Contracts Outline 1. Sources of Contract Law: A.

Statutes - Uniform Commercial Code (UCC) model adopted by all states except LA. i. Article 2 - governs the sale of goods. - If a case falls under UCC, common law does not apply ii. Sales: transactions in which seller transfers title of goods to buyer iii. Goods: any movable item iv. Hybrids: involve goods and services have to determine the predominant purpose of the contract by: 1. language of the contract 2. nature of the suppliers business 3. relative values of the goods v. services - services with incidental goods: a rendition of services with goods incidentally involved - goods with incidental services: a sale of goods with services being incidentally involved B. Common Law i. governs contracts not involving the sale of goods. ii. Courts will sometimes use the UCC by analogy. C. Basic Definitions i. Contractual obligations 3 types 1. Express parties make oral or written expressions 2. Implied-in-fact consensual agreements that fail to express the agreement of the parties in its entirety Contract: an agreement between two or more persons - mutual promises (has a legal effect a promise for the breach of which the law either provides a remedy or recognizes a duty (Restatement 2nd).

CONTRACT = MUTUAL ASSENT + CONSIDERATION

1. Need to determine if an offer is made 2. If so, did the party express assent? (Acceptance) =

CONTRACT
3. if so, is the contract supported by consideration?

Basis of Contractual Obligation: Mutual Assent and Consideration

A. Mutual Assent: meeting of the minds - reasonable person test

BUT sometimes a meeting of the minds isnt the same as mutual assent - Objective Theory of Contract intention to be bound based on objectivity (reasonable person test what a reasonable person would conclude from the words and conduct) not subjectivity

(Embry v. Hargadine) P demanded a renewal of his employment contract or he would quit. D said Go ahead youre alright. A reasonable person would think this was an expression of assent contract is enforceable based on objectivity. (Lucy v. Zehmer) P challenged D that he wouldnt sell his property. D accepted as a joke, but it was enforceable. If the meaning of the expressed words and actions are reasonable, it is immaterial what their real intention may be and the contract is valid and binding. doesnt matter what internal intent was it only matters what the outward expression was CANNOT claim that you are not bound to terms of the contract if you didnt read or subjectively understand them (Ray v. William Eurice & Bros.) D didnt read the terms of the building contract closely and agreed to specifications that they later didnt intend to follow. But they signed it and bound themselves to the contract. Intent = immaterial. Expressed words and actions matter. Pepsi points case: No reasonable person would believe the jet in commercial was an actual prize not reasonable. Need to consider other circumstances, like context in which the words were used, past history of dealings, relevant business norms derived from customary meaning of parties words. (UCC 1201(b)(3)

1. Offer and Acceptance in BILATERAL Contracts 1. Commitments on BOTH sides -> an exchange of promises -> reciprocal commitments (may be formal or not) 1. Preliminary negotiations: exchanging communication Rest. 26 2. Offer direct, complete proposal that a contract be entered into. A proposal manifesting a willingness to enter into a bargain, and made in such a way that the other person

is justified in believing that his assent to that bargain is invited, and if given, will result in a binding contract. (Rest. 24) a. an outward manifestation (written, oral, etc.) (Subjective inner intent doesnt matter. Expressed intent does.) b. certainty and definiteness of terms c. signal that acceptance will close the deal (offerer must signal that offerees acceptance will conclude the deal. Must be a willingness to commit.) Communications that withhold privilege of further assent is not an offer (ex. Invitation to make an offer or preliminary negotiations) 3. Acceptance Voluntary act by the person to whom the offer was made, by which they exercise their power to create a contract offered by the offeror. (Rest. 52) a. Mirror-image rule: acceptance must mirror the terms of the offer b. Acceptance must be communicated: through the same means used by the offeror, the means customarily used in that transaction, or another reliable means. SILENCE can be acceptance if theres a reasonable opportunity to reject, if offeror has communicated that silence will be acceptance, it would be reasonable to notify if he does not intend to accept PERFORMANCE (Rest. 50) or tender delivery commencement of performance MAIL: Mailbox Rule acceptance by mail is effective upon dispatch so long as the acceptance is properly posted. Only applies to acceptances. Once it is dispatched, it is binding. (Restatements) acceptance under an option contract is effective upon receipt by the offeror, but the case law on this has been limited. the Mailbox Rule does not apply to unilateral contracts only bilateral. (Lonergan v. Scolnick) P sent letter to D asking about land for sale responded to letter too late D indicated he was going to sell it quickly. An ad is not an offer because many people could respond its an invitation to make an offer. No contract because no offer. (Izadi v. Machado) Car dealership made a deceiving ad P sued

