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Class 21, Friday, Feb. 24

Class 21, Friday, Feb. 24. Next Week Tuesday 381-406 Thursday 407-26 1 1 Friday Essay Midterm. Mid-Semester Review or Contract’s Greatest Hits (Vol. 1). Questions to ask yourself.

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Class 21, Friday, Feb. 24

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  1. Class 21, Friday, Feb. 24 Next Week Tuesday 381-406 Thursday 407-2611 Friday Essay Midterm Class 21 Mid-Semester Review

  2. Mid-Semester RevieworContract’s Greatest Hits (Vol. 1) Class 21 Mid-Semester Review

  3. Questions to ask yourself • What does A want? What is the subject matter of the dispute? Is there a contract? Has there been mutual assent? Consideration? If one or both are lacking, are there alternative theories for recovery? Reliance? Restitution? • Why might there not be a duty? Questions regarding interpretation? 2-207 & terms? What defenses? Statute of Frauds? Class 21 Mid-Semester Review

  4. Typical Executory K prelim. executory negotiations period -----------------|-------------------------|---------------------- t K formation performance due (1) mutual assent (2) consideration Class 21 Mid-Semester Review

  5. Mutual Assent • objective theory—see Ray v. Eurice; Park 100 v. Kartes • offer—see Lonergan v. Scolnick; Izadi v. Machado (Gus) Ford; Normile v. Miller • acceptance—unequivocal, unconditional, timely (common law) • why not timely? offer might have (1) lapsed; (2) been revoked; (3) been rejected; (4) terminated because of death of offeror/offeree Class 21 Mid-Semester Review

  6. OfferWhat does a court look at? • The proposal in question • Prior communications • Other facts and circumstances This does not tell us whether an offer has been made. It directs us to what we look at or consider in applying the following test: Class 21 Mid-Semester Review

  7. OfferWhat does the court look for? • Language of commitment • Relatively complete terms • That are communicated so that the recipient reasonably believes that their acceptance is invited and will conclude the deal This is a reworking of Restatement §24. Class 21 Mid-Semester Review

  8. What indicates clearly that a communication is not an offer? • See Lonergan; see Restatement §26—references are to second restatement unless otherwise noted. • Look to see if the one making the proposal reserves to themselves further action or assent before the deal is closed • Really just a corollary to 24. Class 21 Mid-Semester Review

  9. Acceptance (bilateral K) • unequivocal (must contain lang. of commitment) • unconditional (mirror-image rule) • timely—look for a supervening event (1) lapse; (2) revocation (look for option or indirect revocation); (3) rejection (counteroffer generally operates as rejection unless the counteroffer has clear language reserving power of acceptance or if it has precatory language; (4) death of offeror/offeree for (2) and (3), see Normile v. Miller Class 21 Mid-Semester Review

  10. Mailbox Rule §63. Time when an acceptance takes effect. Unless the offer provides otherwise, (a) an acceptance made in a manner and by a medium invited by an offer is operative and completes the manifestation of mutual assent as soon as put out of the offeree’s possession, without regard to whether it ever reaches the offeror; but (b) an acceptance under an option contract is not operative until received by the offeror. Class 21 Mid-Semester Review

  11. When is an acceptance invited by mail? • Expressly • Implicitly Remember, though, that the mailbox rule can be negated by the offeror—e.g., 2004 Practice Midterm, Essay Q. Class 21 Mid-Semester Review

  12. Unilateral K • seeks acceptance by performance only; does not seek promissory acceptance • issue arises as to whether offeror can revoke after offeree has begun performance • traditional approach—offeree has no protection; modern approach—offeree is protected by an option K created by the beginning of performance—see Restatement §45 • see Petterson v. Pattberg; Cook v. Coldwell Banker (point at which offeree is protected is different from 45) Class 21 Mid-Semester Review

  13. Offer/acceptance Preliminary negotiations K formation --------|------------------|--------------|-------------- offer acceptance termination of power of acceptance? Class 21 Mid-Semester Review

  14. Consideration • benefit/detriment test—e.g., Hamer v. Sidway • bargain theory—e.g., Baehr v. Penn-O-Tex • Restatement 71 Class 21 Mid-Semester Review

  15. Approach • Identify promise • Identify candidates for consideration • Assess whether they exist in the proper relationship • Return promise or performance must “count” as a legal detriment to the promisee or a legal benefit to the promisor Class 21 Mid-Semester Review

