CONTRACTS I OUTLINE

Professor Kwestel
2018

The first question to always ask is whether the transaction involves the sale of goods. If
it involves the sale of goods than use article 2 of the UCC. Everything else is controlled
by the common law.

If a contract does not include the sale of goods than use common law restate-
ments.
I. Definition of a Contract (Restatement §1)
a. A promise or a set of promises for the breach of which the law gives a remedy,
or the performance of which the law in some way recognizes as a duty
II. Introduction
a. Promise (Restatement §2)
i. “a manifestation of intention to act or refrain from acting in a specified
way, so made as to justify a promise in understanding that a commitment
has been made.”
b. Agreement/Bargain (Restatement §3)
i. An agreement is a manifestation of mutual assent on the part of two or
more persons
ii. A bargain agreement to exchange promises or to exchange a promise for a
performance or to exchange performances
c. How a Promise May Be Made (Restatement §4)
i. A promise may be stated in words either oral or written, or may be inferred wholly or partly
from conduct.
d. Terms of a Promise, Agreement, or Contract (Restatement §5)
i. (1) A term of a promise or agreement is that portion of the intention or as-
sent manifested which relates to a particular matter.
ii. (2) A term of a contract is that portion of the legal relations resulting from
the promise or set of promises which relates to a particular matter,
whether or not the parties manifest an intention to create those relations.
III. Ascertainment of Assent (Bargain Process/ Manifestation of
Mutual Assent)
a. Mutual Assent
i. Manifestation of Mutual Assent (Restatement §18)
1. Manifestation of mutual assent to an exchange requires that each
party either make a promise or begin or render a performance.
2. Mutual assent = promise or performance
3. Parties must intend to contract and must agree to the same terms
and is found through the process of offer and acceptance
ii. Conduct as Manifestation of Assent (Restatement §19)
 1. (1) The manifestation of assent may be made wholly or partly by writ-
ten or spoken words or by other acts or by failure to act.
2. (2) The conduct of a party is not effective as a manifestation of his as-
sent unless he intends to engage in the conduct and knows or has rea-
son to know that the other party may infer from his conduct that he
assents.
3. (3) The conduct of a party may manifest assent even though
he does not in fact assent. In such cases a resulting contract may
be voidable because of fraud, duress, mistake, or other invalidating
cause
4. The objective behavior of the parties determines whether or not a
contract was made.
iii. Intention to be Legally Bound (Restatement § 21)
1. Neither real nor apparent intention that a promise be legally binding is
essential to the formation of a contract, but a manifestation of inten-
tion that a promise shall not affect legal relations may prevent the for-
mation of a contract.

iv.Mode of Assent: Offer and Acceptance (Restatement §22)

1. (1) The manifestation of mutual assent to an exchange ordinarily
takes the form of an offer or proposal by one party followed by an ac-
ceptance by the other party or parties.
2. (2) A manifestation of mutual assent may be made even though nei-
ther offer nor acceptance can be identified and even though the mo-
ment of formation cannot be determined.
v. Restatements §18,19,21,22 all basically say that the objective behavior
manifests a contract
b. Objective Theory
i. Would a reasonable person believed that the promisor’s words and con-
duct indicate that he is willing to enter into the deal and
ii. Whether the promise is so believed
1. Embry v. Haragadine, McKittrick Dry Goods® actual words used as un-
derstood by a reasonable man, rather than subjective intent deter-
mines whether a contract was formed
The first element to look at is whether an offer was made…
IV. OFFER: CREATION OF ACCEPTANCE
a. Offer Defined (Restatement § 24)
i. 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.
Are the terms certain and definite…
b. Intent needs to be present in order for an order to be made and that relies
on:
i. Language
 1. Where the words a promise and commitment or invitations to negoti-
ate? “I bid” is an offer whereas “are you interested” is preliminary ne-
gotiations
ii. Surrounding Circumstances
1. Where the parties intoxicated or at a party? Words may sound like an
offer but clearly be made in jest. [Lucy v. Zehmer® when a party’s
conduct and words could warrant a reasonable person in believing
that he intended a real agreement, the party cannot avoid the con-
tract by claiming he was acting only in jest.]
iii. Advertisements
1. Generally not an offer unless it is clear, definite, and explicit and
leaves nothing open for interpretation [lefkowitz v. great Minneapolis
surplus store] (Restatement §26 comment b)
iv.Existence of Contract where Written Memorial is Contemplated
(Restatement § 27)
1. Manifestations of assent that are in themselves sufficient to conclude
a contract will not be prevented from so operating by the fact that the
parties also manifest an intention to prepare and adopt a written
memorial thereof; but the circumstances may show that the agree-
ments are preliminary negotiations.
v. To Whom the Offer is Addressed (Restatement § 29)
1. (1) The manifested intention of the offeror determines the person or
persons in whom is created a power of acceptance.
2. (2) An offer may create a power of acceptance in a specified person
or in one or more of a specified group or class of persons, acting sepa-
rately or together, or in anyone or everyone who makes a specified
promise or renders a specified performance.
c. Definite and Certain Terms/ Communicated
i. Certainty and Choice of Terms; Effect of Performance or Reliance
(Restatement § 34)
1. (1) the terms of a contract may be reasonably certain even though it
empowers one or both parties to make a selection of terms in the
course of performance (2) part performance under an agreement may
remove uncertainty and establish that a contract enforceable as a bar-
gain has been formed (3) action in reliance on an agreement may
make a contractual remedy appropriate even though uncertainty is
not removed
ii. Preliminary Negotiations (Restatement §26)
1. A manifestation of willingness to enter into a bargain is not an offer
if the person to whom it is addressed knows or has reason to
know that the person making it does not intend to conclude a
bargain until he has made a further manifestation of assent.
2. c. Quotation of price. A "quotation" of price is usually a statement
of price per unit of quantity; it may omit the quantity to be sold, time
and place of delivery, terms of payment, and other terms.
3. d. Invitation of bids or other offers. Requesting an offer or bid for
a construction project is not an offer
4. f. Preliminary manifestations as terms of later offer. Even
though a communication is not an offer, it may contain promises or
 representations which are incorporated in a subsequent offer and
hence become part of the contract made when the offer is accepted.
iii. Form of Acceptance Invited (Restatement §30)
1. The offeror may stipulate any manner of acceptance he
chooses. If offeror doesn’t specify, than an acceptance should be rea-
sonable under the circumstances
iv.Invitation of Promise or Performance (Restatement §32)
1. An acceptance can be by promise or performance
v. Certainty (Restatement §33)
1. (1) Even though a manifestation is intended to be offer, it won’t be
legally enforceable if the terms are not certain
2. (2) terms are reasonably certain if they provide a basis for determin-
ing the existence of a breach and for giving appropriate remedies
3. (3) The fact that one or more terms of a proposed bargain are left
open or uncertain may show that a manifestation of intention is not in-
tended to be understood as an offer or as an acceptance.
vi.Auctions (Restatement §28)
1. At an auction, unless a contrary intention is manifested (a) the auc-
tioneer invites offers from successive bidders which he may accept or
reject; (b) when goods are put up without reserve, the auctioneer
makes an offer to sell at any price bid by the highest bidder, and after
the auctioneer calls for bids the goods cannot be withdrawn unless
no bid is made within a reasonable time;(c) whether or not the auc-
tion is without reserve, a bidder may withdraw his bid until the
auctioneer's announcement of completion of the sale, but a bid-
der's retraction does not revive any previous bid.

Prior to acceptance the offeror can terminate an offer in the following ways:
V. TERMINATION OF OFFER (DESTRUCTION OF POWER OF ACCEP-
TANCE)
a. Methods of Termination of the Power of Acceptance (Restatement § 36)
i. Power of acceptance can be terminated by (1) revocation by the offeror (2)
rejection or counter-offer by the offeree (3) lapse of time (4)death or inca-
pacity of the offeror or offeree
b. Revocation
i. Offeror can revoke the offer any time before it is accepted unless the offer
is an option or irrevocable
ii. Termination of Power of Acceptance Under Option Contract (Re-
statement § 37)
1. the power of acceptance under an option contract is not terminated
by rejection or counter-offer, by revocation, or by death or incapacity
of the offeror, unless the requirements are met for the discharge of a
contractual duty.
iii. Unless the promisor receives something for the promise to keep the offer
open (consideration), the offeror is not bound and can revoke the offer at
any time before it is accepted
iv.A revocation MUST be communicated to the offeree to be effective
 v. Direct Revocation by Communication from Offeror to Offeree (§42)
1. An offeree's power of acceptance is terminated when the offeree re-
ceives from the offeror a manifestation of an intention not to enter
into the proposed contract.
vi.Indirect Communication of Revocation (Restatement §43)
1. An offeree's power of acceptance is terminated when the offeror takes
definite action inconsistent with an intention to enter into the pro-
posed contract and the offeree acquires reliable information to that
effect.
vii. Revocation of a General Offer (Restatement §46)
1. When an offer is made in an advertisement in a newspaper or other
general notification to the public or to a number of persons may be re-
voked using the same medium in which the offer was made
c. Rejection or Counter-Offer
i. Rejection (Restatement § 38)
1. (1) An offeree's power of acceptance is terminated by his rejection of
the offer, unless the offeror has manifested a contrary intention.
2. (2) A manifestation of intention not to accept an offer is a rejection
unless the offeree manifests an intention to take it under further ad-
visement.
ii. If the offeree attempts to add to or vary the terms of the offer, then it is
not an acceptance but a counter-offer and rejection of the offer
iii. To be effective the acceptance must be the “mirror image” of the offer or
it is a counter-offer and terminates the power of acceptance
iv.Counter-offer (Restatement § 39)
1. (1) A counter-offer is an offer made by an offeree to his offeror relat-
ing to the same matter as the original offer and proposing a substi-
tuted bargain differing from that proposed by the original offer.
2. (2) An offeree's power of acceptance is terminated by his making of a
counter-offer, unless the offeror has manifested a contrary intention
or unless the counter-offer manifests a contrary intention of the of-
feree.
3. Comment A: a counter-offer is a rejection that could be accepted
d. Lapse of Time
i. If no time is specified, then the offer lapses at the end of a reasonable time

ii. Time When Rejection or Counter-offer Terminates the Power of Ac-

ceptance (Restatement § 40)
1. Rejection or counter-offer by mail or telegram does not terminate the
power of acceptance until received by the offeror, but limits the
power so that a letter or telegram of acceptance started after the
sending of an otherwise effective rejection or counter-offer is only a
counter-offer unless the acceptance is received by the offeror before
he receives the rejection or counter-offer.
iii. A reasonable time is the surrounding circumstances at the time the offer
and attempted acceptance was made
 iv.Lapse of Time (Restatement § 41)
1. (1) offeree’s power of acceptance is terminated at the time stated in
the offer, if not time is specified, then at the end of a reasonable time
2. (2) reasonable time depends on circumstances existing when the offer
and attempted acceptance are made
a. (3) an offer sent by mail is seasonably accepted if an accep-
tance is mailed at any time before midnight on the day on which
the offer is received
v. “mailbox rule”® rule holds that an acceptance is effective upon dispatch
vi.“direct negotiations” the power of acceptance continues only during the
conversation unless a contrary intent is indicated (comment d)
vii. Seasonably accepted if an acceptance is mailed at any time before
midnight on the day on which the offer is received (§41 (3) cmt. E)
viii. Acceptance Must be Properly Dispatched (§66)
1. An acceptance sent by mail or otherwise from a distance is not opera-
tive when dispatched, unless it is properly addressed and such other
precautions taken as are ordinarily observed to insure safe transmis-
sion of similar messages.
ix.Effect of Receipt of Acceptance Improperly Dispatched (§67)
1. Where an acceptance is seasonably dispatched but the offeree uses
means of transmission not invited by the offer or fails to exercise rea-
sonable diligence to insure safe transmission, it is treated as operative
upon dispatch if received within the time in which a properly dis-
patched acceptance would normally have arrived.
x. What Constitutes Receipt of Revocation, Rejection, or Acceptance
(§ 68)
1. A written revocation, rejection, or acceptance is received when the
writing comes into the possession of the person addressed, or of some
person authorized by him to receive it for him, or when it is deposited
in some place which he has authorized as the place for this or similar
communications to be deposited for him.
xi.Effect of Receipt by Offeror of a Late or Otherwise Defective Ac-
ceptance (§70)
1. A late or otherwise defective acceptance may be effective as an offer to
the original offeror, but his silence operates as an acceptance in such a
case only as stated in § 69.

