Gwu school of Law Professor Swaine Spring 2013

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Contracts II

GWU School of Law

Professor Swaine

Spring 2013

Table of Contents

The Sale of Goods 4

An Introduction to the Study of Contract Law 4

Sources of Contract Law 4

The Basis of Contractual Obligation: Mutual Assent and Consideration 7

Contract Formation Under Article 2 of the Uniform Commercial Code 7

Mutual Assent Under the Uniform Commercial Code 7

Jannusch v. Naffziger 7

E.C. Styberg Engineering Co. v. Eaton Corp 8

Harlow & Jones, Inc. v. Advance Steel Co. 9

The Objective Theory of Contract 9

Offer and Acceptance: Bilateral Contracts 10

Irrevocability by Statute: The Firm Offer 18

Limiting the Power to Revoke 18

Qualified Acceptance: The “Battle of the Forms” 21

Classical Principles

Princess Cruises, Inc. v. General Electric Co. 21

Battle of the Forms 22

Brown Machine, Inc. v. Hercules, Inc. 25

Paul Gottlieb & Co. v. Alps South Corp. 25

Filanto v. Chilewich 28

Chateau Des Charmes Wines Ltd. v. Sabate USA Inc. 29

Electronic and “Layered” Contracting 29

Hines v., Inc 31

“Layered” Contracting


DeFontes v. Dell, Inc. 32

Postponed Bargaining: “The Agreement to Agree” 32

Statute of Frauds 33

The Sale of Goods Statute of Frauds: UCC § 2-201 33

Buffaloe v. Hart 35

Interpreting the Agreement 36

The Parol Evidence Rule 36

The UCC Rule and Trade Usages 39

Nanakuli Paving & Rock Co. v. Shell Oil Co. 41

Parol Evidence under the CISG 42

MCC-Marble Ceramic Center v. Ceramica Nuova D’Agostino 42

Advanced Topics in Contract Law 44

Supplementing the Agreement 44

Reasons for Implied Terms 44

Wood v. Lucy, Lady Duff-Gordon 45

Leibel v. Raynor Manufacturing Co. 45

Implied Obligation of Good Faith 47

Seidenberg v. Summit Bank 47

Morin Building Products Co. v. Baystone Construction, Inc. 49

Locke v. Warner Bros., Inc. 50

Donahue v. Federal Express Corp. 50

Warranties 52

Bayliner Marine Corp. v. Crow 53

Caceci v. Di Canio Construction Corp 56

Defenses Relating to Capacity and Fairness 59

Minority and Mental Incapacity 59

Dodson v. Shrader 59

Hauer v. Union State Bank of Wautoma 61

Duress 63

Totem Marine Tug & Barge v. Alyeska Pipeline 63

Undue Influence 65

Odorizzi v. Bloomfield School District 65

Misrepresentation 67

Syester v. Banta 69

Nondisclosure 70

Hill v. Jones 70

Park 100 Investors v. Kartes 71

Unconscionability 73

Williams v. Walker-Thomas Furniture Co. 74

Higgins v. Superior Court 74

In re Checking Account Overdraft Litigation 76

Public Policy 77

Valley Medical Specialists v. Farber 78

R.R. v. M.H. 79

Mistake and Changed Circumstances 82

Mistake 82

Lenawee County Board of Health v. Messerly 83

WilFred’s, Inc. v. Metropolitan Sanitary District 84

Impossibility 86

Impracticability 86

Frustration of Purpose 87

Karl Wendt Farm Equipment Co. v. International Harvester 87

Mel Frank Tool & Supply, Inc. v. Di-Chem Co. 88

Modification 90

Alaska Packers’ Assn v. Domenico 91

Kelsey-Hayes Co. v. Galtaco Redlaw Castings Corp. 93

Problem 8-3 93

Third Parties 95

Third Party Beneficiaries 95

Vogen v. Hayes Appraisal Assoc., Inc. 96

Zigas v. Superior Court 97

Assignment and Delegation 99

Herzog v. Irace 100

Sally Beauty Co. v. Nexxus Products Co. 102

Breach, Repudiation, and Conditions 104

Express Conditions 106

Oppenheimer & Co. v. Oppenheim, Appel Dixon & Co. 107

J.N.A. Realty v. Cross Bay Chelsea 107

Problem 10-1 109

Substantial Performance and Material Breach 111

Jacob & Youngs, Inc. v. Kent 112

Sackett v. Spindler 113

Perfect Tender Rule under the UCC 113

Anticipatory Repudiation 116

Truman L. Flatt & Sons v. Schupf 116

Assurances 117

Hornell Brewing Co. v. Spry 117

Problem 10-2 118

The Sale of Goods

    • An Introduction to the Study of Contract Law

  • Sources of Contract Law

        • Universal Commercial Code

        • Purpose:

