Validity of Offers 1. Offer made in jest-not valid, even if accepted, no contract is created a. Must be communicated b.

Indicate a desire to enter into a contract i. specify the performances to be exchanged and the terms that will govern the relationship c. Directed at some person or group d. Invite acceptance e. Create the reasonable understanding that a contract will arise without any further approval being
required from the offeror i. =>Offeror thus confers on the offeree the POWER TO DECIDE (POWER OF ACCEPTANCE) 2. Preliminary negotiations: a. If the proposal reserves to the proponent the final say on whether to be bound, it is not an offer b. Soliciting bids is not an offer, cannot be accepted, c. INTENT and DEFINTENESS of terms. i. Be careful for language that sounds like an offer but is an invitation to deal ii. when intent is not clearly expressed, the communication must be interpreted objectively d. Case: Lonergan v. Scolnick i. D wrote to P saying that if P was willing to buy his property he will have to decide fast ii. Mere request for an offer is not binding iii. Offer must be made under circumstances evidencing an express or implied intention that its acceptance shall constitute a binding contract iv. Rest § 24 : "Until the person making a promise has given a further expression of assent, he has not made an offer." 3. Advertisements: most are not offers to sell because they do not have sufficient words of commitment to sell (too vague regarding quantity, duration, etc) a. YES OFFER : Specific terms, specific words of commitment, a promise to sell a particular number of units b. Unilateral offer: Made to the public not to any specific person, if not supported by any consideration, could be withdrawn without notice. c. Case: Lefkowitz v. Great Minneapolis Surplus Store i. Facts: Went to buy a fur coat addressed in the advertisement with a first come first served basis. But d refused to sell. Went again one week later to buy Lapin, same thing happened ii. The value of damages was speculative and uncertain -> no damages rewarded to P. iii. Promise to hold an offer is binding if and only if there is consideration iv. When offer is clear, definite and explicit, it constitutes an offer, acceptance of which will complete the contract v. P's action constituted acceptance vi. The court ruled that P could get damages for the second visit, legal effect of the advertisement depends on its apparent intent as reasonably understood by the plaintiff. d. EXCEPTIONS to advertisements i. Clearly indicate an intention to make a bargain ii. Invites those to whom it is addressed to take a specific action without further communication iii. Overacceptance is unlikely 4. Termination of the offeree¶s power of acceptance

a. Offeree¶s power of acceptance may be terminated in five ways i. Rejection by the offeree: as soon as an offeree rejects offer, power of acceptance ii. iii. iv.
terminated Counter-offer by the offeree : Has same effect as rejecting the offer Lapse of time : Offeror can set time limit for acceptance, at end of which power of acceptance ends Revocation by the offeror :  Offeror can revoke offer at any time before it is accepted (exception: option contracts)  When revocation is effective, only when received by the offeree. Rest. 2d § 42  Indirect revocation: If the offeree obtains reliable information that the offeror has taken action showing that he has changed his mind, the offer is revoked. (Dickinson rule)  Case: Dickinson v. Dodds a. Facts: P should have until Fri 9 am to determine whether to purchase the house or not. P thought he had the power to accept until that time but D sold the house to a third party b. Holding: Unless both parties had then agreed, there was no concluded agreement made. It was only an offer to sell. No binding contract. c. There was no consideration for the offer to be open to P, therefore, the offer can be withdrawn (was NOT an OPTION) d. Rest 2d § 68 : ³ A written revocation, rejection, or acceptance is received when the writing comes into the possession of the person addressed, or of some person authorized by him to receive it for him or when it is deposited in some place which he has authorized as the place for this or similar communications to be deposited for him Revocability of firm offers: an offer that by its express or implied terms is to remain open for a certain period.  General rule: an offer that by its terms is to remain open until a fixed date can generally be revoked prior to the expiration of its term.  Exceptions: a. Option Contracts: promise to keep an offer open for a stated period of time. There was consideration, the offer is irrevocable for the stated period. i. Consideration can be cash payment, promise to pay a specific sum of money etc ii. Rest 2d § 87 (1)(a) : the grant of an option Is valid if it is in writing, signed by the grantor, recites a purported consideration for the offer, and proposes an exchange on fair terms within a reasonable time. b. Nominal consideration c. Reliance: A firm offer irrevocable i. Implied promise to hold offer open  Case: Drennan v. star Paving Co. a. Facts: Subcontractor revoked his contract to the general contractor stating that the price he bid for was a mistake b. Holding: General contractor¶s reliance on the subcontractor made subcontractor¶s offer irrevocable c. Rest § 90 : ³ A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promise 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.´ d. => Makes a promise binding even though there was no consideration ³in the sense of something that is bargained for and given in exchange´ e. The subsidiary promise serves to preclude the injustice that would result if the offer could be revoked after the offeree had acted in detrimental reliance thereon. This is implied in law. Protection of justifiable reliance as a general value of contract law. f. Promissory estoppels should be applied carefully and selectively in the precontractual context. Promises are not normally made during negotiations prior to making a contract.  Rest. 2d §87 : ³an offer which the offeror should reasonably expect to have induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forebearance is binding as an option contract to the extent necessary to avoid injustice. vi. Death or incapacity of offeror or offeree : power to accept terminated b. Offers for unilateral contracts: i. Classical contract law: Could be revoked at any time before the designated act had been completed, even if performance of the act had begun. ii. Modern contract law: Rest § 45 :  Beginning to perform completed a bargain and therefore made the offeror¶s promise to hold the offer open enforceable.  Action by the offeree other than beginning to perform has no effect  If the offeree takes on step on the B. Bridge, the offeror it bound, but if the offeree engages in massive preparations to get ready to cross the Bridge, the offeror is not bound *General rule: Offer is REVOCABLE UNLESS 1) the offer was supported by consideration (2) cause reasonably foreseeable reliance (3) was a U.C.C. firm offer or (4) was an offer for a unilateral contract in which performance had begun.

Forms of Acceptance 1. Acceptance : brings the contract into existence. 2. Offeror is ³master of his offer´ and prescribes the method of acceptance a. Where method not specified: any reasonable method b. Acceptance of unilateral contract: full performance (classical common law) of the requested act,
beginning of performance (modern contract law)

c. Mailbox Rule: acceptance of an offer will be effective upon mailing putting in the mailbox. i. Case : Bishop v. Eaton 

Facts: P paid a note for the loan made to D¶s brother on behalf of a promise. D refused to reimburse. Holding: there was a binding contract. D should pay.

Facts: Smoke Ball provides a unilateral promise to pay 100 pounds if P catches a flue after using the smoke ball ii. unless acceptance is expressly made conditional on assent to the additional or different terms (normally addition or different term would be a counteroffer NOT an acceptance) f. Impose rigidity on the process and result in greater cost to awarding authorities 4. b. Using Sub-Contractor Bid i. Seller will not be found to be in breach UCC § 2-206(1)(b) e. Inc. Inadvertent acceptance: The offeree¶s subsequent conduct creates the impression of acceptance.C. Holloway  . Carbolic Smoke Ball i.C. There is ample consideration. v. Orville E. P made every reasonable effort to send notice of acceptance. Shipment of goods: seller may accept a purchase order by promising to ship or by in fact shipping goods ii. Reliance on subcontractor's bid. Reason to understand: offeror has given offeree reason to understand that silence constitutes acceptance i. It is natural that P reply by the same form of communication through which the offer was made.D's offer was made by letter. it is still accepted. Consideration: There was an inconvenience of using the smoke ball. d. U. 5. Nature of bidding allows leeway to maintain flexibility in executing subcontracts c. U. Acceptance by silence: NOT an acceptance Rest 2d § 69. Madsen & Sons.  Subcontractor cannot withdraw the bid but the general contractor can withdraw the bid  The subcontractor did not rely on the contractor. v. Case: Holman Erection co. Even if the letter was not received. Accomodation shipment: if seller is accommodating the buyer by shipping nonconforming goods. Exceptions: b. An offer to pay 100 to anybody who will perform these conditions and the performance of the conditions is the acceptance of the offer. Notice of acceptance of unilateral contract: Offeree must give notice of his acceptance after he has done requested act within reasonable time or else contract that was formed by act is discharged a. it is a counter-offer which buyer can accept or reject. Case: Cole-McIntyre-Norfleet Co. Notice of acceptance: the person who makes the offer gets the notice of acceptance contemporaneously with his notice of the performance of the condition. Carlill v. it is not an acceptance. § 2-207(1) for sale of goods.a definite and seasonable expression of acceptance operates as an acceptance even though it states terms additional to or different from those offered or agreed upon.subcontractor prepares its bid regardless who wins b.C. Holding: There was a promise iii.C. the promise is not bound  The court also considers the industry and the interest a. why subcontractor does not rely on general and suffers no detriment . a. Offer invites either promise or performance: offeree may accept by either method i. v. iv. § 2-207(3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale 3. Done to prevent bid-shopping d. therefore.

