Contracts Outline

I. Introduction to Contracts
A. Contract: An agreement between two or more persons that has a
legal effect. Must have “mutual assent” or “meeting of the
minds.”
1. Express Contract – true expression of words (verbal or
written)
2. Contract Implied in Fact – based on conduct
3. Three elements that can be called a “contract”
a. Agreement in fact between two parties
b. An agreement as written
c. Set of rights created by agreement in fact or as
written
4. 2 types of contracts:
a. Bilateral – an exchange of a promise for another
promise.
b. Unilateral – an exchange of a promise for
performance.
i. Only party that makes promise is bound
ii. Offeree never becomes obligated to perform
iii. Offeror not bound until accepted by offeree – performance is
acceptance
B. 2 categories of source of law:
1. Primary – “the law” must be followed. Can be mandatory
or persuasive (persuasive if it is a law in a lower court or
another jurisdiction, therefore a higher court or a court in
another jurisdiction can follow it if they want to, but they
do not have to)
2. Secondary – Articles and opinions of court cases. Not
“law” or legally binding. Almost always persuasive.
a. Example: Restatement of Contracts (1932 –
Llewellyn and ALI) – court has choice of either
following the common law (primary) or the
Restatements (secondary).

C. Stare decisis: if a case has been decided, the court has to decide
their case based on that previously decided case – must be
virtually identical.
D. Corbin and Williston
1. Williston – “black letter law” formalist approach.
Regarded law as a set of abstract rules courts could by
deduction use to decide in individual cases. Did not use
moral or political values in decisions.

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 2. Corbin – realist approach geared toward discovering what
courts are actually doing and weave the findings into
“working rules” of law.

II. Mutual Assent - “Meeting of the Minds” - required for a contract to be

formed.
A. Elements:
1. Objective view – Intent (or manifestation) of willingness to
enter into a bargain constituted an offer.
a. Contract has nothing to do with personal or
individual intent of the parties, rather the action that
represents that intent. If that action manifests an
intent that a reasonable person would believe is an
offer, that action constitutes the offer, not the actual
intent of the offerer.
b. Restatement of Contracts Section 70: One who
makes a written offer which is accepted, or who
manifests acceptance of the terms of a writing
which he should reasonably understand to be an
offer or proposed contract, is bound by the contract,
though ignorant of the terms of the writing or its
proper interpretation.

2. Reliance:
a. Refers to offeree’s reasonable right to rely on
offeror’s offer for which there is a legal ramification
for offeror not upholding (breach of contract)

III. Offer and Acceptance : Bilateral Contracts (exchange of promise for

another promise)
A. Offer: a manifestation of willingness to enter into a bargain.
Offer empowers offeree to accept. Dispute is typically whether
there is an offer or an acceptance in contract cases.
1. To determine if a correspondence is an offer:
a. Look at language – even if term “offer” is used, it
may not be an offer
b. Consider to whom statement is being made – if
made to a large group, is likely an invitation to an
offer
c. Look at details surrounding statement – more
details, the more likely the person intends to be
bound
i. Exception: Limiting Language - language that prevents offeror
from opening themselves up to unlimited liability. (Language
must sufficiently limit boundaries of liability)

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 1. example – offer of a reward for
return of a dog (only one person can
bring dog back)
2. example – ads “first come first
served,” “while they last”
B. Acceptance: a manifestation of an assent to an offer.
1. Can be accepted only by party to whom it is communicated
2. Must follow how offer dictates how acceptance should be

C. Counter-offer
1. A counter offer is considered a rejection …. No contract

D. Rejection
1. No contract

E. Events that can terminate an offer (by offeror)

1. Revocation – General rule: even if offeror states that offer
will remain open for a stated time, offeror can still revoke
any time before acceptance
a. Can be verbally communicated
b. Can be revoked by offeror acting inconsistently
with offer (ie selling to another)
c. Must be communicated before revocation is
effective
i. If done by a 3rd source, it must be a reliable party
2. death or incapacity of offeror, offeree
a. does not have to be communicated
3. lapse of time
a. If time is stated, offer terminates at end of time
stated
b. If no time stated, offer terminates within a
reasonable time
c. General rule is that offer lapses at end of
conversation to accept unless there is an indication
that offeror intended to give offeree more time
4. rejection by offeree
a. Outright
b. Counteroffer
i. “Mirror Image Rule” – acceptance must mirror the offer or
there is not an acceptance (therefore counteroffer not an
acceptance)
5. Exceptions
a. “Grumbling Acceptance”
(ex. If buyer offers “$90,000” and seller says “too
low” – the original offer by buyer is still open as
this is not an official counteroffer

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 b. Inquiry (ex. Seller says “Can you give me $95?” –
offer still open b/c this is an inquiry, not a
counteroffer)
6. Option Contract – Offeree provides consideration to have
offer held open. Consideration can be nominal.
a. ex. Offeree pays $ to keep contract open for 90
days. If they reject but then accept within those 90
days, acceptance is good and rejection irrelevant.
b. NO Mailbox Rule – acceptance effective when
received.
c. Unilateral Contract – Section 45 – if part of
performance tendered, an option contract has been
instated

