Emanuel Law Outlines for Contracts (Emanuel Law Outlines Series) 11th.pdf - CONTRACTS ELEVENTH EDITION STEVEN L EMANUEL Founder Editor-in-Chief Emanuel

Emanuel Law Outlines for Contracts (Emanuel Law Outlines Series) 11th.pdf

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Unformatted text preview: CONTRACTS ELEVENTH EDITION STEVEN L. EMANUEL Founder & Editor-in-Chief, Emanuel Law Outlines and Emanuel Bar Review Harvard Law School, J.D. 1976 Member, NY, CT, MD and VA bars The Emanuel® Law Outlines Series 2 Copyright © 2015 CCH Incorporated. Published by Wolters Kluwer in New York. Wolters Kluwer serves customers worldwide with CCH, Aspen Publishers, and Kluwer Law International products. ( ) No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopy, recording, or utilized by any information storage or retrieval system, without written permission from the publisher. For information about permissions or to request permissions online, visit us at , or a written request may be faxed to our permissions department at 212-771-0803. To contact Customer Service, e-mail [email protected], call 1-800234-1660, fax 1-800-901-9075, or mail correspondence to: Wolters Kluwer Attn: Order Department PO Box 990 Frederick, MD 21705 eISBN 978-1-4548-7369-3 This book is intended as a general review of a legal subject. It is not intended as a source of advice for the solution of legal matters or problems. For advice on legal matters, the reader should consult an attorney. 3 About Wolters Kluwer Law & Business Wolters Kluwer Law & Business is a leading global provider of intelligent information and digital solutions for legal and business professionals in key specialty areas, and respected educational resources for professors and law students. Wolters Kluwer Law & Business connects legal and business professionals as well as those in the education market with timely, specialized authoritative content and information-enabled solutions to support success through productivity, accuracy and mobility. Serving customers worldwide, Wolters Kluwer Law & Business products include those under the Aspen Publishers, CCH, Kluwer Law International, Loislaw, ftwilliam.com and MediRegs family of products. CCH products have been a trusted resource since 1913, and are highly regarded resources for legal, securities, antitrust and trade regulation, government contracting, banking, pension, payroll, employment and labor, and healthcare reimbursement and compliance professionals. Aspen Publishers products provide essential information to attorneys, business professionals and law students. Written by preeminent authorities, the product line offers analytical and practical information in a range of specialty practice areas from securities law and intellectual property to mergers and acquisitions and pension/benefits. Aspen’s trusted legal education resources provide professors and students with high-quality, upto-date and effective resources for successful instruction and study in all areas of the law. Kluwer Law International products provide the global business community with reliable international legal information in English. Legal practitioners, corporate counsel and business executives around the world rely on Kluwer Law journals, looseleafs, books, and electronic products for comprehensive information in many areas of international legal practice. Loislaw is a comprehensive online legal research product providing legal content to law firm practitioners of various specializations. Loislaw provides attorneys with the ability to quickly and efficiently find the necessary legal information they need, when and where they need it, by facilitating access to primary law as well as state-specific law, records, forms and treatises. 