e. Death or Incapacity
i. Death terminates the power of acceptance, whether or not the offeree has
notice of the death
ii. The offeror’s lack of capacity terminates the power of acceptance just like
offeror’s death
iii. These rules do NOT affect option contracts
iv.Death or Incapacity of Offeror or Offeree (Restatement § 48)
1. An offeree's power of acceptance is terminated when the offeree or
offeror dies or is deprived of legal capacity to enter into the proposed
contract.
f. Irrevocable Offer: Option Contract
i. Option Contracts (Restatement § 45)
1. An option contract is a promise which meets the requirements for the
formation of a contract and limits the promisor's power to revoke an
offer.
ii. Option Contract Created by Part Performance or Tender ( § 45)
1. (1) Where an offer invites an offeree to accept by rendering a perfor-
mance and does not invite a promissory acceptance, an option con-
tract is created when the offeree tenders or begins the invited perfor-
mance or tenders a beginning of it.
2. (2) The offeror's duty of performance under any option contract so
created is conditional on completion or tender of the invited perfor-
mance in accordance with the terms of the offer.
a. Offer does not invite a promissory acceptance, “offer for a unilat-
eral contract” (cmt. A)
b. Beginning of performance carries with it an express or implied
promise to complete performance, it furnishes consideration for
an option contract (cmt. D)
c. Only the offeror has a duty of performance which is conditioned
on completion of the offeree’s performance (cmt. E)
d. Preparations to begin performance create reliance sufficient to
make the offeror’s promise binding (cmt. F)
iii. Option Contracts (Restatement § 87)
1. (1) An offer is binding as an option contract if it:
a. (a) in in writing and signed by the offeror, recites a purported con-
sideration for making of the offer, and proposes an exchange on
fair terms within a reasonable time; OR
b. (b) is made irrevocable by statute
2. (2) on offer which reasonably induces reliance (which must be sub-
stantial & foreseeable) is binding as an option contract to extent nec-
essary to avoid injustice
iv.Guaranty (Restatement 88)
1. A promise to be surety for the performance of a contractual obligation,
made to the obligee, is binding if
a. (a) the promise is in writing and signed by the promisor and re-
cites a purported consideration; or
b. (b) the promise is made binding by statute; or
c. (c) the promisor should reasonably expect the promise to induce ac-
tion or forbearance of a substantial character on the part of the
promisee or a third person, and the promise does induce such action
or forbearance.

g. Consequences of Irrevocability
i. If the offer is irrevocable, then a purported revocation by the offeror does
not terminate the offeree’s power of acceptance
ii. Offeree’s power of acceptance under an option contract is not terminated
by rejection, revocation, or death or incapacity of the offeror or offeree
iii. Termination of Power of Acceptance Under Option Contract (§ 37)
 1. the power of acceptance under an option contract is not terminated
by rejection or counter-offer, by revocation, or by death or incapacity
of the offeror, unless the requirements are met for the discharge of a
contractual duty.
2. If the offeror has detrimentally relied on the rejection then the offeree
should be estopped from later accepting the offer

When it has determined that an offer was made the next element to look at
is if there is an acceptance…
VI. ACCEPTANCE
a. There must be an acceptance of the offer on the same terms and in the man-
ner requested or authorized by the offferor.
b. The Offeree’s Power of Acceptance (Restatement §35)
i. (1) An offer gives to the offeree a continuing power to complete the mani-
festation of mutual assent by acceptance of the offer.
ii. (2) A contract cannot be created by acceptance of an offer after the power
of acceptance has been terminated in one of the ways listed in § 36.
c. Form of Acceptance Invited (Restatement §30)
i. (1) An offer may invite or require acceptance to be made by an affirma-
tive answer in words, or by performing or refraining from performing a
specified act, or may empower the offeree to make a selection of terms in
his acceptance.
ii. (2) Unless otherwise indicated by the language or the circumstances, an
offer invites acceptance in any manner and by any medium reasonable in
the circumstances.
d. Acceptance of Offer Defined: by Promise or Performance (§ 50)
i. (1) Acceptance of an offer is a manifestation of assent to the terms
thereof made by the offeree in a manner invited or required by the offer.
ii. (2) Acceptance by performance requires that at least part of what the of-
fer requests be performed or tendered and includes acceptance by a per-
formance which operates as a return promise.
iii. (3) Acceptance by a promise requires that the offeree complete every act
essential to the making of the promise.
e. If an offeror merely suggests a particular manner of acceptance than another
method of acceptance is not precluded
i. Effect of Part Performance without knowledge of Offer (§51)
1. Unless the offeror manifests a contrary intention, an offeree who
learns of an offer after he has rendered part of the performance re-
quested by the offer may accept by completing the requested perfor-
mance.
ii. Acceptance of Offer Which States Place, Time or Manner of Accep-
tance (§60)
1. If an offer prescribes the place, time or manner of acceptance its
terms in this respect must be complied with in order to create a con-
tract. If an offer merely suggests a permitted place, time or manner of
acceptance, another method of acceptance is not precluded.
iii. Effect of Delay in Communication of Offer (Restatement §49)
 1. If communication of an offer to the offeree is delayed, the period
within which a contract can be created by acceptance is not thereby
extended if the offeree knows or has reason to know of the delay,
though it is due to the fault of the offeror; but if the delay is due to the
fault of the offeror or to the means of transmission adopted by him,
and the offeree neither knows nor has reason to know that there has
been delay, a contract can be created by acceptance within the period
which would have been permissible if the offer had been dispatched at
the time that its arrival seems to indicate.
f. Acceptance by Promise
i. If the offeree’s conduct gives the offeror reason to believe that the offer
has been accepted than a contract has been formed
ii. 3 General Requirements:
1. The promise must be an expression of commitment, must indicate in-
tent to be bound
2. The commitment must be unconditional and not require any further
action on the part of either the offeror or offeree
3. The return promise must not vary the terms of the offer