IV. Offer and Acceptance: Unilateral Contracts (exchange of promise for

performance)
A. Elements
1. Offeror not bound until offeree has completed performance
2. Offeree never becomes bound
B. Revocation
1. Williston’s view – offeror may see the approach of the
offeree to accept the offer once performance is completed
and still be within rights to revoke it even with full
knowledge that acceptance is contemplated
a. Problem: Offeror can revoke offer when offeree in
middle of performance b/c offeror never bound.
Puts offeree in vulnerable position
2. “Corbinization” - Section 45 of Restatements - Revocation
of Offer for Unilateral Contracts
a. If an offer for a unilateral contract is made, and part
of the consideration requested in the offer is given
or tendered by the offeree in response thereto, the
offeror is bound by a contract, the duty of
immediate performance of which is conditional on
the full consideration being given or tendered
within the time stated in the offer, or, if no time is
stated therein, within a reasonable time. (most
jurisdictions now follow this rule)
b. Still no acceptance until completion

C. Restatement 2nd § 32 – unless language or circumstances (such as

“I’ll give you $50 if you win contest) indicate otherwise, it
should be assumed that offer may be accepted either by a
promise of performance in return or by an actual rendering of
that performance.

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 1. What offeror is seeking determines whether unilateral or
bilateral (courts try to see contracts as bilateral if at all
possible)
a. Bilateral: Offeree must notify offeror either verbally
or by beginning performance.
i. If offeror seeking a promise and offeree does not verbally
accept promise but begins performance, that is seen as a
promise.
b. Unilateral: If offeror seeking a performance,
offeree is not required to give notice of acception.
Performance constitutes notice.
i. Exception: if performance would not ordinarily come to
attention of offeror, offeree must give notice within a
reasonable time after completion of performance.
ii. If result can’t be promised (ex. Cook Case), indicates unilateral
contract
D. Silence – generally not considered acceptance
1. example: “If I don’t hear from you within 10 days, I will
assume you have accepted” = not binding
2. exception: if some past relationship dictates that silence
can be acceptance
E. Mailbox Rule
1. Acceptance effective when SENT if manner sent is
reasonable.
a. Offeror can be bound by contract before they know
about it.
2. “Vacillating Offeree” – ex. O’ee puts acceptance in mail
Thursday. Puts rejection in mail Friday. Rejection arrives
Friday. Acceptance arrives Saturday.
a. Under mailbox rule, offeror bound b/c acceptance
sent first.
b. However, if reliance of offeror on rejection (such as
having sold item) can be proven, offeree estopped
from asserting mailbox rule.
3. If rejection goes in mail first, no mailbox rule. Whatever
arrives first prevails.

4. “At will employment” – employee working at will of

employer. Employee has no rights and employer could
terminate employment at anytime for any reason.
a. Split of authority regarding this issue
V. Consideration – imposes legal liability on party and is required for formation
of contract (Gratuitous Promise v. Consideration)
A. Benefit/Detriment Theory (traditional view)
1. benefit to promisor OR
2. detriment to promissee

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B. Bargain Theory (more modern view)
1. Elements (all must be answered yes)
a. Promise by promisor?
i. Promise: an assurance that a thing will or will not be done
ii. If promise made in jest, court must look to surrounding
circumstances, such as personality of person, wealth of person,
etc.
iii. Promise v. Future intent – future intent does not form a
promise
iv. Illusory Promise – a promise that appears to be a promise, but
really is not a promise. Leaves performance of contract to
promisor’s control. (ex. “I promise to pay when I feel like it.”)
Leaves it unclear as to whether or not promise is going to come
(Good Faith rule followed in modern law and can overrule
an illusory promise)
1. Requirements Contract – agreement
between buyer and seller that buyer
will buy everything she needs from
one seller. Problem: buyer may
never need anything. (Now
governed by UCC)
2. Output Contract – agreement
between a buyer and seller that seller
will sell everything she makes to the
one buyer. Problem: seller may
never make anything. (Now
governed by UCC)
3. Contracts Terminable at Will –
unenforceable unless there is
notification of termination of
contract, which prevents contract
from being illusory.
a. Exception: employment at
will
b. Promise or performance by promise?
i. Can be in the form of a forbearance – giving up the right to do
something
ii. Settlements and invalid claims – if two parties come to
settlement and it is later found to be an invalid claim, parties
are bound to settlement. Courts favor settlements. (exception
– fraudulent claims)
c. Did promisor seek performance or promise?
i. May be inferred based on circumstances
ii. Gratuitous Promise with a condition (ex. “I will buy you lunch
if you walk around the corner to the cafeteria.”) – must
determine if it benefits promisor. If so, may be consideration.

