offer, acceptance, consideration, writing?

:: interpretation, misunderstanding, mistake, breach, unexpected

circumstances :: remedies, specific performance, expectation, reliance, restitution
Contract law facilitates exchange providing assurances that promises will be enforceable, lowering transaction costs -
allowing allocatively efficient exchanges to take place. With this in mind, much of contract law revolves around notions of
keeping the administration of contract law low, partly through the selective enforcement of contracts likely to promote
efficiency. Additionally there is the element of risk allocation with respect to foreseeability, and potential to control or insure
against risks, and finally the distributive consequences of the bargains people have made. The distributive goals can at times
be at odds with the efficiency goals, leading to a level of debate in the courts role in the application of contract law.

1. Formation of a Contract
R2 17(1): formation of a contract requires a bargain in which there is a manifestation of mutual assent to the
exchange and a consideration.
R2 22 :: Mode of Assent
(1) The manifestation of mutual assent to an exchange ordinarily takes the form of an offer or proposal by one
party followed by an acceptance by the other party or parties.
(2) A manifestation of mutual assent may be mad even though neither offer nor acceptance can be identified and
even though the moment of formation cannot be determined.
Offer
Offer: R2 24: An offer is the manifestation of willingness to enter into a bargain, so made as to justify another person
in understanding that his assent to that bargain is invited and will conclude it.
Invitation to bargain/Preliminary Negotiations: R2 26: A manifestation of willingness to enter into a bargain is not
an offer if the person to whom it is addressed knows or has reason to know that the person making it does not intend to
conclude a bargain until he has made a further manifestation of assent.
Counter-Offers R2 39: may terminate power of acceptance
(1) 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
(2) An offeree's power of acceptance is terminated by his making of a counteroffer, unless the offeror has
manifested a contrary intention or unless the counteroffer manifests a contrary intention to the offeree
Ads for the sale of goods are generally invitations to bargain, however if (1) the terms are clear, definite, and
explicit, and leave nothing open for negotiation, and (2) some performance is promised in positive terms in return
for something requested (such as to constitute consideration for the promise), then the ad is an offer.
Lefkowitz v. Great Minneapolis Surplus Store (pg. 461) :: Lefkowitz responded to ad in paper for fur coat w/
first come first served deal. Offer was clear, definite, and explicit, leaving nothing to negotiation - hence,
constituting an offer - lefkowitz accepted by showing up first and expressing acceptance, completing contract.
Store attempted to add stipulation "only for women" after. Offer cannot be modified after acceptance.
Lonergan v. Scolnick (pg. 458) :: ad in paper re: sale of real property. Lonergan made inquiry, Scolnick sent
more info, lowest acceptable price, and advised to act fast as he expected to have a buyer soon. This
constituted a request for offers, rather than offer meriting an acceptance.
Ford Motor Credit Co. v. Russell (pg. 464) :: Paper offers to sell ford @ 11% interest, goes in to buy but
cannot attain rate with his credit history; ad was not an offer to general public. unreasonable for to believe
ad was binding offer as it is clear that not everyone can qualify for specific rates, nor is there an unlimited
supply.
Fisher v. Bell (pg. 467) :: Switchblade knife displayed in window of shop; statute against sale of switchblades.
"display of an article with a price on it in a shop window is merely an invitation" to bargain.
unreasonable to expect to sell something in violation of the law.
Acceptance
Certainty of Terms :: R2 33:
(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 fact that one or more term 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.
Berg Agency v. Sleepworld-Willingboro, Inc (pg. 599) :: Lease agreement didn't include terms for
maintenance, repairs etc. but did set out essential elements of commercial lease. Basic Essentials are enough.
Rego v. Decker (pg. 599) :: Greater degree of certainty required for specific performance than damages, but
less if the party seeking specific performance has substantially shifted his position in reliance. NO
MECHANICAL JUSTICE.
Saliba-Kringlen Corp. v. Allen Engineering Co. (pg. 601) :: Subcontractor's bid is binding even if only price
 has been given, as this is the custom and most important term
Academy Chicago Publishers v. Cheever (pg. 594) :: Agreement for book omitted terms like bumper of pages,
date for delivery, who decides which stories to include etc. Essential terms missing, not a valid contract.
Ridgway v. Wharton (pg. 598) :: Agreement to enter into an agreement whose terms will be settled afterwards
is a contradiction as until terms settled he can retire from bargain.
Joseph Martin, Jr., Deli v. Schumacher (pg. 604) :: Agreement to Agree. Rent term not in lease, nor indication
of calculation. what can be made certain is certain, but here there is nothing to work with.
R2 50(1): Acceptance of an offer is a manifestation of assent to the terms thereof made by the offer in a manner
invited or required by the offer.
R2 19(1): The manifestation of assent may be made wholly or partly by written or spoken words or by other acts or
by failure to act.
R2 19(2): The conduct of a party is not effective as a manifestation of his assent unless he intends to engage in the
conduct and knows or has reason to know that the other part may infer form his conduct that he assents.
Holman Erection Co. v. Orville E. Madsen & Sons, Inc. (pg. ???) :: Holman submit bid to Madsen who was
awarded contract. Madsen then awarded the Holman part to another company. Mere listing of subcontractor does
not create contract between subcontractor and general contractor.
Acceptance by Promise
R2 50(3): Acceptance by a promise requires that the offeree complete every act essential to the making of the
promise
R2 56 : Except as stated in 69 or where the offer manifests a contrary intention, it is essential to an acceptance
by promise either that the offeree exercise reasonable diligence to notify the offeror of acceptance or that the
offeror receive the acceptance seasonably.
(b) where the offeror has stated or given the offeree reason to understand that assent may be manifested by
silence or inaction, and the offer in remaining silent and inactive intends to accept the offer.
If the subject of the contract is perishable or otherwise may become unmarketable by delay, shorter
delays may be considered unreasonable.
Cole-McIntyre-Nor fleet Co. v. Holloway (pg. ???) :: meal ordered, 60 day delay in acceptance -
delay unreasonable. nature of goods required prompt action. silent stalling of one party constitutes
action from which assent may be inferred. salesman had regular opportunities to inform buyer of
refusal of order.
no refusal & "business as usual" conduct sufficient to provide assent.
If insurance contract, the nature of the risk against which the insurer seeks protection may impose a duty
to act upon the application for insurance within a reasonable time.
Kukuska v. Home Mut. Hail-Tornado Ins. Co. (pg. ???) :: insurance company didn't get back to
farmer about whether his policy had been approved, suffered damages to his crops. If he'd known
earlier, could have procured other insurance. Insurer did not act in a reasonable time.
(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
Hobbs v. Massasoit Whip Co. (pg. ???):: continuous acceptance of previous shipments of eelskins,
required to specifically say something in order to show rejection of a shipment.
Vogt v. Madden (pg. ???) :: sharecrop agreement. farmer assumed that it had been renewed. previous
years they had made express agreements about crops/use. this year they hadn't. Silence did not constitute
acceptance.
Acceptance by Performance
R2 50(2): Acceptance by performance requires that at least part of what the offer requests be performed or
tendered and includes acceptance by a performance which operates as a return promise.
Rewards + Prizes
offer of a prize or reward is a unilateral contact; for the offer to be accepted and the contract to become
binding, the desired act must be performed with knowledge of the offer. A person may accept an offer for a
unilateral contract by rendering performance, even if he does so primarily for reasons unrelated to the offer.
(Simmons v. United States (pg. ???)
Public policy may dictate giving a required for information without knowledge of the reward. (Siphons v.
Memphis (pg. ???))
Carlill v. Carbolic Smoke Ball Co. (pg. ???) - 100 reward advert for person who gets a cold after having used
the ball according to its directions. Woman did as the advertisement said, but still got sick. Ad was an offer,
performance was acceptance, and person who makes the offer gets notice of performance and acceptance at
same time. Advertisers get use out of the ad, serves as consideration.
Effect of Part Performance :: R2 45(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 invited
performance or tenders a beginning of it.
 Ragosta v. Wilder (pg. ???) :: Undertaking financing to buy a place is not part performance because it is in
preparation for performance, not part of the performance.
Acceptance by Silence :: R2 69:
(1) Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance in the following
cases only:
(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.
Day v. Caton (pg. 572) :: Day expected to get paid for wall partially built on vacant lot Caton used.
Assent is inferred since Caton stood by in silence and watched valuable services be rendered upon his
estate.
