CONTRACT

 What is a contract?
o §1– legally enforceable agreement between individuals/corps that was entered into voluntarily
 Common law versus UCC vs. CISG
o The UCC governs transactions of movable goods
o The common law covers everything else: real estate or fixtures attached to real estate, services,
intangible property, and leases
o CISG is treaty for international law about international sale of goods, analogous to UCC but UCC applies
to consumer transactions and CISG does not.
 Contract formation:–
o Common law - Formation of a contract requires a bargain where there Is manifestation of mutual assent
o Contract formation: UCC
 Consideration is generally the same as in common law.
 1-201 (3) Agreement - the bargain of the parties in fact, as found in their language or inferred
from other circumstances including course of performance, course of dealing, or usage of trade
 1-201 (12)- Contract -, means the total legal obligation that results from the parties' agreement
 UCC – open terms don’t undermine existence of contract.
o Bilateral or unilateral?
 Bilateral is exchange of promises. Mutuality of obligation (both sides are bound or neither are)
 if they don’t want performance, they want a promise then it is bilateral.
 Unilateral is a promise that will be delivered on if the offeree performs in a way specified by the
offeror. Offeree can only accept by performance. Moment of formation has one promise due.
o Unilateral contracts
 preparation for performance doesn’t count.
 Once the offeree begins performance, the offeror can no longer revoke it (§45).
 You can’t claim you performed in acceptance of a unilateral offer if you didn’t know about the
offer at the time of performance.
 But you can perform in acceptance if you learn about the offer mid-performance and
then complete the performance.
o Offer UCC
 2-204 - a master of the offer may invite acceptance by conduct and may propose limitations on
kind of conduct that constitutes acceptance. Buyer may accept by performing the acts the vendor
proposes to treat as acceptance
 2-206 unless otherwise unambiguously indicated by language or circumstance
 An offer to make a contract shall be construed as inviting acceptance in any manner and
by any medium reasonable in circumstance
 Order or other offer to buy goods for prompt or current shipment shall be construed as
inviting acceptance either by a prompt promise to ship goods or current shipment
o Offer? DO THEY WANT A CONTRACT OR OPPORTUNITY TO ENTER INTO CONTRACT?
 § 24- A manifestation of willingness to enter into a bargain so made as to justify another
person in understanding that his assent to that bargain is invited and will conclude it.
 Gives offeree power of yes, offer is a promise – may propose sale or barter or propose
exchange of promises or performances
 § 26 – just preliminary negotiations manifestation of willingness to enter a bargain is not
an offer if no intent to conclude bargain
 § 33 – certainty- Offers must have terms that are clear and specific enough that a reasonable
person would think that acceptance is invited with no further negotiation.
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  IF conflicting terms in an offer/contract you should read them in the way that makes sense.
 Offers don’t necessarily have to be towards a specific person;
 Lonergan v. Scolnick – bilateral. Invitation to make offer in advertisement, not an offer to
begin with so nothing for Lonergan to accept in time. The letters were preliminary
negotiations, did not give rise to offer so did not give opportunity for acceptance.
 Advertisements are invitations not offers – BUT REWARDS PROGRAMS ARE OFFERS. – look at
different classes of members
 Sateriale v. RJR communication give offeree reason to believe it was an offer. there was
unilateral contract offer bc plaintiffs reasonably believed defendant intended rewards
program to give them catalog items, and defendant party greatly benefited by part
performance.
 Illusory or indefinite? By giving notice before termination waives their right to
“terminate without warning”
 Option contracts with consideration
 § 45- when offer invites offeree to accept by tendering performance THAT PROMISOR
SOUGHT and offeror cannot revoke so long as timely completion of performance, option
contract is created when offeree tenders or begins invited performance. PROTECT
OFFEREE IN JUSTIFIABLE RELIANCE ON OFFEROR’S PROMISE
 What do we need to know if they’re in a deal?
o Needs consideration or sufficient reliance.
o Has to be consideration what the promisor SOUGHT
o If informed of withdrawal offer then knew it could not be accepted bc revoked.
 option contract is not binding without consideration (Normile)
 Cook v. Caldwell- goes past restatement to say beginning performance must be
SUBSTANTIAL. When you begin, you inhibit offeror ability to revoke or modify contract.
 An option is a promise to keep an offer open
o An option can become enforceable like any other promise
o Offeror's duty of performance is conditional upon completion of invited
performance, A cannot revoke or renege when B is halfway across the bridge but
B can decide to stop walking and then A does not owe them anything. Offeree is
not required to perform but offeror does not pay anything until complete. Just
locks in offer but does not create obligation to pay anything
 What if after being given the option the offeree puts effort into raising funds/otherwise
taking steps required for acceptance?
o Only consideration that would make option binding if the parties had agreed that
the offeree would do so. The offeror benefits b/c presumably they want the
person to be able to accept their underlying offer.
o only reliance that would make the option binding by promissory estoppel if
detrimental and reasonable
 87(1) option contract
 (not widely ACCEPTED) §87 – an offer is binding as an option contract if
o 1. (a) it is in writing and signed by offeror, recites a purported consideration for
the making of the offer AND proposes an exchange on fairs terms within
reasonable time,
o OR (b) if it is made irrevocable by statute. (UCC SALE OF GOODS)
o 87(2) is not widely followed outside of commercial building – PE expressed
if offer was withdrawn and there was extensive reliance
 Mailbox rule does not apply to option contracts – acceptance has to be received to be in
effect (Berryman)
 Option contract irrevocable by statute - 2-205 UCC, CISG
o Revocation- offer is freely revocable even if offeror has promised to keep it open
 § 42- offeror needs to make offeree aware in some way that the offer is no longer on the table.
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  § 43- This can include just taking steps inconsistent with moving forward with the agreement, as
long as the offeree finds out about them from reliable source or offeror or agent.
 the offeror has the power to revoke their offer any time before acceptance.
 Exceptions:
 Binding options’ Option contract - Beginning of performance on offer for a unilateral
contract
 UCC § 2-205) Statute making some kinds of offers irrevocable - indicates that for certain
kinds of circumstances and offer will be held open - firm offer rule. Holds open without
consideration or reliance. Offer made by merchant signed in writing that gives
assurance it will be held open for period not exceeding 3 months
o Acceptance -IF DOES NOT MIRROR OFFER, IT IS REJECTION AND COUNTER OFFER.
 Once an offer is made, the offeree is granted the power of acceptance.
 § 30- AS MASTER OF THE OFFER, offeror may invite or require acceptance in promise,
performance, or empower offeree to make section of terms in his acceptance. Unless stated, offer
invites acceptance in any manner
 § 32 – invitation of promise or performance
 The offeree can choose if the offer is interpreted as inviting acceptance either by
promising to perform or by performance.
 If performance then true unilateral contract offer, but if offeree might also accept by
making promise of performance it forms bilateral contract.
 § 62 – effect of performance by offeree when offer invites either performance or promise, tender
or beginning of invited performance is acceptance by performance.
 SAYING I’ll pay you 10k for a pool: either tender beginning performance or by promising
to make the pool, you have accepted.
 Offerees have a duty to read contracts they accept. If you accept then you’re bound to it.
 Ray v. Eurice – unilateral mistake, the bros did not read the contract they signed
