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What is a contract?

A contract involves: a promise or promises


AND is enforceable by law

communicated to offeree)

Offer (promise, undertaking, or commitment with definite and certain terms

Mutual Assent
Acceptance (before termination by revocation, rejection, or operation of law)
Bargained-for-Exchange (of something of legal value)
Consideration
Substitute (promissory estoppel, detrimental reliance, good faith modification under
UCC)
Statute of Frauds
Mistake (mutual, unilateral)
No Defenses
Illegality (contract void)
Lack of Capacity (contract void or voidable)

Creation of a contract
Was there mutual assent?
Was there consideration or some substitute for consideration?
Are there any defenses to creation of the contract
Freedom of contract: Each person is a free actor to negotiate whatever you want ability to bargain about the
terms of a deal freedom to decide what you are will to sign up for
Contracts that will not be enforced
Public
RR v MH
Facts:
Held:
Why:
36

Has Your Client Made a Deal?


1.
2.
3.
4.
5.

Determining Mutual Assent


Offer 66
Destroying the Offer 83
Preserving the Offer 96
Modes and Methods of Acceptance 106

6. Deficient Agreements: Insufficient, Inadequate and Postponed Terms 180


Mutual Assent
Determining Mutual Assent
meeting of the minds
Objective v. Subjective Understandings
o Objective test: outward appearances, does it seem that he is signaling to
the person he is entering into the agreement with?
What would the reasonable person understand this communication to
mean?
Would they view it as an offer to sell the land?
Would they see the fighter jet and think it was a legally binding
offer?
o Subjective test: it is just what he is thinking that there is no contract?
Must be both parties both must agree to the terms of the deal
Lucy v. Zehmer (Objective Test)
Facts: P and D having drinks P offered D $50,000 to buy his farm. D wrote, We
hereby agree to sell P farm for $50,000, and signed it.
Held: This is binding contract.
Why: Evidence shows that contract was business transaction, not joke discussed
for 40 minutes, rewrote agreement to meet Ps requirements, etc. Ds intention
is irrelevant. Instead, must use objective test how would reasonable person
interpret words/acts of D?
NOTES: WE must look to the outward expression of a person as manifesting his
intention rather than to his secret and unexpressed intention
Equity contract: there is no fraud, no misrepresentation, no
Leonard v. PepsiCo, Inc.
Facts: PepsiCo had a promo where you could get pepsi points for drinking pepsi
there was a commercial that said you could get a jet for 7 million points. Leonard
had 7 million points tried to get jet, Pepsi said that the jet wasnt in the promo
Leonard sued.
Held: Leonard does not get the jetthe commercial was NOT an offer because it
referred to the catalog, jet was not in the catalog.
Why: The reasonable person would not be lead to believe the jet was included in
the offer. There was not writing to satisfy statute of frauds.
when an advertisement would normally be considered an offer, are so absurd that
a reasonable person would not consider them to be serious, then there is no offer
and there cannot be any acceptance.
Rule: A joke or zany humor contained in a commercial is not an offer.
Advertisements are not considered offers; they are invitations to offer; unless the
advertisement is clear, definite and explicit and leaves nothing open for
negotiation (advertisements are mere requests to offer)
Leftkowitz v. Great Minneapolis Surplus Store

Facts: Store published ad on sale of fur coats and said they would be sold on a first
come first serve basis for $1.
Held: An ad for goods is an offer when it invites particular action and when it is (1)
clear (2) definite and (3) explicit and leaves nothing open for negotiation; this is
the exception to the general rule that ads are NOT advertisements.
Why: An advertisement involving a transaction in goods is an offer when it invites
particular action and when it is clear, definite and explicit and leaves nothing open
for negotiation
Gleason v. Freeman (ELVIS HOUSE ON EBAY )
Facts: P bidders sued D sellers alleging breach of contract, fraud, negligent
misrepresentation. D listed Elvis house on ebay, website stated that ads of real
property did not involve legally binding offers to buy and sell, Ds agent included
disclaimer that bid was legally binding contract to deter frivolous bidders. P won
auction but negotiated deposit amount and time of possession. Sellers sold to
another individiaul
Held: Found for sellers
Why: If not sure about what the argument says then look at parties behavior.
Breach of contract failed because website indicated winning was not legally
binding. And the sellers language required bidders to negotiate in good faith.
Continuing to negotiate the contract indicates that you didnt think the ending of
the acution made it a binding contract
Negotiation does not equal mutual assent
Smith v. Boyd Would the reasonable person think mutual assent had occurred?
Facts: House for sale- buyers offered asking price and sellers negotiated trhoguh
broker about sale of furnishings. Both signed purchase and sales agreement forms.
Would be buyers sought specific performance (that the sellers would sell their
house to them)
Held: In real estate, individuals generally do no intend to contract until the
completion of a sales and agreement form signed by both parties; any attempt to
enforce an oral contract in real estate places the burden of proof on the individual
seeking to enforce the existence of an oral contract.
Why: Intent not to be bound until agreement expressed in writing can indicate no
mutual assent, rather mere negotiations
R2d 27 existence of a contract where written memorial is contemplated:
manifestations of assent thata are in themselves sufficient to conclude a contract will
NOT be prevented from so operating by the fact that the parties also manifest an
intention to prepare and adopt a written memorial thereof; but the circumstanes may
show that the agreement are preliminary negotiations
Statute of Frauds: Agreements required to be in writing involve the sale of any interest
in real estate --- the point at which the sale becomes final is the point where both sign
names to a written document talking about the washing machines.

Offer
If immediately accepted it is clear there is a contract

Restatement Second of Contracts 24 An offer is the manifestation of willingness


to enter into a bargain, so made as to justify another person in understand that his
assent to that bargain is invited and will conclude it.
Ex. If she says she is going to sell the case book for $20 = Offer
I will see my casebook, how much will you pay me? = NOT and offer, solicitation
for
An offer must be clear, definite and made in a manner which invites another to be part of
a deal.
How do you know you have an offer?
The reasonable person would understand that it was an offer
Bilateral Contract: Contract consisting of the exchange of mutual promises (promise
for a promise, in which each party is both a promisor and a promise)
Unilateral Contract: one in which the offeror requests performance rather than
promise. Offeror-promisor promises to pay upon the completion of the requested act by
the promise. Once act is completed, a contract is formed.
If it isnt clear if the offer is unilateral or bilateral, the assumption is for bilateral (because
a return promise may bind the offeror) with the caveat that the offeree gets to choose
the manner of acceptances. Restatement 2d of Contracts 32 (1981)
To make an offer irrevocable, an offer
Lonergan v. Scolnick
Facts: D put ad in newspaper saying he wanted to sell property. P sent letter of
inquiry. D sent letter describing property and indicating lowest price. P sent letter
asking legal description of prop. and suggested an escrow agent should he desired
to purchase the land. D wrote back saying expected buyer soon. D sold land to
third party. P brought action for specific performance
Held: The parties did not enter a contract.
Why: Enforceable contract requires an offer AND acceptance. D made an invitation
for offers, but at no time made an offer to plaintiff. No offer was made so plaintiff
could not accept.
Ads are invitations to make offers, not offers themselves. The exception is where
the ad is clear, definite, and explicit and leaves nothing for negotiation. An
invitation for offers does not operate as an offer to create an enforceable contract.
Rule: Continuing negotiations do not rise to the level of an offer. When a course
of correspondence indicates that further definite assent is necessary to
conclude a deal, despite agreement on certain terms, no offer is made.
Without an offer, there can be no manifestation of mutual assent to the
deal; advertisements are generally an invitation to offer, not invitations
to acceptance
Maryland Supreme Corp. v. Blake Co.
Facts: Agreement was that it would be $21 per yard ready mix. They dont know
how much concrete they are going to buy. They start builindg the shool and

halfway through production they say they have to increase their prices from $2127
Held:
Why:
A letter does contain certain aspects of an offer that when accepted would
constitute a contract
Rule: An offer must be definite and certain. The facts and circumstances along with
piror dealings between the parties and industry custom and usage determine if
there is an offer.
UCC is bing law sale of goods, it is a binding law however the court is still talking about
the common law. UCC section 2-204
(1)
Destroying the Offer
Destroying the offer
Rejection
Revocation
Lapse
Death of Incapacity of the offeror
Rejection
Express rejection the offeree (to whom an offer is made) terminates an offer which cannot be revived
if the offeree changes his mind and tries to accept it
Implied rejection an offer is rejected when the offeror is justified in inferring from the words or
conduct of offeree that the offeree doesnt not intend to accept the offer nor take it under advisement
Implied rejection counter offer a rejection of the offer by the offeree; a counter offer is an offer
made by an offeree to his offeror relating to the same matter as the original offer and proposing a
substituted bargain differing from that proposed by the original offer. Restatement 39
Revocation
Direct revocation The offeror (the party making the offer) retains full control and mastery over his
offer including the right to modify or terminate the offer until the offer is accepted by the offeree
(objective theory); an affirmative statement to the offeree expressly withdrawing the offer
o Exceptions to direct revocation 1. If there is a detrimental reliamce by the offeree upon a
promise not to revoke the offer or reliance upon the offer itself 2. In the case of an offer for a
unilateral contract when the offeree has begun to perform the requested act 3. Or if a statute
precludes revocaiton
Indirect revocation Offeror is the master of the offer. An offerees power of acceptance is terminated
when the offeror (1) takes definite action inconsistent with an offer to enter into the proposed contract
and (2) the offeree acquires reliable information to that effect ( 43; Dickinson v. Dodds)
o use reasonable person standard
o would the reasonable person think that the offer still stands or that the offer is rejected?
o If you hear from a reliable source that an offer is gone then you should take that as an indirect
rejection
Lapse
Lapse terminating an offer because of inaction; time runs out; the offeror has complete control about
how much time there is to make an offer
Death
Dickinson v. Dodds

Facts: On Wed. D signed writing that he agreed to sell P property for $800offer
available until Fri. On THURS P accepted offer in writing and left it innwith Ds
mother who never gave it to D. D then signed contract with X
Held: Contract with P not enforceable an open offer to sell terminated when the
offeree learns that the offeror has already agreed to sell to someone else; absence
of consideration made the offer revocable
Why: No agreement is made until offer is accepted. Time limited, fixed by offeror,
cannot prevent revocation before time limit has expiredno consideration given
for promise not to revoke. Before P attempted to accept offer, he knew that D
had agreed to sell property Xno meeting of minds
The promise to keep the offer open until a specific date was not binding since an
Offeror can revoke his offer at anytime before an agreement has been entered into
Lapse
Minnesota Linseed Oil Co. v. Collier White Lead Co.
Facts: P sent telegram to D saying they would sell oil at $.58. Dispatch was
transmitted Saturday and was not delivered to D until Monday. During time, cost of
oil increase to point that P would take great loss if they sold at .58. Tuesday D
replied saying they accepted terms
Held: Delay by D to response to the offer was too long and the contract should not
be enforced. Acceptance effective on dispatch but at the time od dispatch, offer
had lapse. Delay was too long. If the market did rapidly fluctuate , context to
determine if the necessity of immediate response was probably assumed
Why: An offer for an unstated period lapses after a reasonable time. Reasonable is
determined by industry, subject matters, and parties involved.
Rule: the law will decide this to be that time which as rational men they ought to
have understood each other to have had in mind. The intention or understanding
of the parties is to govern, the controlling question is what are the offerees
reasonable expectations arising from the offerors communication.
Death or Incompetence of the Offeror
If a person dies, the offer dies with them.
Preserving the Offer
Beall v. Beall
Facts: D owned farm that P purchased. Same day he contracted to buy the farm , P
obtained a 3 year option to purchase the landowners parcel for which he paid a
money consideration. Option was never exercised and the parties executed
new option for five years and for an additional consideration. The later option was
never exercised by the language was apprended to the agreement extending the
option for 3 more years. P attempted to exercise the option, the D had died and
the trial court found that there was no consideration for the extension because no
benefit flowed to the defendants widow
Held: An option contract will be irrevocable if support ed by consideration. There
can be acceptance of an offer contract if no consideration is provided assuming the
offeror has not revoked the offer.
Why: An option is a binding agreement if supported by consideration of which gies
the option its irrevocable character for the period provded in the option, and not a

mere offer to sell which can be withdrawn by the person presenting the option at
anytime before acceptance.
Just because you dont have a valid option contract doesnt mean there isnt an
offer.

Board of Control of Eastern Michigan University v. Burgess


Facts: Defendant signed contract extending a 60 day option to purchase ds hom
with $1 as consideration. Signed document confirming receipt of the $1 but never
received dollar. P informed D of intent to purchase, D rejected. P sued for specific
performance
Held: Acknowledgment of receipt of consideration does not estop the defendant
from proving he did not receive it. Because plaintiff concede not tendering
consideration, the option contract was unenforceable.
UCC 2 205: An offer by a merchant to buy or sell goods in a signed writing
which by its terms gives assurance that it will be held open is NOT revocable for
lack of consideration, during the time stated or if no time is state then for a
reasonable time, but in no event may such period of irrevocability exceed three
months; but any such term of assurance on a form supplied by the offeree must be
separately signed by the offeror.
An agreement will be constrasted most strongly against the party who drafted it in
the case of ambiguity
Option Contract distinct contract in which the offeree gives consideration for a promise by the offeror not
to revoke an outstanding offer.
UCC 2-205 Firm offers acceptances but there are limitations to this
An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be
held open is not revocabale, for lack of consideration, during the time stated or if no time is stated then for a
reasonable time, but in no event may such period of irrevocability sexceed three months; but any such term of
assurance on a form supplied by the offeree must be separatedly signed by the offeror.