Not a definite expression of acceptance (not seasonable) b. exercises ownership rights over the property or accepts the benefits of the service. D ordered meals from P. c. Prior dealings between the parties or other circumstances make it reasonable for the offeror to expect the offeree to give notice of rejection c. No evidence that Vogt stated or gave Madden reason to understand assent to Vogt's expectation to farm the property might be manifested by silence or inaction. Expressly states that acceptance is conditional on assent to its new terms . Prices went up after the order. and sees valuable services rendered upon his real estate by the erection of a structure. Prior Conduct: prior course of dealing may make it reasonable for the offeree¶s silence to be construed as consent i.Facts: Through a traveling salesman. Benefit of services: offeree silently receives benefit of services (but not goods) held to have accepted a contract for them if he (had a reasonable opportunity to reject them) and (2) knew or should have known that the provider of the services expected to be compensated i.  When one stands in silence. Silence would amount to an acceptance if the offerer is relying upon him for goods. Madden had no objection of having bean crop grown. Case: Vogt v Madden  Fact: He thought there was an agreement. P was silent both upon accepting and rejecting the offer. a promise to pay for them may be inferred. No evidence that Madden had received benefits b. 6. Not an acceptance: UCC §2-207(1) a. However the court holds that not in this case. when he has the option whether to accept or reject them. The exception arising from "previous dealings" between the parties is inapposite. accompanied with the knowledge on his part that the party rendering the services expects payment therefor.  Holding: The delay in notice was unreasonable and effected an acceptance of the contract.  There was a DUTY TO LET P KNOW of his acceptance or rejection of the offer  Two situations in which silence binds the offeree: a. Caton  Facts: Debate whether there was a contract to construct the wall  If a party voluntarily accepts and avails himself of valuable services rendered for his benefit. b.  d. The offeror proffers property or services with the offer and the offeree. even if there is no distinct proof that they were rendered by his authority or request. may fairly be treated as evidence of an acceptance of it and tending to show an agreement to pay for it.  Rationale: a.Vogt had an impression that they had an agreement. have reasonable opportunity to return or refuse them. Madden never expressly told him that he would enter into another agreement in the spring of 81.  Holding: Jury hold that silence was an acceptance. such silence. Case: Day v.

with options in the lessee to extend the term for an additional fifteen years. Facts: D occupied premises in Taunton under a written lease. tobacco c. i. v. ii. Illusory promise is one where there is no substance to the promise. subject to the lease agreement. 2. do something she does not have to do. Consideration: a bargain is an exchange in which each party views his promise or performance as the price of the other¶s promise or performance. 90 days would not be nearly as long as 15 years but that doesn't matter as long as there has been an exchange. and occurrence of this condition is of benefit to him. drinking and gambling until he was 21. or refrain from doing something that she has a right to do. => rejection or counteroffer THE BARGAIN PRINCIPLE 1. he was trying to obtain something he regarded as desirable and was therefore bargaining." The bank acquired the premises. then the bargain element will be possibly present. This bargained-for price may include not only promises and acts. acts. Holding: Uncle¶s promise was ³bargained for´ and therefore supported by consideration. No basis for treating the lease as void on public policy grounds. or both. a. While the uncle may have derived no actual economic benefit from his nephew¶s abstinence. Sidway i. a. Adequacy of consideration does not matter as long as promise suffers some detriment . Shell Oil Co. ii. Detriment element a. Non-economic detriment : suffices ± abstaining from alcohol. money or some legal right has been given up to the promisor) b. b. Will did abstain. his hephew. The two must have been BARGAINED FOR (AGREED TO) Promise to make a gift 1. Benefit to the promisor c. i. 2. Here there was substance. a bargain constitutes consideration. Facts: Uncle William promised to give young Willie. Case: Hamer v.  There was consideration to support the lessor's obligations under the lease. Generally unenforceable. but also promises to forbear and actual forbearance from performing acts one is legally entitled to perform. which permits the lessee to terminate the lease on ninety days' notice is "so lacking in mutuality as to be void as against public policy. b." ii. The lease contained a provision that "Shell may terminate this lease at any time by giving Lessor at least ninety days' notice. The bank asserts that a lease for fifteen years. Bargain: Exchange of promises. iii. As a general rule.000 if he would refrain from smoking. A promisee must suffer a ³detriment´ for consideration to be present. Detriment to the promise (property. One side of the exchange is not illusory. But if the promisor imposes a condition. the sum of $5. Holding:  Courts have traditionally declined to relieve a party from the terms of a contract merely because he made what he regards as a bad or uneven bargain.i. Case: Hancock Bank & Trust Co.  It is not clear that the original lessor made a bad bargain.

000.  Procedural unconscionability: Bargaining did not proceed as it should.  Professor thinks there needs to be both unconscionability for the contract to be void. understanding of one party. Restatement section 176. P brought a declaration that the contract was unenforceable on the grounds that it was unconscionable. The three damage measures differ. Contract of adhesion: A contract that comes on a take it or leave it basis. The purchase price was $6. v. it is enforceable as long as it is not beyond the reasonable expectation. . INVALID for the purposes of novation. the promisor did not cause the duress that the promisee suffered so the promise could be enforceable. 177 e. VALID  Nor was the plea of failure of consideration availing. i. Case: Maxwell v.  The court should have rendered judgment in favor of P against D for the principal sum of $2000 evidenced by the instrument sued on. D was willing to pay the restitution damages but resisted to pay the expectation damages which was the value of what she had promised. iv. with interest as therein provided.  Substantive unconscionability: If the deal is sufficiently unfair. iv. Whereas pulling out a gun and asking for money.000 Greek drachmae. vi. Facts: P financed for purchasing a solar home water heater from d. which is equivalent to $25 American money. D said that the contract worked on novation barring P on any action of the earlier contract. Case: Batsakis v. the principle is one of the prevention of oppression and unfair surprise. iii. the promisor was the one who caused the duress therefore the promise would not be enforceable. Holding: Award P a recovery against D of $2000 with interest thereon at the rate of 8% per annum from the date the instrument was signed. Demotsis i. iii. D created a new loan contract. ii.512 and for a ten-year period at 19. D agreed to repay the 2000 plus 8% interest. disparate value. ii. Holding: The contract was unconscionable. § 2-302  The clauses involved are so one-sided as to be unconscionable under the circumstances existing at the time of the making of the contract. If not I'm not interested in doing business with you.C. Inc. Rationale:  D¶s testimony clearly shows that the understanding of the parties was that P would give her the 500. The court made a damages rule that when a bargain has been made. the degree of appreciation of what is at stake. Later P approached D to borrow additional $800 for purposes unrelated to the original loan. Fact: P sued D to recover $2000 with interest at the rate of 8% per annum alleged to be due on an instrument in which d acknowledged receipt of $2000 american money to help support her family in a time of need. Unconscionability U. In this case.000 drachmas if she would sign the instrument.d. but it is a matter of understanding of the party. D got exactly what she contracted for according to her own testimony.  Mere inadequacy of consideration will not void a contract. Fidelity Financial Services. then the deal will not be valid and substantively unconscious.5% interest which amount to the total cost of $15. not of disturbance of allocation of risks because of superior bargaining power. The evidence in the trial court showed that the actual amount tendered to D was 500.C. the normal remedy for the breach is expectation damages and it is no defense that the value of one promised performance exceeded the value of the other.