enforceable contract if ad is purposely contradictory or misleading. Usually ads are only invitations to offer unless they are reward offers of self-limiting reward offer (Carbolic Smoke Ball). (Normile v. Miller) Issue of offer/counter-offer/acceptance in real estate sale. P made offer, so when D made counter-offer, she revoked the original offer, and the 5:00pm expiration was only part of original offer. No timeline in counter-offer. P made no indication that he would accept counter-offer, so D sold it to someone else. P no longer had power of acceptance. No enforceable contract. 4 ways to terminate power of acceptance: lapse of time, death/incapacity, revocation by offeror, rejection by offeree. Lapse of time: an offerrees power of acceptance terminates at the time stated in the offer. If not specified, a reasonable amount of time. Revocation: The offeror is free to revoke an outstanding offer (terminating offerrees power of acceptance) at any time as long as it (1) occurs prior to acceptance and (2) is effectively communicated. 1. Direct revocation: offeror communicates directly with offeree. 2. indirect revocation: Offeree will learn of offerors intention from a third-party source (offeror has taken definite action inconsistent with the intention to enter the contract and offeree acquires reliable information of this action)

2. Offer and Acceptance in UNILATERAL Contracts A. Offer: The offeror offers to exchange promise of a future performance only in return for the offerees actual rendering of performance. Only one party is bound in a conditional sense no mutuality offerree is never bound because they can choose not to perform and can also choose to abandon performance at any time Ex. reward offer B. Acceptance: Actual performance is acceptance. No contract until the offeree completes entire performance (Ex. Crossing the Brooklyn Bridge) Act of crossing completes performance and offeree is entitled to what was promised. But what happens if you only get halfway across? Offer can be withdrawn before it is completed Offeror is free to revoke the

unilateral offer until completed, but modern rules have changed this. Offer cannot be revoke once offeree has begun performance. Performance can be abandoned at any time.

(Petterson v. Pattberg) D made offer to P that if he paid off mortgage, he would deduct the remaining amount, but when P went to pay, D wouldnt let him in the door and said he already sold the mortgage before P could complete the requested performance of paying him. D revoked the offer before P completed performance, so there was no unilateral contract. but now, modern rule is that once offeree begins performance, an option contract is created and the offeror may not revoke it. (Restatements 45) (Cook v. Coldwell Banker) P promised a bonus for performance from D employer. P met requirements for bonus, stayed until end of year, then took a new job and never got paid the bonus. There was an enforceable unilateral contract between D and P because P fully performed the requested action, and D cannot revoke the offer after performance has been completed. Remedies for breach of contract: 1.expectation interest puts the promisee in the same position he wouldve been in had the promisor performed his promise 2. restitution and reliance interest the extent to which the defendant has been enriched by, or the plaintiff has been injured by, plaintiffs actions in reliance on defendants commitment to perform. 3. specific performance ordering the defendant to cooperate with the plaintiff in exchanging promises as originally agreed to 3. CONSIDERATION: A benefit received by the promisor or a detriment incurred by the promisee. Something of value given in exchange reciprocal What you promised is what I want, and you want to get what I promised in exchange. (quid pro quo) Must be bargained-for. An exchange in which each party views their performance as the price of the others promise or performance. A bargain constitutes consideration. Legal detriment when a party obliges himself through a bargain to perform in a certain manner, even if the performance is not detrimental in the ordinary sense of the word. (Hamer v. Sidway) (Nephew was promised $5000 by his uncle if he refrained from drinking, smoking, etc. until he turned 21. He did this, but after uncle died, executor refused to pay nephew the money. Court forced him to pay because the nephew gave up his legal right to drink, etc, in favor of the promise from his uncle. This was sufficient consideration even though giving

