Contracts II

*only applies if there is a writing w the intent that embodies final expression of their bargain

**prohibits the introduction of evidence, agreements, or concessions that are prior to or contemporaneous with the written k

***doesn't apply to written k

• R2d§209
• *integration - put into writing; no integration, PER doesn't apply & all evidence gets in

• **complete integration - everything is addressed in written k (cant contradict; cant add anything into written k §215)
• ->can try to get evidence of side/separate k in, but need separate consideration
• ->merger clauses strengthen presumption of complete integration, but doesn't prove outright

**partial integration - stuff left out; cant bring in diff terms, but add'tl consistent terms ok

*if there is a writing:

• **Can §214
• ->explain, clarify, define

• **Cannot §215
• ->contradict the writing

• *if the writing is intended as a final expression= complete & no PER
• **§216 - if the writing is a partial integration, it cannot be contradicted, but can be supplemented w consistent additional terms 

• ***to determine if partial/complete (SPLIT)
•     *Old/NY/PA Rule - look @ 4 corders of doc, if it looks complete, judge doesn't look @ PE
•     **Modern/Traynor/CA Rule - judge looks @ PE to decide if it should be admitted to clarify intent of parties

*Reformation - ct can reform written k & make it correspond w the intent of the parties; mistake must be mutual btwn parties

**Subsequent Modification - Not subject to PER; Oral modification clauses generally ok bc k law is private law & parties can mutually change k at will

***behavior of parties doesn't modify k, constitutes waiver for times parties voluntarily acted conversely to the k

• *vagueness - when word's applicability in marginal situations is uncertain (green..shade?)
• **ambiguity - when a word has 2 different connotations (light...color? weight?)

• ***Plain Meaning Rule - look @ terms to see if it is clear
• ->2 stage process:
•    *judge determines if language in written k admits only 1 plausible meaning; if unambiguous, use plain meaning of terms
•    *if ambiguous - ct interprets k's language; Traynor/Modern - can look @ PE to interpret

*UCC 2-202 - look @ extrinsic evidence unless info would've been unquestionably included in written k

• *UCC 2-209 - if clause not allowing modification w/o signed writing, can only be modified w signed writing unless btwn merchants
•    **behavior doesn't modify=waiver; estoppel can trump this=reasonable notice

*if parties attach diff meanings to same terms, ct will interpret to explain, clarify, define

• **Order of authority for clarification
•    *Express terms
•    *course of performance §2-208(1) - how parties actually execute k 
•    *course of dealing §1-205(1) - if parties had deals before, how they acted in those ks
•    *trade usage §1-205(2) - 2 questions:
•       **? do the terms of the k commonly mean in the trade?
•       **geographic scope

*interpret k using parties intent; if parties use same term & meant same thing, that's what the term means

**§201(2) - 1 party in a better position to avoid confusion bc know/should've that the term has more than 1 meaning, he bears the risk; lesser positioned party's meaning prevails

• ***neither party is bound to meaning of other
•      ->if neither party at fault for mistake bc there is no reasonable basis for choosing 1 meaning over the other, then no k

*§204 - when parties have k, but didn't agree to essential term, ct will supply a reasonable term in the circumstances to make k workable

**§2-305 - apply when parties left non-material term out; gap fillers are default provisions

*UCC §2-314 - Implied warranty of merchantability - seller is merchant of goods of that kind, k auto inc that goods are fit for ordinary use for which they are intended

*UCC §2-315 - Implied warranty of fitness for particular use - protection for buyer that intends to put good to non-standard use; when merchant knows/shoul've that buyer is using goods for particular purpose & expressly states the product is good for that purpose

• *UCC §2-316 - can disclaim implied warranties 
•      ->language must mention merchantability, writing must be conspicuous, must give good fair notice to consumer
•      ->exception - parties bargain for disclaimer or if meets 2-316, can still be invalid if against public policy

*ct has limiting principles to prevent enforcement of unequal bargains; if k is grossly inequitable, do it @ time of contracting (prospectively)

**§364 - effect of unfairness - equitable remedy refused if relief would be unfair bc: 1 k induced by mistake/unfair practices or 2 exchange is grossly inadequate or terms of k are unfair