iii. Notice of acceptance is generally required

1. Time when Acceptance takes Effect (Restatement §63)
a. Unless the offer provides otherwise,
b. (a) an acceptance made in a manner and by a medium invited by
an offer is operative and completes the manifestation of mutual
assent as soon as put out of the offeree's possession, without re-
gard to whether it ever reaches the offeror; but
c. (b) an acceptance under an option contract is not operative until
received by the offeror.
2. It is sufficient for the offeree to exercise reasonable care to let the of-
feror know of acceptance, even if the offeror never actually learns of it
a. Acceptance by Promise; Necessity of Notification to Of-
feror (§ 56)
i. it is essential to an acceptance by promise either that the of-
feree exercise reasonable diligence to notify the offeror of
acceptance or that the offeror receive the acceptance sea-
sonably.
b. Effect of Equivocal Acceptance (§57)
i. Where notification is essential to acceptance by promise, the
offeror is not bound by an acceptance in equivocal terms un-
less he reasonably understands it as an acceptance.
g. Acceptance by Performance
i. Unilateral contracts
1. A contract can be formed only by performing the requested perfor-
mance. The offer is not accepted until performance is completed and
there is no contract and legal liability does not attach until the offeree
has fully performed
2. Offeree doesn’t have to give notice of intent to perform but must ren-
der the performance for an effective acceptance
 a. Acceptance by Performance; Manifestation of Intention
not to accept (§53)
i. (1) An offer can be accepted by the rendering of a perfor-
mance only if the offer invites such an acceptance.
ii. (2) Except as stated in § 69, the rendering of a performance
does not constitute an acceptance if within a reasonable time
the offeree exercises reasonable diligence to notify the of-
feror of non-acceptance.
iii. (3) Where an offer of a promise invites acceptance by perfor-
mance and does not invite a promissory acceptance, the ren-
dering of the invited performance does not constitute an ac-
ceptance if before the offeror performs his promise the of-
feree manifests an intention not to accept.
b. Acceptance by Performance; Necessity of Notification to
Offeror (§54)
i. (1) Where an offer invites an offeree to accept by rendering
a performance, no notification is necessary to make such an
acceptance effective unless the offer requests such a notifi-
cation.
ii. (2) If an offeree who accepts by rendering a performance
has reason to know that the offeror has no adequate means
of learning of the performance with reasonable promptness
and certainty, the contractual duty of the offeror is dis-
charged unless
1. (a) the offeree exercises reasonable diligence to notify
the offeror of acceptance, or
2. (b) the offeror learns of the performance within a reason-
able time, or
3. (c) the offer indicates that notification of acceptance is
not required.
3. If the offeree who accepts by performance has reason to know that
the offeror will not learn of the acceptance within a reasonable time,
then the offeree has a duty to exercise a reasonable diligence to no-
tify the offeror of acceptance (§ 54(2))
h. “Mirror image rule”
i. When the contract is formed by correspondence, the mechanics of assent
follow the “mail box rule” [Adams v. Lindsell]
ii. Acceptance is effective upon dispatch
iii. Rationale: at this time, the offeror’s power to revoke is terminated and the
offeror is bound, even though the offeror does not know that the offer has
been accepted
iv.The rule also binds the offeree to the acceptance and it now becomes too
late for the offeree to either reject the offer or revoke the acceptance
v. Exception:
1. If the acceptance contains terms that are different from those of the
offer, then it is not an acceptance but a rejection or counter offer
2. Time When Acceptance Takes Effect (Restatement § 63)
a. Unless the offer provides otherwise,
 b. (a) an acceptance made in a manner and by a medium invited by
an offer is operative and completes the manifestation of mutual
assent as soon as put out of the offeree's possession, without re-
gard to whether it ever reaches the offeror; but
c. (b) an acceptance under an option contract is not operative until
received by the offeror.
3. If the offeree chooses an acceptance not invited by the offer, the mail-
box rule does not apply and the acceptance is not effective until re-
ceipt
4. Necessity of Acceptance Complying with Terms of Offer (Re-
statement § 58)
a. An acceptance must comply with the requirements of the offer as
to the promise to be made or the performance to be rendered.
vi.***It is important to note that the mailbox rule applies only to accep-
tances by mail, not revocations, so a revocation by mail is not effective
until receipt.
1. Ex. if the offeror mails the offer and the next day mails a revocation,
the offeror may still be bound if the offeree puts an acceptance in the
mail after receiving the offer but before receiving the revocation
vii. When does a rejection or counter-offer by mail or telegram terminate
the power of acceptance?
1. Restatement (§ 40) states that the power to accept ends on the of-
feree’s receipt of the rejection so that the offeree is bound.
viii. Limitations:
1. Doesn’t apply to simultaneous communications: phone, conversations,
e-mail
i. Silence as Acceptance
i. An offeree’s silence does not typically constitute acceptance except when
acceptance may be inferred by an offeree’s exercise of dominion over the
offered property
1. Acceptance by Silence or Exercise of Dominion (Restatement §
69)
a. (1) Where an offeree fails to reply to an offer, his silence and in-
action operate as an acceptance in the following cases only:
i. (a) Where an offeree takes the benefit of offered services
with reasonable opportunity to reject them and reason to
know that they were offered with the expectation of compen-
sation.
ii. (b) Where the offeror has stated or given the offeree reason
to understand that assent may be manifested by silence or
inaction, and the offeree in remaining silent and inactive in-
tends to accept the offer.
iii. (c) Where because of previous dealings or otherwise, it is
reasonable that the offeree should notify the offeror if he
does not intend to accept.
b. (2) An offeree who does any act inconsistent with the offeror's
ownership of offered property is bound in accordance with the of-
fered terms unless they are manifestly unreasonable. But if the
 act is wrongful as against the offeror it is an acceptance only if
ratified by him.
c. d. Prior conduct of the offeree. Explicit statement by the offeree,
usage of trade, or a course of dealing between the parties may
give the offeror reason to understand that silence will constitute
acceptance
j. Option contracts and Irrevocable Offers
i. Option contract® it meets the requirements for the formation of a con-
tract, i.e., there is mutual assent, and consideration, and limits the of-
feror’s power to revoke the offer during the time period of the option
1. Option Contract (Restatement § 25)
a. An option contract is a promise which meets the requirements for
the formation of a contract and limits the promisor's power to re-
voke an offer
2. Two ways offer is irrevocable in bilateral contracts:
a. (1) “firm offers” dealing with the sale of goods (2) option con-
tracts
ii. Nominal consideration can be found sufficient to support a short-term op-
tion proposing an exchange on fair terms
1. Option Contracts (Restatement § 87)
a. (1) An offer is binding as an option contract if it
i. (a) is in writing and signed by the offeror, recites a pur-
ported consideration for the making of the offer, and pro-
poses an exchange on fair terms within a reasonable time;
or
ii. (b) is made irrevocable by statute.
b. (2) An offer which the offeror should reasonably expect to induce
action or forbearance of a substantial character on the part of the
offeree before acceptance and which does induce such action or
forbearance is binding as an option contract to the extent neces-
sary to avoid injustice.
2. ** note on (2)® justified reliance under the principle of promissory
estoppel
3. Courts differ on the situation where there is a recital of consideration
but no actual payment is made. Some say there is no effect because
false recital is not consideration. Others say it makes the offer irrevo-
cable either as acknowledgement of the payment or as a promise to
pay
4. Unilateral contracts can be irrevocable where the offeree begins the
performance invited by the offer® an option contract is created to pro-
tect the offeree
a. Option Contract Created by Part Performance or Tender (§
45(1))
i. (1) Where an offer invites an offeree to accept by rendering
a performance and does not invite a promissory acceptance,
an option contract is created when the offeree tenders or be-
gins the invited performance or tenders a beginning of it.
ii. (2) The offeror's duty of performance under any option con-
tract so created is conditional on completion or tender of the
 invited performance in accordance with the terms of the of-
fer.
b. Offeree must complete the required performance before the of-
feror’s duty of performance under the contract arises (§ 45(2))
i. Cmt f. preparations for performance. Beginning preparations,
though they may be essential to carrying out the contract or
to accepting the offer, is not enough. Preparations to perform
may, however, constitute justifiable reliance sufficient to
make the offeror's promise binding under § 87(2).
5. Reliance theory® applied on bids on construction contracts to make
the subcontractor’s bid an option contract to the extent necessary to
avoid injustice
6. The subcontractor’s offer is irrevocable until the general contractor
has had a reasonable opportunity to notify the subcontractor of the
award and accept the subcontractor’s offer.
k. Consequences of Irrevocability
i. No power of acceptance terminated to the offeree by the offeror
ii. Offeree’s power of acceptance under an option contract is not terminated
by rejection, revocation, or death or incapacity of the offeror or offeree
iii. If the offeror has relied on the rejection, then the offeree should be
estopped from later accepting the offer
When it is determined that there is offer and acceptance then it needs to be
determined whether there is sufficient consideration to validate the contract
VII. CONSIDERATION
1. Consideration consist of a performance or return promise that is bar-
gained-for in exchange for the promise sought to be enforced
2. Requirement of a Bargain (Restatement § 17)
a. Except as stated in Subsection (2), the formation of a contract re-
quires a bargain in which there is a manifestation of mutual as-
sent to the exchange and a consideration
b. The Requirement of Exchange
1. Requirement of Exchange; Types of Exchange (Restatement §
71)
a. (1) To constitute consideration, a performance or a return prom-
ise must be bargained for.
b. (2) A performance or return promise is bargained for if it is
sought by the promisor in exchange for his promise and is given
by the promisee in exchange for that promise.
c. (3) The performance may consist of
i. (a) an act other than a promise, or
ii. (b) a forbearance, or
iii. (c) the creation, modification, or destruction of a legal rela-
tion.
d. (4) The performance or return promise may be given to the
promisor or to some other person. It may be given by the
promisee or by some other person.
 2. The promise and consideration assume a reciprocal relationship of
motive or inducement: “the consideration induces the making of the
promise and the promise induces the furnishing of the consideration”
(§71 cmt. B)
3. [Hammer v. Sidway] Uncle promised to pay his nephew $5,000 if the
nephew would refrain from drinking liquor, using tobacco, swearing,
and playing cards until he was 21 years old. Defense said there was
no consideration because the nephew was not harmed but benefitted
by not engaging in these activities and therefore the promisor did not
enjoy a benefit. NY Court of appeals rejected the argument that a
benefit had to be received by the uncle, it found that the nephew’s re-
fraining from engaging in these activities which he had a legal right to
do was consideration to support the promise.
c. Adequacy of Consideration
i. The consideration does not need to be of equal value to the offeror’s bene-
fit
ii. Adequacy of Consideration; Mutuality of Obligation (Restatement §
79)
1. If the requirement of consideration is met, there is no additional re-
quirement of
a. (a) a gain, advantage, or benefit to the promisor or a loss, disad-
vantage, or detriment to the promisee; or
b. (b) equivalence in the values exchanged; or
c. (c) "Mutuality of obligation."
iii. Commercial bargains
1. Exchange of unequal value (§ 79 cmt. C): they are not ordinarily
bound to follow the valuations of others. Ordinarily, therefore, courts
do not inquire into the adequacy of consideration. This is particularly
so when one or both of the values exchanged are uncertain or difficult
to measure. But it is also applied even when it is clear that the trans-
action is a mixture of bargain and gift.
2. If the exchange is extremely unbalanced the court may consider it a
factor in determining whether the bargain was tainted by fraud,
duress, mistake, or unconscionability
3. Exchange of Promise for Promise (Restatement § 75): a promise is
consideration, but only if the performance promised would be consid-
eration
a. [Langer v. Superior Steel Corp.] Consideration here, not a gift; the
promise ($100/mo) induced detriment (forbears from legal right
to work from competitor). So there was a detriment to promise
and benefit to promisor (former employee wouldn’t work for com-
petitor)
iv. Shame and Nominal Consideration
1. Questions of nominal consideration when a dollar is used as consider-
ation
2. Such disparity in value may show that the consideration was bar-
gained for but was a pretense, therefore consideration is not met
3. Most often situation: disguised gratuitous promise® where a promisor
really intends to make a bargain in order to make it enforceable
 a. The restatement requires an actual bargain and not a pretense
for exchange
v. Mutuality of Obligation
1. Both parties are bound or neither is bound® both parties should give
something of legal value in order to get something in exchange
2. Unilateral contract® promise is exchanged for a performance® the
promisor’s duty does not arise until the performance is rendered
i. Performance of Legal Duty (Restatement §73): Perfor-
mance of a legal duty owed to a promisor which is neither
doubtful nor the subject of honest dispute is not considera-
tion; but a similar performance is consideration if it differs
from what was required by the duty in a way which reflects
more than a pretense of bargain.

3. Unilateral contracts do not require “mutuality of obligation”

4. What does it mean when courts say there is no “mutuality of obliga-
tion”?
a. They are saying that either or both of the promises made by the
parties do not meet the consideration standard of a “bargained
for” exchange
vi. Settlement of Claims
1. A promise to settle a claim constitutes consideration
2. If the party has no right to assert the claim bc it is unfounded, then
there is no “detriment” to the promisor in promising to do so
3. Settlement of Claims (Restatement § 74) :
4. (1) Forbearance to assert or the surrender of a claim or defense
which proves to be invalid is not consideration unless
a. (a) the claim or defense is in fact doubtful because of uncertainty
as to the facts or the law, or
b. (b) the forbearing or surrendering party believes that the claim
or defense may be fairly determined to be valid.
5. (2) The execution of a written instrument surrendering a claim or de-
fense by one who is under no duty to execute it is consideration if the
execution of the written instrument is bargained for even though he is
not asserting the claim or defense and believes that no valid claim or
defense exists.
6. Exceptions to § 74: (1) when the validity of the claim or defense is un-
certain, even if it becomes clear later on it is judged as it appeared at
the time it was made
vii. Illusory Promises
1. Promise is not consideration if it makes performance entirely optional
with the promisor
a. No words of commitment have been made
2. Conditional Promise (§76)
a. (1) A conditional promise is not consideration if the promisor
knows at the time of making the promise that the condition can-
not occur.
 b. (2) A promise conditional on a performance by the promisor is a
promise of alternative performances within § 77 unless occur-
rence of the condition is also promised.
3. Ex. “if you give me the dishwasher when you move out of your apt, I
will pay you $100 next week unless I change my mind” Although
you’ve said “I promise” you have no obligated yourself to do anything.
Such a promise is illusory and would not be consideration. If your
friend agreed to give you the dishwasher her promise would not be
enforceable bc she has received no consideration in exchange for it.
4. Illusory and Alternative Promises (Restatement § 77): A promise
or apparent promise is not consideration if by its terms the promisor
or purported promisor reserves a choice of alternative performances
unless
a. (a) each of the alternative performances would have been con-
sideration if it alone had been bargained for; or
b. (b) one of the alternative performances would have been consid-
eration and there is or appears to the parties to be a substantial
possibility that before the promisor exercises his choice events
may eliminate the alternatives which would not have been con-
sideration.
viii. Exclusive Dealings
1. [Wood v. Lucy, Lady Duff-Gordon] Lucy a “creator of fashion” gave
Wood the exclusive right for at least one year to place her endorse-
ments and to sell her designs to others. In exchange she was to re-
ceive half of all the profits and revenues from any contracts he might
make. Wood claimed he kept his part but she broke it by endorsing
products on her own and keeping profits to herself. Lucy argued that
Wood had no bound himself to do anything to earn the profits. Court
decided by granting an exclusive privilege to Wood where her sole
compensation depended on him an implication arose the he would
“use reasonable efforts to bring profits and revenues into existence.”
ix. Satisfaction Clauses
1. The promisor’s obligation to perform is conditioned on satisfaction
with the other party’s performance
2. The promisor must act in good faith in determining its satisfaction or
its promise is illusory
3. The duty to perform can be conditioned on the promisor’s personal
satisfaction with the performance of the promise
4. It is not completely discretionary: (1) depends on whether it is a mat-
ter of subjective or objective satisfaction (if it is a commercial contract
then objective satisfaction is required, if it is personal services than
subjective satisfaction is required) (2) the party must be honestly dis-
satisfied with the performance
x. Requirements and Output Contracts
a. In requirements contract, the seller agrees to sell and the buyer
agrees to buy all of the goods of a particular kind that the buyer
may require in its business.
 b. In an output contract the seller agrees to sell the buyer agrees to
buy all of the goods of a particular kind that the seller may pro-
duce in its business
2. In these types of contracts there is a contractual obligation without
committing to purchase a specific quantity

