A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.

- may consist of a single promise or mutual promises by two persons to one another

- may be any # or persons and promises

- to constitute a set, promises don't need to be made simultaneously, they just need to be regarded by the parties as constituting a single k

- legal remedies for breach vary

- a promise which is a k is "binding" but that doesnt necessarily mean a particular remedy is available in the event of breach

(1) A promise is a manifestation of intention to act or refrain from acting in a specified way,s o made as to justify a promisee in understanding that a commitment has been made.

(2) The person manifesting the intention is the promisor.

(3) The person to whom the manifestation is addressed in the promisee.

(4) Where performance will benefit a person other than the promisee, that person is a beneficiary.

- "manifestation of intention" means the external expression of intention as oppose to the undisclosed internal intention.

- A promisor manifests an intention if he believes or has reason to believe that the promisee will infer that intention from his words or conduct

- words of promise that make performance entirely optional with the "promisor" do not constitute a promise

- reservation on an option to change intention means there can be no promisee who is justified in an exprectation of performance

A promise may be stated in words either oral or written, or may be inferred wholly or partly from conduct.

- express or implied k's... same legal effect. Distinction is the mode of manifesting assent.

- Intention to make a promise may be manifested by language of implication from other circumstances.

- Implied k's differ from quasi k's b/c quasi k's are not based on the apparent intention of the parties to undertake the performances in question, nor are they promises.  They are obligations created by law from reasons of justice.

(1) Except as stated in subsection (2), the formation of a contract requires a BARGAIN in which there is MANIFESTATION OF MUTUAL ASSENT to the exchange and A CONSIDERATION.

(2) Whether or not there is a bargain a contract may be formed under special rules applicable to formal contracts or under the rules stated in 82-94.

- the typical contract is a bargain and is binding w/out regard to form

- bargains are enforceable unless some other principle conflicts

-"meeting of the minds", element of agreement, same as mutual assent

- "consideration," the element of exchange

- some promises are binding w/out bargaining b/c of reliance

(1) To constitute consideration, a performance or a return promise must be BARGAINED FOR.

(2) A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for that promise.

(3) The performance may consist of (a) an ACT other then a promise (b) a FORBEARANCE 

(c) the creation, modification, or destruction of a legal relation

(4) The performance or return promise may be given to the promisor or to some other person.  It may be given by the promisee or some other person.

- "consideration" is the element of exchange that is sufficient to satisfy the legal requirement

- consideration induces making of a promise, promise induces furnishing of the consideration

- undisclosed mental states don't matter, just the external manifestation

- it is enough that one party manifests an intention to induce the other's response and to be induced by it and that the other responds in accordance with the inducement

- it is NOT ENOUGH that the promise induces the conduct of the promisee or that the conduct of the promisee induces the making of the promise (must have bargain) - gifts are not a bargain

- pretense of bargain is NOT enough - ordinarily courts don't inquire into the ADEQUACY of the consideration

Except as stated in 73 and 74, and performance which is bargained for is consideration.

- this is the general rule that EXCHANGE of performance for promise is an enforceable bargain

- 3 grounds of enforcement: bargain, reliance, unjust enrichment

- formality is not essential consideration

formality DOES NOT supply consideration where an element of exchange is absent

- consideration does NOT have to have an economic value equivalent to that of the promise

If the requirement of consideration is met, there is no additional requirement of

(a) a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promisee; or

(b) equivalence in the values exchanged; or

(c) "mutuality of obligation"

- parties of transactions are free to fix their own valuations--> they are better able than others to evaluate the circumstance of a particular transaction

- disparity in value can indicate the purported consideration was not in fact bargained for, but was a mere formality or pretense (nominal consideration)

(1) A promise which the promisor should REASONABLY EXPECT TO INDUCE ACTION OR FORBEARANCE on the part of the promisee or a third person and WHICH DOES INDUCE SUCH ACTION OR FORBEARANCE is BINDING if injustice can by avoided only by enforcement of the promise.  The remedy granted for breach may be limited as justice requires.

