FORMATION

Mutual Assent

Unilateral Contracts.o Second § 45. Revocation of Offer for Unilateral Contract; Effect of Part

Performance or Tender. “If an offer for a unilateral contract is made, and part of the consideration requested by the offer is given or tendered by the offeree in response thereto, the offeror is bound by a contract, the duty of immediate performance of which is conditional on the full consideration being given or tendered within the time stated in the offer, or if no time is stated therein, within a reasonable time.”

Postponed Bargaining. Agreement to agree.o § 2-305. Open Price Term will not necessarily prevent enforcement of a contract

for the sale of goods, especially when one individual has the future power to fix a price.

o § 2-204. Even if one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis forgiving an appropriate remedy.

o Second § 27. Manifestations of assent that are in themselves sufficient to conclude a contract will not be prevented from so operating by the fact that parties also manifest an intention to prepare and adopt a written memorial thereof; but the circumstances may show that the agreements are preliminary negotiations.

Consideration

Second § 71. A mere pretense of bargain does not suffice, as where there is a false recital of consideration or where the purported consideration is merely nominal.

Second § 79c. No requirement of equivalence in the values exchanged. If consideration requirement is met, that is enough.

Note: Comment “e” notes that “gross inadequacy of consideration may be relevant” to the application of other doctrines, such as fraud, mistake, lack of capacity, duress, or undue influence.

Second § 81, Comment b. Where bargained-for consideration is present, the fact that the promisor may have had some other motive or inducement for making the promise will not of itself defeat the agreement.

Second § 77. Illusory Promises. A promise, even if bargained for, will not serve as consideration if it is illusory—if it makes performance entirely optional with the promisor.

Second § 59. An acceptance that varies the terms of the offer is a counteroffer which rejects the original offer.

§ 2-204(3). Emphasis on the question whether the parties had an intent to be bound even if some terms were left open.

Acceptance

§ 2-207. In essence, accepting a contract but making additional proposals to the contract. Significantly modifies, though it does not reject entirely, the application of both the mirror image rule and the last shot doctrine. Reasons that in commercial settings “the terms of offer and acceptance will rarely be identical.”

o Express Assent. Cannot under 2-207 be presumed by silence or mere failure to object.

Note: Additional terms not expressly assented to may still become part of the contract if they are (1) not directly objected to and (2) not material.

Note: Conduct alone should not be sufficient to amount to assent to an expressly conditional acceptance.

o Supplementary Terms. Implied terms under Article 2 as the implied warrantees of merchantability and fitness and the damages provisions.

Promissory Estoppel

Second § 90. Promissory estoppel. The promisee’s reliance must be foreseeable, but not specifically reasonable.

Option Contract

Second § 79. Nominal consideration is generally not effective. Second § 71. The offeree in an option contract may give services or some other form of

consideration instead of the payment of money. Second § 87. Comment c. Signed writing has vital significance as a formality, and

therefore its recital of consideration would not be open to invalidation by oral testimony which is easily fabricated. This means that the nominal requirement isn’t necessarily required to be paid.

Second § 63b. Comment f. The usual understanding is that the notification that the option has been exercised must be received by the offeror before the stated time limit.

o Note: some courts reject this view, holding the Mailbox Rule to be more universal.

§ 2-205. Firm Offer Rule. Adopts a formality standard that may render an option contract for the sale of goods enforceable without consideration. “An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated or if no time is stated for a reasonable time, but in no event may such period of irrevocability exceed three months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeree.”

CISG Art. 16(2)(a). An offer cannot be revoked if it indicates that it is irrevocable by stating a fixed time for acceptance or by other means.

Reliance

Second § 87(2). An offeree may in some cases reasonably and detrimentally rely on an offer that he/she has no yet accepted.

Second § 45. Provides protection to the offeree against revocation of an offer to enter into a unilateral contract when the offeree has relied on the offer by beginning the requested performance.

