Post on 19-Dec-2015
Pre-K Liability 2
Contracts – Prof. Merges
Feb. 28, 2011
3/1: Statute of Frauds
Intro. and Notes on Contemporary Statutes, 257-270; C.R. Klewin, 270-77.
3/3: S o F II
Richard v. Richard, 280; Note on Sales of Goods and St. Ansgar, 289-295; Notes on 2-201(3) and Estoppel, 294; Surety clauses, 297-9, Intro and Monarco, 305.
1. Pre-contractual liability
2. Definiteness
Cyberchron Corp. v. Calldata Systems
Cyberchron Corp. v. Calldata
• Procedural History
• Facts
Who appealed?
• Why?
• How many causes of action in the Cyberchron complaint?
Cyberchron Corp. v. Calldata
• How many causes of action in the Cyberchron complaint?
1. Breach of K
2. “Quantum meruit”
3. Promissory Estoppel/Reliance
Cyberchron Corp. v. Calldata
Negotiation History
• 1989-90: “extended negotiations”
• May 15, 1990 – Grumman P.O.
• June 2, 1990 Letter from Grumman (“insist” on perf. Under “K”)
Negotiation History
District Court Ruling
• Enforceable agreement?
District Court Ruling
• Enforceable agreement?
Why not?
District Court Ruling
• Enforceable agreement?
Why not?
“two of the most essential, material and substantial terms” missing
District court
• Theory of recovery?
District court
• Theory of recovery?
–Reliance
District court
• Theory of recovery?
–Reliance
–On what promise?
The key promise
–Reliance: On what promise?
–Grumman/Calldata’s Wilhelm, to Cyberchron’s Paul: P. 237
What was the district court’s “reliance period”?
What was the district court’s “reliance period”?
• July 15 – Sept. 26 1990
• Why this period?
What was the district court’s “reliance period”?
• July 15 – Sept. 26 1990
• Why this period?
[From] Grumman direction to proceed “as if we have a K” [to] entering into 2nd K with Codar Technology on Sept. 26
Reliance Period
7.15.90 9.26.90
Reliance Period
7.15.90 9.26.90
Why no reliance before 7/15?
Reliance standard
3 Elements in NY: p. 237:
1. Clear unambiguous promise2. Reasonable foreseeable reliance3. Injury to relying party
“Unconscionable” injury?
§ 90. Promise Reasonably Inducing Action Or Forbearance
(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 be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.
Reliance Period
7.15.90 9.26.90
Why no reliance after 9/26?
What was the enforceable promise?
• We will pay you for expenses in preparing the data terminal prototype?
• OR: we will negotiate a final agreement in good faith?
Channel Home Centers v. Grossman
Famous historical site?
Who was Washington’s No. 2 person at Valley Forge?
What was the 1st major battle after Valley Forge?
What was the 1st major battle after Valley Forge?
• Battle of Monmouth, June 19, 1778
What major legal figure was encamped wit Washington at
Valley Forge?
What major legal figure was encamped wit Washington at
Valley Forge?
Channel Homes v. Grossman
• Facts
• History
Negotiation history
Negotiation history
• Location tour Nov. 28, 1984
• Memo Dec. 7, 1984
“To induce the Tenant to proceed with the leasing of the store, you will withdraw the store from the rental market and only negotiate [this K] to completion.”
District court holding
District court holding
• No K
• Reliance?
• Restitution?
Holding – 3d Circuit
Holding – 3d Circuit
• “Evidence existed” to support K to negotiate in good faith
• Remand: Issues to consider
• Was there actually a K?
• Was the offer open only for 30 days?
What about lost opportunities?
What about lost opportunities?
• Note 1, p. 245
D&G Stout v. Bacardi
• Reliance on promise not to withdraw distributor’s account
• Caused promisee to forego acquisition offer – led to significant damages
“Tribune I” and “Tribube II” Contracts
• Fully enforceable preliminary agreement
• Vs. Agreement to negotiate in good faith
Rennick v. O.P.T.I.O.N. Care Inc., 77 F.3d 309 (9th Cir.1996)
To determine whether the agreement binds anything, the court must look to the content of the letter and to the circumstances. The agreement in Rennick contained a non-binding clause and also contained a provision requiring approval of the O.P.T.I.O.N. Board of Directors. Id. at 313. The court found no binding intent absent approval of the board of directors. However, the Rennick agreement contained express language that the parties agreed to "continue good faith discussions directed toward the creation of formal written contract." Id. at 314. Thus, a good faith obligation could be found in an otherwise nonbinding agreement where the parties included such language. Id. at 316.
Tribune II Ks
• Breach?
• Remedies?
Burlington and definiteness
• Terms vs.
• Standard for determining terms
• Here: fully enforceable option
– Unfair to defendant?