CONTRACTS Dow Fall 2015

Important Definitions
Contract=legally enforceable agreement; O+A+C

Offer=something that creates the power of acceptance

 Must be clear, definite, explicit such that a reasonable person knows what the parties
have agreed to when the offerree accepts

Acceptance=something that mirrors the offer

Consideration=Benefit to promisor/Detriment to promisee + Bargained For

 Bargained For=Induced action

Principles

 Freedom of Contract—parties to a K are acting in accordance w/ their individual wills

 There are no compulsory contracts
 Master of the Offer—in determining a K, it is the will of the party that controls
o Courts give benefit of ambiguity to offerree, however
 No party can make another a debtor against his or her will
 Mutuality principle—until both parties are bound, neither are bound

Hawkins v McGee: patient sues for “100% perfect hand”

 P: Dr. went out of his way to solicit the operation, shows intent behind promise
 D: No reasonable man would understand that verbal warranty on a surgery is a
“contractual relation”
Ruling: Evidence shows that both parties believed the verbal warranty—solicitation showed
Dr.’s intent to create a “100% perfect hand”
What about damages?

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Overview of Doctrine: Rule and Counter-rule
Hurley v. Eddingfield, p. 56: family physician doesn’t come to dying patient
 P: Dr. had duty to rescue and come to aid of dying patient
 D: There was previous ‘discrete K’ but no ‘ongoing K’
Ruling: Dr. isn’t legally bound to patient—he cannot be forced into contract against his will

Cotnam v. Wisdom, p. 163: Drs. Perform surgery on fatally injured patient w/o K
 P: The patient would’ve consented to surgery if he was conscious; reasonable
compensation should be given for sustaining recovery fees
 D: Patient was unconscious, so no acceptance and no K
Ruling: “implied K” that deceased could be held liable to services given to him in good faith
while in a helpless condition (just like infants or idiots)

Continental Forest, p. 67: Chandler gets plywood fr. wrong company

 P: Chandler should pay for price of goods they received/”wood is wood”
 D: K wasn’t entered with Cont. Forest
Ruling: There is a quasi contract requiring payment and the price owed Cont. Forest is the
amount of enrichment btw parties that it would be unjust for one party to retain

3 Contractual Agreements:
1. Express=both parties agree
2. Implied=no express agreement, but both parties’ actions imply agreement
3. Quasi=no K at all, but for purpose of bringing about justice, it should be treated as
though there were a K (restitution)

Boston Ice Co. v. Potter, p. 1504: Company delivers ice to person who didn’t want to be in
business with that company
 P: Potter should pay for price of goods they received/”ice is ice”
 D: Didn’t want to be in a K w/ Boston Ice and expressly told them (fraud?)
Ruling: Person has a right to select and determine with whom he will contract

Taft v. Hyatt, p. 377: Who gets reward for fugitive?

 P: Attorney isn’t entitled b/c he didn’t lead to apprehension; friends aren’t entitled b/c
they didn’t know of reward before; police isn’t entitled b/c he was doing his duty
 D: all believe they led to apprehension of fugitive
Ruling: Offer for reward to multiple offerees is a mere proposal and specific performance
entitles person to reward—none of these made K

Noble v. Williams, p. 76: Teachers buy school supplies

 P: they are entitled to recovery from intervening to fulfill their teaching K
 D: Teachers should’ve enacted mandamus to get supplies--their actions were voluntary
Ruling: The obligation to buy supplies was not theirs, their teaching K gave them right of action
to bring mandamus

Sommers v. Putnam Bd. of Educ., p. 168: Father drives children to school

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 P: Requested school to do its job, but denied--he is entitled to recovery from intervening
 D: Dad should’ve enacted mandamus to get rides—his action was voluntary
Ruling: Quasi contract b/c of beneficial intervention that requires justice

Beneficial Intervention Requirements:

1. prompt performance is matter of grave public concern
2. person with who obligation rests has failed to perform though aware
3. it is reasonably apparent that its impossible to perform
4. person who intervenes must be of proper credentials

Davis & Co. v. Morgan, p. 77: Employee offered a raise in his K to stay
 P: promise of extra compensation was gratuitous
 D: was promised more money for staying the remainder of the term
Ruling: Promise was ‘naked’ b/c there was no consideration—Morgan no worse off, no better

Schwartzreich v. Bauman p. 79: Employee offered new money in new K

 P: the new K w/ more money was agreed upon and the old was terminated
 D: the new K had no consideration—still bound by 1st K to do the same work
Ruling: The mutual promise by both parties to terminate existing K and make new one is
consideration (expressed rescission)—2nd K is enforceable

Wood v. Boynton, p. 84: diamond v. topaz stone

 P: Only sold stone to Boynton under false conception of value, wants to rescind
 D: Didn’t know the real value at time of sale either
Ruling: Only reasons for rescinding sale are fraud or mistake in delivering the actual article;
seller is no worse off, no better and she took risk by going in to sell

Sherwood v. Walker, p. 887: Beef cow v. Breeder

 P: We both agreed on the transaction and that’s the price the cow should be sold at
 D: There was a mistake in the nature of the cow when the price was agreed upon
Ruling: The K was to sell the cow as a beef creature; the cow is a breeder and the K doesn’t
apply