---------------------------------------------------------------------------------------------------Modes and Methods of Acceptance

Promissory Acceptance
Acceptance by Performance
o Notification typically not necessary Restatement 45
o Start of the performance creates option contract allowing offeree to finish performance within
reasonable time
Marchiondo restatement 45
Acceptance by Silence or Inaction
o Usually no acceptance but see Laredo v. Gordon restatement 69
Imperfect Acceptance
Electronic Acceptances
o Under Art II and the Restatement 2 of contract unless clearly indicated otherwise by the language
or circumstances, all offers are indifferent offers, which means they may be accepted by
promising or beginning performance.

Formation of agreements
Acceptance

o Offeror as king
Be careful of the terms: Ever tite
What is offeror bargaining for? : Davis v. Jacoby
o Promissory Acceptance
Requires notice Hendrick v. Behee
They did nto send the offer back so tey didnt know they had accepted the offer
Mailbox Rule Adams v. Lindsell
o Acceptance by Performance
Offer
Offers are definite and specific enough that a yes from the offeree creates an agreement
o Lonergan v. Scolnik
o Circumstances of the transaction matter
Maryland Supreme v. Blake
Leonard v. Pepsi Co (Leftkowitz)
o Destruction of offers
Rejection
Saying no then have a counter offer
Revocation
Dodds v. Dickinson learning that someone has sold their house to someone else is
effectively revocation
Offerors Control Over the Manner of Acceptance
La Salle National Bank v. Vega
Facts: P filed complaint seeking specific performance by D of a contract for
the sale of real estate. P
Held: Another mode of acceptances may not be substituted when an offer
requires a written acceptance by a specifical party.
Why: An offeror has complete control over an offer and may condition that
acceptance be made according to the terms of the offer. No other mode may
be used when an offer by its terms requires a written acceptance by a
specific person or entity. IN this case the contract between P and D stated
that the contract would not be in full force until signed by the trust. Singing
by the trust was the only permissible mode of acceptance. I this case there
was no acceptance and no contract
The Offeror is the master of the offer and may set the terms of acceptance.
The terms of the offer are the first step in determining the validity of the
acceptance.
Ever-Tite Roofing Corp. v. Green unilateral contract
Facts: P agreed to re-roof Ds home. D signed writing that listed work and
price in monthly installments ps sale representative signed writing , but he
did not have authority to bind P writing Agreement shall become binding
only upon written acceptances by principal/authorized officer or upon
commencing performance of work When P went to Ds house to work,
another company was working on roof
Held: Since contract did not specify time within which it was to be accepted
or work was to begin, reasonable time must be allows (consider
circumstances). Contract was accepted when commencement of work began
( when workers loaded trusk NOT upon arrival at Ds home)

Why:
The court is not clear about what type of work will be deemed acceptane and
in what situations

Notes on required for of acceptances p 113


Davis v. Jacoby
Facts: P had relationship with Whiteheads, Mrs. Whitehead ill, Whitehead offered to
bequeath all that the and his wife possessed if Davis moved back to CA from
Canda and cared for Mrs. Whitehead Davis moved back but prior to arrival Mr.
Whitehead killed himself. After Mrs. Whitehead died Davis learned that
consideration bequeathed to others and not them
Held: It was a bilateral agreement, Davis entitled to specific performance.
Why: The agreement between the parties was bilateral contract. Mr. Whitehead
knew from his past relationship with Davis that is they promises to perform (taking
care of Mrs. Whitehead) they would preform. Whitehead expressly indicated the
nature of the acceptance desired by him, Davis promise that they would come to
California and do the things requested by him. The Davis immediately sent their
promise back and Mr. Whitehead received the same. The Davis moved to
California despite Mr. Whiteheads suicide, they continued to perform by
administering assistance to Mrs. Whitehead.
Rule: An offer invites the formation of a bilateral contract by an acceptance
amounting in effect to a promise by the offeree to perform what the offer requests
rather than the formation of one or more unilateral contract by actual performance
on the part of the offeree If an offer cannot be labeled clearly as unilateral
or bilateral, the offer is assumed to be bilateral.
Maryland Supreme Corp. v. Blake Co.
Facts: Subcontractor Supreme changes price of concrete in middle of building job.
Blake cues.
Held: Letter that was sent was actually an offer not a price quote the question of
whether an offer was made seems to be on depedent on the intention of the
parties and being such, it depend on the facts and circumstances of the particular
case
Why: In the construction industry bids from subcontrators to general contractors
are considers to be offers because of the nature of the business and because they
are relied upon. An offer must be definite and certain. The facts and circumstances
along with prior dealings between the parties and industry custom and usage
determine if there is an offer.
UCC 2-204(1) appropriate conduct by the parties may be sufficient to establish
an agreement and an offer to make a contract shall be construed as invited
acceptance in any matter and by any medium reasonable in the circumstances
UCC 2-206(1)(a)
Effectiveness of Promissory Acceptance
Hendricks v. Behee
Facts: On 3/2/1987 D made written offer to buy real estate from Smiths.
3/4/1987 Smiths signed proposed agreement but D was not notified that
Smiths had accepted. Before notified of acceptance, D notified smiths agent
that he was withdrawing offer.

Held: Ds notification of withdraw to Smiths agent was


Why: Even though they signed the agreement their intention was not
communicated to D until after he had withdrawn his offer. An
uncommunicated intention to accept cannot be binding on an offeror who
had no knowledge of the acceptance.
Acceptance must be communicated to the Offeror (or agent
therefor). Notice to the agent, within the scope of the authority, is
notice to the principle of the agent
Adams v. Lindsell
Facts: Ds, wool dealers, sent letter to P, wool manufacturers, offering to sell
them fleeces, upon receipt of their acceptance in the court of post
Held: When forming contracts by mail, acceptance is valid from the time of
mailing a letter containing language of same.
Why: Because Ds in their offer notified P of their terms, that they would
await acceptance in the course of post, they were bound by the terms of
their offer until ti was accepted of until the terms of the offer had experience.
Ps accepted within the course of post by mailing same and therefore
manifested valid assent.
Mail Box Rule Acceptances are legally effective upon dispatch (when they are sent)
After dispatch of acceptance, offerors power to revoke is terminated, offerees power to reject has
ended, and risks of transmission are on offeror
Generally applies when parties are located far apart and bargain by correspondence
As soon as they drop it in the mail, acceptance has come into effect
Ex. Mail offer on Monday, mail revocation of offer on Tuesday does not arrive until Friday accept offer
on wed. acceptance of offer is effective, contract created cannot revoke.
Effectiveness of Acceptance by Performance
Carlill v. Carbolic Smoke Ball Co.
Facts: D sold smoke balls. They made an advertisement that said that they would
pay reward to anyone who got the flu after using the ball as directed 3 times a day
for 2 weeks. They showed their sincerity by depositing money in specific bank. P
used Ds product as advertised then contracted the flu. P asked for payment and
sued D after D refused to pay.
Held: An offer for a reward (offers that can only be accepted by performance only
becomes binding upon the performance of the conditions requested in the offer.
An individual making a unilateral offer to sell product waives the
requirement of notification in favor of offerees performing the purchase
of offerors product.
Why: In offers of rewards, they are offers to anybody who performs the conditions
named and anybody who does perform the condition accepts the offer. The
performance of the conditions is he acceptance of the offer.
Comports with R2d 54. Acceptance by performance necessity of notification to
offeror
R2d 54 Acceptance by performance ; necessity of notification to offeror

(1)Where an offer invites an offeree to accept by rendering a pereformance, not


notification is necessary to make such an acceptance effective unless the offer
requests such a notification
(2)If an offeree who accepts by rendering a performance has reason to know that the
offeror has no adequate means of leanring of the performance with reasonable
promptness and certainty, the contractual duty of the offeror is discharged unless
a. The offeree exercises reasonable diligence to notify the offeror of acceptance
or
b. The offeror learns of the performance within a reasonable time, or
c. The offer indicates that notification of acceptance is not required
Marchiondo v. Scheck
Facts: D made written offer to sell property to a prospective buyer and to pay a
commission to the broker of the sale. When he made offer D gave 5 day time
period for acceptance. Before 6th day, D revoked offer in writing however P had
already begun to perform on Ds offer by communicating the Offer to its clients
who accepted Ds offer on the same day it attempted to revoke said offer. P
brought suit herein to recover his broker fees based on performance he rendered in
reliance of Ds offer.
Issue: Whether partial performance rendered pursuant to an offer has the effect of
creating a binding agreement.
Held: Partial performance in response to an offer could render a contract
enforceable. Caveat is that what constitutes partial performance is a question of
fact and could vary from case to case. An offeror cannot effectively revoke a
unilateral contract after partial performance is tendered
Why: When considering whether an action has been done in furtherance of a
contract partial performance must be taken into consideration based on all
relevant facts.
Restatment 45 Option contract Created by part performance or tender
(1) where an offer invites an offeree to accept by rendering a performance and does not invite a promissory
acceptance an option contract is created when the offeree tenders or begins the intied performance or
tenders a beginning of it
(2) the offerors duty of performance under any option contract so created is conditional on completetion o
tender of the invited performance in accordance with the terms of the offer
Acceptance by Silence or Inaction
Offeree cannot be forced to speak under penalty of having their silence taken as acceptance, if offeree
silently takes offered benefits, the courts will often find acceptance.
When offeror and offeree have had prior dealings between the parties, or trade practices known to both ,
create a commercially reasonable expectation by the offeror that silence represents acceptance the
offeree is under a duty to notify the offeror if she does not intend to accept == restatement 2d 60
Laredo National Bank v. Gordon
Facts: D is in process of settling lawsuit, tells P to answer quill with required
payment. D does not respond and does not pay P.
Held: Acceptance by silence is upheld because D had a duty to reply and offeror
was justified in expecting a replay

Why: When offeree seeks to take advantage of offeror by remaining silent as to


acceptance, the silence will be construed as acceptance of the offerors offer;
exception to the general rule that silence is not acceptance.
Rule: Acceptance by silence is normally not effective, except under very specific
conditions.
R2d 69 Acceptance by silence or exercise of dominion
(1) Where an offeree fails to replay to an offer, his silence and inaction operate as an acceptance in the
following cases:
a. Where an offeree takes the benefit of offered services with reasonable opportunity to reject them
and reason to know that they were offered with the expectation of compensation
b. Where the offeror has state or given the offeree reason to understand that assent may be
manifested by silence or inaction, and the offeree in remaining silent and inactive intends to
accept the offer.
c. Where because of previous dealings or otherwise it is reasonable that the offeree should notify
the offeror if he does not intend to accept
(2) An offeree who does any act inconsistent with the offerors ownership of offered property is bound in
accordance with the offered terms unless they are manifestly unreasonable but if the act is wrongful as
against the offeror it is an acceptance only it ratified by him.
Imperfect Acceptance
Mirror Image Rule Acceptance must look exactly like the offer no added terms, changed terms or
subtracted terms.
Additional or different terms in acceptance make response a counter offer
o Ex. A offers to lease house to B by handing B signed copy of his standard lease agreement. B
reads over lease, adds clause providing that disputes will be settled by arbitration, signs lease,
and gves it back to A. A gives b keys, By additing arbitration clause, B rejected As offer and
made counter offer. By giving D keys, A accepted Bs counter offer.
Last Shot Rule party that sent last message before performance began usually maintains control over
agreement
Gresser v. Hotzler
Facts: Appellant submitted purchase agreement to respondents for purchase of
real property. Respondents signed and returned the agreement. Appellant then
changed closing date to a date that was approximately six weeks later than initial
closing date. Appellant initialed change and returned agreement to respondents
with earnest money. Respondents received another offer and accepted the new
offer.
Held: Original contract was not legally binding.
Why: The date change was a material change to the contract and that respondents
could not be equitably estopped from denying the validity of the purchase
agreement by changing the date it was more of a counter offer.
Restatement 59-61
59 Purported Acceptance which Adds Qualifications
A reply to an offer which purports to accept it but is conditional on the offerors
assent to terms additional to or different from those offered is not an acceptance but a
counter offer
60 Acceptance of offer which states place, time or manner of acceptance

