CONTRACTS 1 - Section 2 (Fall 2010)

Mondays and Wedaesdays -l:00 - 2:30 p.m.

Professor Benjamin G. Davis

Office: Room 2009 F
Tel.:~l 19-530-5 l 17
E-mail: [email protected]

Description of the coarse:

This is a conrse about prolnises that the law will seek to enforce. These promises are a soarce of individnal power.
These promises are a lneans by which we allocate risks and rewards to improve our lives. The nature and contours
of tiffs fi’eedom of contract will be explored over the next two semesters.

Tbe first semester emphasis will be on offer, acceptaoce, consideration, promissory estoppet, restitution, obligation
in the absence of complete agreement, the statnte of fi’ands, principles of ioterpretation and the parol evidence ride,
and the obligation of good faith and other hnplied terms. Ym~ will learn what these words mean.

Objectives for the conrse:

¯ To familiarize yoo with the black-letter law;

¯ To eoable yon to evaluate critically tbe doctfiaes and policies that lie behind the black-letter law;
¯ To develop aod eld~aace your ability to analyze cases, interpret statntes, and thhr& throngh problems;
* To encoarage yon to think about yonr role as a lawyer drafting aad enforcing contracts in our society and
aroand the world.

Casebook:

Our casebook is Problems in Contract Law, Cases and Materials by IOlapp, C~ystal and Prh~ce (the carreot edition)
(hereinafter "casebook") pnblished by Aspen Law & Basiness.

Oar statutory supplement is most current Roles of Cooia’act Law the Statutor’,, Supplemeot to the casebook
(hereinafter "statntory snpplement") also published by Aspen Law & Business.

Oar restatement supplemeat is Restatement (2d) Cootracts & Unidroit Principles (lnstitnte of Intenlational Banking
Law & Practice, Inc. Pablications (hereinafter "Restatement supplemeot").

In the first semester \re should cover the first six chapters of the casebook:

Chapter 1 An loh’odaction to tile Stady of Contract Law

Chapter 2 The Basis of Contraetnal Obligation: Mutual Assent aad Coosideration
Chapter 3 Liability in the Absence of Bargained-for Exchange: Promissol3, Estoppel and Restitntion
Chapter 4 The Statute of Frauds
Chapter 5 The Meaning of the Agreement: Principles of Interpretation and the Parol Evidence Rnle
Chapter 6 Sapplemeotiog the Agreemeot: Implied Terms, tile Obligation of Good Faith aod Warraoties

You are responsible for those six chapters and the relevant sections of the statutory sopplement (Uoiform
Commercial Code, Convention on Contracts for the International Sales of Goods, Restatement (Second) of
Contracts and the UNIDRO1T Principles) and the Restatement sopplement.

Additional materials may be provided by me as we proceed. These additional materials will be handed out in class
and provided ontside my door after class. You are respoosible for making sate that yoo have these additional
materials.
 Other Materials:

1 sincerely discoarage you fi’om spending money on commercial outlines, etc. You may wish to consult treatises as
you become more comfol~,able with the langnage of contracts. The most importaut preparatioo is yonr thinking
aboat and analysis of the assigomeuts.

Assignmenls:

Assigameuts for the conrse will be hauded out in class, posted oa the course information bulletin board, posted oo
my office bulletin board, and posted on my web nuiversity web page. Assignments for the next week will be
provided tile previous week. You are responsible for getfing yoar assignments.

Study groups:

1 encourage yoa to form small study groups (3-5 persoos) that meet regularly. If after a week or three you are
haviag difficnliT forming a study groap, please come to see me and I will see what caa be done.

Teachin~ methods:

Classes will be taught through questions and answers (Socratic and reverse Socratic method) and shm~ lectures.
Stndents should be prepared to be called on to participate on a raudom basis during the course of the semester.

lu addition, problems requiring written work may be assigned. The problems will be reviewed iu class. The writteu
work is to be handed iu at the beginoing of the class at which the problem is to be reviewed. Bring two copies of
your written work to class (one for you and one for me). This wriiteu work is requh’ed to be done. It will be
reviewed, bat not graded, by a personal note. The problems are intended to be an aid to study. 1 WILL NOT
PERMIT YOU TO TAKE THE FINAL EXAM UNLESS YOU COMPLETE THE WRITTEN WORK. IF YOU
DO NOT TAKE THE FINAL EXAM, YOU WILL RECEIVE AN "F" FOR YOUR FINAL GRADE.

