Contracts
Professor Helen Scott
Fall 1998

Is corporation involved?  If yes - 
Agency: did agent have actual or apparent authority?

Is it an intrafamily dispute?  If yes - maybe not likely to be enforced (the closer relationship - the less likely; if more like K: offer, acc’ce, c’n - bargaining - more likely)

Are there dates in the fact pattern?  If yes, consider firm offer and NY statute on firm offers
Is K formed/offer made in NY - NY statute may apply
Shares of stock? - not goods under 2-105, but maybe analogize
Merchant or not merchant under 2-104? - do 2 different scenarios
	say for my client would be better this claim

Employment at will? no written employment K?
To show that there was a breach, P has to show 2 things (Cloutier)
1. 	firing was based on bad faith, malice and retaliation (Cloutier, Monge)
2. 	public policy violation: fired for doing smth that public policy would encourage or refusing to do what public policy would condemn (Cloutier, Howard v. Dorr)
	Age and Sickness do not count (Howard v. Dorr)

Opportunity cost - damage can be in lost opportunity: when person missed out on another deal

Is there malicious interference with K (torts)?  If yes, court may find for P (Winternitz)

What does the client want?
•	What is the best case scenario?
•	What is the worst case scenario?
•	As a legal matter - which claim is better?
•	As a practical matter - which claim will get more damages?
•	Is settlement possible?
•	What’s objective - to retain friendship?

Is there a K? Offer, Acceptance, Consideration
Is there a bilateral K?  Is there an exchange of promises
•	Is there an offer or invitation for an offer (if too indefinite - Rest §26 Preliminary Negotiations)
•	Is there an offer? Rest §24:
•	Can offeree just say “yes”?  Is all offeree have to do is accept?
•	Does offer include all “reasonably certain” material terms (price, quantity, time, place of delivery, medium of payment, price, subject)? Rest §33
•	Is this an offer for a bilateral or a unilateral K?
•	Does offer invite active acceptance (Rest 50: by promise or performance) as opposed to acc’ce by silence (Rest 69)?
•	Offer is effective upon receipt
•	Form letter/ad in newspaper (sent to more than one person) – not an offer (invitation for an offer) (Lonergan v. Scolnick)

Was offer accepted or revoked?
•	Is there an acceptance? Rest §50:
•	Is acceptance invited by the offer?
(if there was acc’ce, likely that there was K)
•	Mirror-image rule - acc’ce must match offer (Normile v. Miller)
•	Acceptance doesn’t match - counter-offer (or UCC if sale of goods?)
•	Is there time is of the essence clause (if no acc’ce within specified time, offer may expire)
•	Offeror is master of the offer (Henthorn v. Fraser)
•	If offeror specified the means of acc’ce in his offer, he can waive it and ok a different method
•	Mailbox rule (Henthorn v. Fraser): acc’ce is effective upon deposit
when offer doesn’t specify the method of acc’ce, any reas method will suffice (Henthorn v. Fraser)
•	Revocation is effective upon receipt (Henthorn v. Fraser)
lost in the mail - still effective, misaddressed - not effective
•	Any reliable info received that offer was revoked before acceptance, even indirect - is effective (Normile v. Miller, Rest §43)
•	Revocation before acceptance – effective (Rest §36)
•	Revocation at the last minute (at any time) but before acc’ce - effective - “I revoke, I revoke” (Petterson v. Pattberg)

Classical K
•	Unilateral mistake does not void K (Ray v. Eurice Bros)
•	But if mutual mistake – no meeting of the minds – no K
•	If you showed manifestation of assent - you’re bound (St. Landry Loan v. Avie) - but was there disparity in bargaining power?
•	Signature binds - manifestation of assent (Ray v. Eurice Bros)
•	Reasonable person standard as to objective manifestation of assent (Ray v. Eruice Bros)
•	Secret intent is irrelevant, when there is manifestation of assent (Shoney’s)

Is there consideration (Rest 71)? (if an exhange K: money for goods, money for services – c’n)
•	Benefit/detriment test (Hamer v. Sidway)
•	detriment to promisee is sufficient to qualify as c’n; benefit to promisor is not always necessary (Hamer v. Sidway)
•	Bargained-for exchange test (Baehr v. Penn-O-Tex)
•	can be condition of gratuitous promise - not c’n
•	Gift promises - no enforcement
•	Mere promises are outside of enforcement - has to be exchange of smth
•	Court doesn’t inquire into value, adequacy of c’n (Batsakis v. Demotsis)
•	past performance is not c’n (Plowman)
•	moral obligation is not c’n (Plowman)

