Interpretation

Question 1

Restatement § 77 Illusory and Alternative Promises

(Alternative Choices for Promisor)

Answer 1

A promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performances unless

(a) each of the alternative performances would have been consideration if it alone had been bargained for; or
(b) one of the alternative performances would have been consideration and there is or appears to the parties to be a substantial possibility that before the promisor exercises his choice events may eliminate the alternatives which would not have been consideration.

Question 2

Restatement § 77 Illusory and Alternative Promises: Illusory Promises

A offers to deliver to B at $2 a bushel as many bushels of wheat, not exceeding 5,000, as B may choose to order within the next 30 days. B accepts, agreeing to buy at that price as much as he shall order from A within that time.

Answer 2

B’s acceptance involves no promise by him, and is not consideration.

Question 3

Restatement § 77 Illusory and Alternative Promises: Alternative Promises

A offers to deliver to B at $2 a bushel as many bushels of wheat, not exceeding 5,000, as B may choose to order within the next 30 days, if B will promise to order at least 1,000 bushels within that time. B accepts.

Answer 3

B’s promise is consideration since it reserves only a limited option and cannot be performed without doing something which would be consideration if it alone were bargained for.

Question 4

Restatement § 77 Illusory and Alternative Promises: Alternative Promises

A agrees to sell and B to buy between 400 and 600 tons of fertilizer in installments as ordered by B, A reserving the right to terminate the agreement at any time without notice.

Answer 4

B’s promise is without consideration.

Question 5

Restatement § 77 Illusory and Alternative Promises: Alternative Promises

A promises B to act as B’s agent for three years on certain terms, starting immediately; B agrees that A may so act, but reserves the power to terminate the agreement on 30 days notice.

Answer 5

B’s agreement is consideration, since he promises to continue the agency for at least 30 days.

Question 6

Restatement § 77 Illusory and Alternative Promises: Alternative Promises

A owes B an undisputed debt of $5,000 payable in five years. A makes a subsequent promise that he will either pay $4,000 at the end of the first year or pay the debt at maturity; in return B promises to accept the $4,000, if paid at the end of the first year, in full satisfaction of the debt.

Answer 6

A’s subsequent promise is not consideration for B’s return promise, since the alternative of performing his legal duty is not consideration.

Question 7

Restatement § 77 Illusory and Alternative Promises Alternatives Not Dependent on Promisor’s Free Choice

A orders goods from B for shipment within three months, reserving the right to cancel the order before shipment. B has the goods in stock and accepts the order.

Answer 7

A’s promise to pay for the goods is consideration for B’s promise to ship, since B can prevent cancellation by shipping immediately.

Question 8

Restatement § 77 Illusory and Alternative Promises: Illusory Promises

A promises B to act as B’s agent for three years from a future date on certain terms; B agrees that A may so act, but reserves the power to terminate the agreement at any time.

Answer 8

B’s agreement is not consideration, since it involves no promise by him.

Question 9

Restatement § 77 Illusory and Alternative Promises: Implied Limitations on Promisor’s Choice

A promises to sell his output or buy his requirements of a specified type of goods from B on specified terms.

Answer 9

A’s promise is consideration for a return promise by B. A must operate his plant or conduct his business in good faith and according to commercial standards of fair dealing in the trade so that his output or requirements will approximate a reasonably foreseeable figure.

Question 10

Restatement § 77 Illusory and Alternative Promises: Implied Limitations on Promisor’s Choice

A promises to pay B half of any profits he derives from the sale of goods manufactured by B; in return B promises that A shall have the exclusive right to market such goods.

Answer 10

The promises are consideration for each other, since the agreement for exclusive dealing imposes an obligation on A to use best efforts to promote sale of the goods and on B to use best efforts to supply them.

Question 11

Restatement § 77 Illusory and Alternative Promises: Implied Limitations on Promisor’s Choice

A owes B a matured liquidated debt bearing interest. In an agreement to extend the debt for a year at a lower rate of interest, B reserves the right to accelerate payment “at will,” but under Uniform Commercial Code § 1-208, B may accelerate payment only if he in good faith believes that the prospect of payment is impaired.