(2) A charitable subscription or a marriage settlement is binding under subsection (a) without proof that the promise induced action or forbearance.

- this section is often referred to as PROMISSORY ESTOPPEL

- estoppel prevents a person from showing the truth contrary to a representation of fact made by him after another has relied on the representation

- the promisor is affected only by reliance which he DOES or SHOULD foresee AND enforcement MUST BE NECESSARY to avoid injustice... this depends on reasonableness of reliance

- reliance by a beneficiary is judged on the same basis as reliance by the promisee

- relief may be measured by the extent of the reliance, not the terms of the promise

(1) A promise to pay all or part of an antecedent contractual or quasi contractual indebtedness owed by the promisor is binding if the indebtedness is still enforceable or would be except for the effect of a statute of limitiations.

(2) The following facts operate as such a promise unless other facts indicate a different intention:

(a) A voluntary acknowledgement to the obligee, admitting the present existence of the antecedent indebtedness; or

(b) A voluntary transfer of money, a negotiable instrument, or other thing by the obligor to the obligee, made as interest on or part payment of or collateral security for the antecedent indebtedness 

(c) A statement to the obligee that the statute of limitations will not be pleaded as a defense.

- most states say the promise included in this section is not binding unless it is in writing or signed by the promisor except when the promise is inferred from part payment

- without a contrary statutory provision, acknowledgement or part payment is effective to extend the running of the statute of limitations only if a new promise is fairly implied

- An unqualified admission that a debt is owing operates as a promise to pay for the purpose of subsection (1)

- part payment (even of interest) amounts to an admission that it is owing and has the same effect as acknowledgement--> this transfer must be voluntary

-if the partial payment does not mention the larger payment, it does not operate as a new promise

- this section does NOT address the promise not to plead the statute of limitations.  That promise is not binding unless there is consideration or reliance

- a new promise binds the debtor only... not a co-debtor

An express promise to pay all or part of an indebtedness of the promisor, discharged or dischargeable in bankruptcy proceedings begun before the promise is made, is binding.

- only a few states have enacted statutes that require this promise to be in writing (unlike rule 82)

- a promise implied from acknowledgement or part payment does not revive a debt discharged in bankruptcy

(1) Where a mistake of both parties at the time of the contract was made as to a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of the mistake under the rule stated in 154.

(2) In determining whether the mistake has a material effect on the agreed exchange of performances, account is taken of any relief by way of reformation, restitution, or otherwise.

- only governs mistakes to the same basic assumption. 153 deals with different assumptions.

- relief is only available where the assumption that results in a mistake is a MATERIAL MISTAKE and has a material effect on the agreed exchange of performances as to upset the very basis for the contract.

- the basic assumption must be made by both parties

- the party seeking to void the contract must be the one who does not bear the risk

- not enough to show that you wouldn't make the contract if it hadn't been for the mistake, must show that the result of the mistake is an imbalance in the agreed exchange so severe that he can't fairly be required to carry it out.

- courts will consider not only the disadvantage to B, but also unexpected advantage to A

- before determining the effect of the agreed upon exchange, the court examines other relief that may be available (ex reformation)

Where a mistake of one party at the time a contract was made as to a basic assumption on which he made the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake under the rule stated in 154 and (a) the effect of the mistake is such that enforcement of the contract would be unconscionable, or (b) the other party had reason to know of the mistake of his fault caused the mistake.

- rule in this section governs option contracts, where party's offer is irrevocable either under a statute, such as one applying to bids for public works, or on other grounds

- parol evidence rule doesn't preclude the use of prior or contemporaneous agreements or negotiations to establish that a party was mistaken.