3. UCC addresses this issue by implying a duty of good faith® unless the
parties state it the court will define the duty to have output or require-
ments in terms of good faith
xi. Modification and the Pre-Existing Duty Rule
1. If a person promises to perform a duty that he or she already owes un-
der an existing contract, then it does not constitute consideration
2. Performance of a Legal Duty (Restatement § 73)
a. Performance of a legal duty owed to a promisor which is neither
doubtful nor the subject of honest dispute is not consideration;
but a similar performance is consideration if it differs from what
was required by the duty in a way which reflects more than a pre-
tense of bargain.
3. The promisee must promise something new in order for there to be
consideration
4. To make a subsequent agreement® the new agreement to modify the
contract is itself a contract and subject to all the rules governing the
formation of contracts, which of course includes the requirement of
consideration
5. Modification of Executory Contract (Restatement § 89)
a. A promise modifying a duty under a contract not fully performed
on either side is binding
i. (a) if the modification is fair and equitable in view of circum-
stances not anticipated by the parties when the contract was
made; or
ii. (b) to the extent provided by statute; or
iii. (c) to the extent that justice requires enforcement in view of
material change of position in reliance on the promise
6. A modification to a contract will be enforced without consideration if a
party encounters unanticipated difficulties, the modification is fair,
and the contract is still executor on both sides, each side still owes
performance
xii. Modification Under the UCC
1. 2-209 eliminates the requirement of consideration for an agreement
modifying a contract for the sale of goods.
2. The modification must be (1) made in good faith (desire to escape a
bad bargain or extortion would be in violation of good faith)
a. Modification, Rescission and Waiver. UCC 2-209
i. (1) An agreement modifying a contract within this Article
needs no consideration to be binding.
ii. (2) A signed agreement which excludes modification or
rescission except by a signed writing cannot be otherwise
modified or rescinded, but except as between merchants
 such a requirement on a form supplied by the merchant must
be separately signed by the other party.
iii. (3) The requirements of the statute of frauds section of this
Article (Section 2-201) must be satisfied if the contract as
modified is within its provisions.
iv.(4) Although an attempt at modification or rescission does
not satisfy the requirements of subsection (2) or (3) it can op-
erate as a waiver.
v. (5) A party who has made a waiver affecting an executory
portion of the contract may retract the waiver by reasonable
notification received by the other party that strict perfor-
mance will be required of any term waived, unless the retrac-
tion would be unjust in view of a material change of position
in reliance on the waiver.
xiii. Accord and Satisfaction
1. Occurs when the parties agree to modify the performance specified in
the original contract
2. A lesser amt of money is offered by the debtor to the creditor to re-
solve a good faith dispute
3. The new substitute agreement is the “accord”
a. The consideration is the detriment of forbearance from suit on the
original disputed contract
b. If the offer is accepted by the party an “accord” is created
c. The “satisfaction” is performance of the new agreement
i. When performed the satisfaction discharges both the execu-
tor accord and the original contract

VIII. PROMISES LACKING CONSIDERATION

a. There are two groups, (1) promises where there is no exchange (2) where
there has been no bargain
i. Gratuitous Promises
1. Gift promises are the biggest category of promises that are unenforce-
able for lack of consideration
2. There is a distinction between a gift and a promise to make a gift
a. Gift: a gift is a present transfer of an interest in property
ii. Past Consideration
1. Ex. a promise that lacks consideration is where it is given for an action
that has already taken place or been performed
2. Ex. Robyn’s employer promises to send her on a vaca to Hawaii for
the great work she did last year. The employer’s promise is not en-
forceable. Robyn already performed the work that is the subject of
the promise and therefore cannot be said to have been induced by
that promise. The promise did not induce the work and therefore has
not the result of a bargain between the parties
3. Promise for Benefit Received (§86)
a. (1) A promise made in recognition of a benefit previously re-
ceived by the promisor from the promisee is binding to the extent
necessary to prevent injustice.
 b. (2) A promise is not binding under Subsection (1)
i. (a) if the promisee conferred the benefit as a gift or for other
reasons the promisor has not been unjustly enriched; or
ii. (b) to the extent that its value is disproportionate to the ben-
efit.
iii. Moral Obligation/Material Benefit Rule
1. A promise to pay a benefit previously received falls within the area of
“past consideration” and is generally unenforceable.
2. Some promises fall within an exception to this rule as in the cases
where the promisor is said to be under a “moral obligation”
3. Courts recognize the doctrine where a debtor promises to pay for a
debt although there is no longer a legal obligation to do so because
the debt has been discharged through bankruptcy
a. Promise to pay Indebtedness Discharged in Bankruptcy
(Restatement §82)
i. (1) A promise to pay all or part of an antecedent contractual
or quasi-contractual indebtedness owed by the promisor is
binding if the indebtedness is still enforceable or would be
except for the effect of a statute of limitations.
ii. (2) The following facts operate as such a promise unless
other facts indicate a different intention:
1. (a) A voluntary acknowledgment to the obligee, admit-
ting the present existence of the antecedent indebted-
ness; or
2. (b) A voluntary transfer of money, a negotiable instru-
ment, or other thing by the obligor to the obligee, made
as interest on or part payment of or collateral security for
the antecedent indebtedness; or
3. (c) A statement to the obligee that the statute of limita-
tions will not be pleaded as a defense.
4. A promise to pay back a debt is only enforceable if it is made after the
bankruptcy proceedings
5. Promises to pay a debt barred by the statute of limitations may be
binding under the moral obligation exception
6. A promise may be inferred from a voluntary acknowledgment or part
payment of the debt as will a statement that the statute of limitations
will not be pleaded as a defense
a. Promisor is bound only to terms of the new promise® enforceable
only to extent of the new promise (ex. pay part of the whole debt)
7. Material Benefit Rule
8. Promise for Benefit Received (Restatement § 86)
a. (1) A promise made in recognition of a benefit previously re-
ceived by the promisor from the promisee is binding to the extent
necessary to prevent injustice.
b. (2) A promise is not binding under Subsection (1)
i. (a) if the promisee conferred the benefit as a gift or for other
reasons the promisor has not been unjustly enriched; or
ii. (b) to the extent that its value is disproportionate to the ben-
efit
 9. § 86 replaces “past consideration” and “moral obligation” with “prom-
ise for benefit received”
a. [Webb v. McGowin] Webb was an employee of lumber co. he was
clearing the upper floor of the mill and while dropping a 75pd
block to the floor he noticed McGowin standing right in the way.
Webb held onto the block falling with it and diverting its fall so
that it missed McGowin completely. He was left permanently dis-
abled from the fall. McGowin promised to pay him $15 every 2
weeks for the rest of his life as gratitude. After McGowin’s death
Webb sued and won. The benefit of being saved put a moral obli-
gation on McGowin
There is either consideration OR promissory estoppel
If there is no apparent consideration that does not mean a contract is unen-
forceable, the doctrine of promissory estoppel may be applicable.
IX. PROMISSORY ESTOPPEL
i. Provides recovery on the basis of reliance
ii. The books states that the elements of promissory estoppel are: (1) the
party to be estopped must be explained of the facts (2) he must intend
that his conduct shall be acted upon, or must so act that the party assert-
ing the estoppel has a right to believe it was so intended (3) the other
party must be ignorant of the true state of facts (4) he must rely upon the
conduct to his injury
b. Promise Reasonably Inducing Action or Forbearance (Restatement § 90)

i. (1) A promise which the promisor should reasonably expect to induce ac-
tion or forbearance on the part of the promisee or a third person and which
does induce such action or forbearance is binding if injustice can be
avoided only by enforcement of the promise. The remedy granted for
breach may be limited as justice requires.
ii. (2) A charitable subscription or a marriage settlement is binding under
Subsection (1) without proof that the promise induced action or forbear-
ance.
c. 4 requirements for this doctrine:
i. (1) there must have been a promise
ii. (2) the promisee’s reliance must have been reasonably foreseeable
iii. (3) there must have been actual reliance on the promise
iv.(4) the circumstances must be that injustice can be avoided only by en-
forcement of the promise
d. Maker of the promise can be bound even though it is not supported by consid-
eration if the promissee relies on the promise to her detriment and the
promisor should have foreseen this reliance
e. Recovery is limited to damages based on the reliance interest which affords a
lesser recovery than would a full measure of expectation damages
f. Doctrine has been applied to: (1) gratuitous promises to convey land (2) gratu-
itous promises to procure insurance (3) charitable subscriptions (4) gratuitous
intra-family promises… there are others.
Although you may have all the elements necessary to formulate a contract
it still may not be legally binding for the following reasons…
The conditions that are necessary in a formal writing for legal enforcement
of a promise. The necessity is from the Statute of Frauds.