Answer 11

B’s surrender of the unconditional right to demand immediate payment is consideration

Question 12

Restatement § 77 Illusory and Alternative Promises: Implied Limitations on Promisor’s Choice

A is under a contractual duty to deliver to B a described automobile. Because it is doubtful whether such a car will be available at the agreed time, A promises that if he cannot obtain it he will deliver a described substitute; B agrees to accept the substitute if delivered.

Answer 12

A’s promise is consideration.

Question 13

UCC § 2-306. Output, Requirements and Exclusive Dealings

Answer 13

(1) A term which measures the quantity by the output of the seller or the requirements of the buyer means such actual output or requirements as may occur in good faith, except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded.
(2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.

Question 14

Restatement § 201 Whose Meaning Prevails 3 Parties not Bound

Answer 14

(3) Except as stated in this Section, neither party is bound by the meaning attached by the other, even though the result may be a failure of mutual assent.

Question 15

Restatement § 201 Whose Meaning Prevails 2 Different Meanings

Answer 15

(2) Where the parties have attached different meanings to a promise or agreement or a term thereof, it is interpreted in accordance with the meaning attached by one of them if at the time the agreement was made
(a) that party did not know of any different meaning attached by the other, and the other knew the meaning attached by the first party; or
(b) that party had no reason to know of any different meaning attached by the other, and the other had reason to know the meaning attached by the first party.

Question 16

Restatement § 201 Whose Meaning Prevails 1 Same Meaning

Answer 16

(1) Where the parties have attached the same meaning to a promise or agreement or a term thereof, it is interpreted in accordance with that meaning.

Question 17

Restatement § 202 Rules in Aid of Interpretation All Circumstances

Answer 17

(1) Words and other conduct are interpreted in the light of all the circumstances, and if the principal purpose of the parties is ascertainable it is given great weight.

Question 18

Restatement § 202 Rules in Aid of Interpretation As a Whole

Answer 18

(2) A writing is interpreted as a whole, and all writings that are part of the same transaction are interpreted together.

Question 19

Restatement § 202 Rules in Aid of Interpretation Consistancy

Answer 19

(5) Wherever reasonable, the manifestations of intention of the parties to a promise or agreement are interpreted as consistent with each other and with any relevant course of performance, course of dealing, or usage of trade.

Question 20

Restatement § 202 Rules in Aid of Interpretation Repeated Performance

Answer 20

(4) Where an agreement involves repeated occasions for performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other, any course of performance accepted or acquiesced in without objection is given great weight in the interpretation of the agreement.

Question 21

Restatement § 202 Rules in Aid of Interpretation Meaning of Words

Answer 21

(3) Unless a different intention is manifested,
(a) where language has a generally prevailing meaning, it is interpreted in accordance with that meaning;
(b) technical terms and words of art are given their technical meaning when used in a transaction within their technical field.

Question 22

Restatement § 211 Standardized Agreements

Answer 22

(1) Except as stated in Subsection (3), where a party to an agreement signs or otherwise manifests assent to a writing and has reason to believe that like writings are regularly used to embody terms of agreements of the same type, he adopts the writing as an integrated agreement with respect to the terms included in the writing.
(2) Such a writing is interpreted wherever reasonable as treating alike all those similarly situated, without regard to their knowledge or understanding of the standard terms of the writing.
(3) Where the other party has reason to believe that the party manifesting such assent would not do so if he knew that the writing contained a particular term, the term is not part of the agreement.

Question 23

Restatement § 211 Standardized Agreements Non-Contractual Documents

A delivers a fur coat to B for storage and receives a warehouse receipt which purports on its face to set forth the terms of the storage contract.

Answer 23

By accepting the receipt, whether or not A reads it or understands it, A assents to its terms.

