FORMATION, ASSENT, CONSIDERATION, PE
§ __, a “promise” is a manifestation of __ to act or refrain from acting in a specified way, so made as to justify a __ in the promisee that a __ has been made.
§ 2; intention; belief; commitment.
The Statute of Frauds provision for contracts for the sale of goods is found in U.C.C. § -, which generally requires a writing for contracts for the sale of goods priced at $__ or more.
§ 2-201; $500.
Under Restatement (Second) § 152, mutual mistake requires:
(1) a mistake by __ parties as to a basic __ on which the contract was made;
(2) the mistake has a material effect on the agreed __ of performances; and
(3) the party seeking avoidance does not __ the risk under § 154.
both; assumption; exchange; bear.
Restatement (Second) § __ defines a condition as an event, not certain to occur, which must occur, unless its non-occurrence is excused, before performance under a contract becomes __.
§ 224; due.
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.
Answer option C is correct. The woman agreed to bear the risk of a mistake regarding the worth of the ring. Remember that a party may bear the risk of a mistake based on allocation by party agreement, allocation by the court, or the party’s conscious ignorance of the truth. See Restatement (Second) of Contracts § 154 (1981). Here, as noted, the contract stipulated that the woman bore the risk of a mistake regarding the worth of the ring.
§ 71, to constitute consideration, a performance or return promise must be __ for by the promisor in exchange for his promise, and is given by the promisee in exchange for that promise. Mere __ or __ motive is generally not sufficient.
bargained; moral; donative.
Under Restatement (Second) § 213, a __ integration is a final but not complete expression that discharges prior agreements to the extent they are __ with it, while a __ integration is a final and complete expression that discharges even prior __ additional terms within its scope.
partial; inconsistent; complete; consistent.
Restatement (Second) § 159 defines a misrepresentation as an __ assertion that is not in accord with the __. A fraudulent misrepresentation requires that the assertion be made with knowledge of its __ or with reckless disregard for its truth.
assertion; facts; falsity.
Under Restatement (Second) § 261 (impracticability), a party’s duty is discharged where, after the contract is made, performance is made __ impracticable by an event, the nonoccurrence of which was a basic __ on which the contract was made, and the party seeking relief is not at __ and did not __ the risk.
extremely; assumption; fault; assume.
On June 1, a café owner offered to pay a baker to bake dessert cakes for an upcoming event at the café. The owner specified that the baker should accept the offer by signing a prepared agreement, which the owner had already signed. The prepared agreement stated that the baker’s acceptance would be effective upon receipt by the owner. On June 2, the baker stated that he was interested in the offer but needed to review the terms in the prepared agreement. The owner placed the prepared agreement in the mail, and the baker received the agreement on June 3. On June 4, the baker signed the agreement and then placed it in the mail on June 5. The owner received the baker’s signed agreement on June 6.
On which day did the baker’s acceptance become effective?
Restatement (Second) § 90(1) (promissory estoppel) requires:
(1) a __;
(2) that the promisor should reasonably expect to induce __ or __;
(3) that the promise does induce such __ or __; and
(4) enforcement is necessary to avoid __.
promise; action; forbearance; action; forbearance; injustice.
The doctrine of contra proferentem construes ambiguous language in a contract against the party who __ it, especially when the contract is an __ contract drafted by one party and presented on a take-it-or-leave-it basis.
drafted; adhesion.
Unconscionability typically requires some combination of __ unconscionability, involving unfair surprise or lack of meaningful choice in the bargaining process, and __ unconscionability, involving terms that are overly harsh or one-sided.
procedural; substantive.
Expectation damages are often summarized as: Damages = loss in __ of performance + other loss, including __ and __ damages, less costs or losses __, and less loss __.
value; incidental; consequential; avoided; avoided.
A wedding-dress designer, wanting to expand her business, emailed several local bridal shops on June 1 to inquire about the shops’ interest in buying some of her excess inventory of dresses. The owner of a local boutique was very interested. Like the designer, the boutique owner dealt regularly in wedding dresses. The boutique owner replied by return email on June 2, stating that the boutique would buy 25 wedding dresses from the designer for $500 per dress, with delivery to the boutique on June 15. The designer replied by email on June 3 that she agreed but that she could not deliver until June 20.