Laidlaw v. Organ, p. 89: tobacco price goes up b/c of blockade

 P: Organ withheld info about blockade (fraud), so the K is invalid
 D: withholding info is part of business—maybe immoral, not illegal
Ruling: Concealment of facts is standard—not bound to tell external knowledge; it is up to seller
to do own due diligence (as long as the parties don’t impose on each other)

Swinton v. Whitinsville Bank p. 93: Termite-infested house

 P: WSB didn’t disclose that house we bought is infested w/ termites (fraud)
 D: there was no false statement or misrepresentation, Swinton could’ve checked
themselves
Ruling: non liability for bare nondisclosure
*In many other jurisdictions, not disclosing about known defect is fraud

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Caveat emptor=let purchaser take care of his own interest

What assumptions is someone permitted to make? (What would a reasonable person

assume?)

Hadley v. Baxendale, p. 106: mill shaft repair

 P: Baxendale breached K and should pay the damages for how long the mill was closed
 D: Hadley didn’t inform that the mill was shutdown until new shaft arrived when K was
made
Ruling: Hadley made a false assumption that Bax. knew mill would be closed. Only damages fair
are the ones arising naturally—reasonable person would assume the mill could operate using
another shaft (not from loss of profit or wages)

Shaw v. Shaw, p. 154: husband married to two women

 P: Believed she was in a marriage and is entitled to all the benefits she would’ve received
if this had been true
 D: her marriage was not legally valid and she’s entitled to nothing
Ruling: Mrs. Shaw made a false assumption, but there is an implied warranty w/ a marriage that
the man is legally able to marry and doesn’t have second wife—what a reasonable person would
assume (entitled to half of estate+damages)

Upton on Severn v. Powell, p. 171: wrong fire brigade

 P: brigade sent outside of its area and is free to charge for the cost of services
 D: didn’t intend to enter K w/ wrong brigade
Ruling: Powell called the Upton police and asked for the brigade—must be treated as request
implying that he wanted Upton brigade

Vickery v. Ritchie, p. 173: Turkish bath house/shitty architect

 P: Builder deserves to be paid amount they arranged
 D: Client deserves to pay amount they arranged
Ruling: There is no K b/c of the architect’s deceit, just an agreement of payment. P is entitled to
fair value of his labor and materials or “quantum meruit” (what one has earned)

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Offer and Acceptance

Indefinite Contracts
Lefkowitz v. Great Minn. Surplus Stores, p. 183: fur coat ad
 P: Ad offer was explicit and P met with proper acceptance
 D: The offer was not directed to males; Store’s right to modify offer
Ruling: Ad is offer made to general public and specifically stated “first come, first served”—
explicit enough that performance is acceptance and is binding

Jenkins Towel Service v. Fidelity-Phil. Trust, p. 186: property open to bidders

 P: Met all the terms of the offer from Fidelity
 D: The letter was an “invitation to bid”, not an offer
Ruling: The letter was an offer of the properties, subject to terms and conditions that the plaintiff
alone accepted. Performance is ordered
Dissent: The letter sent out even specifically asked for “offers”, should be taken as written

Moulton v. Kershaw, p. 190: Offer of salt

 P: Ordered 2,000 barrels of salt according to price in letter offer
 D: Letter wasn’t an offer, simply a preliminary negotiation
Ruling: The terms of the letter are not clear—“we are authorized to offer”, not “will sell”

An offer must be clear, definite, and explicit such that the reasonable person knows what
the parties have agreed to.

Modes of Acceptance
Prescott v. Jones, p. 238: Fire burns bldg down and no insurance
 P: Jones sent letter saying to accept policy renewal, be silent
 D: Policy lapsed—demurrer
Ruling: Silence cannot be acceptance to turn Jones’s offer into K—breaks mutuality principle
b/c silence could be interpreted as acceptance or non-acceptance and offeror would never know

Carlill v. Carbolic Smoke Ball Co., p. 373: smokes 42 balls, gets sick
 P: Ad stated terms and P met them
 D: P didn’t notify of her acceptance, not meant to be binding
Ruling: The ad is a unilateral offer, of which acceptance may be communicated
contemporaneously with notification of completed performance of the conditions (consideration
b/c CSB benefitted from Carlill’s use)

Firm Offers
Dickinson v. Dodds, p. 316: merchant offers to sell house, sells to other person
 P: Dodds made offer to sell house and attempted to accept before revocation
 D: Didn’t need to keep offer open, sold house to other person

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Ruling: B/c Dickinson had heard that house had been sold to another person, the offer was
revoked to him; Also, offer stating it would stay open wasn’t binding

Baird v. Gimbel Bros, p. 323: sub/gen contractor

 P: Made bid based off Gimbel’s estimate and wouldn’t be able to withdraw w/o great loss
 D: Putting in a bid is not acceptance, they tried to revoke bid shortly after
Ruling: Gimbel revokes before Baird accepts construction job—not binding

