Chapter 4 – IDENTIFYING THE BARGAINSection 1. The effects of adopting Writing

Section 2. Interpreting the PromiseWWW Associates, Inc v GianconteieriCONTRACTS ARE ENFORCED ACCORDING TO CLEAR TERMS, WITHOUT USE OF OUTSIDE EVIDENCE

Giancontieri (D) cancelled a sale of property to WWW (P), claiming that the sales contract allowed it to do so.

Rule: When the terms of a contract are set out in a clear, complete document, the writing should be enforced according to its terms, without reference to outside evidence regarding what the parties really intended.

Decision: When the terms of a contract are set out in a clear, complete document, the writing should be enforced according to its terms, without reference to outside evidence regarding what there parties really intended.

Pacific Gas & Elec. Co. v GW Thomas Drayange & Rigging Co.

EXTRINSIC EVIDENCE IS ADMISSABLE TO HOW THAT THE PARTIES INTENDED TO EXCRIBE DIFFERENT MEANINGS TO THEIR WORDS.

PGE (P) contracted with GW (D) to remove and replace the metal cover on the stream turbine at PGE’s (P) plant; GW (D) was to do the work at its own “risk and expense” and was to indemnify PGE (P) against all losses resulting from property damage because of D’s work

Rule: Extrinsic evidence may be offered to clarify the meaning of a contract term when the parties intended such a meaning and the clause was susceptible of that meaning.

Decision: Courts have historically excluded testimony offered to contradict the plain meaning of words based on the belief that words have certain meanings that should be clear.

Four corners rule- the principle that a doc’s meaning is to be gathered from the entire document and not form its isolated parts; the principle that no extraneous evidence should be used to interpret an unambiguous document.

Frigaliment Importing Co. v BNS Internatinoal Sales CorpA PARTY THAT URGES A SPECIAL MEANING OF A CONTRACT TERM HAS THE BURDEN OF PROOF

Frigaliment (P) bought chickens from BNS (D), which shipped stewing chickens instead of the broilers Frigaliment (P) said it wanted.

Rule: the party that advocates a special meaning for a contractual term has the burden of proving that the special meaning was the one intended by both parties.

Decision: the party that advocates a special meaning for a contractual term has the burden of proving that the special meaning was the one intended by both parties. P could not prove that both parties understood

Section 3. Contracts without Bargaining

Livingstone v EvansAN OFFER MAY NO LONGER BE ACCEPTED ONCE THE OFFEREE HAS PROPOSED A COUNTEROFFER

Evan’s (D) agent wrote to Livingstone (P), offering to sell land, and Livingstone (P) responded. When Livingstone (P) was told the price was not negotiable, he attempted to accept the original terms only to learn that Evans (D) had already found a buyer.

Rule: a counteroffer will extinguish the terms of the original offer; on rejection of the counteroffer, the original offer cannot be revived at the offeree’s discretion and accepted.

Decision: When an offer is made and rejected, it cannot be revived and accepted without the consent of the person making the original offer.

Richardson v Union Carbide Indus. Gases, Inc. THE UNIFORM COMMERCIL CODE HELPS RESOLVE CONTRACT DISPUTES

The buyer’s and seller’s contracts included their own standard indemnification clauses, which conflicted with each other, and the seller sought indemnity pursuant to its standard provision after equipment it sold to the buyer malfunctioned and the buyer’s employee was injured.

Rule: under the “knock out rule”, conflicting contract terms fall out and are replaced to the extent necessary by UCC gap filler provision.

Decision: the majority rule is that the “knock out rule” is used. The minority rule is that the offeror’s terms control, and under the third view the terms of the offer prevail over different terms in the acceptance, but only if the latter are materially different.

ProCD, inc v Zeidenberg SHRINKWRAP LICENSES ARE VALID PARTS OF A CONTRACT FOR THE PURCHASE OF SOFTWARE

Defendant Zeidenberg (D) purchased consumer rated software for commercial use that he offered for use to other uses, in violation of the license provided by the manufacturer.

Rule: A Shrinkwrap license that is included with computer software is binding on a buyer under the UCC when the buyer’s acceptance of the license’s terms occurred after the buyer had the opportunity to read the license, so long as the buyer could have avoided acceptance by returning the software.

Decision: licenses are ordinarily contacts that accompany the sale of products. The law of contracts and the UCC governs them.

RESTATEMENT OF CONTRACTS, SECONDSection 69 Acceptance by Silence or Exercise of Dominion

Silences is okay in several instances:■ Reason to understand that silence is consent ■ Acceptance of services■ Prior conduct making acceptance by silence reasonable ■ Acceptance by dominion

Hobbs v Massasoit Whip CoA COURSE OF DEALINGS MY ESTABLISH ECONTRACTUAL OBLIGTIONS

Hobbs (P) had an agreement with Massasoit Whip (D) to deliver eel skins of a certain size. On receipt, Massasoit (D) would make payment.

Rule: in the absence of a strict contract btwn parties, a course of dealings may support a finding that the recipient of goods will be responsible to pay for conforming shipments.

Decision: Contracts of this type are frequently developed for the benefit of one or both parties. P sent eel skins 4 or 5 times before and the D had each time paid for them. Based on that course of dealing, the P was justified in sending skins that conformed with these requirements and by receiving them, the D assumed an obligation to pay for them.

Martin v Little Brown, CoNO IMPLIOED CONTRACT EXISTS IF THE BENEFICIARY DID NOTHING THAT SHOULD CAUSE THE OTHER PARTY TO EXPECT COMENSATION.

Martin (P) volunteered information to Little (D) that enabled it to recover against a third party for copywright infringement.

Rule: no implied contract exists if the party supposedly reviving the benefit did nothing to indicate a willingness to be bound to compensate the performing party.

