Part Two: Forming a Contract Flashcards

Question

Answer 1

Even if something looks like an offer, it cannot be accepted if the terms are too uncertain. Terms must be clear enough to: * Identify a breach * Provide a remedy Leaving terms open or vague may show there was no real offer or acceptance.

Answer 2

An agreement can be binding even if parties plan to put it in writing later. However, if circumstances show that discussions were just preliminary negotiations, then no contract exists.

Answer 3

A precontractual agreement is only a binding contract when both parties objectively manifest their intentions to be bound by it. The letter was only a preliminary agreement, allowing for more negotiations; subject to a number of conditions

Answer 4

To create an enforceable contract, both parties must have a clear understanding of the terms of the agreement and an intent to be bound by its terms. Must consider circumstances surrounding negotiations and agreement to uncover the parties’ intent. The memo was long and contained all essential terms of a contract

Answer 5

1. Verbal/Written Acceptance – Must match the offer (Mirror Image Rule); modified terms may trigger the Battle of the Forms (UCC § 2-207). 2. Acceptance by Performance – Offeree accepts by fully or partially performing as required. 3. Acceptance by Silence – Generally not acceptance, unless: * Offeree takes the benefit of the offer with reason to know payment is expected. * Prior dealings suggest silence is acceptance. * Offeror states that silence will be acceptance and offeree intends to accept.

Answer 6

Under common law, the Last Shot Rule states that the final terms sent before performance begins become the binding contract terms. Often applies in “Battle of the Forms” situations where parties exchange different terms. UCC § 2-207 modifies this rule by allowing for contract formation even when forms do not match exactly.

Answer 7

(1) Contract Formation: A written acceptance with additional or different terms still counts as acceptance unless it is explicitly made conditional on assent to the new terms. (2) Additional Terms: Between merchants, additional terms become part of the contract unless: (a) The offer limits acceptance to its own terms. (b) The new terms materially alter the offer. (c) The offeror objects within a reasonable time. (3) Conduct-Based Contracts: If parties act like they have a contract, one exists even if their writings don’t match. In that case, the contract includes: * Agreed-upon terms * Default UCC terms for any gaps Subsection (3) is similar to the Last Shot Rule, but only honors terms both parties agree on.

Answer 8

Majority Rule: UCC § 2-207 applies only when both an offer and acceptance/confirmation are in writing. * Cases: ProCD v. Zeidenberg, Hill v. Gateway 2000 Minority Rule: UCC § 2-207 applies even if the offer was not in writing, as long as there is a written acceptance or confirmation. * Case: Klocek v. Gateway

Answer 9

The Mirror Image Rule: If offer and acceptance are not the “mirror images” of one another, and performance is still executory, then no contract has been formed. Last Shot Rule raises problems and ultimately led to UCC §2-207 Ardente’s letter constituted a counteroffer, not a valid acceptance, so no contract was formed. Since the Horans never accepted this counteroffer, no contract was formed. “An acceptance that is conditional on new terms does not create a binding contract; rather, it is a counteroffer that requires acceptance by the original offeror.

Answer 10

3 Possible Tests for Conditional Acceptance: 1. Offeree’s response/confirmation materially alters obligations in a one-sided way; 2. “Magic Words” approach; 3. Demonstrated unwillingness to proceed without acceptance of new/different terms. Court favors the third test here. Additional terms materially alter agreement and are not incorporated without proof that both parties assented to additional terms, no contract. Any later terms, like warranty disclaimers in a shrink-wrap license, are mere proposals and require express assent to be binding. Since Step-Saver never explicitly agreed to the shrink-wrap terms, they did not become part of the contract.

Answer 11

Application of UCC 2-207(1) Acceptance by performance is a valid form of acceptance. Defendant used a non-commercial license commercially To use the license they had to accept the terms. When D accepted the license that was acceptance by performance. There was no "battle of the forms" here The Last Shot Rule prevailed

Answer 12

Terms in the box are enforceable when the consumer does not return the product within the specified time Court presumes consumer reviewed terms and chose to accept The hills kept a computer for more than 30 days Post-purchase contract terms can be enforceable if the consumer has a reasonable opportunity to reject them NO BATTLE OF THE FORMS, this is a better example of silence a form of acceptance