up those things wasnt detrimental to him. The forbearance to act of giving up a legal right is a legal detriment. (Pennsy Supply v. American Ash) (American Ash offered materials to Pennsy for free but they were faulty, and Pennsy was sued for its construction job. Trial court said A.A. not liable because no consideration for free material 1. Gift 2. No bargaining process. But this was reversed. Consideration = A.A. gives away material (and not having to dispose of it in exchange for Pennsy taking it benefit/detriment this is consideration. Any promise in exchange for another to get what youre getting doesnt have to involve actual bargaining.) (Wolford v. Powers) (D promised to take care of Ps son if they named him after D promised $10,000. P was named after D and wants the $. This is consideration because D got what he wanted (naming of the child) for the detriment of P (giving up the right to naeme their son). It doesnt matter how much it was worth it was up to D to decide how much this was worth to him. Courts wont examine the $ that parties think something is worth Peppercorn theory freedom of contract). a. Gratuitous promises: A promise is made but promisee doesnt promise or give anything in return no consideration not enforceable. (Usually family promises) (Dougherty v. Salt) (Aunt gave nephew promissory note, but estate wouldnt pay. This was unenforceable because there was no exchange for her gift no value to aunt - no consideration. (Plowman v. Indian Refining Co.) (Co. promised pension checks for employees for life but then stopped receiving them. This agreement had no consideration because past employment cannot count as present consideration. There was no bargaining voluntary, revocable arrangement because no benefit to the co. and no detriment to the employees. b. Inadequate v. Insufficient Consideration: Inadequacy (unequal values) is not a defense for breach of contract (like in Wolford). Insufficiency means there wasnt consideration for the contract. (Batsakis v. Demotsis) (D borrowed $25 from P but agreed to pay back $2000. Court said the inadequacy of consideration will not void the contract but only the sufficiency of consideration. D got what she contracted for according to her testimony. c. Illusory Promises: a promise to perform that leaves performance to the discretion of the promising party no consideration not enforceable.

(Dupont v. Reno) (DuPont (manufacturer) terminated contract. Reno (distributor) sued for breach. Dupont did not promise to be bound just a mere desire and intention to continue while satisfied. Reno could terminate contract at any time. There was a lack of mutuality illusory promise.)

PROMISSORY ESTOPPEL Limiting Revocation: Pre-Acceptance Reliance

A. Option Contracts: a contract to keep an offer open. Involves 2 promises: 1. Promisor makes an offer. 2. Promisor promises to hold the offer open for a period of time in exchange for some consideration. Offeree can accept the first offer or allow the option to lapse and not accept the offer. (Baird v. Gimbel Bros.) (Gimbel sent bid to Baird for construction contract, but made an error in the measurements sent notice about error and withdrew bid. But Baird used their offer in his bid to the owner, but Bairds offer was accepted. There was no acceptance by Baird of Gimbels offer just by using it in his bid. Gimbel was not bound because there was no consideration received. Gimbel revoked the offer before it was accepted. Bairds acceptance wouldve been Gimbels consideration not their use of the bid.) But Courts have changed this trend

(Drennan v. Star Paving Co.) (Drennan used Stars bid in preparing its own bid for school construction. Drennan was awarded the job, but Star tried to revoke its bid because of an error. Since Drennen used Stars bid, there was an implied promise by Star that the offer would not be revoked. Unilateral contract Drennan had begun performance and had reasonably relied on this implied promise.) B. PROMISSORY ESTOPPEL: Protection to the offeree against revocation of an offer to enter into a unilateral contract when the offeree has relied on the offer by beginning the request performance. Detrimental action by the promisee in reliance on a promise is a SUBSTITUTE for consideration and makes the promise enforceable. (Berryman v. Kmoch) Berryman gave Kmoch a 120-day option contract to

buy land for $10 and other valuable consideration but this was never paid. Berryman asked to be released from the contract and sold it to someone else. Court said no consideration because Ds actions were normal actions of a real estate broker. No consideration because D wasnt required and didnt promise to do anything to benefit P. Since the offeror took action to revoke the offer and there was no consideration, no promissory estoppel.) (Pops Cones v. Resorts Intl) (P and D had been negotiating contract for P to lease space in Ds building. D told P not to renew current lease P made arrangements to move business then D withdrew offer. P suing for damages for moving business. Court said D is liable to P for damages. Promissory estoppel because P relied to their detriment on Ds promises even though contract wasnt fully negotiated. Here, there is liability with promissory estoppel in preliminary negotiations. PROMISSORY ESTOPPEL IS BEING EXPANDED. Before, P.E. used as a substitute for consideration Now, P.E. used as a substitute for the definite promise C. Firm Offers: Some offers will be irrevocable despite the absence of any consideration.

UCC 2-205: Sale of Goods

- (A) an offer (B) by a merchant (C) to buy or sell goods (D) in a signed writing but which its terms gives assurance that it will be held open is no revocable, (E) for lack of consideration, during the time stated or if not time is stated for a reasonable time, but in no even may such period of irrevocability exceed 3 months; but any such term of assurance on a form supplied by the offeree must be separately signed by the offeror. (B) UCC 2-104: Merchant = a person who deals in goods (C) UCC 2-105: Goods = all things movable (D) UCC 1-201 and UCC 2-205: Signed = authenticated record Two fundamental questions for Contracts for the Sale of Goods:

D.

