The script, the unfolding, etc…

February 2, 1999

Options – a time to choose; a promise not to revoke

- see section 87 restatement page 243 for definition

Substitutes for consideration:

• common law – R.2d 87
• statute – e.g. N.Y. statute @ p.563 – applies to contracts made in writing
• Reliance – Drennan – promisory estoppel

• Use of the bid in the contractors final bid was not an acceptance.
• The reliance that the bid would be used is sufficient substitute for consideration; defendant estopped from arguing that the offer was irrevocable
• In some situations you are entitled to undo the contract if there was a mistake ("The Undoing") – can’t use a unilateral mistake as a reason to get out of the contract unless the other party had reason to know other party made a mistake

Review of Spring 1997 final exam, question one

• Chaton makes the offer
• Is a contract not formed until Tisha has signed; or, is the writing simply intended to be a written memorial of an oral contract already formed?
• Was an offer to form a bilateral contract which could be accepted only by her making the promise – way for her to make the promise was to sign the contract; until she signed the contract there is no acceptance
• Can have express (clear, definite expression not to perform) or implied repudiation (one party made it impossible to perform)
• Does not seem to be repudiation here of acceptance by Chaton
• There is repudiation and ultimately breach by Tisha it seems
• Chaton wins on cross complaint – costs minus expenses is damages (~$2500 – expenses saved by virtue of breach)
• What if we conclude that the signature is required as means of acceptance?
• Could say that you need signature AND the downpayment
• An offer is binding as an option contract if it shall "induce forebearance of a substantial character"
• There fore the option is not enforeceable, the revocation was good, the revocation was good, so there was nothing to accept when she signed the contract….

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February 4, 1999

Review of contracts final exam question

In exams follow all steps

Review of Beard Implement case on page 582:

1. One theory: farmer made the offer and the means of acceptance is that the dealer had to sign the bottom of the purchase order. Because no signature, there is no contract.

2. Another theory: there was written memorial between both parties

3. Dealer made an offer, farmer signed the check so he accepted

4. rescission / accord – farmer says he does not want to buy it, and the other person says okay you don’t have to buy it. This is an oral contract releasing each party from existing promises

Accord

Rescission

Rejection

Counter offer

Revocation

Repudiation

Offer

Acceptance

Consideration

Review of US v. Braunstein:

In order to be an effective offer had to include bid and shipping instructions

• Braunstein did not include shipping instructions originally, but then sent them after US requested them
• In second bid they wrote ten cents per box (instead of per pound)
• US then fixed error and requested that they go through with the deal
• Braunstein argued that no contract was formed because there was never an effective acceptance of the offer
• Terminated the power to accept the offer ; because rejection was what the reply was. A reply to an offer that fails to comply with these requirements is a rejection

A rejection is a manifestation of intention not to accept an offer (p 228 restatement)

Since the US had a rejection first, then the power to accept is terminated

Read McIntosh v. Murphy page 303

Also read page 300-301

If a contract looks like it might take place in more than a year from its formation then it must be in writing.

• in this contract there is no conceivable way that the contract could have been formed in less than a year.

Court takes the position that the dealer is estopped from relying on the statute of frauds

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February 9, 1999

Review of Raffles v. Wichelhaus case (p.177):

• agreement on the same set of words, but different interpretation of the words
• two ships called Peerless
• one arrived in October, the other in December
• result of Raffles case is incorporated in 21(a) restatement
• is a mistake going towards formation

mistake

1. misunderstanding
2. judgment
3. basic assumptions

Review of McIntosh (p.302)

• Statute of Frauds – although it sounds singular it encompasses a bunch of things (civil code, etc.)
• Courts tend to construe Statute of Frauds very narrowly
• Tends to be used in situations where there was an oral contract and one of the parties is using it as an excuse to get out of the contract
• Courts see it as a tool to prevent fraud, but also to make fraud – for that reason the courts try to get around it, construe it narrowly, and make exceptions
• § 1624 sections and categories are the same as the English choose many years ago; now there does not seem to be much logic to which contracts must be in writing as deemed by the statute of frauds
• whole thing does not have to be in writing – when it says that the contract has to be in writing – this does not mean the whole thing; the requirement is that there has to be some writing sufficient to show the existence of a contract (note or memorandum thereof are in writing…)

restatement is only law to the extent that the court adopts it in a particular case; never an occasion for court to adopt the entire restatement, will only being looking at a few sections in each case; by following a specific statement in the restatement that court adopts that SECTION as law for that state

restitution – value of the benefit that has been given to the other party

contracts in which the conduct is called for is illegal is unenforceable. Because of "illegality" violate public policy

where conduct not illegal and no statute that prohibits contract, but one party argues that contract violates public policy

accord and satisfaction:

accord – I agree to do something

satisfaction – if what has been agreed to do has been done

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February 11, 1999

Read restatement page 178 and the comment following.

