Mutual

Assent

Offer

Acceptance

Rule for
most cases

Special
offer rules

How to accept
(requirements)

Communication of
Present Commitment

Termination of
power to accept
(see other chart)

Manifestation
of Present
Commitment

By the
offeree to
the offeror

To the
terms

Proper
Manner

Unilateral

Bilateral

Silence as
acceptance

Rules to
determine
manner

Performance
to Accept

Promise to
Accept

Reasonable person test,

looking at:

Language
Used

Context in which
language used

&

Advertisements,
Circulars, etc.

GR: Not offers

except with
specific offeree
or a limited qty

Requests for
Bids

GR: Not offers

and considered
invitations to
offers

Letters of Intent

GR: Not offer

unless party makes
it clear they are to
be bound

Offeree takes
benefit

Certainty of Terms
Required

Parties

Subject
Matter

Rule if doubtful
whether
unilateral or
bilateral?

Bilateral

Reason to
believe silence
is accepted

Previous dealings
have allowed
silence

Acts inconsistent
w/ offerror's
ownership

If Offer is
prescribes
manner

If Offer
suggests
manner

If Offer is
silent re
manner

Must comply

Any
reasonable
manner

Any
reasonable
manner

Price
Quantity

(Common
Law)

Not Required (Use as Evidence of Contract)

Time

ONLY in
the
following
situations

Place

Interpret language to
determine which

Last Updated: 10 December 2008

Termination of the
Power to Accept

Revocation

Rejection

Death or
Incapacity

Manifestation
not to Accept

Effect:
Terminates power
to accept

Lapse

CounterOffer

GR: Time stated

in offer or
reasonable time

Rule for face-toface GR: offer

lapses at the end
of the
conversation

Direct
Revocation

Indirect
Revocation

Elements

Irrevocable
Offers

UNLESS

Defined: Offeror
takes definite actions
inconsistent with an
intention to enter into
the contract

Contrary
intention is
expressed by
either party

Offeree manifests
intent to take it
under further
OR
advisement

Elements

Inconsistent
Act

&

Reliable
Information

Offer

Bilateral

Unilateral

Option Contract
(Trade $ for time)

Offeree starts
performance
(Creates an
option contract)

From the
offeree to the
offeror

Relating to
the same
subject

Proposing
Different
Bargain

Firm Offers (U.C.C.)

Offers between merchants to buy or sell
goods in a signed writing which gives
assurance that it will be held open is not
revocable for lack of consideration
during time stated or reasonable time (not
to exceed 3 months).
Last Updated: 11 December 2008

Consideration

GR: Bargained-for
exchange

Recurring
Problems

Forbearance
(Withhold some
legal action)

Invalid claims
are good
consideration,
if:

GR:
Forbearance
is good
consideration

Plaintiff
asserts claim
in good Faith

&

Pre-Existing
Duty
Rule

Adequacy

GR: Courts will

not usually inquire
into the adequacy
of consideration,
except:

Claim has a
reasonable
Basis

Like-Kind
Exchange

GR: A party who agrees to do

what he has already legally
obligated himself to do has given
no consideration

Illusory
Problems

GR: Agreeing to
do what one has
already done in the
past is not good
consideration

GR: Promises cloaked in

consideration and are
actually one-sided is not
good consideration

Elements

UNLESS

Addition of
Genuine New
Duties

Nominal

Moral &
Past
Considerations

Insufficiency
(items not
capable of
being owned)

Settlement of
a Genuine
Dispute

Minority Rule: Unforeseen

change in circumstances
and the extra compensation
must be fair

Promise

Free to
perform at
promisor's
own
discretion

Promise
cannot restrict
promisor's
discretion by
either:

Good
Faith
Rip & Tear
Contracts

U.C.C.: No Pre-Existing
Duty Rule
(see U.C.C. 1-103 Duress)

OR
Reasonable
Efforts

OR
Reasonableness
Last Updated: 03 December 2008

Promissory Estoppel

Elements
See Restatements (Second)
Contracts 90

Uses

#1 As a substitute for consideration

Promise

&

Promisor should
reasonably expect
to induce action or
forbearance

&

Promise does
induce such action
or forbearance

&

Injustice can only

be avoided by
enforcing the
promise

EXCEPTION
A charitable subscription
and marriage settlement is
binding without proof that
the promise induced action
or forbearance

#2 As a substitute for a writing

required by a statute of frauds

#3 As a way of making bids (offers)

irrevocable

#4 As a way of policing unfair

negotiation behavior

Measure of Damage
The court has the discretion to granting partial or full enforcement.
The remedy granted for breach may be limited as justice requires. In other
words, sometimes a party may be limited only to reliance damages.