          • UCC § 1-102/ 1-103: Purpose

            • simplify, clarify, and modernize law governing commercial transactions;

            • permit the continued expansion of commercial practices through custom, usage, and agreement of the parties;

            • make uniform the law among the various Js, and is to be supplemented by other applicable laws

              • (e.g. If UCC applies to case, doesn’t have a section that applies to the particulars of the case, then we look to common law and the Restatement.)

        • Definitions

          • UCC § 1-201(3) : “Agreement”

            • Agreement” means the bargain of the parties in fact as found in their language or by implication from other circumstances including course of dealing or usage of trade or course of performance as provided in this Act

          • UCC § 1-201(11) : “Contract”

            • Contract” means the total legal obligation which results from the parties’ agreement as affected by this Act and any other applicable rules of law

          • Article 2 (enacted in 48 states)

            • UCC § 2-102: Scope

              • This Article applies to transactions in goods

              • Does NOT apply to:

                • NOT services, real property (land, house, buildings..), Contracts to provide services, contracts to lease goods, contracts involving patents, trademarks or other intellectual property.

                  • Employment contracts, investment securities, or “things in action” – copyrights, patents, etc.

            • UCC § 2-104 : Defining “Merchant” / “Between Merchants”

              • Merchant” means a person who deals in goods of the kind or otherwise by his occupation holds himself out as having knowledge r skill peculiar to the practices or goods involved in the transaction or to whom such knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation holds himself out as having such knowledge or skill

              • Between merchants” means in any transaction with respect to which both parties are chargeable with the knowledge or skill of merchants

            • UCC § 2-105(1) : “Goods”

              • Goods” mean all things (including manufactured goods) which are movable at the time of identification to the contract for sale other than the money in which the price

              • is to be paid and things in action

              • Goods” also includes the unborn young of animals and growing crops and other identified things attached to realty as described in the section on goods to be severed from realty

                • Real-estate is not goods.

            • What about contracts that involve goods and services?

              • Majority Rule: Determine what the more important part of the contract is. Then follow the law the governs that part of the contract

              • Minority Rule: Which part of the contract is being challenged, follow the law governing that part

                • Paying a painter to paint your house, dispute over the quality of paint used, follow UCC

        • Common Law

      • Law made by courts, case law

      • Most commonly used (even over UCC and CISG)

      • Applies when: the UCC and CISG fall short

      • Also may supplement the UCC and CISG (i.e. definition of an offer)

      • *Restatements are persuasive but not binding

        • Restatement 2nd of Contracts Law

      • NO state legislature has enacted the restatement of contracts

      • NO judge has adopted the entire restatement

      • Restatement includes two different types of instruction

      • Accurate restatements of the majority rule of the law

      • Opinion of the writers of the restatement about how the law should be

        • CISG

      • Convention on contracts for the international sale of goods

        • A treaty between the U.S. and other states, covers transactions that UCC covers and parties and places of business in other countries that are contracting states to the treaty - limited to commercial transaction between business

          • Civil law and common law on contract formation varies widely among countries, the CISG was written to establish consistent standard

          • Parties can opt out of the CISG, and many parties do

        • CISG arts. 1

          • This Convention applies to contracts of sale of goods between parties whose paces of business are in different States;

          • When the States are Contracting State

        • CISG arts. 14

          • (1) A proposal for concluding a contract addressed to one or more specific persons constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in case of acceptance. A proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price.

          • (2) A proposal other than one addressed to one or more specific persons is to be considered merely as an invitation to make offers, unless the contrary is clearly indicated by the person making the proposal.

        • CISG arts. 15

          • (1) An offer becomes effective when it reaches the offeree.

          • (2) An offer, even if it is irrevocable, may be withdrawn if the withdrawal reaches the offeree before or at the same time as the offer.

        • CISG arts. 18(1)

          • statement made by or other conduct of the offeree indicating assent to an offer is an acceptance.

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