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End of Semester Review. Announcements office hours—Tuesday, May 9, 11am-3pm Wednesday, May 10, revised hours--1pm-4pm Part 1: Structured review Part 2: Q & A. Today is an excellent day to review contracts. Typical Executory K. prelim. executory negotiations period

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end of semester review
End of Semester Review

Announcements

office hours—Tuesday, May 9, 11am-3pm Wednesday, May 10, revised hours--1pm-4pm

Part 1: Structured review

Part 2: Q & A

End of Semester Review

typical executory k
Typical Executory K

prelim. executory

negotiations period

-----------------|-------------------------|---------------------- t

K formation performance due

focal point during the second half of this semester: figuring out what the rights and duties of the parties are to ascertain whether there has been a breach of a duty and what the appropriate remedy should be

End of Semester Review

slide4
A sues B
  • K
  • A asserts that B breached a duty owed under K
    • duty may be
      • express term, subject to interpretation and parol evidence rule
      • implied term
      • result of a modification
  • possible responses by B
    • I did not owe this duty because _________
    • I may avoid or disaffirm the K because ____________
    • even if the K existed and the duty would otherwise be owed, I was justified in not performing because of ________________

End of Semester Review

slide5
Duty
  • express term
    • K interpretation
    • parol evidence rule
  • implied term—default rules/gap fillers
  • later—we’ll add modification

End of Semester Review

subjective v objective redux
subjectivist approach: Raffles v. Wichelhaus

K for the sale of cotton to arrive “ex Peerless from Bombay”

October Peerless—buyer’s understanding

December Peerless—seller’s understanding

Subjective v. objective (redux)

End of Semester Review

restatement 20 effect of misunderstanding
Restatement §20. Effect of Misunderstanding

(1) There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations and

(a) neither party knows or has reason to know the meaning attached by the other; or

(b) each party knows or each party has reason to know the meaning attached by the

other.

(2) The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if

(a) that party does not know of any different meaning attached by the other, and the other knows the meaning attached by the first party; or

(b) that party has no reason to know of any different meaning attached by the other, and the other has reason to know the meaning attached by the first party.

End of Semester Review

201 whose meaning prevails
§201. Whose Meaning Prevails

(1) Where the parties have attached the same meaning to a promise or agreement or a term thereof, it is interpreted in accordance with that meaning.

(2) Where the parties have attached different meanings to a promise or agreement or a term thereof, it is interpreted in accordance with the meaning attached by one of them if at the time the agreement was made

(a) that party did not know of any different meaning attached by the other, and the other knew the meaning attached by the first party; or

(b) that party had no reason to know of any different meaning attached by the other, and the other had reason to know the meaning attached by the first party.

(3) Except as stated in this Section, neither party is bound by the meaning attached by the other, even though the result may be a failure of mutual assent.

End of Semester Review

joyner v adams

Joyner v. Adams

North Carolina Court of Appeals

87 N.C. App. 570, 361 S.E.2d 902 (1987)

End of Semester Review

frigaliment importing co v b n s international sales corp

Frigaliment Importing Co. v. B.N.S. International Sales Corp.

United States District Court

190 F. Supp. 116 (S.D.N.Y. 1960)

End of Semester Review

what does the court look at
What does the court look at?
  • term itself
  • other provisions in K
  • negotiations/communications
  • course of performance
  • course of dealing
  • trade usage

End of Semester Review

c j fertilizer v allied mutual insurance co

C & J Fertilizer v. Allied Mutual Insurance Co.

Supreme Court of Iowa

227 N.W.2d 169 (1975)

End of Semester Review

reasonable expectations doctrine
Reasonable Expectations Doctrine
  • majority rule
  • narrow and broader versions
    • narrow—requires ambiguity
    • broad

Restatement 211? probably too limiting, favoring too much the “stronger” party; probably not followed by many courts

End of Semester Review

canons of interpretation
canons of interpretation
  • contra proferentum
  • ejusdem generis—e.g., K to sell farm with “cattle, hogs, and other animals”—would this include the prior owner’s family dog? sheep?
  • expressio unius exclusio alterius—e.g., K to sell farm with “cattle and hogs”—family dog? sheep?
  • n.4, pp. 358-59

End of Semester Review

thompson v libby

Thompson v. Libby

Minnesota Supreme Court

34 Minn. 374, 26 N.W. 1 (1885)

End of Semester Review

1 what is the parol evidence rule
1. What is the parol evidence rule?