Last Updated: 20 January 2009

Defenses

Undue
Influence

Duress

Traditional
Duress

Wrongful
Act

Threat or use of
violence, captivity,
or other wrongful
act or threat

Precludes
Exercise of
Free Will

Causation: The
threat or use
subjugated victim's
will

Statutes of
Fraud

Deception

Mistake of
fact by both
parties
(substance,
unconscious
ignorance)

Economic
Duress

Wrongful
Act

Threat of
breach in bad
faith

Illegality

Mistake

Mistake has
a material
effect on K
exchange

Mistake as to
the basic
assumption
(quality,
function,
purpose)

Procedural
(Process)

Absence of
meaningful
choice

&

Considerations:
1. Take-it-or-Leave it
2. Opportunity for
legal advice
3. Legalese
4. Deceptive Sales

No feasible
alternatives
exist

Deception

Substantive
(Terms)

OR

Precludes
Exercise of
Free Will

No practical
legal remedy
exists

Unconscionability

Gross
inequality of
bargaining
power

"Shocks the
conscience
of the court"
Extremely
Unfair K Terms

Think Categorical:
1. Wealth
2. Education
3. Experience
4. Access to legal advice

Argument: could have said "no"

Assumption of Risk
Legitimate
reasons to
threaten breach

Contract allocates risk to a party

OR

Examples

Other party
breached

Change in
Circumstances

Considerations:
1. Marketplace
2. Parties Respective Risks
3. Competition

Party has a
good contract
defense

Party contracts knowing that she

has limited knowledge of the
facts (conscious ignorance)

OR
Court allocates the risk to the
party because it is just to do

Last Updated: 10 December 2008

Remedies

Damages

Coercive Equitable
Remedies

Liquidation (Agreed)
Damages

Restitution
(see separate chart)

(Specific Performance)

(see separate chart)

Measure

(see separate chart)

Limitations

Rest (2d) 347

Avoidability

Foreseeability

GR: Damages
based on harms that
a party could have
evaded without
reasonable burden,
risk, or humiliation
are not recoverable.

Arise in the
ordinary course
of events
(naturally flow)

OR

Certainty

Special
Circumstances

EXISTENCE

AMOUNT

must have a
reasonable
reason to know

Prove damage
actually occurred
because of the
breach

Prove the amount

of damages by
submitting enough
evidence to allow a
reasonable estimate

Additional Rules
1. Construction: After notification of a breach, the
must reasonably stop performance. See Luten Bridge.
2. Employee: Employee need not take an inferior job to
address a wrongful termination. See Hussy and Parker.

General Damages
(Benefit of the
Bargain)

Special Damages

Reliance

Essential:
Money spent
preparing or
performing a
contract

OR

Situations where you

can receive reliance
only damages

Costs & Losses

Avoided
(Expenses Saved)

Consequential

Incidental:
Money spent in
anticipation of a
contract and
dealing with
breach fall-out

&

New Business Rule: A new

business can never claim lost
profits damage due to a
breach. (Only applies to some
jurisdictions.)
Argue what constitutes a new
business.

Additional Rules
1. Emotional Distress: Only recoverable for breach
when a high level of foreseeability is present.
2. Apply & Distinguish Cases
- Ford (Tractor Light): Expect some damages, but actual
damages are disproportionate to what was foreseeable.
- Boiler: Only recover damages that are foreseeable.
- Driveshaft: only responsible for damages knows or
should have known.