 § 50 - Acceptance can be express or implied.
 Acceptance by performance requires at least part of what offer requests be tendered,
includes performance which operates as return promise
o Mere preparation to perform is not acceptance
 Acceptance by promise requires that offeree complete EVERY ACT ESSENTIAL to making
of promise
 § 69 – acceptance by silence or exercise of dominion
 Offeree takes benefit of offered services, or offeree has given reason to understand that
silence or inaction is acceptance like previous dealings.
 § 58 – necessity of acceptance complying with terms of offer.
 Mirror image rule
 Normally, the terms of the offer and acceptance must match
 Exception: If the parties start performing, that’s an implied acceptance even if there was
no expressly agreed to set of terms. In that case, the last set of proposed terms controls
 Mailbox rule (§ 63)
 When an offeree sends in an acceptance, it’s considered accepted at the time they send
it. Not at the time it’s received.
 But: the means of communication needs to be one the parties have explicitly or implicitly
agreed to. You can’t arbitrarily switch to something slow and claim the mailbox rule
 Also: it must be sent in a way that’s effective. If you mess up and create a delay by putting
the wrong address on your letter, the mailbox rule doesn’t apply
 Offeror is no longer free to revoke
o § 60 - Unless stated in K that acceptance is effective only when received.
 CISG is different: acceptance is effective when reaches offeror, if never arrives, never a K.
 When agent acts within scope of his authority, the knowledge or notice he acquires is imputed to
his principal (Dye v. Tamko)
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 o Rejection
 Rejection can be indirect or implied. enough to take actions inconsistent with acceptance.
 § 40 - EVERYTHING EXCEPT ACCEPTANCE HAS TO BE RECEIVED to be effective
 § 38- offeree power of acceptance terminated by his rejection, which is manifestation of intent
not to accept offer.
 If you send a rejection and then send an acceptance, whichever is received first is the controlling
one. No mailbox rule.
o Counter offer
 § 39 – Typically an offer made by offeree to his offeror relating to original offer but different
 § 59 - qualified acceptance or conditional acceptance terminates the OG offer and the power of
acceptance of offeree and creates counteroffer
 Offeree’s power of acceptance terminated by making counter offer
 Normile v. Miller – counter offer if not mirror image OG Offer, so counter offer represents new
offer and is no longer subject to deadline of OG offer
o Implied in fact contracts
 True contracts with all the regular elements.
 The difference is that they are implied by the parties’ conduct rather than by explicit agreement.
o mutual assent Meaning a reasonable person would understand.
 § 17 - The formation of a contract requires a bargain in which there is a manifestation of mutual
assent to the exchange and a consideration
 Intent behind an offer doesn’t matter—offers should be read as a reasonable person
would read them
 Subjective approach to mutual assent– meeting of the minds
 Raffles Peerless – subjective intent of the parties. Neither party knew the other party’s
meaning so no manifestation of mutual assent about which ship carry cotton.
 Objective approach to mutual assent – intent is irrelevant unless externally manifested
 Lucy v. Zehmer – knew or had reason to know the other’s meaning, didn’t matter than
Zehmer was joking so long as reasonable person would believe it was an offer.
 Ray v. Eurice – doesn’t matter if you did not read it, you signed contract
 § 20 – objective approach to mutual assent FROM REASONABLE PERSON
 1. NO MUTUAL ASSENT IF parallel ignorance or parallel awareness of the other
party’s different meanings and neither one has advantage over the other,
 2. MUTUAL ASSENT IF Asymmetry– the most ignorant party’s meaning prevails! If party
A has no reason to know and Party B has reason to know A’s different meaning, then
Party A prevails
 § 201 – whose meaning prevails
 1. When parties attach same meaning, interpreted to shared subjective approach (if both
joking or both know a code word means something else)
 2. If parties different meaning, most ignorant party’s meaning prevail
 § 21 – intention to be legally bound. You can be bound even if you don’t realize
o Mutual assent UCC 2-206
 A contract can be made in any way that shows agreement between the parties, including if the
parties just act in way that recognizes the existence of the contract.
 You don’t need to know when a contract was formed for the contract to exist.
o Consideration –WHAT WAS SOUGHT IN EXCHANGE for the promise??
 § 71 – To constitute consideration
 1., a performance or return promise must be bargained for exchange
o NOT CONSIDERATION: A minor condition on the manner in which the offeree
can receive their benefit is generally not consideration. See Plowman (going to an
office to pick up a check).
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 o NOT CONSIDERATION: If it is a gift with conditions – is that condition on the
gift a benefit to the promisor? If it is, then a contract, if not then it is a gift
(Plowman)
o NOT CONSIDERATION: commitment made for value received; say “this is
consideration” insufficient (Dougherty)
o Consideration must be bargained for in the sense that it is in exchange for a
promise, but it doesn’t need to be actively negotiated over. (Pennsy)
 2. A performance or return promise is bargained for (external manifestation of mutual
assent) if it is sought by a promisor in exchange for his promise and is given by the
promisee in exchange for that promise
o NOT CONSIDERATION: The consideration must be intended as part of this
exchange. Past actions before the promise don’t count because cannot be
inducement of promise (Plowman)
o NOT CONSIDERATION: Nominal consideration – just saying this is consideration
o NOT CONSIDERATION: False recital of consideration: nothing was exchanged
even though K says it should be
o Moral consideration does not count. There needs to be something more.
 3. Performance may consist of : An act other than a promise, a forbearance, or
creation/modification or destruction of a legal relation
o NOT CONSIDERATION : Sham consideration – purely labelling it consideration
when it is not a true bargain is not enforceable.
o Consideration does not need to be equitable. (§ 71)
o Actual performance is equally sufficient consideration if begin performing
unilateral offer in reaction to promise, so return performance (Marshall)
 (§ 81) 4. The performance or return promise may be given to the promisor or to some
other person. It may be given by the promisee or by some other person
o Consideration can be given for mixed motives; it doesn’t have to induce or be
induced by the original promise
 § 79 – If the requirement of consideration is met, there is not additional requirement OF…
(helpful as indicator but if you satisfy with bargain for exchange don’t worry about benefit
detriment)
 A gain, advantage, or benefit to the promisor or a loss, disadvantage or detriment to the
promisee ; or mutuality of obligation ;
 Or equivalence in the values exchanged - NOT CONSIDERATION: unless so excessive or
shocking or out of balance with parties’ motives (Dohrmann- your fortune for your last
name being my son’s second middle name)
o Undue influence/unconscionability
 The promisee doesn’t need to know whether or how the promisor is benefiting (Pennsy) things
that look like gifts can contain the seeds of consideration
 Illusory promise
 Words in promissory form that convey nothing – I may or may not. It was so
noncommittal that it was illusory and did not provide consideration.
 A conditional promise where the condition is that the promisor can choose to terminate
or leave at anytime. Since there’s no real statement of commitment, it’s not a real
promise.
o contingency does not mean illusory just bc will or will not happen. If triggering
event of contingency occurs then it is obligatory promise. (Marshall)
 But presence doesn’t necessarily void a contract. Instead, it can turn a bilateral contract
into a unilateral contract where the party who made the illusory promise can accept by
performing on that promise.
 77 - Illusory promises can’t act as consideration. Prediction of future willingness is not
an expression of current willingness and is not a promise.

