Contract Law 2

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⬢Express agreements is: (words only?).
⬢Elements of a promise.: Implied and express promises.
oWas there a manifestation of an intent to act, promise (?)
oIs there a reasonable expectation that a promise had been made. (?)
⬢Focus on objective manifestation of ascent.
implied contract: = conduct plus words
oElement of a promise:: manifest an intention to act or not to act in a particular way.
If you fail to determine a material term then: there is no manifestation of an intention to be bound by the contract.
oThe courts canâ€™t: rewrite or change terms of an agreement just to make a decision of about the contract based on the terms agreed to by both parties.
What do you look for in determine an intention to be bound?: Reasonable things within the facts of the agreement.
effect of imballance of power in determining a: manifestation of intent to be bound.
material terms of the contract: (ie price, amount, time limit) Anything you would consider reasonable as a material term. This indicates whether or not a manifestation of an attempt exists.
How does the court interpret terms of an agreement in determining a manifestation of intent to be bound?: oThe court looks to interpret terms of the agreement by looking at all the terms and asking do they make sense in the overall context of the agreement.
oThe courts analysis is also guided by: stare decisis (in this case the Moorcock case). â€œ
Restatement, 2nd contr. s 24 an offer is?: the manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it.
Rest. 2nd S 33. even though a manifestation of intention is intended to be understood as an offer, it: even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain.
Rest. 2nd S 33. The terms of a contract are reasonably certain if: they provide a basis for determining the existence of a breach and for givin an appropriate remedy.
Rest. 2nd cont. S 33. The fact that one or more terms of a proposed bargain are left open or uncertain may show: that a manifestation fo intention is not intended to be understood as an offer or as an acceptance.
oThe more open terms the: less likely it is that the parties intended to be bound.
If you allow the courts to fill gaps then: it is no longer as private (between private parties) as is intended.
UCC art 2: transactions for the sale of goods.
⬢UCC has supplanted the common law for sale of goods except: in areas where the UCC doesnâ€™t apply then the common law prevails
⬢Main distinction between the restatement of contracts and the UCC?: The restatement is not binding. Only applies if restatement has been adopted by a court.
⬢Parties must have intent to be bound and the term missing must be: objectively determined. Then the court will fill the gap.
⬢You can also look toward what the industry standard is in determining if: an undetermined material term is not discussed or defined.
oMorecock analysis:: assumption that each party would want an efficient transaction. Case has persuasive value.
formalistic approach to analyzing the contract.: In other words there is no express promise
Lucy case: ⬢ Case represents a change in society requiring more flexibility in open terms to facilitate more useful contracts with broader terms
The terminology used by Cardozo (judge) found itâ€™s way in the uniform com code. Same flexibility through open terms. See page 902 , 2-305 â€œopen price termâ€. (1) says what about making a contract with out price?": the parties if they so intend can conclude a contract for sale even though the price is not settled. In such a case the price is a reasonable price at the time for deliver if;a-c
if; a:nothing is, b: price is left, c:price is to be fixed in terms of: a. nothing is said as to price; or
b. the price is left to be agreed by the parties and they fail to agree; or
c. the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded.
2: a price to be fixed by the seller or buyer is: a price to be fixed by the seller or by the buyer means a price for him to fix in good faith.
3: when a price left to be fixed otherwise than by agreement of the parties: when a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of aone party the other may at his option treat the contract as cancelled or himself fix a reasonable price.
4. where parties intend not to be bound unless the price: where parties intend not to be bound unless the price be fixed or agreed and it is not fixed or agreed there is no contract. in such a case the buyer must retrn any goods already received or if unable so to do must pay their reasonable balue at the time fo the delivery and the seller must retrn and portion of ht eprice paid on accound.
⬢Homeowner hires painter for 1000 to paint ext. painter says okay if I feel like it. Has the painter promised?: No cuz heâ€™s not binding himself to anything. Itâ€™s not justifiable for the owner to believe a commitment has been made. The painter has not manifested an intent to act or not act in a particular way.