1. Property damage
2. Personal injury
3. Lost resale profits
4. Lost use profits

1. Benefit of the bargain too uncertain.

2. Contract is a losing contract.
3. "Break-even" contract.
4. Public Policy.
5. Promissory Estoppel.

Last Updated: 10 May 2009

Three Steps in Damages Analysis - See Restatements (Second) 347

Step 1: What kind of breach did the defendant commit?
1. Breach by Non-Performance?
2. Breach by Defective Performance (Partial Performance)?
Step 2: What damages might the plaintiff be entitled? 4P's: Put the Plaintiff in the Performance
Position
1. Benefit-of-Bargain Damages (General Damages)
A. Breach by Non-Performance
(General Damages = Get - Give)
B. Breach by Defective Performance
(General Damages = FMV Promised - FMV Received)
2. Plus (+) Essential and/or Incidental Reliance Damages
a. Essential Reliance: Money spent preparing or performing a contract
$ spent in performing or in preparing to perform
b. Incidental Reliance: Money spent in anticipation of a contract and dealing
with breach fall-out
$ spent anticipating other party's performance
$ spent dealing with breach fallout
3. Plus (+) Consequential Damages
Property damage
Personal injury
Lost resale profits
Lost use profits (It must be reasonable to the seller/buyer that the item will be
resold)
4. Minus (-) Expenses Saved (Cost and Losses Avoided)
Unauthorized damages: (1) punitive damages, (2) emotional distress, and (3) attorney
fees (unless specified in contract).
Step 3: Do any limitations justify reducing (-) P's damages recovery?
Avoidability
Foreseeability
Certainty
Last Updated: 10 May 2009

COMMON LAW
General Damages for Commonly Made Contracts
Type of Breach

Breaching
Party

Non-Performance

Buyer

= K Price - FMV of Land

Non-Performance

Seller

= FMV of Land - K Price

Construction

Non-Performance

Owner

= K Price - contractor's cost of performing

Construction

Non-Performance

Contractor

= FMV of contractor's services - K Price

Construction

Defective
Performance

Contractor

= COR1 (unless COR1 is grossly disproportionate to DIV2); OR

= COR causes economic waste

Nature of Contract
Land
Purchase & Sale
Land
Purchase & Sale

Measure of Damages

Employment for
Non-Performance
Employer
= K Price
Specific Term
Employment for
Non-Performance
Employee
= FMV of employee's services - K Price
Specific Term
1
Cost of Repairs (COR): captures what you lost; gets you where you were promised to be; more accurate,
except in economic waster cases
2
Diminution of Value (DIV): determined by expert witnesses (not as accurate)

UNIFORM COMMERCIAL CODE (U.C.C.)

General Damages for Commonly Made Contracts
Nature of Damages

Type of Breach

Breaching
Party

U.C.C.

Measure of Damages

All possible measures of seller's BOB damages for buyer's

non-performance: K - FMV, K - Resale $, Profit, K Price (only under extraordinary circumstances).
BUYER'S BREACH BY NON-PERFORMANCE.

Benefit of the Bargain

Non-Performance

Buyer

2-708(1)

= K Price - FMV (OR:= Get - Give)

Profit

Non-Performance

Buyer

2-708(2)

= Price Paid - Cost to Make

Profit Loss (Actual)

Non-Performance

Buyer

2-706(1)

= K Price - Resale Price

Reasonable & Good

Faith Resell w/o Resell

Non-Performance

Buyer

2-709(b)

= K Price

SELLER'S BREACH BY NON-PERFORMANCE.

Benefit of the Bargain

Non-Performance

Seller

= FMV Price - K Price

OR
= Cost of Cover - K Price

Last Updated: 10 May 2009

Remedies

Damages

Restitution

(see separate chart)

Coercive Equitable
Remedies

Liquidation (Agreed)
Damages

(Specific Performance)
(see separate chart)

GR: Value of
the 's gain at
's expense.

Substantive
Claim
(Unjust Enrichment)

EXCEPTION: Applies only to

a party in breach Value of the 's gain minus the
damages caused by the breach.

Situations where a
party can recover
restitution damages
only

Elements
(Two-Part Test
of Validity)

Damages were difficult

to estimate at the time
that the contract was
made.

Elements

The gained
benefit at the
expense
(enrichment)

&

The amount stated is

reasonable in light of
either estimated damages
or the actual damages.

Without
compensating
would be
unfair (unjust)

1. As an alternative to damages.
2. A losing contract.
3. Unjust enrichment not tied to a valid contract.
a. Alternative to a tort claim.
b. $ paid for performance under void or voidable contract.
c. Good Samaritan (services rendered by a medical doctor by an unconscious person)
4. To a party in breach.