See also Restatement §213; UCC 2-202

End of Semester Review

2 what is parol evidence
2. What is parol evidence?

End of Semester Review

visual
Visual

PER may be

likened to a

semi-permeable

membrane that

surrounds an

executed writing

Executed

Writing

Extrinsic

evidence

Extrinsic

evidence

Extrinsic

evidence

End of Semester Review

different visual
Different visual

prelim. executory

negotiations period

-------------------|-------------------------------------|------------------- t

K formation performance due

prior contemp. oral subsequent

oral or oral or

written contemp. written

written

PER applies

End of Semester Review

slide21

When the parties have reduced their understanding to a writing, the court must decide what the parties intended by the writing.--not integrated--integrated

End of Semester Review

slide22

If integrated, and not dealing with contradictory parol evidence, the question now turns to the degree of integration.--Traditional 4 corners approach--Modern contextual approach

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slide23
Integration--turns on the intention of the parties with regard to the writing they execute.
  • 4 corners rule, p. 385
  • Under this rule, where do you look to determine the intention of the parties?
  • Compare with the modern, contextual approach

End of Semester Review

4 5 application
4 & 5--application
  • a. Traditional, 4 corners approach
  • b. Modern, contextual approach

End of Semester Review

modern contextual approach
modern, contextual approach
  • as with the 4 corners approach, integration depends on the intention of the parties
  • under this rule, where do you look to determine the intention of the parties?
  • under this approach, a writing cannot establish its own completeness
  • court looks at the writing and the offered parol evidence and then makes a determination re: intention of the parties

End of Semester Review

4 corners v modern contextual
4 corners v. modern contextual
  • with each, court asks—when the parties have reduced their agreement to a signed writing, what inference are we to draw for two matters: (1) the finality of the terms contained therein; (2) the completeness of the writing—does it embody the complete agreement of the parties so that parol evidence is inadmissible

End of Semester Review

levels of integration
Levels of integration
  • complete integration
  • partial integration
  • not integrated at all

End of Semester Review

merger or integration clause
Merger or integration clause
  • e.g., Entire Agreement. This document constitutes the entire agreement of the parties and there are no representations, warranties, or agreements other than those contained in this document.

End of Semester Review

per 1 parties execute a writing 2 one or both attempt to introduce extrinsic evidence
interpret/explain

admissibility turns on ambiguity

difference in jurisdictional approach

add to/vary

admissibility turns on integration

(1) is the writing integrated? [are the terms in the writing final?]

(2) how integrated is it? [is the writing complete/exclusive?]

PER(1) parties execute a writing(2) one or both attempt to introduce extrinsic evidence

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slide30
add to/vary
  • admissibility turns on integration
  • (1) is the writing integrated? [are the terms in the writing final?] If no, then writing doesn’t bar extrinsic evidence; if yes, then contradictory evidence is excluded; if dealing with evidence of a consistent additional term, must ask the second integration question re: degree
  • (2) how integrated is it? [is the writing complete/exclusive?]

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slide31
add to/vary
  • (2) how integrated is it? [is the writing complete/exclusive?]

4 corners—does the writing appear complete on its face; merger/integration clause nearly dispositive

modern contextual—factors—completeness of writing; merger/integration clause; transactional setting; parties

End of Semester Review

exceptions
Exceptions
  • 1. Collateral agreement. Even a completely integrated writing does not exclude a collateral agreement. Key points are subject matter + consideration.
  • 2. Evidence to show no valid agreement. Example--one party wants to introduce evidence that the writing was produced as a joke. Admissible because it is offered to show that there was no valid agreement. It doesn't mean that you will win.
  • 3. Evidence that would allow one party to avoid the contract. Evidence to establish any of the policing doctrines from the previous chapter is admissible--fraud, misrepresentation, duress, etc.
  • 4. Mistake, fraudulent misrepresentation. Although mistake under certain circumstances allows a party to avoid the contract, mistake here refers to where the parties, by mistake, fail to include a term in the contract. Evidence is admissible which may lead a court to reform the contract to reflect the intent of the parties.
  • 5. Oral condition precedent. Written K might be subject to oral condition precedent not contained in writing.

End of Semester Review

slide33
1. Collateral agreement. Even a completely integrated writing does not exclude a collateral agreement. Key points are subject matter + consideration.

