UCC 2-204 (3)

• UCC 2-204 (3)
  
• R2C sect. 33 comment a
  

  Assignment 23 The Requirement of Definiteness --RE-DO
  

   Read: C 251‐262; Note 1 on 253; Note 4 on 254; Notes 1, 3 & 4 on 256‐257; Notes 1 & 2    on 261 
  

    S 204 §§ 33 & 34; 33 UCC 2‐204(3); 42 UCC 2‐305(1)
  

   Brief: Toys, Inc. v. F.M. Burlington Co.
  

    Oglebay Norton Co. v. Armco, Inc.
  

   
   

• Toys, Inc. v. FM Burlington Co.
  
• Oglebay Norton Co. v. Armco, Inc.
  

 
 

The terms of the offer must be sufficiently clear and complete so that the court can determine what the parties intended & can fix damages in the case of non-performance.

 
 

Rationale of this rule-

Two things the court can determine if the language is clear:

-Terms of the damn thing & whether or not they were broken

-Damages. (In theory, if bad faith can be proved by P expectation damages can be awarded/protected).

***One depends on another.

 
 

 
 

Disclosure v. definiteness

Good faith does NOT require full disclosure of bargaining strategy… see p. 253 for margin comment

Not definite

-Pure conjectures like "I'l give you a fair share" (amounts subj to the view of a particular person whose guess is considered)

"Such an executory K must rest for the performance of the honor & good faith of the promisor."

References in this section:

Fairmount

Wood v. Lucy

 
 

How to determine whether a K is too indefinite to enforce:

-Often, cts will piece together enough terms to satisfy the requirement of definitenes

Sources of these "pieces" include:		Prelim negotiations like prior comm'ns, references to external sources such as gov't regulations, trade usages, prior courses of dealing b/n the parties, course of performance b/n them after their agreements, etc.
Rules		UCC 1-205; 2-208

 
 

Terms will sometimes be supplied by law.

 
 

Factual implications may supply/supplement terms that appear to be too indefinite.

The courts will furnish implied in fact terms from the dealings & relationship of the parties if not expressly covered by the parties. (trial courts have authority to do this)

-failure to specify does not invalidate the K.

 
 

1. Courts WILL imply a reasonable price if price is completely omitted.
   
2. Courts WILL NOT do the same for situations where the price stated is too indefinite.
   
   1. Courts will call it "too indefinite"
      

Rules re: price flexibility

-UCC 2-305

-UCC 2-723

-UCC 2-724

 
 

Helpful analogies + more 256 & 257

 
 

 
 

 
 

 
 

 
 

Toys, Inc. v. FM Burlington Co.

Vt. 1990

 
 

(Conditional acceptance of an option to renew)

 
 

Facts:
P wanted new lease on its terms; D wanted old terms (option K always existed b/n parties)

 
 

PH:

Summ J for P in lower ct

 
 

Issue on appeal:

Whether the lease provision created a valid option for P to renew for another five year or was it too indefinite to be enforceable?

 
 

D's argument:
Emphasis on "renegotiate" in the renewal cause which to them shows the intent to reach a future agreement.

 
 

Rules:

The option K must contain all material & essential terms to be in the subsequent document. It doesn't ened everything, just the main stuff…

 
 

Point of problem:

Price term. "The then prevailing rate w/n the mall."

 
 

Analysis:

Ct does not think this is too indefinite. The agreement says prevailing rate at the mall… this is something that could be determined, which D furnishd a few days after P stated its intent to exercise its option to renew its lease.

 
 

Prevailing rate is not too indefinite b/c of protections of the parties… mkts fluctuate. This was long-term. Instead of the parties agreeing on specific price 5 years out, they decided to agree on one objective indicator.

 
 

Conclusion:

Affirmed. The price term in the option K was definite enough to make the option enforceable.

 
 

Oglebay Norton Co. v. Armco, Inc.

 
 

Facts:

Primary & secondary pricing mechanism present in LOOONG term K.

Primary		Publication in industry that publishes prevailing shipping rate
Secondary		Mutually agreement by parties, as recognized by the leading iron oore shippers in such season for the transportation of iron ore

 
 

-There's a downturn in the industry

-1985: Primary mechanism stops publishing

-Then secondary mechanism also fails b/c indepen shippers stopped publishing their rates.

 
 

-Problem: What is a reasonable rate for the K?

 
 

PH:

P sues, asking for ct to set rsble rate for shipping

Trial ct ruled that K was binding & came out w/ terms

 
 

Issue in lower ct:

Is there a K here, and if there is, what are its terms?

 
 

Issues in app ct:

1. Intent to be bound by both?
   
2. T ct err in establishing its K?
   
3. Was trial ct correct to retain equitable jx over the case and order the parties to use a mediator if they could not mutally agree in a given seaon… Basically t ct retained jx for the future.
   

    
    

   D's argument on app:
   

   -B/c both mechanisms broke down & only 2 were contemplated by parties in K, b/c they broke down renders K unenforceable.
   

   -the t ct did not have jx to impose a shipping rate when the rate did not conform w/ the pricing mechanisms furnished in earlier K
   

   Analysis of instant:
   

   -Parties did intent to be bound… it's a seriously long K (1957-2010)
   

   Factors of definiteness/intent were present
   

   So, despite failure of pricing mechanisms, parties intended to be bound
   

    
    

   -Lower ct did have ability to assign price term
   

   The missing price term could be determined w/ reference to common law & UCC for a "reasonable price"
   

   -Awarding damages would be too speculative… performance held to be better idea
   

    
    

   -Did lower ct err to order specific performance& retain equitable jx?
   

   No. B/c performance is required (v. damages… awarding "future damages" = way too speculative) but, how to monitor/enforce performance if jx is NOT retained???
   

   -This is an unusual result, but required in this case.
   

   Liikely the parties later settled b/c there's a lot of motivation for parties to work it out when cts retain jx in efforts to NOT displease the judge.
   

    
    

   Conclusion:
   

   Affirmed.
   

   -parties intended to be bound
   

   -performance was appropriate remedy
   

   -trial ct used right procedure/analysis