Did a contract form?
A
Yes, because the designer accepted the boutique owner’s June 2 offer in the designer’s June 3 email.
Answer option A is correct. An offer is a manifestation by an offeror that she is willing to enter a bargain, which in turn justifies acceptance by an offeree. To form a binding contract upon acceptance, an offer must be reasonably certain. For example, invitations to bid or offers to negotiate are not offers because they do not contain reasonably certain terms. To accept an offer at common law, a response to an offer must be on terms identical to those contained in the offer. If a response to an offer contains additional or different terms, then it operates as a counteroffer, which terminates the original offer. This is known as the mirror-image rule. The mirror-image rule does not apply to contracts for the sale of goods governed by the Uniform Commercial Code (UCC).
Carr Buff's hobby is restoring vintage cars. He just completed the restoration of a 1957 Ford after working on it for many years. On December 15, he parked the car in the parking lot of a shopping mall. When he returned to it, he found a note stuck under the windshield wiper that read: "Dear owner of 1957 Ford, my name is Rod Hott. I love this car and would like to buy it from you. I offer to pay you $100,000 for it, which I will pay on delivery of the car and its title papers. If you would like to sell the car to me, please reply to me at rodhott@email.com. by no later than December 20. On your acceptance, we will arrange a date to complete this transaction before Christmas."
After thinking about the offer for a couple of days, Carr decided to accept it. At 7:00 p.m. on December 20 he sent an email to the address in the note in which he said, "Rod, I agree to sell the Ford to you for $100,000.
Please note that payment must be in cash or by cashier's check. Reply to me as soon as you get this message to arrange the time for delivery.
The server hosting Rod's email account was down for maintenance during the evening of December 20, so Carr's email was not delivered to Rod's inbox until 6:00 am on December 21.
Do Rod and Carr have a contract?
This is a sale of goods, so $2.207 applies.
Although it is nicknamed the "battle of the forms,"
$2.207 is not confined to
transactions in which forms are used.
Article 2 does not deal with the question of whether a communication qualifies as an offer, so general common law principles apply. Rod's letter appears to qualify as an offer. It set out the terms on which he proposed to buy the car, and can be reasonably understood to confer a power of acceptance on the offeree. Although Rod did not know who the owner of the car was, he addressed the offer to the owner, an identifiable person. The offer just asked for a reply by December 20, and did not actually say that it would lapse if not accepted by that date. However, this is its reasonable meaning.
Carr
intended to accept and
communicated his acceptance on December 20 by the mode specified in the offer. The message was not instantly delivered to Rod because the medium of communication, the server, was not operational when Carr sent his email. It was not delivered to Rod until the next morning, after the offer had lapsed.
The acceptance would have been timely if it was effective on dispatch, but not if it was effective only on receipt. The mailbox rule applies
to
noninstantaneous
communications through the medium of a third party, so it could apply to email. (See section 4.11.2.) If it does, Carr's acceptance is timely (seasonable). Even if Carr's email was timely, $2.207(1) also requires that it must be a definite expression of acceptance. Carr's response appears not to be exactly in accord with the offer, but it actually is. His statement that the price must be paid in cash or by cashier's check does not deviate from the offer. Rod's letter is silent on the method of payment, and unless the offer provides to the contrary, payment in cash on delivery is implied in the offer. (This is specifically stated in $2.310(a), which provides that
"unless otherwise agreed, payment is due at the time and place at which the buyer is to receive the goods.
") Carr's response is
therefore
definite
expression
of
acceptance.
Carr Buff is not a vintage car hobbyist, but a vintage car dealer. Carr displayed a restored
1957 Ford in his showroom. Rod Hott, a consumer, saw the car in the showroom and made a written offer to buy it for $100,000, to be delivered in one week and paid for on delivery. On the next day, Carr sent a document to Rod, headed "Order Acknowledgment." It stated, "I am pleased to accept your order for the 1957 Ford on the terms indicated in your order. The car will be ready for you in one week." There was preprinted sentence at the bottom of the order acknowledgment that read, "This order is accepted subject to your agreement that any dispute arising out of this transaction will be submitted to binding arbitration under the rules of the American Arbitration Association." a.