End of Semester Review

slide34
2. Evidence to show no valid agreement. Example--one party wants to introduce evidence that the writing was produced as a joke. Admissible because it is offered to show that there was no valid agreement. It doesn't mean that you will win.

End of Semester Review

slide35
3. Evidence that would allow one party to avoid the contract. Evidence to establish any of the policing doctrines from the previous chapter is admissible--fraud, misrepresentation, duress, etc.

End of Semester Review

slide36
4. Mistake, fraudulent misrepresentation. Although mistake under certain circumstances allows a party to avoid the contract, mistake here refers to where the parties, by mistake, fail to include a term in the contract. Evidence is admissible which may lead a court to reform the contract to reflect the intent of the parties.

End of Semester Review

slide37
5. Oral condition precedent. Written K might be subject to oral condition precedent not contained in writing.

End of Semester Review

taylor v state farm

Taylor v. State Farm

Supreme Court of Arizona

175 Ariz. 148, 854 P.2d 1134 (1993)

End of Semester Review

levels of integration39
Levels of integration
  • not integrated at all
  • partial integration
  • complete integration

End of Semester Review

merger or integration clause40
Merger or integration clause
  • e.g., Entire Agreement. This document constitutes the entire agreement of the parties and there are no representations, warranties, or agreements other than those contained in this document.

End of Semester Review

exceptions41
Exceptions

End of Semester Review

taylor v state farm42

Taylor v. State Farm

Supreme Court of Arizona

175 Ariz. 148, 854 P.2d 1134 (1993)

End of Semester Review

ambiguity
ambiguity
  • 4 corners plain meaning approach

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ambiguity44
ambiguity

modern contextual approach

  • is the express language reasonably susceptible to the meaning that the party is trying to establish?

End of Semester Review

nanakuli paving rock co v shell oil co

Nanakuli Paving & Rock Co. v. Shell Oil Co.

United States Court of Appeals

664 F.2d 772 (9th Cir. 1981)

End of Semester Review

express k term
express K term
  • “Shell’s Posted Price at time of delivery.”

End of Semester Review

slide47
express terms
  • course of performance
  • course of dealing
  • trade usage

End of Semester Review

slide48
what is a waiver?

End of Semester Review

wood v lucy lady duff gordon new york court of appeals 222 n y 88 118 n e 214 1917

Wood v. Lucy, Lady Duff-GordonNew York Court of Appeals222 N.Y. 88, 118 N.E. 214 (1917)

End of Semester Review

leibel v raynor manufacturing co kentucky court of appeals 571 s w 2d 640 1978

Leibel v. Raynor Manufacturing Co.Kentucky Court of Appeals571 S.W.2d 640 (1978)

End of Semester Review

ucc article 2
UCC Article 2
  • sale of goods?

End of Semester Review

2 309 absence of specific time provisions notice of termination
§ 2-309. Absence of Specific Time Provisions; Notice of Termination.
  • (1) The time for shipment or delivery or any other action under a contract if not provided in this Article or agreed upon shall be a reasonable time.
  • (2) Where the contract provides for successive performances but is indefinite in duration it is valid for a reasonable time but unless otherwise agreed may be terminated at any time by either party.
  • (3) Termination of a contract by one party except on the happening of an agreed event requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable.

End of Semester Review

slide53
Another common K scenario in which the court might imply terms: percentage leases

End of Semester Review

slide54

Locke v. Warner Bros., Inc.California District Court of Appeal57 Cal. App. 4th 354, 66 Cal. Rptr. 2d 921 (1997), review denied (Nov. 19, 1997)

End of Semester Review

discretionary rights
discretionary rights
  • “satisfaction” clauses

End of Semester Review

elective right
elective right
  • at least in CA, a right that is elective is one that is thought to be an absolute right and not subject to judicial second guessing
  • whether or not something is an elective or discretionary right is subject to interpretation
  • with what we’ve learned about conditions, we should know that a court will, if possible, construe or interpret the right in question as a discretionary right

End of Semester Review

empire gas corp v american bakeries co united states court of appeals 840 f 2d 1333 7th cir 1988

Empire Gas Corp. v. American Bakeries Co.United States Court of Appeals840 F.2d 1333 (7th Cir. 1988)

End of Semester Review

2 306 output requirements and exclusive dealings
§ 2-306. Output, Requirements and Exclusive Dealings.

(1) A term which measures the quantity by the output of the seller or the requirements of the buyermeans such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded.