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 o Agreement to agree
 It is possible to enter into an agreement to later enter into an agreement.
 BUT: it should state the essential terms of that later agreement
 The main question of whether it is binding is whether the parties intended to be bound
 See the duty to bargain in good faith
 § 33 – terms have to be reasonably certain.
 § 27 – existence of contract where written memorial is contemplated
 Manifestations of assent sufficient to conclude contract will not be prevented from
operating by fact that they also intended to prepare and adopt written memorial
 Walker -Agreement to agree is different from formal contract: not enforceable conclusive
agreement if they didn’t agree on a standard. walker is agreement to agree, left future
agreement on direct term. Can’t just leave it “future determine” without specific method of
computation to determine the formula,
 Quake is formal contract contemplating - execution of formal contract later on and resolved most
of the terms, sort of agreement to agree and sort of formal contract contemplation. Showed
intention to be bound with timing, commitment language, cancellation clause,
definiteness/detail of prices/goals.
 Quake – principles concerning enforceability of letters of intent unless parties intend them to be
bound. if the parties intend to reduce their agreement to writing must consider DISCRETIONARY
 Whether the type of agreement involved is one usually put into writing ; the agreement
contains many or few details ; the agreement involves a large or small amount of money ;
the agreement requires a formal writing for full expression of covenants (side promises
resolved) ; the negotiations indicated that a formal written doc was contemplated at the
completion of the negotiations
 Where in negotiating process that process is abandoned, the reasons it was abandoned,
extend of assurances previously given by the party which now disclaims any contract
and the other party's reliance upon the anticipated contract and taken steps on the
contract (evidence of performance/certitude in agreement being finalized)
 Could be both if parties reach agreement on all terms except for delivery dates for future
agreement, then express agreement in principle in a brief letter of intent which contemplates
later execution. Binding to work towards a construction contract
 Miscellaneous specific kinds of contracts
o Contractors and subcontractors
 Principal (sometimes govt) puts out a request for bids (offers) from general contractors
 Subcontractors make offers to the general contractors which are conditional on the general
contractor’s bid being accepted by the principal
 Can a subcontractor’s offer still be binding even after they revoke it?
 Maybe by promissory estoppel if the general contractor detrimentally relies on the
subcontractor’s bid in preparing their bid to the principal
 What if the general contractor tries to shop around for a better subcontractor after their
bid to the principal is accepted?
o Then PE doesn’t apply because the general contractor isn’t really relying on their
promise anymore and because justice doesn’t require enforcement
 Another option: when GC uses sub’s bid it is acceptance of that bid and form bilateral contract
conditioned upon GC being awarded the contract but practical effect is to form contract that
either party can enforce. Neither Baird nor Drennan follow this – not popular
o shrink-wrap contracts
 Layered/Rolling/Easterbrook – sellers prefer this, courts prefer this
 Seller is the offeror in shrink-wrap transaction.
 Contract forms when purchaser receives the goods, inspects the terms they came with,
and retain the purchase for the period dictated by terms of offer.