Laurel Race Courses v. Regal Const. Co. (pg. ???) :: constriction company said it would continue and
make improvements to track. had right to reject, but remained silence and incurred benefit.
R2 69(2)
an offeree who does any act inconsistent with the offeror's ownership of offered property is bound in
accordance with the offered terms unless they are manifestly unreasonable
Louisville Tin & Stove Co. v. Lay (pg. ???) :: Husband ordered items delivered to wife's store. Angry, she
took them and had them sent to his store. They were destroyed en-route, however she was liable since she
accepted them from the original delivery.
Notice of Acceptance
R2 54 Acceptance by performance; Necessity of NOTIFICATION to offeror
(1) Where an offer invites an offeree to accept by rendering a performance, no 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 learning 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.
Bishop v. Eaton (pg. 527) :: Eaton told Bishop that if Bishop loans brother money, Eaton will pay back. Bishop
loans, and sends letter to Eaton informing him. Eaton claims not to receive letter. Receipt is irrelevant as Bishop
took reasonable efforts to get notice to him - Bishop entitled to recovery.
Mailbox Rule: Effective upon putting in mailbox
R2 41 : Lapse of Time
(1) An offeree's power of acceptance is terminated at the time specified in the offer, or if no time is specified,
at the end of a reasonable time
(2) What is a reasonable time is a question of fact, depending on all the circumstances existing when offer and
attempted acceptance are made
(3) unless otherwise indicated by language/circumstances... an offer sent by mail is seasonably accepted if an
acceptance is mailed at any time before midnight on the day which the offer is received.
R2 49: DELAY: if communication of offer delayed, and offeree knows/has reason to know of the delay - period of
acceptance not extended, however if the offeree doesn't know/have reason to know "contract can be created by
acceptance within the period which would have been permissible if the offer had been dispatched at the time that
its arrival seems to indicate."
Termination of power of acceptance :: R2 36
(1) An offeree's power of acceptance may be terminated by
(a) rejection or counter-offer by the offeree, or
Rhode Island D.O.T. v. Providence & Worcester R.R. (p.g. ???) : State exercised its option to purchase
and added that tracks shouldn't be removed if selling to them. Mere addition of a collateral or immaterial
matter will not prevent formation of a contract
Ardente v. Horan (pg. ???) :: Bid to buy a house accepted - sent letter about items they wanted to come
with the house - buyers refused to sign purchase agreement due to new terms. Letter was conditional,
operated as a rejection of offer because of new terms.
(b) lapse of time, or
Akers v. J.B. Sudbury Inc. (pg. ???) :: Offer made in face to face convo, generally only extends to the end
of the convo - cannot be accepted thereafter.
(c) revocation by the offeror, or
Dickinson v. Dodds (pg. 486) :: offer said to be left open until friday, however, dickinson discovered
Dodds offered to sell to another party as well. There was no promise to keep open as there was no
consideration exchanged - additionally, Dickinson knew the offer had been withdrawn as a result of his
discovery
 R2 43: An offeree's power of acceptance is terminated when the offeror takes a definite action
inconsistent with an intention to enter into the proposed contract and the offer acquires reliable
information to that effect.
(d) death or incapacity of the offeror or offeree.
Consideration :: promise/performance of one party must be in exchange for the promise/performance
of a counterpart. - adequacy is generally not a concern as this involves making an interpersonal
comparison of utility... this view may be modified by a courts attempts to achieve distributive goals -
potentially viewing a seemingly uneven exchange as evidence of duress or an element of
unconscionability. breaking away from formalism, a court may view certain consideration as nominal
and thus not consideration at all.
Definition of Consideration :: R2 71:
(1) To constitute consideration, a performance or a return must be bargained for.
(2) A performance or return promise is bargained for if it is sought by the promisor in exchange 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.
Bilateral Contract = Promise for Promise :: R2 75: ... a promise which is bargained for is consideration, if, but only if,
the promised performance would be consideration.
R2 79: If the requirement of consideration is met, there is not additional requirement of
(a) a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promisee, or
equivalence in values exchanged
mutuality of obligation
Hamer v. Sidway(pg. 71) :: uncle promise nephew $5000 in exchange for no drink/smoke/gamble. Nephew
complied, uncle held for safe keeping but died, executor refused to give - stated no consideration. nephew
forbore his rights - detriment qualifies as consideration regardless of whether uncle received a benefit.
Davies v. Martel Laboratory Services, Inc. (pg. ???) :: offered contract of employment for VP if MBA
obtained, also position on Presidents council. Accepted, but terminated 1 year later without cause. Detriment
experience by joining council and working towards MBA, regardless of concurrent benefit she may have
experienced from such endeavors.
Hancock Bank & Trust Co. v. Shell Oil Co. (pg. 75) :: Signed lease for 15 years which could b terminated at
any tie with 90 days notice. Lease acquired in foreclosure sale, Bank seeks relief for "unconscionable
bargain". court will not provide relief for bad bargain when the terms were obvious/explicit. Bank knew what
it was getting into, and this likely affected original bargaining price.
Batsakis v. Demotsis (pg. 76) :: accepted 500k drachmae ($25) loan in exchange for $2000 debt. terms were
clear in K, got what she bargained for. inadequacy of consideration will not void a contract.
Option Contract for sales of goods requires no consideration :: R2 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 stated 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.
Implied-in-law contract :: Promissory Estoppel :: R2 90: :: remedy = reliance
(1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the
promisee or a third person and which does induce such action or forbearance is binding if injustice can be
avoided only by enforcement of the promise. Then remedy for breach may be limited as justice requires
(2) A charitable subscription or a marriage settlement is binding under subsection (1) without proof that the
promise induced action or forbearance.
Feinberg v. Pfeiffer Co. (pg. 34) :: Chairman granted employee $200/month upon retirement whenever she
decided to retire. Consideration cannot be based on her past service at company; no past consideration.
Woman relied on the funds, retiring earlier than she otherwise would have, forgoing opportunities.
Enforceable contract created through promissory estoppel.
D&G Stout, Inc. v. Bacardi Imports, Inc. (pg. 47) :: Stout approached about selling general, Bacardi assured
him that they would stay with stout as their distributor. As a result, Stout turned down the offer he had.
Bacardi withdrew from business with Stout. Stout sold at $550k less than original offer. Devaluation of offer
represents reliance injury.
Walters v. Marathon Oil Co. (pg. ???) :: Walters bought service station based on agreement with Marathon.
Marathon refused to sign final agreement. Court awarded lost profits.
Drenan v. Star Paving Co. (pg. 497) :: Subcontractor submitted incorrect bid and tried to revoke it, but general
contractor had relied on it when making its bid to school which had already been accepted based on its lower
 price. Loss here falls on party that made mistake.
Grouse v. Group Health Plan (pg. 134) :: Grouse received offer from group health and consequently turned
down a different offer received. group health called to confirm he had quit his prior job, subsequently failed to
confirm references and offered job to another person. Should have been given good faith opportunity to
perform his duties. since new employment was terminable at will, damages = amount lost from quitting/
turning down other job offers, rather than what he would have earned at new job.
Past Consideration :: R2 86:
(1) A promise made in recognition of a benefit previously received by the promisor form the promise is binding to
the extent necessary to prevent injustice
(2) A promise is not binding under subsection (1):
(a) if the promise conferred the benefit as a gift or for other reasons the promise has not been unjustly
enriched; or
(b) to the extent that its value is disproportionate to the benefit
Schnell v. Nell (pg. 18) :: wife promises $200 inheritance to fam but has no property of her own. Contract
state husband will pay in exchange for 1 consideration. court holds this to be nominal consideration - not
enforceable. past love/affection of life +help accumulating property = past consideration = no consideration.
4 situations in which a promise to pay based on a past event is binding despite lack of consideration
Promise to pay a debt barred by the statute of limitations
promise by an adult to pay a debt incurred as a minor. R2 82
Promise to pay a debt that has been discharged in bankruptcy. R2 83
Promise based on a material benefit received.
Webb v. McGowin (pg. 59) :: Man in factory fell with block sacrificing his wellbeing in order to save life
of McGowin. McGowin agrees to pay $15/biweekly for life. Where the promisee cares for, improves, or
preserves the property of the promisor, though done without his request, it is sufficient consideration for
the promisor's subsequent agreement to pay for the service, because of the material benefit received.
Mills v. Wyman (pg. 55) :: Man's 25 y/o son nursed by Mills and dies. Father writes to mills saying he
will pay for expenses, Mills attempts to collect and fails. No consideration, services not bestowed at
fathers request, and son was not a minor.