Do Carr and Rod have a contract?
b. If they do have a contract, is the arbitration provision a term of the contract?
Would the answers to a or b change if, after
Rod
received
the order
acknowledgment, Carr delivered the Ford to Rodd and Rodd paid for it?
Although Rod's order acknowledgment accepts the transaction-specific terms set out in the order, the preprinted arbitration provision goes beyond the order's terms.
The statement
at the foot of the
acknowledgment declares that the order "is accepted subject to your agreement that any dispute arising out of this transaction will be submitted to. -
- arbitration...." This
does not use the exact language of $2.207(1) by stating that Rod's acceptance is expressly conditional on Carr's assent to the arbitration provision.
However,
the
language suggests quite strongly that this is the intent. The words "subject to" are commonly used to express a condition, and the sentence does appear to require Carr's assent to the arbitration term as a prerequisite to moving forward with the transaction. A court might therefore find the response to be an expressly conditional acceptance. However, this conclusion is not assured because courts tend to construe the term "expressly conditional" in $2.207(1) narrowly, and require that the response must clearly indicate that the offeree will not enter the contract unless the offeror assents to the terms in the response. The printed language in the acknowledgment does not actually say that Carr must agree to this term to conclude a contract, and it does not make it clear that Rod will not enter the contract unless Carr agrees to the term. The language may not be strong enough to convey that intent. If the language does not make the
acknowledgement
into an
expressly
conditional acceptance, Rod has accepted and a contract has been formed. If the language makes the acceptance expressly conditional,
$2.207(1) treats it as a
counteroffer,
even though
the
acknowledgment is otherwise in accord with the offer. As a result, Carr and Rod would not have a contract.
Ballet de la Forms, Inc., a retailer of dance apparel, sent an email to Formfitting Fashion Fabricators, Inc., in which it ordered 1,000 pairs of tights. The order simply contained the quantity, price, and description of the goods and the particulars relating to payment and delivery. Formfitting responded by email on the same day, acknowledging the order and agreeing to supply the tights on the terms set out in Ballet's email. Formfitting's email contained a standard term, automatically included in all its order acknowledgments, stating that any dispute arising out of the sale would be resolved by final and binding arbitration under the rules of the American Arbitration Association and the Federal Arbitration Act. The goods were shipped and accepted, but a dispute has arisen about their quality. The parties concede that they are both merchants, that Formfitting's email was an acceptance of Ballet's offer, and that the arbitration provision is an additional term in the acceptance, to be dealt with under $2.207(2). However, they disagree on whether the arbitration provision should fall away as a material alteration of the contract. How can you tell if it is a material alteration?
Ballet's order was silent on the means of dispute resolution, and Formfitting's acknowledgment includes a standard arbitration provision.
Because the parties have conceded all other issues arising out of SS2.207(1) and (2), the only question raised by this Example is whether the additional arbitration provision in the
acceptance falls away as a material alteration of the contract. The language of the contract must be interpreted in context to decide if this alteration is material. The test for materiality, set out in Official Comment 4 to $2.207, is that the term would result in "surprise or hardship" to the offeror. As explained in section 6.3.2b, despite the Official Comment's use of the word
"or," these two elements must both be present and are considered in combination. Because arbitration provisions are so commonly
included in standard terms, the problem of deciding the impact of such a provision in an acceptance comes up periodically. For example, in Shaney Co. v. Crain Walnut Shelling, Inc., 2012 WL 1979244 (E.D. Cal. 2012), an arbitration provision was included in the seller's order confirmation relating to the sale of walnuts. The issue was whether the arbitration provision materially altered the contract. One might think that a provision that precludes the buyer from resorting to litigation to enforce its rights under the contract would be important enough to qualify as material. However, the court held that the buyer had not made an adequate showing of surprise and hardship. Even though there was no course of dealing or discussion in negotiations that would have alerted the buyer to the presence of an arbitration provision, such provisions were sufficiently common in the industry to preclude an argument of surprise and hardship. The Example does not provide enough facts about the commercial context of the contract between Ballet and Formfitting to decide if it would point to the same conclusion, but the general prevalence of standard arbitration provisions may make it difficult for an offeror to claim the degree of reasonable surprise and hardship that would make such a term a material alteration of the contract.