The Americaa Bar Association, the College of Law and 1 reqaire regular aud punctaal class attendance. At the
beginniag of class, 1 wilt chcolate a class atteadaace sheet. It is yonr responsibility to ensure that you have signed
the attendance sheet. I WILL WITHDRAW YOU FROM THIS COURSE IF YOU ACCUMULATE MORE
THAN TWO WEEKS OF ABSENCES (4 CLASSES). Please do oot interpret this policy as a licease or
enconragement to miss fonr classes; my personal aod professional opiniou is that attending class is the most efficieot
nse of yonr time and tha! all absences should be avoided.

NOTE: IT IS AN HONOR CODE VIOLATION FOR A STUDENT TO MISREPRESENT TH~ STUDENT’S

OWN ATTENDANCE OR THE ATTENDANCE OF ANOTHER STUDENT.

Grading.’

Yonr grade will be based on the exam. The exam will be three honrs long. 30 minutes of the exam will be a closed
book Bar style essay. 60 minutes of the exam will be closed book Bar slyle with 25-30 moltlple choice questions.
The last 90 minutes of the exam will be open book with one or two essay questions lhat will require you to identify
and resolve a nomber of legal issues.

My gradiog practice for exams is to review each exam at least twice. Exam essays that do a better job ou seeing the
issoes, presenting the rules, doiag a thorm~gh analysis and coming to a cm~clusion tend to earn more points than
exams that do this less well. Exams with more correct mnltiple choice aaswers tend to earn more points.

Exams are graded anonymously. Grades are finally determined after a normalization process consisteut with
College guidelines.

More information about tile exam will be provided later h~ the semester. Review sessions will be organized as we
reach the end of the term.

Office hours:

2
 I will generally be available for the half-hour ariel" a class, subject to other commitmeats. Sobject to your
preferences, I will schednle appropriate office honrs early iu the semester. 1 am also available by appointment.
Please do not hesitate to coutact me at my phoue mnnber or e-mail above.

I will also have student teachh~g assistants who will be introdnced early h~ the semester. Office hours for these
teaching assistants also will be posted early in the semester. The teaching assistants’ primaly tasks will be to answer
your questious and review yonr outlines.

Please feel flee to send me e-mails as that is usaally the easiest way to contact me. I will attempt to respond in the
next class to e-mails received before 1500 two days before class (i.e. Satnrday aflenmon at 1500 for Monday;
Monday at 1500 for Wednesday). If possible, I will auswer e-mail queries received later thau 1500 but I reserve the
right to put tbem over to the next class.

First eonple of weeks

Dne to recovery frOln snrgery I am havh~g this smnmer, please note that one of colleagues may be teaching the class
in the first through third weeks.

Momeufs of Panic/Epiphau,¢:

Please feel flee to come in to see me at any time if yon are feeling pallicularly confused aad/or panicky about the
conrse. Law school can be slressfifl but 1 hope that at some point it will become tim. Please feel free to come in to
see me ifyoa want to discnss a topic of iaterest to you fi’om the reading.

Outline aud Readiug List

Please find below an outlh~e and reading list for onr study of contract law for this semester. I may modify this list
fi’om time to thne, and will apprise yon ofauy such modifications h~ class.

Yon should always examine the pertinent provisious of the Uniform Commercial Code and (when feasible) the
Restatement (2d) of Contracts refe~xed to or cited h~ the casebook. Yon are encouraged to read any pertinent
Official Comments to the UCC or Illastrations to the Restatement. To avoid confi~siou, be aware that some older
cases will refer to the First Restatement. Your Restatement snpplement contah~s ouly the Restatement (2d). Since
yonr statutory and Restatement supplemenls contain only selected sections, you will find that the casebook
sometimes refers to UCC or Restatement provisions that are abseut fi’om your supplemeuts. In snch a case, you
need not consnlt the cited provision (althongh you are always welcome to go to the libralz¢ to do so).

Please note that some of the problems in the casebook will be assigned in the conrse of the semester and shonld
therefore be prepared. You may wish to read through tbe other problems and attempt to respoud to them on your
own as a review of the material covered in the cases and other materials. Model answers will be provided in the
library as we complete each cbapter.