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 Does not have to be a tangible benefit (ex. could be a better
company image)
d. Did promisee give performance or promise in
exchange for promisor’s promise?
i. Must be subsequent promise for future
ii. Past consideration is not valid for this element (ex. reward for
lost dog. Person returns dog not knowing of the reward. Then
finds out about reward. Cannot then claim the reward b/c dog
not returned for purpose of receiving reward.
iii. Can phrase the promise as “for value received” or “in
consideration for” but this does not mean consideration has
been given.
C. Exceptions:
1. Gratuitous Promise – giving something for nothing.
Unenforceable even if a detriment is incurred (Kirksey v.
Kirksey)
2. Peppercorn Theory of Consideration – anything will suffice
for consideration not matter how small the thing is as long
as it is bargained for. Court will not look at inadequacy.
a. Exception – if gross disparity, court will look at b/c
could be indicative of fraud, duress, pretense, sham,
etc.
b. Exception – Restatement – if a party states an
amount given in consideration and amount not paid,
consideration is given (policy – should be able to
believe what a party writes)

D. Gratuitous Promise – the giving of a gift without the expectation

of anything in return
1. Not legally enforceable as a general rule
2. Always ask what is benefit to promisor in determining a
gratuitous promise

VI. Promissory Estoppel – basis for recovery based on unbargained for reliance
A. Stops promisor from asserting that there is no consideration

B. Equitable Estoppel – If a party misrepresented fact that other

party relied upon, court would hold party to promise.
1. Extended into theory of promissory estoppel based on
promise rather than misrepresentation of fact
C. Elements (all must be met)
1. Promise by Promisor?
a. An assurance that a thing will or will not be done
b. Future intent does not form a promise

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 c. May be inferred by actions, conduct or
manifestations
d. Will sometimes relax requirements for promise (ex.
sometimes an offeror will do everything but
expressly or impliedly promise)
2. Did Promisor reasonably expect promise made to induce
either an action or forbearance
a. (Restatement 1) of a definite and substantial nature?
b. (Restatement 2) by promise or by 3rd party?
3. Did promise induce action or forbearance by promise?
a. Act must flow from promise
4. Is enforcement of promise necessary to avoid an injustice?
a. Detrimental reliance? Actual or legal
b. Action should be of definite and substantial
character (acc. to First Restatement)
c. Must be foreseeable reliance
D. Exceptions:
1. Charitable Subscriptions: an oral or written promise to do
certain acts or to give real personal property to a charity or
for a charitable purpose. Giving money without
expectation of anything in return.
a. Majority Rule – Use objective standard. All 4
questions must be answered in affirmative. General
Rule: When a person makes a donation to a charity,
the promise will not be enforceable unless there is
consideration or reliance
b. Minority Rule – none of questions need to be
addressed. (Applies only when analyzing under 2nd
Restatement)
2. Restatement §87 – applies to option contracts between
subcontractors and general contractors.
a. Situations where an offer has been made and the
offer is relied upon prior to acceptance.
b. Subcontractor ---- General Contractor ----- Owner
(General contractor relied on subcontractor’s bid for
his own bid but has not yet accepted subcontractor’s
offer because his bid has not yet been accepted.)
i. Three Views:
1. Baird (Minority) – reliance will not
cause offer to become irrevocable.
Offeror can still revoke prior to
acceptance.
2. Drennan (Majority) – uses §45 – if
reasonable reliance shown, offer
cannot be revoked and offeror must

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 give offeree a reasonable time to
accept
3. Use of bid (Minority) – constitutes
acceptance with condition that
general contractor receives overall
contract (conditional upon being
awarded) Acceptance immediately
after general contractor awarded
project.

VII. Restitution – Unjust enrichment. One who benefits at the expense of another
is required to make restitution if unjustly enriched. (separate body of law)
A. When someone performs a service for another without being
asked or without bargaining. Performer must expect
compensation at time service is rendered.
B. Quasi Contract (Contract Implied In Law) –legal fiction - no
intent needed – imposed to justice
C. General Rule – If A does a voluntary act for B without B’s
request, it was gratuitous and A cannot seek restitution.
1. Exception – if done in a professional capacity, unrequested
services may be compensated.
D. Elements:
1. Benefit and enrichment conferred on one party
a. Detriment to promisor irrelevant. Court only
concerned with receipt of service or benefit.
2. Unjust to retain without compensating performer for
service?
a. Unjust if person acting in a professional capacity
without consent. If a layperson, must be an extreme
burden incurred.
i. Restatement of Restitution §116 – Recovery for Service
performed to preserve another’s life or health
1. Unofficiously acts – necessary, not
meddling. Warranted acts.
2. With intent to charge
3. No opportunity to obtain consent
4. No reason to believe consent would
not be given
ii. Restatement of Restitution §117 – Recovery of Services
performed to preserve another’s property
1. Unofficiously acts
2. With intent to charge
3. No opportunity to obtain consent
4. No reason to believe consent would
not be given

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 5. In lawful possession of property or to
be on property
6. Services not made necessary by
party’s breach (Plaintiff did not
cause risk to property)
7. Services accepted
iii. Mechanic’s Lien Statutes – Generally used in construction
industry to protect subcontractors. Allows subcontractors to
place a lien against a property for unpaid services or supplies.
Property owner may require a general contractor to have lien
waivers from all subcontractors before owner will pay general
contractor
1. Common Law Application –
question is whether owner has paid
in whole or part for services. Will
support the argument that owner is
not unjustly enriched by services.
iv. Relatives – must show intent to charge for services
v. Recovery – value of services rendered is what is looked at, not
the defendant’s actual benefit.