Drennan v. Star Paving, p. 326: sub/gen contractor

 P: Made bid based off Star’s estimate and had to perform according to w/ great loss
 D: Putting in a bid is not acceptance, they tried to revoke shortly after
Ruling: The gen. contractor relied on sub’s bid, and the loss of the mistake should fall on party
who caused it

Output Contracts
Eastern Air Lines, Inc. v. Gulf Oil, p. 428: price increase on fuel in K
 P: They have a valid K, which took price fluctuation into account
 D: The intent of indicator in the K was to follow market price, and now it doesn’t
Ruling: ambiguity of the K falls on Gulf—change was foreseeable; also, for policy reasons,
Eastern winning will keep price of air travel down

Utah Intl. v. CO-Ute Electric, p. 437: built bigger generators

 P: the K is invalid b/c terms were laid out based on size of generator, which was changed
 D: They have a K w/ max. and min. set out—not invalid
Ruling: Changing size of generators affects max. price, but not min. price—half of K is invalid

Schlegel Mfg. Co v. Cooper’s Glue, p. 446: offer to sell glue

 P: Cooper’s offered to sell and deliver glue and there was acceptance
 D: The K had no consideration
Ruling: Schlegel never agreed to do or refrain from doing anything and “unless both parties are
bound, neither is bound”

Correspondence
Cushing v. Thompson, p. 349: protest group rents armory
 P: Mailed signed offer back which was acceptance forming a K
 D: Revoked before they received the acceptance back through the mail
Ruling: Mailbox rule states acceptance occurs when dispatched in the mail; performance
ordered

RI Tool Co v US, p. 354: RIT bids on bolts and makes mistake

 P: RIT tried to correct their mistake and revoke before too late
 D: too late, they were awarded bid before revoking
Ruling: no binding contract b/c RIT withdrew bid before acceptance was effective

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“Unilateral” agreements
Davis v. Jacoby, p. 385: Caro comes to take care of dying aunt and uncle
 P: Davis’s accepted by letter and arranged to move down to help dying aunt
 D: Davis’s never performed what was asked of them (acceptance)
Ruling: ambiguous as to whether acceptance was valid by promise or performance—when in
doubt, presumed a bilateral K, where promise makes K binding

Crook v. Cowan, p. 391: Carpet maker

 P: made the carpets according to the offer, wants payment
 D: he never informed of acceptance
Ruling: The order was unconditional and specific, fulfilled completely by Crook; valid K

To find intent of an offeror, look at specific language in the offer. When in doubt, assume
bilateral b/c both parties are bound at earliest point.

Forms
Roto-Lith v. Bartlett, p. 260: cellophane bags w/ emulsion
 P: Bartlett sent bags w/ defective emulsion—want money back
 D: warranty was expressly stated on boxes and used anyway by Roto-Lith
Ruling: Roto-Lith accepted bags w/ knowledge of conditions and so was bound by them

“Last Shot” Doctrine= the last version of the offer is the one that goes into effect, unless
objected to (Sec. 2-207 attempts to abolish this Doctrine)

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Consideration

Gratuitous Promises and Reliance

Siegel v. Spear, p. 285: storing furniture for the summer
 P: creditman undertook the voluntary act of finding insurance for furniture
 D: it was a gratuitous promise, there was no consideration for finding insurance
Ruling: When a person makes a gratuitous promise, and then enters performance (taking in the
furniture), he is held to full execution. Siegel gave Spear the furniture after the promise and
placed his full confidence in him.

Underwood Typewriter Co., p. 294: trying to find a subleaser

 P: Realty Co. asked for suitable subleaser and time and money was spent in finding one
 D: The K was just a benefit for Underwood, no consideration on it
Ruling: When Underwood relied on the Realty Co.’s promise, there was “consideration executed
upon request”

Feinberg v. Pfeiffer, p. 308: Board gives Feinberg $200/mo. for rest of her life
 P: For her faithful service, they promised her money for life once she retired
 D: Past work is not consideration, promise is not legally binding
Ruling: Feinberg retired and gave up valuable job b/c of reliance on promise—only way to avoid
injustice is to enforce K (promissory estoppel)

Promissory Estoppel=promise which promisor should reasonably expect to induce action

on part of promisee and is binding if injustice can be avoided by enforcing the promise

Kirksey v. Kirksey, p. 473: man gives sister-in-law place to stay

 P: brother-in-law promised a place to live and so I came; reliance on that promise
 D: it was a conditional gift, not a bargained-for exchange
Ruling: brother-in-law is already legally entitled to his own property; his promise was a gratuity

“Warm fuzzies” are not consideration b/c then consideration would be essentially cancelled
out; people make promises all the time that are not meant to be legally binding

Devecmon v. Shaw, p. 480: Eurotrip

 P: Uncle promised reimbursement for trip to Europe before he died
 D: The uncle died and so did his debt to Devecmon
Ruling: Devecmon incurred expenses up front, which was surely a detriment to him and he was
induced into action; Uncle meant to make this promise legally binding

Hamer v. Sidway, p. 438: reward to refrain from drinking and smoking

 P: Uncle promised money for performance before he died, perf. was completed
 D: Uncle has died and there was no consideration