- this section is the additional requirements that a party must meet if he alone is mistaken... add these requirements on to the requirements of 152

- mistaken party bears burden of proving unconscionability

- reliance by the other party may make enforcement of a contract proper although enforcement would otherwise be unconscionable

-ALLOCATION OF RISK: if a party undertakes to perform the k even though he knows that the mistake would allow him to avoid the contract, he bears the risk or the mistake

A party bears the risk of a mistake when

(a) the risk is allocated to him by agreement of the parties, or

(b) he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which teh mistake relates but treats his limited knowledge as sufficient, or

(c) the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.

- even though a mistaken party may not bear the risk of a mistake, he may be barred from avoidance if the mistake was the result of his failure to act in good faith and in accordance with reasonable standards of fair dealing.

Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not consideration; but a similar performance is consideration if it differs from what was required by the duty in a way which reflects more than a pretense of bargain.

- a bargain of a public official to obtain private advantage for performing his duty is therefore unenforceable as against public policy.

- similarly, a bargain to pay witnesses for testimony is unenforceable

- the performance of a legal duty is not consideration for a promise in any such case if the duty is owed to the promisor.  If the duty is not owed to the promisor, there is consideration but the violation of public policy or other invalidating cause may remain

- bargain for additional compensation under certain circumstances may be voidable for duress (pg 89)

- this rule is often applied to cases involving a contractual duty owed to a person other than the promisor, even though there is less likelihood of economic duress in these situation.  Some cases, consideration is found.

A promise modifying a duty under a contract not fully performed on either side is binding

(a) if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made; or

(b) to the extent provided by statute

(c) to the extent that justice requires enforcement in view of material change of position in reliance on the promise.

- this section relates primarily to adjustments in on-going transactions

- section (a) goes beyond absence of coercion and requires an objectively demonstrable reason for seeking modification

- relevant circumstances include: financial strength of the parties, the formality with which the modification is made, the extent to which it is performed or relied on and other circumstances

- a contract for sale of goods does not need consideration to modify (UCC 2-209) but it does say that extortion of a modification w/out legitimate commercial reason is ineffectivfe

- a promise becomes binding by reliance regardless of the fact that it isnt binding when made, but original terms can be reinstated for the future by reasonable notification received by teh promisee unless it would be unjust.

A person's non-disclosure of a fact known to him is equivalent to an assertion that hte fact does not exist in the following cases ONLY:

(a) where he knows that disclosure of the fact is necessary to prevent some previous assertion form being a misrepresentation or from being fraudulent or material.

(b) where he knows that disclosure of the fact would correct a mistake of the other party as to a basic assumption on which that party is making to contract and if non-disclosure of the fact amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing.

(c) where he knows that disclosure of the fact would correct a mistake of the other party as to the contents or effect of a writing, evidencing or embodying an agreement in whole or in part.

(d) where the other person is entitled to know the fact because of a relation of trust and confidence between them.

- CONCEALMENT: different from non-disclosure b/c it is the act of preventing another from learning of a fact that is significant... which always is misrepresentation, but nondisclosure w/out concealment isn't always misrepresentation.

- Nondisclosure must be EITHER fraudulent of material.  If it is fraudulent, it doest matter if it is non-material or material.

- Three instances where a person must correct an earlier assertion: 1. if the assertion wasn't a misrepresentation b/c it was true, but it is no longer true; 2. if the assertion was a misrepresentation but it wasnt fraudulent, or the person didn't think it would be relied upon; 3. if the assertion was a misrepresentation but it was not material the person had no reason to know of the other persons special characteristic that made reliance likely, but he later learned of that characteristic.

- rule in clause (a) and (d) extends to third parties as well as parties to the transaction

- (b) clause does not require a showing of material effect (unlike mistake), nor is it affected by who bears the risk of mistake

- Actual knowledge of mistake is required in clause (b), and (c0

(1) A misrepresentation is fraudulent or material if the maker intends the assertion to induce a party to manifest his assent and the maker

(a)  knows or believes that the assertion is not in accord with the facts or,

(b) does not have the confidence that he states or implies in the truth of the assertion, or

(c) knows that he does not have teh basis that he states or implies for the assertion.