Is there a unilateral K?
There is a bias in the Rest to find bilateral K
•	Offer for a unilateral K? Rest §24
•	Performance is both acceptance and consideration
•	Acceptance by performance? Rest §50
•	Reward - classic unilateral K: but offeree has to at least start looking for dog (Rest 45)
•	offer can be accepted by receipt and payment
•	Did performance occur before or after offer? (if after - past performance is not c’n)
•	Rest §45	Was there partial performance? (performance started – irrevocable: Option K):
	Option K is created when offeree begins performance (offeror cannot revoke, but has to be separate consideration) Rest 87(1)
•	Was there a series of unilateral Ks, each K can be viewed independently? (Shoney’s)
•	Did offeree give reasonable notice to offeror that he performed? Notice is a condition subsequent: if notice is defective - no K (Bishop v. Eaton)
•	Performance is consideration
	Past performance and moral obligation is not consideration (Plowman)
	can be a condition of gratuitous promise, but not detriment, not c’n (coming to office to pick up checks- Plowman)

K damages (the best): 
•	benefit of the bargain/expectation damages
damages in the amount he would have gotten if K had been performed
•	or specific performance

Best way to keep offer open (firm offer is not a claim, but part of K claim)
1.  Is there a Firm Offer?  UCC §2-205 (applies ONLY to SALE OF GOODS, NOT services)
•	break apart if combination: if both goods and services, like consulting – deal just with goods
•	offer by a merchant
§2-104 Merchant - person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge or skill peculiar to such practices or goods
     	if she has done sale before, or annually sells goods - merchant, of only once - doubtfully
•	to buy or sell goods
§2-105 Goods: all things which are movable at the time of K for sale
•	in a signed writing
•	gives explicit assurance that offer will be held open
knowledge that offeree will rely on the offer - may be read as assurance
•	no consideration
•	if time no stated - reasonable time
•	whether or not time is stated - no longer than 3 months: offeror cannot revoke within 3 months, offeree can still accept (if he calls and offeror says “I revoke”, he can still accept, or it would be breach)
•	when did offeree received the offer?
•	if on offeree’s form, firm offer clause should be separately signed by offeror

Can be combined with Promissory Estoppel after 3 months of Firm Offer
•	No detrimental reliance is required during the 3 month period of firm offer, but if there was reliance during 3 month period, reliance has to extend after firm offer expired
•	How easy is it for buyer to find alternative source of supply? fungible/substitutable goods?
Series of repeat transactions? If yes – no detrimental reliance – no Promissory Estoppel (Shoney’s)
•	If want to have Option K after 3 months, probably need consideration in writing

Offer made in NY?  K formed in NY?
2.  NY Statute:if not merchants, not sale of goods, but offer should say that it’s irrevocable or will be held open for a stated time, if no time stated - reasonable time, can be more than 3 months

Firm offer damages: K type damages - benefit of the bargain damages or specific performance

Is there an Option K? Rest §87
§87(1) option K (a) if in writing, signed by offeror, recites consideration, proposes exchange on fair terms within reasonable time, or (b) is made irrevocable by statute
•	without consideration, no option K (Normile v. Miller)
§87(2) (Prom Est): offer intended to induce substantial action or forbearance (detrimental reliance) on the part of the offeree, before acceptance, and which does induce such action or forebarance - is binding to the extent necessary to prevent injustice - only in subcontractor cases
•	harder to prove than Rest 90
•	substantial reliance
•	offeree must use subcontractor’s offer in submitting his own bid before the bid can be accepted, and subcontractor knows that gen contractor’s reliance has to occur before acceptance can be made

