Introduction to Contracts

1. Analogical Reasoning & Sources of Law (TB: 1-17)

2. Intro to contract law (TB: 17-26
The Basis of Contractual Obligation
Mutual Assent
3. Offer and Acceptance (TB: 29-46)
4. Bilateral Contracts (TB: 46-60)
5. Unilateral Contracts (TB: 60-75)
6. Agreements to agree (TB: 75-95)
7. Review of Mutual Assent (TB: 95-97)
Consideration
8. Consideration defined (TB: 98-113)
9. Consideration applied (TB: 113-118)
10. Consideration (TB: 127-144)
Uniform Commercial Code
11. Mutual assent and firm offers (TB: 144-157)
12. Battle of the forms I (TB: 157-169)
13. Battle of the forms II (TB: 169-186)
Special Situations
14. Electronic and layered contracting (TB: 188-207)
Promissory Estoppel
15. Promises within the family; charitable subscriptions (TB: 213-233)
16. Commercial promises (TB: 233-251)
17. Pre-acceptance reliance (TB: 260-279)
18. REVIEW
Restitution
19. Non-promissory restitution I (TB: 282-301)
20. Non-promissory restitution II (TB: 301-313)
21. Promissory restitution (TB: 313-325)
22. REVIEW (TB: 326-327)
The Statute of Frauds
23. General principles (TB: 333-344)
24. Exception – Part performance (TB: 344-355)
25. Exception – reliance (TB: 355-366)
26. Sale of goods – UCC (TB: 366-377)
Principles of Interpretation
27. General Principles (TB: 381-401)
28. Patrol Evidence Rule I (TB: 412-421)
Implied Contract Terms
29. Implied contract terms (TB: 471-481)
30. Good faith (TB: 481-484, 498-513)
31. Warranties (TB: 530-541)
Avoiding Enforcement
32. Minority; mental incapacity (TB: 555-574)
33. Duress; undue influence (TB: 574-592)
34. Misrepresentation (TB: 592-603)
35. Unconscionability (TB: 622-632)
36. Public policy (675-694)
Justification for Non-Performance
37. Mistake (TB: 701-724)
38. Impossibility & Impracticability (TB: 724-743)
39. Frustration of Purpose (TB: 743-755)
40. Contract Modification (TB: 755-765)
Consequences of Non-Performance
41. Express conditions (TB: 785-800)
42. Material breach (TB: 809-828)
43. Anticipatory repudiation (TB: 828-836, 845-846)
Expectation Damages
44. Value of expectation I (TB: 851-866)
45. Value of expectation II (TB: 866-877)
46. Restrictions on expectation damages: foreseeability, certainty, causation (TB: 877-895)
47. Mitigation (TB: 895-913)
Alternatives to Expectation Damages
48. Reliance damages I (TB: 971-980)
49. Reliance damages II (TB: 980-988)
50. Restitutionary damages I (TB: 988-1000)
51. Restitutionary damages II (TB: 1000-1012)
52. Specific performance (TB: 1012-1025)
Introduction to Contracts
Pre-Class Assignment: Analogical Reasoning & Sources of Law (TB: 1-17)
August 17, 2020 Class 1 Prep: Analogical Reasoning & Sources of Law
CASE OF THE DAY
Lucy v. Zehmer 1954
FACTS: W.O. Lucy and J.C. Lucy brought suit against A.H. Zehmer and Ida S. Zehmer for specific performance of a contract concerning Zehmer’s
parcel of land.
ISSUE(S): At issue is whether a contract was created between Zehmer and Lucy.
RULE(S): The court asserts the rule that the outward expressions of an individual reveal his intention rather than his secret unexpressed
intentions. The mental assent of the parties is not requisite for the formation of a contract.
ANALYSIS-ARGUMENTS
The court analyzes whether secretive internal thoughts can contradict outward expressions of contract creation. The plaintiff’s best argument is
that Lucy was unaware of Zehmer’s intent of jest in creating the contract. The defendant’s best argument is that Zehmer was overly intoxicated
and unable to create a valid contract.
CONCLUSION-HOLDINGS: The court held that a reasonable person would interpret Zehmer’s outward expressions as an intention to create a
valid contract. The contract between Zehmer and Lucy is therefore sustained, and Lucy is entitled to specific performance.