If an offer prescribes the place, time or manner of acceptance its terms in this
respect must be complied with in order to create a contract. If an offer merely suggests a
permitted place, time or manner of acceptance, another method of acceptance is not
precluded
61 Acceptance which requests change of terms
an acceptance which requests change or addition to the terms of the offer is not
thereby invalidated unless the acceptance is made to depend on an assent to the
changed or added terms.
Dorton v. Collins & Airman Corporation
Facts: The small ptint on the back of acknowledgment form sent in response to
order for carpeting contained an arbitration clause. The face of the form specified
that acceptance was subject to all the terms on the reserves side. Carpet
purchaser sought to avoid application of the arbitrartion clause in order to sue in
Federal court.
Held: Arbitration not a part of the agreement if offeror did nto expressly make clear
the requirement that offeree accept the provision
Why:
Klocek v. Gateway, Inc.
Facts: Because P is not a merchant, P has to expressly agree to the additional
terms for them to become part of the contract. The court found that the five day
acceptance of terms did not constitute express agreement by P. The court holds
that the arbitratrion provision did not become part of the contract because P did
not expressly agree to terms
Held: Per UCC 2-207 a seller must prove sufficient notice and buyers assent to
terms at time of purchase for a shrinkwrap license to be binding.
Why:
Hill v. Gateway 2000, Inc.
Facts: P bought a computer over the phone and paid for it by creditcard. When he
got the computer it included a list of terms which would govern unless the
customer returns the computer within 30 days. P kept the computer beyond 30
days and then complained about its performance and components. P, after trying
to use the warranty to fix the computer, filed suit in federal court alleging that the
D is a racketeer. D pointed out that the terms have an arbitration clause and they
would like ot enforce it.
Held: The terms inside a box bind customers who use it after an opportunity to
read the terms and reject them.
Why:
UCC 2-207
(1)A definite and seasonable expression of acceptance or a written confirmation
which is sent within a reasonable time operates as an acceptance even though it
states terms additional to or different from those offered or agreed upon, unless
acceptance is expressly made conditional on assent to the additional or different
terms
(2)The additional terms are to be construed as proposals for addition to the contract.
Between merchants such terms become part of the contract unless

a. The offer expressly limits acceptance to the terms of the offer;


b. They materially alter it; or
c. Notification of the objection to them has been already given or is given
within a reasonable time after notice of them received
(3)Conduct by both parties which recognizes the existence of a contract is sufficient
to establish a contract for sale althought the writings of the parties do not
otherwise establish a contract. In such case the terms of the particular contract
consist of those terms on which the writings of the parties agree, together with any
supplementary terms incorporated under any other provisions of this act.
Step 1: Is the offer accepted?
If purported acceptance differs on basic terms of the deal, its a counter offer
Step 2: Is the acceptance conditional
If offeree makes it clear that acceptance is expressly contingent on the offeror agreeing to the
additional/different terms he propses, then it is a counter offer
o Expressly contingent: phrases like but only it, sellers willingness to sell to you is condition
on your acceptance of these terms of sale
Step 3: Additional or different terms?
3A: Additional terms
o Are both parties merchants?
IF YES: additional terms become part of contract UNLESS:
Offer expressly limits acceptance to terms of offer (2-207(2)(a))
Additional terms materially alter the offer (2-207(2)(b))
Offeror objects to the additional terms within a reasonable time (2-207(2)(c))
IF NO: additional terms are proposals that only become part of contract if the offeror
agrees to them
o 3B: Different terms, three approaches:
Treat different terms like additional terms
Knock-out rule: different terms cancel each other out (majority approach)
Fall out rule: different term in acceptance falls out
Step 4: What if the acceptance is actually a counteroffer, but the parties acted like there was a contract?
Terms of contract are the terms on which the parties agree plus any default provisions form UCC
Electronic Acceptances
Effective upon receipt dominant approach says you cant avoid contracts by avoiding emails.
Summary of Effective Dates of COmmunicaiton
Offeror has no effect until communicated to offeree
Rejection or counter-offer is effective only when received
Revocation is effective only when received
Acceptance is effective upon dispactch
---------------------------------------------------------------------------------------------------------------------

Deficient Agreements: Insufficient, inadequate and postponed terms


Mutual Misunderstanding of a Contract Term
Raffles v. Wichelhaus two ships peeless
Facts: P contract to sell D cotton to be shipped form Bombay to England on ship
peerless Unknown to parties 2 ships called peerless eah of which carrying cotton

form Bombay to England d thought it was hsip to sail in October, P thought it was
ship to sail in decemebt. D refused to accept later delivery
Held: Contract not enforceable
Why: Ambiguity arose showing that there was no meeting of the minds Parol
evidence admissible to determine whether both parties intended different peerless
to be subject to contract. If different meanings were intended, no contract if
ambiguity related to material term. Since payment was to be made at time of
delivery, and parties could not agree on time of delivery, there was ambiguity
relating to material term.
Note: If both parties were to give same meaning to ambiguity contract is valid. if
you both men something different when you are using the same terms there is
never a mutual assent.
Restatement 20 Effect of Misunderstanding
(1)There is no manifestation of mutual assent to an exchange if the parties attach
materially different meanings to their manifestations and
a. Neither party knows or has reason to know the meaning attached by the
other; or
b. Each party knows or each party has reason to know the meaning attached by
the other
(2)The manifestations of the parties are operative in accordance with the meaning
attached to them by one of the parties if
a. That party does not know of any different meaning attached by the other,
and the other knows the meaning attached by the first party; or
b. That party has no reason to know of any different meaning attached by the
other, and the other has reason to know the meaning attach dby the first
party.
Mistake: Meeting of minders to enter agreement and agreement correctly reflects partes intent. Problem is that
at least one party is wrong about unstated factual assumptions ex. Two guys selling and buying a cow, they
thought the cow could nto have calves, they seelte on a price then cow is pregnant and now they want more
money - -both parties said we had an agreement the value of the could should be set at z this cow is now more
profitable
Restatement 151
Mutual misunderstanding: no successful meetingof minds. Agreement contains a word
or terms that the parties reasonably understand differently and keeps the agreement
form being formed at all
Retatement 152 When mistake of both parties make a contract voidable
o (1) Where a mistake of both parties at the time a contract was made as to a
basic assumption on which the contract was made has a material effect on
the agreed exchange of performances, the contract is voidable by the
adversely affected party unless he bears the risk of the mistake under the
rule state in 154
o (2) Determining whether the mistake has a material effect on the agreed
exchange of performances, account is taken of any relief by way of
reformation, restitution or otherwise.
Unilateral Mustake
Restatement 153 When mistake of one party maes a contract voidable

o Where a mistake of one party at the time a contract was made as to a basic
assumption on which he made the contract has a material effect on the
agreed exchange of performance that is adverse to him, the contract is
voidable if he does not bear the risk of the misakte under 154 and
The effect of the mistake is such that enforcement of the contract
would be unconscionable or
The other party had reason to know the mistake or his fault caused the
mistake
Restatement 154 When a party bears the risk of a mistake
A party bears the risk of a mistake when
Indefinite and Incomplete Terms
Varney v. Ditmars (old approach that the courts took to not fill in terms)
Facts: Job working for ditmars at $35 a week. Got fired for not going into work
because he was sick. Trial court denied recovery of a fair profit base don the fact
that fiar is an ambiguous term which cannot be established in money terms
Issue: Whether a promise of a fair reimbursement without further negotiation,
can be claimed as a loss in reliance
Held: Yes, it is too vague, uncertain and indefinite to form a binding contract.
Common law standards are that indefinite contracts are unenforceable
Why:
One cannot claim promissory estoppel, if he cannot show to what extent he was
prejudiced.
Cardozos dissent.
Community Design Corporation v. Antonell
Facts: Employer challenged trial courts award of judgment with attorneys fees and
costs to appellee employee on the grounds that the contract was too indefinite and
uncertain to be valid and there was no agreement on the amound of the bonus,
degree of completion or division among employees. Ct. affirmed decisions and held
Held: Affirmed the judgment in favor of appellee employee in all respect
Why: Appellee employees cross appeal on the amount of attorneys fees was
without merit and substantial competent evidence supported a finding that
appellant employer breached tis duty to appellee and was responsible for feed
incurred in an action to recover wages including bonuses
Antonell sues for bonus etc. Rule for antonell because the company already benefit from his performances so it
would be unfair for him to get money there was an oral contract between the two and Antonell did everything
the company had good faith to pay the bonus yes there is an agreement here we owe him some amount of
money
Restatement (Second) 33 Certainty
(1)Even though a manifestation of intention is intended to be understood as an offer,
it cannot be accepted so as to form a contract unless the terms of the contract are
reasonably certain
(2)The terms of a contract are reasonably certain if they provide a basis for
determining the existence of a breach and for giving an appropriate remedy

(3)The facts that one or more terms of a proposed bargain are left open or uncertain
may show that a manifestation of intention is not intended to be understood as an
offer or as an acceptance.
Longterm Agreements and Relational Contracts
UCC Gap Fillers
Problems of Postponed Agreement
Walker v. Keith
Facts: P leased lot from D for 10 years. Lease agreement between the parties
provided an option to renew for an additional ten years. The option included the
same terms as the original lease but did not set an amount for rent. Least option
provided that the rent would be set in such amount as shall actually be agreed
upon by the lessors and the lessee with the monthly rental fixed on the
comparative basis of rental values as of the date of renewal with rental values at
this time reflected by the comparative business conditions of the two periods. P
gave notice of renewal but parties were unable to reach an agreement as of the
amount of rent.
Held:
Why: Renewal option stnds on the same footing as any other contract right. Renst
is a material term of a lease. The parties failed to enter into a new agreement as
the renewal option provided and thereby their rights were no longer fixed by the
contract. If the parties do not fix it within reasonable certaintiy it is not the
business of the courts to do so. The renewal provision is fatally defective in failing
to specify either an agreed rental or an agreed method by which it could fixed with
certainty B/C of the lack of agreement the lessees option right was illusory
Traditional approach to postponed agreement there must be substantial certainty
as to the material terms for an agreement to be enforceable
Moolenaar v. Co-Build Companies, INc. (Modern courts more willing to find agreements
and plug in terms)
Facts: P filed a declaratory cation against D(lessor) who purchased land subject to
the disputed lease. The lessee sought a declaration of the rights of the parties
under the lease and specifically whether the lease contained a renewal clause and
if so what the rent for the renewal term.
Held: Agreement to agree valid if theres a way to Reasonably read the term into
the contract
Why:
Intention of the parties when the lease option was made must be examined for
determining reasonable price
Are there alt legal theories that a disappointed suiotpr might pursue when the other
party breaks of negotionats before a final agreement can be concluded?
Budget Marketing, Inc. v. Centronics Corporation
Facts:
Held:
Why:
Good faith is indefinite in business; especially during negotiations.

-------------------------------------------------------------------------------------------------What is Consideration and Why is it Still an Important Part of Contract Law?


1. Bargain and the Legal Concept of Consideration
a. Consideration: Bargained For
b. Consideration and Family Agreements
c. Consideartion One Promise as Consideration for Another Promise
d. Consideration and Contract Modification
2. Promise to Pay for Something That happened before the Promise: Moral Obligations
3. Reliances and the Legal Concept of Promissory Estoppel
Bargain and the Legal Concept of Consideration
Restatement Second 71 Requirement of Exchange; Types of Exchange
(1) To constitute consideration, a performance or a return promise must be bargained for.
(2) A performance or return promise is bargained for it is is sought by the promisor in exhcnage for his
promise and is given by the promisee in exchange for that promise
(3) The performance may consist of:
a. An act other than a promise, or
b. A forbearance or
c. The creation, modification, or destruction of a legal relation
d. The performance or return promise may be given to the promisor or to some other person. It may
be given by the promise or by some other person
Consideration: Bargained For
Reed v. University of North Dakota and The North Dakota Association for the Disabled
Facts: the defendant Reed was on the hockey team at the University of North
Dakota. Part of his training regimen was to compete in a 10-kilometer race for
charity. Close to 200 yards from the finish line, he collapsed from dehydration. He
was then rushed to the emergency room only to be faced with a kidney transplant
and two liver transplants.
Held: Reed argued that there was no contract because there was no consideration.
Court said you signed the release form and NDAD allows Reed to run in the race in
exchance for promise not to hold him liable.
Why: Reed had not identified a breach of a specifical contractual provision despite
being given the opportunity to do so through discovery. Whil reed speculated that
colleges have duty to protect health of their athlests, he fails to demonstrate how
such duty is grounde din contract. Reed asserts the release is not enforceable
because it was not supported by consideration.
Consideration and Family Agreements
Kirksey v. Kirksey
Facts: D told P to move his land with her family. P moved and gave her house/land
to cultivate for 2 years. D told P to leave
Held: Promise not enforceable

Why: To be enforceable pomrise must be supported by bargained for consideration.


If no bargained for consideration it is a pomised to make a gift and any expsense
incurred by P are conditions necessary to accept gift.
Hamer v. Sidway CONSIDERATION
Facts: While at wedding P said to William he was going to make a proposition said
to younger W if you do not drink, gamble, or smoke until 21 I will give you 5,000.
He didnt do it
Held: Abstaining from permitted conduct is sufficient consideration to enforce a
contract based on the forbearance of that contract
Why: You cant have a rule that all promises without benefist to promise are invalid
there would be too many lawsuits it is enough that something is promised, done,
forebodened or suffered by the party to whom the promise is made as
consideration for the promise made to him
Note: Abstaining from permitted conduct is sufficient consideration to enforce a
contract based on the forbearance of that conduct.
Restatement of Contracts 79 Peppercorn rule
If the requirement of consideration is met there is no additional requirement of a
gain, advantage or benefit to the promisor or a loss, disadvantage or detriment to
the promise or equivalence in the values exchanded or mutality of obligation
Consideration: One Promise as Consideration for Another Promise
Hooters of America v. Phillips
Facts: D sexually harassed at work for P. D filed suit, P said that P had signed a
binding contract in which she had to put forward all complaints to arbitration filed
motion for prelimnary injunction which was treated as a motion to compel
arbitration
Held: Found in favor of Phillips denied motion to compel arbitration
Why: The rules were illusory and unenforceable under South Carolina Law because
Hooters retrained to itself an unfettered right to decied later the nature or extent
of its performance by reserving the authority to modify the rules or terminate the
agreement and its choice while denying the same to Phillips. IN order for Phillips
agreement to be enforceable there must be a detriment to hooters OR a benefit to
Philips that was bargained for in exchange for phillip promise to arbitrate her
statutory claim
Restatement 77
A promise or apparent promise is not consideration if by its terms the promisor or
purported promisor reserves a choice of alternative performances unless
(a) each of the alternative performances would have been consideration if it alone had
been bargained for; or
(b)one of the alternative performances would have been consideration and there is or
appears to the parties to be a substantial possibility that before the promisor
exercises his choice events may eliminate the alternatives which would not have
been consideration
Consideration and Contract Modification
Pre existing duty rule
Restatement 73