Chapter 1: An Introduction to the Study of Conh’act Law pp.l-20

A. Conl~’act Law in the First-Year Law Can’iculum
B. The Soarces of Coutract Law
C. The Perspective of Coutract Theory
D. The Lawyering Perspective

Chapter 2: Euforcing Promises: Bases of Legal Obligation pp. 21-214

A. Mu~.ml Assent
B. Consideration
C. lssoes in Applyiag tbe Concept of Motaal Asseat

Chapter 3 Liability iu the Absence of Bargaiued-for Exchauge: Promissm3’ Estoppel and Restitution pp. 215-302
 A. Protection of Promisee Reliance: The Doctrine of Promissory Estoppel
B. Liability for Benefits Received: The Principle of Restitution

Chapter 4 The Statute of Frauds pp. 303-348

A. General Principles: Scope and Application

B. The Sale of Goods Statute of Frauds: section UCC 2-201

Chapter 5 The Meaning of the Agreement: Principles of lnterpretatiou and lhe Parol Evidence Rule pp. 349 -436
A. Principles of Interpretation
B. The Parot Evideace Rule

Chapter 6 Sapplementiug the Agreement: Implied Terms, the Obligation of Good Faith and Wan’anties pp. 437-516
A. The Ratiouale for hnplied Terms
B. The hnplied Obligation of Good Faith.
C. Wan’anties
 CONTRACTS l -Section 2 (Fall 2010)
Mondays and Wednesdays 1:00 2:30 p.m.

Professor Benjamin G. Davis

Office: Room 2009 F
Te1.:419-530-5117
E-mail: [email protected]

Assignment for Week One (Week of August 23)

Prepare pages 1-20 of the casebook. Prepare for discussion in class Problem 1-1

Print out my syllabos fi’om my faculty website at

http://\vww, law.utotedo.edu/st ude~ts/faculty/BDavis/gDavis.htm

Print out DavisBoxes fi’om my faculty website at

Ilttp://www.law.utoledo.edu/s~dents/faculty/B Davis/BDavis.htm

Become acquainted with my syllabus, tile DavlsBoxes, your statutory supplement and your restatement
sopplement.
Contracts 1 Section 1 - Associate Professor of Law Benjamin Davis
Mantra: If yon do not write it or say it, I do not know you know it.

Davis Boxes
(Release 1.0 8/23/10)

¯ Box 1 - Classic Contracts

¯ Box 2 - Promissory
Estoppel

¯ Box 3 - Restitution
Contracts 1 Section 1 - Associate Professor of Law Benjmnin Davis
Mantra: If yon do not write it or say it, I do not know you know it.

Box 1 - Classical Contracts

I. Background

A. Rule backgronnd

What is a contract? Rst 1

What is a pro~nise? Rst 2
Agreement defined; Bargain defined Rst 3
How a promise may be made? Rst 4
Requiremeut of a bargain Rst 17

B. Theory (F.L.E.R.C.R.F) and La~?cering Background (C,N,D,A)

Formalism, Legal Realism, Ecouomics, Relatioual, Critical Legal, Critical Race, Critical
Feminist

Counselor, Negotiator, Drafter, Advocate

C. Exam approach background IRAC

1) Issue
2) Rnle
3) Analysis
4) Conclusion

D. Stndy Approach

¯ Outlineas you go
¯ Learn elements of each rule by heart
Coutracts 1 Section 1 -Associate Professor of Law Benjamin Davis
Mautra: If you do uot write it or say it, I do not know you lo~ow it.

II. Questions to ask in an aualysis: What Law Applies, Intent to be bound~ Offer,
Acceptance, Consideration, Statute of Frauds, Meaning~ Parole Evidence Rule~ and
Implied Terms (W.I.O.A.C.S.M.P.E.R.I.)

A.What law applies? (Is it goods?)

UCC 2-105

Concerns:
Predomiuant purpose test (Princess Cruises v/General Electric)

Factors analysis
1) Language of the contract
2) Nature of the business of the supplier
3) Intrinsic worih of the materials
4) Gravamen of the harm

If it is goods - keep in mind UCC sections

B. Is there iutent to be bound?

Objective Theory of Contracts (words and/or conduct) - manifestation of mutual assent

(Ray v/Eurice; Kartes) Rst 17, 20, 21, 22
As opposed to subjective theory - meeting of minds (Ray v/Eurice)

In more informal setting, you get Promise and Consideration as opposed to Offer,
Acceptance and Consideration.