Question 24

Restatement § 211 Standardized Agreements Non-Contractual Documents

A sells plant bulbs to B. Later A delivers the bulbs with an invoice containing contractual language. B writes on a copy of the invoice “picked up October 27th” and signs his name.

Answer 24

The invoice terms are not part of the contract.

Question 25

Restatement § 211 Standardized Agreements Terms Excluded

A ships goods via B, a carrier. B carries an insurance policy with C, an insurance company, and with C’s authority issues to A a certificate that A’s shipment is insured under the policy. The policy contains a clause excluding coverage of trips on the Great Lakes unless approved by D, an individual, but this clause is not referred to in the certificate or known to A.

Answer 25

It is not part of the contract between A and C.

Question 26

Restatement § 214 Evidence of Prior or Contemporaneous Agreements and Negotiations

A and B make an integrated contract by which A promises to sell and B to buy goods “ex Peerless.”

Answer 26

Evidence is admissible to show that there are two ships of that name, which one each party meant, and, in case of misunderstanding, whether either had knowledge or reason to know of the other’s meaning.

Question 27

Restatement § 214 Evidence of Prior or Contemporaneous Agreements and Negotiations

A, in an integrated contract with B, promises B to sell certain goods to be manufactured by A, and B promises to pay the “total cost.”

Answer 27

Previous negotiations may establish the meaning of “total cost.”

Question 28

Restatement § 214 Evidence of Prior or Contemporaneous Agreements and Negotiations

Answer 28

Agreements and negotiations prior to or contemporaneous with the adoption of a writing are admissible in evidence to establish

(a) that the writing is or is not an integrated agreement;
(b) that the integrated agreement, if any, is completely or partially integrated;
(c) the meaning of the writing, whether or not integrated;
(d) illegality, fraud, duress, mistake, lack of consideration, or other invalidating cause;
(e) ground for granting or denying rescission, reformation, specific performance, or other remedy.

Question 29

Restatement § 213 Effect of Integrated Agreement on Prior Agreements (Parol Evidence Rule)

Answer 29

(1) A binding integrated agreement discharges prior agreements to the extent that it is inconsistent with them.
(2) A binding completely integrated agreement discharges prior agreements to the extent that they are within its scope.
(3) An integrated agreement that is not binding or that is voidable and avoided does not discharge a prior agreement. But an integrated agreement, even though not binding, may be effective to render inoperative a term which would have been part of the agreement if it had not been integrated.

Question 30

Restatement § 213 Effect of Integrated Agreement on Prior Agreements (Parol Evidence Rule) Inconsistent Terms

A orally agrees to sell a city lot to B. The city is installing a sidewalk in front of the lot, and A orally agrees to pay the cost to be assessed by the city in an amount not exceeding $45. B then retains a lawyer to draw up a written agreement, and A and B execute it, A without reading it. The agreement provides that A will pay all costs of the installation of the sidewalk, but does not mention any dollar limit.

Answer 30

If the written agreement is a binding integrated agreement, any agreement for a $45 limit is discharged.

Question 31

Restatement § 213 Effect of Integrated Agreement on Prior Agreements (Parol Evidence Rule) Scope of a Completely Integrated Agreement

In May A and B exchange properties and agree orally that A will make certain repairs on the property to be conveyed by A to B, the repairs to be finished by October 1. A and B then draw up and sign a memorandum of the repair agreement, specifying all the terms except that the memorandum is silent as to time of performance.

Answer 31

If the memorandum is a binding completely integrated agreement, the agreement to finish by October 1 is discharged, and the repairs are to be finished within a reasonable time. The oral agreement as to October 1 may be relevant evidence as to what is a reasonable time.

Question 32

Restatement § 20 Effect of Misunderstanding 2 Meaning of Words

Answer 32

(2) The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if
(a) that party does not know of any different meaning attached by the other, and the other knows the meaning attached by the first party; or
(b) that party has no reason to know of any different meaning attached by the other, and the other has reason to know the meaning attached by the first party.