Performance of a legal duty owed to promisor which is neither doubtful nor the
subject of honest dispute is not consideration; but a similar performance is consideration
if it differs from what was required by the duty in a way which reflects more than a
pretense of bargain
Alaska Packers Assn v. Domenico
Facts: P contracted to go form SF to Alaska on Ds ship to work as
sailor/disherman. Once P reached port in AK, P refused to continue working and
demanded that compensation be increase. D drew up ne contract because unable
to hire new crew but refused to honor new contract
Held: Pre-existing duty rule Domenico is not required to pay P higher rate.
Why When a party merely does what he is already obligated to do he cannot
demand an additional compensation. Promise to pay P for doing what he is already
doing under contract to do is not sufficient consideration. Party who refuses to
perform and thereby coerces promise form other party (duress) to pay him
increase compensation for doing that which he is legally bound take unjustifiable
advantage of necessities of other party.
Restatement 89
Promise modifying duty under contract not fully performed on either side is binding
if it is fair and equitable in view of circumstances not anticipated by parties when
contract was made
Exceptions to preexisting duty rule
Unanticipated difficulties
Impracticability
Mutual recission
Material change and injustice (promisory esoppel)
Angel v. Murray
Facts: Trash collecter had contract with city to pick up trash City growing faster
than any party had planned, can we modify the city counsel said yes and modified
on two specific occasions. Tax payer got upset about paying guy moreguy
removing trash says I am supposed to remove trash fmor the houses but the city
added more houses and trash cant be removed for the same amount of money.
Tax payer says you need consideration for modification.
Held: Does not overrule Alaska Pakers prexiting duty
Why: Restatement 89modification of a contract does not require its own
consideration if the modification was made in good faith and voluntarily acdeped
by both
Restatement 89 Modification of executory contract
A promise modifying a duty under a contract not fully performed on either side is binding
(a) if the modification is fair and equitable in view of ircumstances not anticipated by
the parties when the contract was made; or
(b)the extent provided yn statute ; or
(c) to the extent that justice requires enforcement in view of material change of
position in reliance on the promise.
Promise to Pay for something that happened before the Promise: Moral
Obligations

Harrington v. Taylor
Facts: Taylors wife fled from assault by D and ran to Ps house. D assault wife in
Ps home. Taylors wife was about to hit D with an xe when Harrington cought the
axe with her hand saving D. P suffered severe injuries. D promised to compensate
P for injuries the following day
Held: Past consideration does nto qualify as valid consideration sufficient to create
a binding contract
Why: Gratitude or moral obligations arising from past acts are not sufficient
consideration to create a valid contract, and the promise to compensate P for her
injuries was unenforceable
Mills v. Wyman
Facts: Ds son got sick P cared for him costing p $. D wrote P promising to pay
him back. D did not pay
Held: Promise is NOT enforceable
Why: No consideration. A moral obligation is not sufficient consideration to make a
promise enforceable. Past consideration is not sufficient consideration to make a
promise enforceable. Temporal discontinuity P took care of son THEN D
promised to pay actions not causally connected. A benefit received BEFORE
promise is made is NOT given in exchange for a promise. Moral obligation is not
sufficient consideration. Moral obligation does not create a contract--- moral
obligation is sufficient for consideration for an express promise limited to
application in cases where at some point a consideration existed.
o Exceptions the case of debts by the statute of limitations, or debts incurred
by infants, or debts of bankrupts are generally put for illustration of the rule
that only certain preesiting obligations will justify enforcing a moral
obligation
Restatement 82 Promise to pay indebtness; effect on statute of limitationsb
(1) A promise to pay all or part of an antecedent contractual or quasi-contractual
indebtedness owed by the promisor is binding if the indebtness is still enforceable or
would be except for the effect of a statute of limitations
(2) the following facts operate as such a promise unless other facts indicate different
intention
(a) A voluntary acknowledgment to the oblige, admitting the present existence of the
antecedent indebtedness; or
(b)Voluntary transfer of money, a negotiable instrument, or other thing by the
obligation to oblige, made as interest on part payment of or collateral security for
the antecedent indebtedness; or
(c) A statement to the oblige that the statute of limitations will not be pleased as a
defense.
Restatement 83 Promise to Pay indebtedness discharged in bankruptcy
An express promise to pay all or part of an indebtedness of the promisor,
discharged or dischargeable in bankruptcy proceedings begun before the promise is
made, is binding.
Restatement 85

Webb v. McGowin
Facts: P cleaning upper floor of mill and about to drop block belowsaw D standing
below, only way to avoid hitting D was to fall with block. D uninjured byt P
seriously injured. P and D agree that D would give P $15/week until he died.
Held: Agreement IS enforceable
Why: Life and preservation of body have material, pecuniary values that can be
measured monetarily. D received material benefit constituting valid consideration
for promise.
Note: Restatement 86 Promise made in recognition of benefit previously received
by promisor from promise is beinding to extent necessary to prevent injustice
Reliance and The Legal Concept of Promissory Estoppel
Overview
Promissory estoppel prevents one party from withdrawing a promise made to a second party if the second
party has reasonably relied on that promise. Requires
An unequivocal promise by words or conduct
Evidence that there is a change in position of the promise as a result of the promise (reliance byt not
necessarily to their detriment)
Inequity if the promisor were to go back on the promise.
Reliance promise that is not supported by consideration but can still be enforced
Historical Development
Ricketts v. Scothorn
Facts: D executed promissory note I (D) promise to pay P $2,000 at 6% each
year. In reliance on note, P stopped working. Then D died only paid 1 year
Held: The promise/contract is enforceable even when there is no consideration
when the payee changes his position to his disadvantage in reliance on the
promise but the scope of reliance is really narrow, today used only for actual
damages
Why: Equitable estoppel = P relied on conduct and changed position to her
detriment

Equitable estoppel: defense


o Arises out of misrepresentation of fact by party 1 that party 2 then relies on
his detriment
o Example: paternity by estoppel (if you treat a kid as yours for years, cant
later claim that its not your kid)
Promissory estoppel: basis of claim
o Based on promise of future action by party 1 that party 2 then relies on to his
detriment
o Claim coming out of the promise

Contemporary Applications of the Doctrine


Dargo v. Clear Channel Communications

Facts: P is radio host contracted by D and told to move to host their radio show and
that she would be given higer salary and two year contract. P moved but never
received contract and was fired. Turns out htat D only meant for her to audition
and knew the only way to have her move was to lie.
Held: Promissory estoppel is not appropriate in this case
Why: In order to establish a claim of promissory estoppel, under Ill law, dargo must
show that (1) the D made an unambiguous promise to her (2) she relied on that
promise (3) her reliance was expected and foreseeable and (4) to her detriment .
Under IL law claims of promissory estoppel only succeed where all other elements
of a contract exist, but consideration is lacking. consideration was possibility of
permanent employment since consideration promissory estoppel does not count.

Fortress Systems, L.L.C. v. Bank of the West


Facts:
Held: Doctrine of promissory estoppel does not require that the promise giving rise
to the cause of action must meet the requirements of an offer that would reiped
into a contract if accepted by promise.
Why: Promissory estoppel only provides for damages as justicie requires and does
not attempt to provide the P damages based on the benefit of the bargain.
Conclusions of law pg. 291
Promissory estoppel 291
Restatement 90
o Promise which promisor should reasonably expect to induce action or
forbearance on part of promise and which does incude such action or
forebearance is binding if injustice can be avoided only by enforcement of
promise
o Promise reliance justified/reasonable to rely on promise unjust not to
enforce promise
o Focus on what was done by promise
o Purpose: to make promise binding even though consideration is lacking
Elements of promissory estoppel
o Promise was made
What was promissee justified in understanding intent of promisor to be,
based on promisors statements and conduct?
o Promisor should reasonably have expected promise to induce action or
forbearance by promise
Promisor knew or reasonably should have known that promise would
understand that promise had been made and would thereby be
induced to take/refrain from action of kind that occurred
o Promise induced justifiable action or forbearance by promise
Did promise directly induce promisees action or forbearance?
Note: Any loss incurred before promise was made cannot be said
to have been induced by promise
Was promisss response a justifiable reaction to promise?
o Breach of promise
o Promise is binding if injustice can be avoided only by enforcement of promise

Promisee must have suffered some specific and measurable loss by


relying on promise
Statute of Frauds pg 294
Proper measure of damages 295
Promissory estoppel only provides damages as justice requires and does not
attempt to provide the plaintiff damages based on the benefit of the bargain
(Rosnick)
o Usual measure of damamges under Promissory estoppel is loss incurred by
the promissee in reasonable reliance on that promise or reliance
damages
Correct emeasure of damages is the amount expended in reaosnbale
reliance of the promise to make a loan, not the damages had the loand
been made.

Notes on Promissory estoppel in employment and retirement agreements


Note on promissory estoppel and precontract negotiations
Hoffman v. Red Owl
Facts: P bought a small grocery store to get experience then sold on advice of D representative,
Lukowitz and possible lose some lucrative profits in doing so. P bought lot selected by D moved his
family to area and sold bakery in reliance on statement to get money together and we are set Number
of agreement to get grocery store up and running failed. P rejected final arrangement which would
require his father-in-law to loan money as gift rather than partner.
Held: Promissory estoppel could be invoked when necessary to void injustice.
Why: Restatement 90 does nto require the promise to meet the requirements of an offer that could ripen
into a contract. Rather here since it was shown that the promisor could reasonably expect the promises to
induce action, the promise did induce action and injustice could only be avoided by enforcement of the
promise.
Pavel Enterprises, Inc. v. A. S. Johnson Company Inc.
Facts: P wished to bid on a construction project for the renovation of building. P
solicited subbids from several subcontractors including D. D responded with an
estimate and with his info, p submitted bid for project. P won the contract but D
called off offer stating that it was too low and mde error. D neglect to correct error
because it is not expect to receive contract. P used diff subcontractor that cost
them $32k more. P filed breach of contract.
Held: There was not a traditional contract binding the two parties, and there was
no meeting of the minds. Further there was sufficient evidence in the record to
support the trial judges conclusion that P had not proven its case for detrimental
reliance.
Why: in determining a question of detrimental reliance, there must be a clear and
definite promise where the promisor has a reasonable expectation that the offer
will induce action or forbearance on the part of the promise which does induce
actual and reasonable action or forbearance by the promise and causes a
detriment which can only be avoided by the enforcement of the promise.
Restatement 90 Four part test (1) clear and definite promise (2) where the
promisor has a reasonable expectation that the offer will induce action or
forbearance on the part of the promise; (3) which does incude actual and
reasonable action or forbearance by the promise; and (4) causes a detriment which
can only be avoided by the enforcement of the promise.

UCC 2-205 firm offer


Diminishing Importance of Reliance
Salsbury v. Northwestern Bell Telephone Company
Facts: D wrote letter saying they were donating $15k to collegedonations
normally made with peldge cars. Pledge card typed but never signed by D. P acted
in the belief D was obligated in the same manner as those who executed pledge
cards; p says letters such as Ds were sometimes taken in lieu of pledge cards.
Held: D is liable because this is charity.
Why: Courts are willing to go after what they think is equitable
---------------------------------------------------------------------------------------------------------------------

Is the Agreement Unenforceable Because of the Flaws in the Agreement process or


Problems with the Language of the Agreement?
Contract Law Reasons for NOT enforcing Agreements:
Statute of Frauds
Fraud, Fraudulent or Material Misrepresentation and Nondisclosure
Defendants lack of Capacity
Duress and Undue Influence
Illegality and Public Policy
Unconscionability
Mistake
Statute of Frauds
Radke v. Brenon
Fact: D gave his neighbor Radke (P) a written offer to sell a piece of real property.
Radke accepted the terms of the letter orally. P did not object when Brenon later
increased the sales price by $50. When P gave D a check for $262 D revoked the
offer to sell. P filed a claim against d for breach of contract and d appealed the
courts judgment in Ps favor.
Held: Under the circumstances the letter written by the D offering the land to
plaintiff is a memorandum sufficient to satisfy the requirement of the statute
Why: MN statute permits enforcement of an oral contract if there exists a note or
memorandum as evidence of the contract. Wirting for the sale of land must contain
at least an express statement of consideration, a description of the land, signed by
the party to be bound and the parties to the contract. The court held that all of
these elements were clearly present in the letter written by D.
Statute of Frauds
Restatement 110 Classes of Contracts covered
Using this in this class
o (1)(d) a contract for the sale of an interst in land
o (1)(e) a contract that is not to be performed within a year from making
thereof
o (2)(a) a contract for the sale of goods for the price of $500 or more

Falling within the statute of frauds means that the statute of frauds applies in
this case

DF Activities Corporation v. Brown


Fact: D lived in a house designed by Frank Lloyd Wright known as the Willits
House. A write enthusiast controlled DF activites corporation (p) and P sought to
purchase the Willits Chair. Ps art director contends that the parties entered entire
a verbal agreement on Nov. 26, 1986 to sell for $60K in two equal installement due
on Dec. 31 and March 26. Letter included first installment was mailed by it was
returned with a note indicating that the chair had been sold to another party. P
sued for breach of conrtact and sought the difference between the agreed upon
price and the price at which D sold the chair to the other party.
Held: A defense based on statute of frauds does not always need to be determined
at trial.
Why: Case does not satisfy statute of frauds we dont have browns signature on
the letter it isnt doing anything for us if you take strict reading of the statute of
fraud that there are certain things that have to be written down. BUT if we can get
brown to go into a deposition. It gets us out of statute of frauds subsection 3b if
the party against enforcement is sought admits in his pleading testimony or
otherwise in court that a contract for sale was made
McIntosh v. Murphy
Fact: D made verbal agreement to hire P to work at auto dealership for one year.
Agreement was never put into writing. P later sent D a telegram stating he would
arrive in Honolulu the next day from Los Angeles. P began work the next day D
fired him two months later.
Held: A promise can be removed from the statute of frauds and held to be
enforceable if the promise is one which the promissor should reasonably expect to
induce either action or forbearance on the part of the promise.
Why: An oral promise which the promissor should reasonably expect to induce
either action or forbearance on the part of the promise is enforceable when
injustice can be avoided only be enforcing a contract restatement 217a
o Where the parties to a written agreement agree orally that performance of
the agreement is subject to the occurrence of a stated condition, the
agreement is not integrated with respect to the oral condition
Fraud, Fraudulent or Material Misrepresentation and Nondisclosure
Halpert v. Rosenthal
Facts: Termites in house. D agreed to buy houseaccording to D on 3 diff
occasions they asked if there were termites in the home and P said no. Before
moving in D had inspection of house and there were termites. D doesnt want to
buy house, p sells to someone else. P wants difference between sale of house and
what contract said between p and D.
Held: An innocent misrepresentation of a material fact warrants the granting of a
claim of recission.
Why: Regardless of whether the vendors misrepresentation was innocent or
fraudulent, because the vendee relied upon the misrepresentation as to a material
fact and thereby induced to enter into the contract, the vendee was entitled to
rescind the contract even htough he offered no proof that the vendor intended to
deceive them.