Restitution

§ 20. Protection of another’s life or health.o 1. A person who performs, supplies, or obtains professional services required for

the protection of another’s life or health is entitled to restitution from the other as necessary to prevent unjust enrichment, if the circumstances justify the decision to intervene without request.

o 2. Unjust enrichment under this section is measured by a reasonable charge for the services in question.

§ 107. Effect of existence of bargain upon right to restitution.o 1. A person of full capacity who, pursuant to a contract with another, has

performed services or transferred property to the other or otherwise has conferred a benefit upon him, is not entitled to compensation therefor other than in accordance with the terms of such bargain, unless the transaction is rescinded for fraud, mistake, duress, undue influence or illegality, or unless the other has failed to perform his part of the bargain.

o 2. In the absence of circumstances indicating otherwise, it is inferred that a person who requests another to perform services for him or to transfer property to him thereby bargains to pay therefor.

§ 21. Protection of another’s property.o 1. A person who takes effective action to protect another’s property from

threatened harm is entitled to restitution from the other as necessary to prevent unjust enrichment, if the circumstances justify the decision to intervene without request.

Note: Unrequested intervention is justified only when it is reasonable to assume the owner would wish the action performed.

o 2. Unjust enrichment under this section is measured by the loss avoided or by a reasonable charge for the services provided, whichever is less.

§ 28. Recognizes the right of one unmarried cohabitant to recover in restitution from another cohabitant, provided the relationship resembles marriage and the contributions are substantial.

o Note: The measure of recovery is the value of the services rendered, not their traceable product.

o Note: Services rendered by family members to each other are presumed gratuitous, while services rendered between non-related individuals are presumed to be for compensation.

Promissory Restitution

Second § 82. Promises to pay debts barred by the statute of limitations are enforceable because the debt is a preexisting legal obligation.

Second § 83. Promises to pay debts previously discharged in bankruptcy are also legally enforceable.

Second § 85. Minor’s promise when he reaches the age of majority to perform a contract made during minority is legally binding.

o Note: Contracts made by a minor prior to the time the minor reaches the legal age of majority are unenforceable unless they are for necessaries, goods and services needed by the minor.

Second § 86. Comment f. A promise to pay an additional sum for benefits received under a preexisting bargain is not enforceable.

Statute of Frauds

Second § 110. The following classes of contracts are subject to the Statute of Frauds, forbidding enforcement unless there is a written memorandum or an applicable exception:

o 1. Executor-Administrator Provision. A contract of an executor or administrator to answer for a duty of his decedent.

o 2. Suretyship Provision. A contract to answer for the duty of another. Note: a promise to answer for the debt of another person is usually held

not to be within the statute unless it was made to the creditor to whom that debt is owed.

o 3. Marriage Provision. A contract made upon consideration of marriage.o 4. Land Contract Provision. A contract for the sale of an interest in land.o 5. One-Year Provision. A contract that is not to be performed within one year

from the making thereof. Second § 132. A memorandum may consist of several writings if one is signed and the

others clearly relate to the same transaction.o Comment c. Documents may be read together if in the circumstances they

clearly relate to the same transaction and the party to be charged has acquiesced in the contents of the unsigned writing.

Second § 133. It is not necessary for the signed writing to establish a contractual relationship. The memorandum may consist of an informal writing, an offer, or a document that attempts to repudiate contractual liability.

o Note: The signature need not be formal to constitute a viable memorandum. Even memos written on paper “from the desk” of a person could be accepted as a signature.

§ 2-201. Contracts for the sale of goods for a price of $500 or more to be evidenced by a writing signed by the party against whom enforcement is sought. Makes enforcement possible on the basis of terms that meet three minimal requirements:

o 1. The writing must be signed or authenticated.o 2. The court must be persuaded that the writing does indicate a contract for sale

has been made.o 3. The writing must contain a quantity term.

Note: Drafters suggest that a term agreed upon may be omitted from the memorandum, implicitly allowing enforcement even in the absence of a writing stating the price term.

Note: Enforcement is limited to the quantity listed in the writing. § 2-201(3)(a). Exception to the statue of frauds for specially manufactured goods. The

goods must be specially manufactured for the buyer and not suitable for sale to others in the ordinary course of the seller’s business.