• ***§79 - adequacy of consideration/mutuality of obligation - if req't of consideration isn't met, no add'tl req't of:
•      ->gain,advantage,benefit to promisor or loss, disadvantage, or detriment to promisee; OR
•      ->equivalence in values exchanged (mutuality of obligation)

***McKinnon - when equitable remedy sought, if k is just unfair, no remedy; if grossly unfair, bad enough to be unconscionable, invalid

• *§211 - Standard form K - prewritten k (by repeat player) bc more efficient
•    ->Part 1 - if you sign something, you're responsible for its contents
•    ->Part 2 - ct will interpret standardized form the same for everyone who signs
•    ->Part 3 - if party who drafted form knew/should've that other party wouldn't have signed if knew a certain provision was in it, then that provision is out (addresses unfair surprise)

**K of adhesion - 1 party in bargaining position where can take it or leave it

***can have 1 or both types of k; when both, party may impose questionable terms on other party w/o other party having ability to negotiate...doesn't make k unenforceable, just heightened scrutiny

• *Scissortail - 2 part test of enforceability:
•      ->if there is something part of k that is unfairly surprising/unduly oppressive=out

• *O'Callahan - Dissent Factors of void clauses:
•    ->importance which subj has for physical & economic well being of group agreeing to k
•    ->bargaining power
•    ->amount of free choice exercised in agreeing to clause
•    ->existence of competition btwn group to be exempted

*denies enforcement of K (or term in K) if oppressive/grossly unfair to other party

• **§208/§2-302 - unconscionable k/term - if ct, as matter of law (legal fact ?) finds k unconscionable, ct can:throw out entire k; excise unconscionable part; adjust unconscionable part to make it conscionable 
•    ->Factors:
•       -weakness in k process (fraud/other invalidations)
•       -if no man in senses & not under delusion would accept
•       -unfair/gross imbalance
•    ->Test: principle of prevention of oppression & unfair surprise (ok to allocate risks, but not if oppressive/unfairly surprising; ok to use superior bargain power, cant abuse it)

• *UCC §1-201 - good faith - honesty in fact in the conduct/trans; not what should've known, what actually knew; only req'd one in k, not during negotiations
•    ->cant set out to intentionally harm other party, if have independent business rationale & other party harmed unintentionally, ok

• **R2d§205 & UCC§1-304 - duty of good faith 
•    ->SPLIT
•       *Old - must act in good faith & fair dealing; if merchant, must be honest in fact & act consistent w standard of fair dealing in trade
•       *New - higher standard of honesty in fact & observance of reasonable commercial standards of fair dealing now applies to everyone (not in all jxn, CA yes)

*best efforts - higher standard than good faith; if k says best efforts, have to treat their interest even w own

*§1-303 - Trade Usage - when looking @ good faith, look @ standard business practices (course of performance/dealings/usage of trade)

*k silent on termination, terminable @ will by either party; BUT if abrupt termination will cause undue hardship on other party, ct can interpret good faith as requiring notice; if substantial investment from other party, cant just terminate, must give notice & opportunity to recoup investment @ reasonable profit

• Illegal k
• *k by D to pay P for inducing public official to do something
• *k to do illegal act
• *k that contains illegal subj matter/closely related to illegal subj matter that makes performance illegal

• **§178 - Public Policy Factors - k/term unenforceable bc pub policy if interest in enforcement outweighed by pub policy against enforcement, ct looks @:
•    ->parties' justified expectations
•    ->forfeiture that would result if enforcement denied
•    ->public interest in enforcement
•   *§197 - restitution - party has no claim in restitution for performance under/in return for promise unenforceable on grounds of pub policy unless denial would cause disproportionate forfeiture
•    *179 - bases of policies against enforcement - ct can derive pub policy from: legislation relevant to policy or need to protect public welfare

• *§224 condition - event, not certain to occur, which must occur, unless its nonoccurence is excused, before performance under the k can be due
•    ->express condition - conditions written into k by parties; strictly construed, but exceptions (ie. estoppel)
•    ->constructive condition - conditions put into k by court (by the ct construing the k)