Review of case:

Public policy in favor of protecting children, one of the means of that protection is making sure that parents support their children (financially)

Be careful of opinions in which it is based on an assumption about behavior which may or may not be true. Judges often do this, and often their assumptions may not really be accurate.

• court says that a settlement can come after judgment because the judgment will give mother more leverage in reaching a settlement agreement with the father
• dissent says no

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February 18, 1999

Civil section 1542 – CAL civ code – tells you info for the contract – general release does not extend to claims you don’t know about

Duress and misrepresentation

Spectrum of cases of duress:

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Gun to head any offer

Physical compulsion ex: I offer groceries for $

Threat to physical safety (no $ no food)

Duress of goods

Economic compulsion

Dunham v. Kudra

Rule: 1) has the person been constrained to do what he otherwise would not have done

• this rule seems vacuous
• court suggested an alternative would be a suit for replevin

Rule: 2) was there an adequate legal remedy? If so then there would not be duress.

Adequate legal remedy is irrelevant because they moved from an objective test to a subjective test. They don’t have to decide this issue now because there is no adequate legal remedy under test 1 anyway. So the court says there is no reason to reach a test when there is no question before the court that would bring up that issue. Leave it for a future court to worry about.

What results in Dunham are articulated in 175/76 and how would they be

Dunham would have to show:

• no adequate legal remedy
• an improper threat
• actual inducement (causation)

If these elements are met, then the contract is voidable by the victim

Restatement factors make it harder for Dunham to conclude that he was under duress. Hard to show that it was "an improper threat"

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February 23, 1999

Review of contract settlement agreement drafts

Duress in Selmer case

Pre-existing duty rule – can’t make a new contract when there is already a contract without fresh consideration

Vocabulary lesson:

General Idea: Misrepresentation (a tort)

• defense include liabilities under a contract

Misrepresentation in several forms:

1. statement
2. conduct
3. concealment (some active step taken to hide something)
4. non-disclosure (remaining silent)

Common law misrepresentation:

1. frau
2. negligence (may not know statement is fault, but negligent in making the statement)
3. innocent (made a false statement without negligence)

Factors in misrepresentation (R.2d 164)

1. Misrepresentation

1. Fraudulent

1. a degree of knowledge of falsity
2. intend to induce

1. material (many courts call this negligent or innocent misrepresentation)

1. no intent to induce
2. likelihood of assent (likely to induce assent by a reasonable person OR the maker knows that it would likely induce this person to assent)

1. assent induced
2. justifiable reliance

Examples (use restatement to figure this out if it is misrepresentation):

Fireplace has a crack inside of it (could burn the house down)

Bathtub on bottom floor the drain does not drain

Very cold in sunroom

In one shower, a tile has a crack in it

Type of ground cover in flowerbed will invade the lawn if it goes into the lawn

Bad TV reception without cable

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February 25, 1999

Misrepresentation (including concealment; sometimes including non-disclosure)

R.2d 162(2) – fraudulent or material (negligent or innocent)

Intent to induce

Knows of falsity

Inducement

Justifiable reliance

Sale of a hamburger stand

• seller knew there was a large hamburger stand opening up, but he did not tell buyer – said there was no stand opening up
• seems like this fits the case for misrepresentation based on fraud
• remedies – can ask for damages; or could seek recession of the contract on basis of fraud

several possibilities:

1. question not asked (is there another stand near by)
2. question asked:

1. S remains silent
2. S: judge that for yourself (no justifiable reliance here – so no misrepresentation)

Rule damages for misrepresentation: a party seeking damages for fraud is entitled to recover such damages as will compensate him for the loss of injury actually sustained and place him in the same position that he would have occupied had he not been defrauded.

Measures of benefit of the bargain (compensation measures):

• cost of repair
• difference in value between what was promised and what was delivered
• alternative measure: out of pocket measure (difference in what you pay (this may not be particularly of what you were promised) and the value and what you received)

also can get punitive damages

• have to show malice

One can claim misrepresentation if what is being misrepresented is intent to go forward with the deal

• B can sue for breach of contract
• Also can sue for misrepresentation (for entering into a deal when S had no intention of keeping promise) – this gives a claim for punitive damages

House hypotheticals – whether a non-disclosure would be a misrepresentation (under common law):

Fireplace has a crack inside of it (could burn the house down)

• 161(b) probably covers this as being a misrepresentation

THESE ARE NOT COVERED:

Bathtub on bottom floor the drain does not drain

Very cold in sunroom

In one shower, a tile has a crack in it

Type of ground cover in flowerbed will invade the lawn if it goes into the lawn

Bad TV reception without cable

154: bear the risk of mistake when it is allocated to you by agreement