§ 2-201(2). Exception to the statue of frauds that applies only if the transaction is between merchants.

o Merchant. Someone who regularly deals in goods of a kind or holds herself out as having particular skills or knowledge involved in a transaction. § 2-104(1).

§ 2-201(b)(37). “Signed” includes any symbol executed or adopted with present intention to adopt or accept a writing.

CISG Art. 11. Rejects the statute of frauds as a general rule. CISG Art. 96. A state may opt to retain writing requirements from its state law.

INTERPRETATION

Principles of Interpretation

Contra Proferentem. A contractual ambiguity should generally be resolved against the party who drafted the language in question.

Noscitur a sociis. The meaning of a word in a series is affected by others in the same series. Or, a word may be affected by its immediate context.

Ejusdem generis. A general term joined with a specific one will be deemed to include only things that are like, of the same genus as, the specific one.

o E.g. X contract to sell B his farm together with “cattle, hogs, and other animals.” This would probably include related farm animals like sheep and not animals like a dog.

Expressio unius exclusion alterius. If one or more specific items are listed, without any more general or exclusive terms, other items although similar in kind are excluded.

o E.g. X contracts to sell B his farm together with “cattle and hogs on the farm.” This would exclude both sheep and a dog.

Ut magis valeat quam pereat. An interpretation that makes the contract valid is preferred to one that makes it invalid.

Omnia praesumuntur contra proferentem. If a written contract contains a word or phrase which is capable of two reasonable meanings, one of which favors one party and the other of which favors the other, that interpretation will be preferred which is less favorable to the one by whom the contract was drafted.

Interpret contract as a whole. A writing or writings that form part of the same transaction should be interpreted together as a whole.

Purpose of the parties. The principal apparent purpose of the parties is given great weight in determining the meaning to be given to manifestations of intention or to any part thereof.

Specific provision is exception to a general one. If two provisions of a contract are inconsistent with each other and if one is “general” enough to include the specific situation to which the other is confined, the specific provision will be deemed to qualify the more general one, that is, to state an exception to it.

Handwritten or typed provisions control printed provisions. Where a written contract contains both printed provisions and handwritten or typed provisions, and the two are inconsistent, the handwritten or typed provisions are preferred.

Public interest preferred. If a public interest is affected by a contract, that interpretation or construction is preferred which favors the public interest.

Rational reading of terms. In interpreting an agreement, a court should prefer an interpretation that makes an agreement reasonable, lawful, and effective to one that produces an unreasonable or unlawful result or that renders the agreement ineffective.

First § 230, 233. Objective approach. Words and conduct should be interpreted in accordance with the standard of a reasonable person familiar with the circumstances, rather than in accordance with the subjective intention of either of the parties.

o Note: Modern contract law has departed from this extreme objectivist approach, adopting instead a modified objective approach.

Second § 200. The purpose of interpretation is the determination of meaning of contractual language.

Second § 201. If both parties do in fact attach the same meaning to a provision, that meaning will govern.

Second § 203, cmt. c. Mutual understanding of both parties controls, even if it is different from the interpretation that would be given to the contract by a reasonable person.

o E.g. if “one Caterpillar D9G tractor” is taken to mean “500 railroad cars of watermelons,” that is fine, provided the parties share the intended weird meaning.

§1-303. Definition of Usage of Trade. Evidence of trade usage should be relevant to the interpretation of the parties’ agreement.

Parol Evidence Rule

Second §210, cmt. b. A writing cannot of itself prove its own completeness, and wide latitude must be allowed for inquiry into circumstances bearing on the intention of the parties.

Second §214c. A written agreement may always be explained by extrinsic evidence for purposes of interpretation.

Second §214d. Parol evidence rule does not apply to fraud. Second §216(2). An agreement will not be regarded as fully integrated if the parties

have made a consistent additional agreement which is either agreed to for separate consideration or is “such a term as in the circumstances might naturally be omitted from the writing.”