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Ruling: Jr.’s promise to abstain from his legal right to drink and smoke is a detriment that makes
sufficient consideration

De Cicco v. Schweizer, p. 494: engaged couple gets money for marriage

 P: father-in-law promised annual payment for rest of life following marriage
 D: not legally binding—already engaged and past consideration doesn’t count
Ruling: engagement not legally binding, so they still gave up legal right to rescind (detriment)

Allegheny College, p. 501: donation to college, but doesn’t have money

 P: Johnston pledged $5k and gave first $1k, we promised to set up memorial in her name
 D: pledge was simply a gift that she tried to withdraw if she didn’t have money left
Ruling: College assuming duty of perpetuating her name is sufficient consideration
Dissent: Terms of the offer (memorial in her name) asked for performance, which couldn’t be
completed until after her death, at which point offer was withdrawn

Adequacy (and peppercorns)

Haigh v. Brooks, p. 564: guarantee of 3rd party payment
 P: Brooks offered to pay bills of exchange if we surrendered first K back to him
 D: first K wasn’t even valid (b/c no consideration--past consideration doesn’t count)
Ruling: Turning over the document was sufficient consideration (Brooks asking for document
back shows that they wanted it)

Intent generates the consideration doctrine: after intent is made clear, the promisee can
rely on the promise (a condition cannot show intent in same way as consideration)

Real Estate Co. of Pitt., p. 716: $1 to keep offer open

 P: K said “in consideration of $1 paid, K will stay open”
 D: $1 was never paid and is so small anyway
Ruling: The K acknowledges the payment of the $1 and should be construed as written by its
plain meaning; size of consideration doesn’t matter

Krell v. Codman, p. 728: mother promised under K in England to pay

 P: mother agreed under seal to pay son
 D: the K was made in England, had no consideration, and mother is now dead—not
binding anymore
Ruling: The seal shows intent of the mother to make promise legally binding; honoring law of
English Ks, payment of debt ranks after debts for value but before legacies

“Consideration is as much a form as a seal”

Goulet v. Goulet, p. 730: wife promises not to sue husband for car wreck
 P: seeking payment from accident in NH, K was made in ME with no consideration
 D: K was signed, sealed, and dated in ME that wife wouldn’t sue
Ruling: K is governed by ME laws, which states: seal has legal binding effect, despite presence
of consideration

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Aller v. Aller, p. 731: father promises money owed to dead wife to his daughters
 P: Father gave notes with seal to daughters promising money
 D: seal is presumptive of consideration, but there wasn’t any here
Ruling: Both parties understood there should be no consideration; taking time to put a seal on it
was formal and intended to make it legally binding, not promissory gift (shows intention the
same way consideration is designed to)

Schnell v. Nell, p. 737: honoring wife’s promise in will

 P: Schnell promised the money and consideration was 1c and promise not to sue on estate
 D: Schnell should morally honor commitment, but promise wasn’t legally binding
Ruling: A mere exchange of money (where 1c is obviously unequal value to amt. promised)
cannot be binding; the right not to sue on a frivolous will is not sufficient consideration (this
would be hostage-taking)

Pillans & Rose, p. 744: merchants’ promises to guarantee

 P: VM&H made promise to guarantee White who went insolvent
 D: There was no consideration, pre-existing duty of White to pay P&R
Ruling: Btw merchants, an agreement in writing requires no consideration

Moral Consideration
Gillingham v. Brown, p. 512: Brown promises to pay his old debt
 P: Brown promised to pay expired debt w/ $5 down payment and $10/month after
 D: SOL ran on old debt and new promise had no new consideration
Ruling: Where there is a promise to pay obligation, but that obligation is no longer enforceable,
the new promise is enforceable to the new promise’s extent even if no new consideration
Eastwood v. Kenyon, p. 519: Kenyon promises to pay wife’s debt
 P: he promised to pay old debt, improved his wife’s land
 D: past consideration is no consideration—doesn’t need to pay promise w/o consideration
Ruling: Couldn’t enforce this K or else it would get rid of necessity of consideration; would be
different if Kenyon made promise to Blackburn (the original creditor)
Mills v. Wyman, p. 523: Mills takes care of Wyman’s adult son
 P: Took care of his son and was promised compensation
 D: past consideration is no consideration—doesn’t need to pay promise w/o consideration
Ruling: Couldn’t enforce this w/o consideration—would be different if Mills was doctor (Cotnam
v. Wisdom)
C___ v. W____, p. 527: Mother sues for child support promised and notarized in K
 P: The K acknowledged consideration and father shouldn’t deny the truth of the K