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  RETENTION/accepting product IS ACCEPTANCE OF TERMS. TERMS ARE NOT ADDITION
BC IN THE PACKAGE THAT IS RECEIVED AND ACCEPTED. As master of offer seller
dictates what constitutes acceptance is in the terms of agreement.
 Would reasonable person have known that return of the product would serve as a
rejection of those terms? (DeFontes)
 Silence by acceptance – if you don’t return the product within 30 days then you agree to
the terms. (Dye v. Tamko)
 When agent acts within scope of his authority, the knowledge or notice he acquires is
imputed to his principal (Dye v. Tamko)
 Klocek nonlayered - consumers prefer this
 Purchaser is the offeror when they select the item on the website with all the terms
upfront and you provoke active assent to those terms. Seller accepts when accepts
payment and promises to ship the item.
 Terms bundled with shipment are ADDITIONAL BC COME AFTER TRANSACTION WAS
FINALIZED.
 Anything else not on the website is a proposal! Extra!
 You defeat ability of seller to add provisions but also inhibit ability to return or avail
yourself of more rights.
o Browse-wrap
 Key factors for browse wrap: trying to get them as close to clickwrap as you can get them… so
website is in effect visible terms of conditions and assent
 Look for adequate notice of proposed terms
 Meaningful opportunity to review those terms
 Indication that specific action will mean assent of terms
 Fulfillment of that third condition, action/behavior by user
 If you visit site regularly, more aware of terms
 Consumer click on download button is not assent if the offer did not make clear to a
reasonably prudent user that clicking on download button would assent to those terms
 This test does not include exceptions – like provider has met terms but still hard for consumers?
o Battle of the forms – parties have forms they use standardized in transactions that don’t necessarily
agree. Forms are time savers
 Under UCC 2-204 - contracts for sale of goods may be formed in any manner sufficient to
showing agreement including conduct by both parties which recognizes the existence of such K
 UCC 2-204(3) prices payable – even though one or more terms are left open a K for sale does not
fail for indefiniteness if parties intended to make K and there is reasonably certain basis for
appropriate remedy
 UCC 2-305 -Open Price Term- Parties intend to include sale even though price is not settled,
price is reasonable price at time of delivery if nothing is said, price is left to them and they fail to
agree, price is fixed by third party/agreed market price.
o UCC § 2-207: Additional terms in acceptance or confirmation
 (1) If an expression of acceptance or confirmation contains additional or different terms, it still
counts as an acceptance UNLESS the acceptance is made expressly conditional on agreement
over the additional or different terms.
 (2) Additional terms in expression of acceptance are seen as proposals for addition to the K.
 (2) Between merchants, additional or different terms become part of the contract UNLESS:
 (a) the offer expressly limited acceptance to the terms of the offer, or
 (b) the additional or different terms materially alter the agreement, or
o Materiality is tested by asking whether the new/different terms result in
hardship or reasonable surprise to the other party.
 (c) the offeror gives or has given notice of objection within a reasonable time

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  Inclusive approach B not part of contract (probably) B is evaluated under 2-207(2) (but
usually excluded as a material alteration, because of surprise/hardship)
 Categorical exclusion approach B not part of contract B is excluded from evaluation under 2-
207(2) (only “additional” terms are mentioned) and left as proposed addition
 Knockout approach Neither A nor B is part of contract A and B are both gone, and courts fill
gap (kind of like 2-207(3), but still assuming the written agreements—not just conduct—
concluded a contract under 2- 207(1))
 (3) Conduct that recognizes the existence of a contract is enough to form one even if the parties
haven’t established mutual assent to the same terms in writing.
 In that situation, the contract is limited to only the terms they agreed to. Everything
where there’s disagreement is kicked out.
  