End of Semester Review

donahue v federal express corp superior court of pennsylvania 753 a 2d 238 2000

Donahue v. Federal Express Corp.Superior Court of Pennsylvania753 A.2d 238 (2000)

End of Semester Review

2 316 exclusion or modification of warranties
§ 2-316. Exclusion or Modification of Warranties.

(1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this Article on parol or extrinsic evidence (Section 2-202) negation or limitation is inoperative to the extent that such construction is unreasonable.

(2) Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that "There are no warranties which extend beyond the description on the face hereof."

(3) Notwithstanding subsection (2)

(a) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like "as is", "with all faults" or other language which in common understanding calls the buyer's attention to the exclusion of warranties and makes plain that there is no implied warranty; and

(b) when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; and

(c) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.

End of Semester Review

notes 4 5 disclaimers of express and implied warranties
Notes 4 & 5—disclaimers of express and implied warranties
  • 2-316(1)—what if there is a representation made during negotiations that would be treated as an express warranty, but the parties later execute a writing that disclaims any representations or warranties?

End of Semester Review

what s the current approach
What's the current approach?
  • Any K entered into by a minor is voidable at their election.
  • When may this election be exercised?

End of Semester Review

slide66
Before 18. At 18. Within a reasonable period after 18. Or else it will be considered ratified. Also, actions taken after 18 may ratify the contract, such as making payments after 18.
  • Upon disaffirmance, what happens?

End of Semester Review

traditional rule
Traditional rule:
  • restoration -------
  • minor--------------------------------------adult
  • -------full restitution
  • Minor not liable for anything they have used or for any depreciation in value.
  • Exceptions?

End of Semester Review

exceptions68
Exceptions
  • 1. Misrepresentation of age by minor. Majority approach--minor may disaffirm but is liable for anything that cannot be restored; minority approach--K can't be disaffirmed
  • 2. Necessaries--Majority approach--minor may disaffirm K but is liable in restitution for the reasonable value of what has been "consumed" and cannot be restored. Some courts say that a contract for necessaries cannot be disaffirmed (BUT . . .)
  • 3. Minor as plaintiff (cash v. credit)

End of Semester Review

slide69

Hauer v. Union State Bank of WautomaCourt of Appeals of Wisconsin912 Wis. 2d 576, 532 N.W.2d 456 (1995)

End of Semester Review

slide70
Aside from the status that is protected (age versus mental capacity), what is the major difference between the two doctrines?
  • What justifies this difference?

End of Semester Review

restatement 15
Restatement 15
  • (1)(a) cognitive
  • (1)(b) volitional
  • what are the key differences between the requirements to establish mental incapacity under (1)(a) versus (1)(b)?

End of Semester Review

totem marine barge tug v alyeska pipeline service co supreme court of alaska 584 p 2d 15 1978

Totem Marine Barge & Tug v. Alyeska Pipeline Service Co.Supreme Court of Alaska584 P.2d 15 (1978)

End of Semester Review

duress elements
Duress elements

End of Semester Review

element 1
element 1
  • When is a threat wrongful or improper?

End of Semester Review

element 2
element 2
  • How do you decide if a person had no reasonable alternative than to say yes?

End of Semester Review

element 3
element 3
  • How do you establish that the wrongful threat induced assent?

End of Semester Review

quasi element in some jurisdictions
quasi-element in some jurisdictions
  • protest by threatened party

End of Semester Review

slide78

Odorizzi v. Bloomfield School DistrictCalifornia District Court of Appeals246 Cal. App. 2d 123, 54 Cal. Rptr. 533 (1966)

End of Semester Review

undue influence elements
Undue influence elements

End of Semester Review

factors of overpersuasion
Factors of overpersuasion
  • 1. discussion of the transaction at an unusual or inappropriate time;
  • 2. consummation of the transaction in an unusual place;
  • 3. insistent demand that business be finished at once;
  • 4. extreme emphasis on untoward consequences of delay;
  • 5. the use of multiple persuaders by the dominant side against a single servient party;
  • 6. absence of third party advisers to the servient party;
  • 7. statements that there is no time to consult financial advisers or attorneys

End of Semester Review

misrepresentation
Misrepresentation
  • Restatement 164(1)--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, the contract is voidable by the recipient.
  • 164(2)—deals with third party misrepresentation
  • Elements?