Concerns:
i) Formal Contract Contemplated such as Quake Construction, Inc v/American
Airlines, Inc mad Rst 27, 33, (Letter of intent may cause binding obligations and then
again may not, Coutract, No Contract, Contract to negotiate in good faith)
it) Agreemeut to Agree - Rst 27, 33 - Walker v/Keith
Remember: Price term in Conunon Law - need agreement on it or on mauner to ascertain
it. ha UCC - UCC 2-305 Open price term - minimutn needed for a contract is quantity

(P.O.I.C.T.A.R.A.C.O.) (Preliminary Negotiations~ Offer~ Invitation of Promise or

Performance, Certain~, Termination of the Power of Acceptance, Acceptance~
Reiectlon~ AdvisemenL Couuteroffer, Option
Contracts 1 Section 1 - Associate Professm" of Law Benjamin Davis
Mantra: If you do not write it or say it, I do not know you know it.

C. Is there an offer? (Lonergan v/Scolnick, Izadi v/Machado, Normile v/Mille0

Ideas:
Words and/or conduct become promise become an offer.

Concerns:

Are we looking at Preliminary Negotiations (Rst 26)

Are we looking at an Offer (Rst 24)?
Is there an invitatiou of promise or performance (Rst 32)?
Is there Certainty (Rst 33)?
Is there a method of termination of the power of acceptance (Rst 36)?
ls there Indirect Communication of Revocation (Rst 40)?
Is there Pre-Acceptance Reliance (Rst 87(2))
If UCC, is there a Firm Offer (UCC 2-205, UCC 1-103 to Common Law on Offer, 1-201
on definitions, 2-104 on merchmats)?

Relnember:

A second offer can be made which may act as revocation of the first offer. Also, Offeror,
in responding to a Counteroffer of his offeree, may in turn make a counteroffer. In other
words, Acceptance issues can be issues for the original offeror also depending on how the
negotiation proceeds.

4
Contracts 1 Section 1 - Associate Professor of Law Benjamin Davis
Mantra: If you do not write it or say it, I do not know you know it.

D. Is there Acceptance?

Ideas:

Words and/or conduct become promise become acceptance. Does saying "yes" conclude
the deal?

Concerns:

Acceptance (Rst 50)

¯ Necessity of Acceptance Complyh~g with Terms of Offer (RSt 58)
¯ Acceptance of Offer which States Place, Time or Manner of
Acceptance (Rst 60)
¯ Time when Acceptance Takes Effect (Rst 63)
¯ Acceptance by Silence of Exercise of Dominion (Rst 69)

¯ Rejection (Rst 38(1)),

¯ Advisement (Rst 38(2),

¯ Counteroffer (Rst 39)

¯ Purported Acceptance Which Adds Qualifications (Rst 59)

¯ Time when rejection or counteroffer terminates the power of acceptance (Rst 40)

IfUCC:
Battle of the forms (UCC 2-207 see note I handed out, Brown Machine,
h~c v/Hercules, Inc, Brower v/Gateway, Inc., Register.corn,inc. v/Verio,
Inc., Co~mnon Law on the offer (implicit), 2-104 on tnerchants and 1-201
on other definitions (signed writing for example))
UCC 2-204 Formation in General
UCC 2-206 Offer and Acceptance in Formation of Contract

Remelnber:

In Connnon Law, a second counteroffer can be made wlfich may act as revocation of the
first counteroffer. Also, Counterofferor, in responding to a Counteroffer of his
Counterofferee, may in turn make a counteroffer. In other words, Acceptance issues can
be issues for the counter offeror also depending on how the negotiation proceeds.

Same may be true in UCC, but UCC 2-207 complicates the analysis significantly. On the
other hand, see purposes of UCC in 1-102. UCC is reducing harslmess of common law
Contracts 1 Section 1 - Associate Professor of Law Benjamin Davis
Mantra: If yon do not write it or say it, I do not know you know it,
E. Is there Consideration?

Use both tests

Test 1 - benefit to promisor or detriment to promisee? (Hamer v/Sidway)

Promise induces the consideration, consideration induces tile promise

Court in role of policing the bargain (Where’s the benefit? Where’s the detriment?)

Test 2 - Bargain for exchange (Pennsy Snpply) - Rst 71

Promise for the promise, Pro~nise for the performance - importance of bargain element
More freedoln in pronfise for promise. Little policiug of the bargain by the court.

Both tests we are worried about a legal right.

Remember:
Usually the result is the same under benefit to promisor or detriment to prmnisee test and
bargain for exchange test for consideration. Have to show me you understand how each
test works.