Why do we study cases?

 American law developed from court decisions--"Common Law"
What is contract law?
 Contract: an agreement between 2 or more parties
 Creates obligations which require legal enforcement
 3 elements in a transaction can be called a "contract"
1. The agreement in fact between the parties
2. The agreement as written
3. The set of rights and duties created by 1 and 2
 Contracts is our society's legal mechanism for protecting expectations arising from contracts
What is ownership?
 Many things are susceptible to "ownership"-Spiderman, ring
 State will protect the right of the owner to use, enjoy, and consume that thing to the exclusion of all other people
 "real property" (land, buildings) "personal property" (moveable)
The structure of contract law
 Core task is the enforcement of obligations voluntarily assumed by private agreement
I. Formation
o Agreement by parties for something to be done in the future
II. Interpretation and Implication
o What obligations have the parties undertaken?
o Based on words/actions
III. Defenses to Enforcement
o Basis for avoiding enforcement
 Some misconduct by one party in the making of the agreement, allows party to "avoid" the
contract
 Aspect of agreement violates public policy
IV. Nonperformance and its Consequences
o Some provide that duty of performance will not arise until certain circumstances are met
o Unexcused failure to perform=a breach
o Court protects party from the consequences of the other's breach--money damages
V. Rights and Duties of Third Parties
o One issue is whether as part of their contract the original parties intended to confer enforceable rights to
"third parties"-makes them "beneficiaries" of the contract
o Some "assign" rights to someone else--arrange for someone else to perform obligations
Sources of Contract law
What authority do courts apply to decide contract disputes?
 Primary authority: consists of prior judicial decisions--make up common law
 Secondary authority: loosely defined as anything else that might influence a court
I. Judicial Opinions
o Stare decisis-adherence to past precedents
 Offers predictability, puts rein on judicial prejudice
 Precedent is binding on a court only if it was decided by that same court or by a higher appellate court
 If a court of decision is the one that made the precedent-cant overrule the earlier decision (drastic)
II. Statutory Law
 o Statute of Frauds: Requires certain types of contracts to be evidenced by a signed writing to be enforceable
in court
o A legislature may choose to modify any of the rules of common law
o Any court is bound to follow the provisions of a valid statute that apply to the dispute before it
III. The Restatements
o Resembles a statute, consisting of black-letter statements of general rule
IV. Legal Commentary
o 2 most influential commentaries: Samuel Williston and Arthur Corbin
V. International Commercial Law
o Lack of uniformity of rules governing international commercial transactions--barrier to international trade
o United Nations Convention on the International Sale of Goods CISG
The Perspective of Contract Theory
 During Willistonian period, contract law was a set of universal rules from decided cases (formalist approach)
 Christopher Columbus Langdell--father of case method
 Dean Roscoe Pound argued for a "sociological jurisprudence"--rules of law evaluated by social interests served (Legal
Realists)
The Lawyering Perspective
 Roles of a lawyer:
o Counsel, negotiator, drafter, advocate

LECTURE NOTES: Class One

What is contracts?
 Making promises enforceable--state backed promises
What is the law?
 Set of rules for given community (state, federal)
 All 3 branches of government help make law
 Legislative has overarching rule (drive safe), state creates data point (100 mph not safe), 3rd state creates data point (20mph too
slow) = 3 data points, can advise your client better
Deriving a rule from a case
 What are the rules as a court would enforce them?
 What have judges said about cases similar/different from mine?
Apply to facts
 Take precedents and apply to client's facts
Sources of contract law
 Primary sources:
o Judicial decisions--what are precedents
o Statutes--uniform commercial code UCC
o Treaties--international sale of goods
 Secondary sources:
o Restatements--clarify what law is in a certain area
o Treatises--Corbin
o Includes legislative history
 Tertiary Sources
o Policy arguments
o Good sense--ask yourself about the contract
Lucy v. Zehmer
 Civil cases involve private disputes, criminal cases involve an action harmful to society as a whole--filed against state or jurisdiction
 Lucy appealed to SC of Virginia (appellant-asking for help)
 Hypo: could appeal to U.S. Supreme Court for Constitutional issues
 Do we care whether Zehmer meant it?
 Holding: there was a contract, specific performance enforced
 State facts that are agreed upon--do subjective later
Rule vs. Holding
 Holding is court's decision on issues in the case (e.g. Lucy may buy the land for 50,000)
 Rule is the abstract principle--why the holding was created (general statement)
o An accepted offer is enforceable when a reasonable person viewing the outward expressions would think a contract
existed
o We need to look at behavior, not mind
Different Kinds of Rules
 Declarative Rules: state themselves clearly
 Conjunctive tests: Mandatory elements to be established
 Disjunctive tests: Either/or test
  Factors Test: Flexible standard guided by criteria
 Balancing test: "combo" rule, each side of balance has factors
 Rules with exceptions