4 ftwilliam.com offers employee benefits professionals the highest quality plan documents (retirement, welfare and non-qualified) and government forms (5500/PBGC, 1099 and IRS) software at highly competitive prices. MediRegs products provide integrated health care compliance content and software solutions for professionals in healthcare, higher education and life sciences, including professionals in accounting, law and consulting. Wolters Kluwer Law & Business, a division of Wolters Kluwer, is headquartered in New York. Wolters Kluwer is a market-leading global information services company focused on -professionals. 5 Dedication To my son Michael, who was conceived after this book was and who was born before this book was S.L.E. 6 Abbreviations Used in Text CASEBOOKS Barnett — Randy Barnett, Contracts, Cases and Doctrine (5th Ed. 2012 — Wolters Kluwer) CPB&B — Calamari, Perillo, Bender & Brown, Cases and Problems on Contracts (6th Ed. 2011 — West / Thomson) C&W — Crandall & Whaley, Cases, Problems and Materials on Contracts (6th Ed. 2012 — Wolters Kluwer) D,H&H — Dawson, Harvey and Henderson, Contracts, Cases and Comments (7th Ed. 1998 — Foundation) FSCB&G — Farnsworth, Sanger, Cohen, Brooks & Garvin, Cases and Materials on Contracts (8th Ed. 2013 — Foundation) FYSC&B — Farnsworth, Young, Sanger, Cohen & Brooks, Cases and Materials on Contracts (7th Ed. 2008 — Foundation) F&E — Fuller and Eisenberg, Basic Contract Law (6th Ed. 1996 — West Publishing) KC&P — Knapp, Crystal & Prince, Problems in Contract Law (7th Ed. 2012 — Wolters Kluwer) HORNBOOKS & TREATISES C&P Hnbk — Calamari and Perillo, The Law of Contracts (6th Ed. 2009 — West Publishing) Corbin — Arthur Corbin, Corbin on Contracts (One-Volume Ed., 1952 — West Publishing) Farnsworth — E. Alan Farnsworth, Contracts (4th Ed. 2004 — Aspen) Murray — John Murray, Jr., Murray on Contracts (3rd Ed. 1990 — Michie) Simpson — Laurence Simpson, Handbook of the Law of Contracts (1965) W&S — White and Summers, Uniform Commercial Code (4th Ed. 1995 — West Publishing) Williston — Samuel Williston, Williston on Contracts (3rd. Ed. 1959 — Baker, Voorhis) RESTATEMENTS AND CODES 7 Rest. 1st — First Restatement of Contracts (1932) Rest. 2d — Second Restatement of Contracts (1981) UCC — Uniform Commercial Code (2011) OTHER E — This volume. References of the form “E II(G)(1)(d)” refer to the paragraph with that numbering scheme within the current chapter. These references occur mostly in Tables and in Notes to Flow Charts. 8 SUMMARY OF CONTENTS Table of Flow Charts, Checklists and Other Graphic Aids Preface Casebook Correlation Chart Capsule Summary 1. INTRODUCTION 2. OFFER AND ACCEPTANCE 3. CONSIDERATION 4. PROMISES BINDING WITHOUT CONSIDERATION 5. MISTAKE 6. PAROL EVIDENCE AND INTERPRETATION 7. CONDITIONS, BREACH, AND OTHER ASPECTS OF PERFORMANCE 8. ANTICIPATORY REPUDIATION AND OTHER ASPECTS OF BREACH 9. STATUTE OF FRAUDS 10. REMEDIES 11. CONTRACTS INVOLVING MORE THAN TWO PARTIES 12. IMPOSSIBILITY, IMPRACTICABILITY, AND FRUSTRATION 13. MISCELLANEOUS DEFENSES: ILLEGALITY, DURESS, MISREPRESENTATION, UNCONSCIONABILITY, AND LACK OF CAPACITY 14. WARRANTIES 15. DISCHARGE OF CONTRACTS Essay Exam Questions and Answers Table of Cases Table of UCC References Table of Restatement References 9 Subject Matter Index 10 TABLE OF CONTENTS Preface Table of Flow Charts, Checklists and Other Graphic Aids Casebook Correlation Chart Capsule Summary Chapter 1 INTRODUCTION I. MEANING OF “CONTRACT” A. Definition II. VOID, VOIDABLE AND UNENFORCEABLE CONTRACTS III. ECONOMIC ANALYSIS OF CONTRACT LAW IV. SOURCES OF CONTRACT LAW Chapter 2 OFFER AND ACCEPTANCE I. INTENT TO CONTRACT A. Mutual assent B. Objective theory of contracts C. Intent to create legal relations D. Intent to memorialize agreement in writing II. OFFER AND ACCEPTANCE GENERALLY A. Requirement of offer and acceptance B. Restatement definition C. Promise contained in offer D. Offer creates power of acceptance 1. Options III. VALIDITY OF PARTICULAR KINDS OF OFFERS A. Offer made in jest 11 B. Offer distinguished from expression of opinion C. Preliminary negotiations distinguished from offers D. Price quotations distinguished from offers E. Advertisements as offers F. Offers at auctions G. Invitations to bid H. Seller’s response to inquiry I. Indefinite offers