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 D: the recited consideration in K is recognition of father’s moral obligation—not legally
binding
Ruling: there is no statute to impose legal obligation of child support, so K isn’t enforceable
without consideration
Webb v. McGowin, p. 537: Webb saves McGowin’s life and gets injured
 P: saving McGowin’s life was material benefit and the subsequent promise to pay and
beginning of payment was affirmation of this debt
 D: There was no consideration—moral obligation is insufficient
Ruling: services weren’t gratuitous b/c agreement of McGowin to pay and beginning to pay
show this; holding McGowin liable encourages this kind of conduct
Balfour v. Balfour, p. 116: husband promises to support wife and leaves her
 P: husband promised to pay and wife relied on him
 D: did not intend to make this a legally binding K
Ruling: Arrangements btw husband and wife should not be construed as Ks (Also, love is
inadequate consideration that shouldn’t be determined by courts)
Davis v. Gen. Foods, p. 121: use of old lady’s ice cream recipe
 P: she believed that Gen. Foods would recompense her, that’s why she sent recipe
 D: K stated payment was “matters resting solely in our discretion”
Ruling: Davis thinking this is so entirely unreasonable and ridiculous it cannot be construed as
something a reasonable person would think (2 conflicting principles—Davis’s subjective
intention vs. reasonable person’s intention (objective))
Armstrong v. M’Ghee, p. 128: Armstrong sells disappointing horse as joke
 P: Was joking about offer and people around knew that
 D: Went through the whole action of taking horse home
Ruling: if both parties knew Armstrong was joking, K isn’t binding—low price shows intent of
Armstrong’s joking
Petterson v. Pattberg, p. 689: Pattberg offered to sell property and Petterson tried to perform
 P: went to Pattberg’s home and tried to offer cash, but refused
 D: revoked the offer before payment was tendered
Ruling: Unilateral K isn’t binding until performance is completed; Also, if someone knows they
no longer have power of acceptance, they cannot try to accept
Wood v. Lucy, Lady Duff-Gordon, p. 451: lingerie designer exclusivity K
 P: She broke K by putting label on other designs
 D: He wasn’t doing his part of K, wanted out—invalid K b/c no consideration by him

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Ruling: The fact that Wood intended to market the designs is implied in K—technicality that it
wasn’t stated in plain language
(Adverse to Davis v. Gen. Foods, where she loses on technicality of language)

Statute of Frauds
Eastwood v. Kenyon, p. 760: Suretyship of husband for wife’s debt
 P: Kenyon promised to pay off wife’s debt
 D: no new consideration on promise
Ruling: guarantee on other’s is void unless in writing; if Kenyon promised creditor, would be
different
Bader v. Hiscox, p. 770: Bader gets married to drop son’s charges
 P: He promised land if she got married to his son and charges were dropped b/c of it
 D: K for land, marriage must be in writing b/c statute of frauds
Ruling: Exception to land provision when part of consideration has already been exchanged (she
had already gone through w/ marriage); exception to marriage provision b/c main purpose of
marriage was to drop charges, not the actual marriage
Doyle v. Dixon, p. 773: Dixon can’t go into grocery business for 5 yrs
 P: Doyle sues Dixon for violating K
 D: K was under statute of frauds b/c it couldn’t be performed in 1 yr
Ruling: Would promisor’s duty be fully performed if he died within a year? Yes, so not within
statute.
Boone v. Coe, p. 808: Boone moves down to live on Coe’s land
 P: Coe didn’t do as promised and Boone wants payment for losses incurred
 D: K over land must be written b/c under statute of frauds
Ruling: Parol lease of land for one year is within statute, so invalid; Also, Coe received no
benefit from Boone, so no unjust enrichment.
Crabtree v. Eliz. Arden, p. 783: employment K in pieces
 P: He had K for over a year and this was in different written acknowledgements
 D: K for over a year performance must be on a written K b/c statute of frauds
Rulings: Series of documents satisfies having a K in writing to satisfy statute as long as one
piece is signed by person against whom enforcement is sought.
Imperator Realty v. Tull, p. 801: oral agreement on top of written K for land

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 P: Tull needs to pay b/c they had a K
 D: IR promised on top of written K to do something and it wasn’t done
Ruling: K was about land, but oral agreement was distinct and didn’t need to be in writing; the
additional promise wasn’t within statute.

Unconscionability
To assert unconscionability and make the K unenforceable, must establish one of two
elements:
 Procedural ucs=Lack of meaningful choice (the item is essential or you have no
other options)
 Substantive ucs=Unreasonable terms of the K (may be things such as price,
obscurity, predatory sales behavior, etc.)
All of the elements of a K are present, yet court refuses to enforce the agreement (opposite of a
quasi-K)

Williams v. Walker-Thomas, p. 596: furniture co. tries to repo furniture after stereo purchase
 P: there was inequality of bargaining power and Williams was exploited by the
provisions
 D: the terms of the K stated that repossession is allowed if payment is defaulted
Ruling: Court finds this K ucs due to unequal bargaining power, hidden terms, and lack of
meaningful choice.
Patterson v. Walker-Thomas, p. 603: furniture co. tries to repo furniture after default
 P: the items sold were grossly overpriced and K is ucs
 D: the terms of the K stated that repossession is allowed if payment is defaulted
Ruling: Price is only one element of ucs; Buyer must also have lack of meaningful choice.
Jones v. Star Credit Corp., p. 607: door-to-door freezer salesman
 P: item was grossly overpriced and they were solicited by salesman
 D: the terms of the K stated price and were straightforward
Ruling: Ct. is concerned for uneducated & illiterate—salesman took advantage of welfare
recipient; this shows overpricing + lack of meaningful choice
To make an ucs K enforceable, must take out unreasonable provision(s), because you
cannot grant meaningful choice.
Readjustment of Ongoing Deals

