Restatement (Second) Contracts, UCC, and CISG
R2d 16
Intoxicated people
A buyer sought to purchase a used television from an online auction site. The buyer emailed the seller, asking, “Does the television work?” The seller, who was not a merchant, responded, “Yes, just like new!” The buyer purchased the television. After the buyer received the television, he found that its casing had numerous scratches and dents. However, the television functioned perfectly. The buyer sued the seller, alleging that the seller had breached a warranty because the television was not “just like new.”
What is the seller’s best argument for why she did not breach a warranty to the buyer?
D. The phrase “just like new” should be interpreted as applying to the television’s functioning, not its appearance.
(During the process of interpretation, courts use several standards and rules to determine the meaning of the contract. Writings are to be “interpreted as a whole,” and “all writings that are part of the same transaction are interpreted together.” Restatement (Second) of Contracts § 202 (1981).)
A woman contracted to sell her ring to a coworker for $300. Both parties believed that the ring had a cubic zirconia stone and was worth $300. The parties agreed that the woman would bear the risk of any mistake regarding the worth of the ring. In reality, the stone in the ring was a diamond, and the ring was worth $2,000.
Upon learning of this mistake, the woman refused to sell the ring to the coworker for $300.
If the coworker sues to enforce the contract, is she likely to prevail?
Yes, because the woman agreed to bear the risk of a mistake regarding the worth of the ring.
When a woman’s dog went missing, she posted missing-dog fliers around the neighborhood. The fliers offered a $200 reward for anyone who returned the dog to her. The next day, a man walking in the neighborhood saw the dog and recognized it as belonging to the woman. The man took the dog to the woman’s house and returned it to her. Neither party made any mention of the reward. Later that afternoon, the man saw one of the missing-dog fliers for the first time. Upset that the woman did not pay him $200, he went back to her house and demanded the money.
Is the woman obligated to pay the man the $200 reward?
No, because the man did not know of the reward offer at the time he returned the dog.
( In order to accept an offer, the offeree must know of the offer at the time of the acceptance. Here, the man only became aware of the offer after returning the dog to the woman. Because of this, the woman is not obligated to pay the man the $200 reward)
A homeowner contracted with a groundskeeper to plow a large area of overgrown garden in preparation for new landscaping. The work was to be performed the following Friday. On Tuesday, the groundskeeper twisted his ankle. On Wednesday, the groundskeeper’s ankle was still in pain. He called the homeowner and said, “I don’t know if I am going to be able to plow your land on Friday.”
Can the homeowner sue the groundskeeper for a remedy on Thursday?
No, because the groundskeeper has not expressly repudiated the contract and the time for performance has not passed.
CISG Article 14
Offers
A painter and a homeowner orally agreed that the painter would paint the exterior of the homeowner’s house for $500, plus the cost of supplies. A few days before work was to begin, the parties signed a written contract that indicated that the total price of the painter’s services and supplies was to be $500. All the other terms of the agreement were contained in the contract except the color that the house was to be painted. On the day the painter was to begin work, the homeowner orally told the painter what color to paint the house. The painter purchased the necessary supplies and painted the house to the homeowner’s satisfaction. The homeowner paid the painter exactly $500.
The painter brought a breach of contract action against the homeowner for the cost of supplies.
Assuming the court finds the written contract to be a binding, partially integrated agreement because of the open term regarding paint color, is the painter likely to be permitted to introduce evidence that the parties originally agreed to the price of $500, plus the cost of supplies?
No, because the evidence would be offered to contradict the parties’ final agreement as to price, which final agreement was reflected in the written contract.
(In a binding, integrated agreement, the parol evidence rule will exclude extrinsic evidence that is inconsistent with the agreement. This means that a completely or partially integrated agreement may not be modified by a prior agreement or a contemporaneous oral agreement. The rationale behind the parol evidence rule is that the parties to an agreement will include all of their terms in a written contract, so any terms that are not in the written contract were not intended to be part of the final agreement.)
A homeowner contracted to sell his home to a buyer. The parties reduced the terms of their agreement to a writing, which included all the terms necessary to a land sale contract. The writing was signed only by the homeowner.
Assuming there are no grounds for an exemption from the statute of frauds, which party, if either, could enforce the contract?
Only the buyer.
(A contract subject to the statute of frauds, such as a contract for the sale of land, must be in writing and signed by the party against whom enforcement is sought. Here, the fact that the buyer did not sign the writing does not preclude the buyer from enforcing the contract against the homeowner, who did sign it. However this fact would preclude the homeowner from successfully enforcing the contract against the buyer.)