UCC 2-207: Battle of the Forms

-Problems when parties transact business with pre-printed forms. The parties send their own terms in documents offers/counteroffers but no acceptance -under 2-207, you ask whether a contract was ever formed and if so, what are the terms

 A definite expression of acceptance will operate as an acceptance even though it states additional or different terms, unless acceptance is expressly made conditional on assent to the additional or different terms. (expression of acceptance or written confirmation need manifestation of assent, and then there is a contract even if there are no written documents or if there are different terms) I. FORMATION A. Under 2-207 (1): ASSENT by 1. Exchange of writings 2. Oral agreement and written confirmation B. Under 2-207 (3): Proviso II. TERMS A. If its a contract under (1): 2-207 (2) applies B. If its a contract under (3): 2-207 (3) proviso applies BUT, if acceptance is conditional on assent to different terms, this is not a contract and the proviso is triggered. (its possible to have a contract with different terms, but not when the acceptance is conditional) -Proviso: you need an expression that says I wont go forward unless you accept my terms. This triggers the proviso clause, and it is not a contract under subsection (1) and subsection (3) is used to figure out the terms. If the proviso is not triggered, then there is a contract and the terms are figured out under subsection (2). -Additional terms: When there are different terms, you have to figure out which ones apply. If both parties are merchants, additional terms DO become part of the contract If both parties ARE NOT merchants, additional terms DO NOT become part of the contract if the: 1. offer expressly limits acceptance to the terms of the offer 2. The terms materially alter the contract 3 If notification of objection to the terms has been given (Princess Cruises v. Gen. Electric Co.) (Contract for D to repair Ps ship. The parties exchanged forms and D sent a final confirmation including terms that limited its liability for breach. The Court treated this final confirmation as a counteroffer to Ps purchase order and said that P accepted the counteroffer by giving D permission to begin work, by failing to object to the terms in the final confirmation, and by paying the price quoted in the final confirmation. Since this was the last form sent before performance, its terms governed the contract. )

- last shot rule: a party impliedly assented to and thereby accepted a counter-offer by conduct indication lack of objection to it. -Different terms: Courts have different approaches to this. 1. Subsection 2 applies to both additional AND different terms but this doesnt usually apply because different terms usually materially alter it, so only the offerors terms apply. 2. Subsection 2 doesnt apply to different terms, so the different term wont be part of it and only the offerors terms apply. 3. Knockout Rule when terms dont meet, they knock each other out neither term is included. This removes the advantage of the 1st offer from offeror. (Brown Machine v. Hercules) (P sold machine to D and an indemnity provision was included in Ps order form but not in Ds purchase order. The indemnification provision did not become part of the contract because a price quote is not an offer just an invitation to offer. Ds purchase order was the offer. There was no unwillingness of P to proceed, so this acknowledgement constitutes an acceptance with additional or different terms. Ds offer expressly limited acceptance to the terms of the offer and inclusion of the indemnity provision without express consent of D would materially alter the contract.) E. Indefinite Terms and Agreements to Agree terms must be reasonably definite in order for an agreement to be enforced. Restat. 33: gaps in terms of a contract may reflect the absence of an intent to be bound but otherwise a contract can be formed if the terms are definite enough to provide a basis for determining the existence of a breach and for giving and appropriate remedy. (Walker v. Keith) (Contract for renewal option of lease but no price was set. They agreed to agree but this isnt binding, and its not the courts job to determine the terms (rent) of the contract.) F. Letters of Intent Used by parties in complex negotiations to express terms to which they have already agreed even though complete deal isnt finished yet. Many times, language expressly disclaiming the intent to be bound has been dispositive, preventing liability. Whether or not a contract actually exists depends on the subjective intent of the parties but on what they expressed in their writings. These can result in liability (Texaco v. Pennzoil: resulted in $10 billion jury verdict and eventual bankruptcy of Texaco for interfering with a