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Modifications must:
 Be agreed to by both parties; AND
 Be supported by new consideration
Stilk v. Myrick, p. 649: 2 crewman drop out of sea voyage and the rest p/u the slack
 P: picked up more work as a result of crew leaving and was promised more $
 D: The K was the same as before.
Ruling: P did not specifically agree to do more work (no new consideration) and he wasn’t
induced to stay
Foakes v. Beer, p. 668: payment plan with interest?
 P: Paid off all the installments, agreement never addressed any interest
 D: Interest required on original debt, just b/c not re-stated doesn’t mean the payment plan
took it away
Ruling: The down payment for paying early wasn’t consideration for a new agreement where
interest was given up (A lesser sum cannot be paid in satisfaction of a greater sum aka the down
payment).
Hackley v. Headley, p. 674: Duress case during payment stage
 P: Headley owed $6k for services and would only give $4k—he was forced into signing
K for the $4k agreement b/c of bad financial state (under duress)
 D: Hackley lawfully signed an agreement on the $4k
Ruling: Hackley’s poor financial situation caused by his own doing—bigger policy implication
by allowing poor financial state a qualifier for duress in all signed Ks
Parol Evidence Rule
PER=when 2 parties have made a K and expressed it in writing as complete and accurate,
evidence (parol or otherwise) of antecedent understandings will not be admitted for
purpose of varying or contradicting the writing.
5 Elements:
1. Applies only to written agreements
2. K must be integrated
a. Full Integration=absolutely everything is expressed in the K and no extrinsic
evidence is allowed
b. Partially Integrated=subject matter of the agreement is complete, but
suggests further agreements weren’t addressed in that writing, so some
evidence can be allowed to explain, but not to vary or contradict
c. Unintegrated=much of what parties agreed to isn’t in the writing so rule
doesn’t apply and all extrinsic evidence is allowed
3. Evidence may be parol (nonwritten) or written
4. Applies to only things agreed on before formation—never subsequent
5. Only applicable when party is trying to vary or contradict the writing

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Common Trend: strict, robust PER to defeat ability of parties to assert fraud and
therefore, allow more cases to end at summary judgment
Crawford v. France, p. 832: architect draws up expensive hotel plans
 P: made K to design the hotel “suitable to their needs” and performed, needs payment
 D: told architect hotel shouldn’t exceed $45k orally and plans were $60k
Ruling: The written K is clearly incomplete b/c it didn’t discuss this portion (partially
integrated), so need to parol evidence to clear up ambiguity or uncertainty.
Mitchill v. Lath, p. 837: Sellers of property don’t remove ugly icehouse
 P: Bought the property on the condition that the ice house would be removed
 D: this wasn’t written and is unenforceable
Ruling: The agreement wasn’t collateral and so it’s unenforceable.
In order to consider an oral agreement:
1. it should be collateral in form
2. it mustn’t contradict the provisions of the written K
3. it must be one that wouldn’t ordinarily be expected to embody in writing
Collateral agreement=a second, oral agreement with either separate consideration or is
commonly not included in terms of first K
Danann Realty Co. v. Harris, p. 843: merger clause signed b/c of fraud
 P: The merger clause in written K states that “This Is All There Is”
 D: Realty Co. used fraud to trick them into signing K w/ merger clause
Ruling: Parol evidence would directly contradict terms of the K and so isn’t allowed—big policy
decision to limit being able to bring fraud against any K w/ this clause
Zell v. American Seating Co., p. 852: appropriate commission?
 P: They agreed to a commission beforehand and Co. convinced him to sign agreement
w/o stating the actual “agreed to” oral terms—it was supposed to be a sham
 D: The written agreement states all the terms that should be followed.
Ruling: “A purported written agreement, which the parties designed as a mere sham, lacks legal
efficacy, and that extrinsic parol evidence” is admissible to show that the written agreement was
a sham, and not meant to be the authority.
Raffles v. Wichelhaus, p. 869: cotton from a ship named Peerless
 P: Agreed to buy cotton from Peerless (coming in Oct.) and it never showed
 D: Agreed to sell cotton from Peerless (coming in Dec.) and he didn’t buy it
Ruling: Latent ambiguity made K open to 2 different interpretations (no meeting of the minds)—
if there’s latent ambiguity and mutual mistake of material fact, so no K