A father was planning his son’s birthday party and decided to ask his friend, who was a magician, to come to the party and entertain the kids. The father offered his friend $300 as payment for performing at the party, which was scheduled for three months later. The friend did not reply. No other communication occurred between the father and the friend until the friend showed up at the party in his magician attire, prepared to entertain the kids. However, the father had hired another magician and told the friend to leave, refusing to pay the friend anything. The friend sued the father for breach of contract.
Is a court likely to conclude that the father and friend formed a contract?
No, because the father's offer terminated by lapse of time.
(In general, if an offer is silent on the timing of acceptance, then the offer terminates after a reasonable time, which is determined as a factual matter, considering all the circumstances. See Restatement (Second) of Contracts § 41(2). In the case of a conversation between two individuals, where the offeror does not indicate the time during which the offer will remain open, the offer will often terminate by lapse of time as soon as the conversation ends.)
A farmer agreed to pay a worker $20,000 to help harvest the farmer’s crops for the season. Prior to the date that the worker was scheduled to begin, the worker told the farmer that he had found better employment elsewhere and would be breaching the contract. The farmer could have hired another person to do the job for $30,000, but he made no effort to hire someone else. The farmer sued the worker for breach of contract. The farmer proved that he suffered lost profits of $12,000 due to not having a worker help him harvest his crops. The farmer provided detailed statements regarding historical crop yield and prevailing market prices to establish the lost profits with reasonable certainty. The worker proved that, had the farmer hired someone else, the farmer would not have lost any profits at all.
Is the farmer likely to recover the $12,000 in lost profits?
C. No, because the farmer did not make reasonable efforts to hire another person.
CISG Article 9
Party and Trade Usage
A sculptor agreed to create a sculpture for an art collector. The parties reduced their agreement to a completely integrated written contract that specified that the collector would pay the sculptor $10,000 for the sculpture. Upon completion and delivery of the sculpture, however, the collector paid only $7,500.
The sculptor brought a breach of contract claim against the collector for the remaining $2,500. The collector seeks to introduce evidence of an email exchange between the parties, which exchange occurred several weeks after the parties signed the written contract. The collector argues that this email exchange proves that the parties agreed to change the original price from $10,000 to $7,500.
Is this evidence likely to be barred by the parol evidence rule?
No, because the email exchange occurred after the parties signed the written contract.
(Under the Restatement (Second) of contracts, “[a] binding integrated agreement discharges prior agreements to the extent that it is inconsistent with them.” Restatement (Second) Contracts, § 213 (1981).)
A woman agreed to sell a painting to a man. Both the woman and the man honestly believed that the painting was one of the final works of a famous artist. Due to the artist’s popularity, a thriving market of forgeries of the artist’s work had sprung up. Although the man was aware of the forgeries, the woman had only recently inherited the painting and was not interested in art. The man did not request a certificate of authenticity from the woman or commission his own expert to inspect whether the painting was genuine. The written contract, which both parties signed, described the painting by its title only. After paying for and hanging the painting in his home, the man discovered that it was a forgery worth a fraction of what the man had paid.
If the man sues to void the contract for the painting’s sale based on mutual mistake, is he likely to succeed?
No, because the man was consciously ignorant of whether the painting was genuine.
(A party who has born the risk of a mistake may not then use that mistake to void the contract. A party bears the risk of mistake of fact when (1) the parties agreed in the contract to allocate the risk to that party, (2) a court allocates the risk to that party because the risk is reasonable under the circumstances, or (3) the party was consciously ignorant of the relevant facts.)
On May 15, a homeowner mailed a contract to a carpenter to sign and return. The contract called for the carpenter to construct bookshelves in the home from June 15–30, with three payments from the homeowner on June 15, June 20, and completion. On May 30, the carpenter signed the contract. On May 31, the carpenter placed the contract in an envelope and mailed it. However, the carpenter accidentally transposed two numbers in the homeowner’s street address on the envelope. On June 1, the carpenter purchased lumber needed for the work. On June 2, the postal worker who was delivering the letter saw the homeowner’s name on the envelope, realized that the address was in error, and delivered the letter to the correct address. As a result, the homeowner received the letter on June 2, the same day it would have arrived had the letter been correctly addressed.
On which date was the carpenter’s acceptance of the homeowner’s offer effective?
May 31
(Generally, an offeree’s acceptance is effective the moment it leaves the offeree’s possession to be given to the offeror. Under the mailbox rule, an acceptance is effective upon dispatch. If the acceptance is lost, it still is considered effective upon dispatch only if it was properly addressed, even if the offeror never received the acceptance. If the acceptance is improperly addressed, it is considered effective upon dispatch only if it is received within the time that a properly addressed acceptance would have been received)
A landscaper and a homeowner entered into a contract in which the landscaper would maintain the homeowner’s property for $40 per week, payable at the end of the month. The landscaper maintained the homeowner’s property as agreed, but, at the end of the month, the homeowner refused to pay the landscaper, alleging that the landscaper was overpriced.