⬢ If he shows up an paints, is the homeowner obligated to pay?: No same reason. Unless something else happened leading him to believe a contract had then been agreed to.
⬢ If painter says I promise to paint for 1000 when I get to it?: The material term time is not established leaving a reasonable person to conclude an agreement had not been reached.
⬢ Material terms are dependant on: the industry standard and the context.
but we know law will take joker at word if: seller is reasonable to assume he was serious
Courts judge objective manifestation of assent primarily but there are situations where subjective manifestations of intent are used.: If facts are blatantly obvious, lengthy signing, lots of witnesses, oral agreements with witnesses, courts will look beyond to subjective manifestations.
Joking situations require this.: If the buyer can show that a reasonably prudent person would be justified in believing a promise had been made.
⬢ Why was this complicated?: There was multiple standards for determining lease. Showâ€™s the challenges and difficulties in a long term transaction while attempting to maintain fluidity in the terms.
⬢Why if it was in writing was there interpretation confusion?: Language isnâ€™t always crystal clear so that in itself is not sufficient but ambiguity relies on term interpretation. Relying on other cases in these situations can be useful in determining or interpreting language but they only go so far. They are generally agreed upon ways of interpreting language but are not air tight. Attempting to rigidly apply rules of application is problematic because often courts use a rule to justify outcome rather than compel outcome. So then why and how do we interpret the agreement.
the plain meaning rule: ⬢ The trial court would not look at evidence outside agreement (extrinsic evidence) using
⬢Plain meaning rule:: court looks at rules in document and not outside of it (also called 4 corners rule. If terms are ambiguous, then go to facts in case (extrinsic evidence). It makes things go faster, fosterâ€™s use of contracts and autonomy of parties, donâ€™t have to worry about reliability of claims of facts.
â€¢ Supreme court adopted the â€œcontext ruleâ€ and sections of the restatements. Why establish this rule?: Because they did not want to consider context just when language is ambiguous but allways and initially because you canâ€™t determine what language means without context and you need to look at it to determine intent of partyies even when the language is not ambiguous. Restatement 212 sect 2 comment B pg 71,
use context rule which means you look at: 1. tech terms, 2. surrounding circumstances, 3. Reasonably (idea that you should interpret agreement in a reasonable way like in moorcock case.
Morecock is not assigned reading but you need is: that this case came up with idea that it is assumed that both parties intended to come up with an agreement good for both sides).
the modern view is the: context rule meaning it is not necessary to find ambiguity to look at surrounding circumstances because you need to to determine party intent.
This is an exam question:: make a plain meaning argument and the context analysis. Will need to argue these for your client depending on what serves them. These are tools to help your client.
So the above: discusses how to interpret a promise or the method used to determine. This tells you what to look at and what not to and how much relative weight facts will or will not have.
: you are at auction, million dollar vase, you get kicked by person behind you forcing you to raise hand and sold to you. Are you bound?: (when you talk about manifestation of assent we mean voluntary)
So you analyze in 2 ways:: we didnâ€™t have a promise, no intention to be legally bound.
So proof of manifestation of intent;
Prove that a reasonably prudent person would believe a commitment had been made:
Hypo: prof painter, uncle says if you paint house I will pay you. He does and sends a bill who refuses to pay.: Question here is there enough evidence to overcome assumption of gratuitous service.
Theory of Restitution:: This is a â€œquasi-contractâ€ situation. The court, though no promise had been made, attempt to be fair in the circumstances. Used in some cases between man and wife or unmarried couples. This is just a theory used by the courts to rectify unjust enrichment.
DURESS:: A way to get out of obligation that has been made.
Physical Duress:: gun to head. Court will conclude the agreement is void. A completely unenforceable obligation. Term is VOID=no contractual obligation which can be enforced by either party.
Duress of goods:: where someone is holding your property to get you to agree to an obligation. Courts conclude agreement has been made and may be enforceable but itâ€™s up to the victim. It is VOIDABLE=some parts not and some yes and victim gets to decide.
Economic Duress:: next couple of cases. : is also a voidable contract.
so must show they were forced to do something they wouldnâ€™t otherwise do- under old test you looked at: a reasonable prudent obj test,
would say a reasonably prudent person would succumb to this demand.