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Third Party Beneficiaries

Triangular relationship where the issue is whether the third party to the K can sue despite not
having privity
 The only way 3PB can be held is if both parties intend to benefit the third party, therefore
creating an enforceable right
 An incidental beneficiary is created when there’s no intent—not enforceable
Two Types
 Creditor beneficiary
 Donee beneficiary
Rescission: Promisee and Promisor cannot rescind agreement once:
1. 3PB manifests assent, or
2. 3PB brings suit to enforce the promise, or
3. 3PB detrimentally relies on the promise
Lawrence v. Fox, p. 1333: Creditor Beneficiary
 P: Holly gave Fox $300, which he was supposed to pay to Lawrence the next day—the
consideration was Fox’s promise to pay
 D: There was no privity btw Lawrence and Fox
Ruling: “That where one person makes a promise to another for the benefit of a third person,
that third person may maintain an action upon it.”
Seaver v. Ransom, p. 1356: Donee Beneficiary
 P: Mrs. Beman was dying and intended to leave her house to niece, Seaver
 D: Seaver was just a third party to a promise btw Mr. and Mrs. Beman—no rights
Ruling: “the right of the beneficiary to sue on a K made expressly for his benefit has been fully
recognized”—Seaver alone was damaged by the breach of K
**issue of gratuitous promises arises here
Socony-Vacuum v. Continental Cas., p. 1364: contractor and materialman
 P: CC provided a surety bond and need to pay out for the labor done that wasn’t paid for
 D: CC provided a bond to the subcontractor—intent to benefit Socony-Vacuum,
materialman, or just the contractor?

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Ruling: It is contemplated that performance under the bond would not only benefit the prime
contractor, but also the materialmen; surety co. is in much better to take a loss than the
materialmen anyway
Lucas v. Hamm, p. 1371: Atty. negligently draws up will, cutting Lucas out
 P: Lucas was intended to inherit this money and its atty’s fault that he won’t
 D: Atty. Has never even met Lucas—had no duty to him
Ruling: Despite not knowing Lucas, “it is sufficient that the promisor must have understood that
the promisee had such intent”…”for drafting a will unmistakably shows intent of testator to
benefit the persons to be named in the will”
Copeland v. Beard, p. 1421: 3PB Rescission case
 P: Copeland, intended beneficiary, wants Beard and X to follow through on their
agreement
 D: Copeland has no rights b/c he hadn’t assented to the K before they changed their
arrangement
Ruling: Parties may rescind their K before intended beneficiary agrees to it
Assignments and Delegation
This occurs after the original K is contemplated
 Obligor= owes a duty
 Obligee= person to whom the duty is owed
 Assignment= the transfer of contractual rights
o Assignor= someone who assigns the rights
o Assignee= someone who has rights assigned to them
 Delegation= the transfer of contractual duties
o Delegator= delegates duties to someone else
o Delegatee= receives duties from someone else
Personal Performance is NOT delegable. Certain duties that aren’t:
1. Ks w/ intent of no delegation (Boston Ice)
2. Dissolving Business
3. Delectus Personae—K for duty peformed by specific person
4. Setoff—special arrangements of a K (Cont. Forest)

Speelman v. Pascal, p. 1492: “My Fair Lady” Royalties promise

 P: Pascal wanted Speelman to have the future rights from the production after his death
 D: It was only a gift for the future—not enforceable
Ruling: Future rights of an existing K are assignable, even if the amount hasn’t been
conclusively intended—gift was valid b/c it intended to make irrevocable present transfer
Langel v. Betz, p. 1500: Real estate assignments

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 P: The assignment was made to Def. and they need to perform their duties
 D: The assignment of rights didn’t mean he had to perform anything
Ruling: “mere assignment of a bilateral executory K may not be interpreted as a promise by the
assignee to the assignor to assume the performance of the assignor’s duties”
Modern Law: Assignment of rights ASSUMES promise by assignee to assume duties of
performance, in the absence of agreement to contrary.
British Waggon v. Lea & Co, p. 1507: Agreement to rent wagons
 P: the substitute of BW to do the maintenance work is acceptable—L & Co. should still
be bound by their K w/ Parkgate (old co.)
 D: L & Co. didn’t have a K w/ BW; they had a K w/ Parkgate
Ruling: The duty delegated by ordinary repair and so wasn’t prohibited—“Ice is Ice”
Ark. Valley Smelting Co. v. Beldin Mining, p. 1511: delivery of ore
 P: simply substituted standard work, delivering ore, and so is acceptable
 D: No compulsory Ks—they should have a choice on who they contract with
Ruling: Ore was to be paid for after it was delivered and so there was a security interest in terms
of assignor’s credit and liability—not assignable

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Remedies
Three Categories:
 Expectation Damages=difference btw what was promised and what was received—puts
injured party where they would’ve been had K been performed
 Restitution Damages=what the non-breaching party has paid the breaching party
 Reliance Damages=costs non-breaching party sustains in reliance on breaching party’s
promise to perform, including out-of-pocket expenses not made to breaching party
o Puts P back in position she occupied before K was entered and compensates for
detriments suffered in relying on the K (similar to Tort)
You can get expectation OR reliance/restitution, but not both
Hawkins v. McGee: Perfect Hand
Ruling: Expectation Damages: Perfect hand – hand he was given
Acme Mills & Elevator v. Johnson, p. 1061: failure to deliver wheat
 P: Johnson didn’t deliver the wheat, so he owes damages
 D: P wasn’t damaged, market price of wheat had become lower than K price
Ruling: “In Ks for delivery of property at fixed time and place, vendee is entitled to damages
against vendor for failure to comply. The measure of damages is difference btw K price and mkt.
price of property at the place and time of delivery”
Sullivan v. O’Connor, p. 131: deformed nose after plastic surgery
 P: Pain and suffering damages, as well as the loss to her career
 D: A specific promise for “perfect” nose from doctor cannot be taken seriously
Ruling: Sullivan can collect out-of-pocket expenses (restitution) and lost earnings/foreseeable
damages from relying on D’s breach (reliance)
Freund v. Wash. Sq. Press, p. 1113: exclusive K to publish a manuscript
 P: wanst specific performance or the royalties he would’ve gained had it been published
 D: Freund shouldn’t recover more from breach than if K was performed
Ruling: trying to decide royalties is too speculative—can only give nominal compensation