VIII. Promissory Restitution – occurs when a party comes back after the
conferring of a service and promises to pay, then refuses to do so.
A. Traditional Rule – moral obligation not sufficient consideration
for an express promise, and absent any prior legal obligations,
such as debt or bankruptcy, promise not enforceable. (Mills v.
Wyman)
1. Can be implied through conduct of promisor (ex. SOL for
creditor expired. However, debtor makes a payment on
debt. Debtor acknowledges the debt and held to the
promise to pay the debt)
2. Exception: If a person promises to pay a prior obligation
after the SOL to collect payment of the obligation, promise
enforceable for amount person promised to pay originally.
B. Modern Rule – When promisor promises to pay for a service
subsequent to rendering of the service, promise is enforceable
when promisor has directly received a material benefit (ex.
saving life by falling with block of wood from 2nd floor – Webb
v. McGowin). Promise enforceable to degree that promise not
disproportionate to benefit received. In this case, a legal
obligation flows from a moral obligation.
C. Restatement of Restitution Rule – a subsequent promise to pay
will be enforceable to the extent necessary to avoid an injustice,
provide the service was not gratuitous (person intended to be
compensated) Restatement has not decided whether a promise is
binding when benefit does not directly go to promisor.

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 1. Court can base amount rewarded on value of service, not
on promise.
IX. Obligation in the Absence of Complete Agreement: Limiting the
Offeror’s Power to Revoke
A. Bilateral Contracts – some situations where offeror must rely on
the offer prior to acceptance
1. General Contractor/Subcontractor relationship
a. Minority Rule (Baird v. Gimbel) – in
subcontractor/general contractor situation, reliance
will not cause offer to become irrevocable and
offeror can still revoke before accepting.
i. General contractor can protect themselves from this rule by
using a conditional acceptance (“My use of your bid is my
acceptance and is conditional upon my being awarded the
contract.”)
b. Majority Rule (Drennan v. Star Paving Co.) – uses
§45 – if reasonable reliance is shown, the offer
cannot be revoked and offeror must give offeree a
reasonable time to complete (ex. use of
subcontractor’s bid by general contractor to
generate a bid of their own to obtain a building
contract)
i. Exceptions:
1. reliance must be reasonable.
2. general contractor put on notice of
mistake
c. Use of bid rule – constitutes acceptance with the
condition that the general contractor receives the
overall contract and is conditional upon the project
being awarded. Acceptance is immediately after the
awarding of the project to the general contractor.
2. Complex negotiations can create reliance
a. Example: Pop’s Cones v. Resorts International
3. Bid shopping/Bid chopping - must look to see if general
contractor is accepting or making a counter offer.
a. Subcontractor bound, General not bound (not
entirely fair)
B. Option Contract – created when an offeree gives consideration to
the offeror to leave the offer open for a stated amount of time
during which the offer may not be revoked.
1. Consideration can be nominal
2. If offer rejected within the timeframe offer is supposed to
remain open and then accepted within that timeframe, the
rejection is no good and the acceptance makes the contract
binding.
3. Example case:

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 a. Berryman v. Kmoch – consideration was never paid,
therefore, no option contract
C. Firm Offer – Statutory exception that creates a situation where an
offer is irrevocable without consideration
1. Elements:
a. Offer is there
b. Made by merchant
c. To buy or sell goods (moveable items)
d. In a signed writing (can be on letterhead)
e. Gives assurance that it will be held open.
2. Offer irrevocable for time stated not to exceed 3 months
maximum.
3. If no time stated, offer irrevocable for a reasonable amount
of time not to exceed 3 months.
4. Even if offer states “held open for 125 days,” offer only
irrevocable for up to 3 months. (unclear as to what happens
to it after this point)
5. Example Case: Mid-South Packers v. Shoney’s – the
proposal indicated an intent to be bound = offer.
X. Battle of the Forms: Qualified Acceptance
A. Statutory Rule: an acceptance must exactly mirror the offer or
you have a counter offer (mirror image rule)
B. “Last Shot Rule” – (traditional rule) buyer’s offer is the offer and
seller’s acknowledgment is the acceptance. If the two forms
contain different terms, the buyer accepts the seller’s terms if
payment is remitted and the goods are accepted.
C. UCC §2-207: allows an acceptance of an offer even though the
terms vary from the original offer. (applies only to the sale of
goods, however, not required to be between merchants and not
required to involve forms)
1. Offer based on forms that manifests an intent to be bound?
(usually the purchase order)
2. Acceptance? (usually the acknowledgment)
3. Additional terms in acceptance or confirmation?
a. Yes
i. Express assent to additional terms in acceptance? (Acceptance
actually says, “expressly made conditional on”)
1. Yes – IS NOT an acceptance (c/o)
2. No – IS an acceptance = contract
ii. Additional terms become part of contract UNLESS
1. Not between merchants
2. Offer expressly limited the
acceptance to the terms of the offer,
…OR…
3. Offeror rejects terms in reasonable
amount of time …OR…