• Prevention
• *If I prevent the occurrence of a condition, I cant use that as an excuse for non-performance

• Waiver, Estoppel, & Election
• *Waiver - 1 party doesn't perform condition under terms of k for multiple occasions & other party doesn't object, there was waiver for those occasions 
• *Estoppel - if condition is waived repeatedly & there is reliance on repeated waiver, you eventually cant enforce the condition 
• *Election - choice, binding on the party that makes it, whether to disregard the nonoccurrence or not

• Interpretation (excuse)
• *who can excuse a condition?
•   **party protected by the condition can excuse
•   **ct can excuse condition (have broad latitude & discretion so ct can make k fair; equitable override opportunities for the ct)

Kingston - gave us DOCC - in a bilateral k, each party is conditioned on the performance of a reciprocal obligation of the other party

• Who Goes First?
• *if the k says, then its enforced
• *if k is silent, preference for simultaneous exchange
•   **§234 - if simultaneous exchange isn't possible, then faciendo ante dando, work before you get paid

Mitigating DOCC

• *R2d §241 - Substantial Performance - breach is major, then no sub. perform.; breach minor, then sub. perform. 
•   **Material Breach Factors
•      **Extent the injured party will be deprived of expected benefit v. extent can be adequately compensated for deprivation
•      **extent to which breaching party will suffer forfeiture
•      *likelihood of breaching party will cure (taking tot of cir & any assurances)

• *UCC §2-601 - Perfect Tender Rule 
•   **if goods or tender of delivery fail in any respect to conform to k, buyer may:
•      ***reject whole; or
•      ***accept whole; or
•      ***accept any commercial unit(s) & reject the rest
•   **not like sub perform test; but cant be super small defect; goes to quality of goods & shipment
•   **§2-606 - acceptance - can be express/by paying for goods or by exercising dominion, doing acts inconsistent w seller's ownership
•   **softened: 
•      ***§2-508 - if seller delivers goods before time of performance has expired & buyer rejects, seller gets opportunity to cure before deadline
•      ***§2-608 - applies only when seller makes tender of goods & buyer accepts goods; PTR doesn't apply anymore; if buyer wants to reject, now have to meet higher test that substantial nonconformity impairs value of goods for buyer
•      ***§2-612 - if installment k, PTR doesn't apply, even from beginning; fault, flaw, defect, or unconformity must sub impair value of goods for buyer

Mitigating DOCC

• *R2d§240 & UCC§2-612 - Divisibility - treat subdivided portions of k as if entire k, if major breach in 1 section, doesn't mean major to whole k
•   **test of divisibility - whether each part of k has independent utility; prep for k doesn't have independent utility (some ks, like construction, look divisibile, but aren't)

• *R2d§374 - Restitution - quasi k/k implied by law - ? whether there was enrichment & whether it would be unjust to allow recipient to keep it
•   **can happen:
•      ***if there isn't a k, or
•      ***if there is a k, but enforcing it is unjust or if party has failed to sub perf (sub breach & not divisible k), instead of assigning value to damages caused & deducting obligation to pay, act like there was never a k & then assign value to what was conferred
•   **R2d§371 Ways to measure restitution
•      ***cost avoidance - reasonable value of what was received in terms of what it would've cost to get it from someone in claimant's position
•      ***net enrichment - amt that other party's prop has increased in value/interests are advanced (breaching party can never get more than k price)

• *If there was a breach, look @ whether major/material or minor/immaterial (breach victim should be careful not to overreact..)
•   **If minor, victim must treat as partial & continue performance; but can get damages
•   **If major, victim has 3 options:
•      ***treat as partial, continue perform & get damages
•      ***treat as total, cancel k & sue
•      ***suspend performance & await cure

Anticipatory Repudiation

• *R2d§250
•   **can repudiate by deed - must be voluntary & affirmative action; no AR if just willful failure to get ready, grounds for insecurity, but no AR
•   **can repudiate by statement - stmt indicating intent not to perf OR can be stmt that will perf, but on diff terms OR a distinct/positive stmt of inability to perf