Option K: K-type damages

If there is K
Does Statute of Frauds bar enforcement of K?
1. 	Does S/F apply?  is K of type that must be in writing in order to be enforceable?
•	real estate (sale of interest in land) (Rest 110) - applies to brokers
•	K that can’t be performed within 1 year, like employment Ks (Rest 110)
•	sales of goods for more than $500 (UCC 2-201)
•	personal property beyond $5,000 (UCC 1-206)
2. 	If yes (K falls within S/F), are there writings, at least one signed by D, that specify terms of K?
•	memorandum may consist of several writings if one is signed and the others clearly relate to the same transaction (Crabtree, Rest 132)
•	Rest 133 S/F may be satisfied by signed writing not made as a memorandum of K
•	Rest 134 signature merely needs to be made with intention to authenticate the writing
•	Rest 136 memo may be made at any time before or after K formed
3.  If no writings, are there any exceptions why S/F might not apply?
•	Partial Performance in land transactions (real estate only) - but only if P is seeking equitable relief: non-monetary damages, such as injunction or specific performance: land is unique (Winternitz, Rest 129)
•	Promissory Estoppel - reliance, injustice (McIntosh v. Murphy, Rest 139)
•	not limited to land Ks - can be any K (McIntosh v. Murphy – employment K)
•	remedy is limited as justice requires: P gets reliance remedy - injustice he suffered

If sale of goods for more than $500 under UCC 2-201
•	check is sufficient signed writing (Cohn v. Fisher)
•	quantity - sole material term - has to be there
•	price does not have to be in that writing
	if writing is insufficient, is S/F satisfied under 2-201(3)?
(a) 	specially manufactured goods
(b) 	D admits that K was made, but K is not enforceable beyond the quantity of goods admitted
(c) 	partial performance where payment for goods was made and accepted or where goods were received and accepted

If no K
Is there Pure Restitution (“Emergency”) claim? - no promise
Life or limb: Rest of Restitution §116, In re Estate of Crisan
1.	although acting without the other’s knowledge or consent, is entitled to restitution if
2.	he acted unofficiously and with intent to charge
3.	his services were necessary to prevent the other from suffering serious bodily harm or pain
4.	he had no reason to know that the other would not consent to receiving them, if mentally competent
5.	it was impossible for the other to give consent (or bec of youth or mental impairment consent would have been immaterial)
Property: Rest of Restitution §117, Glenn v. Savage
1.	although acting without the other’s knowledge or consent, is entitled to restitution if
2.	the services were not made in breach of duty to the other
3.	it was reasonably necessary to perform the services before it was possible to communicate with the owner
4.	he had no reason to believe that the owner didn’t desire him so to act
5.	he intended to charge for his services or retain the things if identity of owner was not discovered or the owner disclaimed
6.	the things have been accepted by the owner
intent to charge? professional?
•	if professional - more likely intent to charge, more likely that person would have bargained for benefit and agreed to receive it
•	if professional, he’d be doing the same service for money at his job, make living on it

Is there Restitution claim under Watts v. Watts?  UNJUST ENRICHMENT
1.	benefit conferred on D by P
2.	appreciation or knowledge by D of the benefit
3.	retention of benefit by D is unjust

But: is this an intrafamily dispute? - if yes, maybe considered gratuitous

Is there Promissory Restitution claim?  Rest §86
•	promise
•	made in recognition of a benefit previously received (benefit to promisor)
		benefit should be material (Webb v. McGowin: life is material benefit)
•	binding to the extent necessary to prevent injustice
but: not for a gift, or when value of promise is disproportionate to the benefit

•	How strong was intent to repay for benefit? (Webb v. McGowin)
•	time elapsed
•	heat of passion - then less likely intent, or
•	some time elapsed - then strong intent

Restitution damages: value of the benefit conferred on D by P
objective value of the benefit conferred (how to measure? can be little - just the value of service; if property - maybe market value)

Is there Promissory Estoppel claim?  Rest §90 DETRIMENTAL RELIANCE
1.	promise
2.	promisor should reasonably expect promisee to rely on that promise
3.	detrimental reliance of promisee on that promise (reasonable - Universal Computer)
4.	injustice can only be avoided by enforcing that promise
but: not charitable subscriptions or marriage
•	Is reliance reasonable? (Universal Computer)
•	Agency: Does person making promise have authority to make it? (Universal Computer)
•	Intrafamily dispute? - promises within family - unlikely to be enforced (Kirksey v. Kirksey)
•	if consulting is required in exchange for promise - detrimental reliance (Katz v. Danny Dare)

