoods.

%ust be signed.

%ust 4pecify Ruantity.

(CC Partial Performance"

/artial /erformance can act as a substitute for a writing only for the specific goods whichhave been accepted or for which payment has been made.

::



9etween 8erchants – (CC"

;ailure to answer a written confirmation of a contract within ten days of its receipt is tantamount to a writingunder section516.

Bowever, the burden still remains on the plaintiff to prove that a prior oral contract e>isted between the parties.

(CC 2,@,7>"

516 >cept as otherwise provided in this section a contract for the sale of goods for the

price of <$== or more is not enforceable by way of action or defense unless there is somewriting sufficient to indicate that a contract for sale has been made between the parties andsigned by the party against whom enforcement is sought or by his authori$ed agent or broker.# writing is not insufficient because it omits or incorrectly state a term agreed upon but thecontract is not enforceable under this paragraph beyond the @uantity of goods shown in suchwriting.

5:6 etween merchants if within a reasonable time a writing in confirmation of the contractand sufficient against the sender is received and the party receiving it has reason to know itscontents, it satisfies the re@uirements of subsection 516 against such party unless writtennotice of ob8ection to its content is given within 1N days after it is received.

5F6 # contract which does not satisfy the re@uirements of subsection 516 but which is valid inother respects is enforcea,le-

5a6 if the goods are to be specially manufactured for the buyer and are not suitable to othersin the ordinary course of the sellers business and the seller, before notice of repudiation isreceived and under circumstances which reasonably indicate that the goods are for the buyer,has made either a substantial beginning of their manufacture or commitments for their procurement* or

5b6 if the party against whom enforcement is sought admits in his pleading, testimony orotherwise in court that a contract for the sale was made, but the contract is not enforceableunder this provision beyond the @uantity of goods admitted* or

5c6 with respect to goods for which payment has been made and accepted or which have been

received and accepted.

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The Meaning of the Agreement. This section deals with two important @uestions-

1. 3here there is a dispute about the meaning of certain words in a writing, how does one determine themeaning of the words usedA:. 3here a contract has been reduced to written word, what effect does the writing have on any prior oralor written aspects of the agreementA

Parol (vidence.

<enerall)"

# UL (; CLU42(<.

The rule does not define what evidence is affirmatively admissible.

+t onl# operates to e*clude evidence evidence that would otherwise be admissible as rationally probative ofsome fact at issue.

2f the /arol vidence rule applies at all in a situation, it has the effect of preventing one party from introducinge>trinsic 5or collateral6 evidence of matter not contained in the written agreement between the parties.

/arol vidence rule onl# applies to those agreements which are inte$rated .

The 8udge decides if parol evidence should be admitted.The 3riting does <(T need to be signed, 8ust understood to be final.

Purpose"

'eters people from retroactively writing a contract.

/revents the introduction of possibly unreliable evidence.

#llows people to know up+front what they are getting into.

%ntegration"

2f the parties intend for a document to represent the final e*pression of their a$reement8 thedocument is said to be an 3inte$ration5 of their agreement.

9ull +nte$ration.

2f the document is intended to include all of the details of an agreement, it is referredto as fully, or totally integrated.

(artial +nte$ration.

2f, however, the document is not intended to contain all of the details, 8ust a partiallist of them, the agreement is said to be partially integrated.

+nte$ration Applied .

/artial 2ntegration.

<o evidence may be admitted to contradict a term of the writing.

Total 2ntegration.

<o evidence of prior or contemporaneous agreement may be admittedwhich would contradict or add to the writing.

2n Eeneral.

<o evidence of a prior or contemporaneous agreement may be admitted tocontradict or supplement an integrated writing.

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E:ceptions to the Parol Evi!ence Rule"

vidence offered to clarify a facial ambiguity in the contract.

#greements, oral or written, made after e>ecution of the writing.

vidence offered to establish a "collateral& agreement between the parties.

vidence offered to show that the effectiveness of the agreement was sub8ect to an oral condition precedent.

vidence introduced to show that the agreement is invalid.

4uch as fraud, duress, undue influence, incapacity, mistake, illegality.

vidence that establishes a right to an "e@uitable& remedy, such as reformation of the contract.

2f one of the parties can establish that a part of the agreement was inadvertently omitted from the writing due tosome mistake.

e@uires "clear and convincing& evidence.