J. Offers proposing a series of contracts Quiz Yourself on VALIDITY OF OFFERS IV. THE ACCEPTANCE A. Acceptance defined B. Who may accept the offer C. Must be in response to an offer D. Offeree usually required to know of the offer E. Method of acceptance 1. Can suspend mailbox rule 2. Mode of acceptance where not specified in offer 3. Acceptance of unilateral contract 4. Acceptance of bilateral contract 5. Where offer invites either promise or performance 6. Acceptance by silence 7. Notice of acceptance of unilateral contract Quiz Yourself on THE ACCEPTANCE V. ACCEPTANCE VARYING FROM OFFER A. Problem generally B. Common-law view 1. Injustice C. Liberal UCC view 12 1. “Battle of the forms” 2. Role of § 2-207 3. Text of § 2-207 4. Summary D. Detailed discussion E. Acceptance expressly conditional on assent to changes F. Additional term in acceptance 1. Contract formed 2. Proposal for addition to the contract 3. At least one party not merchant 4. Both parties merchants 5. Recap of how additional terms are handled 6. Additional term in first document but not second G. Different (conflicting) terms in documents H. Response diverges too much to be acceptance I. Contract by parties’ conduct J. Confirmation of oral agreement K. “Terms to follow” contracts (a/k/a “rolling” contracts) L. Negotiations not involving standardized forms M. Electronic commerce, and its effect on contract formation N. Modern view of divergences in non-UCC cases Quiz Yourself on ACCEPTANCE VARYING FROM OFFER VI. DURATION OF THE POWER OF ACCEPTANCE A. Determining whether the acceptance is timely B. “Continuing offers” implied C. Four ways of terminating offer D. Offer terminated by offeree’s rejection E. Counter-offer terminates power to accept F. Lapse of time G. Revocation 13 1. Effective upon receipt 2. Lost revocation 3. What constitutes receipt of revocation 4. Indirect communication of revocation 5. Revocation of general offer H. Death or incapacity of offeror or offeree I. Supervening illegality J. Irrevocable offers 1. Exceptions 2. The standard option contract 3. “Firm offers” under the UCC 4. Part performance or detrimental reliance K. Temporary irrevocability caused by part performance or detrimental reliance VII. WHEN ACCEPTANCE BECOMES EFFECTIVE A. Introduction B. General “mailbox” rule C. Misdirection of acceptance D. Acceptance lost in transmission E. Where offeree sends both acceptance and rejection F. Acceptance of option contracts G. Effective date of revocation of offer Quiz Yourself on TIMELINESS AND EFFECTIVENESS OF ACCEPTANCE VIII. INDEFINITENESS A. Problem of indefiniteness generally B. Modern view more liberal C. Necessary terms 1. Court may supply missing term 2. Implication of reasonable terms, generally 3. Implied obligation of good faith 4. Trade usage or other external evidence 14 5. Need for an intent to contract 6. Agreement to agree 7. Contracts where terms are left to one party’s specifications 8. Indefiniteness cured by part performance IX. MISUNDERSTANDING Quiz Yourself on INDEFINITENESS AND MISUNDERSTANDING Exam Tips on OFFER AND ACCEPTANCE Chapter 3 CONSIDERATION I. INTRODUCTION A. Consideration as a requirement for a contract B. Purpose of consideration doctrine C. Definition D. Two kinds of problems II. THE BARGAIN ELEMENT — GIFT PROMISES A. The bargain element generally 1. “Bargain” defined B. Ordinary gift cases 1. Bargains vs. conditional gifts 2. Test for distinguishing bargains from pre-conditions 3. Non-economic benefits 4. Business context does not negate donative intent 5. Absence of overt bargaining not fatal C. Sham and nominal consideration D. Importance of whether recited consideration was actually paid E. Promisee must be aware of promise F. Consideration doctrine not applicable to executed gifts III. THE BARGAIN ELEMENT — “PAST CONSIDERATION” A. “Past consideration” not sufficient 15 B. Pre-existing debt C. Promise to pay for past services received Quiz Yourself on THE BARGAIN ELEMENT IV. THE “DETRIMENT” ELEMENT GENERALLY A. The “detriment” aspect