August 19, 2020 Class 2 Prep: Introduction to Contract Law

Contract law Through Case Study: Two Examples from Different Periods of Time
Read the opinions with these questions in mind:
1. What happened between the parties that brought about the lawsuits?
2. What are the legal issues that each court is called on to decide?
3. How do the courts decide those issues, and why?
4. Does it appear that the passage of more than 80 years between these two decisions has resulted in changes in the manner in which
the asserted contracts were made, or in the law that was applied?
Allen v. Bissinger & Co. Supreme Court of Utah (1923)
 This is an action at law by the plaintiff to recover fees for furnishing defendant a copy of the official report of certain proceedings
before the Interstate Commerce Commission
 Trial resulted in judgment for the plaintiff, defendant appealed
 Plaintiff: official reporter for the Interstate Commerce Commission Defendant: corporation engaged in buying/selling pelts at Utah
 Communications between P and D, P prepared a copy of the official report of the hearings held up to August 17th at the
Commission's usual rate--shipped to D
 Insisted by appellant that the correspondence did not create a contract bc offer contained in P's letter was not accepted--minds
never met
 Rule: The mutual assent of the parties, essential to contract formation, must be gathered by the language employed by them--if his
words/acts, judged by a reasonable standard, manifest an intention to agree, that agreement is established
 Analysis: No uncertainty in P's offer…we think the communications of the parties, judged by a reasonable standard, manifest an
intention to agree upon the same thing.
 D's argument: the hearings were useless to him…in the absence of misconduct on the part of P, defendant cannot be relieved
Feldmand v. Google Inc. United States District Court (2007)
 Before the court is D Google, Inc.'s Motion to Dismiss Plaintiff's Amendment Complaint, or to Transfer, which motion the court
converted to a Motion for Summary Judgment. Also before court is P Lawrence Feldman's Cross-Motion for Summary Judgment
 Issue before court: whether a forum selection clause in an internet "clickwrap" agreement is enforceable under the facts of the
case--denied P's Motion for Summary judge Grants D's Motion to Transfer to Northern District of California
 P's argument: advances theory of implied contract bc he argues he did not have notice of the terms of the agreement and there was
no "meeting of the minds"
 Facts: P a lawyer of Lawrence E. Feldman & Associates purchased advertising on D Google's "AdWords Program"--if searcher clicked
on P's add, D would charge P for each click made "pay per click"
 P claims he was victim of "click fraud"--claims 20-30% of all clicks for which he was charged were fraudulent
 P alleges that click fraud can be tracked & prevented--P seeks damages, disgorgement of any profits D obtained as result of unlawful
conduct
 Advertisers were required to enter into an AdWords contract before incurring any charges--had to open AdWords account --notice
in bold at top of sign up page--P had to click on box to agree
 Choice of Law: D argues court must apply Cali law--federal, not state law applies
 Rule for clickwraps: Whether the plaintiffs had reasonable notice of and manifested assent to the clickwrap agreement
 Specht v. Netscape Comms. Corp--not reasonable bc user had to navigate to hidden page