Answer 13

Rule: Under UCC § 2-207, additional terms proposed by a merchant to a non-merchant do not become part of the contract unless the non-merchant expressly agrees. * Klocek (a consumer) bought a Gateway computer. * Terms (including arbitration) were inside the box and said keeping the computer 5+ days = acceptance. * Klocek sued; Gateway tried to compel arbitration. Reasoning: * Contract formed at purchase, not upon opening the box. * Post-purchase terms = proposals under UCC § 2-207. * No express assent, so terms didn’t apply. Note: UCC § 2-207 applies when one party sends written terms after agreement. Minority Rule: Some courts apply § 2-207 even without a written offer there was no "battle of the forms" here

Answer 14

(1) Mirror Image Rule: An acceptance with new or different terms is a counteroffer, not an acceptance. (2) Exception: If the new terms do not materially alter the offer, the acceptance is valid unless the offeror objects without undue delay. (3) Material Alterations: Changes to price, payment, quality, quantity, delivery, liability, or dispute resolution are automatically considered material and turn the response into a counteroffer.

Answer 15

Unilateral contracts are accepted by performance, not by a promise. The offeror is bound only when the offeree completes the requested act. Example: A reward offer—no contract exists until someone actually performs the requested action.

Answer 16

An offer may specify how acceptance must be made (e.g., by words, action, or choice of terms). If no specific method is stated, acceptance can be made in any reasonable manner based on the circumstances.

Answer 17

If there’s doubt, an offer allows acceptance by either a promise or performance—whichever the offeree chooses. If performance takes time, starting performance may act as a promise to complete it. Exceptions: Some offers (e.g., rewards or contests) only allow acceptance by performance, not by a promise.

Answer 18

An offeree must appropriately manifest acceptance of an offer before the parties will be bound. With performance by acceptance, the court notes that a certain degree of specificity is required. Further, performance must be made apparent to offeror.

Answer 19

Carbolic Smoke Ball Co. offered £100 to anyone who used its product as directed and still got influenza. Mrs. Carlill did, and sued when the company refused to pay. The Court held the ad was a unilateral offer, accepted by performance, forming a binding contract. Restatement § 54: In unilateral contracts, no notification of acceptance is required unless the offeror requests it. Carlill’s use of the product constituted valid acceptance. Restatement § 30: An offer may invite acceptance by performance or promise. The ad clearly invited performance only—use of the smoke ball as directed. Key Takeaways: * A public ad can be a unilateral offer if clear, definite, and serious. * Acceptance by performance is valid, no need to notify offeror in advance. * Consideration was present (purchase and use of product, benefit to company).

Answer 20

Any offer to enter into a unilateral contract may be withdrawn before the act requested to be done has been completed. Unilateral Ks and “Executory” Performance – Traditional Rule: offeree must complete performance to accept. Attempt is not enough Fact: Petterson showed up to pay but Patt revoked before taking the money Holding: No contract becuase the offer ws revoked before perfomance was complete Rest 45 changes this trad rule

Answer 21

Benefits: * Attracts customer interest and increases sales. * Builds public trust by making a bold guarantee. * Creates free publicity if challenged legally. Costs: * Risk of large-scale liability if many people claim the reward. * Potential legal battles and enforcement costs. * Damage to reputation if the promise is seen as deceptive.

Answer 22

Clear disclaimers in future advertisements. * Limit the number of claims (e.g., first 100 customers). * Require proof of specific conditions (e.g., doctor’s certification of flu). * Set an expiration date on the offer. * Use precise language to avoid unintended contractual obligations.

Answer 23

No notification required if acceptance is by performance, unless the offer requires it. Exception: If the offeror has no reasonable way of knowing about performance, the offeror’s duty is discharged unless: * (a) The offeree diligently notifies the offeror. * (b) The offeror learns of performance in a reasonable time. * (c) The offer waives notification.

Answer 24

If an offer lets the offeree accept by promise or performance, then: * Starting performance = acceptance. * Once begun, the offeree is bound to complete performance.

Answer 25

If an offer requires acceptance by performance only, then: * Starting performance creates an option contract. * The offeror must keep the offer open until performance is completed. * The offeree is not obligated to finish performance. Caveats: * Not the only way to create an option contract. * Applies only to unilateral contracts (performance-based acceptance). * Creates an option contract, not the final contract.

Answer 26

Offeror controls acceptance → Can specify any method (Restatement § 30). If no method specified → Acceptance can be in any reasonable way (Restatement § 32). If accepting by performance → May need to notify offeror (Restatement § 54). If offer requires performance to accept: * A promise isn’t enough. * Starting performance creates an option contract (Restatement § 45).