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 4. Terms materially alter agreement
a. Surprise (catch buyer
unaware) OR
b. Hardship (substantial
economic hardship)
4. Different terms in acceptance or confirmation?
a. View 1 - different terms never become part of offer
b. View 2 – different terms treated same as additional
terms
c. View 3 – “Knock Out Doctrine” – different terms
cancel each other out and neither term comes into
play
5. If no offer based on forms, offer based on conduct?
a. No – no contract
b. Yes
i. Terms?
1. Terms parties agreed on AND
2. Supplementary code terms
6. Confirmations in relation to §2-207 –ONLY applies when
there has been a prior agreement.
a. If an agreement has been reached, either the buyer
or seller (or both) will send written confirmations to
the other. The tendency is for additional terms to be
included here.
b. Has there been an agreement prior to the
confirmation?
i. No – no contract
ii. Yes – go to question 2 in §2-207 analysis re. terms.
XI. Agreement to Agree – contract to enter into a future agreement
A. 3 situations
1. parties purport to agree (“first class house” example)
2. parties omit or are silent regarding a term of the agreement
3. parties agree to agree “later”
4. letter of intent – preliminary negotiations
B. Traditional Rule – Must be a definite standard or method for the
court to decide the left out or ambiguous term or it is not
enforceable (ex. Walker v. Keith)
C. Modern Rule – If court can find proof in intent to be bound, the
court will find a way to enforce the agreement if there is a way to
clarify the ambiguity or supply the missing terms. If price is
term missing, court will determine a reasonable price based on
market conditions and local indicators.
D. Letters of Intent – Court can find an enforceable contract if
parties are looking to have a formal writing in a letter of intent.
(same as agreement to agree)
XII. Statute of Frauds – Restatement of Contracts §§ 110 – 151

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A. Covers contracts that must be in writing for 2 reasons:
1. Prevent fraudulent claims
2. Minimize mistakes of ill thought out decisions
B. Courts dislike the statute and try to find ways around it to
enforce agreements that would not ordinarily be enforceable
under the statute by narrowly construing the provisions and
hoping the contract falls under an exception.
C. Analysis
1. Is it a type of contract that falls under the statute? If yes,
2. Is the writing requirement met?
a. If yes, it is enforceable
b. If no,
3. Does the contract fall within any of the exceptions to the
writing requirement?
a. Yes = enforceable
b. No = unenforceable
4. Question 1: Contracts covered (MY LEGS)
a. Marriage – agreement made in consideration of
marriage
b. Year – promise that cannot be performed within one
year of its making
i. Look at when it was entered into and when performance will
end. (ex. K entered into on 1/1/02 for a 3 month contract.
Performance begins on 11/1/02. Performance not complete
until 2/1/02.)
ii. Courts will disregard fractions of a day (ex. one year K entered
into on 1/1/02 and performance begun on 1/2/02, court will
disregard one day so it will not fall under SOF)
iii. Promises of indefinite duration – if at all possible to be
performed within a year, court will not consider it under SOF
1. Ex. “rest of A’s life” – A could die
2. No matter how slim the chance is, K
will not fall into SOF if possibility of
performance within one year.
3. Ex. “contract can be terminated in
90 days” – indefinite in duration.
Must look at intent of parties – trying
to be excused from K or that it must
be performed in 90 days? Calling
for performance w/in year or
termination w/in year?
4. “Defeasance” different from
“indefiniteness” (ex. A contracts to
work for B for 5 years. A dies
within 1st year. Contract has to be in

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 writing to be enforceable b/c A has
not performed)
iv. Excusatory or termination clause – contracts with these clauses
that cannot be performed within a year, must be in writing to
be enforceable.
c. Land – promises to convey an interest in property
i. Included lease agreements, option K or a total conveyance of
land
ii. Leases – any lease for more than one year will fall into statute.
Short term leases usually excused. (NC – lease can be up to 3
years w/o having to be in writing)
d. Executorship – Promise of administrator to pay debt
of decedent from administrator’s funds
e. Goods – Contract for sale of goods for $500 or
more (UCC §2-201) * see XIII
f. Suretyship – promises to answer for the debts of
another
i. 3 parties: debtor, creditor, promisor
ii. Promise must be made to creditor, not debtor
iii. Must have underlying debt or obligation by debtor
iv. Exceptions:
1. Novation – promisor promises to be
solely responsible and debtor is
released completely from debt (look
to see if creditor is looking to debtor
and promisor (suretyship) or just to
promisor (novation)
2. Main Purpose Rule – if promise for
promisor’s benefit (ex. mortgagee –
mortgager)
3. Situations where debtor never
became obligated (ex. P buys car for
D. D pays car payments but D not
obligated, P obligated)
4. Surety tells debtor he will pay but
never tells creditor
5. Question 2: hWriting Requirement
a. Memorandum – evidence of contract, not contract
itself. Can be almost anything. If more than one
document,
i. If all documents signed by party being charged, no problem
ii. If one of documents unsigned, 2 views:
1. signed doc. must make a reference to
unsigned doc.
2. papers considered together as long as
on “face” of each document they