Donative Promise: Promise to give a gift
Dougherty v. Salt (pg. 9) :: Aunt gave boy promissory note for $3k payable upon death. Not enforceable, promise
of executory gift for which there was no consideration.
Kirksey v. Kirksey (pg. 28) :: Brother in law told sister in law to move after brothers death. promised to provide
accommodations for her/family. after 2 years, brother in law forced her to leave. court held promise to be
unenforceable; merely a gratuity. probably not consistent with more modern decisions - sister in law relied to her
significant detriment, losing her previous house.
Conditional Donative Promise :: performance of the condition is the necessary means to make the gift, not the price
(consideration) for the gift.
ex. conditional bargain promise "if you mow my lawn, I will pay you $20"
ex. conditional donative promise "if you select a car costing no more than $15,000, I will buy it for you as a
graduate present"
Illusory Promises :: Form of promise without an obligation to do anything does not limit the choices of one party
and thus NOT consideration.
R2 77: A promise or apparent promise is not consideration if by its terms the promisor or purported promisor
reserves a choice of alternative performance 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.
Ex. if contract can be terminated at any time by one party, return promise isn't actually binding it to anything
and doesn't count as consideration
Ex. Employment at will
Wickham & Burton Coal Co. v. Farmers' Lumber Co. (pg. ???) :: wickham agreed to sell coal to farmers
for a low price, but then refused. farmers merely agreed to buy what it pleased; a contract to sell personal
property is void for want of mutuality if the quantity to be delivered is conditioned entirely on the will,
wish or want of the buyer. Where there is an obligation to sell but no obligation to purchase, it is not a
mutual contract of sale.
also D&G Stout ^^
also Grouse v. Group Health Plan (pg. 134) ^^
public policy : provides legitimacy in labor markets
Exception: A contract for exclusive dealing in goods may imply an obligation to use best efforts such that it counts
 as consideration
Wood v. Lucy, Lady Duff-Gordon (pg. 131) :: Exclusivity of marketing implies use of best efforts which acts
as consideration -> consideration
enacted later :: UCC 2-306 (2) : A lawful agreement by either the seller or the buyer for exclusive
dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use
best efforts to supply the goods and by the buyer to use best efforts to promote their sale.
Exception: Output and requirements contracts which measure quantity based on output of the seller or
requirements of the buyer mean "such actual output or requirements as may occur in good faith" (UCC 2-306)
Legal-duty Rule :: R2 73: Performance of a legal duty owed to a 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 a bargain.
Gray v. Martino (pg. 138) :: Plaintiff was a police officer who had information that would help recover some
stolen jewelry. Plaintiff agreed to share that information in exchange for the reward of the stolen goods. After the
items were recovered, the reward wasn't paid.
Denney v. Reppert (pg. ???) :: Armed men rob bank. Reppert was deputy sheriff of different county under no legal
duty to make arrest -> therefore eligible to collect reward for doing so.
Lingenfelder v. Wainwright Brewery Co. (pg. 141) :: refrigeration contract giving to company in competition with
architect who wanted the contract. results in architect refusal to complete project. Brewery as a result promises to
pay 5% of the cost of refrigeration contract to architect so he will complete his original contract. promise to pay
for doing that which he was already under contract to do is without consideration = unenforceable.
Discharge
Novation: substitution by mutual agreement of a new debt or obligation for an existing one which is thereby
extinguished.
R2 281:
(1) an accord is a contract under which an obligee promises to accept a stated performance in satisfaction of
the obligor's existing duty. Performance of the accord discharges the original duty
(2) Until performance of the accord, the original duty is suspended unless there is such a breach of the accord
by the obligor as discharges the new duty of the obligee to accept the performance in satisfaction. If there is
such a breach, the obligee may enforce either the original duty or any duty under the accord.
(3) breach of the accord by the obligee does not discharge the original duty, but the obligor may maintain a
suit for specific performance of the accord, in addition to any claim for damages for partial breach
Accord and Satisfaction
Accord: When a party promises to perform a different action from the original contract in order to satisfy
the original obligation. (does not discharge the original obligation necessarily)
i.e. A owes B $1000, but offers to give B a car instead. This is acceptable, whereas offering to pay
$900 instead would create a legal duty issue.
generally the court find that an accord is not a substituted contract if the duty under the original contract
was;
undisputed
liquidated
had matured
and involved the payment of money
Executory (unperformed) Accord
traditionally unenforceable, however, modern behavior tends to enforce
(1) performance: if an accord involving a different performance by B is executed- that is, if there is
both an accord and a satisfaction- B has a complete defense against A under the original contract
(2) Suspension of old contract: under the modern rule, an executory accord operates to suspend A's
rights under the original contract during the period in which B is supposed to perform the accord.
(3) Suit by A under the accord: If B fails to tender performance under an executory accord, A can
sue B under either the old contract or the accord.
R2 279: Substituted Contract
(1) A substituted contract is a contract that is itself accepted by the obligee in satisfaction of the obligor's existing
duty.
(2) the substituted contract discharges the original duty, and breach of the substituted contract by the obligor does
not give the obligee a right to enforce the original duty
Substituted Contract vs. Accord
Substituted Contract: immediately discharges the original obligation, the new obligation is a complete
substitute.
generally the court finds a substituted contract if the duty under the original contract was;
disputed
 unliquidated
had not matured
involved a performance other than the payment of money
Statute of Frauds
R2 110 :: Classes of Contracts Covered
(1) Then following classes of contracts are subject to the statute of frauds, forbidding enforcement unless there is
a written memorandum or an applicable exception:
(a) a contract of an executor/admin to answer for a duty of his decedent
(b) a contract to answer for the duty of another (suretyship provision): legally enforceable debt of another
purpose is evidentiary and cautionary
(c) a contract made upon consideration of marriage
(d) a contract for the sale of an interest in land
also, mortgages, leases, easements... any interest concerning land; exception short term lease
oral agreement can be enforced based on detriment/occupation/improvements
(e) contract that is not to be performed within one year from the making thereof
(2) The following classes of contracts, traditionally Statute of Frauds, are now governed by SoF provision of UCC
(contract for the sale of goods priced $500 or more (UCC 2-201)
R2 145 :: Effect of full Performance
Where the promises in a contract have been fully performed by all parties, the statute of frauds does not affect the
legal relations of the parties.
Klockner v. Green (pg. ???) :: stepson/step granddaughter orally agree to take care of woman in exchange for
her estate. woman died without changing will, executor refused to pass to them. because s had completed
performance, contract was removed from statute of frauds. If an act is requested by the offeror as
consideration for a unilateral contract, the act need only be given with the intent of accepting the offer.
Statute satisfied by:
nature and contents of writing required: signed writing, can be electronic
time before or after the formation of a contract
satisfied by a letter written after the time of formation and acknowledging the contract, even if also repudiates
the contract
contents: with reasonable certainty
identify the parties to the contract and show that a contract has been made by them or offered by the
signatory to the other
indicate the nature of the contract and its subject matter
state the essential terms of the promises to be performed under the contract
Contract Interpretation
Misunderstanding; Interpretation of a Term
R2 201
(1) Where the parties have attached the same meaning to a promise or agreement or a term thereof, it is
interpreted in accordance with that meaning
(2)Where the parties have attached different meanings to a promise or agreement or a term thereof, it is
interpreted in accordance with the meaning attached by one of them if at the time the agreement was made
(a) that party did not know of any different meaning attached by the other, and the other knew the meaning
attached by the first party; or
(b) that party had no reason to know of any different meaning attached by the other, and the other had reason
to know the meaning attached by the first party
Standards of Preference In Interpretation R2 203: In the interpretation of a promise or agreement or a term thereof,
the following standards of preference are generally applicable:
(a) an interpretation which gives a reasonable, lawful, and effective meaning to all the terms is preferred to an
interpretation which leaves a part unreasonable, unlawful, or of no effect;
(b) given weight in the following order:
express terms
course of performance
course of dealing
usage of trade
Specific terms and exact terms are given greater weight than general language
Separately negotiated or added terms are given greater weight than standardized terms or other terms not
separately negotiated.
Old approach: if the writing appeared to be plain and unambiguous on its face, its meaning must be determined from
the instrument itself without resort to extrinsic evidence of any nature (plain meaning rule)
New Approach provided by R2 202:
 (1) words and other conduct are interpreted in light of all the circumstances, and if the principal purpose of the
parties is ascertainable it is given great weight.