Answer 27

Rule: Conduct which looks like acceptance is acceptance. 99% of the time, silence carries no meaning. Here, many prior dealings of the same nature allowed silence + conduct to constitute acceptance. Mass had an obligation to reject or return the eel skins if they did not intend to accept them since many prior dealings silence = acceptence. Policy: Unfair to allow a party to remain silent, let goods spoil, and then claim no obligation to pay.

Answer 28

General Rule: Silence does not usually constitute acceptance. Exceptions: Silence operates as acceptance only if: * (a) The offeree takes the benefit of services with a reasonable opportunity to reject and knows payment is expected. * (b) The offeror has given reason to believe silence is assent, and the offeree intends for silence to be acceptance (only enforced against the offeror). * (c) Previous dealings make it reasonable to assume acceptance through silence. Acts Inconsistent with Ownership (§ 69(2)): * If the offeree acts inconsistently with the offeror’s ownership, they are bound by the offered terms (unless manifestly unreasonable). * If wrongful, acceptance occurs only if ratified by the offeror.

Answer 29

Benefit or Detriment: Each party must promise to confer a benefit or incur a detriment. Mutual Inducement: The promises must be part of a bargain, meaning each party’s promise must induce the other’s promise or action.

Answer 30

Rule: A party’s agreement to incur a detriment constitutes adequate consideration. Consideration exists when a party either incurs a detriment or the other party receives a benefit. Giving up a legal right (forbearance) is sufficient consideration as an incurred benefit, even if the promisor does not receive a tangible benefit. Uncle tells kid he'll pay him 5K if he abstains from drinking, smoking, gambling, and swearing till he is 21. The kid does it and wants his 5K

Answer 31

Rule: If one party makes a promise in exchange for the other party’s action or performance, and the other party fully performs, a binding contract is formed. Performative Acceptance under 71 (3a) Facts If the people joined the drug study they would get additional doses of the drug for free post-trial. Pharma did not give them the doses. Pharma claimed this was not a contractual agreement but a voluntary one and there comment about additional doses was a statement of intent not an enforceable obligation. Holding: the court held that the participants’ actions in undergoing testing and complying with the study requirements constituted valid consideration, making Hem’s promise enforceable.

Answer 32

Consideration Requires an Exchange: 1. A performance or return promise must be **bargained for** to be consideration. 2. It is bargained for if the promisor seeks it in exchange for their promise, **and** the promisee gives it in exchange for that promise (mutual inducement whether you do it for the promise). 3. Performance can be: * (a) An act other than a promise, **or** * (b) Forbearance (refraining from an action), **or** * (c) Creation, modification, or destruction of a legal relation. 4. The performance or return promise does not have to go directly to the promisor; it can be given to another person by the promisee or someone else.

Answer 33

Bargained-for Exchange (Consideration Present): * Example: “I will give you X if you give up something you have the right to or give me something I don’t have.” * Why? The promisor is motivated to induce the exchange. Conditional Gift (No Consideration): * Example: “I will give you X so long as you use it in a prescribed way.” * Why? The condition is a pragmatic limitation, not an exchange. * Example "Hey Willy, cross the street and I will give you 100$" Key test: * Was the promisor objectively motivated to induce the condition, or was it just a limitation? * Could the promisee fulfill the condition without relying on the promisor’s performance? If yes then conditional

Answer 34

1. Past Acts Don’t Count (Sometimes) * Exception: Moral Consideration (§ 86) – past acts may be enforced if they create a moral obligation. * Why? A temporal disconnect makes it hard to prove mutual inducement. 2. Pre-Existing Duties Don’t Count (Sometimes) * Exception: UCC § 2-209 – Contract modifications do not require new consideration, even outside merchant agreements. 3. Value of Consideration is Irrelevant (Sometimes) * Exception: Sham consideration doesn’t count. * Exception to the exception: Ceremonial consideration (e.g., Option K). * If a promise/performance is "bargained for" and involves a "legal" benefit/detriment, courts won’t question fairness. * BUT Other doctrines consider fairness.(duress, misrepresentation, unconscionability) * Grossly disproportionate consideration may be evidence that the promise wasn’t truly bargained for.

Answer 35

Consideration: Past Acts Don't Count Rule: Past acts prior to a promise cannot serve as consideration because they were not bargained for. Mills cared for Wyman's son until Wyman Jr. died Wyman wrote to Mills promising to pay for expenses, but never did Holding: the court held that Wyman’s promise was not enforceable because there was no pre-existing contract or legal obligation to pay.