Swinton v. Whitinsville Savings Bank


Facts: D sold termite infested house to P. Although D knew house was infested by P
could not readily observe this condition upon inspection, d did not make condition
known before sale
Held: D NOT liable
Why: Non-disclosure of truth will not render one party liable to other when no false
statement was made, no attempt to conceal true fact was made and no duty to
speak
Note: Caveat emptor let buyer beward, buyer must transact at own risk
Weintraub v. Krobatsch
Facts: D contracted to purchase home owned by P and gave deposit as required by
the contract which was to be held in escrow on behalf of P. Prior to closing Ds
discovered house infested with cockroaches and attempted to rescind. P rejected
recission and filled lawsuit for damages in the amoung of the deposit.
Held: D entitled to a trail on the issue of whether there was fraudulent
concealment or nondisclosure justifying their recision. Ps silence regarding the
roach infestation if she was aware of it and was found to be a material fact, could
constitue fraud.
Why:
Defendants Lack of Capacity
Duress and Undue Influence
Restatement 12
(1) No one can be bound by contract who has not legal capacity to incur at least voidable contractual duties.
Capacity to contract may be partial and its existence in respect of a particular transaction may depend
upon the nature of the transaction or upon other circumstances
(2) A natural person who manifests assent to a transaction has full legal capacity to incur contractual duties
thereby unless he is
a. Under guardianship or
b. An infant or
c. Mentally ill or defective
d. Intoxicated
Austin Instrument, Inc v. Loral Corporation
Facts: D won $6million navy contract for radars and bid for 40 precision gear
components that are needed for the radars. D awarded P the production of 23 of
these parts. Delivery of these parts commence the D received second contract for
navy and D again bid for 40 parts. P told D that P should award P the right to
produce all of these parts of the second contract and substantially increase the
prices of the current parts and future parts that P will ship to D or P will stop
shipment and production. D looked around for other manufactures but after not
finding a reliable alternative agreed to Ps demands.
Held: P used economic duress to charge higher prices form D than the original
agreement
Why: Contract is voidable on the ground of duress when it is established that the
party making the claim was forced to agree to it by means of wrongful threat

precluding the exercise of free will. Existence of economic duress or business


compulsion is demonstrated by proof that immediate possession of needful goods
is threatened or by proof that one party to a contract has threatened to breach the
agreement by withholding gods unless the other party agrees to some further
demand.
Totem Marine Tug & Barge, Inc v. Alyeska Pipeline Service Company
Facts:P, totem entered into a contract with D to transport pipeline construction
materials from TX to AK. P chatered barge and tug to accomplish this. Upon arrival
P discovered that D had mislead them about volume of material. In waiting for
assurances and an amendment to the contract P second tug was delayed getting
through Panama Canal and the transport dealt with a hurricane and then D
unloaded the materials at Long beach without Ps consent which nullified Ps
insurance. D terminated contract without providing reason and stated payment
would be in either 1 day or within 6-8 moths. P received settlement and signed
release for $97500 when the debt amount was between $260K and $300K.
Held: Any genuine issue of material fact related to whether that had been
economic duress which would permit avoidance of the release precludes summary
judgment for the defendantsP executed agreement under duress. Deliberate
holding of the funds was a coercive act.
Why: Duress exists where (1) one party involuntarily accepted the terms of another
(2) circumstances permitted no other alternative (3) such circumstances were the
result of coercive acts of the other party. Economic duress uses a reasonable
person standard to determine if freewill was overcome. essential element of
economic duress is that P show other party, by wrongful act or threats,
intentionally caused him to involuntarily enter into a particular transaction.

Odorizzi v. Bloomfield School District


Facts: P arrested while teacher at school. D went to Ps apartment after release P
had not slept and was under emotional distress was told that if he resigned
immediately, matter would be kept quiet.
Held: P was under undue influence
Why: Excessive persuasion leveled against Pjust endured arrest and interrogation
for crime that could subject him to public humiliation and was threatened with
such humiliation if he did nto resign.

Illegality and Public Policy


Hanks v. Power Ridge Restaurant Corp.
Facts: Facility invited public, in exchange for a fee, to ski, snowboard and snow
tube. Injured person brought 3 kids and nother child to snow tube. Injured person
signed a waiver, defense , indemnity and hold harmless agreement.
Held: Contract was not enforceable because it was against public policy
Why: Though contract was clear nd most likely understood by P. Enforcing this type
of contract that waives a party of their own negligence is against public policy.
There is no negotiation over the contract (take it or leave it), not right of people to
not be held liable for negligence, social expectation that family oriented
recreational activities will be reasonable safe

Valley Medical Specialists v. Farber


Facts: Ds entered into employment agreement with P and contained a restrictive
covenant not to compete. After D doctor left the practice and began practicing
within the area defined by the restrictive covenant, P sued Ds based on the
restrictive covenant not to compete. Ct denied Ps preliminary injunction request
and held that the covenant violated public policy and was unenforceable because
it was too broad
Held: non compete contract was unenforcable
Why: Covenant was unenforceable because P failed to prove that its interests
outweighed public policy interest. Duration and geographic scope was
unreasonable. Trial courts opinion was affirmed and the appellate court opinion
was vacated and remanded.
1)
2)
3)
4)
5)

The three year duration was unreasonable because patients need to see the DR every 6 months
The 5 mile radius was unreasonable because it covered over 235 square miles
Restriction was unreasonable because it did not expressly poivide an exception for emergency medical treatment
Overly broad becyse it is not limited to pulminology
Violates public policy because of the sensitive and personal nature of the doctor-patient relationship

Restatment 181 Effect of Failure to Comply with Licensing or Similar Requirement


If a party is prohibited fmor doing an act because of his failure to comply with licensing, registration or similar
requirement a promise in consideration of his doing that act or of his promise to do it is unenforceable on
grounds of public policy if :
(1) the requirement has regulatory pupose and
(2) the interest in the enforcement of the promise is clearly outweighted by the public policy behind the
requirement
Unconscionability
William v. Walker Thomas 1964
Facts: Single mom bought stuff on installment plan, she didnt pay so furniture
store filled complaint for replevin, trial court found for furniture store. P admitted
she didnt read contracts nor did she ask anyone to explain them to her she
thought that once she had paid off one item it was hers (not the case)
Held: Ct said there was a meeting of the minds but contracts were against public
policy.
Why: contracts are unconscionable when they are so extreme as to appear
unconscibale according to the business practices of the time and place. Case
should be remanded.
Restatement 208 Unconscionable contract or term
If a contract or term thereof unconscionable at the time the contract is made a
court may refuse to enforce the contract, or may enforce the remainder of the contract
without the unconscionable term or may so limit the application of any unconscionable
term as to avoid any unconscionable result.
Mistake

Sherwood v. Walker
Facts: Both parties assumed that a cow was barren and could not breed. P bought
cow based on meight for meat. Before P secured possession of animal D learned
she was preggo and of great value, tried to rescine the sale by refusing to deliver
Held: D had right to refuse to deliver cow

Why: a party who ahs given apparent consent to a contract of sale may refuse to
execute it or he may avoid it after it has been complted it the assent was founded
on the contract made, upon the mistake of material fact such as the subject
matter of the sale. The price or some collateral fact materially inducing the
agreement this can be done when the mistake is mutual -- both thought cow
was barren.
Estate of Nelson v. Rice
Facts: Appraisers hired to appraise personal property in prep for an estate sale.
Appraiser told personal reps that she did not appraise fine after and that if she saw
any they would need to hire additional appraiser. Appraiser did not report finding
any find art, relying on her silence they assumed not fine art and sold property. D
buyer paid asking price of $60 for two oil paintings. Auction house authenticated
paintings to be work of heade and old it for $1,072,000. P sued D alleging sale
contract should be rescinded or reformed on grounds of mutual mistake and
Unconscionability.
Held: Summary Judgment for D
Why: P was victim of its own folly and it was reasonable for trial court to allocate to
it the burden of its mistake. While results of transaction may have seemed
unconscionable to plaintiff in hindsight, ther terms of the contract were not.
Grenall v. United of Omaha Life Insurance Company
Facts: D wanted to rescind an annuity decedent purchased 4 months before dying
based on mistake of fact that decedent did not know at time of contract that she
was terminally ill. Plaintiffs claimed that decedent would not enter into annuity
contract but for mistake of fact
Held: Judgment for United of Omaha
Why: Ct concluded that P failed to establish an essential element for recission
based on mistake of fact. Decedents mistaken belief that she was in good health
and had a reasonable life expectancy did not support a claim for recission.
Decedent bore the risk of the alleged mistake regarding her health and life
expectancy at the time of the annuity contract. Allocation of this risk of the
decedent was reasonable because such a risk was an inherent part of the annuity
contract.
Pg 431
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What are the Terms of the Deal?


Trade Custom and Usage
Threadvill v. Peabody Coal Co.
Facts: Contractor hired by coal company to probe the test holes and coal company
employees were unable to recover probing device that became stuck in hole.
Contractors complaint alleged two claims for relief; loss of that probe was due to
coal companys negligence in attempt to recover the probe and the coal company
owner by the contractor that was lost during the probing operation. Trial court
found that although there was no negligence by the coal company or an express
agreement on the probe loss issue, the contractor had demonstrated that drilling
industry custome placed risk of probe loss on driller and the coal company absent
an agreement otherwise.

Held: Coal company was liable for damages for the lost equipment . Court rejected
findings that the relevance of negligence issue and remanded case for further
proceedings.
Why:
Parol Evidence Rule
Restatement 213 Effect of intergrated agreement on prior agreements (parol evidence rule)
(1) binding integrated agreement discharged prior agreement to the extent that it is inconsistent with them
(2) binding completely intergrated agreement discharges prior agreements to the extend that they are within
its scope.
(3) An integrated agreement that is not binding or that is voidable and avoided does not discharge a prior
agreement but and intergrated agreement even though not binding, nay be effective to render inoperative
a term which would have been part of the agreement if it had not been intergrated.
Common Law
Nelson v. Elway
Facts: P brought suit against D alleging D did not honor terms of service agreement
which was never signed and was never incorporated into the final agreement
between the parties.
Held: Reversed grant of summary judgment for Ds on Ps promissory estoppel
claim
Why: because it was unreasonable for the petitioners to rely on a contract
containing an unfulfilled condition precedent. Court affirmed the remainder of the
appellate courts order and remanded for the entry of judgment for respondent.
Rogers v. Jackson
Facts: D borrower appealed a summery judgment in favor of P lenders on their
claim for enforcement of a promissory note claiming that his payment obligation
under the note was subject to an unfulfilled oral condition. After borrow did not
make any payments to the lenders pursuant to a written promissory note borrower
contended that pursuant to an oral agreement between the parties he would pay
only if and when he was able.
Held: vacated and remanded for further proceedings
Why: State held that borrowers statement of material facts was not procedurally
defective under civil procedure. It complied with parol evidence rule as the
agreement was only partially intergrated. Agreement imposed no contractual
duties on the lenders. Existence of the oral condition was, thus, a question of fact.
Note Cannot admit parol evidence that contradicts what is in the contract, promise
is not intended to be binding unless something happens.
Uniform Commerical Code
Ucc 2-202
(1) Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set
forth in a writing intended by the parties as a final expression of their agreement with repsect to such
terms are included therein may not be contradicted by evidence of any prior agreement.
Simmons Foods, Inc. v. Hills Pet Nutrition , Inc.
Facts: P manufactures chicken byproduct for animal food, over years they had
output and requirement contracts for one year at a time for hills to buy the by
product of simmons over time hill started to use low ash, simmons continued to
make stuff thinking they would get business. Simmons files a breach of contract

and promissory estoppel they relied on an oral promise to continue relationship for
a longer amount of time P argued these facts
Held: Where UCC applies a party cannot introduce parol evidence to contradict
evidence statute of frauds.
Why:
Exceptions
Using Parol Evidence and Other Extrinsic Evidence to Discover the Meaning of the Terms Used in the
Written Contract
Frigaliment Importing v. International Sales
Facts: D agreed to sell P chickens. D shipped stewing chickens P rejected them, claiming that contract
referred to fryer chickens
Held: Judgment for D
Why: Trade usage is binding on D only if D had actual knowledge of usage or usage was so generally
known in community that Ds actual knowledge could be inferred. Here, D was new to poluntry business
and accnot show that trade usge was well-established
Course of Performance, Course of Dealing and trade Usage (Again)
Ambiguous In contract terms
Random House, Inc. v. Rosetta Books LLC
Facts: copyright infringement action, P publisher sought to enjoin D internet
company and its chief executive officer from selling in digital format eight specific
works on the grounds that the authors of the workds had previously granted the
publisher the right to print, publish and sell the works in book form
Held: Motion for preliminary injunction was denied.
Why: Relying on the language of the contracts and basic principles of contract
interpretation, the court found that the right to print, publish and sell works in
book form did not include the right to public works in a digital formant. Ct found
phrase itself distinguished between pure content the work and the format of
display in book form. Language would not have been necessary if the phrase in
book form encompassed all types of books.
Trident Center v. Connecticut General Life Inc. Co.
Facts: P claimed language of contract was ambiguous and p had option of
prepaying loan if only it was willing to incur the prepayment fee. P also argued that
under CA law even seemingly unambiguous contracts were subject to modification
by parol or extrinsic evidence. P argued that lower court should have granted it an
opportunity to prove that the contract language did not accurately reflect the
parties intentions.
Held: remanded the case for reinstatement of the complaint on the grounds that
California did not follow the traditional rule that barred extrinsic evidence in the
case of unambiguous intergrated contracts.
Why: Ct rejects argument that contract was ambiguous, proffered interpretation
would hav resulted in a contradiction between two clauses of contract; the default
clause would have swallowed the clause prohibiting plaintiff from preparing.
Whether to accelerate repayment o the loan in the event of default was entirely
defendants decision.