(2) a writing is interpreted as a whole, and all writings that are part of the same transaction are interpreted
together
(3) unless a different intention is manifested,
(a) where language has a generally prevailing meaning, it is interpreted in accordance with that meaning;
(b) technical terms and words or art are given their technical meaning when used in a transaction within their
technical field.
(4) Where an agreement involves repeated occasions for performance by either party with knowledge of the nature
of the performance and opportunity for objection to it by the other, any course of performance accepted or
acquiesced in without objection is given great weight in the interpretation of the agreement
(5) Wherever reasonable, the manifestation of intention of the parties to a promise or agreement are interpreted as
consistent with each other and with any relevant course of performance, course of dealing, or usage of trade
For adhesion contracts especially - R2 206: In choosing among the reasonable meanings of a promise or agreement
or a term thereof, that meaning is generally preferred which operates against the party who supplies the words or from
whom a writing otherwise proceeds
Whether an ambiguity exists is a question of law. Interpretation of the ambiguity is a question of fact.
Old approach:
Steuart v. McChseney (pg. 686) :: Agreement granted a right of first refusal at a value equivalent to market value
as determined by assessment rolls. (this value was far less than the offers being made). Language was express and
clear, and therefore not in need of interpretation by reference to extrinsic evidence.
Benefits of approach:
not the function of the courts to rewrite or alter contracts
assumption that parties chose the language in their written contracts carefully
enhances security of belief that contract will not be construed differently later
parties cant make up different meanings later or be biased towards a different meaning
Weaknesses:
Some of the surrounding circumstances need to be known before the meaning of the words can be plain and
clear
Meaning of words can vary from one person to the next and one trade to the next, lack of uniformity
Embry v. Hargadine, McKittrick Dry Goods Co. (pg. 432) :: worker said he would search for new job if contract not
renewed for another year. claims pres. of company said to keep working and not to worry; Court says if the jury
believes employee about what the president said, and believes that Embry believed that he had a contract then the jury
needs to find for Embry.
Frigaliment Importing Co. v. B.N.S. International Sales Corp. stew chicken vs. regular. Buyer had the burden of
showing that chicken was used in the narrower rather than the broader sense, and this it has not sustained. Since
chicken can have many meanings, problem was one of vagueness. Court assumed that, when contract was made, each
party attached the meaning that it asserted and therefore misunderstanding had arisen. It resolved the misunderstanding
in favor of the seller. Although buyer may have attached narrower meaning of the word chicken, it did not appear that
the seller had reason to know this.
Trade Usage:
Party having proved usage must also prove that the other party is chargeable with knowledge of it.
Party may do this by showing that at the time the contract was made the other party either was actually aware of
the usage or should have been aware of it.
Foxco Industries, Ltd v. Fabric World :: fabric world ordered "first quality goods", refused to pay for goods it
considered defective, threatened that if there was a single flaw in the fabric it would return the order.
Berwick & Smith v. Salem Press :: Contract for the printing/binding of a two volume work Masterplots One
side argues it is a per volume basis, one argues it is a per two volume set. Printing was per set, however,
general usage was per volume; Where the usage is established it is assumed the parties knew it
Supplying a Missing Term
R2 204: When the parties to a bargain sufficiently defined to be a contract have not agreed with respect to a term
which is essential to a determination of their rights and duties, a term which is reasonable in the circumstance is
supplied by the court.
Parol Evidence Rule :: Supplementation of Written Contract :: Textualism v. Contextualism
Only applies to agreements that are written or at least partially written and one party seeks to use evidence of prior
agreements to supplement or interpret the terms of the writing. Agreements made contemporaneously are treated as
part of the same writing and are not subject to the parol evidence rule, same with collateral agreements supported by
separate consideration.
Currently only excluded if it will be misleading to the fact-finder (issue if judge is fact finder?)
R2 214: Agreements and negotiations prior to or contemporaneous with the adoption of a writing are admissible in
evidence to establish
(a) that the writing is or is not an integrated agreement;
(b) that the integrated agreement, if any, is completely or partially integrated
(c) the meaning of the writing, whether or not integrated;
(d) illegality, fraud, duress, mistake, lack of consideration, or other invalidating cause: {conditions that show
performance was not meant to be due until a particular even occurred}
ground for granting or denying recission, reformation, specific performance, or other remedy
Ordinarily the issue whether there is an integrated agreement is determined by the trial judge in the first instance as a
question preliminary to an interpretive ruling or to the application of the parol evidence rule. After the preliminary
determination, such questions as whether the agreement was in fact made may remain to be decided by the trier of fact.
R2 212(2): A question of interpretation of an integrated agreement is to be determined by the trier of fact if it depends
on the credibility of extrinsic evidence or on a choice among reasonable inferences to be drawn from extrinsic
evidence. Otherwise a question of interpretation of an integrated agreement is to be determined as a question of law.
Written contract must not be completely integrated
R2 209(3): Where the parties reduce an agreement to writing which in view of its completeness and specificity
reasonably appears to be a complete agreement, it is taken to be an integrated agreement unless it is established
by other evidence that the writing did not constitute a final expression.
R2 210(1): A completely integrated agreement is an integrated agreement adopted by the parties as a complete
and exclusive statement of the terms of the agreement.
completely integrated agreement supersedes even consistent additional terms.
Factors for determining integration:
Apparent completeness and detail of writing itself (length, detail) - some states only allow this "face of the
document test" / "four corners rule"
Business experience (sophistication) of parties
Representation by counsel of parties
Relative bargaining strength of parties
Amount of negotiation preceding signing of contract
Provision that states the written contract is the entire contract between the parties ("merger" or "integration"
clause)
Other extrinsic evidence presented by parties meant to show the agreement was not meant to be completely
integrated
Agreement must not be inconsistent with express or implied provisions of the written contract.
R2 213(1): A binding integrated agreement discharges prior agreements to the extent that it is inconsistent with
them.
Agreement must not be one that would certainly have been included in the writing.
Masterson v. Sine (pg. 665) :: dispute over execution of option contract on home for $50k+depreciation. the option
clause in the deed does not explicitly provide that it is a complete agreement and the deed is silent on assignability.
Nothing in the record indicates that the parties did not have any warning of the disadvantages of failing to put the
whole agreement in the deed. Therefore, this case is one in which it can be said that a collateral agreement might
naturally be made as a separate agreement.
Mitchill v. Lath (pg. 652) :: Written contract to buy property didn't include earlier conversation to remove
icehouse. In order to consider oral agreements as modifying the contract, at least three conditions must exist:
the agreement must in form be a collateral one
it must not contradict express or implied provisions of the written contract
it must be one that parties would not ordinarily be expected to embody in the writing, or, put in another
way, an inspection of the written contract, read in the light of surrounding circumstances, must not
indicate that the writing appears "to contain the engagements of the parties, and to define the object and
measure the extent of such engagement." Or, again, it must not be so clearly connected with the principal
transaction as to be part and parcel or it.
Court believed agreement to remove icehouse would be expected to be found in the contract because it was
closely related to the subject dealt with. dispute wasn't over the existence of the agreement, merely over its
enforceability absent a writing.
Promissory Fraud Exception
A promise is fraudulent if the promisor makes the promise with a present intent not to perform it
Evidence of a side agreement that would otherwise be barred under the rule may be admissible if the promisor
made the agreement with a present intent not to perform it.
If promissory fraud is found, the court can
restrict relief to recission
award damages measured on a tort theory, based on the extent to which the promise was made worse off by
the promise, or award damages measured on a contract theory, based on the value of the promise
Implied-in-fact
No express exchange of offer and acceptance, but rather, an indication by conduct of an understanding that a contract
is made.
Often seen in Employed At Will employment
Traditionally at will employment can be terminated for any cause, good, bad, or non-existent
modern rule: in 3/5 of states incl. IL there is some cause of action for wrongful discharge of at will employees
Bennett believes this is implied in law: if imposed by courts because they found it to be good policy, rather
than in the contemplation of the parties at the time
Three approaches:
public policy: most widely accepted, employers conduct undermines some public policy, based on statute or
appropriate facts
shaped by legislators, judicial opinion
does not apply to employee refusing to do something based on their own morals
Applies when there is a statute to protect greater good (ex. fired for refusing to commit perjury)
"Personnel Policy Manual" exception: implied-in-fact promise of employment - circumstances surrounding
relationship, assurances of job security in memos
questions of fact => Jury
Implied-in-law covenant of good fairh and fair dealing : employers liable in tort and contract for breach.