utu O'Severn decided to take up dance lessons. She needed a tutu, so she searched the web and found the website of Ballet de la Forms, Inc., a supplier of dance apparel. She selected a tutu for $150, clicked on it to place it in her virtual "shopping cart," and filled out the online order form in which she inserted her name, email address, shipment and billing address, and credit card particulars. In the box called
"delivery options," she selected
"standard, 1 to 2 weeks delivery." She clicked the "submit order" button at the bottom of the screen. A couple of seconds later, an automated response
headed
"Order
Confirmation"
appeared on the screen.
It set out a
confirmation number, the details of the order as submitted by Tutu, and instructions on how she could track the progress of the shipment.
Two days later, Tutu received an email from Ballet, which stated, "We regret to inform you that the tutu that you ordered is no longer available for the price of $150 because the manufacturer has increased the price since you placed your order. The tutu now costs $250. If you would still like to buy the tutu at the new price, please resubmit your order." Tutu insists that she had already bought the tutu at the original price and that Ballet is obliged to deliver it to her at that price. Is she correct?
The proffering of goods on a website, catalog, or advertisement might be an offer, or it might be merely a solicitation for offers from the public.
To determine which it is, the language on the website must be interpreted in light of all the circumstances,
including the reasonable
expectations of the marketplace. If Ballet made the offer, Tutu accepted it by submitting her order, and Ballet is bound. However, if Ballet did not make an offer, then Tutu made the offer when she clicked the "submit order" button.
Tutu's order was made on an electronic form supplied by Ballet, but this does not detract from the order's qualities as an offer, and it can reasonably be interpreted as such. It sets out the terms of the proposed transaction with particularity and reasonably appears to invite acceptance by shipment or promise to ship the goods. Ballet's immediate automated response might conceivably be seen as an acceptance, which can be accomplished by an electronic agent, as explained in section 5.8. However, the response may not be an acceptance at all because it has no language that signifies assent to the order. It could therefore be interpreted as nothing more than an acknowledgment that the order was received. If it is an acceptance, Ballet was bound immediately upon communication of the confirmation and it cannot unilaterally change the price of the goods thereafter. If it was not an acceptance, then Ballet's later email is a rejection of Tutu's offer and a solicitation of a new offer from Tutu. Section 2.207 has no relevance on these facts because there is no
"battle of the forms." The question simply involves an analysis of offer and acceptance principles to determine if the parties made a contract through their communications. (Note, also, that the facts do not indicate that Ballet's website referred to or contained a link to any standard terms, so there is no question here of whether Tutu is bound through clickwrap or browsewrap assent to any standard terms proffered by Ballet.)
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?
B
No, because the groundskeeper has not expressly repudiated the contract and the time for performance has not passed. Answer option B is correct. Although the groundskeeper expressed doubt in his ability to perform, a mere expression of doubt is not sufficient to constitute an anticipatory repudiation, which would allow the homeowner to bring a cause of action before the due date of performance. Thus, the homeowner cannot sue the groundskeeper until he actually fails to perform.
Granite Corp. sends a signed letter to Alice: “We will sell you 1,000 tons of gravel at $50/ton. This offer will remain open for 60 days. – Granite Corp.” Granite is a merchant under the UCC. On Day 40, before Alice has responded, Granite emails Alice saying, “We revoke the offer.” On Day 50, Alice sends a signed fax stating: “I accept your offer for 1,000 tons of gravel at $50/ton.” Granite refuses to deliver, arguing it revoked.
Issue: Is Alice’s acceptance effective to form a contract despite Granite’s attempted revocation?
Conclusion:
Alice’s acceptance on Day 50 likely formed an enforceable contract because Granite’s signed, time-limited offer was a firm offer under U.C.C. § 2-205 and could not be revoked before the 60-day period expired.