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 relate to same subject matter (better
view)
b. Must contain:
i. Identification of parties
ii. Reference to subject matter
iii. Essential terms
iv. Consideration must be reflected if not already given
6. Question 3: Exceptions
a. Main Purpose or Leading Object Rule (suretyship)
i. If main reason promise made was to benefit promisor
b. Part performance doctrine (property interest)
i. Requirements:
1. Possession AND
a. Improvements OR
b. Part Payments
2. Plaintiff seeking equitable relief
ii. Rent payment generally not sufficient for part performance
iii. Partial performance – not same as part performance. When
plaintiff does something less than requirements of part
performance of a service K, generally does not fall into these
types of K’s – courts will grant restitution for money or time
put into promise to avoid unjust enrichment.
iv. Divisibility Rule – if K not divisible, entire contract may be
enforced. If is divisible, will be divided to extent performed.
c. Promissory Estoppel Exception (Alaska
Democratic Party v. Rice)
i. Majority – Restatement (Second) §139 – promise which
promisor should reasonably expect to induce action or
forbearance on part of promisee or 3rd party and which does
induce action or forbearance is enforceable notwithstanding the
SOF if injustice can be avoided only be enforcement of
promise. Enforceable to extent necessary to avoid an injustice.
ii. Minority – apply promissory estoppel exception as set out in
first Restatement – limits application to cases where one of
parties has been misrepresented (where p’sor promised to
reduce to writing or misled p’see into thinking agreement not
covered by SOF.
XIII. UCC §2-201 Contracts for sales of goods in amount of $500 or more
A. Three sections and steps to analysis
1. Must be in writing and contain:
a. Quantity (except for output and requirements Ks)
b. Signature of party being charged
c. Sufficient to indicate contract
2. Merchant’s exception – contracts between merchants may
be enforceable even though writing not signed by party
being charged

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 a. Was there a contract? If yes,
b. Was there a written confirmation? If yes,
c. Was confirmation received within a reasonable
period of time after contract formed? If yes,
d. Did party have reason to know of its contents
(writing must be sufficient to indicate that a prior
agreement had been reached) If yes,
e. If party did not object in writing to contents of
confirmation within 10 days of receipt of
confirmation.
f. * Note – party in receipt does not lose case, only
loses argument of Statute of Frauds. Other party
still must prove the existence of a contract.
3. Exceptions - §2-201(3)
a. Part Performance – K enforceable to extent
payment has been made and accepted or goods
received and accepted (ex. K for 5 deliveries at
$500 each and no written contract. If one delivery
made, K enforceable to that extent – one delivery)
b. Admission Exception – K enforceable to extent it
has been admitted to as some part of court
proceedings (ex. same scenario as “a” but
admission to contract for one delivery, not
necessarily a delivery. Enforceable for one
delivery)
c. Specially Manufactured Goods – If goods not
suitable for sale to other people in course of
business (ex. business cards)
d. * If not between merchants and does not fall within
an exception, back to common law rule that
agreement must be in writing to be enforceable.
B. Writing Requirement
1. Must be sufficient to indicate an agreement, AND
2. Must contain quantity, AND
3. Signed by party being charged
C. Differences in 2-201 and 2-207
1. 2-201 – one party trying to enforce K and other trying not
to enforce K
2. 2-207 – parties want K enforced, but must decide which
party’s terms to apply
3. Ex. – A and B are merchants entering into a contract. A
sends B a confirmation with additional terms. B received
confirmation, but did not respond. B ships goods and
goods are defective. Goods worth $1,000. A brings action
against B.

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 a. B would raise SOF defense under 2-201 b/c he does
not want K enforceable. B would argue the
agreement fails under subsection 1 b/c not in
writing.
b. A would argue that K falls under subsection 2 b/c
there was a confirmation received within a
reasonable amount of time after agreement, B had
reason to know of contents and did not object
within 10 days of receipt of confirmation.
c. B loses. Now must look at K using 2-207.
XIV. Content and Interpretation – when vagueness and ambiguity in language of K
A. Problem arises when:
1. Ambiguity and vagueness in a document
2. Poor communications with client such that K does not
contain everything client wanted (sloppy drafting)
3. Developments occurred that the parties did not foresee and
did not provide for in K
4. Purposeful use of vague language to allow parties to reach
an agreement
B. General Principles of Interpretation – used when parties disagree
about the meaning of a term (ex. “chicken”)
1. Must first decide if there is an ambiguity
a. Plain Meaning Rule – if meaning of term is clear on
its face, court will not allow parties to present
evidence of meaning of term. Meaning will depend
on context. Majority of courts will allow parties to
submit evidence to what something means, even if
there is no ambiguity. Problem – what appears to
be plain on its face is not plain on its face (ex. two
ships with name “Peerless”)
b. Doctrine of Reasonable Expectations – primarily
applies to insurance contracts
1. If a K is taking away a right the
person is contracting for or
something the person did not expect,
then the person is not bound to these
items and is only bound to things he
expected.
2. One would not reasonably expect to
find a provision that takes away the
very protection you sought in
entering the K (ex. burglary
insurance, but then after burglary
occurs, burglary does not fall within
definition)
2. Tests to Intepretations