New test,: more subjective, whether the individual felt coerced to succumb and agree to demand
The effect here is that there is: broader protection applied on a case by case basis and ultimately discouraging this type of conduct. You donâ€™t have to show what a reasonable person would do, just you. The reasonable person test (as opposed to subjective test) could still be used and found useful)
c. Must also prove the: lack of a complete and adequate remedy in court
Why would courts recognize duress?: Lack of assent by a lack of voluntary ness of one party- goes against idea of freedom of contract. Also, if seems unfair or extortion, doesnâ€™t seem to be moral.
What does judge say is main policy reason for duress?: If people know it wonâ€™t work then they will not make improper threats by making them unprofitable. It allows courts to police the bargaining process.
Note: we noted the other day that judge Posner says we allow avoidance on duress to: discourage improper threat carving behavior. that the doctrine did not apply in older cases if duress resulted from a threat to break a contract.
why not?: This is because people will use it in ridiculous situations and it can undermine the use of contract. He notes that despite this fact, there were cases where the holding was on a different grounds but
dissolved the contract.
questions asked in determining duress: [is this an improper threat?]
[induced assent?]
[were there reasonable alternatives?] while you need to discus all three factors, they do need to work together.
the circumstances are analyzed to determine: if threat is improper to determine duress.
duress steps: steps, 1. improper threat?, 2. induced assent?, and 3. no reasonable act).
). What is the modern trend standard to apply in determine if assent was induced? Was this person compelled in this way?: (you look subjectively at the indiv victim not reasonable person). Subjective standard
So judge Posner He says about using threats?: you donâ€™t want them to use a threat as a weapon.
UNCONSCIONABILITY: (determined by judges only)Is a doctrine of last resort. [this would be the last defense used on an exam]
subject to non-enforcement on grounds of unconscionability?: Uniform Com Code is for sale of goods so court looks at it for persuasive authority though it talks about unconscionability.
2-302 unconscionable contract or clause: 2.When it is claimed or appears to the court that the contract of any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.
Unconscionability focuses: on the time of contract formation. This is how itâ€™s different from other analysis;
2 questions. both must be proved but courts: Both must be proved but courts weigh elements together. IOW if 1 is lacking, they will expect more in 2 and vice versa.
2 questions. which are: Lack of meaningful choice?
Unfair terms?
1. Lack of meaningful choice?: [procedural element of unconscionability] [was bargain fair] [procedure behind how agreement was reached].
1. Lack of meaningful choice? A.: A. unequal bargaining power. (take it or leave it terms. Limited resources on part of P so if she could she would have bargained for a better deal had she been given the opportunity.)
1. Lack of meaningful choice? B.: ( B. opportunities to understand the terms. [think about why D has terms and argue from that perspective]
1. Lack of meaningful choice? C.: C. Deceptive practices.
2. Unfair terms?: [substantive element of unconscionability][focus on oppressive terms]. [talking about very oppressive terms not just somewhat bad decision] to determine if terms a reasonableness and fair look at; A. general commercial setting/context. (cross collateral clause was an unfair term cuz u never got out of your obligations.)
Options courts take if an unconscionable agreement is found?: There are 3
Can you agree to resolve something like an age discrimination that will have a final and binding effect?: Yes. Since mid 1980â€™s S Ct has broadened scope that can be resolved during arbitration. With the federal arbitration act. Even in employment discrimination cases. The only exception would be if the agreement said this canâ€™t be solved in arbitration.
per curium: from al the judges as a whole. exp. the judges reached their decision per curium.
contract law doesn't distinguish between who?: the parties envlovled
philosophies of contracts which are the foundations for contracts: 1. economic fountation
2. individualism
3. fairness/reliance
4. morality
economic foundation: aids in dependance on contracts. stable basis to foster economic development.
individualism: contracts represent the power of the individual. there are limits based on societal understanding of right and wrong.
fairness/reliance.: enforces ideas of fairness and stabalize reliance on contracts.
morality: break a promise its a sin.
