3


Contracts I:  Outline  (Only One Cause of Action to Analyze in this course:  Breach of Contract formerly Assumpsit)
I. Scope:  What law applies?
A. UCC:  Transactions in Goods.
1. 2-102:  UCC Governs the Sale of Goods (not securities, not services).
a. Where the Common Law and the UCC differ, UCC prevails.
b. Services are covered in the Common Law.
2. Sale:  2-106 = The passing of title from the seller to the buyer for a price.
a. Seller 2-103 (1)(d): = A person who sells or contracts to sell goods.
b. Buyer 2-103 (1)(a): = a person who buys or contracts to buy goods.
(1) Receipt of Goods 2-103 (1)(c): = Taking physical possession of the goods.
c. Price 2-304:  The price may be payable in money or otherwise.
3. Goods 2-105: = All things which are moveable at the time of identification to the contract for sale (chattels);
a. Except 2-105(1):
(1) Money in which the price is to be paid;
(2) Investment Securities;
(3) Things in Action - An Incorporal Right not reduced to possession (Royalties, Trademarks, Copyrights).
b. Includes 2-107:
(1) Specially manufactured goods;
(2) Unborn young of animals;
(3) Growing Crops;
(4) Attached things to real property that can be servered.
B. Common Law:  Not a Transaction in Goods.
1. If NOT a Sale of Goods, then Common Law applies.
2. Contractual Interpretation:
a. Subjective:  Internal state of mind of one of the actors.  Intent.
b. Objective:  Actions outwardly observable to the other party.  Words and actions for K. >> This is the primary school of thought in K interpretation.
c. UCC’s influence on Objective approach:  Article 2 strongly encourages courts to be realistic and keep an eye on business practice in resolving disputes on formation; where possible to find an enforceable K.
C. Mixed Transactions = Goods + Services
1. Tests to Determine Whether UCC or Common Law applies:
a. Predominant Purpose Test:
(1) Terms of the K:  Specify a Service or Sales of Goods?
(2) Terms of K:  What do they say about the relationship of the parties?
(3) What is primary reason for the K?
(4) How do the costs break down?  Mostly for services or mostly for goods?  Whatever is the most, is the purpose of the K.
(5) Party seeking application of the UCC provisions bears the burden of proof showing Predominant purpose was Sale of Goods.
(a) Policy for its use:  
b. Gravamen of the Action Test:
(1) Looks to that portion of the transaction upon which the complaint is based, to determine if it involved goods or services;
(2) Doesn’t look at the contract as a whole;
(a) Policy against its use:  Most courts recognize this test as oppositional to the purpose of the UCC to “simplify, clarify, and modernize the law governing commercial transactions.”  Predominant Purpose Test used more often, because a K for services under the Gravamen test could result in a ruling on Goods based on the isolated part of the dispute being looked at.
c. Exception:  If a contract divides payment between goods & services, then Article 2 will apply to the goods portion and common law will apply to the services portion.
II. Formation & the Elements of Contract: Is there an enforceable K?
A. Is there an enforceable Promise?  [ Analysis is done against the party against whom you wish to enforce the promise; can be offeror or offeree.]
1. Common Law:
a. An objective manifestation of an intent to be bound by both parties [ often through a two-step process of Offer and Acceptance, but can be manifested otherwise (verbal, e.g.) ] = [ Bracketed part is Mutual Assent ]
(1) Not Promises:
(a) Gratuitous Promise:  One by which a person promises to do, or refrain from doing, something without requiring any consideration in return.   (Offers to give gifts, etc.)
(b) Illusory Promise:  Promise worded in such a way, that performance of the promise is the subject only of the promisor’s whim, wish, will, or option; worded in a way to give the promisor an “out”.
2. UCC:
a. Formation in General 2-204:
(1) Conduct:  A contract for sale of goods may be made in any manner sufficient to show agreement, including conduct by both parties which recognizes the existence of a contract.
(2) Undetermined Moment of Creation:  An agreement sufficient to constitute a contract for sale may be found even though the moment of its making is undetermined.
