1L Contracts Question

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TJISMYHERO
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1L Contracts Question

Postby TJISMYHERO » Wed Nov 02, 2011 12:52 am

I have a question over the application of promissory estoppel in the following situation:

A K between merchants for the sale of goods (so, UCC applies)

K falls under statute of frauds

K includes an enforceable no oral modification clause

Parties make an oral modification

A party reasonably relies on the oral modification

Is promissory estoppel applicable?

There is no oral promise to put the oral modification into writing

StyrofoamWar
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Re: 1L Contracts Question

Postby StyrofoamWar » Wed Nov 02, 2011 12:26 pm

Been a long time since K's, but here we go:

I think this sounds a lot more complicated than it actually is. Here's why:

Promissory estoppel requires reasonably foreseeable detrimental reliance (or some such variation of this general rule, your jurisdiction may vary) by a party on a promise that is subsequently reneged on.

Here, the parties freely entered into a contract that explicitly stated there could be NO oral modifications. Subsequently, one party relies on an oral modification. Given that this party freely entered into a contract that explicitly stated there could be no oral modifications, it appears unlikely that this party will be able to argue that it was reasonably foreseeable that he would detrimentally rely on that promise, when he knew full well that the contract he was attempting modify expressly stated he could not do so in this manner.

As such, promissory estoppel likely fails. If the parties want to modify this contract, per its terms, they must do so in a manner other than an oral modification. Courts are in the business of enforcing proper contracts, not of re-writing them to be "fair" to someone who made a bad deal by the terms of his own contract.

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Kiersten1985
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Re: 1L Contracts Question

Postby Kiersten1985 » Wed Nov 02, 2011 2:27 pm

2L here - I agree with the above. Both the statute of frauds and the fact that a written K was already agreed upon cut against PE.

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TJISMYHERO
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Re: 1L Contracts Question

Postby TJISMYHERO » Wed Nov 02, 2011 7:34 pm

Thanks, I tend to agree with you both. Unfortunately, my professor does not. I raised the question in class today and he pretty much said that reliance beats the no oral modification clause. I can see that being true if the parties' conduct indicates a "waiver" to the no oral mod clause, since the UCC allows PE under SoF, but in general I agree with your responses. I know what to say on my exam, but am still confused as to which view is correct. Thanks for the responses.

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InnocuousDiatribe
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Re: 1L Contracts Question

Postby InnocuousDiatribe » Wed Nov 02, 2011 8:51 pm

So just to be clear:

If parties modify orally after an integrated writing is created--e.g., Party A says, "Instead of 1000 widgets, I need 1500"; Party B promptly orders 500 more from his supplier and ships to Party A; Party A then calls up Party B (after he's already shipped) and says, "Don't want 'em anymore."--promissory estoppel could NOT be used to put Party B back to where he was before Party A rejected?

(I'm in TJ's K class, but unlike TJ, my bleeding heart wants B to be able to recover, despite no-oral mod clause. But your point is well taken, styrofoamwar.)

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jessuf
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Re: 1L Contracts Question

Postby jessuf » Wed Nov 02, 2011 9:21 pm

Statute of Frauds does not bar oral modifications that do not materially alter the original contract where one party reasonably relies on the oral modification. See Brookside Farms v. Mama Rizzo's

Also see Restatement 139

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bk1
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Re: 1L Contracts Question

Postby bk1 » Wed Nov 02, 2011 9:26 pm

InnocuousDiatribe wrote:So just to be clear:

If parties modify orally after an integrated writing is created--e.g., Party A says, "Instead of 1000 widgets, I need 1500"; Party B promptly orders 500 more from his supplier and ships to Party A; Party A then calls up Party B (after he's already shipped) and says, "Don't want 'em anymore."--promissory estoppel could NOT be used to put Party B back to where he was before Party A rejected?

(I'm in TJ's K class, but unlike TJ, my bleeding heart wants B to be able to recover, despite no-oral mod clause. But your point is well taken, styrofoamwar.)


Does it have the same no oral modification clause as TJ's hypo?

And doesn't integration just mean that stuff prior or contemporaneous to the writing, not after, is obviated?

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jessuf
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Re: 1L Contracts Question

Postby jessuf » Wed Nov 02, 2011 9:41 pm

InnocuousDiatribe wrote:So just to be clear:

If parties modify orally after an integrated writing is created--e.g., Party A says, "Instead of 1000 widgets, I need 1500"; Party B promptly orders 500 more from his supplier and ships to Party A; Party A then calls up Party B (after he's already shipped) and says, "Don't want 'em anymore."--promissory estoppel could NOT be used to put Party B back to where he was before Party A rejected?

(I'm in TJ's K class, but unlike TJ, my bleeding heart wants B to be able to recover, despite no-oral mod clause. But your point is well taken, styrofoamwar.)


I think you can still recover under promissory estoppel under the same theory of reasonable reliance to your detriment etc. etc. Restatement 139, but he wouldn't necessarily be reimbursed for all of the widgets because he has the ability to sell those widgets to another company. If he sells them at a reduced price to Party C, he would only be entitled to the difference.

StyrofoamWar
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Re: 1L Contracts Question

Postby StyrofoamWar » Thu Nov 03, 2011 9:06 pm

TJISMYHERO wrote:Thanks, I tend to agree with you both. Unfortunately, my professor does not. I raised the question in class today and he pretty much said that reliance beats the no oral modification clause. I can see that being true if the parties' conduct indicates a "waiver" to the no oral mod clause, since the UCC allows PE under SoF, but in general I agree with your responses. I know what to say on my exam, but am still confused as to which view is correct. Thanks for the responses.


Go ask him if you want to know. Ask for the case that supports it, not just his personal preference. if there's no case, it's probably because it hasn't come up. I can see why too, since parties tend to abide by specific terms of the contract since they, you know, bargained for them and agreed to 'em in the first place.

Then again, I guess I can see the waiver argument. If, in the course of the oral modification, the parties explicitly said "we're waiving the fact that you can't modify this contract orally" or hinted at it (a la "don't worry that this isn't written, we don't care"), you could probably make a pretty strong PE argument, despite the no modifications term.

E.g.: Contract to buy 100 of something. K says no oral modifications to this contract. X calls Y in a panic the day before the order's due and says "oh snap, I actually need 300, can you please get them for me, I need them now, can't wait" and Y relies on it and orders them, and X subsequently tries to back out, I could definitely see a court sticking it to 'em.

Now I'm curious if courts have ever directly addressed this. Dammit.




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