  16. Consideration Diagram Class 21 Mid-Semester Review

  17. bargained for exchange restated A return promise or performance is bargained for if: • Promisor seeks the return promise/perf. • Promisee is induced to give the return promise/perf. by the promisor’s promise Class 21 Mid-Semester Review

  18. benefit/detriment That which is given by the promisee, whether it is a return promise or a performance, must count as a legal detriment to the promisee OR a legal benefit to the promisor Class 21 Mid-Semester Review

  19. Common consideration problems • so-called past consideration—e.g., Plowman v. Indian Refining • illusory promises • gratuitous promises—e.g., Dougherty v. Salt; Plowman • conditional gratuitous promises—e.g., Williston tramp hypo; Plowman • promise lacking • bargain lacking—e.g., Baehr; Dougherty • legal detriment lacking (pre-existing legal duty) • settlement of what proves later to be an invalid claim—e.g., Problem Set 2.1 Class 21 Mid-Semester Review

  20. Promissory estoppel • traditional approach—e.g., Kirksey v. Kirksey • evolution of doctrine—e.g., Ricketts v. Scothorn (court borrowed from equitable estoppel) • first Restatement • second Restatement Class 21 Mid-Semester Review

  21. Elements • promise • which promisor can reasonably expect to induce action or forbearance • which does induce such action or forbearance • is binding if injustice can be avoided only by enforcement of the promise Applications—e.g., Greiner v. Greiner; Katz v. Danny Dare; Shoemaker v. Commonwealth Bank Class 21 Mid-Semester Review

  22. Approach First see if a contracts claim can be brought based on mutual assent and consideration. If that fails, see if you can bring an alternative basis for recovery such as promissory estoppel/reliance OR restitution, which we are about to cover. Class 21 Mid-Semester Review

  23. Restitution Quasi contract Implied-in-law contract (different from an implied-in-fact contract) Quantum meruit Quantum valebat Many names, a lot of confusion. Class 21 Mid-Semester Review

  24. Restatement of Restitution §1 A person who has been unjustly enriched at the expense of another is required to make restitution to the other. Two elements: 1. enrichment 2. under circumstances where retention of benefits would be unjust Class 21 Mid-Semester Review

  25. Two broad categories for us • restitution in the absence of a promise (a) emergency aid—see Restatement of Restitution 116 & 117; e.g., Pelo v. Credit Bureau (b) SC-GC-O scenario—e.g., Commerce Partnership v. Equity Contracting 2. promissory restitution—compare Mills v. Wyman and Webb v. McGowin; see Restatement (Second) of Contracts 86; also, exceptions for promise to pay debt barred by statute of limitations, debt discharged in bankruptcy, and debt barred by infancy doctrine Class 21 Mid-Semester Review

  26. Emergency aid §116 covers aid to protect person; §117 covers aid to protect property (see note 4, p. 126) **very similar in approach Starting point--presumption of gratuitousness To prevail, must show: • unofficiously & intent to charge • no meaningful opportunity to communicate/negotiate K • services were necessary to protect person/property • benefit was conferred Class 21 Mid-Semester Review

  27. Offer/acceptance Preliminary negotiations K formation --------|------------------|--------------|-------------- offer acceptance termination of power of acceptance? Class 21 Mid-Semester Review

  28. Option K • Express option K • Option K formed under §45—limited to unilateral K offer • By statute—e.g., 2-205 and firm offers • Option created by reliance—traditional approach embodied by James Baird v. Gimbel Bros.; modern approach embodied by Drennan v. Star Paving; see also Restatement §87(2) Class 21 Mid-Semester Review

  29. 2-205 Elements • an offer to buy or sell goods; • by a merchant; • in a signed record; AND • which gives assurance that it will remain open IS IRREVOCABLE (even though no consideration) DURATION? Time stated or if none stated, reasonable time; not to exceed 3 months Extra requirement if form is supplied by offeree—firm offer part must be signed separately by offeror Class 21 Mid-Semester Review

  30. Liability during negotiations • e.g., Pop’s Cones v. Resorts International; Hoffman v. Red Owl Stores Class 21 Mid-Semester Review

  31. Incomplete bargaining • agreement to agree—e.g., Walker v. Keith and requirement of relative certainty • formal K contemplated (often there is a letter of intent) Three basic possibilities: 1. K. Written K only a formality 2. no legal obligation 3. limited K--parties are not bound to the Big K, but have bound themselves to negotiate in good faith toward the big K Which of these it is turns on the intent of the parties; e.g., Quake Construction v. American Airlines Class 21 Mid-Semester Review