Answer 36

Consideration: Past Acts Don't Count Exception: “Moral Obligation” substitutes for consideration (§ 86); Moral Obligation is enforceable when the promisee’s prior act: (1) conferred a material and substantial benefit, and (2) the benefit was personally received by promisor. Facts Webb saved McGowin’s life while working for McGowin. Webb suffered serious bodily harm as a result, and McGowin agreed to pay Webb to sustain him. After McGowin’s death, the executors of his estate refused to continue paying Webb. Distinguished from Mills: here promisor directly receives material benefit Wyman's father did not recieve a material benefit his son did.

Answer 37

Consideration: Pre-existing Duties Don’t Count Rule: If parties enter a new agreement where it requires one party to do only what they were already obligated to do under an existing contract, the new agreement is unenforceable for lack of consideration. Facts: Fisherman discover holes in nets – demand more payment. They are only agreeing to work as they were already supposed to. No bargained for consideration supporting revised agreement.

Answer 38

Consideration: Value Irrelevant/ Adequacy of Consideration The court found there was a contract because forbearance from filing an invalid legal claim can constitute consideration for a settlement if the party in good faith believed that the claim was legitimate. Traditional Approach: Legal claim must be genuinely uncertain in fact/law, at time of execution of contract. Alternative Approach: Either (a) uncertainty in fact/law; OR (b) forbearing party had good faith belief in validity. (approach used in Dyer). An objective and subjective theory

Answer 39

Typical areas where adequacy/sham distinction is in play: 1. Ceremonial consideration (often invalid) a. Allowed for option contracts (Rest § 87) 2. Consideration whose value is contingent and uncertain when made (usually valid) 3. Agreement to forbear from asserting legal claims that are later deemed to be invalid (Dyer)

Answer 40

General Rule: A promise made in recognition of a previously received benefit is binding if needed to prevent injustice. Exceptions – A promise is NOT binding if: * (a) The benefit was given as a gift, or the promisor was not unjustly enriched. * (b) The promise is disproportionate to the benefit received.

Answer 41

If consideration exists, no additional requirement of adequacy or mutuality. Exception (Comment D - Pretended Exchange): * Sham or nominal consideration does not satisfy the requirement. * Disparity in value may suggest that the exchange was a mere formality rather than a true bargain. * Inequality in consideration may limit equitable remedies (see Restatement § 364).

Answer 42

Forbearance to sue or surrender a legal claim is NOT consideration unless: * (a) The claim is in fact doubtful due to factual or legal uncertainty. * (b) The forbearing/surrendering party honestly believes the claim/defense could be valid (good faith requirement). Most courts require the belief in (b) to be honest and reasonable (Dyer case interpretation).

Answer 43

Promissory Estoppel (PE) has two roles (dual life): L1: Substitute for consideration – “Perfects” contractual rights. L2: Separate cause of action – Based on reliance theory. Why This Matters: * Procedural: PE as a separate cause of action must be pleaded separately (like restitution). Remedies Differ: * As a substitute for consideration → Full contract damages and entitled to contract damages. * As a separate cause of action → Remedy is “as justice requires”, often limited to out-of-pocket reliance costs. Strategic Consideration: * Plaintiffs prefer PE as a substitute for consideration if they can prove it, as it allows for greater recovery.

Answer 44

A promise is binding if: The promisor should **reasonably expect it to induce** action or forbearance by the promisee (or a third party). The promise **actually induces** such action or forbearance. Enforcement is necessary to **avoid injustice**. (notions of fairness and equity) Remedy: * The court may limit damages to what is necessary for justice rather than full contract enforcement.

Answer 45

4 elements Was there a promise? Could the promise reasonably be expected to induce reliance? Did the promisee actually rely on it? Is enforcement necessary to avoid injustice? If all elements are met, the promise is binding under promissory estoppel

Answer 46

Additional v. Pre-Existing Duties Clear cut breach of suit expectation damages Can Brian hold Brighenty to the modified contract? the court held that the modification was enforceable because the removal of unexpected debris constituted new consideration beyond the original contract. Rule: A contract modification is enforceable if unforeseen circumstances create additional work that was not contemplated in the original agreement, and the parties mutually agree to modify the contract to account for the extra work. New consideration exists when the modified agreement requires additional performance beyond the original contractual duty.