X. STATUTE OF FRAUDS
i. Certain agreements must be in writing to be enforceable® such agreement
can be said to “fall within the statute of frauds”
ii. Defense for the statute is raised at the beginning of litigation by a motion
to dismiss or a motion for summary judgment
iii. Plaintiff has the burden to establish a contract was formed, the D breached
and the P has suffered damages
b. Classes of Contracts Covered (Restatement §110)

i. (1) The following classes of contracts are subject to a statute, commonly

called the Statute of Frauds, forbidding enforcement unless there is a writ-
ten memorandum or an applicable exception:
1. (a) a contract of an executor or administrator to answer for a duty of
his decedent (the executor administrator provision);
2. (b) a contract to answer for the duty of another (the suretyship provi-
sion);
3. (c) a contract made upon consideration of marriage (the marriage
provision);
a. (this covers pre-nups where property or $ is settled prior to mar-
riage)
4. (d) a contract for the sale of an interest in land (the land contract pro-
vision);
a. Interest in Land (Restatement § 127)
i. An interest in land within the meaning of the Statute is any
right, privilege, power or immunity, or combination thereof,
which is an interest in land under the law of property and is
not "goods" within the Uniform Commercial Code.
b. Although a contract to lease is one to transfer an interest in land
most states have statute of frauds exceptions for short-term
leases for a year or less

i. Contract to Transfer, Buy, or Pay for an interest in

Land (§ 125)
ii. (1) A promise to transfer to any person any interest in land is
within the Statute of Frauds.
iii. (2) A promise to buy any interest in land is within the Statute
of Frauds, irrespective of the person to whom the transfer is
to be made.
iv.(3) When a transfer of an interest in land has been made, a
promise to pay the price, if originally within the Statute of
 Frauds, ceases to be within it unless the promised price is it-
self in whole or in part an interest in land.
v. (4) Statutes in most states except from the land contract
and one-year provisions of the Statute of Frauds short-term
leases and contracts to lease, usually for a term not longer
than one year.
5. (e) a contract that is not to be performed within one year from the
making thereof (the one-year provision).
a. Refers to a contract which by its terms, cannot be fully performed
within one year from its making
b. Period begins from the date the contract is made not when per-
formance is promised
c. Whether writing is necessary: (1) time of the making of the con-
tract (2)time when performance is to be completed
d. Writing is required only if the contract specifically prevents per-
formance within one year, not just that performance appears to
be impossible to complete
ii. (2) The following classes of contracts, which were traditionally subject to
the Statute of Frauds, are now governed by Statute of Frauds provisions of
the Uniform Commercial Code:
1. (a) a contract for the sale of goods for the price of $ 500 or more
(Uniform Commercial Code § 2-201);
c. Exception to §110(1)(b): “main purpose rule”
i. This is where the guarantor’s main purpose in making the promise is to
benefit herself
ii. Main Purpose; Advantage to Surety (Restatement §116)
1. A contract that all or part of a duty of a third person to the promisee
shall be satisfied is not within the Statute of Frauds as a promise to
answer for the duty of another if the consideration for the promise is
in fact or apparently desired by the promisor mainly for his own eco-
nomic advantage, rather than in order to benefit the third person. If,
however, the consideration is merely a premium for insurance, the
contract is within the Statute.
iii. Requirement of Suretyship (§112)
1. A contract is not within the Statute of Frauds as a contract to answer
for the duty of another unless the promisee is an obligee of the other's
duty, the promisor is a surety for the other, and the promisee knows
or has reason to know of the suretyship relation.
iv.Novation (Restatement §115)
1. A contract that is itself accepted in satisfaction of a previously existing
duty of a third person to the promisee is not within the Statute of
Frauds as a contract to answer for the duty of another.
v. Contract to Discharge the Promisee’s Duty (§123)
1. A contract to discharge a duty owed by the promisee to a third person
is not within the Statute of Frauds as a contract to answer for the duty
of another.
d. Satisfying the Statute
1. Requirements of the statute are cumulative: if more than one require-
ment applies to a single contract, then all must be met
 2. Although the written agreement falls within the statute does not pre-
vent its modification by a subsequent oral agreement
a. The modifying agreement may itself fall w/in the statute thus its
requirements must be met to be enforceable (this is true regard-
less of whether the original agreement required a writing)
3. 3 Requirements:
a. (1) a writing (2) a signature (3) sufficient information in
the writing to evidence the agreement
b. Is there a written memorial of any kind?
c. Must ask yourself Does the writing contain the essential terms of
the agreement (subject matter, parties, and essential terms)?
d. Is there a signature on behalf of the party to be charged?
i. If not then ask is it a merchant to another merchant which
don’t need to follow the stipulated rules?
4. It must be signed by the party to be charged with its enforcement and
it must reflect the agreement with adequate specificity
5. The writing can be pieced together from several related documents
and doesn’t have to all be on one document
6. Writing need not be signed by both parties as long as the person who
is denying the contract (the party to be charged) has signed it
ii. Signature (Restatement § 134)

1. The signature to a memorandum may be any symbol made or

adopted with an intention, actual or apparent, to authenticate the
writing as that of the signer.
iii. Who must Sign (Restatement § 135)
1. Where a memorandum of a contract within the Statute is signed by
fewer than all parties to the contract and the Statute is not otherwise
satisfied, the contract is enforceable against the signers but not
against the others.
iv.Time of Memorandum (Restatement § 136)
1. A memorandum sufficient to satisfy the Statute may be made or
signed at any time before or after the formation of the contract.
v. Loss or Destruction of a Memorandum (Restatement § 137)
1. The loss or destruction of a memorandum does not deprive it of effect
under the Statute.
vi.It is required that the content of the writing be sufficient to show a con-
tract was made by stating “with reasonable certainty the essential terms
of the unperformed promises in the contract
1. General Requisites of a Memorandum (Restatement § 131)
a. Unless additional requirements are prescribed by the particular
statute, a contract within the Statute of Frauds is enforceable if it
is evidenced by any writing, signed by or on behalf of the party to
be charged, which
b. (a) reasonably identifies the subject matter of the contract,
c. (b) is sufficient to indicate that a contract with respect thereto
has been made between the parties or offered by the signer to
the other party, and
 d. (c) states with reasonable certainty the essential terms of the un-
performed promises in the contract.
vii. UCC 2-201: Formal Requirements; Statute of Frauds.
1. (1) Except as otherwise provided in this section a contract for the sale of
goods for the price of $500 or more is not enforceable by way of action or
defense unless there is some writing sufficient to indicate that a contract for
sale has been made between the parties and signed by the party against
whom enforcement is sought or by his authorized agent or broker. A writing
is not insufficient because it omits or incorrectly states a term agreed upon
but the contract is not enforceable under this paragraph beyond the quantity
of goods shown in such writing.
2. (2) Between merchants if within a reasonable time a writing in confirmation
of the contract and sufficient against the sender is received and the party re-
ceiving it has reason to know its contents, it satisfies the requirements of
subsection (1) against such party unless written notice of objection to its
contents is given within 10 days after it is received.
3. (3) A contract which does not satisfy the requirements of subsection (1) but
which is valid in other respects is enforceable
a. (a) if the goods are to be specially manufactured for the buyer and are
not suitable for sale to others in the ordinary course of the seller's busi-
ness and the seller, before notice of repudiation is received and under
circumstances which reasonably indicate that the goods are for the
buyer, has made either a substantial beginning of their manufacture or
commitments for their procurement; or
b. (b) if the party against whom enforcement is sought admits in his plead-
ing, testimony or otherwise in court that a contract for sale was made,
but the contract is not enforceable under this provision beyond the
quantity of goods admitted; or
c. (c) with respect to goods for which payment has been made and ac-
cepted or which have been received and accepted (Sec. 2-606).
viii. Required writing need not contain all the material terms of the contract
and the ones stated not even be correctly stated
ix.If the price in term is omitted the “gap fillers” will provide one
1. Oral Modification (§149)
a. (1) For the purpose of determining whether the Statute of Frauds
applies to a contract modifying but not rescinding a prior con-
tract, the second contract is treated as containing the originally
agreed terms as modified. The Statute may, however, apply inde-
pendently of the original terms to a contract to modify a transfer
of property.
b. (2) Where the second contract is unenforceable by virtue of the
Statute of Frauds and there has been no material change of posi-
tion in reliance on it, the prior contract is not modified.
e. EXCEPTIONS to the Statute
i. Part Performance
1. Part performance does not make a contract that otherwise falls within
the statute enforceable® a party may have a claim on restitution or
reliance
2. Most courts have held that a party who has fully performed such a
contract can enforce it
 3. Effect of Performance by Offeree Where Offer invites either
Performance or Promise (§62)
a. (1) Where an offer invites an offeree to choose between accep-
tance by promise and acceptance by performance, the tender or
beginning of the invited performance or a tender of a beginning
of it is an acceptance by performance.
b. (2) Such an acceptance operates as a promise to render com-
plete performance.
4. Most common in the sale of land
a. Under part performance rule: a court may grant specific perfor-
mance of an oral agreement to transfer an interest in land if there
has been “performance ‘unequivocally referable’ to the agree-
ment, performance which alone and without the aid of words of
promise is unintelligible or at least extraordinary unless as an in-
cident of ownership [Burns v. McCormick]
ii. Unilateral contracts
1. A promise under a unilateral contract may not be capable of perfor-
mance within a year of its making but it does not fall within the
statute of frauds
2. In a unilateral contract , performance is the acceptance that creates
the contract and so the contract is complete at the inception of the
one-year period
iii. Promissory Estoppel
1. Promissory estoppel not available where the statute of frauds was
raised as a defense® traditional view was that reliance on an oral
promise did not make the promise enforceable
a. Rather reliance has become a basis for recovery through case law
and the new restatement
2. Enforcement by Virtue of Action in Reliance (Restatement §139)
a. (1) A promise which the promisor should reasonably expect to induce
action or forbearance on the part of the promisee or a third person and
which does induce the action or forbearance is enforceable notwith-
standing the Statute of Frauds if injustice can be avoided only by en-
forcement of the promise. The remedy granted for breach is to be lim-
ited as justice requires.
b. (2) In determining whether injustice can be avoided only by enforce-
ment of the promise, the following circumstances are significant:
i. (a) the availability and adequacy of other remedies, particularly
cancellation and restitution;
ii. (b) the definite and substantial character of the action or forbear-
ance in relation to the remedy sought;
iii. (c) the extent to which the action or forbearance corroborates evi-
dence of the making and terms of the promise, or the making and
terms are otherwise established by clear and convincing evidence;
iv. (d) the reasonableness of the action or forbearance;
v. (e) the extent to which the action or forbearance was foreseeable
by the promisor.

3. Even if reliance was justified, the detriment suffered in reliance must

be of “definite and substantial character” to warrant enforcement of
the promise
 a. Contract not to Be Performed Within a Year (Restatement §
130)
i. (1) Where any promise in a contract cannot be fully per-
formed within a year from the time the contract is made, all
promises in the contract are within the Statute of Frauds until
one party to the contract completes his performance.
ii. (2) When one party to a contract has completed his perfor-
mance, the one-year provision of the Statute does not pre-
vent enforcement of the promises of other parties.
4. UCC 2-201 includes a list of circumstances under which the writing re-
quirement may be avoided and it does not include the estoppel princi-
ple
5. Statute of Frauds under the UCC
a. 2-201 and requires “some writing sufficient to indicate that a
contract for sale has been made between the parties and signed
by the party against whom enforcement is sought (2-201(1))
b. Exceptions where oral contract is enforceable absent writing:
i. (1) the contract calls for specially manufactured goods and
the seller has made a substantial beginning in their manufac-
ture
ii. (2) the contract is bt merchants and within a reasonable time
a written confirmation or the oral contract is sent by one of
the parties and the party receiving it does not send a written
objection within 10 days (2-201(2))
iii. The contract is admitted in court pleadings or testimony by
the party against whom enforcement is sought (2-201(3)(b))
iv.Goods for which payment has been made and accepted or
which have been received and accepted (2-201(3)(c))
There are certain times when the courts may amend, rescind, or void a con-
tract.