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slide83
1. misrepresentation
  • 2. fraudulent or material
  • 3. justifiable reliance
  • 4. which induces assent

End of Semester Review

slide84
(1) misrepresentation
  • an assertion of fact that is false
  • opinion—see §168 & 169
  • nondisclosure—see §161

End of Semester Review

slide85
keep in mind difference between a tort action and a K action to rescind the K or in special circumstances reform a K

End of Semester Review

hill v jones arizona court of appeals 151 ariz 81 725 p 2d 1115 1986 review denied oct 1 1986

Hill v. JonesArizona Court of Appeals151 Ariz. 81, 725 P.2d 1115 (1986), review denied (Oct. 1, 1986)

End of Semester Review

nondisclosure
Nondisclosure

End of Semester Review

williams v walker thomas furniture co united states court of appeals 350 f 2d 445 d c cir 1965

Williams v. Walker-Thomas Furniture Co.United States Court of Appeals350 F.2d 445 (D.C. Cir. 1965)

End of Semester Review

unconscionability elements
Unconscionability elements
  • procedural—absence of meaningful choice on the part of one of the parties
  • substantive—on terms which are unreasonably favorable to the other party

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slide90
Should courts intervene in situations such as this?
  • laissez-faire versus regulation
  • institutional competency (court, legislature, administrative agency)

End of Semester Review

valley medical specialists v farber supreme court of arizona 194 ariz 363 982 p 2d 1277 1999

Valley Medical Specialists v. FarberSupreme Court of Arizona194 Ariz. 363, 982 P.2d 1277 (1999)

End of Semester Review

slide92
policy against restraints on trade/competition
  • restrictive covenants that are considered ancillary are restrictions on employees not to compete with the employer, restrictions upon the seller accompanying the sale of a business, and restrictions upon a partner from competing with the partnership

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slide93
Duration?
  • Geographic scope?
  • Activities proscribed or prohibited?

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remedy
Remedy
  • If a restrictive covenant is unreasonable, are there different approaches that courts take?

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slide95
Traditional
  • Blue pencil (casebook authors call this the traditional severance rule)
  • Reform/rewrite (my designation; casebook authors call this the modern severance rule)

End of Semester Review

slide96

Borelli v. BrusseauCalifornia Court of Appeal12 Cal. App. 4th 647, 16 Cal Rptr. 2d 16 (1993), review denied (Apr. 1, 1993)

End of Semester Review

illegality and public policy
Illegality and public policy
  • covenants not to compete
  • exculpatory provisions
  • K to do an illegal act
  • K, though legal, procured illegally
  • K, though legal, performed illegally
  • In the last 3, what should a court do if one party tries to enforce the K? The following examples are meant to be illustrative and in no way exhaust the possible permutations.

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licensing statutes
Licensing statutes
  • result may turn on specific language in the licensing statute—see note 1, p. 618
  • in absence of the above, result typically turns on distinction between purpose of the statute—regulation for public health/safety versus revenue-raising measures

End of Semester Review

avoiding enforcement
Avoiding enforcement
  • minority
  • mental incapacity
  • duress
  • undue influence
  • misrepresentation and nondisclosure
  • unconscionability
  • public policy

End of Semester Review

slide100
A sues B
  • K
  • A asserts that B breached a duty owed under K
    • duty may be
      • express term, subject to interpretation and parol evidence rule
      • implied term
      • result of a modification
  • possible responses by B
    • I did not owe this duty because _________
    • I may avoid or disaffirm the K because ____________
    • even if the K existed and the duty would otherwise be owed, I was justified in not performing because of ________________

End of Semester Review

slide101
A sues B
  • K
  • A asserts that B breached a duty owed under K
    • duty may be
      • express term, subject to interpretation and parol evidence rule
      • implied term
      • result of a modification
  • possible responses by B
    • I did not owe this duty because _________
    • I may avoid or disaffirm the K because ____________
    • even if the K existed and the duty would otherwise be owed, I was justified in not performing because of ________________

End of Semester Review

enforceability of modifications
enforceability of modifications
  • after K formation, one or the other or both parties seek a modification of their agreement
  • if after the parties agree on the modification, one party doesn’t perform as required based on the modified K, the issue then is whether the modification is enforceable

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slide103
A sues B
  • K
  • A asserts that B breached a duty owed under K
    • duty may be
      • express term, subject to interpretation and parol evidence rule
      • implied term
      • result of a modification
  • possible responses by B
    • I did not owe this duty because _________
    • I may avoid or disaffirm the K because ____________
    • even if the K existed and the duty would otherwise be owed, I was justified in not performing because of ________________

End of Semester Review

alaska packers association v domenico united states court of appeals 117 f 99 9th cir

Alaska Packers’ Association v. DomenicoUnited States Court of Appeals117 F. 99 (9th Cir.)

