Ks Checklist

8/17/2019 Ks Checklist

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04/25/2015 A contract is a legally enforceable promise

In standard cases, a contract involves:

1. Objectively sincere manifestation of intent to commit to the other partyA. If this is absent, check to see if quasicontract

!. "onsiderationA. Is there a bargained for e#change of a promise for a or a promise for performance$

i. %oes it involve a sufficiently definite and specific commitment$

ii. Is it for an action or forbearance definite in the present or future$$1. &"onsideration must be fresh, not outdated' (ast consideration, even if valuable, is notconsideration, unless)

!. It not, is the material benefit met$iii. Is it for something the party is not other*ise obligated to the promisee to do$ +that is, the consideration

bargained for must not be a &prior duty'iv. -ettlement offer$

1. ven doubtful legal claims may act as consideration!. /inning, doubtful, and nondoubtful believed good faith to be doubtful claims are ok +subjective

beliefs 0 must be good faith +234. 5ondoubtful claims *ithout qualification is not ok

6. Is it legal and minimally moral$". Is it for real$ +not a sham

i. 5o test for adequacy of consideration as such, but cannot be a shambargain

ii. Illusionary &I promise to being oranges if I feel like it' 0 promisor can choose *hat they *ant to do 0 not binding

1. -atisfaction clauses are ok e.g. I7ll buy if I get lessees


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!. #clusive rights deals require &best efforts' based on custom4. &requirements' 8s are ok, see 9""

4. AlternativesA. If the requirements of consideration are not met, the elements of promissory estoppel may be met and may be

substituted for considerationi. %id the promise induct action$

ii. -hould the promisor reasonably have e#pected that action to result from the promise$iii. %oes justice so require enforcement$

6. If 4A is not met, check to see if it is a charitable subscription or a marriage settlement +A promises to marry 6 and

this inspires " to promise to leave property to A. A7s marriage is sufficient to make promise bindingi. If so, restatement ;+! may provide relief in some jurisdictions

3. "ontractual alternativesA. If you don7t have a contract, check to see if there is an action in restitution, also kno*n as quasicontract. Is one

party unjustly enriched by another$ +is a nongratuitous benefit besto*ed by plaintiff *ith acquiescence by thedefendant such that justice requires remedy$

CONSIDERATION 0 is there consideration to support the promise$

• Adequacy of Consideration: "ourts do not look into the relative values of consideration

o #ception: Sham consideration: parties may attempt to make it appear as if the promise *as part of an

e#change, even *hen it *as nothing more than a promise to make a gift. .g. ;;

• “Bargained for” echange 0 has something, either another promise or a performance, been sought by the promisor

and given in e#change for that promise$ 21o ?es. If so, then the parties have bargained for the e#change of promises or performances such that each

induced the other and the consideration requirement is met. 6efore a promise is enforceable, the promisor must have received something sought in return for

making it 0 even if *hat *as received *as nothing more than the other party7s reciprocal promise. @he promisor7s price for her promise

Includes: a forbearance, creationmodificationdestruction of a legal relation, and an act other

than a promise, promise 0 must !e !argained for" not #ust a !enefit$detriment incurred %erformance as consideration& i.e. a re*ard

'or!earance as Consideration& Bammer v. -id*ay 0 giving up smoking and drinking for

money


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o 5o. if the performance or return promise is not sought by the promisor in e#change for her promise and

given by the promisee in e#change for that promise, then there is no consideration.

• %romises that are not “Bargained 'or” 0 if the promise is not sought by the promisor and given by the promisee

in e#change for that promise, then *hat type of promise is it$o (ratuitous )romise 0 is the promise one to make a future gift *here the promisor asks for and receives

nothing in e#change$ If so, then the promise is not legally enforceable. Bo*ever, it is only the promise tomake a gift, not the making of the gift, that is unenforceable for lack of consideration. Once made, the promisor cannot rescind the gift for lack of consideration.

o

Conditiona* (ifts 0 /ould the condition be sought independently by the promisor$. /hen you put acondition but do not seek the condition 8irksey: Ber coming to the home *as just something that *as necessary to accept the gift, he

didn7t seek for her to leave her houseo %ast Consideration 0 has the promisee already taken the action before the promise is made$ If so, then

the promisor cannot be seeking to induce it and It is not consideration. Bo*ever, there are e#ceptions for promises to perform *hat are considered &moral obligations.' Ask is the promise one made under thefollo*ing circumstances$ +Cills v. /ynman: father reneging promise made after person cared for sick son*ho died *as not consideration

De!t !arred !y statue of *imitations 0 has a debtor promised to pay a debt that has been barred

by the statue of limitations. If so, the promise is enforceable absent the e#change element D!+1 Antecedent inde!tedness 0 has a debtor voluntarily ackno*ledged an antecedent debt$ D!+!

%ebt discharged in bankruptcy D4

+ateria* Benefit 0 is the promise *as made in recognition of a benefit previously received bythe promisor from the promisee *here enforcement is necessary to prevent injustice$ If so, the promise is binding. D> +/ebb v. CcEo*in: employee that had severe injuries and *as promised*eekly sum

o I**usory %romise 0 does the promise by its terms make performance entirely optional *ith the promisor$

If so, the there is no commitment as to future behavior and the promise is illusory. Bo*ever, if the promisor has limited its discretion in some *ay, then the promise is not illusory. Ask: are there limits tothe party’s discretion?

Requirements and out)ut contracts 0 is there a term *hich measures its quality by the seller7s

requirements or the buyer7s output$ If so, it means it must be done in good faith and isenforceable. @here is a requirement to need. -tructural (olymer

Reasona!*e efforts 0 is there an implied promise to use &reasonable efforts' as in an &e#clusive

dealings' agreement$ If so, then the obligation to use best efforts prevents the promise from

being illusory and the promisor is bound. Fady%uff. @he imposition of the implied promise ofgood faith is consideration for the promise of e#clusivity

(ood faith 0 is there an obligation to act in good faith$ /here a party is entitled to e#ercise

discretion over its performance, that discretion is not unlimited because it must be donereasonably and in good faith. @he obligation to act in good faith keeps the promise from beingillusory. i.e. satisfaction clauses Catteri

o Conditiona* %romise 0 has the promisor conditioned its promise$

On an e,ent$ If the promise is based on a condition *hich must occur and the promisor kno*s at

the time of making the promise that the condition cannot occur, then no commitment has beenmade because no duty of immediate performance can ever arise 2>

On %ersona* satisfaction$ If the promisor7s obligation to perform is conditioned on satisfaction

*ith the other party7s performance, then the promisor must act in good faith *here the performance involves matters of personal taste and must be reasona!*e *here the performance is

of a technical or commercial nature.o Sett*ement of c*aims 0 is the promise one to forbear from bringing or to surrender a claim or defense

*hich is invalid$ If so, it is not consideration unless the claim or defense is doubtful or the forbearing party believes that the claim or defense may be found to be valid. 23 %yer

%RO+ISSOR- ESTO%%E. 0 if there is no consideration, has there been reliance$ @here are some promises *hich,

although the promisor makes them *ithout bargaining for anything in return, nonetheless induct the promisee to rely to herdetriment. In such circumstances, recovery may be available on a reliance basis. Ask: are the elements for promissory estoppel as

set forth in § 90 satisfied

• %romise 0 has a promise been made$ %id the promisor use clear and definite language such that a reasonable

person in the position of the promisee *ould be justified in believing a commitment had been made$o 5o. If not, then there is no basis for recovery


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o ?es. If so, then there may be a basis for recovery under promissory estoppel. If the promise is a charita!*e

)*edge, then the promise is enforceable under ; *ithout proof of reliance and you inquiry ends here. Ifyour jurisdiction does not follo* the restatement, then reliance on the promise by the charitable institutionis required. (roceed to the ne#t question

• 'oreseea!i*ity of re*iance 0 did the promisor have reason to e#pect the promisee to rely on the promise$

o 5o. If the promisor had no reason to e#pect any reliance or not the kind of reliance that resulted, them the

promisor is not bound.o ?es. If so, then the promisor may be bound if the other requirements are met. (roceed to the ne#t question.

•

/ustified re*iance 0 did the promise induce actual reliance and *as the reliance justified$o 5o. IG the reliance *as not induced by the promise, then it is not enforceable

o ?es. If the promisee actually relied on the promise and that reliance *as reasonable based on the nature of

the promise, then the promise may be enforceable if all the elements are satisfied. (roceed to the ne#tquestion.

• A,oiding in#ustice 0 are the circumstances such that injustice can be avoided only be enforcement of the promise$

o 5o. if not, then the promise is not enforceable

o ?es. If so, and all the other requirements are met, then the promise is enforceable. (roceed to the ne#t

question to determine the applicable remedy.

• Reco,ery may !e *imited 0 *hat is the appropriate form of relief$ @he remedy may be limited as justice requires.

@his means that the promisee may not receive full contractual relief *hich *ould include her e#pectation damages but may be limited to reimbursement of the actual loss e#pended in reliance on the promise.