merger) (Quake Construction v. American Airlines) Even though D sent letter of intent with language giving them the right to cancel, the court allowed the P to go to trial for damages. Different factors made their intent to be bound ambiguous (language authorizing immediate commencement of performance, implied recognition of the parties that the letter was binding otherwise cancellation language would not have been necessary.) G. Electronic Contracting Shrinkwrap - warning outside package of a product informing the purchaser that the product contains the sellers terms and use of the product constitutes the purchasers agreement with those terms. Clickwrap before completing purchase of a product, the purchaser must scroll through the sellers terms and click an I agree button. If the purchaser refuses, the sale does not go through. Browsewrap information made available by Internet providers on their websites and sometimes involving information that the user accesses but does not always download. (Terms of use of a website). Courts are split about whether or not customers are bound by terms that were not fully disclosed to them but other courts do bind customers to these contracts if they had a reasonable chance to read and consider them. Uncertainty about whether or not UCC Article 2 applies to electronic information up to courts to decide. (Brower v. Gateway) P ordered computer with agreement with arbitration provision and claims it was unconscionable, but court says no. The contract was formed when P kept the computer for 30 days (according to shrinkwrap agreement). P could return the computer if he didnt agree to the terms. (Register.com v. Verio) D subscribes to Ps services and obtains data to send spam, which is against Ps terms for use of their website. The terms appeared after D submitted requests for data, but they appeared every time, so D was continuously aware of the terms and continuously violated them.

Liability in the Absence of Bargained-For Exchange: Promissory Estoppel and Restitution

Problem: Promises not supported by consideration were not enforceable, so courts had difficulty reaching the conclusion that a person could reasonably rely on such a promise. Reliance wouldve been reasonable if there had

been consideration but if none, reliance would be unreasonable. (Kirksey v. Kirksey) Widow received letter from brother-in-law offering her a place to live told her to seel her land and move to his land. In reliance on this, she abandoned her land and possessions and moved, but 2 years later, he demanded that they leave. Court ruled in favor of D because there was no consideration for his promise only a promise to make a gift of a place to live with the natural condition associated with it that she would have to move to where his property was. today we might look at this through promissory estoppel, but at that time (1845) the doctrine hadnt evolved enough. Promissory estoppel began being used as a way to enforce promises Promissory estoppel as a substitute for consideration: 1) Promise 2) Promisors reasonable expectation that the promise will induce action 3) Reasonable reliance by the promisee 4) Necessity of enforcing the promise to avoid injustice (Wright v. Newman) D assumed the responsibilities of fathering Ps son even though he wasnt biological father. This caused P to refrain from identifying and seeking support from the real father and so his promise of paying child support was enforceable based on her detrimental reliance. (Promises to Convey Land) (Greiner v. Greiner) Mother told so she would give him land if he moved home, so he did, but mother wouldnt give him the deed. Court said she sufficiently expressed a promise to son and this caused reliance enforceable due to promissory estoppel. (Charitable Subscriptions) Promises to a charity lack consideration, but courts used promissory estoppel to enforce them. Restatements 90(2): A charitable subscription or marriage settlement is binding under Subsection (1) without proof that the promise induced action or forbearance (Allegheny College) D made a promise to donate to college after her death in the form of a scholarship named after her. She paid $1000 (of the promised $5000) before her death, and the college set it aside. However, months later she repudiated the promise and the college sued after her death. The court said the promise was supported by consideration as a detriment to the promisee sustained by accepting the $1000 and impliedly promised to do whatever acts were customary or reasonably necessary to maintain the

memorial fairly and justly a biltateral contract was formed. But, Cardozo discussed promissory estoppel as a possible basis for the courts decision, but there was nothing in the way of reliance that would have made the promise enforceable. but promissory estoppel was still being used in other instances as the equivalent of consideration for charitable subscriptions. (King v. Trustees of BU) MLK promised BU to donate his papers to them. They had taken possession of them, indexed them, made them available to researchers, and provided trained staff members to care for them. Court used this reliance for promissory estoppel to enforce this promise. (Promises in a commercial context) (ex. Promises of pensions to employees) In employment situations, courts insist that the promisee incur some meaningful legal detriment in reliance on the promise. (Katz v. Danny Dare) D offered pension to P to incentivize him to retire because they didnt want to fire him. D argued that P didnt give up anything to which he was legally entitled since was an at-will employee and did not rely on Ds promise, but court said he did because he retired based on Ds promise of a pension. (Insurance) Promises to obtain insurance are enforceable if they are relied upon, regardless of whether the promisor performed its promise badly or not at all. (Shoemaker v. Commonwealth Bank) D told P they were required to get insurance and if they didnt, D would obtain it and add it to their mortgage payment. Ps house burned down and was uninsured and sued D for damages. Court said yes, there is promissory estoppel: 1. D promised to obtain insurance and add it to costs of motgage. 2. P relied on this and didnt get insurance. D did get insurance, but they let it expire so theres enough for the jury to determine if there was reliance or not. 3. Injustice = loss of the house and no reimbursement. Restitution A person who has been unjustly enriched at the expense of another is required to make restitution to the other,

(Glenn v. Savage) Ds building materials fell into river and P saved them from the water suing D for the costs of this service. Court said there was no legal liability for D because he didnt request Ps services and didnt promise to pay. An act done for the benefit of another without his request is a voluntary act of courtesy has no legal cause of action. The court says a friendly act will never be converted into a pecuniary demand.