b. Novation: Substitute of contract. Case: Scott v. 2. and it doesn¶t occur.50 until 9/1/1916 and$1.65 until 4/1/1917. within a reasonable time. chartered the ship to a third person. 4. and before the ship was delivered to him. Moragues a. Facts: Scott made an offer to Moragues Lumber Co. If the act is a condition on the other party¶s duty. Not enforceable (Wickman. the other party won¶t have to perform.v. no answer to do something now. prediction of future willingness not enough. he would charter the ship to Moragues for the transportation of a cargo of lumber. P alleges that the stated amount of coal had to be purchased by D in the open market at greater than the contract price. the condition is a ³constructive´ one ± implied in law. b. not a real promise. VALID Illusory Promise 1. even though the event may depend on the will of the party. the other party can sue for damages. which thereby rendered him unable to comply with the contract he made with Mor. Right to choose to terminate his commitment at any time. the bargain can't be enforced against the person who made the real promise. Distinction between conditions and promises: The fact that an act is a condition does not by itself make it also a promise. R2d §77) a. who afterwards weeks to avoid its obligation. a. Rule: if bargain involves exchange of a real promise for an illusory promise. Moragues accepted. Significance of distinction: Strict compliance with express conditions is ordinarily necessary but merely substantial compliance is required to satisfy a constructive condition 3. Agreeing to do what he chooses ii. If the act is a promise. Illusory Promise-Rest 2d § 77 ->not a promise. a. commit to do something in the future . In this case. Holding: A valid contract may be conditioned upon the happening of an event. . sometimes when one party is substituted for the existing party Conditions 1. Express and constructive conditions: If the parties explicitly agree that a duty is conditional upon the happening of some event. if not otherwise stipulated. Facts: P agreed to furnish and deliver to D orders given for carload shipments of coal at the price of $1. If instead the happening of an event is made a condition of a duty because a court so determines. Concurrent: exists only when the parties to a contract are to exchange performances at the same time. that subject to his purchase of a ship. without notifying Moragues of his purchase. there is no consideration i. v. undue the contract and re-make another. Farmers¶ Lumber Co. that event is an ³express´ condition. form of promise w/out substance-no consideration. Thereupon the offer was converted into a binding contract to be performed. Scott. 3.if I decide I want to do that thing at that time. Case: Wickham & Burton Coal Co. Mor accepted Scott's offer before he purchased the ship. (Delivery and payment of a car are to be rendered simultaneously) 2.

Lucy. Facts: D promised P to pay 5% on the cost of the ice machine if P promised to work when P refused to continue with his plan. There was an IMPLIED PROMISE of his duties. when it pleased. b. b. If the party makes no effort at all. Facts: $25. rejected P's argument. Case: Slattery v. No detriment when legally obligated to do or forbear from doing something which he is not legally entitled to do 2. Unanticipated Difficulty 1. The contract on part of D is to buy if it pleased. There is no way to break it. the law will regard it as nudumpactum. (Cardozo) d. Case: Wood v. and will not lend its process to aid in the wrong. Pre-existing Duty Rule 1. Lucy breached the exclusive agency by endorsing products on her own and keeping all the profits for herself. d.00 to be awared for information leading to the arrest and conviction of the person participating in the shooting of a Wells Fargo agent. Facts: Wood had agreed to pay Lucy half the profits earned from placing her endorsements and selling her designs. P contends that he is entitled to the reward offered by D. a. P sued D contending that there was consideration when D promised to pay 5%. to buy if it thought it advantageous. c. Implied Promise 1. There is no undertaking to buy that much or indeed any specified amount of coal of P. Although by taking advantage of the necessities of his adversary he obtains a promise for more. Trial judge. Holding: A contract of sale is void for want of mutuality if the quantity to be delivered is conditioned entirely on what the buyer may want to buy. little or not at all as it thought best. It was P¶s pre-existing duty. Holding: Lucy¶s grant of an exclusive agency necessarily gave rise to the implication that Wood was obliged to use best efforts in generating profits. or . he cannot demand an additional compensation. Rest 2nd § 89 Modification of Executory Contract a. Rationale: D merely agreed to buy what it pleased. Wainwright Brewery Co.b. a. Holding: When a party merely does what he has already obligated himself to do. Implied promise to use best efforts is binding. entered summary judgment in favor of D. he is liable for breach of contract 2. The latter does not have the substance of a promise. to buy much. 3. If the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was made. Case: Lingenfelder v. c. There is a difference between a promise to buy what I need to buy and a promise to buy what I want to buy. Wells Fargo Armored Service Corp. A promise modifying a duty under a contract not fully performed on either side is binding i. Lady Duff Gordon a. Wood argues that there was no contract since wood had not actually promised to do anything to earn those profits.

stipulation was a condition precedent. Rule of § 73 finds its modern justification in cases of promises made by mistake or induced by unfair pressure. Cause of action. Rest. The waiver related to a condition to be fulfilled by the other party to the contract. If it is merely a condition. b. The waiver was not given for separate consideration b. the formality with which the modification is made. Court holds that the stipulation was a condition precedent. A party excuses the nonoccurrence or delay in fulfillment of a condition to her duty to perform under the 2. The limitation to a modification which is ³fair and equitable´ goes beyond absence of coercion and requires an objectively demonstrable reason for seeking a modification. then the West company would not be able to get damages even though he drinks. ii. West a. This is something that can be waived without consideration. The other party has not changed position in reliance on the waiver c. 6. Holding: D waived the incidental condition therefore is not bound to pay the plaintiff 6 dollars. It clearly thinks of it being a condition but it also seems like a promise along with a condition. as a condition or both at once? The only way for there to be a breach. 6 dollars a page if he abstained from drinking alcohol and 2 dollars if he didn¶t. or To the extent that justice requires enforcement in view of material change of position in reliance on the promise b. If it was a promise in addition to the condition.To the extent provided by statute. Waiver 1. The relative financial strength of the parties. Condition Precedent: something a party has to do Condition Subsequent: will relieve obligation that has come into being 5. . Facts: Drunken law professor. iii. Condition can be waived if done with sufficient notice. contract Enforceable if it is given in exchange for separate consideration. ii. Clark's not drinking was a condition to his entitlement for the extra four dollars. Comment b i. 2d § 84(1) Retraction: If each of four conditions is met a. c. Enforceable without separate consideration if the waived condition was not a material part of the agreed-upon exchange and uncertainty of the occurrence of the condition was not an element of the risk assumed by the party who gave the waiver. 3. d. rather than by a third party and d. the extent to which it is performed or relied on and other circumstances may be relevant to show or negate imposition or unfair surprise. The retraction occurs before the time that the waived condition was supposed to occur and the party who gave the waiver either gives notice of her intention to retract while there is still a reasonable time for fulfilling the condition or provides a reasonable extension of the time in which to perform. 2. then the West company is entitled to damages if he drinks. Case: Clark v. Does the court talks about non-drinking as a promise. UCC does not require consideration to make binding of contract for the sale of goods if the modification was sought in good faith. then the court would have to think that drinking would have been a promise. 7. entered into an agreement for law books. 4.

or where the services were furnished without request in an emergency. Holding :McGowin was benefited. (pre-existing debt. The court would say that the company waived the condition so you cannot insist about that condition. After D¶s father dies. eliminate insurance proceeds not what a promise would have done to get its damages. Condition can be waived w/o consideration.8. McGowin i. b. there is no bargain. b. and thus no consideration. promises to pay for services already received. except what grew out of the relation which subsisted between P and D. In the insurance policy. that are not cast in a form to which modern contract law gives special significance and that have not been demonstrably relied upon." iii. There wasn't a bargain for exchange because the service that was provided preceded the promise. Defendant promised to pay P¶s hospital expenses. It was a past consideration. . Then later. No consideration for this promise. provide a way out of conditions that is easier than promises. Facts: D¶s father promised to pay for P¶s care and maintenance when P got injured from saving D¶s father¶s life. was relieved by the plaintiff. that could be waived. 3. ii. Holding: Moral obligation itself won't bind D. If promise is made in return for detriment previously suffered by promisee. the insurance company say you didn't fulfill a condition. P sues. Plaintiff was injured. Case: Webb v. b. Case: Mills v. The insurance company would have to pay 100%. D no longer paid P. nor was aunt repaying a debt or other obligation. There was no consideration given for the note when the aunt gave a note for ³value received´ by the boy. The note was simply a voluntary and unenforceable promise of an executory gift. Past Consideration 1. Reasons: To prevent forfeiture. a promise needs consideration for modification of waiver a. It will work as a forfeiture. There was no reliance and the promise is not enforceable because it was a past consideration. In order to compensate for the harshness. Case: Dougherty v. if the insuree doesn't provide notice of the event within 10 days. Facts: He was suddenly sick at Hartford and being poor and distress. A promise to pay for benefits or services one has previously received will generally be enforceable even without consideration. Promises that are made for affective reasons. ii. The insurance agent says that don't worry about the notice. 2.A forfeiture is harsh. Wyman a. Salt i. PROMISES Donative Promises 1. The boy was not a creditor. despite the note's form language of being for "value received. This is especially likely where the services were requested. then he loses his right to get the amount of the damage. a. This is a sufficient legal consideration for the promisor's agreement to pay. Promises to pay for benefits received a. lack ³bargain´ element.