(2) A misrepresentation is material if it would be likely to induct a reasonable person to manifest his assent, or if the maker knows that it would be likely to induce the recipient to do so.

- in order for a misrepresentation to be fraudulent w/in the meaning of this section, it must be consciously false but must also be intended to mislead another.

- Consequences are intended if a person either acts with the desire to cause them or acts believing that they are substantially certain to result

- fraudulent representations do not need to be material (within meaning of this rule) to have legal effect.

- a fraudulent misrepresentation does not need to be material to entitle the recipient to relief under 164, but a non fraudulent misrepresentation does need to be material

MATERIALITY may be met in two ways: 1. it would be likely to induce a reasonable person to manifest his assent or 2. if the maker knows that for some special reason it is likely to induce the particular recipient to manifest his assent.

If a misrepresentation as to the character or essential terms of a proposed contract induces conduct that appears to be a manifestation of assent by one who neither knows nor has reasonable opportunity to know of the character or essential terms of the proposed contract, his conduct is not effective as a manifestation of assent.

- It is immaterial in this section whether the misrepresentation is made by a party to the transaction or by a third person.

(1) If a party's manifestation of assent is induced by either a fraudulent or a material misrepresentation by the other party upon which the recipient is justified in relying, the contract is voidable by the recipient.

(2) If a party's manifestation of assent is induced by either a fraudulent or a material misrepresentation by one who is not a party to the transaction upon which the recipient is justified in relying, the contract is voidable by the recipient, unless the other party to the transaction in good faith and without reason to know of the misrepresentation either gives value or relies materially on the transaction.

- In general, a recipient of a misrepresentation need not show that he has actually been harmed by relying on it in order to avoid the contract.

Judicial remedies under the rules stated in this Restatement serve to protect one or more of the following interests of the promisee:

(a) his EXPECTATION INTEREST, which is his interest in having the benefit of h is bargain by being put in as good a position as he would have been in had the contract been performed

(b) his RELIANCE INTEREST, which is his interest in being reimbursed for loss caused by reliance on a the contract by being put in as good a position as he would have been in had the contract NOT been made, or

(c) his RESTITUTION INTEREST, which is his interest in having restored to him any benefit conferred on the other party.

- A party can't recover for loss that he could have avoided by arranging a substitute transaction on the market.

- In theory the expectation recovery is the actual worth of the contract to the individual party, but in reality b/c the loss has to be a foreseeable result of breach, it ends up being more closely linked to market price.

(A) The remedies provided by the UCC must be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed but neither consequential or special damages nor penal damages may be had except as specifically provided in the UCC or by other rule of law.

(B) Any right or obligation declared by the UCC is enforceable by action unless the provision declaring it specifies a different and limited effect.

Where the buyer wrongfully rejects or revokes acceptance of goods or fails to make a payment due on or before delivery or repudiates with respect to a part or the whole, then with respect to any goods directly affected and, if the breach is of the whole contract, then also with respect to the whole undelivered balance, the aggrieved seller may

(a) withhold delivery of such goods;

(b) stop delivery by any bailee as hereafter provided;

(c) proceed under the next section respecting goods still unidentified to the contract;

(d) resell and recover damages as hereafter provided

(e) recover damages for non-acceptance or in a proper case the price;

(f) cancel.

(1) Under the conditions stated in 2-703 on seller's remedies, the seller may resell the goods concerned or the undelivered balance thereof.  Where the resale is made in good faith and in a commercially reasonable manner the seller may recover the difference between the resale price and the contract price together with any incidental damages allowed under the provisions of this Article, but less expenses saved in consequence of the buyer's breach.