(Restitution in the absence of a promise) A. Express contracts: made in express oral or written terms B. Implied-in-fact contract: based on the ways the parties behaved parties conduct 1. the defendant requested the service 2. the plaintiff expected the defendant to compensate them for that service 3. the defendant knew or should have known that the plaintiff expected compensation C. Implied-in-law (quasi contract): not promissory there is a contractlike liability because the law says there ought to be based on restitution (Credit Bureau Enterprises v. Pelo) D was taken to the hospital and held involuntarily for mental instability refused to sign a consent form accepting responsibility of payment until nurse forced him to. After D was released, hospital demanded payment. The court said D was liable for payment because it was an implied-in-law comtract. The hospital performed services that benefited D and they were not gratuitous. Not paying them for their services would be unjust enrichment of D. (Commerce v. Equity) P was hired by a general contractor who filed for bankruptcy and didnt pay P P suing owner for restitution. Court says the owner paid they general contractor, so they werent unjustly enriched, and P must exhaust other remedies and try to get paid by general. (Cohabitation problems v. marriage) (Watts v. Watts) Wife and husband cohabitated for 12 years had kids together, shared bills, financial expenses, etc. Wife suing husband for breach of implied-in-fact contract and unjust enrichment. Her domestic services (raising children, cooking, cleaning) were consideration. She also worked for husband, contributed financially to his business so he would be unjustly enriched if he gets to keep all the assets that she contributed to. Husband benefitted from the relationship, knew about the benefit, and accepted it. (Promissory restitution) (Mills v. Wyman) P took care of Ds son while he was sick (and died) but D promised to pay P for his services and later refused. Court said the moral obligation of D to pay P is not sufficient consideration not enforceable because of the lack of the bargain element. (Webb v. McGowin) P was cleaning in a mill and was about to drop a heavy weight to the floor below but saw D standing below. In order to avoid injuring D, P fell back with the weight and sustained severe injuries

permanently disabled. D promised to pay P a monthly sum for life and did until he died. P suing Ds estate for continued payments. Court said the moral consideration here is sufficient to support the promise. When the promisor receives a material benefit and the promisee suffers a material detriment, moral obligation is sufficient consideration. Different from Mills because in Mills, the promisor did not directly receive a benefit. Material Benefit rule if a person receives a material benefit from another, other than gratuitously, a subsequent promise to compensate the person for rendering such benefit is enforceable. Restatement 86: if the promise would be disproportionate to the reasonable value of the benefit received, enforcement may be limited to that value.

Statute of Frauds
An affirmative defense that can be an impediment to enforcement Procedural: if you want to raise this defense, you have to raise it in the pleading A. UCC 2-201 governs sales of goods B. Transactions not involving sale of goods may still be governed by statute of frauds

1. Does the statute apply to the contract? Restatement 110 Requires some particularly important types of contracts to be in writing (real estate, contracts that will take longer than 1 year to be performed, suretyship agreements, and contracts for the sale of goods with a price of $500 or more) 2. Is there something in writing that is sufficient to show a contract? If a contract is within the statute of frauds, the next step is to determine whether there is a writing that satisfies the statute. Its satisfied by a writing that is signed by the party against whom enforcement is sought and that demonstrates that a contract has been made and contains essential terms of the agreement. 3. If theres no sufficient writing, is there an exception for this contract? Part performance or some other reliance. UCC Article 2

Purposes: - Limiting fraudulent claims - Evidentiary function: provide evidence of contract besides self-serving testimony - Cautionary function: protects people from impulse purchases - Channeling function: bright-line test that distinguishes agreements that are

enforceable from those that are not - Promotes greater certainty about the details of agreements (McInerney v. Charter Golf) P worked for D, got a better offer from another employer, but agreed to stay and work for D for lifetime employment. D fired p after a few years, and P is suing for breach. The Court says that this contract for lifetime employment is subject to the statute of frauds because it could not be performed within one year. The dissent says it shouldnt be within the statute because its for an uncertain amount of time. This is an outlier case because usually performance for life is not within the statute because the designated life may end within a year leaving the contract fully performed One-year provision: one year is measured from the date of the making of the contract not beginning of performance of it. A contract with a duration of less than a year may still fall under this provision if performance is not to be completed until more than a year after contract formation. The question is whether it is possible to complete the required performance within a years time Virtually any contract can be breached or excused within a year of its formation. However, courts typically hold that a breached or excused contract would not be a fully performed contract for purposes of the one-year provision. Under the majority rule, a lifetime or permanent contract of employment is not governed by the one-year provision because the employees death is possible within the first year and would terminate the contract without breach. The minority does treat these types of contracts as falling within the one-year provision. (Crabtree v. Elizabeth Arden) Court permitted several documents to operate together to satisfy the statute, even though only one of them was signed and even though the documents themselves did not explicitly refer to one another. Form of writing: When multiple documents are combined to form a composite document some evidence must be available to show that they are related to one another and to the transaction involved in the dispute.