Concerns’.
¯ Bilateral Executory Contract - Promise for a Promise - 2nd Promise is Acceptance
and Consideration but not Performance
¯ Unilateral Executory Contract - Pro~nise for a Performance - Performauce is
Acceptance, is Consideration, and is Performance
¯ Option Contract -
Rst 25,
Rst 45 (Option Contract Created by Pa~ Performance) (Pettersou v/Pattberg
old rule; Modern Rule Rst 45, Cook (substantial performance) a variant of Rst
45),
Rst 87(1)(a) but see Berryinan and courts that insist consideration be actually
paid,
Rst 87(2) (Pre-Acceptance Reliance) - but limited to subcontractor offer
being included by general contractor in general contractor’s bid (cf Jmnes
Baird Co. v/Gimbel Bros with Drennan v/Star Paving)
Rst 87(1)(b) which IfUCC is UCC 2-205 Firm Offer
Remember also Rst 90 and Promissm3, Estoppel in Box 2 (Pop’s Cones, Inc
v/Resorts International Hotel, Inc.)
¯ Preteuse of a bargain/Gift (Daugherty v/Sal0
¯ Failure of Consideration (Daugherty v/Salt)
¯ Past Consideration (Plo~vman)
¯ Condition as opposed to Consideration (Plowman and notes)
¯ Performance of Legal Duty (Rst 73)
¯ Settlement ofClainas (Rst 74)
¯ Illusory and Alternative Promises (Rst 77)
Contracts 1 Section 1 - Associate Professor of Law Benjamin Davis
Mantra: If you do not write it or say it, I do not know you know it.
¯ Adequacy of Consideration, Mutuality of Obligation (Batsakis v/Demotsis) (Rst
79)
¯ Consideration as Motive or Inducing Cause (Rst 81)

7
Contracts 1 Section 1 - Associate Professor of Law Benjamin Davis
Mantra: If you do not write it or say it, I do not know you tamw it.

F. Does the Statute of Frauds apply?

3 questions:

1) Is the contract at issue one of the types to which the statute of frauds applies, so that a
signed memorandum will be required for its euforcement (Is the contract w/i the statute
of frauds)? If no, go ahead with analysis. If yes, go to question 2.
2) Is there some sort of written statement of its terms signed by the defendant (the party
to be charged)? If no, go to 3. If yes, go on with analysis.
3) Are there other factors in the case, such as performance or reliance by the plaintiff,
which might invoke an exception to the statutory bar?

if Cmmnon Law, Rst 110, Rst 129, Rst 130, Rst 131, Rst 132, Rst 133, Rst 134, Rst 139,
Rst 144, Rst 150 (Crabtree v/Elizabeth Arden (multiple documents), Winternitz v/
Summit Hills Joint Venture, Alaska Democratic Party v/Rice)

If UCC - UCC 2-201 0nerchants re~nember UCC - 2-104) and still Rst 139
(Buffaloe v/Hart)

Remember:
Common law-
1) one year rule means one year from making of a contract
2) i~npossibility of full performance within one year fi’om making (termination not
relevant) briugs contract within one year rule
3) must always state, if relevant, why this contract is subject to the Statute of Frauds
Con[facts 1 Section 1 -Associate Professor of Law Benjamin Davis
Mantra: If yon do not write it or say it, I do not know you know it.

G. Meaning

Key concerns
1) Whose meaning controls? Rst 201
2) What is that meaning? Rst 202, 203,204, 205, 206, 207,

i) Approach of the Colnmon Law

Approach 1 - Is the term ambiguous - patent liability? If yes, extrinsic evidence for
meaning comes iu.
Approach 2 Is the term ambiguous latent liability with term and extrinsic evidence
looked at together? If yes, extrinsic evidence for meaning crones in
Approach 3 - Terms and conditions looked at together - no preliminary ambiguous
approach (Rst 202(1)) and UCC 2-202.

Hierarchy of meaning:
1) Express terms
2) Course ofperformauce
3) Course of Dealing
4) Trade Usage

Rst 222, 223, Rst 203 (b)

ii) Approach of the UCC

UCC 1-205, UCC 2-202, UCC 2-208

1) Express terms
2) Course of performance
3) Course of Dealing
4) Trade Usage

Concerns: Explicit rejection of ambiguous step of many Common law jurisdictions in the
comment to 2-202.

Joyner v/Adams, Frigaliment hnporting Co. v/B.N.S. International Sales Corp

iii) Reasonable expectations

Approach ! -Ambiguity? If yes, reasonable expectations

Approach 2 - Reasonable expectations response to terms
Approach 3 Rst 211

C & J Fertilizer, ]hac. v/Allied Mutual Insurance Co.