  Applies where there is an offer and acceptance but where the acceptance adds new terms. How to react in this
circumstance.

  2-207(1) where an acceptance with new terms is an acceptance (unless conditional)

KLOCEK If answer is yes there is an acceptance than the next step is about the terms

KLOCEK 2-207(2) question: are there two merchants?

If at least one or more nonmerchant then the new terms a a proposal, they are already bound to a contract
that does not include this term
If both merchants then we got complications, presumptively in a contract unless we have exception of 1 where
offeror says nope.

NOT If answer to 2-207(1) was no, we don’t have an agreement because written terms do not agree and acceptance is
ROLLING conditional
We go to 2-207(3) we skip 2,
look to see whether parties are agreeing in their contract behavior. What else UCC fills in.

  Rolling approach says offer contains everything bc offer arrived with shrink wrapped tiles or box with dell
terms so acceptance is consumer opening it and retaining it doesn’t propose new terms, accepts what has
been given to them and AVOIDS 2-207(1) ALL TOGETHER
 There are 4 scenarios that fall under § 2-207:
Offer Acceptance K (assuming no How do you approach
other problems)? the problem?
YES expressly NOT expressly Yes, under § 2- Apply § 2-207(2)(a), (b)
conditional conditional 207(1)
NOT expressly NOT expressly Yes, under § 2- Apply § 2-207(2)(b), (c)
conditional conditional 207(1)
Anything YES expressly Maybe (but not IF the parties perform:
conditional because of § 2- apply § 2-207(3)
207(1))
Mutual assent by oral Yes Apply § 2-207(1) and
agreement, followed by (2)(b), (c)
confirmation

o Rejection
 Parties can reject goods they’re given, but it has to happen within a reasonable amount of time
and the buyer must notify the seller that they’re doing so.
PROMISSORY ESTOPPEL
 FIRST DO YOU HAVE AN OFFER? – all we have is an offer
o Classical approach – free to revoke/withdraw before accepted. GC has option to avail itself by accepting.

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  Learned Hand Promise (Baird) – majority for other contexts outside of GC/SC.
 Expecting an equivalent/something in return – Offer for exchange is not meant to
become a promise until consideration is received, either counter promise or whatever
else is stipulated. It is potential promise, it is an offer.
o Offensive use –– Drennan – GC relies on SC bid to prepare its own bid – wants that money back
 Potentially enhances GC power over SC even if it stopped bid shopping
 Reasonable reliance that promisor expects is irrevocable for certain period of time
 Majority rule – 87(2) applies for GC/SC only
o Courts only indulged in commercial bidding §87(2). if the offeror should reasonably expect to
induce action or forbearance OF SUBSTANTIAL CHARACTER on offeree before acceptance which does
induce action is binding.
 Should the offeror reasonably expect to induce this kind of reliance? Reliance was foreseeable
here – it is the nature of the reliance.
o Offer is less than promise but still can rely on. More limited consequence – preserve and establish option
contract, unlike 90 that can be used to enforce main contract. 90 is more versatile .
 Sometimes not enough evidence of voluntary/bargain for exchange so we look to reliance.
 If there was not an offer: Elements: §90
o 1. Was there a promise?
 Is there consideration (K) or supported by reliance (PE)?
 Can be explicit or implied from the promisor’s conduct.
 Like Harvey –Conduct of financial/emotional support fills in blank of earlier promise bc
not specified land/time
 Need more than general, non-specific plan
 Was there a promise to negotiate in good faith? Promise to inform them of material changes in
situation? (Pop Cones)
o Could the promisor reasonably expect to induce action or forbearance in promisee or a 3 rd party?
 If induces such action it is binding if injustice can be avoided only be enforcement
 Promisor acted to induce that action (Aceves)
o 2. Was the reliance to the promisee’s detriment?
 Was there actual reliance?
 Hope or expectation of receiving something that was promised isn’t enough for reliance.
 Did the promise actually make a choice to rely on the promise?
 How substantial? Promisee has to be worse off than if no promise has been made
 initial setback: Katz – quit full time position is detrimental even if get pension and work parttime
 Any change if it would not have been made without the promise
 Change in position/show promise had effect in real world.
o Was it reasonable for the promisee to rely? (to avoid injustice)
o 3. Does justice require enforcement of the promise?
 Requires an injustice that can be avoided only by enforcement of the promise - remedy
situation where reliance on promise led to bad consequences.
 Is there no other land available? Is this the only source of what they need?
 Charitable pledges/subscriptions (§ 90(2))
o A pledge on its own is no more enforceable than any other promise. Look for consideration (K), reliance
(PE), or maybe promissory restitution but probably not.
o Bailor/bailee - If the promisor actually puts the promised goods in the promisee’s custody, that is strong
evidence of donative (gratuitous) intent. (King)