Use of Rules, Maxim, and Extrinsic Evidence to Construce Contract Language


Special Interpretive Rules for Contracts of Adhesion
Meyer v. State Farm Fire & Cas. Co.
Facts: Meyers home damaged by fire. Appraisal clause in contract, Meyers sue
and say that they should be able to sue for damages because it was an adhesion
contract, they were unware the contract contained and appraisal provision and
there was no effective waiver of their constitutional right (ability to have trial by
jury)
Held: Arbitration is very commonly used, there is nothing really problematic about
the appraisal provision.
Why: Policy argument if they were to find for Meyers it would dismantle all cases
involving arbitration
Adhersion contract: a contract made by one party that doesnt allow for any
bargaining or flexibility one sided is problematic because they can write something
very much in their interest. cts dont always refuse to enforce adhesion contracts
there is no clear rule against adhesion contracts and whether there is any special
concern for them if the terms are totally unconscionable if there is any ambiguity it is
read against the drafter.
Lauvetz v. Alaska Sales and Service D/B.A National Car Rental
o Facts: Couple rented a van in Alaska and gets optional collision damage waiver.
National says that renters are liable for all damages UNLESS they get the CDW
BUT the collision damage waiver isnt going to save you if you violate the terms
and conditions but arent given terms and condition until after acceptance
o Held: Trial court erred in granting summary judgment that CDW was
enforceable, case reversed and remanded. NOT enforcible
o Why: Court says that a consumer would not reasonably expect the damage
waiver to be less than complete reasonable person standard
Restatement 211: (3) Where the other party has reason to believe that
the party manifesting such assent would not do so if he knew that the
writing contained a particular term, the term is not part of the agreement
439-61, 470-80, 497-501
501-535
Terms Added by the Courts
Terms Implied by Courts of Effectuate Assumed Intent
Wood v. Lucy, Lady Duff- Gordon
Facts: D made agreement with P gave P right to place Ds endorsement on
fashion designs. D agreed that P would be only person to have this right and P
agreed to give D profits derived from sale of endorsed designs. Then, D put
endorsement on designs of 3rd party without sharing profits with P, so P sued for
breach. D argued that agreement was not binding because P was not obligated to
sell any endorsed designs at all.
Held: Contract is binding.

Why: P impliedly promised to use reasonable efforts to sell Ds designs. Implied


promise is sufficient detriment to P to constitute consideration for Ds counterpromise that she would not put endorsement on 3rd partys designs.

Billman v. Hensel
Facts: D selling home to P for case. Parents come over and they change mind and
say they dont have enough moneySellers sued to secure $1000 liquidated
damage deposit required by contract buyers defended upon basis that they were
relieved form performing gin that they could not obtain financing.
Held: Found in favor of the sellers
Why: Buyers were not excused form performance. Subject to financing clause
imposed upon the buyers an implied obligation to make reasonable good faith
effort to satisfy the condition. Evidence supported that sellers carried their burden
of proof by establishing that the buyers had not made a reasonable and good faith
effort to secure the necessary financing and therefore could not rely upon the
condition to relieve their duty to perform.
Terms Implied by Courts to Effectuate Public Policy the implied duty of good
faith and fair dealing
Locke v. Warner Bros., Inc. Clint eastwood case.
Facts: as part of settlement agreement with clint eastwood Eastwood secured a
production agreement between D and P. Agreement gave P non-exclusive first
look deal which allowed P to submit to D any picture in which P was intereste din
developing. D had optio to pass on any project P submitted. P brought action
against D for breach for failing to consider her for any projects and alleged fraud
on the part of D for entering into a contract without intention of honoring the
agreement.
Held: D did not act in good faith found for P
Why: Where one party holds a discretionary power affecting the rihgts of another,
it must exercise such power in good faith. However implied covenant of good faith
will not be used to contradict any express terms of a contract.
Hobin v. Coldwell Banker Residential Affliates, Inc.
Facts: Appealed form superior court which dismissed claims against D for breach of
implied covenant of good faith and fair dealing, breach of contract and
misrepresentation. Ct dismissed claims brought by P a franchise against D related
to Ds placement of additional franchise in Ps territory. Parties agreed the
franchise agreement expressly allowed D to place additional franchises in plaintiffs
area but disagreed as to whether the implied covenant of good faith and fair
dealing limited the extent of its discretion to do so.
Held: Affirmed dismissal of ps claims, finding plaintiff did not allege a breach of
implied term of agreement thus plaintiff failed to state claim for breach of contract
Why: Dismissed for failure to state a claim, finding P failed to allege breach of
implied covenant of good faith and fair dealing, thus, p did not allege an implied
term of the agreement.
------------------------------------------------------------------------------------------------------------------

When is Someone Who Made an enforceable deal excused from doing what she agreed to
do?
Conditions: Non Occurrence of Something that Contract Expressly Provided Must Occur as an excuse
for not Doing What you Agreed to Do
Occurrence of Express Conditions and Strict Compliance
Luttinger v. Rosen
Facts: P contract to buy Ds property conditional upon him obtaining a mortgage
financing in the amount of $45k for interest rate not more than 8.5% per annum. P
promised to use due diligence. Ps attorney handled the financing process and he
only knew of one lending institution that met Ps rqs. He applied for loan at
institution and loan was offered but above 8.5% -- refused loan asked d for deposit,
offered to fund the interest rate difference but P refused.
Held: P is entitled to return of his deposit
Why: Under the contract, P used due diligence. P didnt have to apply to lending
institutions where he knew his loan was not going to get approved. Law does not
required the performance of a futile act Contract clearly stated the condition upon
which the parties promised to purchase.
Recognizing Language of Express Condition
Peacock Construction Company v. Modern Air Conditioning, Inc.
Facts: D subcontractors enter into agreement with P contractor to work on a
construction project. After Ds completed work, P refused to make final payment
contending that it had not received final payment from owner. D initiated breach of
contract action and were granted summary judgment. P contended parties
agreement provided that the owners payment was condition precedent to
petitioners duty to perform
Held: Intent in most cases is that payment by the owner to the general contractor
is not a condition precedent to the general contractors duty to pay the sub
contractors.
Why: Parties agreement was ambiguous regarding the payment provision so that
such ambiguity was resolved in Ds favor. Ds were small subcontractors who would
usually not assume the risk that the owner would not pay them. This is because
small subcontractors who must have payment for their work in order to remain in
business will not ordinarily assume the risk of owners failure to pay the general
contractor. If parties wanted to shift burden of risk from p to d the parties
agreement could have provided such provision.
Excusing Conditions (Eliminates the Excuse)
Avoidance of Forfeiture as a Reason for Eliminating a Condition
Acme Markets, Inc. v. Federal Armored Express, Inc.
Facts: P grocery chain and D armored car service entered into contract for amored
car service and the agreement was later amended to provide for timely
reimbursement of service related issues. P brought breach of contract after it
allged robber stole one of Ps cash bags in Ds possession and d refused to
reimburse P. P claims D was in possession of bag when stolen but there was no
receipt issued this is immaterial and d claims that although they were in
possession they were not responsible for the bags until the bags had been
accepted and rexipted for but its employees

Held: Receipt provision was a condition precedent, but it could be excused if it was
not a material part of the contract.
Why: Remanded for a determination of the materiality of the receipt provision.
Court also remanded to determine whether the forfeiture (not enforcing the receipt
condition) would be disproportionate
Rule: to the extent that the nonoccurrence of a condition would cause
disproportionate forfeiture a court may excuse the non-occurrence of that
condition unless its occurrence was a material part of the agreed exchange
(restatement 229)
Prevention as a Reason for eliminating an express condition
Moore Brothers Co. V. Brown & Root, Inc.
Facts: Ps were subcontractors contracts to D general contract to help build parts of
road for toll road. Subcontracts between brown and root and plaintiffs contain a
general pay when paid clause which said in party, payment by owner to general
contract is a condition precedent to any obligation of general contractor to make
payment to subcontractor and the general contractor shall have no obligation to
make payment to subcontractor, and the general contractor shall have no
obligation to make payment to subcontractor for nay portion of work which general
contractor has not received payment form the owner. The contract also contained
provision for additional payment if the owners ordered design changes that
constitute chance in scope P was asked to make a thicker payment and they did
so which cost them more. An arbitrator ordered the owner to pay D more who
would then pay p more. Owner did not have funds to get more money because the
lenders were not made aare that it would be possible that more funds would be
needed partly because of the acts of D. P sued to recover additional money
Held: D may not rely on the non-occurrence of a valid pay when paid condition
precedent in the subcontract as a defense to liability where the general contractor
was partly responsible for the failure of condition precedent. D is liable to Ps for
payment for the additional change in scope work.
Why: B& R contributed to the non-occurrence of condition precedent, thus the
district court applied the prevention doctrine to waive the condition precedent and
held that brown and root is liable to the plaintiffs for payment for the additional
change in scope work notwithstanding the pay when paid clause in the
subcontract.
Note: court may excuse to avoid disproportionate forfeiture. Party
seeking to enforce the condition is prevented form happening.
579-612
Modications, Waiver or Estoppel as an Excuse for Not Doing what you Agreed to do
Waiver one party
Modificaiton needs both parties.
Dynamic Machine Works Inc v. Machine & Electrical Consultants, Inc.
Facts: P purchased a lathe machine from D. After a delany in its manufacture the
parties agreed to an extension of the deadline for the installation and
commissioning of the lathe. Once delivered, the lathe required significant

readjustments in connection with its final commission. The buyer wrote the seller
granting one last extension of the final commission date. Next say buyer realized
lathe would not be able to meet required specifications. Buyer rescinded the
extension within 48 hours of giving it. Seller had not relied on the extension ot is
detriment
Held: If a written extension constituted a modification of an agreement to purchase
a product then the buyer might not retract it unilaterally . If on the other hand the
wrrten extension constituted a waiver of an executory portion of the agreement,
the buyer might retract it by reasonable notification received by the seller that
strict performance will be required unless the retraction would be unjust in view of
a material change of position in reliance on the waiver.
Why: If both parties agree and they agree to the terms of the contract
then you remand it back for further consideration
May Centers Inc v. Paris Croissant of Enfield Square, Inc Et Al.
Facts: Parties entered into a 10 year lease and the guarantors agreed to guarantee
the lease payments for the first 2 years. Guarantors agreed to extend their liability
for the duration of the lease if the tenant was in default of the lease during the first
two years. Tenant normally paid rent after the 15th of each month. Tenant received
notices of default on its rent payments after the two year guaranty period had
expired landlord claimed tenatnwas in default during the month that guaranty
expired.
Held: ct found in favor of the guarantors in the landlords claim against them
finding that the landlord did not prove that the tenant was in default of its rent
prior to the expiration of the guaranty period. Landlords acceptance of the rent
check after the 15th of the month during which the guaranty period expired
discharged the rent and waived any right to claim default in that month.
Why:
Clark v. West
Facts: Contract for book if you write it sober we will pay you $6/page if you write
it drunk we will give you $2/page. P argued that they had waived this condition
(past expericen with company paid him $6 last time even though they knew he
was drinking) while he was writing West knew he was dirnking and said we are
going to give you $6 anyways.
Held: Court sides with drunk law professor this is wests discretion this only
effects wests duties under the contract so they have the right to waive this
Why:
Impossibility, Impracticability, Frustration of Purpose: Occurrence of Something Not Provided for in the
Contract as an Excuse for Not doing what you agreed to do
Taylor v. Caldwell
Facts: P and D had contracted for use of Music Hall in July. In June Hall burned
down. P sued D for not allowing him to use hall in July
Held: D is excused from performance
Why: For contracts in which performance depends on continued existence of
something, condition is implied that impossibility of performance arising from
perishing of that thing exucses performance
Note: When there is post contract occurrence that makes performance more
expensive, it is NOT an excuse it is risk assumed when entering into contract