O''ER AND ACCE%TANCE

• Offer: has the offeror made an offer$ Bas a manifestation of *illingness to enter a bargain been made so as to

justify the offeree in understanding that her assent to the bargain is invited and, if given, *ould conclude it$ @odetermine *hether an offer capable of acceptance has been made, consider the follo*ing:

o Intent 0 *as there intent to make an offer$ @he *ords or conduct used in the proposal must be *ords of

offer and not just *ords of preliminary negotiation .anguage *hat *ords *ere used$ /ere they *ords of promise and commitment or invitation to

negotiate$ &I bid' suggests an offer *hereas &are you interested$' suggest preliminarynegotiations

Surrounding circumstances0 1hat 1ere the surrounding circumstances$ /ere the parties

into#icated or at a party$ /ords may sound like an offer but clearly be made in jest. -urroundingcircumstances may alter the normal meaning of *ords

Ad,ertisements to the )u!*ic0 to 1hom 1as the offer made$ (roposals made to the public or a

large group of persons +such as ads or price quotations are more likely to be consideredinvitations to make an offer

o Definite and certain terms 0 are the terms sufficiently clear and definite so that a court could determine

*hat the parties intended and fi# damages in the event of breach$ ?es. If such significant terms as the parties to the contract, the subject matter of the contract, the

time for time for performance, and the price to be paid are identified, then it is more likely to bean offer

5o. if essential terms are missing or vague, then the offer may fail for indefiniteness unless it can

be cured. ven if some terms have been left open, it may still be possible to meet the requirementfor definiteness by the time for performance arrives. Ask the follo*ing:


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Indefinite term cured 0 can the indefinite term be cured by the conduct of parties

through full or part performance$ 43 +issing term im)*ied 0 can the missing term+s be implied from the usages of trade to

*hich the parties are subject, by a prior course of dealing bet*een the parties, or by acourse of performance bet*een them after the agreement

(a) 'i**er 0 can the missing term be cured by the court *ith a gap filler

o Communicated 0 has the offer been communicated to one capable of acceptance

?es. If so, then the po*er of acceptance has been created in the offeree

5o. If not, then there is no po*er of acceptance• Acce)tance 0 has there been a valid acceptance$ Bas the offeree manifested assent to the offer$ In order for a

contract to be formed, there must be an acceptance of the offer on the same terms and in the manner requires orauthoriHed by the offeror @O determine *hether there has been a valid acceptance, consider the follo*ing:

o 2ho is acce)ting the offer 0 is the proper party accepting the offer$ Only the party *ith the &po*er of

acceptance' can accept the offer. Ask the follo*ing: In,ited to acce)t$ Only the party to *hom the offer is made has the po*er of acceptance. A

purported acceptance by one not invited by the offeror is not an acceptance but may itself amountto an offer

3no1*edge of the offer$ Only on *ith kno*ledge of the offer and *ho acts *ith that kno*ledge

has the po*er to accept. @his is the case in re*ard claims: one cannot received the re*ard unlessshe kne* of the offer of re*ard and acted *ith intent to accept it

o +anner of acce)tance 0 has the offeree accepted the offer in the manner required by the offer$

Acce)tance !y )romise$ %oes the offer invite acceptance by a return promise$ If so, then ask ifthe follo*ing have been met to determine *hether there has been a valid acceptance by a promise:

2as there an e)ression of commitment$ @he offeree must e#press an unequivocal

intent to be bound. 2as it unconditiona*$ @he offeree7s e#pression of assent cannot be conditional on some

further act by either party 2as it a “mirror image” of the offer$ @he acceptance must be on the same terms as

proposed in the offer and cannot vary them if the terms of the acceptances vary from theterms of the offer, then it is a counteroffer.

Acce)tance !y %erformance$ %oes the offer invite acceptance by performance and no promise

is invited$ ?es. If so, then the offeree can accept only by performing the act the promisor is seeking

and cannot accept by promising the performance. Bere, the act requested and performedas consideration for the offeror7s promise also constituted acceptance

5o. If the manner of acceptance is not specified, then the offeree can choose *hether to

accept by promise or by performance By Si*ence$ Bas the offeree accepted by virtue of her silence$

5o. @he general rule is that silence is not acceptance

?es, silence can ac as acceptance but in a very limited set of circumstances. >


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• 4as the offeree ta5en the !enefit of ser,ices 1hen she has had a reasona!*e

o))ortunity to re#ect them and reason to 5no1 that )ayment 1as e)ected

and has not done so$ If so, then there is an acceptance.

• 4as the offeror stated or gi,en the offeree reason to understand that assent

may !e manifested !y si*ence or inaction and the offeree in remaining

si*ent or inacti,e intends to acce)t$ If so, then there is an acceptance

• 4a,e there !een )rior dea*ings !et1een the )arties such that it 1ou*d !e

reasona!*e for the offeree to notify the offeror if she did not intend to

acce)t$ If so, then there is an acceptance• 4as the offeree eercised dominion o,er the goods or )ro)erty !y acting in

a 1ay that inconsistent the 1ith offeror6s o1nershi)$ If so, then there is anacceptance.

o Notice of acce)tance 0 is the offeree required to give notice of acceptance to the offeror$

Acce)tance !y )romise$ %oes the offer invite acceptance by promise$

?es. 9nless the offer indicated other*ise, it is essential to an acceptance by promise

either that the offeree &e#ercise reasonable diligence to notify to offeror that the offerhas been accepted or that the offeror receives the acceptance seasonably' >

5o. if not,, proceed to the ne#t question.

Acce)tance !y )erformance$ %oes the offer invite acceptance by performance$ If the offer

invites acceptance by providing a performance, the not notification is necessary to make iteffective unless one of the follo*ing is applicable. Ask:

Does the offer request a notification$ If so, notification is necessary for a validacceptance 3+1

Does the offeree ha,e reason to 5no1 that the offeror 1i** not *earn of the

acce)tance 1ith “reasona!*e )rom)tness and certainty” 1ithout notice$ If so, theofferor7s duty *ill be discharged unless: 3+!

• @he offeree e#ercises reasonable diligence to notify the offeror, or

• @he offeror learns of the performance *ithin a reasonable time, or

• @he offer indicated that notification of acceptance is not required

o 2hen acce)tance is effecti,e 0 does the acceptance take effect$ @his question is closely related to the

method of acceptance but sufficiently separate to require its o*n consideration. @o determine the effectivedate of acceptance, consider the follo*ing:

Instantaneous Communication 0 *ere the parties in direct communication *ith each other at

the time by phone, in person, or communicating by electronic means$ If so, then acceptanceoccurs as soon as it is manifested

In,ited !y the offer 0 *as the acceptance made in a manner and by a medium invited by the

offer$ If so, it is effective as soon as it is put out of the offeree7s possession, &*ithout regard to*hether it ever reaches the offeror.' @his is referred to as the &mailbo# rule' *here acceptance iseffective upon dispatch if the letter *as properly stamped and addressed. If properly dispatched,it is effective, even if it *as received after the offer terminated or *as never received by theofferor >4

2here Offeree sends !oth an acce)tance and re#ection 0 has the offeree mailed a rejection and

then changed her mind and mailed an acceptance or vice verse$ -ince a rejection terminates the po*er of acceptance, you must consider the question in terms of *hen a rejection becomeseffective:

Jejection sent before acceptance$ A rejection does not terminate the offeree7s po*er of

acceptance until it is received, but any acceptance dispatched by the offeree after she has

dispatched the rejection is not effective unless the acceptance is received by the offeror before she receives the rejection. 3;

Acceptance sent before Jejection$ @he contract is binding as soon as the acceptance is

dispatched and the subsequently dispatched revocation of acceptance does not undo theacceptance, *hether it is received by the offeror before or after her receipt of theacceptance

Acce)tance of o)tion contract 0 an acceptance of an option is effective upon receipt by the

offeror, not upon dispatch. >4+b


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• Termination of the )o1er of acce)tance 0 does the offeree have the po*er of acceptance$ Gor an acceptance to

be valid, it must be made *hile the po*er of acceptance is still in effect. %oes the offeree still have the po*er ofacceptance or has the offer terminated$

o .a)se of time 0 has the offer lapsed *ither because the time specified in the offer for acceptance has

passed or, if no time *as specified, then a reasonable time has passed$ Ask: /as the offer sent by mail$ If so, then it is seasonably accepted if an acceptance is mailed at any

time before midnight on the day on *hich the offer is received. 31+4 /as the offer made during direct negotiations$ /here the parties bargain facetoface or over the

telephone, the time for acceptance ends *ith the conversation unless a contrary intention isindicated. 31 cmt. %o Re#ection 0 has the offeree failed to accept the offer before it lapsed or has she communicated to the

offeror that she foes not intend to accept$ ?es. If so, the po*er of acceptance is terminated and the offer can no longer be accepted.