XI. DEFENSES AND LIMITS ON ENFORCEABILITY

1. Generally the issue under review is assent® if the court finds that the
assent was induced by improper means, or that the party was inca-
pable of giving consent it will refuse to enforce the contract
2. Voidable Contracts (Restatement §7)
a. A voidable contract is one where one or more parties have the
power, by a manifestation of election to do so, to avoid the legal
relations created by the contract, or by ratification of the contract
to extinguish the power of avoidance.
3. Unenforceable Contracts (§ 8)
a. An unenforceable contract is one for the breach of which neither
the remedy of damages nor the remedy of specific performance is
available, but which is recognized in some other way as creating
a duty of performance, though there has been no ratification.
b. Misunderstanding
 1. The parties will assent to the same words or terms but attach materi-
ally different meanings to what they have said

ii. Effect of Misunderstanding (Restatement § 20)

1. (1) There is no manifestation of mutual assent to an exchange if the

parties attach materially different meanings to their manifesta-
tions and (a) neither party knows or has reason to know the meaning
attached by the other; or (b) each party knows or each party has rea-
son to know the meaning attached by the other. (2) The manifesta-
tions of the parties are operative in accordance with the meaning at-
tached to them by one of the parties if (a) that party does not know
of any different meaning attached by the other, and the other knows
the meaning attached by the first party; or
2. (b) that party has no reason to know of any different meaning at-
tached by the other, and the other has reason to know the meaning
attached by the first party
iii. Ex. case with the two ships named Peerless
1. A mutual mistake as to the subject matter means that a contract is
void because the parties did not consent to the same thing
c. Capacity to Contract
1. A contract made by a party while under a legal incapacity is voidable
® the public police is to protect (1) children (2) the mentally handi-
capped
2. Capacity to Contract (Restatement §12)
a. (1) No one can be bound by contract who has not legal capacity
to incur at least voidable contractual duties. Capacity to contract
may be partial and its existence in respect of a particular transac-
tion may depend upon the nature of the transaction or upon other
circumstances.
b. (2) A natural person who manifests assent to a transaction has
full legal capacity to incur contractual duties thereby unless he is
i. (a) under guardianship, or
ii. (b) an infant, or
iii. (c) mentally ill or defective, or
iv.(d) intoxicated.
ii. Infancy

1. A person under the age of 18 can only enter into voidable contracts
“until the beginning of the day before the person’s eighteenth birth-
day
2. Infants (Restatement §14)
a. Unless a statute provides otherwise, a natural person has the ca-
pacity to incur only voidable contractual duties until the begin-
ning of the day before the person's eighteenth birthday.
3. A minor can avoid or “disaffirm” a contract or choose to perform
a. A minor can disaffirm any time before reaching majority or within
a reasonable time thereafter
i. “reasonable time” depends on the surrounding circumstance
 4. Failure to disaffirm within a reasonable time of attaining majority con-
stitutes a “ratification” of the contract and the minor is bound
a. Ratification can be by words or conduct, such as performance of
the contractual obligation or accepting the other party’s perfor-
mance under the contract
5. When the minor disaffirms they are not forced to make restitution®
they are required to return only what was in their possession
6. There is no obligation to account for depreciation or loss of value,
even where necessaries are involved
7. Necessaries
a. This is based in quasi-contract (a contract implied in law)
b. Necessaries are goods and services that are essential for main-
tain the minor’s existence® to determine things such as what is
reasonable, maintenance of the minor’s social position, situation
in life, customs of the social circle, or the fortune possessed by
him or his parents
iii. Mental Incapacity
a. The party claiming incompetence has the burden of proving a
lack of mental competency at the time of contracting
b. A person who enters into a contract with a minor is on notice that
the other party may lack capacity (it’s easy to ask for identifica-
tion), it is not the same for mental competency
c. Claims consider both the condition of the party seeking to avoid
the contract and what the other party has reason of know about
the incompetent’s background or by general observation during
the transaction
2. Alcohol

a. Intoxicated Persons (restatement § 16)

b. A person incurs only voidable contractual duties by entering into
a transaction if the other party has reason to know that by reason
of intoxication (a) he is unable to understand in a reasonable
manner the nature and consequences of the transaction, or (b)
he is unable to act in a reasonable manner in relation to the
transaction
c. Drug use is treated the same way
d. Voluntary intoxication not accompanied by another disability has
been considered less excusable than mental illness
iv. Mistake
a. Mistake Defined (Restatement § 151): A mistake is a belief that
is not in accord with the facts.
b. The parties reached an agreement but one or both of the parties
entered that agreement on an wrong assumption about the facts
that existed at the time of the contracts formation
c. In some situations the mistake doctrine will provide the party with
equitable relief of reformation or rescission
d. 3 mains themes:
i. (1) the mistake must relate to a fact in existence at the time
of the contract
 ii. (2) the mistake must be with respect to a material aspect of
the contract and have a significant effect on the agreed ex-
change of performances
iii. (3) the aggrieved party neither assumed the risk of the mis-
take nor would it be fair or appropriate to allocate it to her