Ground for Claim

Measure of Restitution

Alternative to damages for K

Alternate to tort
Performance under a non-contract

Value of defendant's gain

Losing K
Doctors to unconscious patients
Restoration to party in breach

(Value of defendant's gain) minus (Damages caused by breach, general damages)

Last Updated: 10 May 2009

Remedies

Damages

Restitution

(see separate chart)

(see separate chart)

Liquidation (Agreed)
Damages
(see separate chart)

Adequacy
Requirement

Uncertain

Coercive Equitable
Remedies
(Specific Performance)

Discretionary
Considerations

Undue burden on the

.
Fairness of bargain.

Irreplaceable
contract subject

Undue Burden on
the Court.
Higher degree of
certainty.

Uncollectable

Public policy.

Injunctions Against Breach

1. Analyze adequacy requirement (see chart above).
2. Analyze discretionary considerations (see chart above).

Laches and unclean

hands.

Covenants Not to Compete (see p. 416)

1. Must be part of a legit agreement;
2. Must be necessary to protect legit employer interests (good will, trades secrets,
or other proprietary information); and
3. Cannot be unduly burdensome regarding geography, duration, amd restricted
activity.
Limitation
13th Amendment: It is against the 13th Amendment for a court to order an
individual to work for an employer for whom the individual does not wish to work.
Last Updated: 10 May 2009

PAROL EVIDENCE RULE

STEP 1: Determine if the PER applies to the evidence.
The PER ONLY applies to prior or contemporaneous oral evidence or prior written evidence for which there is no separate
consideration.
Is it oral or written?

Was it made prior to, during or

after the making of the writing?

Was it for separate

consideration?

If the PER does NOT apply, STOP. The evidence is admissible.

STEP 2: Determine if the writing is integrated at all.

An agreement is integrated if it is in writing and final as to at least one term.
If the agreement is NOT integrated at all, STOP. The evidence is admissible. An agreement that is NOT
integrated at all does not bar ANY evidence.

STEP 3: Determine if the agreement is completely integrated.

There are three approaches. Apply each separately.
1. Williston Two-Part Test (Narrow). NOTE: A merger clause creates an irrebuttable presumption of
complete integration. If no merger clause, then apply two-part test:
a. Look at the writing and analyze whether it was adopted as a complete, exclusive statement.
b. Look at the term at issue and analyze whether it was natural for the parties to have omitted it.
(Analyze the six Hatley naturalness factors on page 2 of the note-taking guide.)
2. Corbin All-Evidence Test (Broad). Look at the agreement, the term and all surrounding circumstances
and determine if the parties intended a complete integration.
* Merger clause is evidence of complete integration.
3. U.C.C. 2-202. (Broad, like Corbin) Intent of the parties unless it is certain that parties similarly
situated would have included the term.
If the agreement is completely integrated, SKIP to STEP 5.
If the agreement is NOT completely integrated, the evidence is admissible depending on whether it is consistent or
contradictory. GO to STEP 4.

STEP 4: Determine if term is consistent with or contradictory to the writing.

There are two approaches. Apply each separately.
Reasonable Harmony Test: Courts look at what the
parties have already agreed to and use as evidence to see
if any contradictions. (Narrow - bars more evidence)

Complete Negation Test: Evidence is consistent

as long as it does not completely negate any term
in the agreement. (Broad - bars less evidence)

If the term is consistent or NOT contradictory, STOP. The evidence is admissible.

If the term is inconsistent or contradictory, GO to STEP 5.

STEP 5: Determine if the evidence is of a type that is always admissible.

Evidence of contract defenses, of an oral condition precedent, or to help resolve an ambiguity is always admissible.
There are two approaches to identifying ambiguities. Apply each separately.
Four Corners Rule: An agreement is ambiguous only if it
appears so on its face. (Narrow - bars more evidence)

P, G & E Rule: An agreement that is unambiguous

on its face can be shown to be ambiguous by
extrinsic evidence, so long as the agreement is
reasonably susceptible of the alleged meaning.
(Broad - bars less evidence)

If the evidence falls into any of the above categories, the evidence is admissible.

