Outline: Contracts - IV - Express and Implied Promises

Contracts (Spring 2006, Hull)

IV. EXPRESS AND IMPLIED PROMISES

1. Express Promises – Promise must be reasonably definite (i.e., provide a basis for finding breach and rendering remedy) to be enforceable. R.2d 33. [Abrams v. Illinois College of Podiatric Medicine – A vague and indefinite promise prevents the creation of a binding and enforceable oral contract.]
2. Exception – Facts can overcome express promises. [Payne v. Sunnyside Community Hospital – Inconsistent representations and/or contradictory practices may negate an express disclaimer.]
3. 2-313(1)(b) – Express Warranties – Any description of [the quality, character, or condition 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.
   1. UCC 2-313(2) - Formal words not required. [Carpenter v. Chrysler Corporation – Statements of fact (i.e., conveying sufficiently definite information about the quality of a product) create an express warranty. Implied warranty of merchantability.]
   2. Puffery – Exaggerations by the seller do not create an express warranty unless they are statements of fact. [Scheirman v. Coulter – Seller’s statement that a product has been discontinued is puffery; express warranties do not include price.]
4. Inchoate Agreements
   1. Traditional View – An agreement to agree is not enforceable.
      1. Cottonwood Mall Company v. Sine – An agreement to extend or renew lease without specifying rate and duration of the lease is not enforceable.
      2. Exception – promissory estoppel [Hoffman v. Red Owl Stores, Inc. – A promise unenforceable for lack of definite terms may still be enforced under promissory estoppel if injustice would otherwise result because defendant’s conduct induce plaintiff to act to his detriment.]
      3. Unjust enrichment [Dursteler v. Dursteler – Buyer in failed mink farm deal without adequately comprehensive contract entitled to restitution for reasonable value of benefits conferred.]
   2. R.2d 27 - Where parties clearly intend to agree, but have not have filled out every detail, the court may attempt to fill in the gaps. [Berrey v. Jeffcoat – In a failure to agree to rental amount for a renewal of an existing lease, a court can determine reasonable terms for renewal.]
5. Implied Terms
   1. Good Faith
      1. R.2d 205 - Good Faith and Fair Dealing - Every contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.
         1. Carrico v. Delp – Where induced by promise to extend credit, extra collateral is consideration, making agreement enforceable, with implied good faith obligation to exercise reasonable discretion.
         2. Triangle Mining Co., Inc. v. Stauffer Chemical Co. – Absent special elements of reliance and unequal bargaining power, no implied good faith limitation on a contract with unambiguous terms of termination.
         3. Casa D’Angelo, Inc. v. A & R Realty Company – Burden on plaintiff to demonstrate bad faith; where base rent is substantial, there is no implied covenant to generate percentage rent.
      2. 2-203 - Obligation of Good Faith [Brewster of Lynchburg, Inc. v. Dial Corporation – A requirements contract allows a buyer to reduce the quantity demanded to any amount, including zero, so long as it does so in good faith.]
   2. 2-314 – Implied Warranty of Merchantability – A merchant’s wares carry an implied warranty of merchantability.
   3. 2-315 - Implied Warranty of Fitness - If a seller has reason to know particular purpose of purchase, there is an implied warranty that the goods are fit for that purpose.