Promissory Estoppel Damages:
	reliance damages/out of pocket damages - what you spent in reliance on the other party’s words or action; to put P in a position he would have been if he hadn’t relied on D’s promise

Promissory Estoppel to limit power to revoke?
•	Rest §87(2) - option K usually in bidding cases (construction cases) - 3 parties

Where Postponed Bargaining - Agreements to Agree
•	Agr’nt to agree without mechanism for agr’nt is no K (Walker v. Keith)
•	Is a material term left open for future agr’nt?
•	Is there an open price term? (UCC 2-305) - if parties intended to be bound, open price term is not fatal to K; but can be evidence that parties didn’t intend to be bound, unless they agreed on price
•	Did parties intend to form a K? (Rest §33; UCC 2-204)
•	Is there a reasonably certain basis for giving an appropriate remedy (Rest §33, UCC 2-204)
•	Letter of intent can be binding K (Pennsylvania v. Wilmington Trust)
•	under common law - test is material terms
•	under UCC - test is intention (if there is intention - there is K)
•	if too indefinite - no K
•	Was there a written memorial contemplated but not completed? (Rest §27: when there are manifestations of assent + intention to write agr’nt; but can be evidence of preliminary negotiations)

Where K has been formed, but dispute as to meaning of K, ambiguity - Interpretation
Rest 201 Whose Meaning Prevails - modified objective view
1.	reasonable objective meaning prevails, but when parties agree on meaning - it governs
2.	rules favor the innocent party (1 knows 2’s intention, 2 doesn’t know 1’s intention, 2 is the innocent party)
3.	intention of the parties is primary - what party knows about the other’s intentions
•	P has the burden of proof - to show by preponderance of evidence that its meaning is correct
•	when Adhesion K - ambiguity is resolved against the drafter
•	words of the feather - words in context
•	plain meaning rule
Evidence of which interpretation is right (Frigaliment)
•	language of K
•	preliminary negotiations between parties
•	trade usage (common law - if new, not hold to it, but UCC - obligation to learn customs)
•	performance (202(4) - if accepted and not complained - acc’ce, if complained - no acc’ce)
•	regulatory standards
•	reasonable construction (reasonable to assume that D expected to get some profit)

Satisfaction (Morin v. Baystone)
2 standards
1. 	Objective: reas person standard - K involves commercial quality, operative fitness, or mechanical utility (standard commodities K)
2. 	Subjective: good faith - K involves aesthetics or fancy (painting a portrait - buyer can reject for any reason, as long as in good faith)
Rest 228 Satisfaction of Obligor as a Condition - reas person interpretation; commercial Ks are subject to objective standard

Adhesion Ks - insurance companies, banks
1.	standard from (with boilerplate/fine print)
2.	great inequality of bargaining power
3.	take it or leave it approach, absence of choice, no ability to bargain
•	Equal bargaining power - not an Adhesion K
•	When Adhesion K - ambiguity is resolved against the drafter

Doctrine of Reasonable Expectations (C&J Fertilizer)
1.	applies only to Adhesion Ks
2.	only where forms frustrate reasonable expectations of the parties

Briefly mention what claims the client does not have, although they might apply (if have space)
What is my advice to the client?
	Negotiate, don’t start litigation process (adversary)

Battle of the Forms §2-207  Where complete agreement has not been reached (whose forms govern)

2-207 applies only to GOODS (2-105): see if there is combination of goods and services and do only goods
If services - UCC doesn’t apply - do classical K

SPECIFIC TERMS ALWAYS TAKE PRECEDENT WHEN CONFLICT WITH STANDARD FORM (MAXIM OF INTERPRETATION: SPECIFIC TERMS OVERCOME GENERAL)

Was K formed?  If yes, what are its terms?
Part of K can be ORAL

Where is the offer: use common law principles - Rest §24
•	usually buyer’s purchase order form is the offer (material terms), seller’s acknowledgment of order form is acc’ce (Brown Machine v. Hercules)
•	Preferred for buyer - that his is the offer - first shot rule (determines who wins)
•	price quotes - usually not (requests for offers), but can be offer