Categories of K
Ambiguities

CONTRACT INTERPRETATION ISSUES

1. Patent

General Ambiguity
Problems

Recurring Ambiguity
Problems

(Appearing on the
face of document)
2. Latent

Grammatical
Problems
(Sloppiness)
(e.g. commas,
modifiers)

Words or
Phrases with
Multiple
Meanings

Conflicts
Among
Terms

Same as General Problems

BUT
Arise in Special Contexts

(Ambiguity revealed
only after learning
additional info)
3. Gap in K
(Contract is silent or
incomplete regarding
an issue)

NAME OF
CONTEXT

Creation of
an
Constructive
Condition

Creation of
an
Express
Condition

Force
Majeure
Clauses

Time of the
Essence Clauses

Construe
narrowly and
"other such
causes" must be
within the same
category

Express Condition?
Pro: It is so central that,
without it, nothing important
is left so it must be an EC.
Con: Boilerplate - time is
important but not so
important to mean if
performance is late, the K is
over.

* Preference to find CC *

USE
SPECIAL
RULES

Preference for a
promise
&
Against unclear
and ambiguous
language

1. Following stated or
relative dates.
2. If the parties can
perform at the same time,
they must.
3. "Work before Pay."
4. Nature of Transaction.

Divisibility

TEST
1. K divided into pairs;
and
2. Parties agree that each
item in each part is an
agreed equivalent of the
other item in that part.

EFFECT
1. If divisible, breach of
one party generally not
excuse further
performance.
2. If not divisible, breach
of one party may excuse
performance of
dependent obligation.

AND

USE GENERAL CONTRACT

INTERPRETATION RULES
(IN ORDER OF PRECEDENCE)
2

1
Course of
Performance
(Performance of
the K at issue and
neither party has
objected)

Negotiations
between
parties

3
Course of
Dealing
(Performance of
past Ks between
the same parties)

Trade Usage
(Parties must be in the
trade and usage is so
prevalent that anyone
in the trade would
know it.)

2009, Carolina Academic Press - Used with Permission

Interpreting
Ks to make
them
reasonable

Interpret the K
to reconcile
any
inconsistencies

8
Contra
Proferentem

Public Policy
(Interpret against
the drafting party)

Checklist for Identifying Patent Ambiguity

1. Try the easy way first. Look at the parties contract and their dispute and try to figure
out what each party would say the contract means.
2. Focus on what you know about the dispute between the parties. Look for a basis in the
contract itself for either party claiming the other party breached the contract.
3. Look for ambiguous words or phrases. Use your dictionary to help you develop
alternative and competing meanings for what you believe to be the key words in the
contract provision at issue.
4. Look for grammatical ambiguity. Make sure you understand what word in the contract
each modifying phrase is modifying. If you discover that a phrase may modify more
than one word, you may have found the ambiguity.
5. Look for conflicts between terms.
6. Try to translate the contract term(s) into your own words. If you cannot find the
ambiguity, the act of translating may reveal it. At least, translating contract into your
own words will demonstrate your ability to articulate at least one partys contract
meaning contentions.

2009, Carolina Academic Press - Used with Permission

Conditions

Express
Conditions

GR: Courts prefer

promises when the
language is
ambiguous.

Was the express

condition
accomplished?

Constructive
Conditions

Clauses

CREATION

Magic
Words
(See Page 2)

OR

K
Interpretation
Rules

Perfect Performance: Express

conditions must perfectly occur, for
example:
1. Happen when suppose to happen;
2. Done in the correct manner

1. Pay when Paid: Ambiguous

must use the surrounding
circumstances.
2. Time is of the Essence
* FOR EC: If something is of the
essence, it is so central that without it
nothing important is left.
* AGAINST EC: Boilerplate clause
used by the parties to mean that time
is important BUT do not mean that if
performance is a day late, the contract
is over.
3. Satisfaction: Creates an express
condition. Standards to evaluate:
* Fancy, Taste, or Judgment: made
in "good faith."
* Commercial Value: reasonable
person in determining satisfaction.
(operative fitness or mechanical
utility).

GR: Preference for

finding constructive
conditions.

Did the non-breaching

party get most of what
he was supposed to get?
(Core Assessment)

Types & Purpose

RULES
(In order of precedence)

1. Follow stated or relative

dates.
2. If parties can perform at
the same time, they must.
3. "Work before pay."
4. Courts consider the
nature of the transaction.