will often be 2. Nell a. There was no consideration. 4. 5. the prevailing view is that nominal consideration normally will not make a donative promise enforceable. 4. D did not enter into a binding contract with P. 2. Promissory Estoppel 1. there is still no consideration if the meeting of conditions is not ³bargained for´ by the promisor 3. enforcement of the promise must be necessary to avoid injustice. One of the promises which foreseeably induce reliance on the part of the promise. 2. It is not a consideration. His wife's desire to pay the money to the recipients in the inoperative will. remedy Actual reliance: promisee must actually rely on the promise Foreseeable reliance: promisee¶s reliance must be foreseeable to promisor Reliance damages would be granted Case: Feinberg v. However. Gratuitous Promise 1. enforceable without consideration 6 elements: Promise. 3. It was simply a gift in accordance to Schnell¶s deceased wife. Normally. 2. Restatement First adopted the convention that a nominal consideration is an actual bargain. Even if the person promising to make a gift requires promise to meet certain conditions. Pfeiffer co. As such. although the authorities are not in complete accord. Love and affection Schnell had born for his deceased wife. 6. 3. In this situation the promise of D has been interpreted by the majority of the court as a mere gratuity. Holding: A change of residence in reliance on a promise to provide a new residence is not necessarily sufficient consideration to impose contractual duties upon the promisor. . Kirksey a. Disparity is so great as to be unconscionable. applied to determine whether the terms in a form contract were unfairly surprising or one party improperly exploited the other¶s ignorance. promissee must have relied justifiably on the promise.Nominal Consideration: 1. Facts: Theresa made a will that devised a sum of $200 to each of three recipients. b. Restatement Second rejects the concept of nominal consideration. Case: Kirksey v. In the case of donative promises. Case: Schnell v. 3. Holding: Nominal consideration is not sufficient to make a contract valid and enforceable. Nominal consideration exists when there is a recital of a bargain. Some courts use the doctrine to upset contracts that appear to be so imbalanced as to be oppressive without regard to defects in the bargaining process. Three potential consideration: Promise to pay Schnell one cent. but the transaction lacks the substance of a bargain because neither party views each promised performance as the price of the other. but no real bargain. promissor reasonably have expected that promise would rely on its promise. Promisor falsely casts her promise in the form of a bargain with the promisee in an attempt to make the promise enforceable. the loss and inconvenience that P suffered in moving to D's land is sufficient consideration to support D's promise to furnish her with a house and land to cultivate. Unconscionability 1. Unenforceable because it lacks ³bargain´ element of consideration. 5.

Meeting of the minds needed for there to be a contract 2. 2nd §20 There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their manifestations e. Holding: P relied on D¶s promise to pay benefits when she made her decision to retire. Latent ambiguity to which Ship ³peerless´ was referring to. The extent of that devaluation represents a reliance injury. promised that General would continue to act as Bacardi's distributor for Northern Indiana. Same meanings attached. Case: Raffles v. D&G Stout. Wichelhaus a. Ct found where evidence shows P meant or understood something different from what D meant or understood when entering into agreement due to ambiguity in lang. c. Rest. One week later. interpreted in accordance to one of them. b. v. Bacardi Imports. v. rather than an injury to Genera's expectation of future profit. This rule is limited to cases where two or more meanings are equally reasonable Meaning Prevails 1. Different meaning of ³chicken´ . a. is not recoverable on a theory of promissory estoppel. Rest. d. a. which is reasonable. Rationale: Lost future income expected from an at-will relationship.a. Bacardi's account was never an "asset" that National could acquire by purchasing General. Terminable at will promise INTERPRETATION Mutual Assent Needed 1. Inc. Different meanings attached. Case: Frigaliment Importing Co. 2nd §201 : Discusses whose meaning prevails a. b. Holding: P will be able to be compensated the reliance damages but not the price differential from Bacardi based on the promissory estoppels.S. D withdrew its account. it is interpreted in accordance with that meaning b. c. Intern. Facts: D stopped paying P money after her retirement which D promised for her good effort to the company. Facts: Bacardi. Inc. B. P went back to the negotiating table and settled for an amount $550. Section 90 of the Restatement of Contracts ³a promise which the promisor should reasonably expect to induce action or forbearance on the part of the promise and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise´ 7. d. Ruling in favor of P. where no party can be shown to be more to blame the K is not binding c. one of General's remaining major supplier. Based on this promise.N.General had a business opportunity that all parties knew would be devalued once Bacardi announced its intention to go elsewhere. or at least more reasonable 2.000 below the first offer. When parties subjectively attach different meaning to an expression and the two meaning are equally reasonable neither prevails. P turned down the negotiated selling price with a different distributor it was offered. Sales Corp. b.

Smith v. e. a contract is formed if the party acts in such a way that a reasonable man would believe he is assenting to the term propsed b another party and that other party believes he is agreeing to those terms. Despite a party's real intent. Father is not required to perform provisions for the maintenance and education of Richard while he was or is in the armed service of the U. The evidence is of an earlier written or oral agreement or a contemporaneous oral agreement with the scope of the contract c. you are alright´ b. or contradict the terms of the contract 3. McKittrick Dry Goods Co. d. PAROLE EVIDENCE 1.b. Offered to show lack of consideration. add. c. it may rule the jury from considering any evidence of certain preliminary agreements that are not contained in the final writing. => ³Objective´ interpretation. 3. 4. UCC § 1-303(c). 2. The main objects for which D had bound himself to provide did not existed within the meaning of the trust instrument. duress. The court rules that the case was properly submitted to the jury and the jury looks into the trade usage and holds that per volume was right. Father agreed to pay son in trust until he entered into college and 4 years after his entrance into a higher institute. or in a certain industry.S. Son went to army. Morse => Main purpose of the contract. There if a fully integrated contract (final and complete expression of agreement) b. fraud. Separate consideration was given for parol agreement 4. Case: Spaulding v. Underlying intention a. b. Hargadine. The meaning attached to a particular term in a certain region. The court looks into the underlying intention. Salem Press => Trade Usage a. The evidence attempts to vary. Concerns a naturally omitted term f. even though this evidence might show that the preliminary agreement did in fact take place and that the parties intended it to remain part of their deal despite its absence from the writing. would be admissible. Main purpose of the parents of Richard was to arrive at an agreement for his maintenance and education and to provide security. Statement of Rule: . An employee thought he was re-employed for another term when the employer said ³Go ahead. Facts: Dispute over charging per volume basis or charging per set basis b. Sometimes. Trade Usage i. Case: Embry v. Offered to explain or interpret terms of the contract d. General Rule: Parol evidence is NOT ALLOWED if a. a reasonable person standard a. Offered to show a condition precedent to effectiveness of the final contract c. There was a literal meaning that the father would pay for his son only when he is in school f. Rules for the plaintiff. Concerns a modification of the contract (later agreement) e. Father stopped paying. Limits the extent that discussions or writings prior to the signed written contract should be taken as part of the agreement. the purpose of the contract 5. Exceptions: Parol evidence MAY BE admissible if a. or mistake b.

i. McChesney  Facts: P refused tender and commenced an action to cancel the Right of First Refusal or have an agreement fair market value determined independently of assessed value.´  The option clause in the deed in this case did not explicitly prove that it contains the complete agreement and the deed is silent on the question of assignability. Prior writings and oral agreements: The parole evidence rule applies to oral agreements and discussions that occur prior to a signing of integration. When a writing is a partial integration. shielding it from evidence the judge finds to be suspect and unreliable. Case: Materson v. the focus of interpretation is upon the terms of the agreement as manifestly expressed rather than silently intended. Self-contained and distinct. .  This is a case where the collateral agreement might naturally be made as a separate agreement  D offered evidence that the parties agreed that the option was not assignable in order to keep the property in the Masterson family. Lath  Facts: Oral agreement that D would get rid of the ice house in front of the property  Holding: Not binding since it was not put into the written contract which the parties presumably signed  Court refused to admit it as a collateral agreement. The trial court erred in excluding that evidence Total integration: A final expression of agreement with all details of the agreement included. e. Consistency and may not contradict the writing. i. they would certainly have been included in the document in the view of the court. ii. It also applies to writings created prior to an integration Policy: i. then evidence of their alleged making must be kept from the trier of fact. f.820 and sought specific performance  Where language is clear and unambiguous. Subject matter and consideration of the collateral agreement must be distinct and capable of being separately identified.a. > Parole evidence cannot be used Collateral Agreement: A separate form of the integrated written agreement. No evidence of prior or contemporaneous agreements or negotiations may be admitted. Control the jury¶s decision making. It was related closely enough to the sale of the property that one would expect to find it in the writing if it had been agreed to. d. i.  Plain meaning approach b. D requested the conveyance of the premise for $7. Case: Steuart v. Promoted efficiency in the conduct of litigation iii. Case: Mitchell v. ³Naturally omitted´  UCC § 2-202: ³If the additional terms are such that if agreed upon. no evidence of prior or contemporaneous agreements may be admitted if this evidence would contradict a term of the writing -> Consistent but not contradictory parole evidence can be used ii. Sine  Holding: the majority found that such an oral agreement might naturally be made outside of the writing in a family transaction. c. Partial integration: Document that is intended to be final but that is not intended to include all the details of the parties¶ agreement. to guard against fraud and mistake Interpretation of Written Contracts i.