Is there acceptance under 2-207? 
1.	Are there additional or different (from the offer) terms in acceptance?  If yes, go to 2-207(1)
2.	Does acceptance say that it is expressly conditional on assent (by offeror) to the additional or different terms?
•	where acceptance is not expressly conditional - it is an acceptance with additional or different terms (go to 2-207(2))
•	where acceptance is expressly conditional - 2 options
1) it’s a counter-offer ( if counter-offer was not accepted, but there was performance - go to 2-207(3))
2) court may ignore boilerplate, even if it’s in flashing lights (because everyone ignores boilerplate) and find no express conditionality (Brown Machine) - so do further analysis - go to 2-207(2)
•	but such express conditionality must be clearly expressed in writing, not just in fine print boilerplate, and to such degree that it is clear that the party would not be willing to proceed, court needs more proof of conditionality (Brown Machine)
•	silence or lack of protest is not enough, has to be express assent in writing to conditionality clause
•	so boilerplate might not be effective - but maybe indemnification clause will fail anyway because it is material (Brown Machine)
•	even if boilerplate is “flashing” and bright - do further analysis, it’s not sufficient limit (everybody knows that)

If you have acceptance with additional terms - go to 2-207(2) to determine whether additional terms will become part of K

•	If at least one party is not a merchant - then additional terms are proposals for addition to K - new terms are not part of K (proposals for addition require acceptance)

•	If both parties are merchants (2-104), additional terms are part of K unless
(a) 	did offer originally say that acceptance is expressly limited to its own original terms and thus that no new terms are acceptable?
if he did, 1) new terms are not part of K, or
2) but offeree has to assent to this conditionality clause, or it’s not effective, because it’s material alteration of K (Brown Machine)
(b) 	do new terms materially alter K: surprise or hardship (Comment 4)? if they do, new terms are not part of K
•	is it common practice to put such boilerplate in, did the other party know or should have known about it?
•	substantial economic hardship? (Dale Horning)
		indemnification clause (in boilerplate)- material (shifts all risk to buyer)
•	when hardship, but no surprise - material alteration (Dale Horning)
•	what if surprise, but no hardship - probably not material alteration
(c) did offeror expressly give notification of objection to additional terms within reasonable time after notice of them is received? if he did, new terms are not part of K + objection can be assumed if conflicting terms (Comment 6)

If you have acceptance with different/conflicting terms
(treat as additional terms)
1) 2-207(2)(b) analysis: conflicting terms can drop out under 2-207(2)(b) - if they materially alter K
2) 2-207(2)(c) analysis: Comment 6: difference in terms suggests conflict, so each party must be assumed to object to conflicting terms, thus satisfying 2-207(2)(c): conflicting terms are not part of K.  K then consists of terms originally expressly agreed to, terms on which confirmations agree, and UCC gap-fillers
3) knock out rule under 2-207(3): conflicting terms drop out, substituted with UCC gap-fillers (but you may end up not with what parties intended)

If you have counter-offer
•	Was it accepted? if yes, start over
	If there was acceptance - no 2-207(3)
•	If counter-offer was not accepted, was there performance?
	If no performance - no K (just executory K: performance has not yet occurred))

If there was performance - go to 2-207(3) (can be offer/counter-offer/counter-offer/performance)
1) 2-207(3) applies only when there is not enough writing - no acceptance, when writings do not establish K, but conduct of the parties recognizes existence of K
K consists of terms on which writings agree, conflicting terms knock each other out, and they are replaced with UCC gap-fillers under Comment 6
2) could also be last shot rule - then boilerplate is part of K, but UCC is against it

If there is a written confirmation (forms confirm what’s been decided in oral agreement)
•	K is already done, so subsequent confirmation could never amount to counter-offer (no 2-207(2)(a)
•	Go through 2-207(2) analysis, additional terms will be knocked out in 2-207(2)(c) or (b)
•	If forms have conflicting terms, these terms knock each other out and UCC gap-fillers take their place under Comment 6

First Shot Rule? Whoever gets their form recognized as original offer gets to set terms (new or different ones get knocked out)

UCC (first shot rule) - against last shot rule (Poel v. Brunswick: mirror-image rule, counter-offer)

Consider:
goods and services - combination
2-207 Battle of the Forms
should boilerplate be flashing - everybody knows that
what’s the writing - electronic
authority q’n
interpretation - assurance
reliance