Note: existence of the hall is an implied condition of the contract


Wisconsin Electric Power v. Union Pacific Railroad
Facts: Contract provided that after railroad delivered coal to the utility, if railroad
was prevent by force majeure from reloading its empty cars with steel the
railroad could charge higher rade. Steel mill shuts down they have to charge higher
rate utility contended that the railroad waived its right to the higher rate by not
exercising the right when steel mill first shut down and that railroad did not make
good faith effort to obtain backhauling of other commodities
Held: RR contractually entitled to charge higher rate (more specific language in
contract would avoided going to court).
Why: RRs failure to immediately invoke its rights to the higher rate did not waive
the right, ther was no detrimental reliance by the utility on the lack of prompt
notice and the utility enjoyed the benefit of the lower rate to which it was not
contractually entitled. RRs duty of good faith did not include a duty to explore the
possibility of re-configuring its operations and obtaining railcars optimized to carry
other shippers commodities.
Frustration of Purpose
Post-contract occurrence not anticipated in contract that does not affect ability to
perform but affects mutually understood purpose of contract
Krell v. Henry
Facts: D contracted to rent Ps flat to watch coronation parade. After contract was
entered into, but before coronation parade, parade was cancelled. D did not pay
rent
Held: Contract NOT enforceable
Why: While it was still possible to perform contract, D was excused from renting
flat because of frustration of purpose (which was mutually understood to be to
watch parade)
Mel Frank Tool & Supply, Inc. v. Di0Chem Co.
Facts: Lessee chemical distributor leased premises to lessor. Those premises wer
vacated after city enacted an ordinate prohibiting the storage of hazardous
material.
Held: Ordinance did not excuse the lessees breach
Why: When a partys principal purpose in making the contract was substantially
frustrated by the occurrence of an event that was beyond the control of
expectation of the parties, its duty to render performance was discharged.
However, the frustrating even had to nullify a basic assumption upon which the
contract was made and had to be so severe that it could not be regarded as within
the risks assumed under the contract. Thus, so long as there was a serviceable use
for the property, a partys performance was expected even though the remaining
uses were less lucrative. Lessee failed to est. that entire inventory consisted of
hazardous materials, it could not establish frustration of purpose.
Anticipatory Reprudiation: Other guys Unambiguous Indication of Unwillingnes or Inability to Perform
as an Excuse for not Doing what you Agreed to Do
Anticipatory Repudiation

Repudiation that is not accompanied by breach by nonperformance and occurs before time for
performance has arrived.
o Ex. I will not perform is anticipatory repudiation if made before performance is due
o Ex. I doubt I will be able to perform is NOT repudiation, so suit CANNOT be brought
immediately under doctrine of anticipatory repudiation
UCC 2-610
o (1) When either party repudiates contract with respect to performance not yet due, agrrieved
party may
a. Await performance by repudiating party for commercially reasonable time
b. resort to any remedy for breach, even though he has notified repudiating party that he
would await performance and has urged retraction
c. suspecnd own performance or proceed in according with UCC for sellers right to
identify goods to contract notwithstanding breach or to salvage unfinished goods.

Statement as Anticipatory Repudiation


Hochster v. De La Tour
Facts: D contract for Ps services as courier for 3 motnhs to begin in June. In May D
stated that he would not perform contract. P sued for breach of contract
Held: P may bring suit for breach of contract prior to time for performance of
contract since D has repudiated.
Why: If immediate suit not allowed, P would either have to cancel contract and
give up all rights under it or ignore repudiation and hold himself in readiness to
perform until June (and not get another job). After Ds repudiation, P is considered
absolved from any future performance of it.
Repudiation Based on Conduct
Failure to Give Adequate Assurance of Future Performance as Like Unto
Repudiation
Norcon Power Partners, L.P. v. Niagara Mohawk Power Crop
Facts: D contract to purchase electricity generated at Ps facility for 25 years had
3 pricing periods. During 2nd period, D gave P letter stating substantial credits in
Ds favor would accrue and P would not be able to satisfy escalating credits in 3rd
period. D demanded assurance that P would perform all future repayment
obligations
Held: D had right to demand adequate assurance of future performance because
D has reason to believe P will breach by nonperformance
Why:
Material Breach: Other
Material Breach and Constructive Conditions and Substantial Performance: Conceptual Basis for the
Material Breach Doctrine
Nichols v. Raynbred
Facts: P promised to deliver a cow to D in exchange for 50 shillings. D did not pay
nor did D deliver cow. P sued D for assumpit (an action for recovery of damages for
the nonperformance of a contract) Trial court entered judgment for Nichols and
held that Nichols need not prove that he delivered the cow in order to bring suit.

Held: In a promise for a pomrise a party need not perform before recovery on the
contract is allowed
Why: Agreement was promise for a promise and P was entitled to sue f for
performance without showing that he himself had performed. The pomises (not the
performance) must be exhcnaged at one instant otherwise the agreement will be
construed as unenforceable (nuda pacta an agreement not clothed with
consideration)
Kingston v. Preston
Facts: D would serve P for 1 year and a as a servant in his trade for 200lbs a
year and inconsideration for the business premises the d covenanted that at the
end of the period he would give up the business to P or some other person named
by D give them his stock in his trade at a fair value and that between the young
traders deeds of parternship for 14 years would be executed. At end of period D
did nto surrender the premises because P did nto offer security.
Held: Ps tender of sufficient security was a condition precedent to D surrendering
the premises and stock
Why: Covenants called conditions and dependent in which the performance of
wone depend on the prior performance of another and until the prior condition is
performed the other party is not liable to an action on his covenant. Essence of the
agreement was that D should not trust to the personal security of P but before he
delivered up his stock and business, he should have good security of the payment
of the money. Giving of security must necessarily be a condition precedent.
Substantial performance fulfillment of obligations agreed to in a contract, with only
slight variance with the extact terms and or unimportant omissions or minor defects.
Simple test is whether the omission, variance or defect can easily be compensated for
money
Rule of substantial performance the condition of complete performance may be
excused if the party has rendered substantial performance. In this case, the other partys
duty f counter performance becomes absolute --. The court generally applies this
doctrine where a CONSTRUCTIVE condition is involved. They will not apply it in an
express condition for fear this would defeat the express intent of the parties.
Constructive Conditions of Exchange in Current Practice
Pullmanm Comley, Bradley and Reeves v. Tuck-It-Away, Bridgeport
Fact: Parties signed contract for sale of real property, D seller and V buyer, v
deposited $100l in escrow with Ds lawyers, P. This is the money in dispute.
Contract stated that the closing date was Dec 10. Allowed to extend the closing
period for fee and they did four time, as closing date approached they were short
on funds and refused to allow another extension on Dec 10 nothing took place four
days later D received letter attempting to cancel contract, the size of the plot of
land was not accurately represented. Neither party knew of the incorrect
description of the land. Both parties claim the other violated the contract
Issue: Whether Ds agreement to deliver title was simultaneous with the delivery of
the money
Held: Express language of the contract evidence the parties intent that the buyers
duty to tender full payment of the purchase price was a condition precedent of the
sellers obligation to convey title to it.

Why:
Interplay between constructive and express conditions:
Implied conditions regulate the order of performance
o Express conditions attempt to do the same
MXL Industry Inc. v. Mulder
o Lease had an early termination clause (tenant could elave early upon the
condition that he pays all the sums due pluse 4 months rent)
o Condition precedent one which must be performed either before a contract
becomes effective or which is to be performed by one party to an existing
contract before the other party is obligated to perform.
o Constructive conditions of exchange
Allow the court to supply terms under which a partys dutie to perform
are conditioned on the performance to be given in return.
What Constitutes Material Breach
Jacob & Young, INc v. Kent
Fact: P build house for Dreading pipe was supposed to be used. After house was
complete, D learned that pipes were not reading, but were of equal quality. P
refused to change pipes so D refused to pay him
Held: D must pay P
Why: Dailure to install reading pipe was breach but was not sufficient enough to
allow D to pay. Measure of damages should not be replacing all pipestoo grat.
Instead, should be different between swelling as specified and dwelling s
constructed, even though it may be nominal or nothing.
O.w. Grun Roofing & Construction Co. v. COPE
Facts: Cope sued Grun to set aside a mechanics lien filed by D for damages of
breach of contract alleging that Grun failed to install a new roof on Copes house
rook looked ugly and patchy. Grun filed a cross claim alleging Cope breached
contract by failing to pay.
Held: Gruns actions did not constitute specific performance under the contract
and thus there was a material breach
Why: Grun failed to perform on contract looked like a patch job so Cope doesnt
have to paycope wanted specific shingle on roof, new roof looked streaky then
patchyexternal factor (opposed to pipes_ might affect property value. Functional
v. decorative.
Divisible Contracts
Tendency on the part of legal scholars to look for ways to avoid/mitigate harsh
consequence
Divisible contract
o A mitigating doctrine that reduces the harsh consequences in a class of
cases
Filet Menu Inc. V. CCL & G
Divisible contract is one under which the whole performance is
divided into two sets of partial performances, each part of each
set being the agreed exchange for a corresponding part of the
set of performances to be rendered by the other promisor

Failure to perform one part does not bar recovery for


performance of other
Restatement 240
o If the performance to be exchanged under an exchange of
promises can be apportioned into corresponding pairs of
part performances so that the parts of each pair are
property regarded as agreed equivalents, a partys
performance of his part of such a pair has the same effect
as it would have it only that pair of performances had been
promised.
If a party has breached one part of a divisible contract, he or she is not
precluded from obtaining consideration that was allocated to that
portion of the contract that he or she performed.
Material breach does not cause a forfeit to the rest of the contract but
this hinges on being able to pair up different deals.

Perfect Tender
Material breach concept is not a part of law governing sale of goods
Sale of goods follow perfect tender
o Any breach by a seller will excuse the buyer from performing
UCC 2-601 buyers rights on impropert diverlery (Perfect tneder rule)
Subject to provisions of this article on breach in installment contracts (Section 2-612) and unless
otherwise agreed under the sections on contractual limitaions of remedy (secitions 2-718 and 2-719, if
the goods or the tender of delivery fail in any respect to conform to the contract the buy may
o Reject the whole
o Accept the whole
o Accept any commercial unit or units and reject the rest.
Does not care if the breach was material and the power shifts to the buyer
Alaska Pacific Trading Company v. Eagon Forest Products, Inc.
Facts: Log purchaser and log seller entered into a contract to buy and sell raw logs.
After months of communications between the parties, the delivery date passed
with no shipment. The purchaser canceled the contract alleging that the seller had
breached. Seller brough an action for breach.
Held: Buyer did not breach the contract by cancelling it.
Why: Following perfect tender rule the seller breached its duty under the contrat
and released the purchaser form its duty to accept the logs.
Material Breach and Election of Remedies
ESPN, Inc v. Office of the Commissioner of Baseball
Facts: Contract dispute between plaintiff sports cable television network and major
legal baseball. Parties TV contract allowed plaintiff to preempt baseball for
significant sports events and required defendant to permit such preemptions if
they were reasonable. In April 1999 basebal terminated the 1996 agreement
contending that ESPN had materially beached.
Held: Courts split the breaches, 1998, Baseball continued the performance so they
waived their right to terminate (election of remedies is not a definitive right, it is a
choice between both remedies AND YOU CANT CHOOSE BOTH, by performing
shows the waiver) 1999 breach not barred by the election of remedies, baseball

did not force ESPN to stop showing baseball even though they wanted to terminate
the contract. They allow showing of baseball for the rest of season.
Why:
Election of remedies Party has two options (1) terminate the contract OR continue
to perform and sue later ESPN argues that Baseball accepted full performance. -
Must choose between termination because of material breach OR Continuing
performance and suing later (performing not waiving right to sue)

--------------------------------------------------------------------------------------------------------------------

How does the Law Enforce a Deal


Specific Performance
Van Wagner Advertising Corp. v. S&M Enterprises
Facts: Leased eastern exterior wall of building for 2 years with an option for 7
years. Erected illuminated sign there leased to Asch Advertising for 3 year period.
Michaels sold building to D, d sent letter to p cancelling the lease pursuant to a
section that said the lessor (or its successor) could terminate and cancel the lease
on no less than 60 days notice if the even of the bona fide sale of the building to a
third party. P abandoned space and sued for specific performance and damages
Held: Trial court was correct in awarding damages instead of specific perfomrnace
Why: ct not convinced by uniqueness of wall it is possible to determine the value
of the billboard. There is preference for damages over specific performance trial
court said that specific performance would help the P and unequally hurt D. D
wanted to renovate the entire area and keeping the billboard would keep them
from doing this.
Walgreen Co. v. Sara Creek Property Co. B.V
Facts: P has contract with D 33 year contract had an exclusivity clause, which
stipulate that no other pharmacy would be in the shopping center while P was
there. 10 years left on the least, D allowed new anchor tenant P to move in
Held: In junction for Walgreens
Why: Court said that costs and benefits that must be weighed in deciding whether
to rant an injunction and determined that the trial court had engaged in a proper
cost-benefit analysis. Injunction was within the bounds of permissible choice under
the circumstances.
Agreed Remedies
Liquidated Damages
OBrian v. Langley School
Facts: School membership agreement contained a liquidated damages clause
requiring the parents to pay tuition for an entire academic year ot the school for
failure to give timely notice of the parents decision to withdraw their daughter from
the school. School claimed that the error existed because parents were asserting
an invalid liquidated damages clause defense that was not legally cognizable. The
curt did not find error but found that summary judgment for the school was
improper before permitting the parents to conduct discovery with regard to their
defense that the clause was an unenforceable penalty
Held: circuit court erred in awarding summary judgment before permitting the
OBrians to conduct discovery with regard to their defense that the agreement
was not a valid liquidated damages clause.