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 a. Subjective Test (Traditional) – try to determine
what parties intended or meant
b. Objective Test – what a reasonable person would
have interpreted the language to mean.
c. Modified Objective Test (Modern) – Ask: (1) What
did parties intend? (2) Did either party know or
have reason to know what the other party intended?
1. If party seeking to enforce K knew
or had reason to know what the other
party meant and the other party did
not, then the K is enforceable in
favor of the innocent party
2. If neither party knew or had reason
to know what the other party was
thinking, no meeting of the minds
and no K
3. If both parties knew or had reason to
know what the other party was
thinking, each party equally at fault.
4. Note: does not require that buyer had
actual knowledge, but rather reason
to know. (ex. “Peerless” ship – if
seller normally ships in Dec., buyer
had reason to know that seller meant
the Dec. “Peerless” and not the Nov.
ship.
3. Factors that affect court’s interpretation
a. Relevant circumstances
b. Principle purpose of agreement
c. If 2 provisions in conflict, will look to see if one
provision is more general than the other and more
specific provision will control
d. If a mixture of typed, handwritten, and pre-printed
provisions in agreement, court will give preference
to something handwritten over typed and typed over
pre-printed. (more recent language more indicative
of parties’ agreement)
e. Unequal bargaining power – ambiguity in K terms
must be construed most strongly against the party
who drafted agreement
f. Does not go against public policy
g. Avoid an absurd result (Golden Rule)
h. Will use context to determine what a term means.
Take word within context of sentence it is used in.
C. Content

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1. Unless K required to be in writing, is possible for parties to
have an agreement that is a combination of written and
verbal agreements. When more than one expression of an
agreement, courts show preference for final expression of
agreement.
2. Parol Evidence Rule (PER) – to the extent that the parties
execute a writing that is and is intended to be a final
expression of their agreement, no parol evidence may be
admitted to supplement, explain, or contradict it.
a. Reasons:
1. Where there is a writing of
agreement, writing tends to be a
more reliable indicator of what
agreement consisted of
2. If courts give preference to writing,
this gives stability to parties’
transaction.
b. Courts have some hostility to PER b/c if it is strictly
applied, agreement may be partially enforced.
c. Two schools of thought:
1. Williston (traditional) – based on
belief that writing should be given
preference under all circumstances
2. Corbin (modern) – based on belief
that agreement should consist of all
that parties intended it to be
composed of, written or verbal
d. Requirements:
1. Written K or agreement
2. Dispute based on prior or
contemporaneous agreements or
negotiations
e. Analysis:
1. Writing?
a. No – no PER problem
b. Yes, then
2. Integrated? – does it represent
parties’ final agreement? (exam will
say writing was integrated b/c it
appears they had an agreement –
nothing to discuss if not integrated!)
a. No – no PER problem
b. Yes, then
3. Totally or Partially Integrated?

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 a. If totally, writing cannot be
contradicted or supplemented
(evidence cannot come in)
b. If partially, writing can’t be
contradicted but can be
supplemented by prior or
contemporaneous agreements
or negotiations b/c party did
not intend for writing to be
sole indication of agreement
4. Exceptions? (where PER will not
keep prior and cont. negotiations out)
f. Determining Total or Partial Integration
1. Williston –
a. Merger clause? – makes it clear that it is the entire agreement and
negotiations have been merged into doc.
i. Yes – totally integrated
ii. No, then
b. Four Corners Rule – Does writing appear on its face to be entire
agreement?
i. No, writing partially integrated and may be supplemented
ii. Yes, writing totally integrated UNLESS alleged consistent term
would not have naturally been included in the writing (then partial)
a. Subject Matter test – to determine if alleged consistent
term would not have been naturally included. Look to see
what is subject matter of writing. Did writing deal with
subject matter of alleged consistent term?
1. Yes, parties probably said everything they had to say
about the term in writing and evidence will not come in.
2. No, K is partially integrated and evidence will come
in.
2. Corbin –
a. More modern/liberal view – Restatement and Code
b. Not limited to Four Corners Rule
c. Looks at intent of parties
d. Looks to all relevant circumstances
e. Merger clause may not preclude evidence from being admitted
3. Exceptions - must look to see why party trying to bring in evidence
a. Evidence to Explain – PER does not apply. Two approaches apply in
deciding when to admit extrinsic evidence to explain:
1. Traditional – Plain Meaning Rule – If ambiguity in writing,
evidence is allowed. If meaning clear on its face evidence
barred b/c no need to explain something that is clear.
2. Modern – Reasonably Susceptible Test – Allows anything in
that will give some insight into what a word means b/c a word

21
 is always susceptible to more than one meaning (Ex.
“Peerless”)
a. Is term reasonably susceptible to asserted meaning? If
yes,
b. Court will allow evidence in to interpret meaning
b. Collateral Agreement – a separate agreement on a subject matter
distinct from subject matter of dispute. Evidence is allowed.
c. Evidence to show K is invalid – PER does not apply. (Fraud, duress,
misrepresentation, no consideration)
d. Evidence to show effectiveness of K (ex. failure to satisfy a condition
precedent)
e. Evidence to reform – PER does not apply (ex. wrong quantity or price)
4. UCC §2-202 – Parol Evidence Rule
a. Same analysis as above
b. Differences from regular PER:
i. Oral contemporaneous agreements excluded. Only written
contemporaneous agreements admissible.
ii. If totally integrated, writing cannot be supplemented or
contradicted by consistent terms. Only trade usage, course of
dealing, and course of performance are allowed.
a. When a party is trying to introduce these practices, if
they can reasonably be construed as being consistent with
the express terms of the writing, they can come in. If not,
the express terms will prevail.
ii. Trade Usage: deals with the industry
a. Some type of practice in the context of a vocation, trade
or place that has such regularity of observance that it would
justify an expectation that that particular usage will be
observed with respect to the parties’ transaction.
b. No overall consensus as to how trade usage applies to
someone new to an industry.
iii. Course of Dealing: deals with past behavior between parties
that has created an expectation that it will be followed in the
present transaction.
iv.Course of Performance: deals with conduct of parties during
transaction in question
v. Courts give more credence to evidence the closer it gets to
transaction in question. Dealing over usage, performance over
dealing.
XV. Supplementing the Agreement – “gap fillers” apply only when parties silent on term
A. Parties have omitted terms, dispute between parties, and court is being
asked to supply terms. Categories of terms:
a. Implied in Fact – when a court determines the intent of the
parties
b. Implied in Law – when a court implies a term in the agreement
to achieve a just result; does not deal with intent of parties