(Promissory estoppel) Where a party suffers losses in reliance on an oral contract, but the enforcement of that contract is barred under the Statute of Frauds, the party may be able to recover damages via promissory estoppel.

Some courts hold that promissory estoppel is available to protect reliance on a contract whose enforcement is barred by the Statute of Frauds. Other courts have held that the common law promissory estoppel doctrine is preempted by the Statute of Frauds. Among the courts that do not recognize promissory estoppel, some will impose stiffer requirements on the claimant than those applicable under an ordinary promissory estoppel action. In particular, courts will look for: o The definite and substantial character of reliance, and its relationship to the remedy sought o The extent to which the reliance is corroborated by the evidence of the formation and terms of the contract o The extent to which the formation and terms of the contract are otherwise established by clear and convincing evidence

(Alaska Dem. Party v. Rice) Pres. promised P that she would have her old job back when he took office, so she quit her job and moved to Alaska, but the party informed the pres. that they couldnt hire her. Court said P had a promissory estoppel claim even though it was a 2-year contract for employment and subject to the Statute of Frauds. The Court said promissory estoppel is an exception only if not enforcing the contract would lead to injustice. P relied to her detriment on Ds promise. Here, the court didnt enforce the contract but just allowed P to recover for damages that she incurred in relying on the promise. Restatements 139: A promise which the promisor should reasonably expect to induce action or forbearance and which does induce action or forbearance is enforceable notwithstanding the Statute of Frauds if injustice can be avoided only by enforcement. but this should be limited to circumstances such as the inadequacy of other remedies; the degree, reasonableness, and forseeability of the promisees reliance; and the corroborative character of the promisees reliance, which makes enforcement necessary to avoid injustice.

The Sale of Goods and the Statute of Frauds: UCC 2-201 A contract for the sale of goods for the price of $500 or more is not enforceable unless there is some writing sufficient to indicate that a contact for sale has been made and signed by the party against whom enforcement is sought.

5 ways to satisfy UCC Statute of Frauds: 1. Signed writing Writing includes any kind of printing, typewriting, or any other intentional reduction to tangible form. Because of problems with electronic media, proposed revisions change writing to record. Signed by the party against whom enforcement is sough Sufficient to show that a contract for sale has been made The writing does not have to contain all of the terms (price, quality, etc.) but it must indicate that a contract has been made and must contain a quantity term. 2. Merchants confirmation 2 merchants enter an oral agreement and one sends the other a written confirmation. The Merchant Confirmation exception: 2-201(2) applies only if the transaction is between merchants. A merchant must send a confirmation of the contract in writing within a reasonable period of time after the contract was formed. It must be received by the other party. Must show the existence of a contract, must be signed by the sender, and must show the quantity of goods. if these are met, it is treated as sufficient to comply with the statute against the recipient merchant even though the recipient has not signed any writing showing the existence of a contract. 3. In-Court admission Occurs when the party against whom enforcement is sought admits in his pleading, testimony, or otherwise in court that a contract for sale was made. 4. Partial Performance Contract is enforceable with respect to goods for which payment has been made and accepted or which have been received and accepted. Must be action by both parties. (Ex. Payment can constitute partial performance on if the buyer makes it and the seller accepts it.)

5. Substantial Reliance by the Seller of Specially Manufactured Good UCC 2-201(3)(a) exception to the statute for specially manufactured goods. (Buffaloe v. Hart) P bought property from D and gave them a check, but the next day, D tore the check and refused to sell. The court said the check wasnt sufficient writing because it wasnt signed by D (the party being charged). But, since D had accepted the sale, this was part performance because the seller delivered the goods and the buyer accepted them. This is enough to enforce the entire contract.