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 o § 90 (2) A charitable subscription or a marriage settlement is binding under Subsection (1) without
proof that the promise induced action or forbearance – JUST NEED TO SHOW PROBABILITY OF
RELIANCE - Bc greater need to rely on pledges and harder to evidence on particular gifts
 Can PE enforce assurances made during K negotiations if the parties don’t end up forming a contract?
o Yes. But it can be a lot harder to establish reasonableness of reliance depending on how well the
promisee understood that the contract had not yet been formed.
 Judgment of this can depend on how competently the promisee was being advised
 also depend on whether the promisor acted in good faith or was trying to mislead the promisee
RESTITUTION & PROMISSORY RESTITUTION
 LIABILITY UNDER IMPLIED CONTRACTS
o implied in fact contract
 REAL CONTRACT where mutual assent inferred in whole in part from parties’ conduct not solely
from their words
 Plaintiff gets contract based on expectation, damages amount should have received
o implied in law
 Obligation CREATED by law without regard to either party’s assent either by words or acts
 Do not arise from traditional bargaining, rest on legal fictions of consideration of justice
and unjust enrichment!
 GENERAL RULES OF CONTRACTS DO NOT APPLY TO THEM!
 Restitution IS QUASI CONTRACT – get back value of services, restore what given to someone else
 Non-Promissory Restitution/ quasi in contract/ unjust enrichment/ quantum meruit/constructive K
o Elements: (Commerce)
 1. Did the plaintiff confer a benefit on the defendant? Like Wealth enhancement?
 Is there a clear and reasonable expectation of compensation?
 2. Defendant has knowledge of the Benefit
 3. Did the defendant accept and retain the benefit?
 4. It would be inequitable for defendant to retain benefit without paying fair price
 Recovery: what’s the fair market value?
 Exception: if the benefit was wealth enhancement, recovery is based on the specific value
of that enhancement
 5: additional criteria; exhaustion of remedy (Maloney)
 1. Have you exhausted remedies against contractor you have contract with?
o Must go through all processes before bringing against owner
 2. You have owners receipt of benefit conferred without paying consideration to anyone?
o Not about getting money that is due; taking back from someone who should not
retain it
o Were the benefits part of a contract?
 If they are, then they can’t be recovered by restitution unless the contract was breached.
 you can’t claim restitution just because you’re unhappy with the terms you agreed to in a K.
o Emergency rescuers
 Instead of intent to charge after – focus on if there are professional services being provided.
 Focus on reasonable value of serviced received: Can recover if you protect someone’s property,
doesn’t have to be just life or health
o FIRST §116 entitled to restitution if he acted
 1. inofficiously with intent to charge after
 Unwelcome/inappropriate interference with someone’s affairs
 Did not act in way to benefit yourself –

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  Can’t recover: if you help someone who got hit by car, you cant sue them bc you didn’t do
with intent to charge
 2. Necessary to prevent other from suffering harm and pain
 Prospective -Pelo he was not fit to leave when hospitalized
 3. Person supplying had no reason to know that other would not consent
 4. Impossible for them to consent bc mental impairment
 Provide service in good faith
o Cannot go beyond what is necessary – act in good faith and reasonable tailored to that person’s benefit
 Promissory Restitution / Moral Obligation
o § 86 - Under 86 is promise enforceable? Elements:
 1. Was there a promise?
 2. Is promise based on a previous and recognized material benefit from the promisee to the
promisor? (Mills – it was the son who benefited not the dad)
 3. Did the plaintiff intend to be compensated?
 4. Did the plaintiff act under legal duty?
 5. Recovery: NECESSARY TO PREVENT INJUSTICE? what’s the amount that was promised?
 86 (2) Promise is not binding if (THIS IS what defendants will argue)
 Promisee conferred benefit as gift or other reasons the promisor as not unjustly enriched
 The value is disproportionate to the benefit
o moral obligation is sufficient substitute for consideration if -
 If you promise to pay for prior action it is effect of prior request FOR THAT ACTION and serve AS
FUNCTIONAL EQUIVALENT OF CONSIDERATION (McGowan)
 §82. If you agree to pay your debts that when the statute of limitations passed you've revived it
with a promise.
 §83 Debt in bankruptcy – promise to pay all or part of indebtedness of promisor, discharged in
bankrupty before promise was made, is binding.
 Contracts made by minor - enforced promise to pay
 Bargain for exchange at some point and the promise merely revives this preexisting obligation
and makes it enforceable again
o The promise used to argue promissory restitution can’t also be used to argue contract or promissory
estoppel because the latter are concerned with benefits given after a promise while the former is concerned
only with benefits given before a promise.
o Can apply with mistakes – benefit conferred to another by mistake inadvertently wrong party or
ADDITIONAL service beyond obligation.