22
B. Terms court will imply in parties’ agreement
a. “Best Efforts”
i. Promise that the parties will put forth a best effort to
fulfill contract (ex. Lady Duff Gordon case)
ii. Usually applied to exclusive dealings contracts – where
one party has exclusive rights to market or distribute
some item made by another party. (ex. requirements K,
output K, territorial distributorships, percentage leases
(lease for percent of profit), real estate brokerage)
b. Good Faith – honesty in fact
i. Merchants – observance of commercially reasonable
standards.
ii. Cannot say some acts are good faith and others are bad
faith. Must look at facts of case and reason from facts
as to whether act was in good faith.
iii. At-will contracts – applies to these. Application very
limited.
iv. Employee Handbooks – if manual sets certain
procedures that must be followed for termination,k
court may take one of two views:
1. Manual is binding. Failure to follow procedures
is a breach of good faith.
2. Manual doesn’t matter – merely a promise that
is not binding
v. Subjective Standard – applies to things of personal
aesthetics, such as painting, poetry, sculpture. Person
can reject product and cancel K if person honestly does
not like object (even if others say it is fine). May revert
to the reasonable person standard if there was a lot of
work involved in the creation of the final product.
vi. Reasonable Person Standard – if the reasonable person
finds work to be acceptable, then the K may not be
canceled. (ex. painting a house or other commercial
contexts)
c. Termination Requirements
i. In K’s of indefinite duration, a reasonable notice of
termination is required. (exception: employment at-
will – court will not imply)
ii. Generally parties can make termination at will in the K
iii. UCC §2-309 – requires a reasonable notice and parties
will be bound for that period of time. Applies only to
contracts for sale of goods.
iv. Amount of notice will depend on circumstances. Could
be days, weeks, months, or years. Court will look at:
a. Time needed to recoup financial
investment

23
 b. Time needed to sell remaining inventory
v. Salespersons – if commission based, not a contract for
sale of goods. If salesperson is actually buying goods
from manufacturer and reselling goods, there is a
contract for sale of goods (Dealer-distributorship
relationship as in Leibel case)
vi. If agreement provides for K to terminate upon
occurrence of an event, then the court will not imply
this term (ex. if sales drop for six months, contract will
be terminated)
d. Implied Warranties
i. Contracts for Sale of Goods – UCC provides for 3 types
1. Implied Warranty of Merchantability –
a. When a consumer purchases a good, it is
implied that the good will be
i. Of fair and average quality (ex.
AC unit)
ii. Fit for purpose they were
intended (ex. AC unit will cool)
iii. Conform to any affirmations on
label (ex. label says that AC unit
will cool 1,000 sq. ft., it must
cool a 1,000 sq. ft. area)
b. Exception: Goods rendered with a
service are considered to be part of
service and K is no longer under UCC
provisions. Ex. Blood Shield Statutes –
when blood products supplied as part of
service, blood is considered part of
service and party is precluded from
raising warranty defense. X receives a
transfusion and contracts Hepatitis.
(whereas hair product not part of
beautician’s service)
2. Implied Warranty of Fitness for a Particular
Purpose: Arises when buyer is buying goods
and seller has reason to know of particular
purpose for which goods being bought and
buyer relies on seller’s recommendations.
Goods must be suitable for purpose. Applies
even if goods are not defective. (Ex. Customer
buys shoes for climbing. Salesperson knows of
purpose and sells customer running shoes)
3. Implied Warranty of Good Title: when a person
buys a good, the seller is ensuring good title.

24
 No liens against property and property is not
stolen.
ii. Residential Leases and Contracts for Sale of Real Estate
1. Traditional – Caveat Emptor – “buyer beware”
– buyer responsible for inspecting dwelling and
detecting defects in premises.
2. Implied Warranty of Habitability – applied to
both residential leases and contracts for new
homes.
a. Residential Leases – lessors obligated to
provide fit and habitable premises
b. Purchase of Real Estate – applied to
builders in regards to original buyer of
house. Builder obligated to build a
house that is free from material defects
and that is fit and habitable.
i. Subsequent buyers – unsettled as
to whether liability is imposed on
builder.
ii. Commercial Real Estate –
unsettled. Some courts: business
owner is like home owner. Other
courts: business owners better
able to detect defects
c. Professional Services – when services
provided in a professional capacity, there
is no warranty b/c that professional
cannot guarantee the outcome (ex.
lawyer cannot say she is going to win
case b/c she does not know what judge
or jury will do)

25