Three requirements for avoidance: Must be satisfied before the adversely affected party may avoid the contract on account of mutual mistake: i. c. b. Otherwise a question of interpretation of an integrated agreement is to be determined as a question of law.´ ii. Risk: The adversely-affected party must not be the one on whom the contract has implicitly imposed the risk of the mistake.  Case: Lenawee County Board of Health v. Basic Assumption: This mistake must concern a basic assumption on which the contract was made.a. Buyer can¶t avoid contract if comparable land is worth $2000. This was a . Existence of subject matter : The existence of a subject matter of the contract is usually a ³basic´ assumption. Buyer can avoid the contract before or after closing. MISTAKE 1. ii. Material Effect: The mistake must have a material effect on the ³agreed exchange of performance´ No material effect if buyer and seller think violin is a Stradivarius when it is a Garnarius worth almost same amount iii. b. There was a provision in the writing that seemed to assume the risk by the buyer. Special contexts: i. Comparable land is believed to be worth $100 per acre. Market conditions: Mistakes as to market conditions will generally not be ³basic´ ones so the mistaken party will not be able to avoid the contract.  Holding: the language of the Right of First Refusal is express and clear and not in need of interpretation by reference to extrinsic evidence. Mutual mistake: If both parties have the same mistaken belief a. Could hinder parties dissatisfied with their agreement from creating a myth as to the true meaning of the agreement through subsequently exposed extrinsic evidence. Rest § 212(2) ³A question of interpretation of an integrated agreement is to be determined by the tried of fact if it depends on the credibility of extrinsic evidence or on a choice among reasonable inferences to be drawn from extrinsic evidence.  Case: Griffith v. Messerly a. Brymer a. Facts: Pickles bought land from Messerly and shortly after Lenawee obtained a permanent injunction against the land for not conforming to the sewage standard. Recission is not available to relieve a party who has assumed the risk of loss in connection with the mistake. The agreement was made on the supposition by both parties that nothing had happened which made performance impossible. Holding: parties did entertain a mutual misapprehension of fact but that the circumstances of this case do not warrant rescission. when facts emerge that land contains only 20 % of timber believed to be in it. Seller agrees to sell land containing timber to Buyer. Exercise price must be in effect ³ not less than´ the market value of the premises according to the assessment rolls. The belief that a violin is a Stradivarius when it is a worthless imitation ii.

Correct a mistake as to a basic assumption on which that party is making the contract iii. Holding: A party who has given an apparent consent to a contract of sale may refuse to execute it or he may avoid it after it has been completed. Unilateral Mistake a. missuppposition of the state of facts which went to the whole root of the matter -> contract void Quality of subject matter : the quality of the contract¶s subject matter is often a ³basic´ assumption so the disadvantaged party can avoid the contract. the price or some collateral fact materially inducing the agreement and this can be done when the mistake is mutual. Both parties believe the violin is a Stradivatius when in fact is worthless imitation. Unconscionability: the mistake is such that enforcement of the contract would be unconscionable ii. Agree on a mistakenly known as a barren cow which turned out to be fertile. c. Contemporary approach: Tolerate minor discrepancies and to apply the rule only where the response makes material changes in the transaction proposed in the offer. upon the mistake of a material fact.Facts materially affection and knows that facts are not known to or within iv. The question is not in the difference of value but whether the cow was the same thing as the cow that both parties thought they were buying. Classical common law: the acceptance must correspond exactly with the offer. or the other party¶s fault caused the mistake. Nondisclosure of material fact makes contract voidable ii. Reason to know: The other party had reason to know for the mistake. . A fertile cow is fundamentally different from a barren cow.iii. Mirror Image: a. and risk on the other party). 3. Buyer can void contract. Where the mistake is unilateral. this is a mistake on the basic assumption. such as the subject matter of the sale. b. Facts: P wants to purchase a cow from D. the reach of diligent attention Matter is material if is one to which a reasonable person would attach importance in determining his choice of action in the transaction. CONTRACT FORMATION IN A FORM-CONTRACT SETTING 1. Walker a. Case : Hill v. Non-Disclosure: a. plus must show either that: i.  Sherwood v. 2. b. material effect. if the assent was founded or the contract made. D refuses to deliver. Duty to tell . it is more difficult for the mistaken party to avoid the contract than in the mutual mistake situation. Jones i. The mistake party must show the same three showings as for mutual mistake (basic assumption.

Disagreed with the trial court that offer and acceptance occurred at the retail store. c. Inc. 6. Acceptance of unknown terms: a. Zeidenberg i. 4. If accepting terms were different then it was a counter offer. Focuses on the disputed term itself to decide if the offeree had a reasonable opportunity to become aware of it Rolling Contracts . the vendor of the software made an offer by supplying the software with the license and the buyer accepted by failing to return the software and using it. Knockout Rule: Conflicting terms in the offer and acceptance cancel each other out of the parties¶ agreement b. the box in which the software was packaged contained a license that limited the use of the software to noncommercial purposes.UCC 2-606(1)(b) & 2-204(a) a. ii. Object to the added terms in the acceptance under subsection (2)© iii. Include contrary terms in the offer so that both the offeror¶s terms and the offeree¶s added terms drop away under the knockout rule iv. The offeror fails to either expressly limit acceptance to the terms of the offer under subsection(2)(a) ii. Buyer accepts the offer if he does not reject it within a reasonable time by returning or declining the benefit of the contract. intended Sales of good: Non-conforming purchase order would be a counter offer and the seller¶s shipment would be deemed an acceptance of that counter-offer. the terms of the contract were those set by whichever party fired the last shot in the battle of the forms Acceptance under UCC § 2-207 a. The delivery of the standard terms is an offer. Holding: The license was a term of the contract. Offer and acceptance have occurred but it is due to the common transaction of this kind and a reasonable buyer should have known that and should have ascertained what they are. No offer and acceptance. v. 3. conditions/info on the inside 5. Can lead to the conclusion that a counteroffer was made where an acceptance was really 2. including conduct by both parties which recognize the existence of such a contract v. Facts: A buyer bought software at a retail store. 2-204(1) a contract for sale of goods may be made in any manner sufficient to show agreement. ³Last shot´ approach : if the goods were shipped and accepted. If he failed. . If the term that is added by an acceptance would ³materially alter´ the contract.c. buyer had opportunity to return afterwards  Otherwise all buyers would get standard warranty . the term will not become part of the contract  Material: Economically significant or would be likely to affect a party¶s decision  Result in ³surprise or hardship´ : Surprise includes both a subjective element of what a party actually knew and an objective element of what a party should have known. Traditional offer and acceptance rule: Offer and acceptance occurred at the time of buying goods or service b. Acceptance upon failure to return iv. § 2-207(2)(b) ³Materially Alter´ : Important terms may be added by an acceptance i. He did not fulfill his ³duty to read´. Case: ProCD.and no state disregards warranties furnished with consumer products  Consumer drugs. Irrelevant that buyer could not see terms at time of purchase. iii.

Case: Batsian v. Debate whether there was a contract to construct the wall b. Benefit to D therefore contract implied in fact Contract implied in law = not really a contract (Contrast this with moral obligation arising out of past economic benefit to promisor) 1. 5. License past where you clicked download . Contract that can be inferred from the circumstances even though the parties didn't say they were 2. Employers conduct undermined public policy Proof of implied-in-fact promise for duration found in manuals or memoranda Implied-in-law . 4. The care was essential to D¶s health and safety. that event is 2. 5. he was benefited of having the option to use it. 3. an ³express´ condition. Case: Nursing Care services. 4. b.90.723. D contested that she never signed a written contract nor orally agreed to be liable for the nursing services.not reasonable to assume that P would see the license QUASI CONTRACT Contract implied in fact 1. Employment at will 1. v. Netscape Communications p. Specht v. Reasonable Notice of License terms a. If the parties explicitly agree that a duty is conditional upon the happening of some event. D had reason to know that P had this expectation and did nothing -> K Request and receive them under circumstances which imply agreement No need for unjust enrichment Case: Day v. Caton a. Inc. 6. Scottsdale Look this over . Cause of action of unjust enrichment Remedy is RESTITUTION damages. the condition is a ³constructive´ one ± implied in law. 2. Benefit conferred on a recipient under circumstances in which it is unfair to permit him to retain without payment. Holding: The court found that there was a contract implied in law which entitles the plaintiff to recover. 4. Dobos a. 5. Facts: D was served with nursing services which billed to $3. There was a contract implied in law. 3. Even if D did not use the plans. Assent is implicit rather than explicit If P undertook work thinking D would pay. If instead the happening of an event is made a condition of a duty because a court so determines. agreeing or even though they didn't even think about agreeing.good faith & fair dealing Case: Wagenseller v.676 i.7. Gafford a. 3.