End of Semester Review

slide105

Kelsey-Hayes Co. v. Galtaco Redlaw Castings Corp.United States District Court749 F. Supp. 794 (E.D. Mich. 1990)

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slide106
indirect policing—pre-existing duty rule
    • problems because too easy to circumvent
      • hawk, horse, robe
      • rescission, express or implied
  • direct—duress and other policing doctrines that look at bargaining behavior
  • other ways?

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slide107
Restatement approach—see 73 & 89

§ 89. Modification Of Executory Contract

A promise modifying a duty under a contract not fully performed on either side is binding(a) if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made; or(b) to the extent provided by statute; or(c) to the extent that justice requires enforcement in view of material change of position in reliance on the promise.

End of Semester Review

slide108
2-209(1)
    • Roth good faith test
      • Party may in good faith seek a modification when unforeseen economic exigencies existed which would prompt an ordinary merchant to seek a modification in order to avoid a loss on the contract
      • BUT--bad faith to attempt to coerce the other party by threatening breach
      • BUT--this bad faith presumption may be rebutted if the party threatening to not perform did honestly believe that it had a legal defense to the duty of performance.

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slide109
are there other ways to resist an agreed upon modification?
  • if modification not in writing,
    • statute of frauds (where applicable)
    • no-oral-modification clause (if Art. 2 of UCC applies)
      • often in conjunction with a no waiver clause

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slide110
A sues B
  • K
  • A asserts that B breached a duty owed under K
    • duty may be
      • express term, subject to interpretation and parol evidence rule
      • implied term
      • result of a modification
  • possible responses by B
    • I did not owe this duty because _________
    • I may avoid or disaffirm the K because ____________
    • even if the K existed and the duty would otherwise be owed, I was justified in not performing because of ________________

End of Semester Review

brookside farms v mama rizzo s inc united states district court 873 f supp 1029 s d texas 1995

Brookside Farms v. Mama Rizzo’s, Inc.United States District Court873 F. Supp. 1029 (S.D. Texas 1995)

End of Semester Review

2 209 modification rescission and waiver
§ 2-209. Modification, Rescission and Waiver.
  • (1) An agreement modifying a contract within this Article needs no consideration to be binding.
  • (2) A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.
  • (3) The requirements of the statute of frauds section of this Article (Section 2-201) must be satisfied if the contract as modified is within its provisions.
  • (4) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver.
  • (5) A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.

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slide113
(2) A signed agreement which excludes modification or rescission except by a signed writing cannot be otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied by the merchant must be separately signed by the other party.

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slide114
(3) The requirements of the statute of frauds section of this Article (Section 2-201) must be satisfied if the contract as modified is within its provisions.

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slide115
(4) Although an attempt at modification or rescission does not satisfy the requirements of subsection (2) or (3) it can operate as a waiver.
  • (5) A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.

End of Semester Review

problem 8 3
Problem 8-3
  • sale of goods?
  • changed circumstances excusing Waller Bros. from having to perform
  • Modification
    • UCC 2-209(1); good faith
    • Restatement 73 & 89(a) and (c)
    • Duress
    • no-oral-modification clause
      • UCC 2-209(2), (4), (5)
      • common law—generally ineffective

End of Semester Review

note 4 p 703
Note 4, p. 703
  • accord and satisfaction
  • “payment in full” check
  • point of emphasis—amount in question must be unliquidated for a payment in full check to be effective

End of Semester Review

slide118
A sues B
  • K
  • A asserts that B breached a duty owed under K
    • duty may be
      • express term, subject to interpretation and parol evidence rule
      • implied term
      • result of a modification
  • possible responses by B
    • I did not owe this duty because _________
    • I may avoid or disaffirm the K because ____________
    • even if the K existed and the duty would otherwise be owed, I was justified in not performing because of ________________

End of Semester Review

justifications for nonperformance
Justifications for nonperformance
  • chapter 8—justifications covered were mistake, mutual and unilateral; changed circumstances and impossibility, impracticability, and frustration of purpose
  • chapter 10—justifications include material breach by the other party; anticipatory repudiation by the other party; and the operation of express conditions