2. Mutual Mistake

a. Claim allows avoidance of the contract by the adversely affected

party if the mistaken belief relates to facts in existence at the
time of the contract ,issues of basic assumption on which the con-
tract was made and has material effect on the agreed exchange
and the aggrieved party did not bear the risk of the mistake
i. Effect of Fault of Party Seeking Relief (Restatement
§157)
1. A mistaken party's fault in failing to know or discover the
facts before making the contract does not bar him from
avoidance or reformation under the rules stated in this
Chapter, unless his fault amounts to a failure to act in
good faith and in accordance with reasonable standards
of fair dealing.
ii. When Mistake of Both Parties Makes a Contract Void-
able (§152)
1. (1) Where a mistake of both parties at the time a con-
tract was made as to a basic assumption on which the
contract was made has a material effect on the agreed
exchange of performances, the contract is voidable by
the adversely affected party unless he bears the risk of
the mistake under the rule stated in § 154.
2. (2) In determining whether the mistake has a material
effect on the agreed exchange of performances, account
is taken of any relief by way of reformation, restitution, or
otherwise.
iii. When a Party bears the Risk of a Mistake (§154)
1. A party bears the risk of a mistake when
a. (a) the risk is allocated to him by agreement of the
parties, or
b. (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 lim-
ited knowledge as sufficient, or
c. (c) the risk is allocated to him by the court on the
ground that it is reasonable in the circumstances to
iv.A party bears the risk of a mistake under the following:
1. When it is allocated to them by an agreement of the par-
ties
2. They are aware
 3. At the time of contract she has only limited knowledge
with respect to facts which the mistake relates but treats
her limited knowledge as sufficient –or-
4. It is allocated to her by a term supplied by the court on
the ground that it is reasonable in the circumstances to
do so
3. Unilateral Mistake
a. Same as mutual mistake BUT the mistake is not shared by both
parties
b. The mistake must be material and the risk not be borne by the
mistaken party
i. It is required that the mistaken party show that enforce-
ment of the contract would be unconscionable or that the
other party knew of the mistake or their fault cause the
mistake
ii. When Mistake of One Party Makes a Contract Void-
able (§153)
1. 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 void-
able by him if he does not bear the risk of the mistake un-
der the rule stated in § 154, and
a. (a) the effect of the mistake is such that enforcement
of the contract would be unconscionable, or
b. (b) the other party had reason to know of the mistake
or his fault caused the mistake.
iii. Ex. builder submitting a mistake in the price of the bid. The
builder “must show that the profit or loss that will result if he
is required to perform as well as the profit that he would
have made had there been no mistake.
4. Scrivener’s Error
a. There has been an error as to expression in recording the parties’
agreement
b. There would be a clerical error resulting in a written agreement
that fails to express the parties’ agreement correctly
c. Remedy: is reformation of the writing to properly reflect the
agreement reached by the parties
5. Misrepresentation
a. Definition (§ 159): A misrepresentation is an assertion that is not
in accord with the facts.
i. Ill. 1: A, seeking to induce B to make a contract to buy a used
car, turns the odometer back from 60,000 to 18,000 miles. B
makes the contract. A's conduct in setting the odometer is a
misrepresentation. Whether the contract is voidable by B is
determined by the rule stated in § 164.
b. It can be expressed in words or by conduct® can be a half truth
c. When a Misrepresentation is Fraudulent or Material (§ 162)
 i. (1) A misrepresentation is fraudulent if the maker intends his
assertion to induce a party to manifest his assent and the
maker
1. (a) knows or believes that the assertion is not in accord
with the facts, or
2. (b) does not have the confidence that he states or im-
plies in the truth of the assertion, or
3. (c) knows that he does not have the basis that he states
or implies for the assertion.
ii. (2) A misrepresentation is material if it would be likely to in-
duce a reasonable person to manifest his assent, or if the
maker knows that it would be likely to induce the recipient to
do so.
1. “Scienter” is a word used by the courts that the maker
know of the untrue character of his assertion
d. When a misrepresentation Prevents formation of a Con-
tract (§163)
i. If a misrepresentation as to the character or essential terms
of a proposed contract induces conduct that appears to be a
manifestation of assent by one who neither knows nor has
reasonable opportunity to know of the character or essential
terms of the proposed contract, his conduct is not effective
as a manifestation of assent.
e. When a Misrepresentation Makes a contract Voidable (§
164)
i. (1) If a party's manifestation of assent is induced by either a
fraudulent or a material misrepresentation by the other party
upon which the recipient is justified in relying, the contract is
voidable by the recipient.
ii. (2) If a party's manifestation of assent is induced by either a
fraudulent or a material misrepresentation by one who is not
a party to the transaction upon which the recipient is justified
in relying, the contract is voidable by the recipient, unless
the other party to the transaction in good faith and without
reason to know of the misrepresentation either gives value or
relies materially
f. under §164 the following must be true: (1) there must have been
a misrepresentation (2) the misrepresentation must have been ei-
ther material or fraudulent (3) the misrepresentation must have
induced the recipient to make the contract (4) the recipient must
have been justified in relying on the misrepresentation
6. Fraudulent/Material Aspect
a. An assertion is fraudulent if it is made with the knowledge that it
is false and with the intent to induce the other party’s assent
b. State of mind distinctions important because: (1) if the misrepre-
sentation is intentional, than the party does not have to show that
it was material (2) only those who have been the victims of inten-
tional misrepresentation are entitled to relief in either the form of
damages or avoidance of the contracts
 c. If the misrepresentation is NOT fraudulent then it must be mate-
rial
i. It is material if it would likely induce a reasonable person to
assent or if they maker knows that for some reason it is likely
to induce particular person to give her assent (§162 cmt. C)
7. Opinion vs. Fact
a. It must be a misrepresentation of fact
b. Exceptions (reliance on an assertion of opinion is justified):
i. (1) where there is a confidential relationship to the person
whose opinion is stated so that they rely on it
1. Reliance on Assertions of Opinions (§168)
a. (1) An assertion is one of opinion if it expresses only
a belief, without certainty, as to the existence of a
fact or expresses only a judgment as to quality, value,
authenticity, or similar matters.
b. (2) If it is reasonable to do so, the recipient of an as-
sertion of a person's opinion as to facts not disclosed
and not otherwise known to the recipient may prop-
erly interpret it as an assertion
i. (a) that the facts known to that person are not in-
compatible with his opinion, or
ii. (b) that he knows facts sufficient to justify him in
forming it
ii. (2) where recipient reasonably believes the other person has
special skill or judgment with respect to the subject matter
iii. (3) Where the recipient is “for some other special reason par-
ticularly susceptible to a misrepresentation of the particular
type involved
1. When reliance on an assertion of Opinion is Not
justified (§169)
a. To the extent that an assertion is one of opinion only,
the recipient is not justified in relying on it unless the
recipient
i. (a) stands in such a relation of trust and confi-
dence to the person whose opinion is asserted that
the recipient is reasonable in relying on it, or
ii. (b) reasonably believes that, as compared with
himself, the person whose opinion is asserted has
special skill, judgment or objectivity with respect to
the subject matter, or
iii. (c) is for some other special reason particularly
susceptible to a misrepresentation of the type in-
volved
8. Non-Disclosure/Concealment
a. Can be liable for misrepresentation if they fail to disclose a mate-
rial fact when there is a duty to do so
b. A party making a contract is not expected to tell everything they
know they are required to disclose facts where non-disclosure
would be equivalent to misrepresentation
 i. When Non-Disclosure is Equivalent to an Assertion (§
161)
1. A person's non-disclosure of a fact known to him is equiv-
alent to an assertion that the fact does not exist in the
following cases only:
a. (a) where he knows that disclosure of the fact is nec-
essary to prevent some previous assertion from being
a misrepresentation or from being fraudulent or mate-
rial.
b. (b) where he knows that disclosure of the fact would
correct a mistake of the other party as to a basic as-
sumption on which that party is making the contract
and if non-disclosure of the fact amounts to a failure
to act in good faith and in accordance with reasonable
standards of fair dealing.
c. (c) where he knows that disclosure of the fact would
correct a mistake of the other party as to the contents
or effect of a writing, evidencing or embodying an
agreement in whole or in part
c. Concealment is the act of knowingly or intending to prevent an-
other from learning of a fact that otherwise would have learned
i. When Action is Equivalent to an Assertion (Conceal-
ment) (§160)
1. Action intended or known to be likely to prevent another
from learning a fact is equivalent to an assertion that the
fact does not exist
ii. Reliance on Assertions as a Matters of Law (§ 170)
1. If an assertion is one as to a matter of law, the same rules
that apply in the case of other assertions determine
whether the recipient is justified in relying on it.
iii. When Reliance on an Assertion of Intention is Not Jus-
tified (§171)
1. (1) to the extent that an assertion is one of intention
only, the recipient is not justified in relying on it if in the
circumstances a misrepresentation of intention is consis-
tent with reasonable standards of dealing.
2. (2) If it is reasonable to do so, the promisee may prop-
erly interpret a promise as an assertion that the promisor
intends to perform the promise.
iv.When Fault Makes Reliance Unjustified (§172)
1. A recipient's fault in not knowing or discovering the facts
before making the contract does not make his reliance
unjustified unless it amounts to a failure to act in good
faith and in accordance with reasonable standards of fair
dealing.
v. Duress and Undue Influence
a. The defense of duress is available if the D can show that they
were unfairly coerced into entering the contract or into modifying
it
i. Typically used as a defense for breach of contract or for resti-
tutionary relief
b. Undue influence focuses on one party’s taking advantage of the
relationship with the other
c. Duress is any wrongful act or threat by one contracting party
which compels or induces the other party through fear to enter
into a transaction against their will
i. Courts only look at the victim and whether they exercised
free will in entering into or assenting to the transaction
ii. Factors: (1) age (2) emotional nature (3) surrounding circum-
stances
d. When duress is accomplished by physical compulsion then there
is no contract at all or a “void” contract
i. When Duress by Physical Compulsion Prevents Forma-
tion of a Contract (§174)
1. If conduct that appears to be a manifestation of assent by
a party who does not intend to engage in that conduct is
physically compelled by duress, the conduct is not effec-
tive as a manifestation of assent.
e. There are a wide range of threats that are improper
f. “Economic duress” is a basis to avoid a contract
i. When Duress by Threat Makes a contract Voidable
(§175)
1. (1) 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.
2. (2) If a party's manifestation of assent is induced by one
who is not a party to the transaction, the contract is void-
able by the victim unless the other party to the transac-
tion in good faith and without reason to know of the
duress either gives value or relies materially on the trans-
action.
g. Defense of threat include:
i. (1) there must be a threat
ii. (2) the threat must be improper
iii. (3) the threat must induce the victim’s assent to the agree-
ment
iv.(4) the threat must be such that it leaves the victim with no
reasonable alternative
h. When a threat is improper (§176)
i. (1) A threat is improper if: (a) what is threatened is a crime
or a tort, or the threat itself would be a crime or a tort if it re-
sulted in obtaining property, (b) what is threatened is a crim-
inal prosecution,(c) what is threatened is the use of civil
process and the threat is made in bad faith, or (d) the threat
 is a breach of the duty of good faith and fair dealing under a
contract with the recipient.
ii. (2) A threat is improper if the resulting exchange is not on
fair terms, and
iii. (a) the threatened act would harm the recipient and would
not significantly benefit the party making the threat,
iv.(b) the effectiveness of the threat in inducing the manifesta-
tion of assent is significantly increased by prior unfair dealing
by the party making the threat, or
v. (c) what is threatened is otherwise a use of power for illegiti-
mate ends
i. Undue Influence: makes a contract voidable and may be a de-
fense or basis for restitution
j. 2 elements:
i. (1) that a special relationship existed between the parties
ii. (2) the stronger party used unfair persuasion on the weaker
party to gain the party’s assent
k. It is effective only under the domination of the other of is justified
based on the relationship to the other® some relationships fall
into this because the person is said to be “acting in the other best
interest:
i. When Undue Influence Makes a contract Voidable
(§177)
1. (1) Undue influence is unfair persuasion of a party who is
under the domination of the person exercising the per-
suasion or who by virtue of the relation between them is
justified in assuming that that person will not act in a
manner inconsistent with his welfare.
2. (2) If a party's manifestation of assent is induced by un-
due influence by the other party, the contract is voidable
by the victim.
3. (3) If a party's manifestation of assent is induced by one
who is not a party to the transaction, the contract is void-
able by the victim unless the other party to the transac-
tion in good faith and without reason to know of the un-
due influence either gives value or relies materially on
the transaction.
vi.Unconscionability

a. § 2-302. Unconscionable contract or Clause.

i. (1) If the court as a matter of law finds the contract or any
clause of the contract to have been unconscionable at the
time it was made the court may refuse to enforce the con-
tract, or it may enforce the remainder of the contract without
the unconscionable clause, or it may so limit the application
of any unconscionable clause as to avoid any unconscionable
result.
ii. (2) When it is claimed or appears to the court that the con-
tract or any clause thereof may be unconscionable the par-
 ties shall be afforded a reasonable opportunity to present evi-
dence as to its commercial setting, purpose and effect to aid
the court in making the determination.
b. An unconscionable contract is one that is manifestly unfair or op-
pressive® a contract that no one in their right mind and not under
delusion would make
2. Procedurally Unconscionable:

a. The absence of meaningful choice so the court looks to (1) the re-
lationship bt the parties to determine if there was unequal bar-
gaining power, (2) a lack of opportunity to study the contract and
inquire about the terms, and (3) whether the terms were non-ne-
gotiable
b. A one-sided agreement may be found where one party is de-
prived of all the benefits of the agreement or left without a rem-
edy for the other party’s breach or there is a larch disparity bt the
market price and the contract price
vii. Illegality and Public policy
a. If either the consideration or the object of the contract is illegal
the bargain is treated as an illegal contract
b. Some are illegal bc they are expressly prohibited by statute (gam-
bling) and other are classified as illegal bc they violate public pol-
icy
c. Not clear when it offends public policy
d. Court considers: (1) the public interest in protecting the justified
expectations of the parties (2) any forfeiture that will result if en-
forcement is denied (significant bc restitution is generally avail-
able when enforcement is denied on grounds of public policy) (3)
special public interest in enforcing the particular item
e. Weighing public policy against enforcement of a term: (1) the
strength of the public policy involved (2) the likelihood that re-
fusal of enforcement will further the policy (3) the seriousness
and deliberateness of any misconduct that has occurred (4) the
closeness of the connection between the misconduct and the
agreement

If the contract deals with the sale of goods it is automatically the UCC.
Goods are anything that is movable at the time of identification.
XII. Uniform Commercial Code (UCC)
a. (1) "Goods" means all things (including specially manufactured goods) which
are movable at the time of identification to the contract for sale other than the
money in which the price is to be paid, investment securities (Article 8) and
things in action. "Goods" also includes the unborn young of animals and grow-
ing crops and other identified things attached to realty as described in the sec-
tion on goods to be severed from realty (Section 2-107).
 b. (2) Goods must be both existing and identified before any interest in them can
pass. Goods which are not both existing and identified are "future" goods. A
purported present sale of future goods or of any interest therein operates as a
contract to sell.

c. (3) There may be a sale of a part interest in existing identified goods.

d. (4) An undivided share in an identified bulk of fungible goods is sufficiently

identified to be sold although the quantity of the bulk is not determined. Any
agreed proportion of such a bulk or any quantity thereof agreed upon by num-
ber, weight or other measure may to the extent of the seller's interest in the
bulk be sold to the buyer who then becomes an owner in common.

e. (1) "Merchant" means a person who deals in goods of the kind or otherwise
by his occupation holds himself out as having knowledge or skill peculiar to
the practices or goods involved in the transaction or to whom such knowledge
or skill may be attributed by his employment of an agent or broker or other in-
termediary who by his occupation holds himself out as having such knowledge
or skill.

f. (1) In this Article unless the context otherwise requires "contract" and "agree-
ment" are limited to those relating to the present or future sale of goods.
"Contract for sale" includes both a present sale of goods and a contract to
sell goods at a future time. A "sale" consists in the passing of title from the
seller to the buyer for a price (Section 2-401). A "present sale" means a sale
which is accomplished by the making of the contract.

1. Has there been an offer and acceptance? A conduct for the sale of goods?
The following is conduct…
XIII. FORMATION UNDER THE UCC
i. Parties may form a contract through conduct and not rely solely on the
mechanics of offer and acceptance
ii. A contract for sale may be found even though the precise moment of its
making is undetermined and it may be formed in any manner sufficient to
show agreement.
1. § 2-204. Formation in General.
a. (1) A contract for sale of goods may be made in any manner suffi-
cient to show agreement, including conduct by both parties which
recognizes the existence of such a contract.
If yes, then there is a contract even if the moment of its making is undetermined. If no,
the parties may not have intended to contract and none will have been created.