R2 contracts s 18: if one party is deceived and has no reason to know of the joke, the law taked the joker at his word.
Rest. 2nd contracts S 175: when duress by threat makes a contract voidable. two parts
R2C175 1: if a party's manifestation of assent is induced by: if a party's manifestation of assent is induced by an improper threat by the other party that leaves the victim no reasonable alternative, the contract is voidable by the victim.
R2C175 2: if a party's manifestation of assent is induced by: if a party's manifestation of assent is induced by one who is not a party to the transaction, the contract is voidable by the victim unless the other party to the transaction in good faith and without reason to know of the duress either gives value or relies materially on the transaction.
R2C176: talks about when a threat is: when a threat is improper.
R2C176 1: A threat is improper if,
1a: a threat is improper if what is threatened is a: what is threatened is a crime or a tort, or the threat itself would be a crime or a tort if it resulted in obtaining property.
1b: a threat is improper if what is threatened is a: what is threatened is a criminal prosecution (cuz not why criminal court is there)
1c: what is threatened is the use of civil: what is threatened is the use of civil process and the threat is made in bad faith, or (using it to extort another party)
1d: the threat is a breach of: the threat is a breach of the duty of good faith and fiar dealing under a contract with the recipient.
R2C176 2: a threat is improper if the resulting exchange: a threat is improper if the resulting exchange is not on fair terms, and
2a: a threat is improper if the threatened act would harm: the threatened act would harm the recipient and would not significantly benefit the party making the threat,
2b: the threat is improper if the effectiveness of the threat in inducing: the effectiveness of the threat in inducing the manifestation fo assent is significantly increased by prior unfair dealing by the party making the threat, or
2c: a threat is improper if what is threatened is otherwise a: what is threatened is otherwise a use of power for illegitimate ends.
applying 176: 1. fact to each, 2.A. not on fair? 2B. threat harmful to party and: 1. fact to each (just need 1 of thease for 1 under all 3 elements)
2. A. not on fair terms
b. threat harful to party and no benefit to other party.
contract of adhesion _________________________: contract is so heavily restrictive of one party and non restrictive of another that it is not seen as a voluntary agreement. Seen as cohersed.
Misrepresentation 1. At the time the contract was made... 2. Types: a. Fradulent

b. Material to the agreement
Misrepresentation 1. At the time the contract was made... 2. Types a. Fradulent: i. Intent to mislead, & assertion of false knowledge or reckless
disregard for the truth
ii. assertion not in accord with the facts
Misrepresentation 1. At the time the contract was made... 2. Types b. Material to the agreement: i. in fact relied upon / reasonable reliance - opinion?
ii. misrepresentation contributed to the decision to enter the agreement
(1) needs to be significant to the transaction
(2) does not need to be made with malice; an innocent misrepresentation
can still cancel a contract
- misrepresentation =: assertion not in accord with the facts
- When there is fraud in execution and fraud in the factum, the contract is: completely void
- Where there is fraud in inducement, the contract is: voidable. In this case, the victim is allowed to avoid the contract
MISREPRESENTATION - Analysis Look at:: o assertion not in accord with a fact (flat out lie or purposeful concealment or misleading a party to think one conclusion by leaving out some information when in reality a different conclusion is present)
o duty to disclose (silence)
At time the K is made: - there is misrepresentation that: o is fraudulent when:: ï‚§ maker is intending to mislead AND
ï‚§ knows what they are saying is false.
â€¢ courts will find that the fraud in fact induced the assent of the other party and they were reasonable in their reliance. This allows the victim to avoid the agreement or adjust the agreement.
At time the K is made: - there is misrepresentation that: o is material when:: ï‚§ misrepresentation would be material to a reasonable person on an objective basis OR
ï‚§ that the victim used that information which contributed to their assent of the K
â€œModicum of bilateralityâ€: If the arbitration process requires the employee to do something and not the employer then itâ€™s unfair
If there is a fee splitting arrangement: requiring employee to pay part of arbitrators fee which they wouldnâ€™t have to pay if went to court, then this is enough to: defeat the arbitration clause, unconscionable.