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typical executory k120
Typical Executory K

prelim. executory

negotiations period breach

-----------------|-------------------------|--------------|------- t

K formation performance due

(1) mutual assent

(2) consideration

End of Semester Review

jacob youngs inc v kent new york court of appeals 230 n y 239 129 n e 889 1921

Jacob & Youngs, Inc. v. KentNew York Court of Appeals230 N.Y. 239, 129 N.E. 889 (1921)

End of Semester Review

cardozo s factors for substantial performance reformulated
Cardozo’s factors for substantial performance, reformulated
  • 1. effect of breach on non-breaching party’s expectations given the purpose of the K
  • 2. excuse for deviation/good faith on part of breaching party
  • 3. forfeiture suffered by breaching party

BUT—willful transgressor cannot utilize this doctrine

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cost to remedy v difference or diminution in value
cost to remedyv.difference or diminution in value
  • Which is the standard remedy in construction cases where there has not been full performance?
  • Does Cardozo apply the standard remedy?

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slide124
If there isn’t substantial performance, even though the non-breaching party’s payment obligation under the contract may not be due, the non-breaching party may owe restitution to the breaching party for the benefit that the non-breaching party received from the breaching party’s performance.

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restitution for the breaching party
restitution for the breaching party
  • hypo—lawnmowing hypo—A agrees to mow B’s lawn; B agrees to pay A $10. A mows half the lawn then runs out of gas. A goes to get gas but then is delayed by one thing after another. Assume that B is justified in hiring someone else to finish mowing the lawn. B pays substitute mower $7 and incurs no other transaction costs.
  • 1. May A recover under the K?
  • 2. If not, is A entitled to any recovery?

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divisibility
divisibility
  • e.g., K for 35 houses; 20 built

End of Semester Review

sackett v spindler california district court of appeal 248 cal app 220 56 cal rptr 435 1967

Sackett v. SpindlerCalifornia District Court of Appeal248 Cal. App. 220, 56 Cal. Rptr. 435 (1967)

End of Semester Review

slide128
A sues B
  • K
  • A asserts that B breached a duty owed under K
    • duty may be
      • express term, subject to interpretation and parol evidence rule
      • implied term
      • result of a modification
  • possible responses by B
    • I did not owe this duty because _________
    • I may avoid or disaffirm the K because ____________
    • even if the K existed and the duty would otherwise be owed, I was justified in not performing because of ________________

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slide129
What is a repudiation?
  • When is a repudiation lawful? Or its corollary—when is a repudiation unlawful?

End of Semester Review

characterizing breach
Characterizing breach
  • total or partial
    • partial and material
    • partial and immaterial
    • total

Why is it important to characterize the severity of one party’s breach of a contract?

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slide131
What are the options of the non-breaching party in the following scenarios?

non-breaching breachparty’s options

    • partial and immaterial
    • partial and material
    • total

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241 circumstances significant in determining whether a failure is material
§ 241. Circumstances Significant In Determining Whether A Failure Is Material

In determining whether a failure to render or to offer performance is material, the following circumstances are significant:

  • (a) the extent to which the injured party will be deprived of the benefit which he reasonably expected;
  • (b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived;
  • (c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture;
  • (d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances;
  • (e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.

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242 circumstances significant in determining when remaining duties are discharged
§ 242. Circumstances Significant In Determining When Remaining Duties Are Discharged

In determining the time after which a party's uncured material failure to render or to offer performance discharges the other party's remaining duties to render performance under the rules stated in §§ 237 and 238, the following circumstances are significant:

  • (a) those stated in § 241;
  • (b) the extent to which it reasonably appears to the injured party that delay may prevent or hinder him in making reasonable substitute arrangements;
  • (c) the extent to which the agreement provides for performance without delay, but a material failure to perform or to offer to perform on a stated day does not of itself discharge the other party's remaining duties unless the circumstances, including the language of the agreement, indicate that performance or an offer to perform by that day is important.