Case: U. Damages Expectation Damages 1. 5. D verbally ³warrantied´. P brought suit to recover all profits obtained ³wrongfully´ by D. Facts: Coppola contracted to sell Alfone a land. Naval Institute (P) v. 6. Expectation damages are the usual measure of damages for breach of contract. The latter profits would have made P better off than if K had been performed. not part of contract damages. c. Case : Coppola Enterprises. (torts law) e. no disgorgement i. Purpose of contract damages is to compensate for injured party¶s loss ii. which P had before the surgery and the scarred and hairy hand which P had after the surgery. by the defendant. Note: If Court were awarded reliance damages. P argued loss of profits from not selling hard-copy versions. and punitive awards are not part of contract law. Naval is not entitled to Berkeley¶s profits. the difference between what he would have received had the contract been performed (a perfect hand) and the position he was left in after D¶s breach (a scarred and hairy hand). b. a surgeon for a skin graft operation which. v Alfone²disgorgement a. The plaintiff should end up with a sum equal to the profit he would have made had the contract been completed Case: Hawkins v. Generally occurs when profits tend to define P¶s loss. If awarding profits would exceed P¶s loss and there was no tortuous conduct>punitive damage.REMEDIES 1. which achieves the objective of compensating the injured party. MgGee a. will make P¶s hand completely normal . Facts: P¶s hand is scarred from a severe burn. Coppola sold the land to a third party at a better price. Damages make you no more well off than you would have been if contract had been performed d.S. Facts: P conferred copyright authority over book Red Oct to D in K. Contract remedies are compensatory. it would have been the difference between the scarred hand. While Coppola delayed closing. RULE OF HOLDING: P may recover the difference between the value of a perfect hand and the value of the scarred and hairy hand. he did not grant necessary time for Alfone to acquire financing within the time required. Inc. The court tries to put the plaintiff in the position he would have been in had the contract been performed 3. Damages for breach of contract ate generally measured by P¶s actual loss. 2. Theoperation fail to correct the scar. P suffers very significant emotional consequences as a result. c. D breached such clause and shipped paperback versions before Oct 1985. D¶s profits are used as a measure of damages sometimes. Expectation damages. Charter Communications (Berkeley) (D) a. b. . But awarding D¶s profits that far exceed P¶s loss would be a penalty (restitution damage interest was larger than expectation interest). not punitive. P K¶ed with D. but stated that paperback versions could not be shipped before Oct 1985. 4. AND caused P¶s hand to become covered with hair and to bleed.

Buyer purchases substitute goods and recover as damages the difference between the cost of this cover and the contract price. Work wasn¶t done. we say leave it. Aside from market values. the damages are the value of the diminution of the land. UCC § 2-712 (1) After a breach. rationally. Facts: P let D mine coal as long as D did restorative work after finishing. It was all market value that was lost. It would be wasteful. h. Holding: When performance costs are disproportionate to increases in the value of the land. Indiosyncratic Value: In theory. They¶re identical and changing it would be very costly. Cover : 1. 10. the buyer may ³cover´ 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. Was there idiosyncratic value attached? 2. Idiosyncratic value is compensable if it was attached to the promise. Owner would probably not put that much idiosyncratic value. the section on determination and proof of market price is available to permit a showing of a . If there was. The trial court found that Coppola failed to exercise good faith by refusing Alfone a reasonable time to close and by terminating the contract. Case: Peevyhouse v. John Hancock would not tear down the building if they had got the $100 million and build up a new one.000. The cost of performance would be $29. Is it compensable? g. there could be idiosyncratic value that the hancock owner puts in.restitution damage 7. A large problem is the potential emotional attachment that Peevyhouse may have had for the farm.) f. (the buyer must cover in good faith and without reasonable delay) a. measurement is much more difficult than market value. e. but less expenses saved in consequence of the seller¶s breach. was it incidental? 3. The court hold that the ³award of damages to a contractual vendee includes the profit made by the vendor on the sale of the property to subsequent purchaser even though there is no proof of fraud or bad faith.´ . Built up to 98 floor and it was discovered that they used steel #2. Hypo: Hancock built to be with steel #1.b. d. Efficient Breach 8. However. Comment 3: ³when the current market price under this section is difficult to prove. (Idiosyncratic value: Value that the party puts in that the court cannot perceive from the market. However. 9. i. (would be economic waste). The value of the farm is $300 less than the value it would have been had D performed his work. Garland Coal & Mining a. c. it should be compensable.000. What should be the award? a. If they tear the building down and rebuild it would take $100 million dollars. Rationale: (1) provision of K requiring the remedial work was only incidental to the main purpose of K (2) economic benefit which P would have received from full performance of the work was grossly disproportionate to the cost of performing the work. b. Three issues: 1. if idiosyncratic value was attached to fulfillment of the promise. b. Put in a different type of pipe than the one requested. UCC § 2-713 Buyer¶s Damages for Non-delivery or Repudiation (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 provided in this Article but less expenses saved in consequence of the seller¶s breach. Now the value difference is $100. (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 as hereinafter defined. b.

it was its duty to do nothing to increase the damages. Egerer filed suit.´ Forseeability : 1. Holding: Hypothetical cover : the difference between the market price at the time when the buyer learned of the breach and the contract price. Facts: Film company offers another film with the same salary b. 2. Damages are not recoverable before loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made. A court may limit damages for foreseeable loss by excluding recovery for loss of profits incurred in reliance or otherwise if it concludes that in the circumstances justice so requires in order to avoid disproportionate compensation. 4. b. It had no right thus to pile up damages by proceeding with the erection of a useless bridge. REASONABLE AND CUSTOMARY 2. After P had received notice of the breach. Bridge company continues to build even after they know that the contract was breached. 3. a. CSR west a. Twentieth century for film corp. Case: Egerer v.´ c. Egerer purchased pit run that was more expensive. b) as a result of special circumstances. Baxendale . Case: Hadley v. Facts: CSR breached contract to provide shoulder excavation to Egerer. beyond the ordinary course of events. Employment contracts: ³If an employer wrongfully terminates the employment. Case: Shirley MacLaine Parker v. Policy: Having the rule of mitigation may avoid the cost of negotiation 3. Case: Rockingham County v. Holding: The actress does not have to mitigate the damages by taking the offer of the new role. 4. UCC § 2-273 ³price which in commercial judgment or under usage of trade would serve as a reasonable substitute for the on described´ d. Luten Bridge Co. that the party in breach had reason to know. a. b. Holding: Recovery amount is limited to the recovery damages for breach of contract and not the work done after the notice of breach was received. Loss may be foreseeable as a probable result of a breach because it follows from the breach: (a) in the ordinary course of events. Mitigation of Damages: Cannot recover for the expenses which you could have avoided. The plaintiff must mitigate the damages caused by the defendant's wrongful act. It was an ³inferior employment and different. 1. the employee is under duty to mitigate by looking for a comparable job. c. evidence of spot sale prices is proper. 2.comparable market price or where no market price is available. Plaintiff would have desisted from further work when the county gave notice to the plaintiff.