Bennett believes this toes the line with getting rid of an employers right to terminate at will
Wagenseller v. Scottsdale Memorial Hospital (pg. 574) :: At will employee terminated for not participating in lewd
activities on camping trip with boss. Violates public policy, potential implied-in-fact promise through promotions
and employee manual policies outlining the proper method for termination including good cause, or no cause, but
not bad cause.
Defenses
Unconscionability: procedural probably not enough on its own - maybe substantive, but probably need a combination
UCC 2-302(1): If the court as a matter of law finds the contract or any clause of the contract to have been
unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of
the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to
avoid any unconscionable result.
R2 208: same as above
Principles of Unconscionability (pg.105) - many courts hold that there must be some quantum of both procedural
and substantive unconscionability
Prevention of oppression and unfair surprise, not of disturbance of allocation of risks because of superior
bargaining power
the clauses involved are so one-sided as to be unconscionable under the circumstance existing at the time
of the making of the contract.
Things to take into account
(a)age, (b)education, (c)intelligence, (d)business acumen and experience, (e)relative bargaining
power (f)who drafted the contract, (g)whether the terms were explained to the weaker party,
(h)whether alterations in the printed terms were possible, (i)whether there were alternative sources of
supply for the goods in question
Procedural or Process unconscionability (106)
deals with unfair surprise
fine print clauses
mistakes or ignorance of important facts
Substantive Unconscionability
deals with an unjust or one-sided contract
can be sufficient to avoid a term in a contract
can confirm or provide evidence of procedural unconscionability
Maxwell v. Fidelity Financial Services, Inc. :: Loan from fidelity financed worthless solar water heater that never
worked, also placed a lien on house. Fidelity combined with $800 unrelated loan. Maxwells continued making
payments and then filed for declaratory judgement declaring terms unconscionable.
Williams v. Walker-Thomas (pg. ???) :: Furniture store high interest credit line, repossess all past purchases if
missed payment on any current/future purchases.
Mistake
R2 151: A mistake is a belief that is not in accord with the facts
R2 154: A party bears the risk of mistake when
(a) the risk is allocated to him by agreement of the parties, or
(b) he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to
which the mistake relates but treats his limited knowledge as sufficient, or
 (c) the risk is allocated to him by the court on the grounds that it is reasonable in the circumstances to do so.
Misunderstanding
R2 20(1): There is no manifestation of mutual assent to an exchange if the paries 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
Raffles v. Wichelhaus (pg. 425) :: (a) Problem of ambiguity. Neither buyer nor seller had reason to know that
there were two ships of the same name and therefore neither had reason to know of the meaning attached by
the other. In suit by the seller, buyer had judgment, on ground that there was no consensus ad idem, and
therefore no binding contract.
Mutual Mistake: there was not a true meeting of the minds so the agreement never existed (functionally void)
R2 152(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 violable by
the adversely affected party unless he bears the risk of the mistake under the rule state in 154
Three requirements for avoidance Adversely-affected party may avoid contract on account of mutual mistake.
Basic Assumption Mistake must concern a basic assumption on which the contract was made
Material Effect Mistake must have a material effect on the agreed exchange of performance. (i.e. no material
effect if the mistaken item is the same)
Risk Adversely-affected party must not bear the risk of the mistake.
Sherwood v. Walker (pg. 860) :: thought cow was barren, turned out to be pregnant and much more valuable -
contract void.
Griffith v. Brymer (pg. 867) :: rented room to see coronation which had been cancelled. at time of agreement,
parties unaware procession had been canceled.
Lenawee County Board of Health v. Missilry (pg. 872) :: property purchased w/ building that was then
condemned for inadequate sewage system. contract showed that buyers had inspected land and accepted in its
current condition = risk accepted by buyer.
Unilateral Mistake: When Mistake of One Party Makes a Contract Voidable
Courts reluctant to allow avoidance
R2 153: 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 by him if he does not bear the risk of the mistake under the rule stated in 154, and
(a) the effect of the mistake is such that enforcement of the contract would be unconscionable, or
(b) the other party had reason to know of the mistake or his fault caused the mistake
Donovan v. RRL Corp. (pg. ???) :: Mistakenly advertised car $12k under. refused to sell to customer who saw
misprinted ad in paper.
relief from mistaken bids is allowed where one party knows or has reason to know of the others error, the
mistake is material to the contract, was not the result of neglect of a legal duty, enforcement would be
unconscionable, and the other party can equitably be placed in status quo.
Mistake in Transcription
R2 155: Where a writing that evidences or embodies an agreement in whole or in part fails to express the
agreement because of a mistake of both parties as to the contents or effect of the writing, the court may at the
request of a party reform the writing to express the agreement, except to the extent that rights of third parties such
as good faith purchasers for value will be unfairly affected.
Misrepresentation
R2 159: A misrepresentation is an assertion that is not in accord with the facts.
R2 161: A person's non-disclosure of a fact known to him is equivalent to an assertion that the fact does not exist in
the following cases only:
(a) where he knows that disclosure of the fact is necessary to prevent some previous assertion from being a
misrepresentation or from being fraudulent or material
(b) where he knows that disclosure of the fact would correct a mistake of the other party as to a basic assumption
on which that party is making the contract and if non-disclosure of the fact amounts to a failure to act in good
faith and in accordance with reasonable standards of fair dealing.
(c) where he knows that disclosure of the fact would correct a mistake of the other party as to the contents or effect
of a writing, evidencing or embodying an agreement in whole or in part.
(d) where the other person is entitled to know the fact because of a relation of trust and confidence between them
R2 162: A misrepresentation is material if it would be likely to induce a reasonable person to manifest his assent, or
if the maker knows that it would be likely to induce the recipient to do so.
Misrepresentation prevents formation of a contract where it prevents a party from knowing the essential terms of the
proposed contract (R2 163)
Misrepresentation makes a contract void where a party's manifestation is induced by a fraudulent or material
 misrepresentation by the other party or a third party (R2 163, 164)
Hill v. Jones (pg. 888) :: seller did no disclose past termite infestations. material to decision of buyer and value.
Exception: where the other is indolent, inexperience or ignorant, or if his judgment is bad or he lacks access to
adequate information, his adversary is not generally expected to compensate for these deficiencies.
Buyer of property not ordinarily expected to disclose circumstances that make the property more valuable than the
seller supposes
Must act in good faith an in accordance with reasonable standards of fair dealing
Duress
R2 175: When duress by threat makes a contract voidable
(1) If a party's manifestation of assent is induced by an improper threat by the other party that leaves the victim no
reasonable alternative, the contract is voidable by the victim
(2) If a party's manifestation of assent is induced by one who is not a party to the transaction, the contract is
voidable by the victim unless the other party to the transaction in good faith and without reason to know of the
duress either gives value or relies materially on the transaction.
Fraud
R2 162: When a misrepresentation is fraudulent or material
(1) a misrepresentation is fraudulent if the maker intends his assertion to induce a party to manifest his assent and
the maker
(a) knows or believes that the assertion is not in accord with the facts, or
(b) does not have the confidence that he states or implies in the truth of the assertion, or
(c) knows that he does not have the basis that he states or implies for the assertion
(2) A misrepresentation is material if it would be likely to induce a reasonable person to manifest his assent, or if
the maker knows that it would be likely to induce the recipient to do so.
Undue Influence
R2 177: When undue influence makes a contract voidable
(1) Undue influence is unfair persuasion of apart who is under the domination of the person exercising the
persuasion or who by virtue of the relation between them is justified in assuming that that person will not act in a
manner inconsistent with his welfare.
(2) If a party's manifestation of assent is induced by undue influence by the other patty, the contract is voidable by
the victim
(3) If a party's manifestation of assent is induced by one who is not a party to the transaction, the contract is
voidable by the victim unless the other party to the transaction in good faith and without reason to know of the
undue influence either gives value or relies materially on the transaction.
Capacity
R2 12 : Capacity to Contract
(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 particular transaction may depend upon the
nature of the transaction or upon other circumstances.
A natural person who manifests assent to a transaction has full legal capacity to incur contractual duties thereby
unless he is
(a) under guardianship, (b) an infant, (c) mentally ill or defective, or (d) intoxicated.
Events That Excuse Performance
Impracticability
R2 261: Where, after a contract is made, a party's performance is made impractical without his fault by the
occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his duty
to render that performance is discharged, unless the language or circumstances indicate the contrary.