(2) Except as otherwise provided in subsection (3) or unless otherwise agreed resale may be at public or private sale including sale by way of one or more contract to sell or of identification to an existing contract of the seller.  Sale may be as a unit or in parcels and at any time and place and on any terms but every aspect of the sale including the method, manner, time, place and terms must be commercially reasonable.  the resale must be reasonably identified as referring to the broken contract, but it is not necessary that the goods be in existence or that any or all of them have been identified to the contract before the breach.

(3) Where the resale is at a private sale the seller must give the buyer reasonable notification of his intention to resell.

(4) Where the resale is at a public sale: (a) only identified goods can be sold except where there is a recognized market for a public sale of futures in goods of the kind; and (b) it must be made at a usual place or market for public sale if one is reasonably available and except in the case of goods which are perishable or threaten to decline in value speedily the seller must give the buyer reasonable notice of the time and place of the resale; and (c) if the goods are not to be within the view of those attending the sale the notification of sale must state the place where the goods are located and provide for their reasonable inspection by prospective bidders; and (d) the seller may buy.

(5) A purchaser who buys in good faith at a resale takes the goods free of any rights of the original buyer even though the saller fails to comply with one or more of the requirements of this section.

(6) The seller is not accountable to the buyer for any profit made on any resale.  A person in the position of the seller or a buyer who has rightfully rejected or justifiably revoked acceptance must account for any excess over the amount of his security interest, as hereinafter defined in section 2-711.

(1) Where the seller fails to make delivery or repudiates or the buyer rightfully rejects of justifiably revokes acceptance then with respect to any goods involved, and with respect to the whole if the breach goes to the whole contract, the buyer may cancel and whether or not he has done so may in addition to recovering so much of the price as has been paid (a) "cover" and have damages under the next section as to all the goods affected whether or not they have been identified to the contract; or (b) recover damages for non-delivery as provided by 2-713.

(2) Where the seller fails to deliver or repudiates the buyer may also (a) if the goods have been identified recover them as provided in 2-502; or (b) in a proper case obtain specific performance or replevy to goods as provided in this Article.

(3) On rightful rejection of justifiable revocation of acceptance a buyer has a security interest in goods in his possession or control for any payment made on their price and any expenses reasonably incurred in their inspection, receipt, transportation, care and custody and may hold such goods and resell them in life manner as an aggrieved seller.

(1) After a breach within the preceding section the buyer may "cover" by making in good faith and without unreasonable delay any reasonable purchase of or contract to purchase goods in substitution for those due from the seller.

(2) The buyer may recover from the seller a damages the difference between the cost of cover and the contract price together with any incidental or consequential damages as hereinafter defined (2-715) but less expenses saved in consequence of the seller's breach.

(3) Failure of the buyer to effect cover within this section does not bar him from any other remedy.

- COVER does not need to be an identical item... just a commercially reasonable substitute under the circumstances of the particular case.

- cover remedy is not limited to merchants, consumers may use it as well.

(A) The remedies provided by the UCC must be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed but neither consequential or special damages nor penal damages may be had except as specifically provided in the UCC or by other rule of law.

(B) Any right or obligation declared by the UCC is enforceable by action unless the provision declaring it specifies a different and limited effect.

(1) Subject to subsection (2) and to the provisions of this Article with respect to proof of market price, the measuring of damages for non-acceptance or repudiation by the buyer is the difference between the market price at the time and place for tender and the unpaid contract price together with any incidental damages provided in this Article, but less expenses saved in consequence of the buyer's breach.

(2) If the measure of damages provided in subsection (1) is inadequate to put the seller in as good a position as performance would have done then the measure of damages is the profit (including reasonable overhead) which the seller would have made from full performance by the buyer, together with any incidental damages provided in this Article, due allowance for costs reasonably incurred and due credit for payments or proceeds of resale. 

- If there is no evidence available of the current market price at the time/place of tender, a substitute market may be used.

- this section provides recovery for lost profits in all appropriate cases, including all standard priced goods.