Rule:
Under U.C.C. § 2-205, an offer by a merchant to buy or sell goods in a signed writing which gives assurance that it will be held open is not revocable, for lack of consideration, during the time stated (or for a reasonable time, not exceeding three months). During the firm-offer period, the offeror may not revoke, and the offeree retains the power of acceptance. Once the offeree seasonably accepts within the open period, a contract is formed.
Explanation:
The firm-offer rule relaxes the common-law requirement of consideration for an option when a merchant signs a writing assuring that an offer will be held open. The policy is to protect reliance on commercially serious written offers without requiring nominal consideration. As long as the offeror is a merchant, the writing is signed, and it expressly states that the offer will be kept open, the offer is irrevocable for the stated time (subject to the three-month cap).
Application:
Here, Granite Corp. is expressly described as a merchant under Article 2 and sent a signed letter agreeing to sell goods (gravel) to Alice and stating that the offer would remain open for 60 days. That writing satisfies § 2-205: it involves goods, is made by a merchant, is signed, and contains an explicit assurance it will be held open. Granite’s Day 40 email purporting to revoke conflicts with the statutory rule that such an offer is “not revocable” during the firm-offer period. Thus, Granite’s attempted revocation is ineffective. Alice’s fax on Day 50, within the 60-day window, is a timely acceptance that mirrors the terms of the offer. Because the offer remained legally open and unrevoked for purposes of the UCC, her acceptance created a binding contract for 1,000 tons of gravel at $50 per ton.
Conclusion (restated):
Granite’s firm offer was irrevocable for 60 days under § 2-205, so its Day 40 “revocation” was ineffective, and Alice’s Day 50 acceptance formed a valid contract.
HYPO:
Buyer purchases a commercial freezer from Seller under a fully integrated written contract with a merger clause. The written contract is silent about specific temperature range but describes the freezer as “suitable for long-term storage of perishable goods.” Before signing, Seller’s salesperson orally told Buyer that the freezer “will reliably maintain -10°F, no problem.” After installation, the freezer holds -2°F to +5°F; Buyer’s high-end ice cream repeatedly suffers texture damage. Buyer sues for breach, seeking to introduce the salesperson’s oral statement. Seller argues the Parol Evidence Rule bars any evidence of oral promises.
Issue: Is the oral statement that the freezer would maintain -10°F admissible despite the merger clause?
Conclusion:
The oral statement about maintaining -10°F may be admissible, not to add a new term inconsistent with the writing, but as parol evidence to interpret the ambiguous phrase “suitable for long-term storage of perishable goods” and potentially as evidence of an express warranty.
Rule:
The Parol Evidence Rule, as reflected in Restatement (Second) §§ 209–216 and U.C.C. § 2-202, bars evidence of prior or contemporaneous agreements that contradict a final written integration, and bars consistent additional terms if the writing is a complete integration. However, parol evidence is admissible to interpret ambiguous terms, to show fraud or misrepresentation, or under the UCC to explain or supplement the written terms by course of dealing, usage of trade, or course of performance. The UCC also recognizes that oral affirmations of fact can create express warranties (§ 2-313).
Explanation:
A merger clause is strong—but not absolutely conclusive—evidence of complete integration. Even in the presence of a merger clause, courts often admit extrinsic evidence to clarify what the parties meant by broad or vague terms. Under a more contextual approach (like in Pacific Gas & Electric or Frigaliment), courts look at trade usage and the parties’ negotiations to determine if language is reasonably susceptible to a particular meaning. Furthermore, under UCC § 2-313, any affirmation of fact by the seller that becomes part of the basis of the bargain can create an express warranty, regardless of whether it appears in the writing.
Application:
The contract’s phrase “suitable for long-term storage of perishable goods” is arguably ambiguous because different types of perishables require different temperatures. High-end ice cream often requires much colder temperatures than, say, frozen vegetables. The salesperson’s representation that the freezer would “reliably maintain -10°F” can be framed as interpretive evidence of what both parties understood “suitable for long-term storage of perishable goods” to mean in this context. Admitting the statement for that purpose does not necessarily contradict the writing; instead it clarifies the standard of performance embedded in the vague phrase. Under the UCC, that statement also looks like an express warranty that the freezer would maintain -10°F, given to induce the sale. The merger clause supports Seller’s argument that the writing is complete, but the court can still admit the statement to interpret or show warranty, especially given the technical nature of freezer performance and the likely informational advantage of Seller.