Question 33

Restatement § 20 Effect of Misunderstanding 1 No Mutual Accent

Answer 33

(1) Mutual assent to an exchange is not shown if the parties attach materially different meanings to their assent and
(a) the parties don’t know or don’t have reason to know they’re using different meanings or
(b) the parties know or have reason to know they are using different meanings.

Question 34

Restatement § 20 Effect of Misunderstanding

A offers to sell B goods shipped from Bombay ex steamer “Peerless”. B accepts. There are two steamers of the name “Peerless”, sailing from Bombay at materially different times.

Answer 34

If both parties intend the same Peerless, there is a contract, and it is immaterial whether they know or have reason to know that two ships are named Peerless.

Question 35

Restatement § 20 Effect of Misunderstanding

A offers to sell B goods shipped from Bombay ex steamer “Peerless”. B accepts. There are two steamers of the name “Peerless”, sailing from Bombay at materially different times. A means Peerless No. 1 and B means Peerless No. 2.

Answer 35

If neither A nor B knows or has reason to know that they mean different ships, or if they both know or if they both have reason to know, there is no contract.

Question 36

Restatement § 20 Effect of Misunderstanding

A offers to sell B goods shipped from Bombay ex steamer “Peerless”. B accepts. There are two steamers of the name “Peerless”, sailing from Bombay at materially different times. A knows that B means Peerless No. 2 and B does not know that there are two ships named Peerless.

Answer 36

There is a contract for the sale of the goods from Peerless No. 2, and it is immaterial whether B has reason to know that A means Peerless No. 1. If A makes the contract with the undisclosed intention of not performing it, it is voidable by B for misrepresentation. Conversely, if B knows that A means Peerless No. 1 and A does not know that there are two ships named Peerless, there is a contract for the sale of the goods from Peerless No. 1, and it is immaterial whether A has reason to know that B means Peerless No. 2, but the contract may be voidable by A for misrepresentation.

Question 37

Restatement § 20 Effect of Misunderstanding

A offers to sell B goods shipped from Bombay ex steamer “Peerless”. B accepts. There are two steamers of the name “Peerless”, sailing from Bombay at materially different times. Neither party knows that there are two ships Peerless. A has reason to know that B means Peerless No. 2 and B has no reason to know that A means Peerless No. 1.

Answer 37

There is a contract for the sale of goods from Peerless No. 2. In the converse case, where B has reason to know and A does not, there is a contract for sale from Peerless No. 1. In either case the question whether the contract is voidable for mistake is governed by the rules stated in §§ 151- 58.

Question 38

Restatement § 20 Effect of Misunderstanding

A says to B, “I offer to sell you my horse for $100.” B, knowing that A intends to offer to sell his cow for that price, not his horse, and that the word “horse” is a slip of the tongue, replies, “I accept.” The price is a fair one for either the horse or the cow.

Answer 38

There is a contract for the sale of the cow and not of the horse. If B makes the contract with the undisclosed intention of not performing it, it is voidable by A for misrepresentation.

Question 39

UCC §2-207. Additional Terms in Acceptance or Confirmation 3

Answer 39

(3) Contracts can also be formed through conduct. When parties act as if there is a contract then new or different terms are “knocked out” and are replaced by U.C.C. gap fillers.

Question 40

UCC §2-207. Additional Terms in Acceptance or Confirmation 2

Answer 40

2) For non merchants, new and additional terms must be expressly agreed to. If they are not explicitly agreed to, they are considered mere proposals and parties are not bound by them. Between merchants new or conflicting terms become part of the contract unless:
a. ) The offer is “take it or leave it” on the new or different terms
b. ) A major part of the contract is changed, e.g. an arbitration clause is added
c. ) the original contract states that there can be no change or the other party rejects the terms in a timely matter.

Question 41

UCC §2-207. Additional Terms in Acceptance or Confirmation 1

Answer 41

(1) A timely acceptance with certain terms is valid even if there are different or additional terms. This applies to a written confirmation of an oral contract or a written acceptance of a written offer. However, if the acceptance is dependent on new or conflicting terms, then it becomes a rejection and a counteroffer.