Second §222. Trade usage. Second §223. Course of dealing. Second §202(4). Course of performance. §2-202 cmt. 3. Consistent additional terms should be excluded only where the parties

intend the writing to be a complete and exclusive statement of all terms, or that the court decides the agreed terms are “certainly” in the document.

§2-202 cmt. 2. Terms derived from a course of dealing or a usage of trade are deemed to be part of the agreement unless carefully negated.

§490:1-205(2). Usage of Trade. Any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expection that it will be observed with respect to the transaction in question.

Implied Terms

§2-306(2). “Best efforts” obligation in cases where the contract for sale calls for exclusive dealing.

§2-308. Place of delivery. §2-310. Time of payment. §2-509. Risk of loss. §2-513. Buyer’s right of inspection.

Implied Obligation of Good Faith

Second §205. Duty of good faith and fair dealing is extended to every contract. Second §77 cmt. b. The buyer’s performance of a requirement contract (implied covenant

of good faith to perform well, etc.) does entail sufficient legal detriment to constitute consideration because each alternative would have been sufficient consideration if bargained for separately.

Second §228. The objective test of satisfactory performance should be preferred when it is practicable to determine whether a reasonable person int eh position of the obligor would be satisfied.

Second §228 cmt. a. Subjective test of satisfactory performance should be used only where the agreement leaves no doubt that it is only honest dissatisfaction that is meant and no more.

o Note: this subjective test is also preferred where the contract conditions performance of one party on the other’s performance to the satisfaction of some independent third party, because a third party is less likely to be affected by obligor’s selfish interests.

§1-304. Every contract or duty within its scope imposes an obligation of good faith in its performance and enforcement.

§1-201(b)(20) cmt. The complementary concepts of subjective honesty and objective reasonableness in determining good faith is applied to all parties, merchants and non-merchants alike.

§2-306 cmt. 2. The seller in a requirements contract is to be protected against increases in demand that exceed the bounds of good faith.

o Note: a requirement contract buyer may reduce its level of purchases to zero as long as it acts in good faith.

Warranties

§2-314. Implied warranty of merchantability. §2-314(2). If the seller is a merchant, the implied warranty of merchantability is based on

one of two tests:o Whether the goods would pass without objection in the trade.o Whether the goods are fit for the ordinary purposes for which such goods are

used. §2-315. Implied warranty of fitness for a particular purpose. §2-313. A seller may provide the basis for an express warranty in several ways: making a

representation about the goods, giving a description, or displaying a sample or model. §2-313 cmt. 3. Once a seller has made an affirmation of fact about the goods, no

particular reliance on such statements need be shown in order to weave them into the fabric of the agreement. Rather, any fact which is to take such affirmations, once made, out of the agreement requires clear affirmative proof.

§2-316. A disclaimer of an express warranty is inoperative if the disclaimer cannot be construed as “consistent” with terms in the contract that would create the express warranty.

§2-316(2).o To disclaim the implied warranty of merchantability, the language must mention

merchantability and in the case of a writing must be conspicuous.o To disclaim the implied warranty of fitness for a particular purpose, there must be

a conspicuous writing and will be effective if it states that there are no warranties which extend beyond the description on the face hereof.

§2-316(3). “As Is” Disclaimer. No conspicuous writing requirement for implied warranties, although it should be implied to carry out the section’s purpose of avoiding surprise to buyers.

DEFENSES TO ENFORCEMENT

Bargaining Misconduct (avoiding enforcement)

Second §174. A contract is void if made under actual physical compulsion, though coercion involving a threat of physical harm may also be deemed to result in ineffectual assent.

Second §175. Three elements of economic duress.o Cmt. b. Reasonable alternatives include: availability of legal action if that course

of action is viable, alternative sources of goods, services, or funds when there is a threat to withhold such things, and toleration if the threat is minor.

o Cmt. c. The threat must substantially contribute to the manifestation of assent. Second §176. While threats to engage in litigation or to refuse to honor a contractual

obligation are not per se improper or illegal, such threats may be improper if the circumstances show that the threat was made in bad faith.

Second §177(1). Undue influence.