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slide134
we addressed the effect of one party’s breach on the other party’s performance obligations; we focused on 4 concepts:
    • constructive conditions
    • substantial performance
    • material breach
    • total breach

End of Semester Review

truman l flatt sons v schupf appellate court of illinois 271 ill app 3d 983 649 n e 2d 990 1995

Truman L. Flatt & Sons v. SchupfAppellate Court of Illinois271 Ill. App. 3d 983, 649 N.E.2d 990 (1995)

End of Semester Review

typical executory k136
Typical Executory K

prelim. executory anticipatory

negotiations period repudiation

-----------------|---------------------|----|--------------------- t

K formation performance due

(1) mutual assent

(2) consideration

End of Semester Review

hornell brewing co v spry supreme court of new york county 174 misc 2d 451 664 n y s 2d 698 1997

Hornell Brewing Co. v. SprySupreme Court of New York County174 Misc. 2d 451, 664 N.Y.S.2d 698 (1997)

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slide138
(1) anticipatory repudiation
  • (2) its retraction, including what might prevent retraction; and
  • (3) an alternative pathway to get to anticipatory repudiation—if reasonable grounds for insecurity arise, and there is a lawful demand for assurance of performance, failure to provide reasonable assurance may be treated as an anticipatory repudiation

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slide139
A sues B
  • K
  • A asserts that B breached a duty owed under K
    • duty may be
      • express term, subject to interpretation and parol evidence rule
      • implied term
      • result of a modification
  • possible responses by B
    • I did not owe this duty because _________
    • I may avoid or disaffirm the K because ____________
    • even if the K existed and the duty would otherwise be owed, I was justified in not performing because of ________________

End of Semester Review

slide140

Oppenheimer & Co. v. Oppenheim, Appel, Dixon & Co.New York Court of Appeals86 N.Y.2d 685, 660 N.E.2d 415, 636 N.Y.S.2d 734 (1995)

End of Semester Review

restatement 224
Restatement §224

A condition is an event, not certain to occur, which must occur, unless its non-occurrence is excused, before performance under a contract becomes due.

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slide142
What place does substantial performance have with regard to express conditions?
  • Why does it apply to constructive conditions and not to express conditions?

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slide143

J.N.A. Realty Corp. v. Cross Bay Chelsea, Inc.New York Court of Appeals42 N.Y.2d 392, 366 N.E.2d 1313, 397 N.Y.S.2d 958 (1977)

End of Semester Review

express conditions
express conditions
  • express conditions
    • preference against express conditions in cases of doubt/ambiguity
  • nonoccurrence may be excused
    • waiver/estoppel/election
    • prevention/breach
    • to prevent forfeiture

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slide145
why is a typical option to purchase treated differently from an option to renew an existing lease?
  • in addition to forfeiture, what else is necessary before the default in notice will be excused?

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slide146

Morin Building Products Co. v. Baystone Construction, Inc.New York Court of Appeals42 N.Y.2d 392, 366 N.E.2d 1313, 397 N.Y.S.2d 958 (1977)

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note 1
Note 1
  • 3rd party satisfaction

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conditions handout
Conditions handout
  • duty (and constructive condition)
  • express condition only
  • promissory condition (duty + express condition)

End of Semester Review

damages
Damages
  • assuming breach, what damages should the non-breaching party receive?

End of Semester Review

note 1151
Note 1
  • limitations on damages
    • foreseeability
    • certainty
    • avoidability (the so-called duty to mitigate)

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note 4 ucc damages
Note 4—UCC Damages
  • some of this is addressed in Problem Set 9 and on the handwritten damages handout

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slide153

Handicapped Children’s Education Bd. v. LukaszewskiSupreme Court of Wisconsin112 Wis. 2d 197, 332 N.W.2d 774 (1983)

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slide154

American Standard v. SchectmanNew York Supreme Court80 A.D.2d 318, 439 N.Y.S.2d 529 (App. Div.), appeal denied, 427 N.E.2d 512 (1981)

End of Semester Review

cost to remedy versus diminution in value
cost to remedyversusdiminution in value
  • Jacob & Youngs v. Kent
  • Groves v. John Wunder Co.
  • Peevyhouse v. Garland Coal & Mining Co.

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slide157
general or direct damages
  • consequential or special damages

End of Semester Review

limitations on damages
Limitations on damages
  • foreseeability
  • certainty
  • avoidability
  • what degree of certainty is required to establish lost profits?
  • what problem does a new business run into?

End of Semester Review

avoidability mitigation
avoidability/mitigation
  • Rockingham County v. Luten Bridge Co.
  • Boehm v. ABC
  • Jetz Service Co. v. Salinas Properties

End of Semester Review