(3) Indefinite Terms:  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.
B. Mutual Assent?  [ Offer + Acceptance=Mutual Assent ]
1. Offer? An objective manifestation of an intent to be bound;  (The offeror is conveying the power to the offeree to create a K by the offeree’s sole actions.)
a. Common Law:  [ Really Need Definite Language + Definite Terms for valid offer ]
(1) Language:  In light of the language, which must be definite;
(a) “I will sell”, “I promise” = Definite language of offer.
(b) “I might be willing to sell” = Indefinite, possible offer, more likely a solicitation for an offer.
(c) “Make me an offer”, “I quote”, “I am asking for” = Not an offer; a Solicitation for an offer.
(2) Terms:  Must also be definite to match the “definite” language;
(a) Absence of definite terms when only definite language is present is unlikely to bind the offeror;
(3) Circumstances: In light of surrounding circumstances such that a reasonable person situated as the parties are situated would believe the offeror had an intent to be bound;
(a) Commercial Practice:  Invitations from contracts are generally “solicitations for offers” and “bids” are generally offers.
(b) Face-to-face conversation, the offer ends at the end of conversation unless some circumstance occurs that keeps it open.
(4) Prior Practice/Relationship of the Parties: In determining whether certain remarks constitute an offer rather than preliminary negotiations, a court will look to the prior relationship.
(5) Conduct:  Behavior by the parties that assumes there is an offer or a K, may satisfy the court that one exists.
(6) Option K (or UCC 2-205 Firm Offers): Promise to hold offer open for a specified time; Irrevocable
(7) Exceptions:
(a) Ads are not offers (Lefkowitz);  UNLESS “An ad is an offer when it is clear, definite, explicit, and leaves nothing open for negotiation.”
(b) An obvious joke does not give rise to contract (Pepsico);
(c) Words & actions that give a reasonable person to believe a K was intended w/o fraud, duress, or unfair bargaining are valid (Zehmer.)
b. UCC:
(1) No specific provisions exist for Offer generally in the UCC; Formation in General 2-204 (above) covers Offer & Acceptance generally.
2. Offer Terminated?  If yes there is an offer, has the Offer terminated?
a. Common Law
(1) Lapse of the Offer:  The offer’s stated period during which it is open for acceptance.  If the offer does not specify its duration, it is deemed to remain open for a reasonable time, which is determined in light of the circumstances of the transaction.  
(a) Rule for Verbal Offers & Lapse:  In face to face conversation, the default reasonable period of time for offer is at the end of the conversation.
(2) Rejection: As stated; offer is rejected. Note, however, that once rejected it cannot be accepted if the offeree changes his mind.
(a) Effective when received by the offeror.
(b) Silence is usually considered rejection of any offer.
(3) Counter Offer:  Offeree rejects offer and proposes a transaction on different terms.  The rejection does not have to be communicated; the counteroffer itself acts as the rejection.  Suggesting a new contract with different terms is a rejection, but of a different kind.  It is a combination of two legal acts:  rejection of the offer and a new offer by the offeree who becomes the offeror.
(a) Mere Inquiry:  Inquiry will not terminate the offer.  (Ex.  “Would you consider lowering the price by $5,000?” Is an inquiry, not rejection or counter offer.)
(4) Revocation:  As long as the offer has not been accepted, the offeror can revoke the offer at any time.
(a) Revocation is not effective until communicated and RECEIVED by the offeree.
(b) Indirect Revocation §43:  If the offeree receives correct information from a reliable source that would indicate offeror has revoked offer, it is effectively revoked.
(c) Revocation by Publication:  Offers made by publication may be terminated by publication (in the SAME publication).  Revocation by Publication is effective when published.
(d) Limitations on Offeror’s Power to Revoke:
I. Part Performance of a Unilateral K:
A. An Offer that invited an offeree to accept by performance, an Option K is created when the offeree tenders or begins the invited performance.