9
Contracts 1 Section 1 - Associate Professor of Law Benjamin Davis
Mantra: If you do not write it or say it, I do not kuow you know it.

H. Parol Evidence Rule

In Common Law, Rsts 209, 210, 213,214, 215, 216, 217

Parol Evidence Approach 1) Four corners (Williston) approach to determine if

completely integrated or partially integrated agreement - only look at the writing and no
extrinsic evidence

Parol Evidence Approach 2) Restatement (Corbinian) approach bring in extrh~sic

evidence to assist in determining if a completely integrated or pm~ially integrated
agreement.

Parol evidence not admissible to contradict the contract.

But mauy exceptions noted (Rst 214)

Thompson v/Libby, Taylor v/State Farm Mutaal Automobile Insorance Co, Sherrodd,
Inc v/Mon’ison-Kamdsen Co.

in UCC - UCC - 2-202, 1-205, 2-208

Parol Evidence Approach 2 - reqnired/prefen’ed approach per couunent to UCC 2-202

Parol evidence not admissible to contradict the contract.

But many exceptions noted (Rst 214) and what does contradict mean?

Nanakuli Paving & Rock Co. v/Sbell Oil Co.

Concerns:

i) Parol evidence = prior or contemporaneous oral or written evidence

ii) Alteruative Judge Approaches

a) Judge approach 1) - Plain Meaning + Four Corners (Willistou) Parol Evidence Jndge

Extrinsic evidence not looked at to determine ambiguity and not looked at to determine
whether Completely or Pal~ially Integrated Agreement. Merger clause likely conclusive.
If no mnbiguity found, no extrinsic evidence comes in even for meaning. If completely
integrated agreement parol evidence that contradicts the agreement is excluded. Merger
claase conclusive. If partially integrated agreement parol evidence relating to the
partially integrated agreement is excluded. Parol evidence admissible for collateral
matters to partial integrated agreement or for a separate agreement (but Statate of
Frauds?). Under this approach, if judge finds ambiguity, then parol evidence may come
in for memfing whether completely or partially integrated agreement (but again can not
contradict). Parol evidence can come in in any event for Rst 214 (d) and (e) reasons.

10
Contracts 1 Section 1 - Associate Professor of Law Benjamin Davis
Mantra: If you do not write it or say it, I do not know you lo~ow

b) Judge approach 2) - Terms + Extrinsic Evidence for Memfing + Corbinian Parol

Evidence Approach (Overall a Restatement Approach)

Extrinsic evidence looked at for determining meaning and to determine if completely or

pariially integrated agreement. If co~npletely integrated agreement parol evidence that
contradicts is excluded. Merger clause persuasive but not conclusive. If partially
integrated agreement parol evidence relating to the pm~ially integrated agreement is
excluded. Parol evidence admissible for collatera! matters to partial integrated agreement
or for a separate agreement (bnt Statate of Frands?). Parol evidence will come in for all
Rst 214 (a), (b), (c), (d), and (e) reasons whether completely h~tegrated or partially
integrated.

11
 Contracts 1 Section 1 - Associate Professor of Law Benjamin Davis
Mantra: If you do not write it or say it, I do not know you ~ow it.
I. Implied terms

A, Implied in fact (agreed to in solne lneaningful sense by the parties themselves) -

See Wood v/Lucy, Lad), Duff Gordon - at Common Law fi’om contract terms imply a
promise to provide reasonable efforts. Exclusive dealing situation now covered most
likely by UCC- 2-306(2) if goods. In Con~non Law would tl3, to find ma implied in fact
obligation for reasonable eflbrts probably. Can t~y for implied in fact also in UCC setting
but note all the UCC Gap-fillers. Might look also to course of performance, course of
dealing, usage of trade to help imply in fact.

B. Implied in law (imposed by the court)

1) Implied in law at common law (for examples, 1) Rst 205 implied covenant of good
faith and fair dealing in Locke v/Warner Bros., Inc and in the at will employment
contract setting of Donabue v/Federal Express Corp, 2) implied warranty of
habitabilily/skillfui construction described in Caceci v/Di Canio Construction Co, 3)
other implied warranties that come from statute or court decisions)

a) Implied covenant of good faith and fair dealing (Rst 205) - protecting reasonable
expectations, fruits of the contract, avoiding opportunistic behavior.

Locke.(see notes also)

(discretion) subjective (honest satisfaction) objective (reasonable person objective) -

express terms overrule the implied covenant of good faith but have to verify whether it is
appropriate to see ~vhether the express terms are performed consisteut with the good faith
and fair dealing.