5o. if not, then the offeree may still accept unless the po*er of acceptance has terminated in

another *ay. (roceed to the ne#t question.o Counter offer 0 has the offeree declined the contract on the terms proposed in the offer and suggested

different terms$ ?es. If so, then the offeree7s po*er of acceptance is terminated. A valid acceptance must be the

&mirror image' of the offer. Bo*ever, is it possible it *as not a counter offer but a mere inquiry$A mere inquiry about the possibility of different terms or a comment about the terms is notordinarily a counteroffer

5o. If not, then the offeree still has the po*er of acceptance unless it has terminated in another*ay. (roceed to the ne#t question.

o Re,ocation 0 has the offeror revoked the offer$ @he offeror may revoke the offer at any time before

acceptance, even if the offer says it *ill remain open, unless it is an option contract or a &firm offer' +if so, proceed to option contracts. If the offeror indicates an intent not to make the proposed contact, then itmay be a revocation even *ithout the *ords &I revoke.' Bo*ever, the revocation is not effective until it isreceived by the offered. Ask:

2as the re,ocation recei,ed$

?es. If so, then the offeree7s po*er of acceptance is terminated

5o. If not, then it is not effective unless it *as an indirect revocation. (roceed to the ne#t

question 2as it an indirect re,ocation$ Bas the offeror behaved in a *ay inconsistent *ith an intent to

enter the contract and the offeree has acquired reliable information to that effect$

?es. If so, there *as a revocation and the offeree cannot accept. 5o. If it *as a mere rumor or heard from an unreliable source, then the po*er of

acceptance is not terminated

• O)tion contracts and irre,oca!*e offers 0 *as there a promise to keep an offer open for a stated period of time$

o 2as it an irre,oca!*e offer$ /hile the general rule is that offers are freely revocable, there are certain

conditions *hich if met, make the offer irrevocable. Ask the follo*ing: Consideration 0 did the offeree give consideration in e#change for the promise to keep the offer

open$ ?es. If so, them the offer is irrevocable. It may also be said that an option contract

formed.


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5o. if not, an option might be binding even *ithout consideration. (roceed to the ne#t

question. Statute 0 is there a statue statute *hich permits the creation of irrevocable offers *ithout

consideration$ Gor the 9""7s &firm offer,' proceed belo* Restatement 0 does the jurisdiction follo* the restatement vie* *hich finds a valid option if the

promise is in the a *riting signed by the offeror, recites a purported consideration, and proposed afair e#change *ithin a reasonable time$ D2+1+a

?es. If so, then the offer is binding as an option contract. ven nominal consideration

*ill be sufficient to support a shorttime option proposing a fair e#change• Jecital and no consideration$ /as there a recital of consideration and no

payment *as actually made$ "ourts differ in the effect given to a recital*ithout actual payment. -ome have held the recital to have no effect *hileothers have found that the recital makes the offer irrevocable, *ith as a promiseto pay an ackno*ledgement of payment.

• Eross disparity bet*een payment and value of option$ If so, then this may

indicate it *as a mere formality, pretense, or sham and *ill not constituteconsideration. D2 cmt. b

5o. If not, an option contract *as not formed in this manner. Bo*ever, an option might

be formed under the rule in the ne#t question. Offer for a uni*atera* contract 0 has the offeree partially performed the requested performance$

As the follo*ing:

"ommon la*$ does the jurisdiction follo* the traditional common la* vie*$ If so, thenthe offer may revoked at any time before performance of the requested act has beencompleted

Jestatement$ %oes the jurisdiction follo* the restatement vie*$ If so, then once the

offeree begins to perform the requested act, the offer becomes irrevocable. @herestatement uses offers becomes irrevocable. @he restatement uses the term &optioncontract' but the meaning is the same as making the offer irrevocable. Bo*ever, theofferee must begin the actual performance and not make mere preparations to perform.@he offeror7s o*n duty to perform is conditional on the offeree7s completing performance as specified in the offer.

Jeliance that is not part performance$ %id the offeror make an offer *hich she should

reasonably e#pect to induce reliance on the part of the offeree before acceptance and*hich did not induce such reliance$ If so, then it is binding as an option contract to the

e#tent necessary to avoid injustice. D2+! Bid on construction contract 0 did a subcontractor submit a bid to a general contractor in

connection *ith a bid on a construction contract$ 5o. If not, the inquiry ends here

?es. If so, is the subcontractor7s bid revocable$ 9nless the parties have agreed

other*ise, the subcontractor7s offer is irrevocable until the general contractor has had areasonable opportunity to notify the subcontractor of the a*ard and accept the offer. @hisis based on a reliance theory. D2+! illus.>.

o 2as an irre,oca!*e offer acce)ted$ As acceptance under an option contract is not effective until received

by the offeror. >4+bo /as an irrevocable offer terminated$

.a)se of time 0 has the offer lapsed$

?es. If so, the irrevocable offer has terminated

5o. If not, then the irrevocable offer has not terminated unless it has terminated inanother *ay. (roceed to the question

Re,ocation 0 has the offer been revoked$ If the offer is irrevocable, then even a purported

revocation by the offeror has effect on the offeree7s po*er of acceptance. Death or inca)acity 0 has the offeror died or become incapacited$ @he option survives the death

or incapacity of the offeror.


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Re#ection or counter0offer 0 has there been a rejection or counteroffer$ @he po*er of

acceptance under an option is not terminated by rejection or counteroffer

SA.E O' (OODS& O''ER AND ACCE%TANCE

• &Bargain of the )arties in fact' 0 is there an agreement bet*een the parties$ Bave the parties, as a practical

matter, reached sufficient agreement for contract liability to arise$o Agreement 0 has there been an offer and acceptance$ A contract for the sale of goods may be made in any

manner sufficient to sho* agreement. "onsider the follo*ing: Conduct 0 does the conduct of both parties recogniHe the e#istence of a contract$ 9"" !!;3+1

?es. If so, then there is a contract even if the moment of its making is undermined

5o. if not, the parties may not have intended a contract and none *ill have been created.

Indefiniteness 0*ere 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 contact and there is a reasonably certain basis for giving an appropriate remedy. 9"" !!;3+4

Acce)tance 0 has the offeror specified a method of acceptance$

?es. If so, then the offer may be accepted only in the manner invited by the offer

5o. if not, then the offeror may accept &in any manner and by any medium reasonable in

the circumstances.' 9"" !!;>+1+a Acce)tance !y )romise to shi) or shi)ment 0 *as an order or other offer to buy goods for

prompt or current shipment accepted either by a prompt promise to ship or by the prompt orcurrent shipment of conforming goods$

?es. If so, it *as an acceptance.

5o. It *as a shipment of nonconforming goods. @his is not an acceptance if theshipment of a nonconforming goods is an accommodation to the offeror as allo*edunder 9"" !!;>+1+b. Ask: did the seller seasonably notify the buyer that theshipment of nonconforming goods *as offered only as an accommodation to the buyerand not an acceptance$

• ?es. If so, then the seller7s shipment of nonconforming goods is not an

acceptance.

• 5o. If not, then the seller7s nonconforming shipment is an acceptance and a

breach of contracto “'irm Offer” 0 did a merchant offer to buy or sell goods in a signed *riting *hich promises to hold the

offer open$ 9"" !!; ?es. If so, then the offer is not revocable for lack of consideration during the time stated or if no

time is stated for more than three months. 5o. If not, then the offer is revocable any time before acceptance unless it is made irrevocable

under one of the other e#ceptions.o “Batt*e of the forms” 0 have one or both parties used oral or *ritten communications in the process of

forming a contract *here the *ritings e#changes may gave been preprinted order and confirmation formscontaining standard, boilerplate terms$ If so, then a conflict bet*een them is possible since such standardterms are usually designed to protect the interests of that party. In such cases, the provisions of 9"" !!;2may be implicated. Ask the follo*ing:

Acce)tance 0 is the response to the offer &a definite and seasonable e#pression of acceptance' or

&a *ritten confirmation' of a prior oral agreement$


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?es. If so, proceed

5o. if not, then no contract has been formed by the *ritings of the parties. (roceed

belo* to determine *hether the conduct of the parties recogniHes the e#istence of acontract.

Terms in acce)tance 0 does the acceptanceconfirmation state terms &additional to or different

from' the offer$ ?es. If so, then ask: is acceptance of the offer “e)ress*y conditiona*” on the offeror7s

assent to the additional terms$ +!!;2+1

•

?es. If so, then ask, did the offeror e#pressly assent$o ?es. If so, a contract has been formed. @he contract terms are those

that are agreed upono 5o. if not, then no contract has been formed by the *ritings of the

parties. (roceed to determine *hether the conduct of the partiesrecogniHed the e#istence of a contract.

• 5o. If the response is a definite and seasonable e#pression of acceptance and it

is not e#pressly conditional on assent to ne* terms, it is an acceptance eventhough it states terms different from or additional to those in the offer.. @here isa contract and the ne#t question is to determine its terms. Ask: are !oth )artiesmerchants$ !!1;2+!

o ?es. If so, then the agreed upon terms are included and additional

terms become part of the contract as *ell un*ess:

+a @he offer *as e#pressly limited to its termsK Additional terms are proposals for modification

+b @he additional term+s materially alters the contractK or

@hose that *ould result in surprise or hardship if

incorporated *ithout e#press a*areness by the other party

i.e. *arranty disclaimers, time for making

complaints, sometimes arbitration clauses comments indicate that force majeure clauses, terms

providing for interest on overdue payments, or those providing for inspection by a sub purchaser, areusually non material

look at industry standards: 6ay*ay

+c @he offeror has already given notice of objection to theadditional term+s or it is given *ithin a reasonable time afternotice is received. 9"" !!;2+!