B. The offeror’s duty of performance under any Option K so created is conditional on completion or tender of the invited performance in accordance with the terms of the offer.
II. Option Contract: Only binds the offeror, not offeree.  Offeree may quit at any time.  Consideration is given to keep an offer open for a specified period of time; the Consideration prevents revocation, but doesn’t need to be “real”. ß
A. An acceptance of an Option K not valid until it is received by Offeror;
B. Types of Consideration (these types ONLY are evaluated in Option Contracts):
1. Valuable/“Real” Consideration:  Bargained-for consideration for something of value.
a. Writing is NOT required for this kind of consideration.
2. Purported Consideration:  Words only; a statement like “this $5 is offered as consideration for the offer of...” even though no money ever changes hands.
a. A Writing is required in this kind of consideration.
3. Nominal Consideration:  Amount that is largely meaningless ($1, et al.)
a. A Writing is required for this kind of consideration as well.
C. Power of Acceptance NOT Terminated by:
1. Rejection, Counteroffer, Death or Incapacity, UNLESS:
2. Requirements for Discharge of Contract Duty are met.
a. Reason:  Offeree “paid” for the time whether the consideration is money or a promise or whatever.  If Offeree rejects the K being held open by the Option K, the rejection cannot take effect unless the Offeror gives Offeree consideration for the rejection.  This is because the rejection in the Option K is itself considered an offer that the Offeror has to purchase with consideration to get out of.  So the Offeror can simply let the Option K expire, or to accept the rejection some kind of consideration must be given to make the rejection effective immediately.
D. Discharge of Contract Duty:
1. Mutual Rescission:  Both parties agree not to hold the other to their exchanged promises.
2. Offeror’s Consideration:  If Offeror gives some consideration to validate the counteroffer or rejection, then it is terminated.
3. Detrimental Reliance: Only way out of an Option Contract that’s still in effect AFTER a rejection by the Offeree; can serve as substitute consideration in some courts.  This means that upon your rejection, the Offeror conducted business in a way that relied on your intent to reject and to now honor that concept will harm the Offeror.
a. Policy Problem with Detrimental Reliance:  The problem with Detrimental Reliance as consideration is that, then just about anything a party wants to call Detrimental Reliance will be seen as such and then the contract is escapable.
E. Contractor Bids
1. Bids are Offers
2. If a Contractor relies on a bid from a Subcontractor to compute his main bid, consideration IS required to make the Subcontractor’s bid an Option K and held open.
3. If no consideration for the bid is made, then Contract has to argue Drennan:
a. Detrimental Reliance
b. If standard industry practice backs the Drennan Detrimental Reliance argument, court likely to back this position.
(5) The Death or Mental Disability of the Offeror:  The offer is considered to have lapsed if after the offer is made the offeror dies or is mentally incapacitated.
(a) Note:  However, once the contract is formed, the contract is not terminated.
b. UCC
(1) No UCC provisions on termination of the offer, generally, only Firm Offers.
(2) Merchant 2-104: = A person who deals in goods of the kind or otherwise by his occupation hold himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction...
(3) Firm Offers 2-205:  UCC Version of an Option Contract (like a SubContractors bid) ß
(a) Irrevocable until date stated for offer to end;
(b) If offer made by a Merchant;  (Offeree does NOT need to be a Merchant.)
(c) In writing;
(d) Signed by the Merchant.
(e) Time Rule:  No matter what the writing says, Firm Offers cannot stay open more than 3 months.
(f) Does NOT require consideration, which is how it differs from an Option Contract.
I. Note:  Rejection is not covered in this.  Go to Common Law for rules on Option Ks (Detrimental Reliance, Offeror payment of Consideration to effectuate a rejection from Offeree, etc.).
3. Acceptance:  If Offer not terminated, is there Acceptance?
a. Common Law:
(1) Acceptance:  An objective manifestation of an intent to be bound by the person to whom the offer is made (offeree).