of consideration B. “Detriment” idea summarized C. Consideration may be either promise or performance D. Where issue arises E. Court will not inquire into “adequacy” of the detriment 1. Minor effort or other thing of non-monetary value 2. Equity courts have different rule 3. Inadequacy of consideration as evidence of fraud, duress, unconscionability, etc. V. THE PRE-EXISTING DUTY RULE A. The pre-existing duty rule generally B. General pre-existing duty rule in two party cases 1. Promise to modify 2. Deterring hold-up behavior 3. Construction contracts 4. Restatement view 5. The “unforeseen circumstances” exception 6. Promissory estoppel 7. Where extra duties assumed 8. Duty owed to third person rather than to promisor 9. Some states have rejected rule 10. Rewards and bonuses C. Agreements to accept part payment of debt in satisfaction of whole D. Extension agreements E. Settlement of other kinds of suits F. The “three party” pre-existing duty cases Quiz Yourself on 16 DETRIMENT, AND THE PRE-EXISTING DUTY RULE VI. MUTUALITY OF CONSIDERATION A. Requirement that each side furnish consideration B. Consideration in bilateral contracts C. “Mutuality of obligation” VII. ILLUSORY, ALTERNATIVE, AND IMPLIED PROMISES A. Introduction B. Illusory promises 1. Reservation of right to change mind C. Alternative promises D. Right to terminate agreement E. Other kinds of implied promises VIII. REQUIREMENTS AND OUTPUT CONTRACTS A. Requirements and output contracts B. UCC approach C. Requirements and output contracts distinguished from continuing offers Quiz Yourself on MUTUALITY PROBLEMS: ILLUSORY, ALTERNATIVE AND IMPLIED PROMISES, AND REQUIREMENTS AND OUTPUT CONTRACTS IX. MISCELLANEOUS CONSIDERATION PROBLEMS A. Conditional promises 1. Conditions outside of the promisor’s control 2. Where condition is within partial control of the promisor 3. Promisee’s discretion B. Voidable and unenforceable promises C. Forging a good unilateral contract out of a bad bilateral one 1. Non-competition clause Quiz Yourself on MISCELLANEOUS CONSIDERATION PROBLEMS 17 Exam Tips on CONSIDERATION Chapter 4 PROMISES BINDING WITHOUT CONSIDERATION I. INTRODUCTION II. PROMISES TO PAY PAST DEBTS A. Promises to pay past debts that are no longer legally enforceable B. “Moral consideration” C. Scope of promisor’s duty III. PROMISE TO PAY FOR BENEFITS RECEIVED A. Promise to pay for benefits received generally 1. Where services were requested, and rendered with an expectation of payment 2. Benefits previously received but not requested Quiz Yourself on PROMISES TO PAY PAST DEBTS AND PROMISES TO PAY FOR BENEFITS RECEIVED IV. OTHER CONTRACTS BINDING WITHOUT CONSIDERATION A. Promise to perform a voidable duty B. Modification of contracts 1. Contracts containing a “no oral modification” clause 2. Good faith and unconscionability in modifications C. Option contracts 1. Restatement 2. Offers which induce reliance 3. Firm offers under the UCC D. Guaranties E. Contracts under seal Quiz Yourself on 18 OTHER CONTRACTS BINDING WITHOUT CONSIDERATION V. PROMISSORY ESTOPPEL A. Introduction 1. Other applications B. Restatement definition C. Unbargained-for reliance D. Promises to make gifts 1. Intra-family promises 2. Oral promises to convey land E. Charitable subscriptions F. Gratuitous bailments and agencies G. Promises to pay pensions H. Offers by sub-contractors I. Promise to perform business service 1. Promise to obtain insurance 2. Promise to make a loan J. At-will jobs and other at-will relationships K. Duty to bargain in good faith L. Theories of recovery M. Promissory estoppel under the UCC Quiz Yourself on PROMISORY ESTOPPEL Exam Tips on PROMISES BINDING WITHOUT CONSIDERATION Chapter 5 MISTAKE I. NATURE OF MISTAKE GENERALLY II. GENERAL RULE ON MISTAKE III. MUTUAL MISTAKE 19 A. Restatement position B. Restatement’s three requirements C. Meaning of “basic assumption” D. Material effect on agreed exchange E. Allocation of risk 1. Agreement of the parties 2. Conscious ignorance 3. Allocation by court F. Relation to breach