Decision: the correspondence P received from D contains no indication that it desired to enter into a contract for Ps services. Nothing indicated that he expected payment either.

Monroe v MonroeA COUPLE MAY EXPRESSLY CONTRACT TO COMPENSATE ONE OF THEM FOR PERFORMING HOUSEHOLD TASKS

An action was brought to recover for domestic services performed by the P at the Ds residence on theories that the services had been performed at the Ds request and that the parties had entered into an express oral partnership agreement.

Rule: the law will not imply the existence of an agreement to compensate one member of a coupe for services, including household tasks; however, the parties may expressly contract to share earnings and assets and the contract need not e in writing.

Section 4. Mistake, Misrepresentation, Warranty and Nondisclosure

Laidlaw v OrganEVEN VOLUNTARY STATEMENTS MADE UNDER NO DUTY MUST BE TRUTHFUL

Ogan (P), who knew that a peace treaty had been signed, bought tobacco from Laidlaw (D), who did not know of the signing of the peace treaty, and Laidlaw (D) repossessed the tobacco after the peace was announced and the price of tobacco increased.

Rule: the fact that a party is under no duty to disclose a fact does not excuse that party from making a false disclosure.

Decision: the false statements are not okay when you don’t have a duty to speak. You must tell the truth or not speak. He was asked about “circumstances, which might influence the price.” It was misrepresented.

Jackson v SeymourFRAUD IS ASSUMED IF THE INADEQUACY OF THE PRICE SHOCKS THE CONSCIENCE

Jackson (P) filed suit seeking rescission of a deed conveying 31 acres of land to her brother Seymour (D), claiming she was fraudulently induced into entering the contract with her brother through his gross misrepresentations concerning the conveyed property’s value.

Rule: if the inadequacy of a price shocks the conscious, equity allows the court to seize on the slightest circumstance to indicate fraud, either actual or constructive.

Decision: constructive fraud is a breach of a legal or equitable duty that, whether or not there is moral guilt, the law declares fraudulent because of its tendency to deceive others, to violate confidences, or to ignore public interests. If this contract stood, it would be constructive fraud on her rights.

Sherwood v WalkerCONTRACTS BASED ON MISTAKE OF MATERIAL FACT CAN BE AVOIDED.

Sherwood (P) agreed to purchase a cow that both parties believed was barren, but the cow turned out to be pregnant, and Walker (D) sought to rescind the agreement.

Rule: a party that has given consent to a contract of sale may refuse to execute it or may avoid it after completion, if the contract was based upon a mistake of material fact.

Decision: if the mutual mistake between parties relates to the substance of the agreement, rescission is an appropriate remedy. The mutual belief that the cow was barren went to the substance of their agreement because the agreed price related only to the cow’s value of beef.

MATERIAL FACT- a fact that is significant or essential to the issue or matter at hand.MUTUAL MISTAKE- a mistake in which each party misunderstands the other’s intent; a mistake that is shared and relied on by both parties of the contract. REPLEVIN- an action for the repossession of personal property wrongfully taken or detained by the defendant, whereby the P gives security for and holds the property unit the court decides who owns it.

Elsinore Union Elementary School Dist. V KastorffTHE COURT WILL GRANT RESCISSINO TO A CONSTRUCTINO CONTRACTOR THAT MADE A MISTAKE IN ITS BID.

A general contractor made an error in a bid for a job and tried to get released from his bid.

Rule: if a party makes a clerical error in computing a bid, he is entitled to rescind that bid to correct the mistake.

Decision: if a bid is submitted as an excusable and honest mistake of a material and fundamental character, and if the bidder is not negligent in preparing the bid and acts promptly to notify the recipient of the mistake, then the party may rescind the bid.

Tribe v PetersonOVERT AFFIRMATINOS CREATE EXPRESS WARRANTIES

Tribe (P) who bought a horse from the Petersons (D), brought suit against the sellers for breach of warranty. He was described as “extra gentle … no buck in him.”

Rule: an express warranty is created by any affirmation of fact made by the seller to the buyer that relates to the goods and becomes a basis of the bargain.

Decision: this was not found to be an express warranty. Any opinion concerning the quality of goods being sold could be construed as an express warranty if the standard of proof was lower. This is determined on a case by case.

Hinson v JeffersonA MISTAKEN ASSUMPTION DOES NOT ENTITLE THE PARTIES TO RESCIND THE CONTRACT FOR THE PURCHASE OF LAND.

Hinson (P) purchased land from Jefferson (D) and sued to recover the purchase price because of restrictive covenants that limited the property’s use and other problems with the property.

Rule: the doctrine of mutual mistake is not a valid basis for obtaining rescission of real estate transactions.

Decision: there is extreme uncertainty surrounding the law of mistake given the various factors that a court can choose to apply in any individual case. For this reason, mistaken assumption of fact, as grounds for rescission should not be applied to cases involving sale and transfer of real property.

CAVEAT EMPTOR-

Section 5. Changed Circumstances Justifying Nonperformance

Chapter 5- POLICING THE BARGAINSection 1. Competency and Other Limits Section 2. Duress and Coercive Renegotiation Section 3. Scrutiny of Limited CommitmentSection 4. Standardized Terms, Unconscionable Inequity, and Good Faith

Chapter 6- THE MATURING AND BREACH OF CONTRACT DUTIES Section 1. The Independence of PromisesSection 2. Interpreting ConditionsSection 3. Conditions of “Satisfaction”Section 4. Protecting the Exchange on Breach

Chapter 7- THE RIGHTS AND DUTIES OF NONPARTIESSection 1. Third Party Beneficiaries Section 2. Assignment and DelegationSection 3. Tourtious Interference with Contract