(a) Offeree Controls Acceptance:  It must be knowing, voluntary, and deliberate.  §30
(2) Substantive Acceptance:  Acceptance of the contract terms.  Is acceptance unqualified, unequivocal, and an absolute manifestation of the offeree’s intent to be bound?
(a) Mirror Image Rule:  An offer must be accepted exactly without modifications.
I. Offeror is master of his own offer.
II. An attempt to accept with different terms is a Counter-offer and = rejection of original offer.
III. Grumbling Acceptance: (complaint about price, etc.) is still acceptance.
IV. Request for Clarification:   Does not necessarily = rejection and counteroffer.
(3) Procedural Acceptance:  Communication in proper time, manner, & medium.  If a manner and medium is mandated, you MUST follow it.  If you do not, no acceptance.
(a) Suggested Manner & Medium:  If ONLY suggested, you can use the suggested method OR a reasonable method of acceptance.
(b) Doubt:  If there is doubt as to whether manner and medium is mandated or suggested, the court will construe it as suggested.
(c) Must be Communicated:  Acceptance must be communicated (unless specific language in the K says otherwise).
I. Effective Acceptance takes effect when it is communicated to the Offeror.
II. Invalid Communication:  Communication to your agent is not valid acceptance.
III. Silence or Inaction as Acceptance (usually silence = rejection)
A. Silence as Acceptance (rare) only when:
1. The offeror has stated reason to understand that assent may be manifested by silence.
2. Previous dealings establish that unless rejection is communicated, silence is acceptance.
(d) Mailbox Rule:  As soon as the acceptance is dropped in the mail, it is effective. (Out of the offeree’s control.)
I. Revocation has to occur BEFORE it is mailed to be valid.  § 63 of the Restatement.
II. If rejection is received before letter of acceptance, there is still a K unless the offeror relied on that rejection.
III. If an acceptance is mailed after a rejection is mailed, but arrives first -- the acceptance takes effect.
IV. If the rejection arrives first, however, then the acceptance is invalid.
V. Scenarios:
A. Acceptance Sent | Rejection Sent | Acceptance Received 1st | K? = YES
B. Acceptance Sent | Rejection Sent | Rejection Received 1st | K? = YES, unless offeror relied on rejection.
C. Rejection Sent | Acceptance Sent | Acceptance Received 1st | K? = YES
D. Rejection Sent | Acceptance Sent | Rejection Received 1st | K? = NO, but considered a counteroffer.
VI. Mailbox Rule does NOT apply to Option K.
(4) Performance as Acceptance
(a) Promise or Performance: Unless the offer clearly specifies either promise or performance as the exclusive mandated method of acceptance, it can be accepted by either promise or performance as long as the method of acceptance is reasonable. § 62
(b) Both Unilateral and Bilateral contracts are classified by their MODE OF ACCEPTANCE (not offer).
(c) Bilateral K:  A contract whereby both parties have made promises to be performed at a future date.  This is most common form of contract; e.g. sale of a house for a price.  (Protects Offeror more.)
I. Offeror must know of acceptance by offeree.
II. Performance:  Offeree is bound once performance begins and is liable for breach if performance is not completed.
(d) Unilateral K:  Knowledge of acceptance is not required unless no way for Offeror to know otherwise.  § 54  ACCEPTANCE in a Unilateral K is ONLY BY PERFORMANCE.
I. Unilateral K:  The offeree’s performance of the promise is complete (not partial) at the point of contraction formation, and only the offeror’s performance remains outstanding when the contract is created.  (Example:  A contract whereby the offeree must accept & pay the full price of the contract before the contract is mutually assented to; e.g. a lost dog reward offer.)  (Protects offeree more.)
II. Performance:  Completion of Performance is required for acceptance to manifest.
A. An Option K is created when performance is tendered or by partial performance by offeree.
1. Policy:  This is designed to protect the offeree, so that the offer cannot be revoked in the midst of the performance required.
B. The offeree is NOT bound in unilateral contract until completion and may quit anytime prior to completion.
(5) Discrepancy Between Offer & Acceptance | Forms in the Common Law
(a) Mirror Image Rule:  If the “boilerplate” terms in the forms don’t match the terms of the offer, then no K as a result of the exchange of forms.