%ifferent terms: not clear if different terms should be treated

different +5orthrop Cajority: knockout rule: conflicting terms kick

each either out and gap fillers are put in Girst shot: find that a 8 *as formed on the terms

e#pressed In the offer, *ith the deviant termcontained in the offeree7s acceptance simplydropping out

(osner"A: treats them as the same. @he deviant

terms become a part of the resulting contract unless

they are materially different from on another


11/37

o 5o. If not merchants, then the agreed upon terms are included and

additional terms are merely proposals for addition to the contract. Conduct 0 does the conduct of the parties &recogniHe the e#istence of a contract$' Bas there been

a tender and acceptance of performance$ ?es. If so, a contract has been formed by the parties7 conduct. Its terms are those upon

*hich the parties7 *ritings agree and the 9""7s &supplementary terms.' Cissing termsmay be supplied by an applicable trade usage or course of dealing or performance bet*een the parties

5o. if not, then no contract has been formed

• Things to remember

o Al*ays begin an analysis by determining the nature of the transition 0 sale of goods versus services. If it is

a sale of goods, then the problem *ill be analyHed under Article ! of the 9"". If it is one for services,then the common la* is applicable.

o "ourts apply an objective test to determine *hether there has been an offer and an acceptance. It does not

matter *hat a matter *hat a reasonable person in the other party7s position *ould believe *as meant bythe promisor7s *ords or conduct.

o Jemember the limits of the &mailbo# rule' *hich holds an acceptance is effective upon dispatch. Girst, if

the offeree choose an acceptance not invited by the offer the mailbo# rule does not apply and theacceptance is not effective until receipt. -econd, upon dispatch, the mailbo# rule also binds the offeree toacceptance. @hird, as &master of the offer,' the offeror can al*ays depart from the mailbo# rule by providing other*ise in the offer.

o

It is also important to note that the mailbo# rule applies only to acceptances by mail, not revocation. Arevocation is not effective until received by the offereeK hence, a revocation by mail or telegram is noteffective until receipt.

+ODI'ICATION 0 is there consideration to support a promise modifying a duty under a contract not fully performed

by either party$

• %re0eisting duty 0 is a party promising to perform a duty that she already o*es$ 24

o ?es. If so, then the party has a pree#isting duty and there is no consideration to support the promise. A

past promise or performance cannot serve as consideration for a later promise. “%ast consideration” is noconsideration

(revents "oercion. (revents enforcement of coercive modifications over the other party *ho has

some sort of over*helming negotiating leverage over the other party after the original contracthas been made. Alaska (ackers

o 5o. if not and the party is promising too perform a duty not already o*ed to the promisor, then there is

consideration to support the promise.• +odern Trend 0 does the jurisdiction allo* for a departure from a strict application of the pree#isting duty rule as

reflected in D *here a modification may be enforceable *ithout consideration$ If so, then a modification is binding absent consideration if all of the follo*ing requirements are met: +/atkins L -on

o 7o*untary 0 did the parties voluntarily agree to the modification$

o Eecutory 0 is the contract still e#ecutory on both sides +each side still o*es a performance$

o 8nantici)ated circumstances 0 *ere the underlying circumstances prompting the modification

unanticipated by the parties$o 'air and equita!*e 0 is the modification fair and equitable$

• Sa*e of goods is there a modification for a contract involving a sale of goods$ If so, then consideration is not

required under 9"" !!; although the "ode requires the modification to meet the test of good faith. Ask: was themodification made in good faith?

o ?es. If so, then the modification is enforceable


12/37

o 5o. if the party acted in bad faith to escape a performance due under the original contract terms, then the

modification is not enforceable

Things to remember

• ven if a party says &I promise' be careful to assess the *ords carefully to determine *hether a commitment has

been made. -uch language as &I promise to do it if I *ant to' is an illusory promise because the promisor has madeher performance conditional on an event entirely *ithin her control

• 'or )romissory esto))e*, e#amine the facts carefully to determine *hether it *as reasonably foreseeable to the

promisor that the promisee *ould rely on the promise. ven if relief is granted under this theory, it &may be limited

as justice requires' and it is likely that recovery *ill be limited to damages based on the reliance interest

DE'ENSES AND .I+ITS ON EN'ORCEABI.IT-

STAT8E O' 'RA8DS

• Ty)e of contract 0 assuming a valid contract *as formed, does it fall *ithin the statue of frauds$ Only certain

categories of contracts are required to be in *riting to be enforceable. @o determine *hether a *riting is required,ask *hat type of contract it is:

o Is it a contract for a sale of an interest in land

Is it a contract for a sale of goods for =;; or more

Is it a contract that cannot be performed *ithin a year of its making

/hen applying this rule, remember that the year starts to run from the making of the

contract, not from *hen the performance under the contract is to begin. Only contracts

*hich by their terms cannot be performed *ithin a year of their e#ecution must be in*riting

Is it a contract to ans*er for the debt of another$ +cosigner 0 &surety'

Is it a contract made in consideration of marriage$

Is it a contract by an e#ecutor or administrator to ans*er for the duty of their decedents$

o ?es. If your ans*er is &yes' to any of the above, then the contract must be in *riting. Gurther, the

requirements of the statute apply separately so that if more than one requirement applies to a singlecontract, then all must be met. (roceed

o 5o. If not, then the contract does not need to be in *riting to be enforceable and the analysis ends here.

• 2ritten +emoria* 0 is there a *riting or record sufficient to satisfy the requirements of the statue$ /here a

contract is required to be in *riting, it must be in a permanent, *ritten form, contain the essential terms, and besigned by the party to be charged. @he requirements of the "ode are similar and any difference *ill be addressed*here applicable.

o 'orm of 1riting$record 0 is there a *ritten memorial of the parties7 agreement$ Is there some form of*riting even if it appears on a napkin, as an internal memorandum, a document *ritten for some other purpose, a check, or a series of separate *riting, *hich *hen considered together, provide evidence of the parties7 agreement$

5o. If there is no evidence of a *riting, then the statute is not satisfied. (roceed to the e#ceptions


13/37

?es. As long as it is in a permanent, *ritten form it does not have to be a fully integrated, formal

contract. (roceed to the ne#t question.o Essentia* terms 0 does the *ritingrecord contain the essential terms of the agreement$ Ask: does it

identify the subject matter of the contract the parties to the contract and state with reasonable certaintythe essential terms of the unperformed promises?

5o. If the memo fails to identify the parties, the subject matter of the contract , and its essential

terms, then the statute is not satisfied. @here is an e#ception for the sale of goods *here, *ithrespect to the required terms, only the quantity term is required. (roceed to ne#t part.

?es. If so, then the general requirements of the memorandum are satisfied. (roceed to ne#t

question.o Signature 0 is the *riting signed by or on behalf of the party to be charged *ith its enforcement$

?es. If so, then this requirement is satisfied

5o. if not, then this requirement is not satisfied unless the follo*ing e#ception for the sale of

goods applies. Ask: has a merchant sent a written confirmation to another merchant who hasreason to know its contents and it is in a form sufficient to bind the sender?

?es. If so, then the requirement of a *riting is satisfies and the other merchant is bound

unless she gives *ritten notice of objection *ithin 1; days of receipt 9"" !!;1+! 5o. if not, then the contract is not enforceable unless an e#ception applies

• Ece)tions 0 is there an e#ception that *ill allo* enforcement of the contract despite the lack of a signed *riting$

o %art %erformance 0 has there been part performance of the contract$

?es. If so, then part performance of the oral agreement may provide reliable evidence that a

contract *as made. Ask the follo*ing Fand contract provision$ @aking possession of the and making substantial improvements

*hich are not compensable in money and are evidence that it *as not a landlordtenantrelationship

Oneyear rule$ /as there part performance of a contract *ithin the oneyear provision$

If so, then if the party has fully performance the contract, she can enforce it absent a*riting

-ale of goods$ /as it a contract for the sale of goods$ If so, then a *riting is not

required &*ith respect to goods for *hich payment has been made and accepted or*hich have been received and accepted' 9"" !!;1+4+c

5o. if not, proceed to the ne#t question to see if another e#ception may be applicable

o S)ecia**y manufactured goods 0 has the seller specially manufactured goods for the buyer or made a

substantial beginning of their manufacture or commitments for their procurement 9"" !!;1+4+a

?es. If so, and the goods are not suitable for sale to others in the ordinary course of the seller7s business, then the contract is enforceable

5o. If not, then proceed to the ne#t question

o Admissions 0 in a contract for the sale of goods, has &the party against *hom enforcement is sought

admitted in his pleading, testimony, or other*ise in court that a contract for sale *as made$' 9"" !!;1+4+a

?es. If so, the contract is enforceable but not beyond the quantity of goods admitted.