Statute of Frauds – affirmative defense

 The statute of frauds requires certain kinds of contracts to be signed in writing to be enforceable.
o Satisfying the SOF doesn’t automatically make an agreement binding; it’s just an extra barrier
o If contract falls WITHIN SOF AND its not in writing THEN generally not enforceable
o If contract DOES NOT fall within SOF then need not be in writing – oral agreements are ok!
 1. Evaluate whether contract exists – mutual assent/consideration
 2. Then evaluate separate SOF defense
o 1. Is the contract WITHIN SOF? FORBID ENFORCEMENT UNLESS IN WRITING §110
 Executor/admin provision
 Suretyship – contract to answer for duty of another
 Marriage provision
 Land provision
 Does not apply to leases
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  §129 – enforced if established that party seeking enforcement reasonable reliance on
continuing assent against party whom enforcement is sought has so changed position
that injustice can be avoided only by specific enforcement
 ONE YEAR PROVISION – contract cannot be performed within one year from making thereof
 if only way contract to end before one year is for breach then within SOF – not sufficient
to say it may be terminated – only performance counts
 Contracts that are indefinite length are excluded
 If possible to perform within one year according to terms, not within SOF
 Idea is witnesses cannot be trusted to testify to events from long ago so need in writing
 ONE YEAR PROVISION DOES NOT APPLY IF P HAS ALREADY FULLY PERFORMED
 SALE OF GOODS FOR $500 OR MORE -
o 2. If within, is there sufficient memorandum to comply with statutory writing requirement?
 IF YES THEN ENFORCE.
 must contain essential terms – including price
 Can use PER to establish memoranda
 §131 – 1. Reasonably identifies the subject matter of contract, 2. indicates that a K was made
between parties or offered by signer to the other party; 3. And states with reasonable certainty
the essential terms of the unperformed promises in the contract
 §132 – several writings – if one of the writings is signed and the writing in the circumstances
clearly relate to the same transaction
 §133 – statute may be satisfied by signed writing not made as a memorandum of the contract
 §134 - Need signature of party to be charged with enforcement– symbolic signatures are fine
o 3. If within, and not sufficient writing, IS THERE AN EXCEPTION?
 Part performance
 Brumlow – within SOF bc sale of land, no writing, so buyers invoke partial performance
exception.
 Unequivocally reparable – part performance only explained by existence of contract
o 1. Taken possession
o 2. Valuable improvement
o 3. Performance cannot exclusively be made with contract
 What objective observer think is natural and reasonable to know
 PE exception to SOF EVEN IF K CLAIM? YES (Alaska v. Rice)
 § § 139 (2) – adapting theory of 90 PE to SOF –
o Performance must lead an outsider to naturally and rxably conclude that the K
allegedly actually exists
o promise detrimentally relied upon which would be unjust not to enforce + no SoF
(may be oral K)
o Factors to det. whether injustice can be avoided only by enforcement of promise:
 Availability and adequacy of other remedies (cancellation and restitution)
 Subst’al and definite char of the forbearance
 Is there evidence of the terms of the promise/ that there was a promise
 Rxableness of forbearance
 Reliance is reasonable
 129 for land
 Did justice inspire specific performance?
 Establishes something that looks like PE
 Link to remedy - Brumlow – pursuit of specific performance is sign of authenticity
INTERPRETATION
 Principles of interpretation
o Text oriented - words are best indicator of their intent
 Use ordinary and technical meanings as appropriate - 202(3)
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  Words are known by the company they keep - know by associates,
 Latent ambiguity – established by something that seems like you know what it means
until you look at context
 Patent ambiguity – one fact don’t know what it means like gibberish terms
 Expressing one excludes the others - if you omit one then that one is barred, meaningful
exclusion.
 Esjudem generis - Specific term illustrated by general term - series of soft drinks and you
say in the end "and other beverages" implied you mean other soft drinks not like wine or
beer bc you know the specific illustrations refer to soft drinks
 Threshold of ambiguity - courts have this plain meaning rule that if we can tell what
language means we won’t pay attention to the stuff below
 establish latent - need context or patent - the word itself doesn’t make sense
 Ambiguity should be resolved against the person who drafted the agreement (Joyner)
o Intent oriented (Frigaliment)
 Purpose of parties §202(1)
 If you can ascertain it is great weight
 Interpret K as whole §202(2)
 Don't take things out of context, try to understand meaning of terms as they are
illustrated by parallel uses, or internal inconsistency is good signal that something wrong
 Interpret K to make valid §203(a)
 Lawful and effective and enforceable
 Refers to legality but also reasonableness and efficacy
 Specific governs over general §203c
 Esjudem generis - Specific term illustrated by general term - series of soft drinks and you
say in the end "and other beverages" implied you mean other soft drinks not like wine or
beer bc you know the specific illustrations refer to soft drinks
 Idea is the intent.
 Indicates that caterer has discretion over snacks provided, and seems to indicate
discretion for dinner, but another provision that you must avoid peanuts bc the bride is
allergic, then you think that provision will exclude caterer's ability of discretion for
snacks bc dominate over that general
 Handwritten trumps printed §203(d)
o Extrinsic evidence of intent
 Course of performance §202(4) (UCC 2-208)
 Conduct between the parties as it relates to that particular agreement
 Course of dealing §223 UCC 1-205
 Previous conduct between the parties – previous contracts?
 Trade usage §222 UCC 1-205 (frigaliment chicken)
 What is going on in commercial context
 Both parties invoke this – does one party not have as much trade knowledge?
o Principles not related to intent
 Interpret ambiguities against the drafter – §206
 Way to repair for a tendency in negotiation of K where one party chooses the term of the
contract they are likely to choose terms that favor themselves and protect their interest
rather than other party
 More likely to know of uncertainties in meaning and may leave something deliberately
obscure if to their advantage - not used too much
o Interpret K to favor the public interest §207
 Not to serve party's interests, to serve the general public.
 Party autonomy in K. circumstances where public also has a say in how contract is interpreted.
 Where public franchise is conveyed and govt is giving away vending right at a national
park, this is constrained narrowly for sake of public.
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 o Plaintiff has burden of proof to prove their interpretation so if both arguments are equally persuasive
then defendant wins
 Parol evidence rule (MUST DO ALL 3 STEPS) (applies to K, PE, NPR/PR)
o we want degree of certainty about written agreement
o 1. What is the level of integration? (court determines)
 How to determine
 writing itself cannot establish own completement
 §214- can USE PE TO FIRST DETERMINE INTEGRATION. Better fuller understanding of
evidence before you cut off inquiry into the PE. Corbin/Taylor–
 use PE extrinsic evidence relevant to issue of whether PER can be used. (Taylor)
 -restrictive- “four corners” ON ITS FACE LOOKS COMPLETE – THEN COMPLETE
 Completely integrated – complete and exclusive statement of terms and agreement
 Merger clauses in a written document expressly stating that it is completely integrated,
final statmenet with no oral modification except with written permiss by both parties
o They are some evidence of complete integration, but they’re not conclusive
 CANNOT ADD NEW TERMS TO FINAL AGREEMENT.
 Partial integrated
 §210 – final statement of some terms but not all the terms
 §216 - Allows prior negotiations/ additional that are consistent to interpret agreement
 Not integrated – none of the terms are finalized
o 2. What is the permissible use?
 if completely integrated
 §215 - cannot introduce Parol evidence to add/change because everything is finalized
 Whole point is that writing is final so cannot supplement or vary it
 Is language reasonably receptible to the meaning? Apparent? (Taylor)
 If partially integrated
 Final and conclusive of some terms so cannot use PER to contradict those fully expressed
terms
 Can intro evidence if supplemental to additional term or something that was not yet
finalized
 If not at all integrated
 Then PER does not apply and evidence of ANYTHING can be brought in to contradict
writing. Everything is contestable!!
 Writing itself is not good indicator of agreement
o 3. What are the exceptions? (Sherrodd)
 The Parol evidence rule does NOT cover evidence that would invalidate the contract
 Lack of consideration; Fraud – accepted narrowly but limited where parties have taken
extra step with merger clause; Duress; Illegality
 The Parol evidence rule also does not cover orally agreed-to conditions precedent for
performance of the contract
 PER does not cover agreements after the final agreement.
 EVIDENCE OF PRIOR AGREEMENT CAN BE USED TO EXPLAIN TERMS even if fully integrated
Supplementing the Agreement
 Rationale for Implied Terms
o If parties don’t anticipate the need, or know that standard terms are implied on their behalf and one
knows that and chooses not to alert the others.
o Courts don’t write the contracts for parties
 tailored default -Apply term parties would have agreed to if had bargained or thought about it
 Or if majority of parties in this type of arrangement would choose this term
 Courts can apply for fairness, efficiency, public policy