His damages were speculative. 4. b. rather than to penalize the party for breach by awarding ³damages´ that are far in excess of the ones actually suffered. D knew that the item was a shaft for P¶ mill but was not told that the mill was closed because of the shaft. Facts: P operated a mill which was forced to suspend operations because of a broken shaft. c. d. P¶s employee took the shaft to D carrier for shipment to another city for repair. Requirements for loss of future profits: a. Rules: The damages must either : (1) arise ³naturally . Only at an amount that is reasonable in the light of the anticipated or actual loss caused by the breach 2. but only if the court is satisfied that the provision is not a ³penalty´ ± so. Requirements a. Holding: The plaintiff may not recover loss of prospective profits for its contemplated 20-year operation of a domed stadium which was to be constructed by defendant County of Erie. Certainty 1.a. Knowledge of consequential damages by D is NECESSARY. ii. Reasonable forecast ± amount must be reasonable relative to the anticipated or actual loss for breach. No proof that liability for loss of profits over a 20 year period was in contemplation of the parties at the time of the execution of the basic contract or at the times of its breach ³What could the parties have concluded had they considered the subject? Cleary not the loss of the whole period of the contract. P sued D for loss of extra profits for these days. Liquidated Damages 1. then expectation awards will not be awarded. Such damages have been caused by the breach b. Damages should not be way disproportionate i. -> may not be mere speculation possible or imaginary but must be reasonably certain and directly traceable 2. b. and the difficulties of proof of loss Should not disregard the principle of compensation. 3. according to the usual course of things from the breach of contract itself (direct or general damages) or (2) arise from ³the special circumstancesunder which K was actually made if and only if these special circumstances ³were communicated by P to D´ (special or consequential damages). Must be compensatory not punitive. Case: Wasserman¶s Inc. Holding: P cannot recover lost profits as the profits were not a consequence which ³in the usual course of things´ flows from the delay. The alleged loss must be capable of proof with reasonable certainty i. Erie County a. Foreseeability is a very powerful limitation on the expectation damages.e. D negligently delayed delivery of the shaft and mill had to stay closed few more days. v. v. Damages must be certain. and b. Foreseeability: Reasonably supposed to have been in the contemplation of both parties. Middletown 5. If they could have not reasonably been foreseen. . Case: Kenford Co.i. based on actual damages. Difficult calculation ± harm caused by breach must be uncertain or very difficult to calculate accurately. Only for the loss that was foreseeable. General rule: Courts will enforce liquidated damages provisions.

3. Walgreen sought an injunction to stop the deal. Holding: An injunction is a proper remedy for a breach of an exclusivity clause in a shoppingcenter lease agreement. When Sara Creek informed Walgreen of the decision. Damages are too speculative or uncertain to be calculated or not a substitute for D¶s performance of K. b. Facts: entered into a commercial lease for tract of municipally owned property->contained a clause. Specific Performance 1. Sara Creek decided to install in the place of the bankrupt anchor tenant a PharMor store. Land is unique. Prof¶s thought: the promissee should not take advantage from the penalty clause when the promisor takes action in good faith. § 367(1) a. stipulated damages. 4. A federal district court granted the injunction and Sara Creek appealed. Sara Creek Property a.´ Reliance Damages : .a. Even though this is a permissible stipulated damages clause. It is difficult to forecast the profitability of a retail store over a decade. c. 2. Rest 2nd § 367(2) ³a promise to render personal service exclusively for one employer will not be enforced by an injunction against serving another if its probable result will be to compel a performance involving personal relations the enforced continuance of which is undesirable or will be to leave the employee without other reasonable means of making a living. Rationale: Determination of Walgreen's damages would have been costly in forensic resources and inescapably inaccurate. A decree for specific performance orders the promisor to render the promised performance. The damages should be measured in effort to estimate the actual damages that will probably ensue form the breach rather than as a threat of which is designed to prevent the breach. c. b. Damages are difficult to compute here and the injunction is a negative injunction. Buyer can get a decree specifically ordering the seller to execute a deed in his favor. pro-rata re-imbursement for any improvement costs and damages of 25% of lessee¶s average gross receipts for one year. Employment Contracts Rest. Stipulated damages are normally enforced but if it is too high. no defined market price ii. Situations in which money damages cannot compensate the party. Rest. Not specifically enforced b. which would have inside it a pharmacy the size of Walgreen's. the court could rule differently d. Facts: Walgreen signed a lease which contained a clause in which the landlord. The costs of judicial supervision and enforcement would be negligible. Problem of servitude ± Against thirteenth amendment d. Sara Creek promised not to lease space in the mall to anyone else who wanted to operate a pharmacy or a store containing a pharmacy. Contracts for the sale of Land a. v. Not be able to earn a living which indirectly forces employees to work for the original employer c. idiosyncratic values 5. § 360 b. Traditional rationale: i. The value of land is conjectural. Case: Walgreen Co. The court affirmed for the damages for construction and remanded for the gross receipts.

Case: Osteen v. the usefulness of the expenditures depends on the promise.Most contracts ± the award of expectation damages will adequately compensate the plaintiff. He may recover his expenses reasonable incurred in preparation for the convention: sum paid to D. Case: Kutzin v. 2nd.Co. including money remedies that are based on the amount of a D¶s unjust enrichment. Blair claimed that the costs of the crain rental were not its responsibility. If you forgo the promise. fare for P and workmen to Atlantic City and back. Note: three interests will basically lead to the same recovery. Refers to remedies. Algernon Blair a. expectation damages are not suitable. c. 5. Pirnie a. Case: U. Kutzin refuses and sues for specific performance. 2. 6. Courts award reliance expenditures instead of the lost profits. Facts: In return for $2. Costal sued b.325(injury Kutzins have suffered) = $18. 3. rental of conventional booth. Issue: May a subcontractor. the opportunity cost is in the reliance to the promise you got. the retention which would leave D unjustly enriched. In some contract situations. Precedent case stated that the subcontractor could choose not to file suit based on the contract and instead could make a claim for the reasonable value of his performance.S.500 less the reasonable value of Johnson¶s services. Holding: P may not recover the profits which he would have made form new orders had the contract been performed. 2. who justifiably ceases work under a contract because of the prime contractor's breach recover in quantum meruit the value of labor and equipment already furnished? c. Blair contracted with Coastal Steel to conduct steel erection operations and supply equipment. Coastal began performing and supplied its own cranes. c. Issue: Whether the Kutzins are entitled to retain the entire $36.000 deposit as damages.000. B completed its contract with the U.$17. Rationale: The common law rule was that where the vendee of real property makes a part payment on the purchase price. Holding: Yes. d. and reliance damages may be appropriate in the following situations: 1. Pirnie seeks to recover the deposit he paid. he cannot . Holding: There was a substantial breach.S. P cannot show his lost profits with sufficient certainty. Johnson a. but can show items of expenditure Res.S. American Rys. P alleged breach of contract. P can seek restitution of the benefit $2.500. Holding: Pirnies are entitled to recover restitution damages of $36. Opportunity cost should be able to be recoverable. Benefit conferred on D by P. the wages of workmen. v. Express Co. Coastal had completed 28% of its subcontract but then terminated its performance. b. for construction of a naval hospital. Facts: Blair entered into a contract with U. the hotel. b. values of P¶s own time. When expenditures are made before a promise is received. a. when they diverge P would prefer expectation > Reliance > Restitution 4. with a new subcontractor. Profits are denied because they are too speculative. Restitution Damages 1. but fails to fulfill the contract without lawful excuse. Case: Security Stove &MFG. b.675. v. Facts: Breach of contract for sell of house. Johnson agreed to promote Linda as a singer and country music. Refused to pay costs.

Judgment entered in favor of the P for the balance $10. The plumbing was then encased within the walls except in a few places where it had to be exposed. Facts: D entered into a contract Dec 1961 for the construction of a dwelling house according to drawings and specifications at a cost of $47. There was much work unfinished. and the cost of fixing that omission would be great. is the enforcement of a penalty or forfeiture against the contract-breaker. 2. D appealed and P cross appealed for interest. which would be either nominal or nothing. Court found P having substantially performed the contract and deducted from the contract price. Substantial Performance 1. When part performance is rendered. D refused. Facts: P built a county resident for D at a cost of upwards of $77. 4. Rationale: The defect was insignificant in its relation to the project. c.000 and now sues to recover a balance of $3. D refused to pay P because of alleged breached. Rationale: The court made no finding on Kreyer's good faith. P sued. the part performance rendered. The measure of the allowance is not the cost of replacement but the difference in value. instead of being made in Reading. therefore is not entitled to contract price. The work ceased in June. c. Case: Jacobs &Youngs v. Case: Kreyer v. Restitution should be refused for the good and sufficient reason that the buyer is guilty of a breach of contract and should never be allowed to have advantage from his own wrong. b. A contractor who leaves this .046 which was to be completed in the fall of 1962. Driscoll a. the plaintiff should be given judgment for restitution of the amount of money plaintiff holds as a penalty rather than as compensation. there is still the fact that he did not construct the house to the point of completeness which could be called substantial performance. a court may order as damages payment of the difference in value between the fulfillment of the contract as completed and the fulfillment as contemplated under the contract instead of the cost of fixing the omission. the buyer may recover the difference. the substantially performing party has an action for breach of contract. P left the work untouched and asked for the final payment. the other is not relieved of his duties. b.recover the payment even though the vendor may have made a profit by reason of the default. The owner is entitled to the money which will permit him to complete. 3. Holding: P did not substantially perform. However. and in such case to allow the injured party to retain the benefit of the part performance so rendered. D learned in March 1915 that some of the pipe. unless the cost of completion is grossly and unfairly out of proportion to the good to be attained. P was directed by the architect to do the work anew. Just restitution through quantum meruit. may be much more valuable to D than the amount of the injury caused by the breach. There were difficulties in completing the house. Where one party substantially performs (does not materially breach). but even if that is implied. 1914 and D then began to occupy the dwelling. If the latter refuses to perform. Holding: When a contractual obligation is substantially though not fully performed. the omission made in the attempted fulfillment of the contract is trivial. then the breaching party would not be entitled to have performed substantially.483 remaining unpaid. Kent a. (deposit . was the product of other factories. If it was a willful breach. without making restitution of any part of such value.967.damages done to D) Whenever the breaching buyer proves that the deposit exceeds the seller's actual damages suffered as a result of the breach.