To be impracticable:
a contingency must have occurred
that is not the fault of the party seeking relief
the risk of which must not have been allocated either by agreement or by custom, and
non-occurrence of the contingency must have been a basic assumption upon which the contract was made.
occurrence of a supervening, unforeseen event not within the reasonable contemplation of the parties at the time the
contract was made. Such occurrence must go to the heart of the contract.
United States v. Wegematic Corp. (pg. 904) :: Government requested bids for tech. Selected based on timely
delivery. wegematic could not deliver in the time they had proposed and said it would be impracticable to do so,
needed more time and more money. Here, ff an essential but intangible aspect of the contract becomes impossible,
the contract may be discharged, just as where the subject matter was destroyed. If certain specifications are drawn
up by the vendor and it turns out that the state of the art is not sufficient to enable the vendor to meet the
specifications he is unlikely to be excused from performing.
Transatlantic Financing Corp. v. United States (pg. 908) :: grain ship contracted to sail from TX to Iran. Canal
 closed, company decided to take another more expensive route. Company was only entitled to contract price,
chose to take its profit on the contract and then force defendant to absorb the cost of the additional voyage.
Missouri Public Service Co. v. Peabody Coal Co. (pg. 922) :: coal company wishes to stop deliveries due to
change in price indexes. cannot do so. arab oil embargo was a foreseeable occurrence. - both parties were
sophisticated, and could have anticipated price fluctuation.
could have avoided perhaps with a clause "any gross proven inequity that may result in unusual economic
conditions not contemplated by the parties can be corrected by arbitration"(Georgia Power Co v.Cimarron
Coal Corp)
However, if at the time the contract was made there was an existing impracticability or frustration which the party had
no reason to know, there is no contract.
R2 266:
(1) Where, at the time a contract is made, a party's performance under it is impracticable without his fault
because of a fact of which he has no reason to know and the non-existence of which is a basic assumption on
which the contract is made, no duty to render that performance arises, unless the language or circumstances
indicate the contrary
(2) where, at the time a contract is made a party's principal purpose is substantially frustrated without his
fault by a fact of which he has no reason to know and the non-existence of which is a basic assumption on
which the contract is made, no duty of that party to render performance arise, unless the language or
circumstances indicate to the contrary.
Impossibility
R2 262: If the existence of a particular person is necessary for the performance of a duty, his death or such
incapacity as makes performance impracticable is an event the non-occurrence of which was a basic assumption on
which the contract was made.
R2 263: If the existence of a specific thing is necessary for the performance of a duty, its failure to come into
existence, destruction, or such deterioration as makes performance impracticable is an event the non-occurrence of
which was a basic assumption on which the contract was made.
Taylor v. Caldwell (pg. ???) :: Agreement to rent out music hall, but music hall burned down - both parties
excused from contractual duties.
Frustration of Purpose
R2 265: Where, after a contract is made, a party's principal purpose is substantially frustrated without his fault by
the occurrence of an event the non-occurrence of which was a basic assumption on which the contract was made, his
remaining duties to render performance are discharged, unless the language or the circumstance indicate the contrary.
Krell v. Henry (pg. 930) :: flat rented for coronation which never happened. LL sues for rent, T counterclaim for
depo. purpose of K was to view Coronation, purpose frustrated, no contract LL owe T depo.
Against Public Policy
R2 178: A promise or other term of an agreement is unenforceable on grounds of public policy if legislation provides
that it is unenforceable or the interest in its enforcement is clearly outweighed in the circumstances by a public policy
against the enforcement of such terms.
Performance
Conditions :: R2 224: A condition is an event, not certain to occur, which must occur, unless its non-occurrence is
excused, before performance under a contract becomes due.
Non-occurrence of a condition: contract is valid, but terms are not yet enforceable
express conditions: specifically provided for in the contract
implied conditions: not stated but required by the factual circumstances
condition precedent: gives rise to a duty
contract exists before the condition is fulfilled, performance happens when the condition is satisfied
condition subsequent: terminates a duty
conditions can be bargained for and can be consideration
Scott v. Moragues Lumber Co. :: Offer to charter, if he buys boat. bought boat, so now bound to charter. A
contract can be conditioned upon the happening of a future event under the control of one of the parties to the
contract. Such a contract is not void for lack of consideration or mutuality of obligation. condition =
consideration
Doctrine of Waiver: condition can be waived without consideration, promises cannot be waived without
consideration.
Clark v. West (pg. 180) :: Contract to write series of books - $2/page, or $6/page if abstained from alcohol. did
not abstain, but claims condition was waived. extra $4 was a condition, not part of consideration; condition
can be waived without consideration.
Why make a condition and not a promise?
One party may not be prepared to promise what was asked
Also to avoid the doctrine of substantial performance
 Substantial Performance ::
Defined: where one party substantially performs (doesn't materially breach), the other is not relieved of his duties
breachor gets: contract price minus damages caused. Damages equal the cost of completion, but if that is
disproportionate to the contract price, then courts give change in market value.
Factors:
materiality of breach: primary purpose of contract?
proportion completed
willfulness of breach: must be compliance in good faith, if breach is willful, failure to perform cannot
accompany substantial performance. (not absolute bar, interpreted need for malicious intent as well as
willfulness - Vincent v. Cerro pg. 1042/93)
motive of breachee (forfeiture?).
Jacob & Youngs v. Kent (pg. 1037) :: builder uses piping of same quality but different mark as in contract, cost of
completion = high, change in value = none: court says substantial performance, no damages.
O.W. Grun Roofing v. Cope (pg. 1046) :: red roof painted w/ yellow streaks: court said roof aesthetic is so
different it is a material breach and no substantial performance, gave breachee cost of completion as expectation
damages for buyer for breach by services seller
Kreyer v. Driscoll (pg. 1042) :: house only 75% finished b/c only of plumbing, electric, heating, tile, linoleum
and decoration: court said no substantial performance
cannot recover full contract price, but can still recover in quantum meruit
where substantial performance has not occurred on a building contract and the non-breaching party accepted
the benefit of the rendition of part performance with knowledge of the breach, the contractor may recover in
quantum meruit for services rendered.

Remedies
The Efficient Breach: remedies are ideally set in such a way that a party will breach when it is efficient to do so - a
coasian approach may then bargain around the rule
Types of remedies
specific: when it is intended to give the injured party the very performance that was promised
substantial: when it is intended to give the promisee something in substitution for the promised performance
Nominal: any breach gives injured party a claim for at least nominal dmg. court costs generally awarded if suit brought
in good faith
Actual value to injured party: not based on injured party's hope at time of making contract, but on the actual value
that the contract would have had to injured party had it been performed.
Changes in market are reflected in expectation interests
R2 344: Judicial Remedies... Serve to protect one or more of the following interests of a promisee:
his expectation interest, which is his interest in having the benefit of his bargain by being put in as good a
position as he would have been in had the contract been performed,
his reliance interest, which is his interest in being reimbursed for loss caused by reliance on the contract by being
put in as good a position as he would have been in had the contract not been made, or
his restitution interest, which is his interest in having restored to him any benefit that he has conferred on the
other party
R2 347:...the injured party has a right to damages based on his expectation interest as measured by
(a) the loss in value to him of the other party's performance caused by its failure or deficiency, plus
(b) any other loss, unclosing incidental or consequential loss, caused by the breach, less
(c) any costs or other loss that he has avoided by not having to perform.
Unless
the loss in value to the injure party cannot be proved with reasonable certainty. (R2 348, 352)
the loss could have been avoided without undue risk, burden or humiliation (R2 350)
the loss was not foreseeable to the breaching party as a probable result of breach when the contract was made. (R2
351)
the loss is emotional disturbance (R2 353):recovery for emotional disturbance excluded
unless the breach also caused bodily harm or the contract or the breach is of such a kind that serious
emotional disturbance was a particularly likely result.
Valentine v. General American Credit, Inc. (pg. 340) :: wrongful termination suit seeking emotional
distress damages. primary purpose of contract is economic -> no recovery
Lane v. Kindercare Learning Centers, Inc. (pg. 343) :: sleeping child locked in daycare. contract was
personal, or at least there was a very clear connection to such a personal nature that it was obvious it
could result in emotional distress.
R2 349: As an alternative... the injured party has a right to damages based on his reliance interest, including
expenditures made in preparation for performance or in performance, less any loss that the party in breach can prove
 with reasonable certainty the injured party would have suffered had the contract been performed.
R2 355: Punitive damages are not recoverable for a breach of contract unless the conduct constituting the breach is
also a tort for which punitive damages are recoverable.