There are also limits on time to file a claim. If arbitration clause limits time period to file it had better be reasonable or: itâ€™s unconscionable.
Just because other party disagrees is not automatically: procedural unconscionability. You have to look at entire circumstances.
Fraud in the execution or Fraud in factum =: VOID agreement
A substitution of a document not agreed to is: a fraud in the execution.
Void agreements are completely uninforceable: where the court includes: not possibility of assent.
Fraud in the inducement:: where you are misled. The agreement is VOIDABLE on the part of the victim.
1st step in analysis:: An assertion not in accord with the facts:
An assertion not in accord with the facts: exp.: A lie. Example if you put a grandfather clock in front of foundation crack to sell a house.
Courts have evolved to active concealment is also viewed as an: assertion not in accord with the facts.
If there is a misleading half truth is now an: assertion not in accord with the facts.
Determining Misrepresentation Must show 1.: Fraudulent misrepresentation either by demonstrating an intention to mislead, by knowing assertion is false or a reckless disregard for truth. (courts will assume other party relied on info and it induced assent of other party and they were justified in relying on it).
MISTAKE OF LAW A mistake is a belief not in accord with the facts (different than: an assertion not in accord with the facts.
MISTAKE OF LAW First: there must be: a mistake
MISTAKE OF LAW Second: There was a: Basic Assumption of the agreement (something vital to the agreement because courts shouldnâ€™t and donâ€™t want to step in unless itâ€™s absolutely necessary to maintain freedom of contracts) (must demonstrate with facts of case)
MISTAKE OF LAW Third: show BA had a: material effect on the exchange unfair to P: (something so significant to transaction that fairness dictates ⬦. P would not have otherwise entered against the agreement).
MISTAKE OF LAW Fourth: No: assumption of risk. (154): Occurs in 3 situations; 1. risk allocated to him by agreement of the parties. 2. conscious ignorance 3. Allocated by court just for fairness if it seems reasonable to do so under the circumstances.
MISUNDERSTANDING: A legal misunderstanding results in: a VOID contract.
Because there is: no assent in these cases. (unlike other situations where assent is just tainted)
R. 2d. Cont. s153 is about what?: mistake
Where a mistake of one party at the time a contract was made as to a: basic assumption
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
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.
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
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 to him if he does not bear t: risk of the mistake
R. 2d of cont. section 154 is about when a party bears the: risk of a mistake
R. 2d of cont. section 154 is about when a party bears the risk of a mistake a party bears the: risk of a mistake
R. 2d of cont. section 154 is about when a party bears the risk of a mistake a party bears the risk of a mistake when a: the risk is allocated to him by: agreement of the parties
R. 2d of cont. section 154 is about when a party bears the risk of a mistake a party bears the risk of a mistake when a: the risk is allocated to him by agreement of the parties, or b: he is: aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient
R. 2d of cont. section 154 is about when a party bears the risk of a mistake a party bears the risk of a mistake when a: the risk is allocated to him by agreement of the parties, or b: he is aware, at the time the contract is made, that he has only limit: allocated to him by the court on the ground that it is reasonable in the circumstances to do so.
Hypo: network reporter in tywan. Network said come back, Correspondent said, okay but will you pay to have my stuff returned. They said okay. He turned in a bill which was high. His stuff included a ship. Should the company have to pay?: Correspondent had superior knowledge and should have (rest 20 or 201) known of possibility of confusion with use of term stuff.
What if he was totally innocent (for whatever reason just assume it) in returning his stuff? Should they pay now? TV station would argue:: the word junk doesnâ€™t include a ship. Itâ€™s a vague term. They thought it was junk or trash not a ship. There was no meeting of the minds = misunderstanding = void transaction.
They could also argue the correspondent had a _______ to say more than just junk on behalf of the correspondent. Duty of good faith and fair dealing.: duty
When would you not use the misunderstanding analysis as opposed to mistake?: When parties have different ideas about the same thing.
In misunderstanding the parties are thinking about: two different things exp. The meaning of the term junk or two ships named peerless.