Why: liquidated damages- agreed upon dangers in the contact, must look at the
clauses individually to see if it is enforceable, if looks like penalty NOT likely to
enforce, if making up for a loss
Kvassy v. Murray
Facts: P seller appealed from trial courts decision that the liquidated damages
clause in the contract with defendants, purchasing corporation and corporate
principals, was not enforceable and that lost profits were not recoverable in the
breach of contract action
Held: There was disproportionate damage to the buyer, seller would have made
more from the liquidated damages than this profits from last year.
Why: The liquidated damages clauses in sales contracts are governed by UCC: 1)
Damages for breach by either party may be liquidated in the agreement but only
at an amount which is reasonable in the light of the anticipated or actual harm
caused by the breach, the difficulties of proof of loss, and the inconvenience or
nonfeasibility of otherwise obtaining an adequate remedy. A term fixing
unreasonably large liquidated damages is void as penalty.
709
Limitation of Remedies to Repair, Replacement or Return of Money paid
Judicial Determination of Money Damages
General Measure of Money Damages: Expectation Interest
Hawkins v. McGee
Facts: Ps hand was injured d promised 100% perfect hand. Surgery did not work,
so P did not get perfect hand
Held: P entitled to expectation damages + incidental losses resulting from breach
Why: P was expecting no breach and perfect hand instead he has scarred and
hairy hand. Money value of perfect hand is $ difference between perfect hand and
scarred/hairy hand this is expectation damages
Panorama Village Homeowners Assn v. Golden Rule Roofing, Inc.
Facts: D put roofs in but they were described as poor workmanship. Damages
awarded we the cost of replacing the roof.
Held: trial courts calculation for damages was correct
Why: Court rest on the damage as simply replacing the roof because the D has the
burden of proof of showing if there are other alternatives for giving calculation. P
met the burden of showing one way of showing how they could be made whole
Groves v. John Wunder Co.
Facts: P leased land to D and let D use the land and take sand and gravel from it. D
supposed to pay P $103k and leave property at uniform grad. P intentionally
breached and didnt leave uniform grde. It would cost $60k to fix grade property
itself if defendant had performed woul have only been worth $12k.
Held: Proper measure of damages is the cost of remedying the defect.
Why:
It would cost P $60,000 to have someone come in and fix it (type 2) If
the ground was uniform, it would only be worth $12,000 more (type 1) The TC goes
with the $12,000 value court ends up focusing on bad fiath of D

Peevyhouse v. Garland Coal & Mining Co.


Face: P owned land with coal deposits on it. Leased land to Dd agreed to restore
land at end of lease period at estimated $29,000. After D failed to restore land, P
sued for $25,000
Held: P may recover $300
Why: Where contract provision that is breached is merely incidental to main
purpose and economic benfit of full performance to P is grossly disproportionate to
cost of performance, Ps damages are limited to diminuation in value resulting to
premises because of nonperformance
Money Damages Under the UCC
KGM Harvesting Co. v. Fresh Network
Facts: KGM does not sell to D cuz of price change. P makes more money selling it
to someone else. D contracts had other contracts to people why buy from them
that are cost plus this means they can pass cost along. D covered their lettuce
by getting it from another source.
Held: Damages to D but subtracts what they did not pay to P. P says not fair
because F was able to pass most of the cost along to others, so it does not make
sense to give them such high damages.
Why:
UCC 2-703
UCC 2-711
2-712 when they cover
2-713 damage not covered
money damages, limitations on money damages awards
Rodriguez v. Learjet, INc.
Facts: Liquidated damages clause in contracts if you back out you wont be
penalized but we will keep whatever you sent us as part of liquidated damanges.
Learject end up selling to circust circus for more than would have made under
original contrac targument is that it is unreaosnbale because they were able to
make a profit off anyways.
Held: Learjet is a lost volume seeler even if P didnt backout of contract there was
already an interested seller so they wold have sold two planes instead of one
Why:
Limitations on Mondey Damages Awards
Leingang v. Mandan Weed Board
Facts: P had contracts for bigger lots, and D contracts smaller lots to a diff person,
diff person was erroneously assigned a larger lot so P sues
Held: Ct uses Ps approach costs avoided (gas, oil blades etc) minus cost of
contract (2000)
Why: Overhed costs are constant regardless of whether he performs or not using
the citys method would essentially be charging him twice.
Parker v. 20th Century Fox Film Corp
Facts: D entered into employment contract with P P was to star in musical filmed
in LA and be paid 750,000. Musical cancelled D offered P substitute employment

under same terms except film was to be western filmed in Australia. P declined and
sued to recover guaranteed compensation under contract
Held: P NOT under duty to mitigate
Why: For P to be under duty to mitigate, substitute offer must be of comparable
employment or at least substantially similar to that which she was deprived but D
offered different/inferior employment
Note: CA rule = before projected earnings from other employment opportunities
not sought/accepted can be applied in similar to that which employee has been
deprived employees rejection of/failure to seek other available employment of
different/inferior kinds may not be used to mitigate damages
Note: If discharged employee obtains new job which, except for compenstation is
comparable, he must still deduct wages from his claim for damges. If new
employment is not comparable, old employer is not entitled to claim deduction
from his liability equivalent to earnings from new employment.
Note: Employee usually not required to accept employment unreasonably far from
original location. Employee does nto have to accept position of lesser rank or lower
salary
Note: If employee takes job that he could nto have done in addition to breached
contract that will be cost avoided.
R. R. Donnelley & Sons Co. v. Vangaurd Transportation Systems, Inc.
Facts: p makes flyers for a macys department store, d was carrier that was
supposed to transport brochures to macys post Christmas sale. D gets them to ATL
but not specific place P has contract with macys for 81,000 sues D for $ because
they didnt get brochures on time
Held: Ct sides with D
Why: Mitigating party doesnt have to put a lot of effort in it doesnt have to be
an undue burden
Hadley v. Baexdale
Facts: P contracted to have Ds shipping company take broken mill shaft to get
repaired in reasonable time. D did not know mill was closed whil P awaiting fixed
shaft. D did not deliver shaft in reasonable time so reopening of mill was delayed. P
sued for lost profits during extra days closed.
Held: P cannot recover lost profits
Why: Ps damages were not consequent that in usual course of things would flow
from delay in shipment of shaft. Damages must either (1) arise naturally according
to usual course of things, from breach of contract itself OR (2) arise from special
circumstances under which contract was actually made if and only if these special
circumstances were communicated by P to D. Only damages that may fairly and
reasonably be considered arising from breach itself may be awarded.

Unforeseeability and related limitaitons on damages


(1) damages are not recoverable for loss that the party in berach did not have
reason to forsee as probable result of the breach when the contract was made.
(2) loss may be forseeable as a probable result of a breach because it follows form
the breach
o a. in the ordinary course of events OR
o b. as a result of special circumstances beyond the ordinary course of events
that he party in breach had reason to know
Manouchehri v. Heim
Facts: P bought x-ray machine that required specific requirements. D sold xray
that was basically good for kids and thin people but not general x ray machine
Held: Ct awards 4400 1900 for direct breach and 2500 for consequential
damages.
Why: How much would it cost to repaid the machine to get it to perform we cant
repair it so how much would a different machine cost.
Rule: Sufficient foreseeability, certainty and mitigation allow for recovery for
consequential damages stemming from the breach
Hollywood Fantasy Corporation v. Gabor
Facts: D was briefly in the business of providing fantasy vacations that would
allow participants to make a movie with a Hollywood personality and imagine
themselves move stars for one week for a fee. P arranged to have D as one of the
celebrities for an event. D canclled two weeks before appearance, they only sold
two tickets cancelled vacation and then went out of business. P sued D for breach
of contract and fraud.
Held: $100K award cannot be supported as the recovery of lost profitslost profits
must be proved with reasonable certaintycan recovery $57 out of pocket
expensive
Why: Actual damages may be recovered when loss is natural, probable and
foreseeable consequence of the defendants conduct (cannot recover for business
going bankrupt). Record must contain evidence that permits jury to assess with
reasonable certainty the degree of causation of the damage by the breach or
interefence relative to other factors.
Espn, inc. v. Office of the Commissioner of Baseball (1999)
Facts: Breached contract resulting from P preempting ballgames. Baseball seeks
recovery for consequential damages based on lost exposure, prestige and ratings,
BBall estimated damages to be millions of dollars but could not quantify anything
Held: consequential damages must be shown with certainty to be allowed. No
certainty means no recovery
Why: Damages of this sort should be quantified. If the party cannot quantify the,
then D should not have to pay.
Restitution Interest as an Alternative Measure of Damages
United States v. Algernon Blair, Inc.
Facts: D contracted with X for construction on hospital. D contracted with P to
perform steel erection/supply certain equipment in conjunction with Ds contract

with X. P commenced performance D refused to pay for crane rental because not
obligated to so under contract . P termindated contract and brough action to
recover for labor and equipment furnished P would have lost money if contract
was fully performed
Held: P can recover for equipment and labor if supplied, despite fact that it would
have lost money on contract and would have been unable to recover for suit on
contrract
Why:
Britton v. Turner
Facts: P contracted to work for one year and would receive $125 at end of year for
services. P stopped working after 9.5 monthsand did not receive compensation
form D. no evidence that D suffered any damage as result of Ps departure.
Held: P can recover (recovers $95 for time worked)
Why: K law reuires that a victim of a breach become whole again. To deny P
benefits from working would be unfair and unjust in its operation if the party
performs over tha damages suffered by the failure to complete services.
Restatment 374 Restitution
Unjust enrichment
One who without intent to act gratiutiously, confers a measurable benefit upon
another, is entitled to restitution, if he afford the other an opportunity to decline
the benefit or else have reasonable excuse for failing to do so. If the other refuses
to receive the benefit, he is not required to make restitution unless the actor
justifiably performs for the other a duty imposed upon him by law.
---------------------------------------------------------------------------------------------------------------------

Quasi Contract and Restitution


Elements of a Quasi Contractual Claim
Quasi contracts not contracts at all. They are constructed by courts to avoid unjust enrichment by permitting
the plaintiff to bring an action in restitution to recover the amount of the benefist conferred on the defendant.
Only relationship to genuine contracts is historical.
In General
Patterson v. Patterson unjust enrichment
Facts:
Held:
Why:
At the Request of the Defendant
Schott v. Westinghouse Electric Corporation quasi contract
Facts: Suggestion box they have policy to pay employees for these cost saving
ideas. P submits idea to save money, they dont award him but later use his exact
suggestion but they claim they did it independent of his idea. P sues for unjust
enrichment
Held: Ct dismisses breach of contract claim, remands for further determination of
ujust enrichment. Equitable remedy is allowed.
Why: P made clear that committee could reject offers, there is no enrforcable
contract here. Equitable remedy allowed court thinks there could potentially be
successful unjust enrichment claim. Dont have to cap remedy at 15k because the

part o k that never existed. If the company is enriched at the expense of


schott it would be unjust; he should be reimbursed
Note the submission is not gratiutious and it is solicits no officious intermeddler
Not At the Request of the Defendant
Cablevision of Breckenridge, Inc. v. Tannhauser Condominium Association
Facts: P subscription station entered oral contract with D to provide cable for
residents of D. P reduced units from 33 to 3 for cable at request of white who acted
as rep for D. White added signal amplified, stealing cable form P and servicing D
with only 3 people paying for cable. P discovered cable being stolen and
disconnects services.
Held: Damages calculated by going market rate for one condo and multiplied by
the number of condos getting free cable and by the number of years they stole.
Why:
Rule: implied contracts refers to the doctrine of unjust enrichment under which
ourts imply a contract as a matter of law (substantive law of restitution) where
necessary to avoid unjust enrichment
Prove three points for unjust enrichment:
o 1. Benefit was conferred on the D by the P
o 2. Benefit was appreciated by the D
o 3. That the benefit was accepted by the D under such cricustmaces that it
would be inequitable for it to be retained without payment of its values.
Watts v. Watts
Facts: couple acted as husband and wife but never married. She decides to leave,
she wants half but she doesnt have ringTC dismisses for lack of claim
Held: unjust enrichment claim.
Why: Allowing no reflief to one party in an unmarried relationship effectively
provides total relief to the other, by leaving that party with all the asseets that
were acquired by the efforts of both would be an unfair result.
At the Request of a Third party
Flooring System Inc v. Radisson Group
Facts: P installed carpet in D but D didnt pay for all of capets.
Held: agrees with flooring. -- $25000
Why:
Breach of Fiduciary Duty
Wiener v. Lazard Freres & Co.
Facts: P thinks D broke fiduciary duty to P by taking $300k fee and never really
tried to make deal go through.
Held: unfair competition dismissed, Upheld breach of fiduciary
Why: The court stated that claims for unjust enrichment and breach of fiduciary
should not have been dismissed, because plaintiffs could claim they had bestowed
a benefit--the application fee--on defendants and had not been adequately
compensated, and because plaintiffs alleged they had placed confidence in
defendant and had reasonably relied on defendant's superior expertise.

Promisory Restitution
Webb v. McGowin
Facts:
Held:
Why:
Restatment 86
Other Remedies for Unjust Enrichment

Pull v. Barnes
Facts:
Held:
Why: Golden Press doctrine and doctrine of estoppel were inapplicable. Trial court
entered judgment for land owarners . TC correct in determining golen press
doctrine was inapplicable because the problems arising from the situation were not
due to bad faith on party of any parties and the tc erred in granting judgment for
the landowners because it was the trial courts duty to rant the relief in equity that
the situation remanded and the adjoining owners who had in good faith erected
improvements on the landowners property had a right to remove the
improvements if feasible and if not they were entitled to an equitable lien on the
property for the value of the improvements.

Affirmative defenses to breach of contract


Contract was supposed to be in writing
o Statute of frauds requires the type of contract to be in writing
Contract is indefinite
o Essential terms were never agreed upon
There is a mistake
o Mutual mistake as to an essential fact in the contract
You lacked capacity to make the contract
You were fraudulently induced to enter into a contract
Estoppel
Contract is unconscionable
Contract is illegal