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“Law attempts to secure to the injured party the benefit of his bargain, subject to the
limitations that the injury was foreseeable, and that the amount of damages claimed be
measurable with a reasonable degree of certainty and adequately proven.”
Jacob & Youngs v. Kent, p. 1042: specific type of pipe (Material v. Minor Breach)
 P: the K said a specific pipe and they are entitled to that specific performance
 D: The omission of the wrong pipe was trivial and not willful
Ruling: Where substantial performance has been rendered, a minor failure to perform will be
excused—breach was insignificant in proportion to entire K
Peevyhouse v. Garland Coal & Mining, p. 1119: repairing after coal-mining lease (Efficient
Breach)
 P: the K called for specific performance in putting their land back together
 D: specific performance would cost $29k, value of farm itself is only $5k
Ruling: If repairing defect or breach would cost a disproportionate amount to the objective to be
attained, diminished value rule is followed b/c it avoids economic waste
Gross Economic Waste=measure value before and after breach (If Peevyhouse wanted to
negotiate around this default rule, she must have stated this explicitly in the K).
Hadley v. Baxendale, p. 106: crankshaft shuts down mill
 P: Bax. Breached and owes the incidental costs that followed when mill was shut down
 D: assumed that the mill had more than one crankshaft and could keep operating
Ruling: consequential damages will only be awarded if they are reasonably foreseeable by both
parties at time of contracting
“Damages from breach should be reasonably considered to be arising naturally or
supposed to have been in contemplation of both parties, at time they made the contract.”

Remedies for Sale of Goods (under UCC)

Gainsford v. Carroll, p. 1129: K to buy bacon
 P: Carroll didn’t deliver the bacon
 D: he could’ve bought bacon from someone else (cover)
Ruling: P still has money and could cover on day of breach, therefore, day of breach is the way
to determine damages—damages are diff. in price of bacon on day K would’ve been performed
and price of bacon in K
Panhandle Agri-Service v. Becker, p. 1134: K to buy 10k tons of hay
 P: Becker didn’t deliver and PAS was planning to re-sell for a big profit
 D: PAS didn’t try to cover

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Ruling: Cover isn’t mandatory, but consequential damages are limited under 2-715 to instances
where buyer could not reasonably cover—doesn’t get awarded loss of profits
Globe Refining Co. v. Landa Cotton, p. 1144: K to buy crude oil
 P: Globe not only lost price diff damages, but also the use of their tanks
 D: Didn’t know that they would be liable for these extra reliance damages
Ruling: “The mere knowledge cannot increase the liability—knowledge must be brought home
to the party sought to be charged…reasonably believe that he accepts the K with the special
condition attached to it”; awards market price damages

Equitable Relief/Specific Performance

Usually only granted if:
1. Terms of K are sufficiently certain
2. Remedy at law is inadequate (goods are unique)
3. Will not cause undue hardship, and
4. Enforcement is feasible (no long-term judicial supervision)
Courts prefer not to grant specific performance, unless extreme circumstances
Lumley v. Wagner, p. 1075: singer performs at exclusive theater
 P: she signed a K to only sing at Lumley’s theater and broke it—wants injunction to stop
her from singing at other theaters
 D: cannot force specific performance on her
Ruling: injunctive relief can be used to enforce a promise not to render personal services
(negative covenant)—it couldn’t be used to force her personal service, however
Stokes v. Moore, p. 1079: promise not to open loan business in Mobile
 P: wants injunction against him opening a business like stated in K
 D: can provide damages, but shouldn’t order specific performance
Ruling: specific performance is a “discretionary remedy to prevent substantial injury where no
adequate remedy at law obtains”; the payment for 4 yrs of work from P to D is consideration
enough for a covenant to not compete.
Campbell Soup Co. v. Wentz, p. 1097: carrot farmer stops delivering
 P: without specific performance, damages would be SO hurtful and incalculable
 D: the K was unconscionable—way too one-sided
Ruling: K is too one-sided to be awarded w/ equitable relief (Clean Hands Doctrine) though this
would’ve been a situation where specific performance was probably necessary
Security Stove v. Amer. R. Express, p. 1188: transport the furnace to exhibit

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 P: Lost travel expenses and ARE should’ve known damage non-performance would
cause
 D: There should only be market price damages for non-delivery of a good
Ruling: under special circumstances, expectation damages are too uncertain; SS awarded travel
costs b/c these grew out of the breach of K

Repudiation and Breach

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