14/37

5o. if not, proceed

o %romissory esto))e* 0 has the promisee relied to her detriment on a promise *hich the promisor could

reasonably foresee *ould induce such reliance and injustice can only be avoided by enforcement of the promise$

?es. If so, then the promise is enforceable

5o. if the reliance *as not of a definite and substantial character or other remedies such as

cancellation or restitution *ould be available and adequate, then the promise is not enforceableabsent a *riting.

DE'ENSES• +isunderstanding 0 do the parties attach materially different meanings to their understanding of the terms of their

e#change$o Neither )arty 5no1s 0 do the parties attach materially different meanings and neither party kno*s or has

reason to kno* the meaning attached by the other$ If so, then there is no manifestation of mutual assento Each )arty 5no1s 0 do the parties attach materially different meanings and each party kno*s or has

reason to kno* the meaning attached by the other$ If so, then there is no manifestation of mutual assento One )arty 5no1s 0 *hat does one party kno* about the meaning attached by the other$

%oes one party not kno* of any different meaning attached by the other and the other kno*s the

meaning attached by the first party$ If so, the agreement is on the terms attached by the first party %oes one party ha,e no reason to 5no1 of any different meaning attached by the other and the

other has reason to kno* the meaning attached by the first party$ If so, the agreement is on theterms attached by the first party.

• Bases for a,oidance 0 assuming a valid contract *as formed, is there a basis for avoidance$o Inca)acity of the )arties 0 did a party lack capacity to enter a contract$ A party must have capacity to

incur contract liability. Age9 /as the party an infant at the time of the transaction$

5o. If not, then incapacity based on age is not a basis to avoid the contract. (roceed to

mental capacity ?es. If so, *as it a contract for “necessities”9 although the issue of *hether it is a

necessity is a question of la*, you still need to make an assessment on the e#am and proceed. Ask:

• Is it a contract for food, shelter, clothing or other such basis items typically

found necessary for the maintenance of life$ If so, proceed to the ne#t question

• /hat is the quantity, quality and reasonable value of that necessity in light of

the infant7s social statue and situation in life$ In ans*ering this question, ask,

*hat is reasonable and necessary for the suitable maintenance of this infant invie* of her social position and situation in life, the customs of the social circlein *hich she moved and her financial situation and that of her parents

Ratification$ 9pon reaching the age of majority, has the infant engaged in conduct so as

to ratify the agreement *ither by performing the contractual obligation or accepting theother party7s performance under the contract$

• ?es. If so, then the infant is bound

• 5o. if not, then proceed to the ne#t question


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Disaffirmance$ Bas the infant taken any actions *hich can be construed as disaffirming

the contract$

• ?es. If the infant has taken steps to disaffirm the *hole contract by *ords or

conduct either before or after a reasonable time upon reaching majority thenshe can avoid the contract. @he infant is not required to make restitution but isrequired to return only *hat she still has in possession. @here is no obligation toaccount for use, depreciation, or loss in value. ven *here necessaries areinvolved, recovery is limited to unjust enrichment.

•

5o. If not, then failure to disaffirm *ithin a reasonable time after attainingmajority is a ratification of the contract and terminated the po*er to disaffirm +enta* inca)acity9 /as the party mentally ill or defective at the time of contract$

8nderstanding$ If by reason of mental illness or defect, *as the party able to

understand in a reasonable manner the nature and consequences of the transaction$

• 5o. If not, then the party may have incurred only voidable contractual duties

• ?es. If so, then this is not a basis to avoid the contract. (roceed to into#ication

3no1*edge of other )arty9 If by reason of mental illness or defect, *as the party

unable to act in a reasonable manner in relation to the transaction and the other partyhad reason to kno* of her condition$

• ?es. If so, then the party has incurred only !oidable contractual duties

• 5o. If not then this is not a basis to avoid the contract

'air terms and other )arty 1ithout 5no1*edge9 /as the contract made on fair terms

and the other party *as *ithout kno*ledge of the mental illness or defect$• ?es. If so, the po*er of avoidance terminates to the e#tent the contract has been

performance in *hole or in part or circumstances have changed such thatavoidance *ould be unjust. @he court may grant relief as justice requires.

• 5o. If not, then this is not a basis for avoidance of a contract

Intoication9 %id the other party have reason to kno* that by reason of the person7s

into#ication, -he *as unable to understand in a reasonable manner the nature and consequences of the

transaction$

• ?es. If so, then the into#icated person incurs only voidable contractual duties

• 5o. if not, then this is not a basis to avoid the contract

"#

-he *as unable to act in a reasonable manner in relation to the transaction$• ?es. If so, then the into#icated person incurs only voidable contractual duties.

• 5o. if not, then this is not a basis to avoid the contract.


16/37

• +ista5e 0 did one or both of the parties enter the agreement based on an erroneous assumption about the facts that

e#isted at the time of contract$o +utua* mista5e 0 if the mistake *as shared by both parties as to a basic assumption on *hich the

contract *as made, does it have a material effect on the agreed e#change of performances$ ?es. If so, then the contract is voidable by the adversely affected party un*ess she bears the risk of

the mistake. Ask the follo*ing to determine *hether the party bears the risk: Allocated by agreement$ /as the risk of a mistake allocated to her by agreement of the

parties$

&conscious ignorance'$ *as she a*are at the time of contract that she had only limitedkno*ledge *ith respect to the facts to *hich the mistake relates, but treated her limitedkno*ledge as sufficient$

Jisk allocated by the court$ /as the risk of mistake allocated by a term supplied by the

court on the ground that it *as reasonable under the circumstances to do so$ 5o. If not, then this defense is not applicable. 5e#t question.

o 8ni*atera* mista5e 0 if the mistake *as held by one party as to a basic assumption on *hich she made the

contract, does it have a material effect on the agreed e#change of performances that is adverse to her$ ?es. If so, the contract is voidable by her if she does not bear the risk of mistake under the tests

above and either: @he effect of the mistake is such that enforcement of the contract *ould be

unconscionableOJ

@he other party had reason to kno* of the mistake or it *as her fault that caused themistake

o Scri,ener6s error has there been a mistake as to e#pression in recording the parties agreement$ If a

clerical error results in a *ritten agreement that fails to e#press the parties7 agreement correctly, then theappropriate remedy is reformation of the *riting to reflect the agreement actually reached.

• +isre)resentation 0 did a party make an assertion that *as not in accord *ith the facts$ All of the follo*ing four

elements must be satisfied to avoid a contract based on misrepresentation:o Assertion 0 did a party make a false representation as to a fact$ An assertion can be oral or *ritten or can

be inferred from conduct. @o determine *hether a statement is false ask the follo*ing: 'a*se im)ression or inference9 If part of the truth is told, but another portion is not so as to

create ad overall misleading impression, this may constitute a misrepresentation Concea*ment9 %id one party take an affirmative act to keep the other party from learning a fact$

Non0disc*osure9 %o one of the e#ceptions to the &no duty to disclose' rule apply$ In certain

situations, the failure to disclose a fact is seen as an assertion that the fact does not e#ist. Ask thefollo*ing:

Re*ation of trust or confidence9 Is there a relation of trust or confidence bet*een the

parties$ @he relationship need not be a fiduciary one but may be one bet*een familymembers or bet*een doctor and patient, among others. If so, then the one in *hom thetrust and confidence is placed is e#pected to disclose *hat she kno*s. Gailure to disclosethe fact is equivalent to an assertion that the fact does not e#ist.

Need to correct$ Is a disclosure necessary to made an assertion$ If a party *ho has

made an assertion later learns something that bears on the prior assertion, then she ise#pected to speak up. Gailure to disclose the fact is equivalent to an assertion that thefact does not e#ist.

+ista5e in !asic assum)tion9 /ould disclosure correct the other party7s mistake as to

a basic assumption on *hich the party is making the contract and nondisclosure of the

fact amounts to a failure to act in good faith and in accordance *ith the standards of fairdealing$ If so, then failure to disclose the fact is equivalent to an assertion that the factdoes not e#ist


17/37

+ista5e as to 1riting9 /ould disclosure correct the other party7s mistake as to the

contents or effect of the *riting$ If so, then failure to disclose the fact is equivalent to anassertion that the fact does not e#ist.

o +ateria* or 'raudu*ent 0 *as the misrepresentation material or fraudulent$ A misrepresentation need not

be fraudulent to make the contract voidable but if it is not fraudulent, then it must be material. Ask thefollo*ing:

+ateria*$ /as the misrepresentation likely to induce a reasonable person to assent or did the

maker kno* that it *as likely to induce the recipient to so do$ ?es. If so, then it *as a material misrepresentation

5o. if not, and it *as not fraudulent, then this element is not satisfied and the assertion is

not a misrepresentationo Inducement 0 did the misrepresentation induce the recipient to make the contract$ @his question is

ans*ered by asking, &did the misrepresentation substantially contribute to her decision to agree to thecontract$ If the ans*er is yes, then the misrepresentation contracted substantially to her decision to makethe contract and it is immaterial that she may also have been influence by other considerations

o /ustified re*iance 0 *as the recipient justified in relying on the misrepresentation$ @ypically, the most

significant and difficult application of this requirement occurs in connection *ith assertions of opinion because opinions are not fact. A party is not justified in relying on statements of opinion unless on of thefollo*ing e#ceptions apply. If the ans*er is yes to any of the follo*ing, reliance is justified. Ask:

Confidentia* re*ationshi)$ %oe the recipient stand in a confidential relationship to the person

*hose opinion is asserted such that the recipient is reasonable in relying on it$

S)ecia* s5i** or #udgment$ %oes the recipient reasonably believe that the other person hasspecial skill of judgment *ith respect to the subject matter$ Susce)ti!i*ity$ Is the recipient particularly susceptible to a misrepresentation of the particular

type involved for some other special reason$

• Duress 0 *as the party unfairly coerced into entering or modifying the contract$

o %hysica* com)u*sion 0 *as the party physically compelled to assent *hen she other*ise *ould not have

done so$ ?es. If so, then the conduct is not effective to create a contract

5o. If not, then proceed to the ne#t question

o Im)ro)er Threat 0 *as the party7s assent induced by means of a threat$ @he follo*ing four elements

must all be satisfied: Threat 0 *as there a manifestation of intent to inflict or harm on another

Im)ro)er 0 *as the threat improper$ If the ans*er is yes to any of the follo*ing, the threat *as

improper: /as the threatened act a crime or tort$

/as it a threat of criminal prosecution$

/as it a threat of civil proceedings made in bad faith$

/as it a threat *here the resulting e#change *ould not be on fair terms such as *ould be

considered &economic duress'$


18/37

/as it a threat because the party had no reasonable alternative$

Inducement 0 did the improper threat actually induce the making of the contract$

Sufficient*y serious 0 *as the threat sufficiently grave to justify the victim in succumbing to it$

• 8ndue Inf*uence 0 did one party induce the assent of the other by improper persuasion$ @here are t*o elements

required for a claim based on undue influence:o S)ecia* re*ationshi) 0 did a special relationship e#ist bet*een the parties$ Is one party highly susceptible

to persuasion by the other$ #amples include the relationships bet*een parentchild, husband*ife, anddoctorpatient

o 8nfair )ersuasion 0 did the stronger party use unfair persuasion on the *eaker party to gain that a party7sassent$ One *ay to determine *hether the dominant party e#ercised this type of persuasion is to ask:

/as there an imbalance in the resulting transaction$

%id the *eaker party have the benefit of independent advice$

/as there time for reflection$

Bo* susceptible *as the *eaker party$

• 8nconsciona!i*ity 0 is the contract manifestly unfair or oppressive$ In determining *hether a contract is

unconscionable, look for an overall imbalance based on the follo*ing considerations:o %rocedura* 8nconsciona!i*ity 0 *as the bargaining process characteriHed by any of the follo*ing:

An absence of meaningful choice$

9nequal bargaining po*er$

A lack of opportunity to duty the contract and inquire about the terms$

5onnegotiable terms$

o Su!stanti,e 8nconsciona!i*ity 0 *ere the terms of the contract unfairly onesided$ @o determine *hether

an agreement is onesided, consider the follo*ing: Is one party deprived of all the benefits of the agreement or left *ithout a remedy for the other

party7s breach$ Is there a large disparity bet*een the prevailing market price and the contract price$

• I**ega*ity 0 is the promise or other term of the agreement unenforceable on grounds of public policy$ Ask the

follo*ing:o .egis*ation 0 is there a statute that identifies specified kinds of promises or other terms as unenforceable$


19/37

o Ba*ancing of interests 0 *hat is the purpose to be served in denying enforcement$ In ans*ering the

question, consider the courts7 traditional interests: 9pholding the intent of the parties

(rotecting the e#pectations of the parties

An abhorrence for unjust enrichment

@he need to protect the public *elfare as in policies against the restraint of trade, the impairment

of family relations, and interferences *ith other protected interests

(AJOF MI%5"@o determines the admissibility of e#trinsic evidence, proceed as follo*s:

• 2ritten agreement 0 have the parties memorialiHed their agreement in a *riting$

o 5o. if there is no *ritten agreement, then your inquiry ends here and the parol evidence rule doe not apply

o ?es. If no, then the parol evidence rule may be implicated. (roceed

• %aro* e,idence 0 is one party seeking to introduce evidence of another agreement, either oral or *ritten, to sho*

that the terms of the *ritten agreement are other than as sho*n in the *riting$o Se)arate agreement$ is it a separate agreement for separate consideration$ If so, then the parol evidence

rule does not apply and the evidence is admissible.o Su!sequent agreement$ Is it a subsequent agreement, one entered into after the *ritten agreement$ If so,

then the parol evidence rule does not apply.o Condition )recedent$ Is evidence to sho* that the contract *as subject to a condition precedent$ If one

of the parties conditioned its performance on the happening of a future uncertain even, then evidence of

that condition is not barred by the parol evidence ruleo Other )ur)oses$ Is the evidence being offered to sho* that the agreement is invalid due to a lack of

consideration, mistake, fraud, misrepresentation, duress, or illegality$ If so, then such evidence isadmissible

o %rior or contem)oraneous agreement$ Is it evidence of a prior or contemporaneous oral or prior *ritten

agreement$ If so, then the parol evidence rule applies. (roceed

• Deciding the integration question 0 *hether a *riting is an integrated agreement and, if so, *hether the

agreement is completely or partially integrated are preliminary questions decided by the judge. "ourts follo*different approaches in making these determinations. Ask: which type of jurisdiction is in!ol!ed?

o Code$Restatement: *ill consider all the circumstances, including evidence of the prior negotiations, to

determine the question of integrationo 'our corners: looks to the *riting and only if the contract appears on its face to be incomplete *ill parol

evidence be admissible.

• Integrated or unintegrated$ @o determine *hether the agreement is integrated or unintegrated ask the follo*ingabout the *riting:


20/37

o %re)ared !y one )arty$ If the document is prepared by only one party, then it is likely to be unintegrated

and parol evidence is admissible. ?our inquiry ends here.o +emo or fi*e$ If it is a memo or file, then it is likely to be unintegrated and parol evidence is admissible.

Our inquiry ends here.o 'ina* as to one term$ If the *riting is final as to at least one term, then the agreement is integrated and

the parol evidence rule bars evidence of prior negotiations for at lease some purposes. (roceed.

• Degree of integration 0 if the agreement integrated, is it completely or partially integrated$

o Com)*ete*y integrated$ Is the *riting a final and complete statement of the parties7 agreement$ If the

judge finds the *riting is completely integrated, evidence even of consistent additional terms may not beadmitted but the *riting may be e#plained or supplemented by course of dealing, usage of trade, or courseof performance. "onsider the follo*ing to determine *hether the *riting is a complete integration:

+erger c*ause$ Is there a merger or integration clause in the agreement$ @he presence of such a

clause is the best evidence of an integrated agreement. Bo*ever, a merger clause is only presumptive of integration 0 it is not conclusive. (roceed

Consistent additiona* terms$ An agreement is not completely integrated if the *riting omits a

consistent additional term *hich is agreed to for separate consideration or such a term as in thecircumstances might naturally be omitted from the *riting !1>

o %artia**y Integrated$ Is the *riting a partial integration such that it is final *ith respect to the terms it

contains but it does not contain all the terms of the parties7 agreement$ If so, then the agreement is only partially integrated and evidence of additional terms is admissible as long as it does not contradict a termof the *riting. Ask: is the offered term consistent or contradictory to the writing?

Consistent$ If the offered term is consistent *ith the *riting, then it is admissible. Contradictory$ If the evidence is contradictory, then it is barred by the parol evidence rule. Only

additional, supplementary terms are admissible.

• Other %ur)oses$ Is the evidence being offered to sho* that the agreement is invalid due to a lack of consideration,

mistake, fraud, misrepresentation, duress, or illegality$o ?es. If so, the evidence is admissible

o 5o. if not, then the evidence is barred by the parol evidence rule.

I5@J(J@A@IO5: although evidence may be barred by the parol evidence rule, it may be admissible to interpret the *riting.@he interpretation checklist helps you analyHe *hether such evidence is admissible and, if so, *hat form it may take.

• Contract meaning$ %o the parties dispute the meaning of a term in their contract$ If the parties disagree s to the

meaning of language in their agreement, then the court may be called upon to interpret the agreement

• #trinsic evidence$ /ill the court allo* admission of e#trinsic evidence to interpret the contract language$

o Sa*e of goods$ If the contract is for the sale of goods, then the code does not require a finding of

ambiguity before evidence of the parties7 course of performance, course of dealing, or usage of trade can be admitted. Eo to hierarchy of statutory interpretation

o Common *a19 If the contract is for services, then it falls *ithin the common la*. (roceed

Restatement : ;


21/37

%*ain meaning #urisdiction$ If it is a &plain meaning' jurisdiction, then the contract meaning

must be determined from the &four corners' of the document *ithout resort to e#trinsic evidenceof any kind. If the contract, read as a *hile to determine its purpose and intent, seems a cleare#pression of the parties7 full agreement, then the court *ill not allo* the introduction ofe#trinsic evidence.