Holding: The commitment letter represented a binding preliminary commitment and obligated both sides to seek to conclude a final loan agreement upon the agreed terms by negotiating in good faith to resolve such additional terms as are customary in such agreements. b. Nature of the problem a. A party that is discharged from performing for such a reason is not liable for breach of contract. or some other tangible item which is destroyed through the fault of neither party. or (3) performance is not impossible but is much more burdensome than originally expected ± impracticable. Impossibility of intangible but essential mode of performance: If essential but intangible aspect of the contract becomes impossible. PRELIMINARY NEGOTIATIONS 1. ii. iii. ii. i. full liability for expectation damages a. Case: Teacher¶s Insurance and Annuity Association of America v. (1) the performance is impossible. 2. building. He should not be entitled to recover on the contract for substantially completing performance. the fundamental purpose of one of the parties has been frustrated. If essential terms are so uncertain that there is no basis for deciding whether the agreement has been kept or broken there is no contract ii. No liability up to the time at which an acceptance of an offer occurred. Henry . The discharge will occur only where the particular subject matter is essential to the performance of the contract. The parties may be discharged from performing the contract if: i. contract is discharged. Tribune Co. Case: Academy Chicago Publishers v. iii. Unduly uncertain and indefinite->no contract b. the contract may be discharged. Pertinent language lacks definite and certain essential terms required iii. Facts: D refused to forego with the agreement with P unless P was willing for the use of offset accounting in a loan agreement ii. If performance involves particular goods. Impossibility : if performance of a contract has been rendered impossible by events occurring after the contract was performed. Cheever i.much work unfinished has not substantially complied with his contract. a. court will discharge both parties. Destruction of the subject matter i. THE EFFECT OF UNEXPECTED CIRCUMSTANCES 1.  Case: Krell v. (2) because of new events. Preliminary negotiations have no legal effect 2.

that is why the lessor charged so much. couldn't happen. => not met b. a. f. The concert couldn't be held. P then demanded that D reimburse P for the extra costs of having to go around the Cape instead of through the Suez. both parties have to agree to put it off. The lessor understood that what the purpose of the lessee's was. P sailed around the much longer route of the Cape of Good Hope. The means to the end. King became kill and the coronation and procession didn't take place as planned.a. To be undone. i. But couldn't lessor say that it wasn't the purpose for him. Case: Transatlantic Financing corp.P argues that although both parties expected the processions to take place and the price of the rooms reflected this expectation. the lessor's purpose was to get money. d. and some event prevents that state of things. the canal was blocked. does this event discharge their duty to perform even if the subject matter of the contract continues to exist and performance remains possible? Holing: Both parties are discharged from the contract Rationale: The impossibility doctrine is not limited to the subject matter. D refused to pay the remainder of the rent and P sued him.  Holding: D may not be rewarded with the additional cost occurred. It can be applied to the substance of the contract. the means to one party's end was impossible.972. Issue: Where both parties enter into a contract based on the assumption of a particular state of things. Occurrence of the unexpected event must have rendered performance commercially impracticable. D denied to pay arguing that because the procession didn't take place. Both parties intended that P would go through the Suez Canal. b. then usually the contract will not be discharged. there will be no breach of the contract thus limited. and parties can find this either from the terms of the contract or from surrounding circumstances which both parties recognize. the contract mentions nothing about it. The risk of the unexpected occurrence must not have been allocated either by agreement or by custom => not met iii. There must be a greater difference between the contract price and the actual costs incurred to perform the duties than $43. the contract was not to lease the rooms for a particular purpose but to see the processions. Here one party's end became impossible to fulfill. US  Facts: P contracted D to deliver cargo to Iran. Frustration of purpose rather than mistake of fact or commercial practicability. 3 conditions must be met i. The court may be reluctant to think that the contract was totally undone. In this case. there was a total failure of consideration. Failure of the agreed upon means of performance : If it is a non-essential aspect of the contract. The previous cases. If performance becomes impossible due to the nonexistence of that state of things. b. e. Something unexpected must have occurred => met ii. . Facts: Krell was to rent Henry a flat for two days for the purpose of viewing the king's coronation procession. c. Military unrest.  Rational: The party cannot show that the performance was impractical. g. v.

Section 133 : Where performance of a promise in a contract will benefit a person other than the promisee. Transatlantic was in a better position to know about the closure of the canal and to buy insurance e. Holding: Yes d. So Fox agreed that he would pay Lawrence the 300. the creditor would go after his debtor who is the promisee and debtor would lose that lawsuit.c. they wanted to keep the profit which included the risk premium. Death or incapacity of a party : if a contract specifically provides that performance shall be made by a particular person. Rationale:Where one person makes a promise to another for the benefit of a third person. that person is (a) a donee beneficiary (make a gift to the beneficiary or to confer upon him a right against the promisee) (b) a creditor beneficiary (an actual or supposed or asserted duty of the promisee to the beneficiary) © an incidental beneficiary Donee or creditor beneficiary has legally enforceable rights under the contract but incidental beneficiary does not (Peanut vendor in Jordan Hypo) 3. but ³incidental´ beneficiaries may not Rest 1st. then they knew of the possibility of the canal being closed. promisee would have sue his promisor. 2. It didn't want the value of the performance including the cape of good hope. Allocated the risk in the pricing mechanism. contract becomes discharged. and then the debtor. Facts: Holly entered into an oral agreement with Fox. . then if that person dies. Two lawsuits. Ransom a. the value of the house. Trans is asking for the extra expenses. c. Fox a. e. Case: Seavor v. Any third person. they would get more if they got the contract price which had the risk premium. Efficiency argument: if the beneficiary can't sue. d. But Fox never paid Lawrence. Facts: P alleged that Beman had obtained property from his wife and induced her to execute the will in the form prepared by him by his promise to give P $6000. could sue on it. If they asked for the high profit. Allowing the benficiary to sue the promisor only takes one law suit. for whose direct benefit a contract was intended. Issue: Can a third party creditor beneficiary of the contract recover for breach of contract? c. 4. When beneficiary may sue: Restatement rule: ³intended beneficiaries´ may sue. the third person has an enforceable right under the contract and can maintain an action for breach of contract. THIRD PARTY BENEFICIARIES 1. A third party beneficiary is a person whom the promisee in a contract intends to benefit. =>the court doesn't articulate this point very much but this shows that transatlantic knew of the risk of the canal being closed. Case: Lawrence v. P wasn't faced with impracticability and P can't receive through the theory of quantum meruit any additional costs incurred outside of the contract price. Lawrence sued Fox. Jury found for Lawrence.P appealed b. Holly loaned Fox 300 but told Fox that he owed Lawrence.

A third-party beneficiary should have power to enforce a contract if but only if (1) allowing the beneficiary to enforce the contract is a necessary or important means of effectuating the contracting parties' performance objectives (2) allowing the beneficiary to enforce the contract is supported by reasons of policy or morality independent of contract law and would not conflict with the contracting parties performance objectives. there would be no mechanism to get that gift the way it is supposed to go. There could be two lawsuits and the creditor could get the money back. where the promisee who is dead. then the donee would not be able to sue. The equities are with the plaintiff and they may be enforced 5. Beman had left her husband the house on condition that he pay P $6000. c. if the creditor is not allowed to sue. . The tendency of American authority is to sustain the gift in all such cases and to permit the donee beneficiary to recover on the contract. 6. In the donee beneficiary case. whatever the value of the house. and P could have recovered in an action at law against him. If it conflicts with the objectives of the contracting parties' then should not be permitted. he would have become personally liable to pay the legacy. then the interests of policy or morality would be served. Holding: If Mrs. In the creditor. and he had accepted the devise. If the promisee donor is still alive and changed his mind. Rationale: The testatrix has in substance bequeathed the promise to P and not because close relationship or moral obligation sustained the contract. there will be no mechanism to set the world right. If no conflict. If we don't allow the donee to sue.b. A donee beneficiary where the promisee extracted the promise to give a gift to the beneficiary would have a stronger case to sue than the creditor beneficiary. there are still mechanism where the world could set it right.

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