Conclusion (restated):
Although the merger clause supports Seller’s Parol Evidence Rule argument, the oral -10°F statement is likely admissible to interpret the ambiguous “suitable for long-term storage” language and as evidence of an express warranty, so the court may allow Buyer to rely on it.
A furniture store advertises “$50 down, $25 per month” to low-income customers. Its standard-form contract, in fine print, contains a cross-collateral clause: if the buyer misses one payment on any item, the store can repossess all items previously purchased on credit from the store. Buyer, a single parent with limited education, buys multiple pieces over two years and misses one payment due to job loss. The store repossesses all furniture, including items nearly paid off. Buyer sues to invalidate the contract clause.
Issue: Is the cross-collateral repossession clause unenforceable on grounds of unconscionability?
Conclusion:
A court is likely to find the cross-collateral repossession clause unconscionable and either refuse to enforce it or limit its application, given substantial evidence of both procedural and substantive unconscionability.
Rule:
Unconscionability, as described in Restatement (Second) § 208 and U.C.C. § 2-302, allows a court to refuse to enforce a contract or clause, or to limit its application, where the contract was unconscionable at the time made. Courts typically look for some combination of procedural unconscionability (unfair surprise, oppression, unequal bargaining power) and substantive unconscionability (harsh, one-sided, or commercially unreasonable terms). In Williams v. Walker-Thomas Furniture Co., a nearly identical cross-collateral clause was scrutinized under this doctrine.
Explanation:
Procedural unconscionability focuses on the process of contract formation—such as fine print, complex terms, and an unsophisticated party facing a take-it-or-leave-it form. Substantive unconscionability focuses on the actual content of the clause—such as a term that allows a creditor to repossess far more than needed to protect its interest, resulting in a grossly disproportionate remedy. Modern courts often view consumer credit contracts targeting economically vulnerable parties with skepticism, especially when the stronger party designs terms to trap consumers in cycles of default.
Application:
Here, the store clearly targets low-income consumers and uses a standard-form contract with key terms buried in fine print. Buyer is an unsophisticated, low-income single parent with little bargaining power or realistic ability to negotiate; this supports procedural unconscionability due to both oppression and surprise. Substantively, the cross-collateral clause allows the store to repossess all items purchased over two years based on a single missed payment, even items nearly paid off. That remedy is extreme and arguably unnecessary to protect the store’s interest in the particular missed payment. This resembles the clause criticized in Williams v. Walker-Thomas Furniture Co., where repossession of all goods for a small default was found potentially unconscionable. Given the combination of a vulnerable consumer, fine-print drafting, and a draconian remedy, the clause is both procedurally and substantively unconscionable.
Conclusion (restated):
Because the furniture store used a fine-print, one-sided cross-collateral clause against a vulnerable consumer, a court is likely to treat the term as unconscionable and either strike it or limit the store’s ability to repossess all of Buyer’s furniture.
HYPO (wedding/blackout U.C.C. + common law combo):
Bride and Groom contract with BanquetCo for a $50,000 wedding reception at BanquetCo’s hall, including food, service, and use of the space. The written contract states: “BanquetCo shall not be liable for failure of performance due to acts of God, utility failures, or other events beyond its reasonable control, but will in such event use reasonable efforts to mitigate guest inconvenience.” The entire contract price is prepaid. Ninety minutes into the reception, a regional transformer explosion causes a full blackout and kills the air conditioning on a 95°F, humid evening. BanquetCo serves some cold food and water by candlelight, but the band refuses to play without power, the photographer stops working, and guests begin leaving. After another hour, BanquetCo shuts down the event. Bride and Groom sue for: (1) return of the $50,000, and (2) consequential damages for the band, photographer, and videographer they already paid.