• 4ierarchy of Inter)retation for ser,ices 0 if the court allo*s the admission of e#trinsic evidence to resolve the

contractual ambiguity, it follo*s a hierarchical sequence to interpret the agreement as it moves rom the e#press*ording of the parties7 agreement to the surrounding circumstances

o Course of %erformance9 %oes the conduct of the parties in the course of performing the contract provide

an ans*er$ According to !;!+3, *here an agreement involves repeated occasions for performance by*ither party *ith kno*ledge of the nature of the performance and opportunity for objection to it by theother, any course of performance accepted or acquiesced in *ithout objection is given great *eight in theinterpretation of the agreement. Ask: ha!e the parties begun performing the contract? $f so then theirconduct in performing may pro!ide e!idence of what they intended by the ambiguous language%

o Course of dea*ing9 Bave the parties engaged in prior dealings *hich may help to interpret the term in

dispute in the present transaction$ !!4o Trade usage9 Is there an applicable usage of trade$ A usage of trade in *hich the parties are engaged or

one of *hich they kno* may be considered in giving meaning to their agreement. !!!o Essentia* omitted terms9 %id the parties fail to include a term *hich has turned out to be essential to a

determination of the rights and duties of the parties$ If so, the court may supply a term *hich is reasonablein the circumstances and if it possible to do so by logical deduction from agreed terms and thecircumstances !;3 cmt. c.

o (enera* standards of reasona!*eness and good faith9 very contract imposes upon each party a duty of

good faith and fair dealing in the contract7s performance and enforcement. !;. In resolving contractualambiguity, the curt may imply general standards of reasonableness and good faith

o “(enera* ru*es of construction”9 there are general rules of construction *hich provide guidance in

dra*ing appropriate inferences *here the language is subject to interpretation. Is there a *ay to interpret the ambiguous term *hich gives effect to all of the terms of the

agreement$ "an the term be interpreted according to an ordinary or lay meaning rather than a specialiHed or

technical meaning$ Is it a specific provision$ If so, then it should be given greater *right then a general provision

&jusdem generis +of the same kind$ Are general and specific *ords connected$ If so, then the

general *ord is limited by the specific ones so that it means only things of the same kind.

&'pression unius e'clusion alterius +&e#pression of one thing e#cludes another$ Is there aspecific list of items *ithout being follo*ed by a general term$ If so, then the implication is thatall other things of the same kind are e#cluded.

• 4ierarchy of statutory inter)retation 0 *here the contract involves the sale of goods, the court follo*s the

"ode7s hierarchy for interpreting agreements. Girst distinguish bet*een the rules for the construing the statue itself+statutory construction from rule for interpreting agreements *hich fall *ithin the statute. Bere you *ould follo*the guidelines for interpreting the parties agreement:

o E)ress Contract terms$ "an the intent of the parties be determined from the e#press terms of their

agreement$ If so the e#press language controls.o %arties6 course of )erformance" course of dea*ing" or usage of trade$ 9nder the code, course of

performance prevails over both course of dealing and usage of trade *hen determining the meaning of theagreement. @he e#press terms of the agreement prevail over all.

o Statutory *anguage and definitions$ %oes the language of the statute have a commonly accepted

meaning$ Is the language of the statute clear$ If the language of the statue is clear, then other evidence is

unnecessary and the &plain meaning' of the statue controls. @o determine meaning, ask thefollo*ing:

"an the plain meaning be inferred using the rule of grammar, i.e., the order and

relationship of *ords in sentence, etc. %o the cannons of construction provide guidance$

Is the statutory meaning ambiguous$ If so, then e#trinsic sources can be consulted. -ee judicial

interpretation


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o Officia* comments$ %oes the code commentary provide clarification of the term in question$

o /udicia* inter)retation$ Is there case la* to e#plain the language at issue$ Once a court interprets a

statute, then stare decisis applies and the court follo*s the interpretation it has adopted. "an the court7sreasoning be applied by analogy to e#plain the ambiguous term$

o Commentators and e)erts$ Is there e#pert commentary available to interpret the language$

o .egis*ati,e history$ Id there legislative history to assist in ascertaining the meaning to the language at

issue

/AJJA5@I-

•2arranty of Tit*e 0 has the seller attempted to e#clude or modify the implied *arranty that its title is &good, andits transfer rightful and that the goods shall be delivered free from any security interest)or encumbrance of *hichthe buyer at the time of contracting has no kno*ledge$' 9"" !41!+1+a and +b

o ?es. If so, the seller must use &specific language or by circumstances *hich give the buyer reason to kno*

that the person selling does not claim title in himself or that he is purporting to sell only such right or titleas he or a third party may have' 9"" !41!+!

o 5o. If not, proceed

• 2arranties of =ua*ity 0 has the seller made a representation of quality to *hich the goods must conform at the

time of delivery$o E)ress 1arranty 0 did the seller7s statements or acts create an e#press *arrant of fact about the goods

*hich became part of the basis of the bargain$ ?es. If so, an e#press *arranty has been created.

5o. If the seller7s *ords lack specificity or are equivocal, then an e#press *arranty has not been

created. -uch *ords may be only an e#pression of the se**er6s o)inion a!out the goods.o &Descri)tion of the goods' 0 did the seller provide a description of the goods *hich became part of the

basis of the bargain$ ?es. If so, an e#press *arranty has been created

5o. if not, the seller7s *ords may be mere puffery and do not create an e#press *arranty

o Sam)*e or +ode* 0 did the seller make reference to a sample or model of the goods *hich became part of

the basis of the bargain such that the *hole of the goods shall conform to the sample or model$ ?es. If so, an e#press *arranty has been created

5o. If not, then an e#press *arranty has not been created

Always check for both e'press and implied warrantieso Im)*ied 2arranty 0 did one of the implied *arranties of quality arise$

2arranty of merchanta!i*ity 0 did the *arranty arise that the goods *ould be fit for their

ordinary purpose$ @his depends on *hether a merchant sold the described goods to the buyer.9nder 9"" !1;3, a merchant is one &*ho deals in goods of the kind or other*ise by hisoccupation holds himself out as having kno*ledge or skill peculiar to the goods.' Ask: was it amerchant of the particular type of good being sold?


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5o. if the goods *ere not sold by a merchant, then the implied *arranty of

merchantability did not arise ?es. If the seller is a merchant, then the implied *arranty of merchantability arose.

(roceed 2arranty of fitness for a )articu*ar )ur)ose 0 did the *arranty arise that the goods *ould be

fit for a particular purpose$ @he ans*er to all of the follo*ing question must be yes for theimplied *arranty of fitness for a particular purpose to arise:

%id the seller have reason to kno* of the buyer7s particular purpose$

%id the seller kno* or have reason to kno* that the buyer is relying on the seller7s skillto furnish appropriate goods %id the buyer rely on the seller7s skill or judgment to select the goods$

• Ec*usion or modification of 1arranty 0 *as there a disclaimer of an e#press of implied *arranty$

o E)ress 1arranty 0 Bas the seller attempted to disclaim an e#press *arranty$

?es. If so, then this *ould be inherently inconsistent and is ruled out by 9"" !41>+1 *here

*ords or conduct creating an e#press *arranty and *ords or conduct negating or limiting *arrantare construed *herever reasonable as consistent *ith each other. If the seller did not *ant tocreate an e#press *arranty, then she had only to be very careful avoiding doing so. Bo*ever,*here the *ords creating the *arranty and those limiting or e#cluding it cannot be reconciled, the parol evidence rule may come into play.

5o. if not, proceed

o Im)*ied 1arranties 0 has the seller disclaimed one of the implied *arranties$ 9nlike the case *ith

e#press *arranties, 9"" !41> neither prohibits not limits the seller7s ability to declaim implies*arranties. It just has to be done in conformity *ith 9"" 41>+! and +4. Ask: is the disclaimer of*arranty valid$

2arranty of merchanta!i*ity 0 has the seller e#cluded or modified the implied *arranty of

merchantability by using language *hich mentions the *ord &merchantability' and if thedisclaimer is in *riting, is it conspicuous$

?es. If so, then the disclaimer is valid. If the *arranty is disclaimed orally, then it must

mention the *ord &merchantability' to be valid. 5o. if the *ords &merchantability' is not used in the disclaimer, then it is not valid.

2arranty of 'itness for a )articu*ar )ur)ose 0 has the seller e#cluded of modified the implied

*arranty of fitness for a particular purpose by doing so in *riting *hich is conspicuous$ ?es. If it is in *riting, no specific language is required. It is sufficient id it states that

&there are no *arranties *hich e#tend beyond the description on the face hereof.' 9""

!41>+!. 5o. if it is not in *riting and conspicuous, then it is not a valid disclaimer of the implied

*arranty of fitness. Common situations 0 are the circumstances surrounding the transaction sufficient to alert the

buyer7s attention to the fact that no implied *arranties are made or that one is being e#cluded$ .anguage 0 has the seller used such language as &*ith all faults' or as is'$ If so, then

all implied *arranties are e#cluded. Eamination of the goods 0 has the buyer has an opportunity to e#amine the goods

+sample or model fully or has refused to do so$ If so, then there is no implied *arranty*ith respect to defects *hich an e#amination *ould have revealed.