Question 42

UCC § 2-202. Final Written Expression: Parol or Extrinsic Evidence.

Answer 42

Terms that are in the final written expression of the parties’ agreement may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented

(a) by course of performance, course of dealing, or usage of trade; and
(b) by evidence of consistent additional terms unless the court finds the written expression to be complete and integrated.

Question 43

Restatement § 215 Contradiction of Integrated Terms

Answer 43

Except as stated in the preceding Section, where there is a binding agreement, either completely or partially integrated, evidence of prior or contemporaneous agreements or negotiations is not admissible in evidence to contradict a term of the writing.

Question 44

Restatement § 216 Consistent Additional Terms (Parol Evidence Rule)

Answer 44

(1) Evidence of a consistent additional term is admissible to supplement an integrated agreement unless the court finds that the agreement was completely integrated.
(2) An agreement is not completely integrated if the writing omits a consistent additional agreed term which is
(a) agreed to for separate consideration, or
(b) such a term as in the circumstances might naturally be omitted from the writing.

Question 45

Nocitur Sociis

Answer 45

the meaning of questionable words or phrases in a statute may be ascertained by reference to the meaning of words or phrases associated with it.

Question 46

Ejusdem generis

Answer 46

a general term joined with a specific one will be deemed to include only things that are alike.

Question 47

Expressio unius exclusion alterius

Answer 47

if one or more specific items are listed without any more general or inclusive terms, other items although similar in kind are excluded.

Question 48

Ut magis valeat quam pereat

Answer 48

An interpretation that makes a contract valid is preferred over one that makes it invalid.

Question 49

Omnia praesumuntur contra proferentem

Answer 49

words with conflicting meanings are interpreted in favor of the non-drafting party.

Question 50

UCC § 2-313. Express Warranties by Affirmation, Promise, Description, Sample.

Answer 50

(1) Express warranties by the seller are created as follows:
(a) If the seller affirms or promises something about the goods and it becomes part of the basis of the bargain, that creates an express warranty that the goods shall conform to the affirmation or promise.
(b) Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.
(c) Any sample or model which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample or model.
(2) It is not necessary to the creation of an express warranty that the seller use formal words such as “warrant” or “guarantee” or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller’s opinion or commendation of the goods does not create a warranty.

Question 51

UCC § 2-314. Implied Warranty: Merchantability; Usage of Trade

Answer 51

(1) Unless excluded or modified (Section 2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.
(2) Goods to be merchantable must be at least such as
(a) pass without objection in the trade under the contract description; and
(b) in the case of fungible goods, are of fair average quality within the description; and
(c) are fit for the ordinary purposes for which such goods are used; and
(d) run, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and
(e) are adequately contained, packaged, and labeled as the agreement may require; and
(f) conform to the promise or affirmations of fact made on the container or label if any.
(3) Unless excluded or modified (Section 2-316) other implied warranties may arise from course of dealing or usage of trade.

Question 52

UCC § 2-316. Exclusion or Modification of Warranties.

Answer 52

(1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this Article on parol or extrinsic evidence (Section 2-202) negation or limitation is inoperative to the extent that such construction is unreasonable.
(2) Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that “There are no warranties which extend beyond the description on the face hereof.”
(3) Notwithstanding subsection (2)
(a) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like “as is”, “with all faults” or other language which in common understanding calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty; and
(b) when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; and
(c) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.
(4) Remedies for breach of warranty can be limited in accordance with the provisions of this Article on liquidation or limitation of damages and on contractual modification of remedy (Sections 2-718 and 2-719).

Question 53

Parol Evidence Rule

Common Law & UCC

Answer 53

Question 54

Ex Ante

Answer 54

before the fact

Question 55

Ex Post

Answer 55

after the fact

Question 56

Legal Formalism

Answer 56

Once law makers produce rules, judges apply them to the facts of the case w/o regard to social interest and public policy.

Question 57

Legal Realism

Answer 57

Judges not only consider abstract rules, but also social interests and public policy when deciding a case.