Which party, or parties, if any, may recover restitution damages?
D. Neither the landscaper nor the homeowner.
(If an enforceable contract is breached, a party may have an interest in the restoration of any benefit conferred on the other party. This interest is known as restitution, or the prevention of unjust enrichment. To receive restitution, the party seeking restitution, who may be either the injured or breaching party, must have already rendered partial performance. An injured party may also recover restitution damages after full performance, but only if the breaching party still owes nonmonetary performance. However, if the injured party has fully performed, and no performance from the other party is due other than payment of a definite sum of money, then the injured party is not entitled to restitution.)
R2d 360
Factors allowing Adequacy of Damages
A recording company entered into a contract with a famous singer to record an album. Under the terms of the contract, the singer would receive one payment up front, followed by a much larger payment once the album was released. After the singer recorded the album, she experienced a personal scandal that greatly decreased her popularity. The recording company believed that it would lose money by releasing the album, as the payment owed to the singer upon release would likely be greater than the amount the company would earn from sales of the album. The company reviewed the terms of the contract with the singer and realized that nothing in the contract specified a date by which the album had to be released. The company decided to not release the album.
If the singer sues the company for breach of contract, how will a court likely rule?
C. It will impose a duty of good faith and require the company to release the album within a reasonable time after its recording
( The terms of a contract may be indefinite if they are left open or uncertain. Similarly, certain terms of a contract may be omitted entirely. As long as the indefinite or omitted terms are not essential, the court will imply a term based upon what is customary or reasonable, imposing a duty of good faith on both parties in their performance and enforcement of the contract. See, e.g., Restatement (Second) of Contracts § 204 cmt. d (1981) (“if no time is specified, a term calling for performance within a reasonable time is supplied.”).)
A driver had an old car that no longer ran. The driver sought to sell the car for its scrap value of $500. A coworker met the driver to inspect the car. The coworker asked the driver why the car no longer ran. The driver responded that he had no idea and did not care. The coworker opened the hood of the car and saw that two wires were disconnected. The coworker believed that the car could be fixed by simply connecting the two wires. The car would have a value of $3,000 if it ran. The coworker agreed to purchase the car for $500. After the coworker had towed the car back to his house, he connected the wires and was surprised to see that the car still did not run. The coworker later learned that the car had numerous mechanical problems and was unrepairable. The coworker consulted a lawyer, asking if he could get his $500 back because he had been mistaken about his ability to fix the car.
Is the coworker’s mistake theory likely to succeed?
A. No, because enforcing the contract against the coworker would not be unconscionable.
(The first three elements of a unilateral-mistake theory are the same as those for mutual mistake. Namely, (1) the mistake relates to a basic assumption on which the contract was made, (2) the mistake has a material effect on the agreed-upon exchange, and (3) the adversely affected party does not bear the risk of the mistake. In addition to these three elements, at least one of the following must also be true for a unilateral-mistake theory to succeed: (1) the mistake is such that enforcing the contract against the mistaken party is unconscionable, (2) the other party knew or had reason to know of the mistake, or (3) the mistake is the other party’s fault.)
A car dealer gave a prospective buyer a signed writing offering to sell the buyer “the fastest car on the lot” for a 25 percent discount off the sticker price. At that time, both the dealer and the buyer understood that the red sports car was the fastest car on the lot. The buyer accepted the dealer’s offer, tendering payment for a red sports car. The dealer also knew that the buyer was aware that the red sports car was the fastest. However, the dealer subsequently had a change of heart and, instead, wrote up a bill of sale for a gray sedan, explaining to the buyer that this was the car that he had intended to sell as “the fastest car on the lot” with the 25 percent discount. The buyer sued to enforce the contract for the purchase of the red sports car.
How is a court likely to rule on the buyer’s claim?
C. The court will interpret “the fastest car on the lot” to mean the red sports car because both parties understood when the contract formed that the red sports car was the fastest car on the lot.
(n choosing among reasonable possible meanings for an ambiguous contract term, courts attempt to give full effect to the parties’ mutual intent and purpose. If the parties both assigned the same meaning to an ambiguous term, then a court will interpret the contract based on that meaning. However, if the parties attached different meanings to an ambiguous term, and one party knew of the other’s understanding, then a court will interpret the term against the party who knew of the other’s understanding. If the parties assigned different meanings to the term, and neither knew of the other’s understanding, then a court will void the contract for lack of mutual assent.)
A man wished to hold a yard sale to sell a variety of household items that he no longer wanted. He had not used much of the electronic equipment or power tools that he was selling in many years and was concerned that they might no longer function. The man wanted to ensure that he was not liable for breach of a warranty if any of the items he sold were nonfunctioning.