When do you go subjective - honest satisfaction? When question of fancy, judgment

taste (example, painting nay portrait, subjective).

When not that, likely more objective standard - other settings more objective reasonable
person standard (example, painting the wall, objective)

Donahue (see notes also)

At will contracts and good faith (CL 205 again)

At will - ternaination possible at wil!

Key ideas:

i) Presumption of employment at will - indefinite term

12
Contracts 1 Section 1 -Associate Professor of Law Benjamin Davis
Mantra: If you do not write it or say it, I do not know you know it.
This presumption is overcome by 1) - contract for specific duration 2) contractually
agree for just or good cause for termination 3) additional consideration (h~tent to have
more lasting relationship)

Types of claims for violation of implied covenant of good faith and fah" dealing even in
the at will employment contract setting -

1) deprived employee of compensation that appeared to have already been earned

before termination
2) manner io which ao employee is terminated did not follow procedures
3) public policy
4) employee handbook (implied in fact term)
5) promissoiq¢ estoppel maybe
NOTE: Not clear if restrictions would apply to other [3’pes of actions like
demotions
6) lawyers situations (duty to report suspected unfitness of other attorneys)

b) Warranties at common law

1) Remember you can have express warranties at conmaon law (part of the
contract)
2) implied warranties example implied warranty of habitability/skillfid
construction

Caceci v/Di Canio Construction Corp (see notes)

Residential arena

Builder Vendor - First Owner - implied warranty of habitability/implied warranty of

skilled construction (used interchangeably but technically not exactly the same - see the
case)

Builder Vendor - Second Owner - not sure if warranty flows through

First Owner - Second Owner - not sure
Look for statutes
Commercial Arena - not sure if this warranty occurs

2) Implied in law in the UCC

a) Gap filling generally (see Notes after Leibel) default rules, express terms, mandatory
roles

13
Coutracts 1 Section 1 -Associate Professor of Law Benjamin Davis
Mantra: If you do not write it or say it, I do not know yon know it.
b) UCC - 1-201(19) (Good faith generally - honesty iu fact) and UCC 2-103(1)(b) (
Good faith for merchants)

c) UCC 2-305 Open Price Term (includes good faith price setting by one party as in
Nanakuli)

d) UCC 2-306 Output, Requirements and Exclusive Dealings (Leibel)

output contract - seller sells all output to buyer. Buyer can purchase output fi’om others
provided seller provides buyer’s requirements. Overtender constrained by ride, can go
down to zero if comply with good faith

rcqnirements contract - seller provides all buyer’s requirements. Seller can sell to
others provided seller provides buyer’s requirements. - overdemand constrained by rule,
can go down to zero if comply with good faith

exclusive dealing (2-306(2) implied in law best efforts)

e) UCC - 2-309 Absence of specific Time Provisions; Notice of Termination

See Leibel v/Raynor Manufacturing Co 2-309(3) unconscionability

f) Express and implied warranties in the UCC see Baylor and notes

UCC - 2-313 - express warranties

2-314 implied warranty of merchantability (merchant)
(course of dealing and usage of trade warranties may arise)
2-315 implied warranty of fitness for purpose

Express warranties -affirmation of fact (conmfitment) vs. puffery, specificity (this

particular good), opinion or commendation - go through the elements of the rule in the
UCC

Implied merchantability - merchant, pass without objection in the trade, are fit for the
ordinary purposes for which goods are used - go through the elements of the rule in the
UCC

Implied fitness for purpose (1) seller has reason to laaow any particular purpose (2)
buyer relyfl~g on seller’s skill or judgment (3) implied warrant3, fit for that particular
purpose(not only merchants)

14
Contracts 1 Section 1 -Associate Professor of Law Benjanfin Davis
Mantra: If you do not write it or say it, I do not know you know i~.
UCC 2-316 - Exclusion or modification of warranties

(1) (subject to 2-202) negation or limitation is iuoperative to the extent that such
constraction is unreasonable

(2) (warranty of merchantability) "merchantability"/writing/conspicuous (1-201(10))

(warranty of fitness for purpose) writing/conspicuous

(3) as is, with all faults, examined the goods or demand and refused to examine, course of
dealing, course of performance, usage of trade