Expectation
Hawkins v. McGee (pg. 211) :: Hairy hand, guaranteed a perfect hand, suffered extensive pain and emotional damages
associated with having a deformed hand.
Damages awarded equal to value of good hand minus value of current hand, pain incidental to the surgery viewed
as part of the consideration/cost accepted. Purpose of awarding damages for breach of contract is to put the in
as good of a position as he would have been had the defendant abided by the contract
United States Naval Institute v. Charter Communications, Inc. (pg. 227) :: published book one month earlier than was
supposed to in contract. naval claimed this hurt their sales for hardbacks etc. Damages are equal to estimate of what
sales would have been, rather than the profits Berkeley made.
award of Berkeley profits would = punitive, NO PUNITIVE.
damages generally measured by actual loss (no benefit of the bargain?)
Breach by services buyer
Damages = Profit + Cost incurred pKp(price paid) = Kp CC pKp if resold, Kp Covp
gross profit that seller wouldve made plus costs incurred in performance minus payment received (same as
contract price minus costs saved minus payment received Restatement) also for lost-volume sellers. Lost
volume seller must prove it would have produced and sold another unit for a profit. But if not lost-volume
seller and you get another person to buy the service, then contract price minus new price.
Aiello Construction, Inc. v. Nationwide Tractor Corp. (pg. 268) :: construction company stopped work
because builder didnt pay: court awarded Prof+Cost-payments already made
Wired Music, Inc v. Clark (pg. 272) :: guy orders music service, moves, replacement tenant wants to take over
contract but has to pay more: court gave damages equal to the value of the rest of the first contract as Wired
was a lost volume seller and wouldve had two contracts instead of just one
Benefits of Expectation Damages
Easier to measure
Provides incentives for promisors to perform and for people to enter contracts
Foreseeability
(a) contemplated at the time of the contract (kind of damage, not magnitude)
Arising naturally from the breach
Measurability: Loss in Value + Other Loss - Cost Avoided-Loss Avoided
Cost of performance damages v. Diminution of Value damages
cannot use cost of performance when would be "unconscionable & grossly oppressive" or would give a
greater benefit from breach than from full performance.
Peevyhouse v. Garland Coal & Mining Co. (pg. 248) :: mining company refuses to do remedial work in
contract after extraction of coal. court determined that primary purpose of contract was for coal, not remedial
work, despite explicit clause. Cost of remedial work is 25k+, for mere increase of few hundred $ in value to
land.
RULE: The measure of damages for a breach of contract obligation to perform construction or
excavation work is usually the reasonable "cost of performance" of such work; but where the economic
benefit which would result by full performance is "grossly disproportionate" to the cost of performance,
damages are limited to the "diminution in value" to the premises because of nonperformance.
idiosyncratic value is very difficult to measure
Reliance
Used in place of expectation when burden of proving expectation with certainty is not possible.
Injured party can then recover damages for total breach based on reliance minus any benefit received through salvage
or otherwise
no recovery of costs incurred before the contract was made
protects significant interest of an injured party that has relied
Objective: To put party in position it would have been in had contract not been made
Types of reliance
Essential Reliance: reliance that consists of preparation for and performance under the contract in question
Incidental reliance: Reliance that consists of preparations for collateral transactions that a party plans to carry out
when the contract in question is performed
Reliance consisting of forgoing other opportunities: generally not recognized
Supplier as injured party
if supplier or builder has already begun work but has trouble proving prospective profits, can recover as damages
any expenditure for labor and materials and other costs of preparation and part performance
recovers cost of reliance minus any loss avoided through salvage
 Recipient as injured party
if recipient has relied on a contract by spending money or making commitments for advertising, acquiring
premises and equipment, hiring employees => recovers these costs
Security Stove & Mfg.. Co. v. American Railways Express Co. (pg. 383) :: exhibition space rented for new
product, transportation costs, shipping costs. meant to ship by certain date in time for exhibition which will
help generate future profits for . fails to ship by contracted date. reliance damages awarded for definite
expenses incurred, potential future profits to uncertain to calculate.
Recovery no greater than party's expectation interest.
Limitation: breaching party may mitigate reliance interest: to the extent that breaching party can prove with
reasonable certainty that injured party's expectation interest was less than reliance interest so that performance of
contract would have resulted in net loss, amount of that loss subtracted form the cost of reliance
Restitution
Restitution: describes body of specific rules that give effect to the principal that one person shouldn't be enticed at
another's expense and describes remedies based on a right to recover on the ground of unjust enrichment
GOAL: the prevention of unjust enrichment: principle that one person should not be unjustly enriched at another's
expense
gives rise to a Quasi Contract: action at law based on unjust enrichment measured by benefit conferred. quasi
contractual obligation imposed when
the defendant has received a benefit and
knew of the benefit and
retention of the benefit is inequitable
effects efficient beach in that it may still leave the party in breach with some of the gain resulting from the breach.
R2 370: A party is entitled to restitution... only to the extent that he has conferred a benefit on the other party by way
of part performance or reliance.
R2 371: If a sum of money is awarded to protect a party's restitution interest, it may as justice requires be measured
by either
(a) the reasonable value to the other party of what he received in terms of what it would have cost him to obtain it
from a person in the claimant's position, or
(b) the extent to which the other party's property has been increased in value or his other interests advanced.
Differences of restitution vs. expectation/reliance
Puts either the breaching or non-breaching party in the position she would have been in had the benefit never been
received.
considers benefits received by either party, even in losing contract
amount of restitution not measured with reference to the promise that was made
recovery may exceed the contract rate (though it is usually less)
can be used where no contract exists
ignores the contract
requires total breach
can be restitution of things or of value in money
Cannot receive restitution if contract has been fully performed and all that remains is breaching party to pay price
of performance => at this point recovery is limited to expectation damages.
Quantum Meruit: As much as is deserved :: Actions at law based on an implied contract to pay reasonable
compensation for services rendered. Measured by the reasonable value of services.
U.S. v. Algernon Blair (pg. 395) :: blair contract with coastal; losing contract with US to construct naval hospital
and provide cranes. performance terminated and crane rental not paid for ($37k). However, would have lost more
if performance had been completed. expectation is negative, reliance would be diminished/negative by losing
contract value. Recovery in quantum meruit is an equitable alternative to actual damages (which may end up as
zero or a loss) to prevent unjust enrichment for the breaching party.
R2 374: Restitution in favor of party in breach
(1) ...if a party justifiably refuses to perform on the ground that his remaining duties of performance have
been discharged by the other party's breach, the party in breach is entitled to restitution for any benefit that
he has conferred by way of part performance or reliance in excess of the loss that he has caused by his own
breach
(2) to the extent that, under the manifested assent of the parties, a party's performance is to be retained in the
case of breach, that party is not entitled to restitution if the value of the performance as liquidated damages is
reasonable in the light of the anticipated or actual loss caused bu the breach and the difficulties of proof of
loss.
Osteeen v. Johnson (pg. 392) :: contract to record/promote 2 records for country singer. claim breach and
refuse payment. partial performance permits compensation for reasonable value of services. restitution
damages awarded to minus the value of services rendered by
Liquidated Damages
Damages provided for within the contract => cannot be penalties
R2 356:
(1) Damages for breach by either party may be liquidated in the agreement buy only at an amount that is
reasonable in the light of the anticipated or actual loss caused by the breach and the difficulties of proof of law. A
term fixing unreasonably large liquidated damages clauses is unenforceable on grounds of public policy as a
penalty.
(2) A term in a bond providing for an amount of money as a penalty for non-occurrence of the condition of the
bond is unenforceable on grounds of public policy to the extern that it exceeds the loss caused by such non-
occurrence
Agreements to under liquidate damages, limit or exclude liability for consequential damages, or limit seller's
responsibility to repair or replacement of goods => VALID
Wasserman's Inc. v. Middletown (pg. 348) :: if township canceled lease, pays 25% of lessee's average gross annual
receipts. Court found this calculation to exceed actual loss in this case => penalty, not enforceable.
Cons
litigation to determine enforceability of liquidated damages, defeats their purpose.