Which of the following accurately describes the warranty, if any, the man makes by selling the goods at his yard sale, and how he can disclaim it?
No warranties, express or implied, are made by selling the goods at the yard sale.
(There are three types of warranties: express warranty, implied warranty of merchantability, and implied warranty of fitness for a particular purpose. The implied warranty of merchantability guarantees that goods are merchantable, that is, fit for the ordinary purposes for which such goods are used. It exists whenever the seller is a merchant of those goods. See U.C.C. § 2-314 (2002). )
UCC 2-711(1)
Buyer's remedies
A prospective car buyer was searching for used cars on a car dealership’s website. The buyer located five cars of the particular make, model, and year that the buyer wanted to purchase. The buyer sent an email to the dealership and asked to purchase “a 2017 Chevrolet Equinox for $12,000.” The dealership accepted the offer by return email. When the buyer went to consummate the car purchase, the dealership realized that the buyer had intended to purchase a different 2017 Chevrolet Equinox that was worth considerably more than $12,000.
How is a court most likely to resolve the parties’ misunderstanding?
D. Determine that there was a lack of mutual assent between the parties and void the contract.
(The terms of a contract must be reasonably certain in order for a court to enforce the agreement. In most cases involving uncertainty, a court must clarify the meaning of an indefinite, ambiguous, or omitted term. A term is indefinite if it is left open or uncertain. If an indefinite term is essential, then a court will likely void the contract for indefiniteness. Generally, essential terms include the contract’s subject matter (e.g., the land in a real estate contract); price or other consideration, whether definitely fixed or ascertainable with reference to some objective standard or formula; the quantity of goods or other things to be sold; the contract’s duration; and the timing of each party’s performance.)
A large computer store changed its logo. The computer store orally contracted with a printing company to create new business cards, stationery, laptop bags, and other items with the new logo, at a cost of $10,000. The computer store forwarded payment in full to the printing company, which deposited the payment in its operating account. After the printing company had accepted the payment, but before beginning any preparation or any work on the job, the computer store called the printing company and said that it had changed its mind and did not want to move forward. The computer store demanded that the printing company return the $10,000. The printing company, which was facing cash-flow problems and had already applied the $10,000 payment to its other debts, insisted that the parties had an enforceable contract.
If the printing company sues the computer store, is a court likely to enforce the oral contract despite the statute of frauds?
B. Yes, because the printing company had accepted payment.
(The statute of frauds forbids the enforcement of a contract unless it is in a writing signed by the party to be charged. There are six classes of contracts that fall within the statute of frauds: (1) marriage contracts, (2) contracts that cannot be performed within one year, (3) land contracts, (4) executor-administrator contracts, (5) contracts for the sale of goods priced $500 or more, and (6) suretyship contracts. For contracts for the sale of goods for $500 or more, there are three exceptions that allow a contract to be enforceable without a signed writing: (1) the goods are specially manufactured goods, but only if the seller has already made a substantial beginning in manufacturing the goods or made a commitment to procure the goods by the time the buyer’s repudiation is received; (2) the noninjured party admits in court that the contract was made; and (3) payment has already been made and accepted, or the goods have already been received and accepted.)
A furniture merchant offered to sell an armoire to a woman for $5,000. The merchant gave the woman a signed letter promising to leave the offer open at that price for one week. Three weeks later, the woman emailed the merchant, asking if the merchant had a certificate of authenticity for the armoire. The merchant informed the woman that he had sold the armoire a week ago.
Did the furniture merchant breach any enforceable obligation to keep open the offer to sell the woman the armoire for $5,000?
C. No, because one week had elapsed before the furniture merchant sold the armoire to someone else.
An accountant purchased a new lawnmower and showed it to a neighbor. The neighbor asked if the accountant’s old lawnmower still ran and if so, if the accountant was willing to sell it. The accountant said honestly, “As far as I know, the old mower runs great.” The neighbor purchased the old lawnmower for $50 without examining it. Upon returning home, the neighbor started the old lawnmower, which ran well but did not cut a single blade of grass. Inspecting the old mower, the neighbor discovered that the blade was dull and rusted.
In a breach of warranty suit against the accountant, which of the following warranties, if any, would the neighbor most likely be able to demonstrate was breached?
The neighbor would be unlikely to prevail in any breach of warranty claim.
(The implied warranty of merchantability guarantees that the goods are merchantable, i.e., fit for the ordinary purposes for which such goods are used, and is automatically created when the seller is a merchant of those goods. See U.C.C. § 2-314 (2002). In this case, while the ordinary purpose of a lawnmower is to cut grass, the accountant would not be considered a merchant of lawnmowers and thus, the implied warranty of merchantability would not be applicable to this sale. )