(CC §2-2020

;2<#L 32TT< /442(<- /#(L ( T2<42C )2'<C

Terms in an agreement intended to be integrated can not be contradicted by evidence of prior

or contemporaneous oral agreements* 2ut ma# 2e supplemented or e*plained 2#-course of performance, course of dealing, trade usage, and

by evidence of consistent additional terms unless the court finds the writing to have been intended also as acomplete ? e>clusive statement of the terms of the agreement

(CC #e1nitions"

Course of Dealing #7(9=$678 Bow the parties have previously interacted.

A se)uence of previous conduct between the parties to a particular transaction which is

fairly to be regarded as establishing a common basis of understanding for interpretingtheir epressions and other conduct.

<otes-

may be added to a writing as an additional term, as long as it is not inconsistent with the written agreement.

Trade !sage #7(9=$698 Bow others in the same industry inter+act.

Any practice or method of dealing having such regularity of observance in a place,

vocation, or trade as to &ustify an epectation that it will be observed with respect to thetransaction in )uestion. The eistence and scope of such a usage are to be proved as facts.

(f it is established that such a usage is embodied in a written trade code or similar writing

the interpretation of the writing is for the court.

<otes-

stablished by e>pert testimony

/erson is bound by trade usage if that person is aware, or should have been aware of it.

Usage of Trade is seen as additional if not inconsistent with agreement.

Course of Performance #9(9=-.

3here the contract for sale involves repeated occasions for performance by either party with knowledge of thenature of the performance and opportunity for ob8ection to it by the other, any course of performanceaccepted or ac@uiesced in without ob8ection shall be relevant to determining the meaning of theagreement.

The e>press terms of the agreement and any such course of performance, as well as any course of dealings andtrade usage, shall be construed whenever reasonable as consistent with each other* but when suchconstruction is unreasonable, e>press terms shall control course of performance and course of performance shall control both course of dealings and trade usage.

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Course of performance shall be relevant to show a waiver or modification of any term inconsistent with suchcourse of performance.

<otes-

• elates to conduct after the agreement in @uestion.

• # one time transaction is insufficient to be course of performance,

and is viewed as a one time waiver. ut two times is enough for toestablish a course of performance.

• %ay be used to add a term because performance takes place after

the writing, and therefore is not e>cluded by /arol vidence ule.

(CC Summar)"

#n integration may not be contradicted or supplemented by evidence of any prior orcontemporaneous agreement. Bowever, the writing may be "e*plained or supplemented & byconsistent additional terms,& unless the court concludes that the writing was intended to be a"complete and e*clusive statement .&

There is a presumption that a writing is only a partial integration, unless a merger clause or other evidence

proves otherwise.#lmost identical to the modern approach.

Circular Logic- #llow in evidence to determine if parol evidence is proper.

Classical H /bjective Iiew * Williston +"

"Four Corners> Approach # fully integrated writing should be interpreted on its face. The fact finder shouldlook not further than the four corners of the paper in making his decision.

Plain Meaning "ule The court should rely on the plain meaning of a contract. %aintain the sanctity andsecurity of a written contract.

>trinsic evidence should (nly be used to sort out facial ambiguities.

/arol vidence is inadmissible to contradict or vary the terms of an integrated agreement.

:illiston?s Three "ules-16 2f a writing e>pressly states that it is the final e>pression of all terms agreed upon,

and that it is a complete and e>clusive statement of these terms, then this is a totalintegration. J%erger ClauseK

:6 2n the absence of a merger clause, determination is made by looking at the writing.Consistent additional terms may be used to prove if the contract is incomplete onits face. J/artial 2ntegrationK

F6 3here the writing appears to be complete, it is deemed total integration unless thealleged additional terms are such as might naturally be made as a separateagreement, in which case J/artial agreementK.

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8o!ern H Subjective Iiew * Corbin +"

# sharply different view than that e>pressed by 3illiston.

The actual intentions of the parties should be looked to.

%uch less emphasis is placed on the actual writing of the parties.

2f all of the evidence showed that the parties did not intend the writing to contain all terms of the agreement,then this evidence was given to the 8ury.

#lmost emasculates the /arol vidence rule entirely. 3illistons sacrosanct view of the written contract is gone,replaced by a sub8ective approach to look at all available evidence of the parties intentions.

Twisting 3illiston to see what would have been naturally in the agreement.

Interretation.

Su"#ective Approach

LooD to parties intent- wor!s- an! con!uctJ then interpret the contractaccor!ingl)"

%f parties !o not inten! the same meaning for a term then there was noagreement- contract is not vali! contract"

ReAuires an e:act meeting of the min!s or no contract" See Peerless"

!"#ective Approach & Classical67illiston

(se reasonable person stan!ar!"