I. No Conduct = Rejection.  If seller doesn’t deliver goods, then buyer’s offer is rejected by seller’s counteroffer and no acceptance.
II. Conduct = Acceptance.  Performance indicates acceptance of counteroffer. Terms in the counteroffer thus “win” the battle of the forms. R.2d 50.  AKA Last Shot Rule (Re: transactions in goods, both are eliminated by 2-207)
b. UCC: [ remember only apply in transactions in goods ]
(1) Formation in General 2-204 [ This section and 2-206 influence the objective interpretation in Common Law ]:
(a) The court should focus on the existence of agreement between the parties, whether shown by:
I. Words, or
II. Conduct; and
(b) should not be concerned about technicalities but do what it can to uphold and enforce the K.
(c) Orders & Purchase Orders = Offers
I. Orders:  An order is a stated intention, either spoken or written, to engage in a commercial transaction for specific products or services. From a buyer’s point of view it expresses the intention to buy and is called a purchase order (offer). From a seller’s point of view it expresses the intention to sell and is referred to as a sales order (acceptance). When the purchase order of the buyer (offer) and the sales order of the seller (acceptance) agree, the orders become a contract between the buyer and seller.
(d) Standard-Form K Terms & Electronic Media
I. Shrink-Wrap Terms, Box-Top Terms, Click-Wrap Terms, and Rolling Contracts
A. Terms accepted after the packaging of a purchased item has been opened, or agreed to when software is opened and installed on a computer.
B. Reasoning in ProCD: Vendor, as master of the offer, may invite acceptance by conduct, and may propose limitations on kind of conduct that constitutes acceptance; buyer may accept by performing acts vendor proposes to treat as acceptance.
1. Policy Against ProCD: The economic argument for shrink-wrap contracts is dangerous in that it then moves against the policy reasons for Contract to begin with:  freedom of contract and to protect the power of the offeror and offeree.  Contracts aren’t JUST for greasing the wheels of commerce.  They’re there to empower the contracting parties.  
C. Licitra v. Gateway, Inc.  >>>Contrasts to the reasoning in ProCD.  Terms of the K placed in the shrink-wrap K are not binding when they conflict with state law and public policy principles designed to safeguard state law, the rights of consumers, and the rights of local court jurisdictions to exercise authority over disputes.  Without specific waiver of rights to the courts, clauses waiving rights to courts are invalid.
D. TREND:  Courts are taking more and more control in taking out provisions that are onerous, unconscionable, and clearly not agreed to by the reasonable consumer.  What’s fair for the consumer is the policy question.
II. Cf. to Rolling K Theory:  “Money  now, terms later.”  If you buy it and you keep it, you have accepted the terms of the contract.
III. Enforceability:  They are usually considered valid and enforceable, even though they lack true negotiation, as long as they satisfy the standard of fundamental fairness.
IV. Software as a Good?  The courts disagree with one another on this issue.
(2) Firm Offers 2-205 (No Consideration Required)
(a) Irrevocable until date stated for offer to end;
(b) If offer made by a Merchant; (Offeree does NOT need to be a Merchant)
(c) In writing;
(d) Signed by the Merchant.
(e) Time Rule:  No matter what the writing says, Firm Offers cannot stay open more than 3 months.
(f) Does NOT require consideration, which is how it differs from an Option Contract.
I. Note:  Rejection is not covered in this.  Go to Common Law for rules on Option Ks (Detrimental Reliance, Offeror payment of Consideration to effectuate a rejection from Offeree, etc.).
(3) Offer and Acceptance in Formation of Contract 2-206:
(a) Primary reason for 2-206 is to establish Orders as Offers;
(b) Emphasizes that an Offer should be interpreted as inviting acceptance by any reasonable mode UNLESS offer or circumstances make it clear the mode is restricted.