Indefiniteness® where one or more terms left open? A contract for the sale of goods
does not fail for indefiniteness if the parties have intended to make a contract and there
is a reasonably certain basis for giving an appropriate remedy.

1. § 2-204. Formation in General

a. (3) Even though one or more terms are left open a contract for
sale does not fail for indefiniteness if the parties have intended
to make a contract and there is a reasonably certain basis for
giving an appropriate remedy
Acceptance® has an offer specified a method of acceptance?

Yes® if so then the offer may be accepted only in the manner invited by the offer. No®
then the offer may accept “in any manner and by any medium reasonable in the circum-
stances
i. § 2-206. Offer and Acceptance in Formation of Contract.

2. (1) Unless otherwise unambiguously indicated by the language or cir-

cumstances

a. (a) an offer to make a contract shall be construed as inviting ac-

ceptance in any manner and by any medium reasonable in the
circumstances

Acceptance by Promise to Ship or Shipment® was an order to other offer to buy goods
for prompt or current shipment accepted either by a prompt promise to ship or by the
prompt or current shipment of conforming goods?

Yes® there was acceptance. No® it was a shipment of non-conforming goods. This is not
an acceptance if the shipment of non-conforming goods is an accommodation to the of-
feror.

§ 2-206. Offer and Acceptance in Formation of Contract.

3. (1) Unless otherwise unambiguously indicated by the language or cir-

cumstances
a. (b) an order or other offer to buy goods for prompt or current
shipment shall be construed as inviting acceptance either by a
prompt promise to ship or by the prompt or current shipment of
conforming or non-conforming goods, but such a shipment of non-
conforming goods does not constitute an acceptance if the seller
seasonably notifies the buyer that the shipment is offered only as
an accommodation to the buyer.
Ask: did the seller seasonably notify the buyer that the shipment of non-conform-
ing goods was offered only as an accommodation to the buyer and not an accep-
tance?
 Yes® if so then the seller’s shipment of non-conforming goods is not an accep-
tance. No® then the seller’s non-conforming shipment is an acceptance and a
breach of contract.

2. “Firm offer” did a merchant offer to buy or sell goods in a signed writing which
promised to hold the offer open?

§ 2-205. Firm Offers.

An offer by a merchant to buy or sell goods in a signed writing which by its

terms gives assurance that it will be held open is not revocable, for lack of consid-
eration, during the time stated or if no time is stated for a reasonable time, but in
no event may such period of irrevocability exceed three months; but any such
term of assurance on a form supplied by the offeree must be separately signed by
the offeror
i. Under UCC 2-205® limits the offeror’s power to revoke making the offer ir-
revocable.

(1) There has actually been an offer

(2) It has been made by a merchant

(3) To buy or sell goods

(4) Which gives assurances that it will be held open, is not re-
vocable for lack of consideration

(5) In signed writing

(6) Which is for the time state or for a reasonable time if no

time is stated, up to a max of 3 months?

Yes® then the offer is not revocable for lack of consideration, during the time
stated or if no time is stated then not more than 3 months. No® then the offer is
revocable any time before acceptance unless it is made irrevocable under one of
the other expectations

3. “Battle of the forms”- have one or both parties used oral or written communi-
cations in the process of forming a contract where the writing exchanged may have been
preprinted order and confirmation forms containing standard, boilerplate terms? If so,
then a conflict between them is possible since such standard terms are usually designed
to protect the interests of the party.

§ 2-207. Additional Terms in Acceptance or Confirmation.

 (1) A definite and seasonable expression of acceptance or a written confirmation
which is sent within a reasonable time operates as an acceptance even though it
states terms additional to or different from those offered or agreed upon, unless
acceptance is expressly made conditional on assent to the additional or different
terms.

(2) The additional terms are to be construed as proposals for addition to the con-
tract. Between merchants such terms become part of the contract unless:

(a) The offer expressly limits acceptance to the terms of the offer;

(b) They materially alter it; or

(c) Notification of objection to them has already been given or is given within
a reasonable time after notice of them is received.

(3) Conduct by both parties which recognizes the existence of a contract is suffi-
cient to establish a contract for sale although the writings of the parties do not oth-
erwise establish a contract. In such case the terms of the particular contract con-
sist of those terms on which the writings of the parties agree, together with any
supplementary terms incorporated under any other provisions of this Act.

Ask the following:

Acceptance® is the response to the offer “a definite and seasonable expression of ac-
ceptance or a written confirmation of prior oral agreement?

Yes® proceed to Part (terms in acceptance)

No® then no contract has been formed by the writings of the parties. Proceed to
(Conduct) to determine whether the conduct of the parties recognizes the exis-
tence of a contract.

Terms in Acceptance® does the acceptance/confirmation state terms “additional to or

different from” the offer?

Yes® then ask: is acceptance of the offer “expressly conditional” on the offeror’s
assent to the additional terms

Yes® then ask did the offeror expressly assent?

Yes® a contract is formed. No® then no contract has been formed by the
writings of the parties. Proceed to (Conduct) to determine whether the con-
duct of the parties recognizes the existence of a contract.
No® if the response is a definite and seasonable expression of acceptance and it is
not expressly conditional on assent to new terms, it is in acceptance even though
it states terms different from or additional to those in the offer. There is a contract
and the next question to determine its terms. Ask: are both parties mer-
chants?
Yes® then the agreed upon terms are included and additional terms become
part of the contract as well unless:

(1) The offer was expressly limited to its terms

(2) The additional terms materially alters the contract

- or-

(3) the offeror has already given notice of objection to the additional
term or it is given within a reasonable time after notice is received.

§ 2-207. Additional Terms in Acceptance or Confirmation.

(2) The additional terms are to be construed as proposals for addition to the
contract. Between merchants such terms become part of the contract unless:

(a) the offer expressly limits acceptance to the terms of the offer;

(b) they materially alter it; or

(c) notification of objection to them has already been given or is

given within a reasonable time after notice of them is received.

[If you are asked to deal with “different terms” then you should analyze the fact
following the 3 approaches that courts follow with respect to different terms:

(1) approach different terms the same as additional terms

(2) disregards different terms in the acceptance since they are not
mentioned in 2-207(2) and are not to be construed as proposals that
can become part of the contract

(3) apply the “knockout rule” where the conflicting terms on the par-
ties’ offer and acceptance “knock each other out” and neither term be-
comes part of the contract]

No® then the agreed upon terms are included and additional terms are
merely proposals for addition to the contract
 No® then there is a contract and it consists of the agreed upon terms

Conduct® does the contract of the parties “recognize the existence of the contract”? Has
there been a tender and acceptance of performance?

Yes® a contract has been formed by the parties’ conduct. Its terms are those
upon which the parties’ writings and the UCC’s “supplementary terms.” Missing
terms may be supplied by an applicable trade usage or course of dealing or perfor-
mance between the parties.

No® then no contract has been formed.

Under the UCC there are issues involving Consideration

Sale of Goods® is there a modification for a contract involving the sale of goods? If so,
then consideration is not required under UCC 2-209:

Modification, Rescission and Waiver. UCC 2-209

(1) An agreement modifying a contract within this Article needs no con-

sideration to be binding.

(2) A signed agreement which excludes modification or rescission ex-

cept by a signed writing cannot be otherwise modified or rescinded,
but except as between merchants such a requirement on a form sup-
plied by the merchant must be separately signed by the other party.

(3) The requirements of the statute of frauds section of this Article

(Section 2-201) must be satisfied if the contract as modified is within
its provisions.

(4) Although an attempt at modification or rescission does not satisfy

the requirements of subsection (2) or (3) it can operate as a waiver.

(5) A party who has made a waiver affecting an executory portion of

the contract may retract the waiver by reasonable notification received
by the other party that strict performance will be required of any term
waived, unless the retraction would be unjust in view of a material
change of position in reliance on the waiver.
 2-209 eliminates the requirement of consideration for an agreement modifying a
contract for the sale of goods.

The modification must be (1) made in good faith (desire to escape a bad bargain or
extortion would be in violation of good faith)

Although the code requires the modification to meet the test of good faith. Ask: was the
modification made in good faith:

Yes® then the modification is enforceable

No® if the party acted in bad faith to escape a performance due under the original
contract terms then the modification is not enforceable.

The UCC under the Statute of Frauds

Under 2-201 requires that “some writing sufficient to indicate that a contract for sale has
been made between the parties and signed by the party against whom enforcement is
sought.”

UCC 2-201: Formal Requirements; Statute of Frauds.

(1) Except as otherwise provided in this section a contract for the sale of goods for the
price of $500 or more is not enforceable by way of action or defense unless there is some
writing sufficient to indicate that a contract for sale has been made between the parties and
signed by the party against whom enforcement is sought or by his authorized agent or broker. A
writing is not insufficient because it omits or incorrectly states a term agreed upon but the con-
tract is not enforceable under this paragraph beyond the quantity of goods shown in such writ-
ing.

However, there is several notable exception where an oral contract is enforceable absent writing:

(1) the contract calls for specially manufactured goods for the buyer and seller has
made a substantial beginning in their manufacture.

UCC 2-201(3)(a)®

(3) A contract which does not satisfy the requirements of subsection

(1) but which is valid in other respects is enforceable

(a) if the goods are to be specially manufactured for the buyer

and are not suitable for sale to others in the ordinary course of
the seller's business and the seller, before notice of repudiation
is received and under circumstances which reasonably indicate
that the goods are for the buyer, has made either a substantial
beginning of their manufacture or commitments for their pro-
curement; or
 (2) the contract is between merchants and within a reasonable time a written con-
firmation of the oral contract is sent by one of the parties and the party receiving it
does not send a written objection within 10 days.

UCC 2-201(2)®

(2) Between merchants if within a reasonable time a writing in confir-

mation of the contract and sufficient against the sender is received and
the party receiving it has reason to know its contents, it satisfies the
requirements of subsection (1) against such party unless written notice
of objection to its contents is given within 10 days after it is received.

(3) the contract is admitted in court pleadings or testimony by the party against
whom enforcement is sought

UCC 2-201(3)(b)®

(3) A contract which does not satisfy the requirements of subsection

(1) but which is valid in other respects is enforceable

(b) if the party against whom enforcement is sought admits in his

pleading, testimony or otherwise in court that a contract for sale
was made, but the contract is not enforceable under this provi-
sion beyond the quantity of goods admitted; or

(4) Goods for which payment has been made and accepted or which have been re-
ceived and accepted.

UCC 2-201(3)(c)®

(3) A contract which does not satisfy the requirements of subsection

(1) but which is valid in other respects is enforceable

(c) with respect to goods for which payment has been made and
accepted or which have been received and accepted (Sec. 2-
606).

I. INTERNET AGE ISSUES

a. Item arrives with lots of paperwork (that is not read)
b. “Shrinkwrap” agreements
i. Additional terms which are included in the product’s packaging
c. “clickwrap” agreements
i. The terms encountered when loading a program’s software on your com-
puter
d. Typically UCC 2-207 is applied to solve the disputes that arise with these is-
sues
i. Arbitration clause shipped with computer is binding [hill v. gateway]
ii. Printed terms on computer software package not part of the agreement
[klocek v. Gateway]
iii. Shrinkwrap license in product box is binding on buyer