Issues: Are Bride and Groom entitled to restitution of the prepaid contract price and/or consequential damages, given the force majeure clause and doctrines of impracticability and frustration of purpose?
Conclusion:
Bride and Groom have a strong claim to at least partial restitution of the prepaid $50,000 because BanquetCo’s performance was substantially frustrated and arguably excused by the blackout, but the force majeure clause and impracticability doctrines likely bar recovery of consequential damages for the band, photographer, and videographer.
Rule:
Under common law, performance can be excused by impossibility or impracticability when an unforeseen event, the nonoccurrence of which was a basic assumption of the contract, renders performance extremely difficult or impossible (Restatement §§ 261–263). Frustration of purpose discharges duties when the principal purpose of a party is substantially frustrated by such an event (§ 265). A force majeure clause can contractually allocate the risk of such events and may limit or exclude liability. Even when duties are excused, a party who prepaid may usually obtain restitution of the portion of the price exceeding the value of any performance received (Restatement §§ 272, 373–377). Expectation or consequential damages are limited by foreseeability and by any valid contractual limitation of liability.
Explanation:
The doctrines of impracticability and frustration operate alongside express force majeure provisions. Where a clause explicitly covers “acts of God” and “utility failures,” the parties have allocated that risk, and courts often enforce those terms. If performance is excused, the performing party is not liable for breach, but the payor may still be entitled to restitution to avoid unjust enrichment when the performance received is far less than what was promised. Consequential damages, like payments to third-party vendors, are often excluded by force majeure language or treated as beyond the scope of recoverable contract damages when the event was not the breaching party’s fault.
Application:
Here, the regional transformer explosion and resulting blackout are classic force majeure events—a sudden utility failure beyond BanquetCo’s control. The contract expressly states BanquetCo “shall not be liable for failure of performance due to acts of God [and] utility failures” and only obligates BanquetCo to use reasonable efforts to mitigate inconvenience, which it attempted by serving cold food and water with candlelight. Under impracticability, full performance in the manner contemplated (powered hall with lighting, AC, band, and full service) became impossible. Under frustration, the principal purpose of a lavish, powered wedding reception was substantially frustrated for both parties. Because the contract allocates this risk to the couple by disclaiming liability, BanquetCo likely is not liable for breach and thus not responsible for the couple’s consequential payments to the band, photographer, and videographer. However, BanquetCo has clearly not rendered the full value of a $50,000 reception; its partial efforts (some food and limited service) may represent a small fraction of the contract’s value. Under restitution principles, Bride and Groom should be entitled to a refund of the prepaid price minus the reasonable value of the benefit actually received, since it would be unjust for BanquetCo to retain the entire $50,000 after an event where the core performance collapsed. The contractual clause addresses “liability for failure of performance,” not necessarily the complete forfeiture of all prepaid funds regardless of how little was provided.
Conclusion (restated):
The force majeure clause and impracticability/frustration doctrines likely excuse BanquetCo from liability for breach and from consequential damages, but do not justify BanquetCo keeping the entire $50,000; Bride and Groom should be able to recover substantial restitution, reduced by the limited value of the partial services BanquetCo actually rendered.
A painter contracted with a homeowner to paint the homeowner’s fence. The contract specified that the fence was to be painted “eggshell white.” While shopping for supplies, the painter learned that eggshell white had been discontinued as a color option, and he instead bought snowflake white paint and used it to complete the job. The homeowner subsequently sued the painter for breach of contract.
Which fact, if true, best supports a finding that the breach was likely NOT material to the contract?
C
The homeowner didn’t notice the difference in color when she first viewed the paint job.
Answer option C is correct. Although the painter did not paint the fence the specified color, he did paint the fence. There are four circumstances that must be considered in determining whether a breach of contract is material: (1) the loss of benefit to the nonbreaching party; (2) the adequacy of compensation for the nonbreaching party’s loss; (3) the likelihood of a cure by the breaching party; and (4) the extent of forfeiture by the breaching party if the breaching party is denied the bargained-for compensation or benefit. In this case, the significance of the loss of the benefit of the contract to the nonbreaching party, the homeowner, is undermined if the difference between the two paint colors was not immediately discernible to her.