Answer 47

Rule: Equitable estoppel prevents a promisor from revoking an otherwise unenforceable gratuitous promise if the promisee foreseeably and reasonably relied on it to their detriment. * The court aimed to enforce fairness, even though it’s not technically equitable estoppel. * Equitable estoppel definition: Prior disclosure or concealment of a material fact prevents a party from making a contrary claim later.

Answer 48

Rule: A contract is formed when one promises to convey a specific tract of land, and the promisee substantially acts or forbears in reliance on that promise. Key Point: * Promise wasn’t sufficient until the specific 80-acre tract was identified.

Answer 49

Rule: An offer can be revoked at any time before acceptance unless consideration or a statutory mechanism makes it irrevocable. There was no consideration to create an option contract, and reliance by itself does not constitute acceptance. The court rejected applying P.E Key Facts: * S.C. mistakenly submitted a bid. * The general contractor (G.C.) incorporated the bid into their own and won the contract. * The mistake was discovered immediately, and the G.C. had time to rescind their bid but could not revise it.

Answer 50

Option contract is implied – the subcontractor (S.C.) is bound. Rule: An offer is enforceable without a contract if the offeror should reasonably expect reliance, and the offeree does rely to their detriment. The court held that the bid was enforceable under P.E. because the G.C.'s reliance was foreseeable, reaonable and detrimental. Key Facts: * S.C. mistakenly submitted a bid. * G.C. incorporated the bid into their own and won the contract. * G.C.’s bid was accepted** before** they became aware of the S.C.’s mistake and could not rescind or revise it.

Answer 51

Enforecability of Charitable Pledges Rule: A charitable subscription is enforceable when supported by consideration or induces the promisee to undertake obligations. Holding: The donor’s pledge was enforceable. Reasoning: – College accepted the pledge by setting up the fund and using donor’s name – This created legal detriment and obligation on the college’s part – Consideration existed through the college’s reliance and actions in return for the promise

Answer 52

Misrepresentation & Lease Rescission Rule: A contract is voidable if induced by a material misrepresentation that affects a party’s decision to assent. Holding: The lease was voidable due to material misrepresentation. Reasoning: – Landlord misrepresented or failed to disclose key facts about the premises – Misrepresentation was material and impacted Sheridan’s decision to lease – Tenant had the right to rescind the lease Outcome: Judgment for Sheridan; lease not enforceable.

Answer 53

Rule: Under NY law, a release signed by a guardian on behalf of a minor is binding and remains enforceable into adulthood, unless procured by fraud or duress.. Reasoning: – Shields’ mother properly signed the release as legal guardian – No fraud or coercion occurred – Public policy favors upholding valid commercial releases Judgment for Gross; release remained valid despite Shields reaching adulthood.

Answer 54

* Common Law Rule: Traditionally, the only way to create a firm offer or option contract was by providing separate (nominal) consideration (§ 71). * Modern Approaches: Other methods now allow for a firm offer or option contract: * Unilateral Contract with Part Performance (§ 45) * Merchant’s Firm Offer (UCC § 2-205): Applies to the sale of goods. * Promissory Estoppel as a Backdoor: If promissory estoppel (PE) can substitute for consideration, an option contract may also be enforced when the offeree detrimentally and reasonably relies on the offer.

Answer 55

An offer is binding as an option contract if: 1. The offeror should reasonably expect the offer to induce action or forbearance of a substantial character by the offeree ** before acceptance.** 2. The offer does induce such action or forbearance. 3. Enforcing the option contract is necessary to avoid injustice

Answer 56

- Defendant may raise as an affirmative defense to avoid liability after plaintiff proves prima facie breach - Burden is on the defendant to prove the defect - Typically makes the contract voidable (invoking party can affirm or avoid) - Some defects render contract void (not just voidable) - Avoidance usually followed by restitution for both parties (doubts favor defect-claiming party) - Defect facts may also support a tort claim (e.g., fraud)

Answer 57

(1) Incapacity (voidable if entered by): a. Mentally ill b. Intoxicated c. Infants (minors) d. Under guardianship (2) Misrepresentation (3) Duress (4) Unconscionability (5) Undue Influence

Answer 58

Defense: Incapacity Rule: A contract is voidable if, at formation, one party was mentally incompetent and the other party knew or had reason to know of the incompetence. Test Used: – Traditional (Cognitive) Test: Was the person’s mind so impaired that they couldn’t comprehend the nature of the transaction? you can use the cognitive test or the rule written above – Applies even to executed contracts – Case involved a depressed teacher changing her retirement payout shortly before death