Course of dea*ing" course of )erformance" usage of trade 0 can an implies *arranty

be e#cluded or modified by the parties7 course of dealing, course of performance, or ausage of trade$


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(JOCI- A5% "O5%I@IO5-

6egin by asking, &is the event a promise or condition of the party7s performance$'

• %romise 0 is it a promise$ %id the party make a commitment to act or refrain from acting in a specified *ay in the

future so as to justify another in understanding that a commitment has been made$ Bas the party used such promissory language as &I promise' or &I *ill'$

o Inde)endent )romise 0 is it an independent promise *here one party7s performance is not dependent on

the other party7s performance$ If the parties intend that performance by each is in no *ay conditional upon

performance by the other, then the promises are independent ?es. If so, then a failure to performance an independent promise does not e#cuse non

performance on the part of the other party, but each is required to perform her promise, and , ifone does not perform, she is liable to the other party for such nonperformance.

5o. If not, then the promises may be dependent. (roceed

o De)endent %romise 0 is it a dependent promise *here one party7s performance is dependent on the other

party7s performance$ If the parties intend performance by one party to be conditioned upon performance by the other, then they re mutually dependent promises

?es. If so, then ask, *hat type of dependent promise is it$

(recedent$ 0 is a promise that is to be performed before a corresponding promise by the

other party is to be performed$ If so, then one party must render its performance beforethe other party7s return promise is performed

-ubsequent$ Is it a promise that is not to be performed until the other party has

performed a precedent promise$ "oncurrent$ Are the promises to be performed simultaneously$ If so, then if *ither party

fails to tender the promised performance at the time required for e#change, then theother has the right to *ithhold the return performance and to treat the failure as a orderof performances and they are capable of being performed simultaneously, then they aredue at the same time.

5o, if not, proceed to conditions

o %erformance of the )romise 0 has the promise been performed$

?es. If so, then the promisor7s duty under the contract has been discharged.

5o. if not, then the failure to perform or the rendering of a defective performance is a breach of

contract. Bere the injured a party has a claim for damages but that party7s o*n duty of further performance under the contract is not discharged unless the breach is materia* and the breaching party makes no effort to cure the breach in a reasonable time. If the breaching party effects a

timely cure, then the other party7s duty to perform under the contract is due although iust maystill have a claim for damages caused by any delay in performance. @he question of *hether breach is material is e#amined later.

• Condition 0 is it a condition$ Is the party7s performance under the contract subject to the occurrence of an

uncertain event such that unless and until the event occurs, the promised performance is not due$o Timing of the Condition 0 is there an order to the parties7 performances$

%recedent$ Is the condition one *hich must be satisfied before the performance subject to that

condition becomes due$ ?es. If so, then it is a condition precedent and it must occur before a contractual duty

becomes due. 5o. If not, proceed.


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Su!sequent$ Is the condition one *hich discharges a duty that is already in e#istence$

?es. If so, then it is a condition subsequent

5o, if not, proceed

Concurrent$ Are the conditions dependent on each other such that one performance is a

condition of the other$ ?es. If so, then they are concurrent conditions of e#change and the performances are due

at the same time. 6ecause the performance are concurrent conditions of each other, both parties must sho* up ready, *illing, and able to perform and if either party fails to

tender the promised performance at the time required for e#change, then the other hasthe right to *ithhold the return performance and to treat the failure as a breach ofcontract.

5o. Bo*ever, *here there is doubt as to the order of performances, an interpretation is

preferred *here the performances are to be performance simultaneously.o +anner in 1hich the condition arises 0 *as the condition agreed to by the parties or created by la*$

E)ress condition$ Is the event one that the parties have agreed to make a condition of

performance by using such language as &if,' &on condition that,' &provided that,' &in event that,'&subject to'$

?es. If so, then strict compliance *ith the condition is required before the other party7s

duty to perform under the contract *ill arise. 5o. if not, proceed

Im)*ied condition$ Is the conte#tual evidence that the parties intended a performance to be

conditional even if they did not use e#press language creating a condition$ ?es. If so, then the condition is impliedinfact and strict compliance is required

5o. If not, proceed

Constructi,e condition$ Are the circumstances and nature of the contract such that a condition

should e#ist because if the parties had considered the issue, they reasonably *ould have intendedit to be part of their agreement$

?es. If so, then the court *ill construe a condition and strict compliance is not required:

substantial performance rather than full performance is permissible. 5o. If not, then the court *ill not supply a condition.

o Condition of satisfaction 0 has the party made its promised performance conditional on their personal

satisfaction or that of a third party$ Ask: is performance conditional on the party’s subjecti!e or objecti!e satisfaction$

Su!#ecti,e standard$ Is the contract one for personal services *here the taste or judgment of the

individual is involved$ ?es. If so, then the standard is on of subjective satisfaction. Bo*ever, even personal

satisfaction must be e#ercised in good faith *hich means honesty in fact. @he party must be honestly dissatisfied *ith the performance to avoid performance.

5o. If not, proceed.

O!#ecti,e standard$ Is it commercial contract such as one involving manufacturing or

construction *here objective criteria is available$


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?es. If so, then the standard is one of objective satisfaction *hich requires the

satisfaction of a reasonable person 5o. In case of doubt, ho*ever, the restatement e#presses a preference for use of the

objective standard or reasonableness to avoid forfeiture. !!Do %erformance of the condition 0 has there been strict or substantial compliance *ith the condition$

Strict com)*iance$ %id the party *hose performance *as subject to an e#press or implies

condition satisfy it completely$ If so, then the condition has been fulfilled and the other party7sduty to perform arises. If the condition has not been satisfied, then the other party7s duty to

perform does not arise unless the condition has been ecused or 1ai,ed. Ecused$ /as the condition e#cuses$

• ?es. If so, then the promisor may still be obligated to performance despite the

nonoccurrence of the condition. A condition may be e#cused if the promisorhad a duty to facilitate the occurrence of the condition and hindered itsfulfillment or failed to act in good faith by obstructing its fulfillment. A courtmay e#cuse a condition to avoid a disproportionate forfeiture unless theoccurrence of the condition *as a material part of the contract.

• 5O. If not, then the nonoccurrence of the condition discharges the duty *hen

the condition can no longer occur. 2ai,ed$ /as the condition *aived$ Bas the promisor *hose performance is condition

indicated by *ither *ords +e#press or conduct +implied that she *ill perform even ifthe condition does not occur$ A party may *aive a condition that solely benefits the

party *aiving it.• ?es. If so, the promisor is still obligated to perform despite the nonoccurrence

of the condition.

• 5o. If not, then the nonoccurrence of the condition discharges the other party7s

duty to perform. 2ai,er retracted$ /as the *aiver retracted before the time for occurrence of the

condition has e#pired$

• ?es. If so, then the condition may be reinstated unless the other party has relied

on the *aiver such that retraction *ould be unjust

• 5o. if not, the condition remains *aived.

Su!stantia* com)*iance 0 did the party *hose performance *as subject to a

constructive condition provide substantial compliance$ If the condition is not e#presslystated but is construed by the court as a matter of interpretation, then there is room for

fle#ibility and substantial compliance may be sufficient to satisfy the condition• ?es. If so, then the party has satisfied the condition.

• 5o. If not, then the party has failed to meet the condition and the other party7s

duty to perform does not arise.

I+%RACTICABI.IT- 0 focus is on the increased burden on the party *ho is to perform

@he party claiming this e#cuse must satisfy all four requirements:

• %erformance is Im)ractica!*e 0 *as there an event that occurred that made &performance as agreed'

impracticable$o #isting or supervening impracticability 0 did the event e#ist at the time the contract *as formed or did it

occur subsequently$ If the event e#isted at the time of the agreement, then e#cuse may be based oneisting im)ractica!i*ity. If so, a party must meet the same four requirements as in the case ofsu)er,ening im)ractica!i*ity *ith one additional requirement: did the party kno* or have reason to

kno* at the time of contracting of the facts making performance impracticable$ ?es. If some then the e#cuse of e#isting impracticability is not available


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5o. If not, then proceed to address the four requirements for supervening impracticability.

o Agreed )erformance 0 since it is the party7s agreed performance that has become impracticable, the first

step is to determine *hat is the agreed performance. A*ternati,es 0 *as there a choice bet*een alternative *ays of performing$

?es. If so, then the fact that one alternative becomes impracticable *ill not e#cuse the

party if another remains available. In this case, the agreed performance has not becomeimpracticable.

5o. if not, there may be an e#cuse, proceed.

Additiona* e)ense 0 has the performance become more e#pensive because of a change inmarket condition$ According to "omment 1 of 9"" !>1, &increased cost alone does not e#cuse performance unless the increase is due to some unforeseen contingency *hich alters the essentialnature of the performance.' Carket fluctuations *ill not e#cuse performance since they are thetypes if risk *hich parties make contracts. Additional e#pense in the cost of performance does notrise to the level of impracticability.

• Basic Assum)tion 0 *hat *as the basic assumption on *hich the contract *as made$ @he nonoccurrence of the

event must have been a basic assumption on *hich the contract *as made. According to th

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