Misrepresentation and Nondisclosure (avoiding enforcement)

Second §164(1). A contract is voidable if a party’s manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying.

o Note: a party may rescind a contract for a material misrepresentation even if the misrepresentation was not made with fraudulent intent.

Second §162(1)b and c. Definition of “fraudulent.” Second §162(2) cmt. c. A contract may be subject to rescission because of an innocent

but material misrepresentation. Second §168(1). Definition of “opinion.” Second §159 cmt. d. a statement of opinion amounts to a misrepresentation of fact if the

person giving the opinion misrepresented his state of mind, i.e. stated that he held a certain opinion when in fact he did not.

Second §169. A statement of opinion may also be actionable if the one giving the opinion:

o 1. Stands in a relationship of trust or confidence to the recipient.o 2. Is an expert on matters covered by the opinion.o 3. Renders the opinion to one who, because of age or other factors, is peculiarly

susceptible to misrepresentation. Second §160. Fraudulent Concealment. A cover up in both a literal figurative sense.

o E.g. buyer puts a rug over floor termite damage. Second §161. A failure to disclose a known material fact may justify rescission of a

contract. Some states hold that a seller of goods has a duty to disclose dangerous conditions and material facts unknown to the buyer and not reasonably discoverable.

Second §161(d). Fiduciary relationships put a greater duty between two contracting parties.

o Fiduciary relationship examples: lawyer and client, trustee and beneficiary, etc. Second §173. Where a fiduciary relationship exists, the terms of the transaction must be

fair and must be fully explained to the other party.

Unconscionability (avoiding enforcement)

Second §208. Definition of “unconscionability.” Excessive price may b a basis of unconscionability. Unconscionability must be judged as of the time that the contract is made, not on developments thereafter.

Public Policy (avoiding enforcement)

Second §179. Categories of contracts that may be unenforceable on grounds of public policy.

Second §179 cmt. b. The declaration of public policy has now become largely the province of legislators rather than judges.

Second §184. A court’s discretion to reduce a covenant should be exercised only when there is no evidence of overreaching or bad faith by the promisee.

Second §188. Restraints that are ancillary to a valid transaction.o Cmt. f and g. a covenant related to partnership or sale of business contracts will

not be scrutinized as strictly or closely as a covenant related to employment because employees are usually at a greater bargaining disadvantage and need more court protection.

Second §191. A contract affecting the custody of a child is unenforceable on grounds of public policy unless it is consistent with the “best interests of the child.”

Second §178 and 197. Factors need to be weighed before enforcement of a contract is denied or restitutionary relief is refused on public policy grounds, including assessing the nature of the public policy involved, degree of resulting forfeiture, and whether denial of relief would further the public policy.

NONPERFORMANCE AND CONSEQUENCES

Mistake

Second §154b. Conscious ignorance. Second §157. Negates any requirement that the mistaken party be non-negligent,

requiring only that its conduct not fall below the level of good faith and fair dealing. Second §153. Where a mistake of one party at the time a contract was made as to a basic

assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake and

o 1. The effect of the mistake is such that enforcement of the contract would be unconscionable, or

o 2. The other party had reason to know of the mistake or his fault caused the mistake.

Impossibility

Second §262,263. When a person or thing necessary for performance of the agreement dies or is incapacitated, is destroyed or damaged, the duty of performance is accordingly excused.

o Note: usually used to apply to destruction of unique goods.

Second §264. Impossibility may be caused by prohibition of performance by governmental action.

§2-613. Traditional impossibility doctrine.

Impracticability

Second §261. Doctrine of impracticability.o 1. The event made the performance impracticable.o 2. The nonoccurrence of the event was a basic assumption on which the contract

was made.o 3. The impracticability resulted without the fault of the party seeking to be

excused.o 4. The party has not agreed, either expressly or impliedly, to perform in spite of

impracticability that would otherwise justify nonperformance. Second §262 (person) and §263 (thing). If a particular person or thing is necessary for

performance, the death or incapacity of the person, or the destruction of the thing, will excuse performance.

Second §212. A defense such as mistake, impracticability or frustration of purpose should be decided by the court as a question of law, rather than being submitted to a jury for a finding of fact.