of warranty G. Misunderstanding Quiz Yourself on MUTUAL MISTAKE IV. UNILATERAL MISTAKE A. The problem generally B. Traditional rule C. Modern view Quiz Yourself on UNILATERAL MISTAKE V. DEFENSES AND REMEDIES A. Negligence usually not a defense 1. Failure to act in good faith 2. Failure to read writing B. Remedies 1. Avoidance 2. Reliance damages 3. Adjustment of contract as substitute for avoidance VI. REFORMATION AS REMEDY FOR ERROR IN EXPRESSION Quiz Yourself on DEFENSES, REMEDIES AND REFORMATION Exam Tips on 20 MISTAKE Chapter 6 PAROL EVIDENCE AND INTERPRETATION I. THE PAROL EVIDENCE RULE GENERALLY A. How the rule applies II. TOTAL AND PARTIAL INTEGRATION A. The concept of “integration” B. “Partial” vs. “total” integrations C. Statement of the parol evidence rule D. Contemporaneous and subsequent expressions E. The UCC’s parol evidence rule Quiz Yourself on THE PAROL EVIDENCE RULE, AND “TOTAL” VS. “PARTIAL” INTEGRATION III. THE ROLES OF THE JUDGE AND JURY A. Preliminary determinations made by judge B. Conflicting views on how judges decide C. Deciding whether a writing is an integration, and whether particular terms contradict or supplement it Quiz Yourself on THE ROLES OF THE JUDGE AND JURY IV. SITUATIONS IN WHICH THE PAROL EVIDENCE RULE DOES NOT APPLY A. Rule does not bar a showing of fraud, mistake or other voidability B. Existence of a condition C. Collateral agreement supported by separate consideration D. Subsequent transactions E. Interpretation Quiz Yourself on 21 WHEN THE PAROL EVIDENCE RULE DOES NOT APPLY V. INTERPRETATION A. Interpretation generally B. Maxims of interpretation 1. Primary purpose rule 2. All terms made reasonable, lawful and effective 3. Construction against the draftsman 4. Negotiated terms control standard terms C. One party knows or should know of the other’s meaning VI. TRADE USAGE, COURSE OF PERFORMANCE, AND COURSE OF DEALING A. Common-law use of “custom” B. Modern tendency exemplified by UCC C. Effect on the parol evidence rule D. Allowable to add or subtract from the agreement E. Priorities VII. OMITTED TERMS SUPPLIED BY COURT A. Court may supply term B. Restatement rule Quiz Yourself on INTERPRETATION; TRADE USAGE, COURSE OF PERFORMANCE, AND COURSE OF DEALING; OMITTED TERMS SUPPLIED BY THE COURT Exam Tips on PAROL EVIDENCE AND INTERPRETATION Chapter 7 CONDITIONS, BREACH, AND OTHER ASPECTS OF PERFORMANCE I. INTRODUCTION II. CLASSIFICATION OF CONDITIONS A. Precedent/Subsequent distinction 22 B. Express and constructive conditions III. DISTINCTION BETWEEN CONDITIONS AND PROMISES A. Importance of distinction Quiz Yourself on CLASSIFICATION OF CONDITIONS, AND THE DISTINCTION BETWEEN CONDITIONS AND PROMISES IV. EXPRESS CONDITIONS A. Strict compliance 1. Avoidance of forfeiture 2. Interpreted in light of parties’ intentions B. Satisfaction of a party C. Satisfaction of a third person Quiz Yourself on EXPRESS CONDITIONS V. CONSTRUCTIVE CONDITIONS A. Use of constructive conditions in bilateral contracts B. Order of performance 1. Periodic payments or other alternating performance 2. Where no order of performance agreed upon C. Independent vs. dependent promises D. Divisible contracts Quiz Yourself on CONSTRUCTIVE CONDITIONS VI. SUBSTANTIAL PERFORMANCE A. Doctrine of substantial performance 1. Relation to material breach 2. Consequences of non-material breach B. Suspension followed by discharge C. Factors determining whether a breach is material D. Material breach in contracts for the sale of goods 23 Quiz Yourself on SUBSTANTIAL PERFORMANCE VII. EXCUSE OF CONDITIONS A. Introduction B. Hindrance or wrongful prevention C. Intent to forego the benefit of the condition (“waiver”) Quiz Yourself on EXCUSE OF CONDITIONS VIII. REPUDIATION AND PROSPECTIVE INABILITY TO PERFORM AS FAILURES OF CONSTRUCTIVE CONDITIONS A. General effect of prospective breach B. Insolvency or financial inability C. Right to adequate assurances of performance Quiz Yourself on REPUDIATION AND PROSPECTIVE INABILI...
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