-It is NOT necessary to show a history of earnings to recover "profit"

(1) Subject to the provisions of this Article with respect to proof of market price, the measure of damages for non-delivery or repudiation by the seller is the difference between the market price at the time when the buyer learned of the breach and the contract price together with an incidental and consequential damages provided in this Article, but less expenses saved in consequence of the seller's breach.

(2) Market price is to be determined as of the place for tender or, in cases of rejection after arrival or revocation of acceptance, as of the place of arrival.

- Where the unavailability of a market price is caused by a scarcity of goods of the type involved, a good case is normally made for specific performance under this Article.

- The remedy in this section is a complete alternative to cover and applies only when and to the extent that the buyer has not covered.

(1) Incidental damages resulting from the seller's breach include expenses reasonably incurred in inspection, receipt, transportation and car and custody of goods rightfully rejected, any commercially reasonable charges, expenses or commissions in connection with effecting cover and any other reasonable expense incident to the delay or other breach.

(2) Consequential damages resulting from the seller's breach include: (a) any loss resulting from general or particular requirements and needs of which the seller at the time of contracting had reason to know and which could not reasonably be prevented by cover or otherwise; and (b) injury to person or property resulting from any breach of warranty.

- PART 1 incidental damage list is NOT EXHAUSTIVE... just an illustration of the typical kinds of incidental damages

- Consequential damages are allowed for all damages that seller had "reason to know" in advance.. .but ONLY if the buyer could not reasonably prevent the loss by cover or otherwise.

- Good faith or bad faith.. doesn't matter when determining consequential damages

- Burden of proving consequential damages is on the buyer

A party is entitled to restitution under the rules stated in this Restatement only to the extent that he has conferred a benefit on the other party by way of part performance or reliance.
- a party's expenditures in preparation for performance that do not confer a benefit on the other party do not give rise to resitution interest.

- The requirement of this section is generally satisfied if a benefit has been conferred, and it is immaterial tha tit was later lost, destroyed or squandered.

- benefit MUST be confered by the party seeking restitution... not just a benefit from the contract

- the other party is considered to have benefit conferred o nhim if a performance was rendered at his request to a third person

If a sum of money is awarded to protect a party's restitution interest, it may as justice requires be measured by either

(a) the reasonable value to teh other party of what he received in terms of what it would have cost him to obtain it from a person in teh claimant's position, or

(b)the extent to which the other party's property as been increased in value or his other interests advanced

- Recovery is ordinarily more generous for a benefit that has been conferred by performance

- court has considerable discretion choosing btwn (a) and (b)... usually give more generous amount unless the measure is hard to apply, or that party breached

- (a) is usually measured based on market price

(1) Subject to the rule stated in subsection (2), on a breach by non-performance that gives rise to a claim for damages for total breach or on a repudiation, the injured party is entitled to restitution for any benefit that he ahs conferred on teh other party by way of part performance.

(2) The injured party has no right to restitution if he has performed all of his duties under the contract and no performance iby teh other party remains due other than payment of a definite sum of money for that performance.

- restitution is available regardless of whether the breach is by non-performance or by repudiation

- if a breach is by non-performance, restitution is only available if the breach gives rise to a claim for damages for total breach and no merely to a claim for damages for partial breach

- injured party under a losing contract can receive more money is restitution then in reliance/expectation damages. Limited by (1) only liable to the extent that hie has benefited and (2) if injured party has completed performance and nothing remains for party breaching to do by pay, recovery is limited to price.

(1) Subject to the rule states in subsection (2), if a perty justifiably refuses to perform on teh ground that his remaining duties of performance have been discharged by teh other party's breach, teh party in breach is entitled to restitution for any benefit that he has conferred by way of part performance or reliance in excess of the loss that he has caused by his own breach.

(2) To teh extent that, under the manifested assent of the parties, a party's performance is to be retained in the case of breach, that party is not entitled to restitution if teh value of the performnace as liquidated damages is reasonable in the light of hte anticipated or actual loss caused by the breach and the difficulties of proof of loss.