Second §264. Compliance with foreign or domestic governmental regulation or order is a basis for excuse under the doctrine of impracticability.

§2-615. Compliance in good faith with any applicable foreign or domestic governmental regulation or order may be a basis for relief.

o Note: addressed excuse of performance by a seller on ground of impracticability, but does not mention relief for a buyer.

Frustration

Second §288. Doctrine of frustration of purpose.

Modification

Second §89. Exceptions to the requirement of new consideration for contract modification.

§2-209(1). Modification needs no consideration to be binding. Parties regularly modify agreements without having new consideration on both sides.

o Note: a party agreeing to an assertedly coerced modification has a good faith duty to make plain that it is acting under protest, so that the other party will not be deceived as to its intention eventually to resist enforcement or seek redress.

§2-209 cmt. 2. The obligation of good faith serves as a bar to extortion of a modifying agreement without legitimate commercial reason.

o Note: even where circumstances do justify asking for a modification, it is nevertheless bad faith conduct to attempt to coerce one, by threatening a breach.

Express Conditions

Second §224. Definition of a condition. Second §227. A term or event is not an express condition. Whether a term is an express

condition depends on the intent of the parties, but such a finding requires clear, unambiguous language.

Second §225. Until the conditioning event does occur, the duty does not arise. At the point when it cannot occur, the obligor is discharged from its performance obligations under the contract.

o Note: a written notice required by a contract would be ineffective unless actually received within the stated time.

Second §237 cmt. d. General rule of strict enforcement of express conditions. Rejects the application of a substantial performance qualification to the rule.

Second §84(1). A waiver is effective without either consideration or reliance, but only if the condition waived was not either a material part of the performance that the obligor was to receive in exchange or a material part of the risk assumed.

Second §229 cmt. b. Definition of forfeiture.o Note: not every loss or forfeiture will provide grounds to justify excuse of

nonoccurrence of an express condition.

Material Breach

First and Second §275. List of factors used in deciding whether a breach is material. Second §237. Doctrine of constructive conditions. An uncured material breach by one

party is in effect the nonoccurrence of a constructive condition to the other party’s duty to render any performance not yet due. Performance of that party may be suspended until the breach is cured.

Second §241(e) cmt. f. A willful breach does not automatically bar recovery, but the motive of the breaching party is a factor to be considered in determining whether performance was substantial.

Second §242. When a material breach becomes total, it has the effect of discharging the other party’s remaining duties of performance and permitting that party to proceed immediately to pursue a claim for damages from total breach.

Second §240. Doctrine of Divisibility. Two requirements must be met for a contract to be divisible: (1) it must be possible to apportion the performances of the parties into corresponding pairs of part performances, and (2) it must be proper to treat these pairs of part performances as agreed equivalents.

Second § 226 cmt. a, b. Conditions are divided into three categories: express conditions, implied-in-fact conditions, and constructive conditions.

Second § 234.o (1). Performances that can be rendered at the same time are due simultaneously.o (2). If performances cannot be rendered at the same time, the performance

requiring the longer period of time must be rendered before the performance requiring the shorter period of time will be due.

Note: construction contracts and employment contracts are ordinarily construed as requiring performance of the work to be completed before

payment is due. Usually these contracts call for payment at stated intervals as work is completed.

Second §242. Definition of total breach. Second §243(1). A total breach relieves or discharges the non-breaching party from his

duties under the contract. After a total breach the non-breaching party is justified in refusing to perform his obligations and may even enter into alternative contracts.

Second §243(4). After a total breach, the injured party is entitled to recover not only actual damages accrued as a result of the breach but also any future damages that will reasonably flow from the breach; a partial breach produces a right to damages only for the actual harm that has resulted to date, not for future harm.

Second §242 cmt. d. Stock phrases like “time is of the essence” in the contract will not necessarily mean that an delay in performance must be deemed material; such phrases are to be considered along with other circumstances. However, parties may make performance by a stated date a condition of their agreement, in which case delay beyond that date will result in discharge.