  32. 2-207 • alters the common law mirror image rule • designed to change the “last shot” rule in order to balance power more evenly between buyers and sellers • relates to K formation as well as to determining what terms are in K Class 21 Mid-Semester Review

  33. 2-207 & Battle of Forms • threshold question—goods? e.g., Princess Cruises v. General Electric and mixed goods/services K—see factors test in case; see also 2-105 • offer to buy/sell goods (incl. mixed K where goods predominate) • purported acceptance with additional and/or different terms OR an oral K followed by 1 or 2 written confirmations Class 21 Mid-Semester Review

  34. 2-207(1) Flow chart/decision tree A definite and seasonable expression of acceptance which contains additional or different terms from those offered Q--is it expressly conditional upon assent to the additional or different terms? Acceptance Counteroffer (go to subsection 2) (go to subsection 3) YES NO Class 21 Mid-Semester Review

  35. When is an acceptance expressly conditional? • Example: "Your order is accepted on condition that you agree to indemnify us for any claims of injury arising out of the use of the goods described above." Is this language sufficient to establish that acceptance is expressly conditional upon assent to these terms? Class 21 Mid-Semester Review

  36. “expressly conditional on Buyer's assent to the additional or different terms and conditions . . .” (form sent by seller) • “on condition that you agree” Class 21 Mid-Semester Review

  37. "acceptance subject to all of the terms and conditions" is this language sufficient to bring this within the UNLESS clause? Class 21 Mid-Semester Review

  38. "acceptance subject to all of the terms and conditions" Very tricky. Courts say "subject to"  "on condition that you agree" or "expressly conditional upon your assent." Class 21 Mid-Semester Review

  39. 2-207 (2) (2) additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless [(a), (b), or (c).] Class 21 Mid-Semester Review

  40. Flow chart/decision tree 2-207(2) Q—are both parties merchants? NO YES such terms become part of K unless: (a) offer expressly limits acceptance to the terms of the offer; or (b) they materially alter it; or (c) notification of objection has already been given OR is given within reasonable time additional terms are construed as proposals to the contract; do not become part of the contract absent express assent Class 21 Mid-Semester Review

  41. BUT 2-207(2) only refers to additional terms • What about different terms? Class 21 Mid-Semester Review

  42. Three approaches 1. Treat different terms just like additional terms. If one of the parties is not a merchant, then not part of the contract absent express assent. If both parties are merchants, then the different term in the acceptance becomes part of the contract unless (a), (b), or (c). This approach is partly supported by comment 3 to 2-207--read very closely, comment 3 is referring to confirmations. Class 21 Mid-Semester Review

  43. 2. Different terms (from acceptance) become part of the contract if the offeror expressly assents to them. Under this view, offeror is "master" of the offer and absent express assent, the offeror's terms control. Class 21 Mid-Semester Review

  44. 3. Knockout rule. The different terms in the offer and the acceptance cancel each other or knock each other out such that neither side's terms are part of contract. If this leaves a gap in the contract, UCC gap fillers step in to provide "neutral" terms that are designed in theory to give neither buyer nor seller an unfair advantage. Class 21 Mid-Semester Review

  45. 2-207(3)—recall how you get there (1) A definite and seasonable expression of acceptance which contains additional or different terms from those offered Q--is it expressly conditional upon assent to the additional or different terms? Acceptance Counteroffer (go to subsection 2) (go to subsection 3) YES NO Class 21 Mid-Semester Review

  46. no contract contract terms? those on which the writings agree; supplemented by gap fillers as needed Flowchart/decision tree for 2-207(3) Q--conduct indicating K? YES NO Class 21 Mid-Semester Review

  47. macro structure of 2-207 (1) acceptance or counteroffer (2) (3) Class 21 Mid-Semester Review

  48. Offer silence indemnification no indemnification Acceptance indemnification clause silence indemnification Additional v. different Class 21 Mid-Semester Review

  49. Application • Brown Machines v. Hercules—2-207(1); 2-207(2)(a) • Dale Horning v. Falconer Glass—oral K followed by written confirmations from each party; 2-207(2)(b) • Hill v. Gateway 2000 • Klocek v. Gateway Class 21 Mid-Semester Review

  50. Statute of Frauds Class 21 Mid-Semester Review

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