Answer 59

(1) A contract is voidable if, due to mental illness or defect, a party: (a) can’t reasonably understand the nature/consequences of the transaction, or (b) can’t act reasonably in relation to the transaction and the other party has reason to know. (2) If the contract was made on fair terms and the other party had no knowledge of the mental condition, the power to avoid is limited if: – The contract is no longer executory, or – Circumstances changed such that avoidance would be unjust. Courts may grant equitable relief as justice requires (restitution)

Answer 60

A contract is voidable if the other party has reason to know that, due to intoxication, the person: (a) cannot understand the nature and consequences of the transaction, or (b) cannot act reasonably in relation to it. Intoxication must be extreme; only the other party’s knowledge matters. self-made condition

Answer 61

A person has capacity to incur only voidable contract duties until the day before their 18th birthday, unless a statute provides otherwise. – Infancy makes a contract voidable, not void – Counterparties may recover for necessaries under quasi-contract – Age of majority can vary by jurisdiction

Answer 62

This case is an assertion of facts issue 4 Elements of the Defense 1. Assertion not in accord with the facts 2. Inducement of assent (to the receiver’s detriment) 3. Justified reliance on the misrepresentation 4. Misrepresentation is material or fraudulent

Answer 63

– Oral/written statements about facts or opinions – Conduct/actions intended or known to prevent another from learning a fact (Rest. § 160) – Silence is not an assertion unless exceptions under Rest. § 161 apply

Answer 64

– Prior assertions have become inaccurate – Other party is mistaken about a writing’s effect – Relationship of trust/confidence – Failure to correct a known mistake amounts to bad faith

Answer 65

A misrepresentation induces assent if it substantially contributes to the party’s decision to agree. – No longer a strict “but-for” test – Focus is on this person’s state of mind, not a reasonable person’s (subjective test) – Reflects a more flexible, modern standard

Answer 66

Fact vs. Opinion Key question: Is the statement based on specialized or non-public knowledge? – Facts: Generally justified in relying, no duty to investigate (unless investigation is done negligently) – Opinions: Reliance usually not justified * Exception: recipient may rely on facts underlying the opinion

Answer 67

Reliance on opinion is justified if: (a) Relationship of trust/confidence to the person whose opinion is asserted (b) Asserter has special skill/judgment or objectivity with respect to the subject matter as compared to the recipient (c) Receiver is particularly susceptible to this type of misrepresentation

Answer 68

– Likely to induce a reasonable person to manifest his assent – OR maker knows it is likely to induce this recipients assent – Maker’s intent/state of mind is irrelevant

Answer 69

– Asserting party **intends** it to induce other to manifest assent AND asserting party: (a) knows/believes that the assertion is not in accord with the facts; or (b) does not have the confidence she states/implies in the truth of the assertion; or (c) knows that she does not have the basis that she states or implies for the assertion

Answer 70

– Material Misrepresentation: Contract is voidable, followed by restitution if applicable – Fraudulent Misrepresentation (Deceit): Also voidable or void - party may bring action in tort for any additional out-of pocket expenses + punitive damages (if applicable) - physical duress can make a contract void - note: you don't need to void the contract to bring tort claim. – Caveats: - Party may ratify contract through words or - Conduct showing intent to proceed Result of voided contract is restitution to unwind the contract

Answer 71

1. 3rd-Party Misrepresentation: Defense limited if counterparty relied in good faith 2. Other Types of Fraud: a. Fraud in the factum (deceived about nature of agreement) b. Promissory fraud (lying about future intent) 3. Remedies: – Fraud may allow tort damages – Some negligent misreps may allow tort recovery (but no punitive damages)

Answer 72

* Physical duress: Threats of physical harm; renders a contract void (Restatement § 174). * Economic duress (or other non-physical threats): Can make a contract voidable (Restatement § 175).

Answer 73

1. There was a threat. 2. The threat was improper. 3. The threat induced the party’s assent. 4. The threat left the party with no reasonable alternative.

Answer 74

* Traditional View: Threats are improper if: * They are illegal or actionable outside of contract law. * Threatening to sue is usually not improper. * Threatening to breach a contract is not historically improper, but may be under bad faith today. * Modern View: Non-actionable threats may still be improper if: * The exchange is one-sided, and: a. The threat harms the recipient with little benefit to the other party, b. Prior unfair dealings enhance the threat’s effect, or c. The threat is a use of power for illegitimate ends.