§2-507. Tender of delivery is a condition to buyer’s duty to accept and pay for goods. §2-511. Tender of payment is a condition to seller’s duty to deliver.

Anticipatory Repudiation

Second §253(1). Doctrine of anticipatory repudiation. Second §250 cmt. b. A manifestation of intent not to perform must be definite and

unequivocal to constitute an anticipatory breach. Mere doubtful and indefinite statements that performance may or may not take place will not be so regarded.

Second §250(b). Conduct that renders the obligor unable or apparently unable to perform may account to a repudiation. For mere conduct to constitute anticipatory repudiation, it must indicate that performance is a practical impossibility.

Second §252 cmt. a. Financial difficulty that might impair performance, even to the level of insolvency, does not constitute an anticipatory repudiation.

Second §250 cmt. c. If a party files a petition in bankruptcy, federal law determines the effect of the bankruptcy on the rights of the other party to the contract.

Second §256(1). A party who commits anticipatory repudiation may change her mind and retract the repudiation so long as the other party has not relied to his detriment on the repudiation or notified the repudiating party that he is treating the repudiation as final.

Second §251 cmt. d. A demand for assurances must be made in good faith. The demand need not be in writing. Although a written demand is usually preferable to an oral one, if time is of particular importance the additional time required for a written demand might necessitate an oral one.

§2-610. Doctrine of anticipatory repudiation. §2-609. A party who has reasonable grounds for insecurity can demand adequate

assurance of due performance from the other party. Failure to give assurance constitutes anticipatory repudiation of the contract.

o Note: the UCC requires the assurance to be “in writing”, although courts differ over the interpretation of this.

§2-609 cmt. 4. An adequate assurance may range from a mere verbal guarantee to a posting of a bond, depending on the circumstances.

§2-609(4). After a justified demand for adequate assurance, the demanding party must wait a reasonable time not to exceed 30 days.

DAMAGES

Expectation Damages

Second §346(2). The party aggrieved by that nonperformance will ordinarily be entitled to some remedy, even if only nominal damages.

Second §344. Three Principals in Awarding Damages.o 1. The plaintiff has in reliance on the promise of the defendant conferred some

value on the defendant.o 2. The plaintiff has in reliance on the promise of the defendant changed his

position.o 3. Without insisting on reliance by the promisee or enrichment of the promisor,

we may seek to give the promisee the value of the expectancy which the promise created.

Second §347. For the court in a breach-of-contract suit to attempt to compute and award damages so as to give plaintiff her expectation of gain under the contract: the benefit of the bargain that plaintiff would have realized had the agreement been fully performed.

o Formula for computing damages: damages = loss in value + other loss – cost avoided – loss avoided.

Second §262. In a personal service contract, the death or incapacity of a person necessary for performance may excuse nonperformance.

Second §261 cmt. d. Performance may be impracticable because it will involve undue risk of injury to a person.

Second §348(2). If the loss in value to the injured party is not proved with sufficient certainty, damages may be measured by either (1) the diminution in market value or (2) the reasonable cost of completing performance or of remedying the defects if that cost is not clearly disproportionate to the probable loss in value to him.

Second §351. Foreseeability of the loss, as per Hadley v. Baxendale. Recoverability of consequential damages depends on whether such damages were in the contemplation of the parties at the time they made the contract.

o Note: only the type of loss needs to be foreseeable, not the manner in which the loss occurs.

o Note: the focus of the foreseeability is on the breaching party.o Note: the standard for foreseeability is at least partially objective.o Note: the loss must be foreseeable as a probable result of the breach.

§2-708(1). Buyer’s damages for breach of a contract to buy or sell goods measured by the difference between the market price and contract price of the goods. The seller’s damages for non-acceptance or repudiation is the difference between the market price at the time and place for tender and the unpaid contract price together with incidental damages.

§2-713. The measure of the buyer’s damages for non-delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with any incidental damages.

§2-723. Proof of market price is flexible.

§2-706. Seller’s resale. Allows the seller who complies with its provisions to recover from a breaching buyer damages measured by the difference between the contract price and seller’s resale price.