The Basis of Contractual Obligation: Mutual Assent and Consideration

Restatement Second: Formation of a contract requires "a bargain in which there is a manifestation of mutual assent to the exchange and a
consideration"
A. Mutual Assent
 Under traditional model of contract formation, parties engage in the give-and-take of bargaining through offer and acceptance
 Doctrines of restitution and promissory estoppel involve possible liability between parties even though no contract had been
formed
1. Intention to Bound: The Objective Theory of Contract
o "Meeting of the minds" is subjective in that the actual intention of a party, rather than the party's conduct, determines
the party's legal obligations
Ray v. Williams G. Eurice & Bros, Inc. Maryland Court of Appeals (1952)
 Trial court found for D and Ps appealed
 Facts: Rays decided to build a home on their lot…entered into negotiations with builders including D. Mr Eurice given a set of plans
and specifications so that he could make a formal bid in writing. Feb. 14 Eurice Corp submitted unsigned, 3 page proposed contract
to build a house according to the specifications. Mr. Eurice claimed he had never seen the specifications of the contract and refused
to build
 Judge Gontrum (trial court): There was an honest mistake; there was no real meeting of the minds and P and D had different sets of
specifications in mind when the contract was signed
 Appeal court analysis: The law is clear absent fraud or mutual mistake, that one having the capacity to understand a written
document who reads and signs it is bound by his signature
  Appellee's (Eurice) claimed intent is immaterial, where it has agreed in writing to a clearly expressed and unambiguous intent to the
contrary
 Rule: Offer and acceptance is not what the party making it thought it meant, but what a reasonable person In the position of the
parties would have thought it meant
 Conclusion: Appellee (Eurice) wrongfully breached its contract to build Rays' house for 16,300--the owner was entitled to be put in
the same position that he would have been if the contractor had performed its contract
 Judgment reversed with costs and judgment entered for appellants against the appellee in sum of 5,993
Skrbina v. Flemings Cos (Ct. App. 1996)
 P employee claimed wrongful termination by the D employer on grounds including violation of both state nad federal
antidiscrimination statutes
 D countered--asserting a release signed by P barred any claims regarding employment, benefits, etc." P believed signing forms was
necessary prereq to receiving severance benefits
 Appeals Court affirmed lower court's grant of summ judgment for defendant: P knowingly and willingly signed the release to obtain
the benefits provided in return for his signature
 Questions: Does the signing party have a duty to read what she signs? Presumption of knowing assent
Leonard v. Pepsico, Inc (2nd Circuit 2000)
 Reedemability of Pepsi points for merchandise
 P Leonard asserted right to buy a Harrier jet palne for 15 Pepsi points and $700,000
 Rule: no reasonable viewer could have understood that the jet plane shown in the ad was seriously offered as a premium for
purchase of the defendant's soft drinks
2. Offer and Acceptance in Bilateral Contracts
 Bilateral contracts: involve commitments on both sides: an exchange of promises in which each party promises to do something for
the other
Lonergan v. Scolnick California District Court of Appeal (1954)
 P agreed to buy a 40 acre tract of land for 2,500; D repudiated the contract and refused to deliver a d, the property was worth
$6,081 and that the P has been damaged in the amount of 3,581
 Facts: exchange of letters--inbetween exchange D sold the property to a third party for $2500
 Trial court judge said P delayed response to D and his delay was not the prompt action required by the terms of the offer--concluded
no contract was formed and that D was entitled to judgment against P, P appealed
 Analysis: It is clear from the correspondence that D's letters were to see if P was interest, not a fixed contract (request for an offer)
 Mailbox rule: Both an offer and a revocation must be communicated to be effective, an acceptance (by the oferee) will in some
circumstances be treated as effective as soon as it was dispatched
Izadi v. Machado (Gus) Ford inc. Florida District Court of Appeal (1989)
 P attempted to purchase a 1988 Ford Ranger by tendering Gus Ford 3,595 in cash and an unspecified trade-in--on belief that the ad
offered 3,000 as a minimum trade in allowance for any vehicle, regardless of value
 D claimed small print said the 3,000 only applied to certain models
 Corbin on Contracts: an enforceable contract arises from an offer contained in an advertisement
 Willistonian: the test of the true interpretation of an offer or acceptance is not what the party making it thought it meant, but what
a reasonable person in the position of the parties would have thought it meant
 Machado used 3,000 header as ad "bait"