Answer 75

* The contract becomes voidable and both parties are entitled to restitution. * The party under duress may ratify the contract later through words or conduct showing intent to continue.

Answer 76

U.S. v. Progressive Enterprises – involving a claim of economic duress due to contract pressure.

Answer 77

* Procedural unconscionability: A lack of meaningful choice, often due to gross inequality in bargaining power or limited understanding (e.g., due to education). * Absence of meaningful choice on the part of one of the parties * Substantive unconscionability: Unfairly one-sided contract terms, viewed in light of general commercial practices. * Contract terns unreasonably favor the other party

Answer 78

* The court may refuse to enforce all or part of the contract. * Illustrated by Williams v. Walker-Thomas Furniture Co., where installment contract terms were both procedurally and substantively unconscionable.

Answer 79

The court held that a valid contract existed because Zehmer’s outward words and actions would lead a reasonable person to believe an agreement was made. Under the objective theory of assent, intent is judged by external expressions, not secret intent. also the fact that Lucy remembered everything showed that they were not as drunk as Zehmer claimed

Answer 80

In ProCD, the court did not apply UCC § 2-207, treating the contract as formed upon use of the software and upholding post-purchase shrink-wrap terms based on notice and conduct. In Klocek, the court explicitly applied UCC § 2-207, holding that post-purchase terms were mere proposals. Since Klocek was a non-merchant, the arbitration clause did not become part of the contract without his express acceptance ProCD relied on common law contract principles, while Klocek used § 2-207 to protect consumers from surprise terms.

Answer 81

Step-Saver: the holding that the shrink-wrap license was an additional term introduced after contract formation and was therefore unenforceable without Step-Saver’s express assent. The contract was formed when TSL accepted the purchase order. ProCD: the contract was formed upon use of the software, not at the point of sale. The shrink-wrap license was enforceable because the buyer had notice and an opportunity to reject the terms by returning the product. UCC § 2-207 was not applied. Key difference: Step-Saver emphasizes pre-formed contracts and buyer protection under the UCC, while ProCD allows post-sale terms based on acceptance by conduct.

Answer 82

Doctrine: Fraudulent Misrepresentation Rule: A false opinion can constitute fraudulent misrepresentation when it is made by someone with superior knowledge intending to induce reliance by someone less experienced. Trigger Fact: Dance instructors told Vokes she had talent and was improving to get her to buy over $31,000 in lessons, even though they knew she had no real aptitude. Main Takeaway: Even subjective opinions can be actionable if the speaker has expertise and uses them manipulatively to induce reliance.

Answer 83

Doctrine: Economic Duress Rule: A contract is voidable for economic duress when one party wrongfully threatens to breach an existing obligation, the other party has no reasonable alternative, and the threat induces the agreement. Trigger Fact: Austin refused to deliver parts under an existing Navy contract unless Loral gave it a second subcontract. Loral agreed under deadline pressure. Main Takeaway: Exploiting a party’s vulnerability under a preexisting contract to extract new terms can render the new agreement unenforceable due to duress.

Answer 84

Doctrine: UCC Contract Modification & Duress (UCC § 2-209) Rule: Under UCC § 2-209, a contract modification doesn’t require new consideration but must be made in good faith. A party who assents to a modification cannot later claim duress unless they objected or communicated their distress at the time. Trigger Fact: Progressive submitted a second purchase order at a higher price without expressing any duress and paid only the original price after receiving the goods. Main Takeaway: If you agree to a price change without protesting or claiming pressure, you’re bound—economic duress requires both actual pressure and timely communication of that pressure.

Answer 85

Doctrine: Unconscionability Rule: A court may refuse to enforce a contract or clause that is unconscionable at the time it was made. Unconscionability has two elements: 1. Procedural unconscionability – Absence of meaningful choice on the part of one of the parties 2. Substantive unconscionability – Contract terms unreasonably favor the other party Trigger Fact: Williams bought household items on credit from the store using a cross-collateralized contract. After defaulting on a stereo payment, the store tried to repossess all items she had bought over 5 years, despite most being nearly paid off. Main Takeaway: Courts can strike down oppressive contracts when one party lacks meaningful bargaining power and the terms are egregiously one-sided — especially in consumer transactions.