Thereâ€™s a customary practice of assuming?: risk
In mistake analysis: the mistake must be: a mutual belief
1st step in mistake analysis?: Was there a belief not in accord with the facts.
2nd step in mistake analysis?: a basic assumption of the agreement. (wouldnâ€™t have agreed otherwise)(think of the basis by which the transaction is made)(ex. If you bought a coin and the price dropped immediately after purchase it would be an assumed risk not a basis by which the transaction is made. It is a mistake in business judgment. The risk of doing business.
3rd step in mistake analysis?: Material effect on the exchange: one that goes beyond demonstrating the parties wouldnâ€™t have simply agreed if the mistake had not been made but also, 1 loss of one party as a result of the mistake, and 2. benefits to one party as a result, and 3. Look at it from the view that both parties are innocent and they want to make the result fair, and 4. Is there any option less than complete avoidance that will make the outcome more fair.
4th step in mistake anlaysis?: Assumption of the risk: 1. K, efficiency of contract. Did buyer assume risk and not be able to avoid agreement. 2. Conscious ignorance.
Caveat Emptor: let the buyer beware.
2 Advantages of Caveat Emptor?: Gives consistent standards
Encourage B to investigate
If you don't use Caveat Emptor then you have to draw line and det when failure to speak=: failure to disclose facts
Court decides S has knowledge of g and B has no way of knowing or finding out so itâ€™s: misrepresentation.
Other exceptions made to Caveat Emptor in...: public policy situations. Exp. Contaminated food.
Also, contract where someone misrepresents a: tenent.
Also, in what type of relationship situations: professional. Expl Dr./patient.
exceptions to caveat emptor is where there is a duty to: speak and failure.
situations where courts overlook caveat emptor represent a failure in duty to: good faith and fair dealing. A misrep not in accord with the facts.
unilateral mistake is what?: a mistake on the part of only one of the parties. It can never justify reformation or alteration of the contract, although such a mistake may be the basis for rescision if the parties can be restored to their original positions and one party is seeking an unconsionalbe advantage over the other.
Material effect: relates to an imbalance as a result of: the mistake.
Courts will attempt to find a lesser remedy thatâ€™s not: too intrusive to find relief if possible.
Courts will always attempt to minimize their: interference in an agreement
Courts are guided by the doctrine of: freedom of contract
Assumption of Risk Analysis: Courts look at what the parties: agreed to.
Assumption of risk analysis. courts will also look at if there was what kind of ignorance?: conscious ignorance:
conscious ignorance is what?: parties at least aware there may have been a problem and they might be taking some kind of risk.
assumption of risk anlaysis. Courts will also look at: fairness ie who can better handle the loss.
RELEASES Used to be a document releasing people from their: obligations.
General release clause: doesnâ€™t clearly focus on negligence of: business. (exp. Leon health club general release of all liability.
a good argument for someone signing a release clause is..: Always think of an argument in terms of Freedom of Contract as one argument for either side. â€œHe volunteered to the agreement, so freedom of contract doctrine says it should be enforcedâ€.
Another question to ask about a release is "Was there an oppressive term on a substantive basis that makes it...": unconscionable?
Release can be held if the type of injury is a poor predictor of the: release
You can avoid a release on the grounds of a: mistake.
If you make a mistake about extent of injury is not a situation where courts are: likely to give relief.
If the mistake is about the type of injury, the courts: may grant you relief.
To determine if release covers all injuries or just a specific injury, you would first look at if there was a: mistake. Look at the intentions of the parties and the agreement at the time of the agreement. Attempt to determine what injuries the parties intended to cover in the release.
Basic assumption of agreement: Court will look at: circumstances, was there attorney representation, also the terms of the release
Material effect on the exchange: is payment is more than fair value of injury reduces impact of: material effect.
Assumption of risk: look to language of release to determine: intent of parties
In dealing with mistakes, be aware the older view did not include a mistake of: law. Ignorance of law was no excuse.
Modern view, existing law is part of the state of facts at time: agreement is made. Can make it avoidable.

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