Interpretation and Parol Evidence Rule

Substance was an offer made? (offer, acceptance) Form the medium of expression/assent (statute of frauds) sometimes this distinction is blurred - Interpretation: process by which a court gives meaning to contractual language when parties attach materially different meanings to language - Construction: judicial role in determining the legal effect of that language 3 views: 1. Subjective if words have different meanings, theres no contract 2. Objective words should be interpreted in accordance with the standard of a reasonable person 3. Modified Objective Whose meaning controls and what was that meaning? Restatements 201(2)(b) - If parties have different subjective understandings of a word, then the meaning of one party controls if the other party knew or should have known of that meaning. (Misunderstanding) Parties use the same word but attribute different meanings to it. Restatements 201(2)(a) If a party did not know of any different meaning attached by the other, and the other knew the meaning attached by the first party, the court would find the contract according to the first partys intent. (Joyner v. Adams) P leased property to D and had a term in it for developing property. P meant putting buildings up, but D meant getting the land ready for construction. There was evidence of both parties meanings, and the

Court remanded the case for more evidence in order to determine if P knew or had reason to know of Ds meaning, and if so, it should be interpreted according to Ds meaning. Contra Proferentem: Usually (in adhesion contracts) the rule is to enforce the contract against the one who drafted it. (Frigaliment v. BNS) P and D had a contract for the sale of chickens, and the entire contract was written in German except for the word chicken. The buyer wanted better-quality chicken, but seller interpreted it to be stewing chicken. The Court determined that there wasnt evidence to show that the seller knew the buyer wanted better-quality chicken or that the seller had any reason to know of this intent, so the contract had been formed according to the terms intended by the seller. The sellers meaning was compatible with the objective meaning of chicken. They looked at trade usage of the term and a reasonable view that the seller had to make a profit, and the price he was charging would not result in a profit if it was for better quality chicken. The buyer had not proven that the seller knew or had reason to know of the buyers different, narrower meaning. When multiple possible meanings of terms, courts make an effort to construe the contract with reference to an external source, such as usage of trade, course of dealing, or course of performance, to determine whether one of the parties knew or shouldve known the intent of the other. (Reasonable Expectations) (C&J Fertilizer v. Allied Mutual) P had insurance with D to protect against burglary, but according to the definition in the contract, it excluded burglary that did not result in visible marks or physical damage to the exterior of the premises at the place of entry. D denied Ps claim because the burglar broke into the premises without leaving any marks. The Court ruled that the policys exclusion of burglary of this type went beyond the reasonable expectations of P and would not be enforced. The language made it clear that it would only protect outside and not inside jobs, but not change depending on the skill of the burglar. Restatements 211(3) A party is not bound to terms of a written obligation, despite having signed it, where the other party has reason to know that the party who signed would not have manifested his assent if he knew of the term involved in the dispute. Adhesion contracts: take it or leave it customers cant negotiate the terms usually standardized with no opportunity to make adjustments to the terms imbalance of bargaining power

Parol Evidence Rule

When the parties to a contract have expressed their agreement in writing and they intend for that writing to be a complete and final version of their agreement, the rule prohibits the introduction of evidence of prior understandings or negotiations between them to vary or contradict the written version. Purposes: 1. promotes commercial certainty 2. permits parties to finalize their agreements 3. facilitates parties in performing contractual obligations confidently - Parol Evidence Rule governs: 1. Both oral and documentary evidence of negotiations and other communications between the parties 2. Communications that took place prior to or contemporaneously with the execution of the written contract

(Pac. Gas & Elec. V. G.W. Thomas) Written agreement required D to perform work for P at its own risk and expense and to indemnify P against all loss, damage, expense and liability resulting from injury to property, arising out of or in any way connected with the performance of this contract. D said they only meant this language to apply to require the D to pay for damage to property owned by a third party, and this that it did not require him to pay for harm done to Ps property. The court ruled that parol evidence is admissible if it is relevant to prove a meaning to which the language of the instrument is reasonably susceptible. By only looking at the plain meaning of the words, they might fail to see the intent of the parties and might substitute the judges understanding of the terms. (Thompson v. Libby) P sold lumber to D, who was unhappy with the quality and claimed there was an implied warranty (even though the contract didnt state it). The court said parol evidence about the warranty was not admissible because the written contract was the full expression of the agreement on its face. It is presumed that the parties have included every material item and term in it. Parol evidence cannot be used to add an additional term, and a warranty term is not collateral because its still part of the contract of sale. Classical view: Four Corners test If, upon examination of the material with the four corners of the document, the contract appears complete, its conclusively presumed to be a fully integrated written contract all parol evidence is excluded.

 Merger clause: states that a writing is intended to be final and complete; all prior understandings are deemed to have been merged into or superseded by the final writing