I. Acceptance 2-206 (1)(a):  Acceptance can be in any reasonable manner unless offer specifies mode of acceptance. (Silence can be acceptance.);
II. Prompt Shipment 2-206 (1)(b):  For offers including prompt shipment, acceptance is manifested by prompt shipment or prompt promise to ship;
A. Shipment of non-conforming goods can count as acceptance as well (but acceptance is not established if the seller notifies that the non-conforming goods are only offered as an accommodation);  (Shipment of Non-Conforming goods with notice become a CounterOffer; if non-conforming goods accepted there is new K but at previous K price.)
III. Time Lapse Rule 2-206 (2):  If there has been no notification to offeror (order) within a reasonable time, the offer may be voided.
(4) Discrepancy Between Offer & Acceptance | Additional Terms in WRITTEN Confirmation 2-207:  [ Battle of the Forms ]
(a) Purpose of 2-207:  To abolish the Mirror Image Rule & Last Shot Rule to resolve conflicts in communications between parties.
I. Can apply to individual buyers and sellers or between Merchants;
II. Merchant 2-104: = A person who deals in goods of the kind or otherwise by his occupation hold himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction...
(b) Acceptance 2-207(1):  This section is like Common Law Acceptance, even if different terms exist.  Acceptance must be effective as defined in Common Law Acceptance; if not, then go to 2-207 (3);
I. Confirmation must be a definite expression of acceptance (if acceptance is conditional, this is a Counter-offer);
II. Acceptance must be Seasonable (not have lapsed);
III. Must have agreement on Dickered Terms (which are NOT material terms):  Price, quantity, subject matter, quality, and sometimes delivery date (if time is of the essence).
IV. If no agreement on Dickered Terms, no K, instead a Counter-Offer.
V. Doesn’t just apply to standard forms; applies to any K (dealing in goods) that Accepts with Additional Terms.
A. Note:  When boilerplate provisions conflict in an acceptance versus an offeror’s terms, the offeror’s terms are typically favored; the conflicting terms are considered an attempt to change the terms and 2-207 excludes such an attempt.  Intent to be bound by the offeree is considered acceptance of the offeror’s terms and modification by the offeree is rejected.
(c) Conduct to Establish K 2-207 (3):  If the writings do not establish a K, conduct by both parties consistent with existence of a K establishes a K.
I. The K includes only those terms on which the parties’ writings agree;
II. All terms not agreed upon fall away;
III. Missing terms are filled with UCC supplementary terms and UCC gap filler provisions;
A. If no UCC provisions are available, then Common Law rules fill the gaps.
(d) Additional Terms as Proposals or Part of K 2-207(2):  Only applies to a confirmation that is found to be an Acceptance.
I. Between Non-Merchants additional terms are proposals for addition to the contract; Between merchants, they become part of the contract unless: (if any ONE is satisfied, the term does NOT become part of the K):
A. Offer expressly limits acceptance to terms of offer; or
B. Proposals materially alter terms (materially alter = there is surprise or hardship to offeror); or
C. Disclaimer of Warranties; or
D. Party proposing additional terms reasonably notified of objection.
1. Philosophical Reasons for making terms not in agreement fall away:
a. 1) White’s Knock-out Rule:
(1) Different terms between offer and confirmation knock each other out;
(2) Policy:  Bad. Gives offeree power to unilaterally control over the terms.
b. Summer’s Rule:
(1) Different terms in confirmation ONLY fall out; offer terms remain.
(2) Reason is UCC is silent on different terms.
(3) Additional terms allowed in.
c. Duesenberg’s Rule:  (Preferred)
(1) Different and Additional terms are treated the same way (as in 2-207) in a confirmation with simply additional terms.
(2) Policy For:  Closes to what the UCC authors intended.  
C. Statute of Frauds:  Has the Statute of Frauds been complied with, if necessary?; and
1. Is K governed by Statute of Frauds? (Where a writing is required.)
a. Functions of Statute of Frauds:
(1) To ensure a person could not falsely claim, on the basis of perjured oral evidence, that a contract covered by the act had been entered into.
b. Common Law:
(1) Land: A promise to transfer to any person any interest in land.