SUBSTANTIAL
PERFORMANCE
EFFECT
1. If an insubstantial
performance, then a
material breach and CC
has not occurred.
2. If a substantial
performance, then NO
material breach and CC
has occurred.

Rest. (2d) Contracts 241

1. Extent non-breaching
party did not get her essential
K benefit.
2. Extent non-breaching
party can get damages to
substitute for loss of the K
benefit.
3. Extent breaching party
will have wasted time and
money.
4. Likelihood breaching
party will cure deficiencies.

CC help courts determine

order of performance.
1. CC Precedent: second
party has no duty to perform,
unless other party performs.
2. CC Concurrent: parties'
performances are due
simultaneouslyeach must
render/tender performance in
order to claim a breach by
the other party.
3. Independent: Terms are
unconditional and parties
must perform.

5. Extent breaching party

acted in good faith.

Last Updated: 10 May 2009

Express Condition Language Chart

(1) Language which all courts would
agree create express conditions:
1. Conditional (-ed) on
2. Contingent upon
Dependent upon*
3. Expressly conditioned on
4. If
5. If and only if
6. On the condition that
7. Only if
8. Provided that
With the understanding that*
9. Satisfy or Satisfied or Satisfaction
Adequate*
Please (-ing)*
Suffices (-ive)*
10. Shall be a condition precedent to
11. Subject to
Subjugate to*
Predispose*
12. Unless
13. Unless and until

(2) Language which all courts

would agree do not create express
conditions:
1. Covenant
2. For
3. Pledge
4. Promise or Promising
Assure or Assurance
Expect
Warrant
5. Shall (or Shall Not)
Expect you to
Must
Ought to
Will (have to / be able to)
5. Swear
6. Time is of the essence
7. Vow

(3) Language about which

reasonable lawyers could argue
either way:
1. After
Afterwards
Behind
Later
Subsequently
2. As
3. As soon as
4. Pay when paid
5. So that
6. Time is of the essence
7. Until
8. Upon
9. Upon receipt of payment
10. Warranty
11. When
Although
At which time
Considering that
12. While

* - Weaker variation found in the

dictionary. A practitioner runs a risk that a
court may find these terms ambiguous (see
e.g. column 3).

Last Updated: 10 May 2009

Excuses

Nonoccurrence of
a prior condition

Waiver

GR: Condition
due before the
condition at
issue did not
occur

GR: Beneficiary of a
condition
intentionally gives up
the right to enforce
the condition.

EFFECT

EFFECT

Discharge or
Breach

Performance
Excused

Prevention
(Bad Faith)

Estoppel

GR: Beneficiary of a
condition takes action
indicating an intent
not to enforce the
condition and that
action causes the
other party to rely.

GR: Beneficiary of a
condition causes the
condition NOT to
occur, or otherwise
has breach her duty of
good faith.

EFFECT

EFFECT

Performance Excused

Discharged
Excused (depending
on significance)

Force Majeure
Clause

Impracticability /
Impossibility

(Act of God)

GR: Impracticability
clause. Lists
circumstances in
which a party can
avoid having to
perform the K without
penalty.

EFFECT
1. If material part, then performance
excused, remainder of K discharged.
2. If NOT material part, then that
performance is excused, remainder of K
is NOT discharged

EFFECT #1
Narrowly construe
and "other such
causes" must be
within the same
category to be
effective.

ELEMENTS
For
Express
Conditions
Only

Occurrence is
unforeseen event.

EFFECT #2

For
Express & Constructive
Conditions

Event makes
performance
impracticable (must
radically change the
obligation).

Shell: x increase (33% increase) (finding

increased cost is NOT excessive or
unreasonable).
Howard: 10 to 12x increase (1000% to 1200%
increase) (finding increased costs is excessive
and unreasonable).

Nonoccurrence of
event is basic
assumption.

If something in the
list happens, then you
do NOT need to prove
impracticability or
impossibility.

Party had no fault in

the occurrence.

K assigned the
risk

Party has not assumed

the risk, unless:

Event was
foreseeable

Event was
within the
party's control

Last Updated: 10 May 2009