2/24/2006Class 21 Mid-Semester Review1 Class 21, Friday, Feb. 24 Next Week Tuesday Thursday FridayEssay Midterm

2/24/2006Class 21 Mid-Semester Review2 Mid-Semester Review or Contract’s Greatest Hits (Vol. 1)

2/24/2006Class 21 Mid-Semester Review3 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? & terms? What defenses? Statute of Frauds?

2/24/2006Class 21 Mid-Semester Review4 Typical Executory K prelim.executory negotiationsperiod | | t K formation performance due (1) mutual assent (2) consideration

2/24/2006Class 21 Mid-Semester Review5 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 offer might have (1) lapsed; (2) been revoked; (3) been rejected; (4) terminated because of death of offeror/offeree

2/24/2006Class 21 Mid-Semester Review6 Offer What does a court look at? 1.The proposal in question 2.Prior communications 3.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:

2/24/2006Class 21 Mid-Semester Review7 Offer What does the court look for? 1.Language of commitment 2.Relatively complete terms 3.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.

2/24/2006Class 21 Mid-Semester Review8 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.

2/24/2006Class 21 Mid-Semester Review9 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

2/24/2006Class 21 Mid-Semester Review10 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.

2/24/2006Class 21 Mid-Semester Review11 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.

2/24/2006Class 21 Mid-Semester Review12 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)

2/24/2006Class 21 Mid-Semester Review13 Offer/acceptance Preliminary negotiationsK formation | | | offeracceptance termination of power of acceptance?

2/24/2006Class 21 Mid-Semester Review14 Consideration benefit/detriment test—e.g., Hamer v. Sidway bargain theory—e.g., Baehr v. Penn-O- Tex Restatement 71

2/24/2006Class 21 Mid-Semester Review15 Approach 1.Identify promise 2.Identify candidates for consideration 3.Assess whether they exist in the proper relationship 4.Return promise or performance must “count” as a legal detriment to the promisee or a legal benefit to the promisor

2/24/2006Class 21 Mid-Semester Review16 Consideration Diagram

2/24/2006Class 21 Mid-Semester Review17 bargained for exchange restated A return promise or performance is bargained for if: a.Promisor seeks the return promise/perf. b.Promisee is induced to give the return promise/perf. by the promisor’s promise

2/24/2006Class 21 Mid-Semester Review18 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

2/24/2006Class 21 Mid-Semester Review19 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

2/24/2006Class 21 Mid-Semester Review20 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

2/24/2006Class 21 Mid-Semester Review21 Elements 1.promise 2.which promisor can reasonably expect to induce action or forbearance 3.which does induce such action or forbearance 4.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

2/24/2006Class 21 Mid-Semester Review22 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.

2/24/2006Class 21 Mid-Semester Review23 Restitution Quasi contract Implied-in-law contract (different from an implied-in-fact contract) Quantum meruit Quantum valebat Many names, a lot of confusion.

2/24/2006Class 21 Mid-Semester Review24 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

2/24/2006Class 21 Mid-Semester Review25 Two broad categories for us 1.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

2/24/2006Class 21 Mid-Semester Review26 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

2/24/2006Class 21 Mid-Semester Review27 Offer/acceptance Preliminary negotiationsK formation | | | offeracceptance termination of power of acceptance?

2/24/2006Class 21 Mid-Semester Review28 Option K 1.Express option K 2.Option K formed under §45—limited to unilateral K offer 3.By statute—e.g., and firm offers 4.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)

2/24/2006Class 21 Mid-Semester Review Elements 1.an offer to buy or sell goods; 2.by a merchant; 3.in a signed record; AND 4.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

2/24/2006Class 21 Mid-Semester Review30 Liability during negotiations e.g., Pop’s Cones v. Resorts International; Hoffman v. Red Owl Stores

2/24/2006Class 21 Mid-Semester Review31 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

2/24/2006Class 21 Mid-Semester Review 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

2/24/2006Class 21 Mid-Semester Review & 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 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

2/24/2006Class 21 Mid-Semester Review (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? AcceptanceCounteroffer (go to subsection 2)(go to subsection 3) NO YES

2/24/2006Class 21 Mid-Semester Review35 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?

2/24/2006Class 21 Mid-Semester Review36 “expressly conditional on Buyer's assent to the additional or different terms and conditions...” (form sent by seller) “on condition that you agree”

2/24/2006Class 21 Mid-Semester Review37 "acceptance subject to all of the terms and conditions" is this language sufficient to bring this within the UNLESS clause?

2/24/2006Class 21 Mid-Semester Review38 "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."

2/24/2006Class 21 Mid-Semester Review (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).]

2/24/2006Class 21 Mid-Semester Review40 Flow chart/decision tree 2-207(2) Q—are both parties merchants? additional terms are construed as proposals to the contract; do not become part of the contract absent express assent 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 NOYES

2/24/2006Class 21 Mid-Semester Review41 BUT 2-207(2) only refers to additional terms What about different terms?

2/24/2006Class 21 Mid-Semester Review42 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 read very closely, comment 3 is referring to confirmations.

2/24/2006Class 21 Mid-Semester Review43 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.

2/24/2006Class 21 Mid-Semester Review44 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.

2/24/2006Class 21 Mid-Semester Review (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? AcceptanceCounteroffer (go to subsection 2)(go to subsection 3) NO YES

2/24/2006Class 21 Mid-Semester Review46 Flowchart/decision tree for 2-207(3) no contract contract terms? those on which the writings agree; supplemented by gap fillers as needed Q--conduct indicating K? NO YES

2/24/2006Class 21 Mid-Semester Review47 macro structure of (1) acceptance or counteroffer (2) (3)

2/24/2006Class 21 Mid-Semester Review48 Additional v. different Offer silence indemnification no indemnification Acceptance indemnification clause silence indemnification

2/24/2006Class 21 Mid-Semester Review49 Application Brown Machines v. Hercules—2-207(1); (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

2/24/2006Class 21 Mid-Semester Review50 Statute of Frauds

2/24/2006Class 21 Mid-Semester Review51 Overall structure/approach 1.Is the K within S/F? 2.If so, has it met the requirements of S/F? 3.If not, does it fall under an exception?

2/24/2006Class 21 Mid-Semester Review52 1. Is it within S/F? see p. 296 in casebook—reproduces Rest. §110 You are responsible for: (1)(b) suretyship provision (1)(d) land provision (1(e) one year provision (2)(a) UCC If not within S/F, then defense fails; if within, go to Question 2

2/24/2006Class 21 Mid-Semester Review53 2. If within S/F, has it met its requirements? 1.written memorandum evidencing an agreement 2.identifying the parties and subject matter 3.containing material terms and conditions 4.signed by the party to be charged If all of these requirements are met, then defense fails

2/24/2006Class 21 Mid-Semester Review54 3. If requirements of S/F not met, does an exception apply? If no, then defense succeeds and K is not enforceable If yes, then defense fails (does not preclude enforcement)

2/24/2006Class 21 Mid-Semester Review55 Exceptions to s/f General exceptions narrow estoppel (equitable and promissory) broader promissory estoppel Clause-specific exceptions land--part performance one year—part performance suretyship—main purpose or leading object rule goods—see 2-201(3) and 2-201(2)

2/24/2006Class 21 Mid-Semester Review recall the differences between and what we have been calling the general statute of frauds

2/24/2006Class 21 Mid-Semester Review57 Interpretation we just covered interpretation, at least to the extent that you’ll be tested on it on March 3.

2/24/2006Class 21 Mid-Semester Review58 End of Class