Parties pay less attention to the possibility of breach, so may not be reasonable
Pros
helps to avoid costly litigation in the event of a breach
facilitates the calculation of risks and reduces the cost of proof
can limit damages for breaching party
can promote efficiency in the legal system
Specific Performance/Injunctive Relief
Defined: Ordering the promisor to render the promised performance
Objective: to produce the same effect as if the contract had been performed
Injunctive Relief v. Damages
Cons
injunctive relief requires court's supervision
Bilateral Monopoly (where only two parties possibly involved in negotiation, bargaining can brick down)
tendency to liberalize: enlarging the class of cases in which damages are regarded an inadequate remedy
Pros
Shifts burden of determining the costs from court to parties, costs are more accurately determined by market
than by government (efficiency here can be diminished by bilateral monopoly)
social/policy benefits can arise from specific performance
R2 359(1): Specific performance or an injunction will not be ordered if damages would be adequate to protect the
expectation interest of the injured party.
Adequacy Test:
R2 360: In determining whether the remedy in damages would be adequate, the following circumstances are
significant:
(a) the difficulty of proving damages with reasonable certainty
(b) the difficulty of procuring a suitable substitute performance by means of money awarded as damages, and
(c) the likelihood that an award of damages could not be collected
UCC 2-716(1): Specific performance may be decreed where the goods are unique or in other proper circumstances.
Not awarded for employment contracts, although employee can be enjoined form working for a competitor.
can generally be granted for contract for the sale of land as all land is viewed to be unique (disputed), patents,
copyrights, stock, heirlooms, unique goods.
Walgreen Co. v. Sara Creek Property Co. (pg. 372) :: Sara Creek agreed to clause in contract not to lease space to other
pharmacies. leases space to Phar-mor. Walgreens request injunctive relief. calculation of damages would be costly and
inaccurate. injunctive relief granted

Limitation on Remedies
Certainty
Reasonable: Injured party canny recover damages for loss beyond the amount proved with reasonable certainty
R2 352: Damages are not recoverable for loss beyond an amount that the evidence permits to be established with
reasonable certainty
New Business Rule: Inherently more difficult to prove for new business as profit projection is uncertain
Doubts are generally resolved against the party in breach on the rationale that courts are less demanding in applying
the requirement if the breach was willful
Measurement Difficulties
court less demanding if it appears that proof with precision is inherently impossible
 absolute certainty not required, but must be more than speculation
Kenford Co. v. Erie County (pg. 327) :: 20 year contract for operation of stadium that wasn't built. loss of
profits over 20 years not in contemplation of parties. expert testimony of projections impossible to determine
with certainty as too many variables and only one other comparable stadium at the time, in drastically
different location.
lost profits must be demonstrated with certainty that such damages have been caused by the breach and
alleged loss must be capable of proof with reasonable certainty
Foreseeability
Defined: R2 351:
(1) Damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable
result of the breach when the contract was made
(2) Loss may be foreseeable as a probable result f a breach because it follows from the breach
(a)in the ordinary course of events, or
(b) as a result of special circumstance, beyond the ordinary course of events, that the party in breach had
reason to know
(3) A court may limit damages for foreseeable loss by excluding recovery for loss of profits, by allowing recovery
only for loss incurred in reliance, or otherwise if it concludes that in the circumstance justice so requires in order
to avoid disproportionate compensation
Hadley v. Baxendale (pg. 313) :: shaft of mill sent off to create pattern for new one. delivery delayed, and mill
production ceased => lost profits. carrier knew that shaft needed to be delivered, but did not know that mill would shut
down without shaft. => no foreseeability of lost profit damages
injured party recovers dmg for loss that may fairly and reasonably be considered as arising naturally from breach
injured party may not recover dmg for loss of consequential dmg unless the loss was such as may reasonably be
supposed to have been in the contemplation of both parties at the time they made the contract as the probable
result of the breach of it
Reasonable Objective: in making contract: one takes risk of consequences that one actually foresees and those that
one ought reasonably to have foreseen
Magnitude of loss need not be foreseeable, just type of loss, although damage can be limited to the amount
foreseeable.
Victoria Laundry Ltd. v. Newman Indus. Ltd (pg. 317) :: laundromat orders large boiler to use in opening its
business. as it was reasonably foreseeable that boiler was needed in order to operate, lost profits can be recovered.
However, lost profits for large industrial contract claimed cannot be recovered as this contract had not been
communicated to the sellers of boiler.
Duty to Mitigate
Defined: Injured party cannot recover damages for loss that could have been avoided if that party had taken
appropriate steps to do so.
Burden of Proof: on breaching party to show that injured party could have, but had not, taken appropriate steps
Once a party knows performance by the other party will not be forthcoming, he is expected rot stop his own
performance to avoid further expenditure and take such affirmative steps as are appropriate in the circumstances to
avoid loss by making substitute arrangements or otherwise.
Appropriate Steps
injured party is not expected to guard against unforeseeable risks nor to take steps that involve undue burden, risk,
or humiliation.
Reasonability: A party that takes steps that seemed reasonable at the time will not be judged by hindsight
Stopping performance:
once a party has reason to know that the other's return performance will not be forthcoming, the former is
ordinarily expected to stop performing in order to avoid further cost.
even if injured party is sure that other party will not perform, there can be instances where it's more
sensible to complete performance than to stop it.
Goods: If seller fails to deliver goods, buyer may be able to cover by buying goods in substitution for those due
from seller. If buyer could have reasonably covered, but didn't, amount of loss that could have been avoided is
subtracted from buyer's damages.
When there is a breach by seller, the buyer can cover (or recover the value of hypothetical cover) and obtain
the difference in price or get damages for non-delivery or repudiation based on difference in market price and
incidental and consequential damages.
UCC 2-712
(1) After a breach... the buyer may cover by making in good faith and without unreasonable delay
any reasonable purchase of or contract to purchase goods in substitution for those due from the
seller
(2) The buyer may recover from the seller as damages the difference between the cost of cover and
 the contract price together with any incidental or consequential damages..., but less expenses saved
in consequence of the seller's breach
UCC 2-713 (1): ... the measure of damages for non-delivery or repudiation by the seller is the difference
between the market price at the time when the buyer learned of the breach and the contract price
together with any incidental and consequential damages, but less any expenses saved in consequence of
the seller's breach
Egerer v. CRS West, LLC (pg. 276) :: fill material purchased, they stopped delivery because of a
more profitable offer. could not cover for 2 years with a comparable (but not exactly the same
product) price used was from 6 months post breach. OK, this was reasonable given the
circumstances.
Employment: don't have to accept different or inferior work or travel far from home to mitigate damages.
However, if it is obtained, it will be used to offset damages.
entitled to the difference in compensation and any expenses incurred trying to look for other employment, but
generally not for any injury to reputation unless specific losses can be identified.
employee/employer can find new job/employee
employee recovery is equal to wage that would be payable during remainder of term minus income
earned during unexpired term
Shirley MacLaine Parker v. Twentieth Century Fox (pg. 304) :: hired for musical with certain rights to
influence script, movie canceled, studio proposed western instead, without script rights. Shirley declined, and
had no duty to accept as mitigation. Western movie was an inferior and substantially different job.
Failure to mitigate: preclude recovery of damages for loss that could have been avoided
Rockingham County v. Luten Bridge (pg. 297) :: county contracted to have bridge built, changed mind and
informed luten, luten continued to build and tried to charge for full contract. Should have stopped, damaged
limited to work done before repudiation of contract
Inefficiency: waste of resources/labor, bridge co, could have saved expenditure and sought other contract
harder to discern when price is more subjective based on labor such as a commission painting.
Third Party Beneficiaries
Intended third party can sue, incidental third party cannot
R2 304: A promise in a contract creates a duty in the promisor to any intended beneficiary to perform the promise,
and the intended beneficiary may enforce the duty
Before the beneficiary materially changes his position in justifiable reliance on the promise or brings suit on it or
manifests assent to it, the promisor and promisee retain power to discharge or modify the duty by subsequent
agreement. (R2 311, 312, 313)
R2 315: An incidental beneficiary acquires by virtue of the promise no right against the promisor or the promisee
Incidental beneficiary = beneficiary who is not an intended beneficiary. (R2 302)
Lawrence v. Fox (pg. 943) :: Holly gave fox $300 to give to Lawrence the next day. Holly did not release Fox from the
promise. Fox has to pay the money to Lawrence despite the lack of privity of contract
Seaver v. Ransom (pg. 948) :: Husband agreed to give money to his wife's niece when wife was on her deathbed and
unable to wait for a new will to be prepared. When he died there was no such provision in his will. niece brought this
action and the court allowed her to recover as a donee beneficiary.
if B left husband house on condition he pay , and he had accepted the divise, he would have become personally
liable to pay the legacy, and plaintiff could have recovered in an action at law against him.