(a) Includes:  Leases for more than a year, easements, fixtures, minerals, structures.
(b) Excluded:  Contract to build a building (service).
(2) One Year: Any agreement that is not to be performed within One Year of the making thereof.
(a) Excluded:  Possibility of completion within a year, the right to terminate within a year, lifetime contracts.
(3) Suretyship Contracts = cosigner loans.
(4) Executor or Administrator Contracts.
(5) Marriage Contracts = Pre-Nuptial Agreements
c. UCC:
(1) $500+:  A K for the sale of goods over $500+. UCC 2-201
(a) Exceptions when a writing is not required under the UCC 2-201: see below under 3.
2. If yes, then have the parties complied with the requirements of the Statute of Frauds?
a. Is there a signed writing?  If yes, the contract is enforceable (as long as you have all the other elements of contract studied up to this point).  If no, the contract is not enforceable unless question 3 can be answered yes.
b. Common Law:
(1) A writing; and the writing can consist of several different writings.
(2) Signed by the party against whom the contract is sought to be enforced; and
(a) Any symbol made or adopted with an intention to authenticate the writing of the signer is valid. R 2d, 134.
I. Electronic Authentication:  Digital signatures, e-mails, et al. covered by UETA are legitimate authentications for a writing.
(b) Only the person denying the K needs to have signed it to be enforceable.
(3) Requisite content of the Writing - subject matter and essential terms (of the unperformed promises of the contract)
(a) Specific terms as to quantity, subject-matter, and time.
c. UCC:
(1) A writing sufficient to show a contract has been made. 2-201.
(2) Signed by the party against whom the contract is sough to be enforced (signed means any symbol meant to authenticate the writing).
(3) Stating a quantity term.
3. If the parties have not complied with the requirements, then does the K fit within any of the Exceptions?
a. Common Law:
(1) Part-Performance Doctrine
(a) A judicially created exception to the Statute of Frauds, used sparingly by courts (typically, in contracts for the sale of land; largely regarded as an equitable remedy, not one of law).  The partial performance of an oral contract may provide enough proof of the contract’s existence to justify enforcing it despite noncompliance with the Statute of Frauds.
b. UCC:
(1) Merchants - Confirmatory Memo Rule 2-201(2)
(a) Specially Manufactured Goods:  Contract is enforceable if circumstances reasonably indicate the goods are for the buyer, made for their purchase before notice of repudiation is received.
(b) Admissions in Pleadings in Court:  If the party against whom enforcement is sought admits to a contract in pleadings or testimony, no writing is necessary to have an enforceable contract.
(c) Paid for Goods:  If goods are received and accepted or paid for, the contract is enforceable.
(d) Merchant’s Exception:  (Where an informal writing that isn’t a K suffices to establish the writing requirement.)
I. If one merchant within reasonable time after an oral agreement is made, send the other merchant a written confirmation that is sufficient under the SoF to bind the sender.  It also binds the recipient if:
A. He has reason to know of the confirmation’s contents; and
B. Does not object within 10 days of receipt.
D. Consideration:  Is there consideration? (All Common Law, no UCC) “The Price of the Promise”  [ Mutual Assent + Consideration = K ]
1. Purpose of Consideration: What this means is that the party trying to enforce the contract must have ‘paid’ something in exchange for the promise of the other party. Consideration must be of real value, but it does not have to be money. For example, a mutual exchange of promises is consideration.
a. Evidentiary:  Formality provides evidence that a contract exists.
b. Cautionary:  Formality forces the parties to think about what they’re doing.
c. Channelling:  Formality is a simple and cheap test of enforceability.  It is a signal to courts and to laymen that the contract is good and enforceable.
2. Difference between Consideration & Offer: Offer & Acceptance is the agreement and Consideration is the payment for the agreement.