Notes. precise and complete specifications may be understood to exclude implied

warranties

(4) remedies can be linfited

UCC - 2-3 ! 7 - Cumulation and Conflict of Warranties Express or Implied

Other UCC implied warranties (for example) UCC 2-312 Warranty for Title

UCC - 2-318 - Third Party Beneficiaries of Warranties Express ofhnplied

A - family or household or guest

B - Any natural person who may reasonable be expected to use or consume - injured in
person
C - Any natural person who may reasonable be expected to use or consume - injured by
the breach

Personal injury or propel~y damage

Tort - lack of vertical or horizontal privity rejected
Contract - erosion of vertical privity/some concern in horizontal privity

Economic loss - lost profits consequential

vertical privity uncertain

Courts iu implied warranty setting less likely than express warranty setting to dispense
with the privity requirement (page 495)

Keep in mhad that still have to prove:

1) scope of the warranty 2) existence of a breach 3) proximate cause of the loss

Can get out of liability through statute of limitations- UCC 2-725, 2-607(3) notice

15
Contracts 1 Section 1 -Associate Professor of Law Benjamin Davis
Mantra: If you do not write it or say it, I do not know yon know it.
Box 2 - Promissory Estoppei

Promise - words and/or conduct

Detrimental Reliance - change of position, to detrinreut
Avoiding hrjustice - balance promisor and promisee situations

A) Rst 90(1) good law

Coutracts within the family (Kirksey v/Kirksey, Greiner v/Greiner, Wrigbt v/Newman)

Commercial context (Katz v/Danny Dare, Shoeuraker v/Conmronwealth Bank, Pop’s

Cones, hrc v/Resorts International Hotel, lnc)

B) Rst 90(2) Charitable subscriptions not good law in 49 states

(Allegheny College v/National Chautauqua County Bank, King v/Trustees of Boston

University)

Concerns: Prolnissory Estoppel uot expauding so much that it engulfs classic contract
law.

C) Pre-Acceptance Reliance

Rst 87(2) (Pre-Acceptance Reliance) - but limited to subcontractor offer being included
by general contractor in general contractor’s bid (cf James Baird Co. v/Gimbel Bros
with Dremtan v/Star Paving) - Help tiffs segue back to option contract possibilities in
Box 1.

Rst 90 comes in here too

D) Statnte of Frauds

Rst 129 - Land Contract Provisiou Action in Reliance: Specific Performance

Rst 139 - Enforcement by Virtue of Action in Reliance

(Winternitz v/Summit Hills Joint Venture, Alaska Democratic Patty v/Rice)

Rst 90 come in here too

16
Contracts 1 Section 1 - Associate Professor of Law Benjamin Davis
Mantra: If you do not write it or say it, I do not know you know it.
Box 3 - Restitntion

A. Restitution in tile absence of a promise

1) Implied in Fact

"Where a person performs services at another’s request, or

Where services are rendered by one person for another without his expressed request, but
with his knowledge, and under circumstances fairly raising the presumptioo that the
parties understood and intended that compensation was to be paid. In these
circumstances the law flnplies the promise to pay a reasonable amount for the services.."
Pg. 129 Conunerce Pal~nership 8098 Limited Pm~tnership v/Equity Contracting Co. Ine

2) hnplied ill Law

1) the plaintiff has conferred a benefit on the defendant;

2) the defendant has knowledge of the benefit
3) the defendant has accepted or retaioed the benefit conferred, and
4) the circumstances are such that it would be inequitable for the defendant to retain
the benefit without paying fair value for it.
Pg. 129 Commerce Pm~nersbip 8098 Limited Partnership v/Equity Contracting Co.
Inc

Rst of Restitution Section 116 (page 121)

Rst of Restitution Section 117 Preservation of another’s things or credit (page 126)
Rst 0frestitution 107 Effect of existence of bargain upon right of restitution (page
125)

Concerns:
Contractor setting
1) exhaustion of renredies against the contractor
2) the owner’s receipt of the benefit conferred without paying consideration to anyone
Officious intermeddler
Gift

See Credit Bureau Enterprises, Inc v/Pelo, Connnerce Partnership 8098 Limited
Partuership v/Equity Contracting Co. Inc, Watts v/Watts

!7
Contracts 1 Section 1 - Associate Professor of Law Benjamin Davis
Mantra: If you do not write it or say it, I do not know you know it.

B. Promisso~3, Restitution

1) Moral Obligation + Promise

(Mills v/Wyman) Rst 82, Rst 83 (debts of banlo’upts, tolled by statute of limitations and
i~ants)

2) Material benefit rule

Material benefit + promise (Webb v/McGowin and Rst 86)

18