§2-712(1). Allows the buyer to cover her loss by purchasing substitute goods and to measure her damages by the difference between the cost of those goods and contract price.

Mitigation

Second §350(1). Damages are not recoverable if they can be avoided without undue risk, burden or humiliation.

§2-715(2)(a). A buyer is not entitled to consequential damages unless loss could not have been reasonably prevented by making cover or a substitute contract.

Non-Recoverable Damages

Second §353. Two types of cases in which damages for emotional distress may be recovered in an action for bodily harm:

o 1. The breach of contract also causes bodily harm.o 2. Emotional distress is a particularly likely consequence of the breach.

Second §355. Punitive damages are not recoverable for a breach of contract unless the conduct constituting the breach is also a tort for which punitive damages are recoverable.

§2A-108(4). Explicitly authorizes the award of attorney fees for unconscionable terms or conduct in inducing or enforcing consumer leases only.

Buyer Remedies under the UCC

§2-712. Cover measure of damages, equal to the difference between the cover price and the contract price, plus incidental and consequential damages.

§2-713. If the buyer has elected to not purchase substitute goods as cover, the buyer may recover damages equal to the difference between market price at the time when the buyer learned of the breach and the contract price.

o “Learned of the breach.” May mean (1) the date the buyer learns of the repudiation, (2) the date when the buyer learns of the repudiation plus a commercially reasonable time thereafter, or (3) the date when actual performance by the seller is due under the contract.

§2-714. Buyer may recover those damages that result in the ordinary course of events from the seller’s breach, equal to the difference at the time and place of acceptance between the value of the goods accepted and the value they would have had if they had been as warranted.

§2-716. Specific performance. May be decreed in the buyer’s favor where the goods are unique or in other proper circumstances.

§2-715. Buyer is entitled to recover both incidental and consequential damages.

Seller Remedies under the UCC

§2-706. Allows a seller to resell goods after a breach by the buyer and recover the difference between the resale price and the contract price.

§2-708(1). Damages formula: traditional contract price minus market value. §2-708(2). Lost profits may be awarded to sellers if the market measure of damages is

inadequate to put the seller in as good a position as performance would have done.o Lost Volume Seller.

§2-709. Seller may recover the price of the goods from the buyer as damages under three situations: (1) if the buyer has accepted the goods, (2) the goods are damaged after the risk of loss has passed to the buyer, or (3) the goods are unable to be resold with reasonable effort.

§2-710. Incidental and consequential damages.

Reliance Damages

Second §349. Reliance damages. Recovery should be offset by any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the contract been performed.

Second §352. The doctrines that normally apply to limit recovery of expectation damages—foreseeability, causation, certainty and mitigation—should also apply to recovery of reliance damages.

Second §90 ill. 11. Award of specific performance in promissory estoppel cases. Second §373. Non-breaching party may elect recovery of restitution rather than

expectation damages for breach. Second §374. A breaching party may in some cases be entitled to restitution. Second §375. Restitution when contract is unenforceable because of the statue of fraud. Second §376. Restitution when contract is voidable because of lack of capacity, mistake,

misrepresentation, duress, undue influence, or breach of fiduciary duty. Second §377. Restitution when contract is discharged due to impracticability, frustration

of purpose, or failure of condition.

Specific Performance

Second §362 and cmt. b. Specific performance will be denied when matters are left out of an agreement.

Second §360 and cmt. e. Specific performance is popular with land suits. Second §364. Factors in deciding whether specific relief should be available. Second §367. A promise to render personal services will not be specifically enforced. Second §356. Two part test for liquidated damages clauses:

o 1. If the amount fixed is reasonable in light of the anticipated or actual loss.o 2. Difficulties of proof of loss.

§2-716. Specific performance may be decreed for a buyer where the goods are unique or in other proper circumstances.

§2-709. Allows goods to be forced on the buyer and the price obtained when the goods are not reasonably subject to resale to others.

§2-718(1) and cmt. 1. A term fixing an unreasonably small amount of damages might be unenforceable if deemed unconscionable.