3. Benefit-Detriment Theory:  “The promise must induce the detriment and the detriment must induce the promise.”  Justice Oliver Wendell Holmes.  This is Benefit-Detriment Theory which is not what we’re using; we use the Restatement’s “Bargained For’ theory which discounts which side is benefitted or detrimented, but simply that the object of the contract is bargained for and EACH side gives something in the bargain.
4. Bargain-For Theory:  Benefit-Detriment Theory: A contract must be either to the benefit of the promisor OR to the detriment of the promisee to constitute consideration.  Though detriment to the promisee is the essential and invariable test of the existence of a consideration rather than by benefit to the promisor.  This is an either-or scenario, whereas Bargained-For Theory assumes both sides must give something.
5. Exchange of; and
a. Exchange happens simultaneous with promise (in bilateral Ks), not before; exchange in this sense is about timing of promises or performance not necessarily about transfer of property.
(1) In Unilateral Contracts the exchange is completed when the Offeree performs;
b. Past Consideration is no Consideration at all.
c. Without Exchange it’s merely a Gratuitous promise;
6. Something; and
a. Any “something” is sufficient to be consideration; and
(1) The courts will not examine the adequacy of the consideration; UNLESS
(a) The consideration is so grossly inadequate that it shocks the conscience (of the court).  (This effectively means that it wasn’t really bargained for.)
(b) Will almost never examine it in an Option K.
b. Return promise (Promise sometimes called a detriment; a legal detriment is the relinquishment of a legal right); or
(1) Illusory Promises:  Promise worded in such a way, that performance of the promise is the subject only of the promisor’s whim, wish, will, or option; worded in a way to give the promisor an “out”.  Can’t serve as consideration because you have given nothing; have not given “something” (no detriment).
(a) When Performance serves as Consideration in place of Illusory Promise: If the promisor begins to perform (even partial performance) based on the agreement, then the performance serves as consideration and an enforceable K exists and instead you have gone from a bad bilateral contract to a good unilateral contract.
(2) Pre-Existing Duty Rule:  A promise, even one bargained for, that the promisor is already legally obligated to perform cannot be consideration. R. 2d, 73.
(a) Policy reason:  A legal obligation is like “past consideration”; you can’t give something away that’s already been given (by statutory requirement).  Bargaining for a legal duty often looks like and becomes a bribery situation.
c. Performance (without a Promise) (many things can fit this);
(1) Forbearance; or
(2) Creation, modification, or destruction of a legal relation.
d. In Option K, if K unravels, does Consideration get returned?:  Consideration does not need to be returned if the deal is called off by the offeror; the consideration (even real money) is the “price of the promise”.  Would also NOT be applied to the total cost o the contract’s terms unless specified to be applied.
7. Bargained For  [ Bargained For = This simply means “agreement”. ]
a. Promisor manifests an intention to induce Performance or a Return Promise (Consideration);
b. Promisor is induced by the Performance or Return Promise (Consideration);
c. Promisee manifested an intention to induce the Promisor to give up Performance or Return Promise (Consideration);
d. Promisee is induced by the Performance or Return Promise (Consideration).
III. If so, what are K’s terms? -- make sure to tell Prof. in the exam answer WHAT THE TERMS of the K are. >>> this may sit under II(B)
A. Determining Terms of the Contract
1. Construed as a Whole
a. Specific clauses will be subordinated to the contract’s general intent.
2. Ordinary Meaning of Words
a. Courts will construe words according to their ordinary meaning, unless it is clearly shown they were meant to be used another way.
3. Inconsistency between Provisions
a. On standard forms, written or typed provisions will prevail over printed provisions.
4. Custom & Usage
a. What’s customarily done will usually win out.
5. Tendency of Courts to Construe Contract as Valid and Enforceable
a. Provisions will be construed to make them operative whenever possible.
6. Ambiguities Tend to be Construed Against Party Preparing Contract
a. Unless fraud, mutual mistake, or other problem can be proven.


I. Remedies (Not Covered This Semester):
A. Money Damages Typically
B. Sometimes, equitable relief in the form of Specific Performance when Money Damages are insufficient.