Wor!s an! con!uct shoul! be interprete! in accor!ance with the stan!ar! of a reasonable person

%f the writing is not an integration *complete or partial+- an! each part) ha!!i4erent meanings for a term- then there is no meeting of min!s"

'herefore no contract"

%f the writing is an integration- then !espite a !i4erence between the partiesof what the) thought a term meant - the term woul! taDe on meaningwhich a reasonable person woul! assume it meant Dnowing all thecon!uct an! circumstances prior an! after the agreement" $ee! not bemeeting of min!s

enefit- more efficient, will allow contract to stay in place with out wasting time trying to interpretwhat everyone meant

Criticism- looking solely at words of k, one could interpret a contract to mean something that neither party intended

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5odified !"#ective Approach 8 Cor"in#n attempt to give meaning to the parties intent and short of that what they should have.

, Auestions to !etermine meaning of contract0

whose meaning controls the interpretationA

what was the partys meaningA2,7>0 8o!i1e! /bjective pproach0

3here the parties both attached the same meaning to a promise or agreement or a term thereof, it is interpretedin accordance with that meaning.

3here the parties have attached different meanings to a promise, etc., 2t is interpreted in accordance with themeaning attached by one of them if at the time the agreement was made.

That party didnt know of any different meaning attached by the other and the other knew the meaning attached by the first party* or

That party had no reason to know of any different meaning attached by the other, and the other had reason toknow the meaning attached by the 1st party.

>cept as stated in this section, neither party is bound by the meaning attached by the other, even though theresult may be a failure of mutual assent.

Plain 5eaning Rule.

The meaning of any writing which appears to be complete, clear, and unambiguous on its facewill be determined with out respect to any e>ternal evidence

:illiston- ;eels there are many clear, precise, and unambiguous terms in a contract.

Cor,in- ;eels most lang. is ambiguous so hardly ever is any plain meaning, all relevant evidence isadmissible on issue of meaning even if no integration.

7hat courts loo9 at to interpret meaning3

Plain language of contract"

$egotiations"E:pert witnesses to 1n! tra!e usages"

Past an! present transactions of parties"

n) legal !e1nition of !ispute! term *from statute+"

, --13 Tests for Satisfaction

/bjective test for satisfaction"

3hen a condition of a contract is that the purchaser ,e satisfied with respect to the finished work of the provider the @uestion is not whether the e>act purchaser is satisfied, but whether a reasona,le person

in the purchaser?s position would ,e satisfied&

generally applies to commercial @uality, operative fitness, or mechanical utility.

Subjective test for satisfaction"

can be e>pressly put in contract that everything must meet sole satisfaction of purchaser only 5then will probably be higher pay for 8ob due to greater risk of failure to complete ade@uately6

applies where personal aesthetics are at direct issue +i.e. paintings.

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Doctrine of Reasona"le (:pectations

Premise! on fairness"

Signer of adhesion contract is not boun! to unDnown terms which arebe)on! boun!s of reasonable e:pectations"

E:pectations foun! from prior negotiations or inferre! from circumstances"

(suall) applies to insurance k.

Signer boun! if signe! contract with unreasonable terms he wasn5t aware of"

5a:ims of )nterpretation

8eaning of a wor! in a series is e4ecte! b) others in that same series"

general term joine! b) a speci1c term will be !eeme! to inclu!e onl)things from the speci1c term"

%f onl) speci1c terms are liste! similar things are e:clu!e! an! contract onl)for that speci1c list"

n interpretation which maDes a contract vali! is favore! over one that

invali!ates"

%f two meanings of a term are reasonable- one more favoring one part) an!one more favoring the other part)- the one least favorable to the !rafteris preferre! @he ha! one chance to get it right- probabl) purposefull) leftit ambiguous for his gain- won5t help him out"

Contract shoul! be interprete! as a whole"

Principle apparent purpose of both parties is given great weight an!inKuences the other more ambiguous terms"

%f two provisions of a contract contra!ict one another an! one is general an!one is speci1c- the speci1c one will rea! as an e:ception provision to theother"

&an!written or t)pe! on a!!e! terms on an alrea!) printe! up contract aregiven more weight than the ol!er printe! ones that the written onescontra!ict@more recent more reliable"

%f public interest is e4ecte! b) D- it will be interprete! in manner whichfavors public interest"

Documents

Contracts I - Maggs - Spring 2002_3