• *UCC§2-610 
•   **ANY announcement of intent not to perform; lang must be able to be interpreted of positive intent not to perform

• *R2d§253 - when there is AR
•   **Hochster - when AR, 'ee can treat as breach now, wo waiting until law day, or can wait until law day (but be careful bc mitigation)
•      ***§243(3) - if only outstanding obligation is to pay $ in installments, this doesn't apply (uni k)
•   **Kanavos - in order for there to be AR, 'ee must actually have ability to perform their side of the k; if cant, no AR
•   **Cosden - as sub matter, when seller breaches by AR, buyer gets K market differential
•      ***when do we interpret market price? wait 2 periods: if 'ee gives 'or option to revoke AR, have to wait that time & @ end of that period, 'ee must have time to cover

• *R2d§256 & UCC§2-609 - Nullifying/Retracting AR 
•   **AR - like an offer of a breach, if you rely on that promise or accept their AR, then AR cant be retracted (something short of AR gives rise to insecurity, can ask for assurance)

*where reasonable grounds arise to believe obligor will commit breach, obligee may demand adequate assurance of due process

*UCC - demand for assurance must be in writing, waiting time limit 30 days, if no response (or if inadequate), then there is AR (can turn what wasn't AR into AR)

*NOT the same in R2d; may suspend performance until receives assurance for what hasn't been received

• *Injunction - ct ordering party to stop breaching k
• *not preferred by cts; only grant if $ can't fix prob/not quantifiable/if only 1 source of goods at issue (1 of a kind/unique)
• *cant get an equitable remedy based on grossly inequitable k

*ct wants to put injured party @ SQA; give benefit of bargain (minus costs..)

*R2d§347 - damages = loss in value + other loss (incidental/consequential) - cost & loss avoided

• *Seller's Remedies
•   **§2-706 - Resale - buyer breaches, seller resells goods, gets $ from buyer if gets less for goods than k price (actual sub trans)
•   **§2-708(1) - K Mkt Differential - hypo sub trans (difference btwn mkt price & K price)
•   **§2-708(2) - Lost Volume Seller - I show that the sub trans of goods wasn't sub, I would've sold both & gotten profits from both if k not breached (profits could've made)
•   **§2-709 - Specific Performance - technically not equitable remedy, $ damages, but equivalent of buyer's specific performance; in kind

• *Buyer's Remedies
•   **§2-712 - Resale - seller breaches, reasonable purch price of goods in sub for those due from seller; recover cost of cover only if exceeds k price
•   **§2-713 - K Mkt Diff - if mkt price above k price, damages diff btwn addt'l amt over k price
•   **§2-716 - Specific Performance

*R2d§350 - Avoidability - aggreived 'ee not allowed to recover loss that could've avoided

• *R2d§347-§348 - Diminished Value Rule - alt to cost of repair, replacement, completion; appropriate when defect embedded;
•   **if cost of RRC grossly diff btwn diminished value resulting from breach, damages diff btwn value of thing promised & thing delivered

• *R2d§351 & UCC§2-715 - Foreseeability - to recover, damages must have been foreseeable w/in contemplation of parties @ time of k
•   **party who later breaches must've been able to foresee @ time of k that the kind of damages that was caused could've resulted from breach
•   **direct damages - flow naturally from breach itself; I breach & damages would've been suffered by anyone in shoes of victim; presumed foreseeable
•   **consequential damages - ripple effect damages; result of breach in combo w/use victim intends to make w/use of product in contro; damages depend on foreseeability
•   **incidental damages - $ spent arranging sub transaction

*R2d§352 - Certainty - damages aren't recoverable for loss beyond amt that evidence permits est'd w reason certain; need enough so that fact finder isn't just making up some #, just a basis for assigning value to claim


*R2d§353 - Emotional Distress - generally don't recover for this for breach of k; except if breach in public/defamatory way (esp w funeral homes)  

*R2d§356 & UCC §2-718 - liquidated damages provisions - (what happens in breach) permissible as long as reasonable; also encouraged, 2 basis: freedom of k & keep ppl out of ct