LECTURE NOTES: Class Two August 19, 2020

The Quilt hypo:
 Was it a true contract or not?
 Lucy v. Zehmer application—what would a reasonable person think of that person’s actions?
Virginia will be able to enforce promise because…
 Not enough distinction between jest and intent to actually sell—3 rd reasonable person standing there watching would
not have interpreted Stewart’s actions as jest
 Stewart never described the joke
 What data points does the court point to?
o Language of the parties “let’s do this right,” date on written contract Extent of Negotiations
o Can only conclude given length of negotiation that you intended a real contract
o Only dispute is about the parties’ intent, not what happened in the case went back and forth on price
o Why was there a written contract if it was written as a joke? Formalization of negotiations
Virginia will not be able to enforce because…
 Stewart said “thanks for playing along”
 ScareHow would a court rule on Stewart’s intent to scare Julia?
o Did he really want to sell the quilt or just hurt Julia because she was in earshot?
 Virginia knew Julia sold what Stewart wanted…should know that Stewart wanted to “get back”
How can I enforce a promise?
 Contracts are the bulk of it
 Three options to enforce a promise
 1. Contract
2. Promissory estoppeldetrimental reliance
3. Restitution orders D to give up his/her gains to the claimant
What is a contract?
 Very basic elements: mutual assent + consideration
 Mutual assent=meeting of the minds—agreed to the terms of agreement…did they agree to be bound?
o Offer and acceptance
o K (contract)=MA(Offer+Acceptance)+C
Allen v. Bissinger
 Plaintiff: Allen official reporter for Interstate Commerce Commission
 Bissinger: sells animal pelts—wants to look at ICC’s shipping rates
 The Facts: Started in 1918 resolved in 1923 (5 years of litigationlawyer expenses)
o Allen sends mailing to potential customers offering to send copies of hearings on freight info.
o Didn’t provide est. length of report or fixed pricefurnished at ICC’s usual rate
o Bissinger said put me down for a copy
 Upset because he wanted one volume and rest didn’t apply to himsubstantively no use—asks to
return it (business proposition without court case)
o Allen said its too late to refund—already paid employees—brings suit for price
 Is there an argument that Bissinger shouldn’t pay?
o Is it a reasonable rate to pay $20,000 for copies of hearings?
o Would a reasonable person expect to pay that price?
o No meeting of the minds on terms/price
 When there’s a discrepancy between buyer/seller who is responsible?
o Court allowing “walk away” from case usually leaves a party disadvantaged
 What did the trial court say?
o Bissinger had to pay because contract was enforceable
o Trial court found that there was mutual assent
o B must uphold promise to pay because there was a contract
 What did Appeals Court say?
o Sided with trial court
Feldman v. Google (2007)
 Parties: Feldman (lawyer) and Google Adwords
o Feldman is plaintiffs attorney in search of clients
o Adwords “pay per click” system
o P alleges he was victim of click fraud
o Similar to Bissinger because agreed to pay for whatever was sent outsigned but realizes no utility, doesn’t
want to pay
 Facts: Feldman HAD to click terms agreement box before placing ads
 Analysis: Feldman had reasonable notice of agreement
 Rule: AdWords agreement doesn’t provide fixed price term but gives reasonable notice of agreement
Ray v. Williams G. Eurice Bros
 Plaintiff: Ray looking to build home Defendant: Eurice Construction Company
 Issue: parties had different ideas of plans (A+B)
 Don’t assume a written paper=a contract
 Ray files suit for breach of contract when Eurice refuses to build
 Trial court said there was no meeting of the minds because they each had different specifications in mind
 Appeals court: unilateral mistake on Eurice’s partreasonable person would have thought Eurice agreed to the deal
 Issues:
o Does it matter Eurice may have been lying? No because what you think in your head doesn’t matter,
outward acts do
o What about jokes?
Leonard v. Pepsico
 P argues that a reasonable person would think ad meant you could buy the jet
 Court says it was done in jest, no RP would think that
Lonergan v. Scolnick
 Case about what is an offer?
 D placed ad in paper about a property
  P said he was interested in a letter to D (put $100 in escrow)
 D told P to hurry, P delayed, D sells to 3rd party
 Trial court: no contract because P delayed response to offer judgment for D
 Appeals court: said D’s letter was an invitation to make an offer, not a contract
 Ads considered to not be firm offers
Mailbox Rule
 Acceptance treated as effective the moment its dispatched