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 o Reasonable efforts are implied bc needed to establish consideration and intent, especially if implied
promise results in business efficacy- can’t make money without effort (Wood v. Lucy)
 Don’t need implied promise when you have performance in unilateral contract
o If one party makes nonbinding, illusory promise that reflects a rational bargain it should be made
enforceable according to those terms
 party making non-illusory promise bargained for chance to show its performance is attractive
 Implied obligation of good faith
o § 205. - Every contract imposes upon each party a duty of good faith and fair dealing in its performance
and its enforcement.
 Disclose material facts, Put forth an honest effort to perform to specifications, Don’t abuse
bargaining power, Act cooperatively, diligently, and reasonably
o Plaintiff has to show improper motive, intent to harm, unreasonable actions OR in violation of
commercially reasonable standard
 Judged in light of proof regarding defendant state of mind and context from which claim arose
o Good faith in output and requirement contract
 Output – require buyer to buy all of widgets that seller produces, seller can’t sell to other buyers
 Requirement contract – buyer buys everything IT NEEDS to produce a widget from one seller,
but seller can sell to other buyers
 Don’t abuse terms of relationship. Don’t deliberately under purchase or oversell to frustrate.
 Fundamental notion that party to contract may not unreasonably frustrate its purpose
o 1. When the contract does not provide a term necessary to fulfil party expectation
 See Wood – reasonable efforts – imply term to protect and fulfil expectations
o 2. When bad faith served as pretext for exercise of contractual right to terminate
 When termination or some other action is in bad faith
 Seidenberg – look at nature of alleged breach and the commercial context
 Locke v. Warner – implied covenant is limited to assuring compliance with express terms of
contract, cannot be extended to create obligations not contemplated in the contract
 No covenant of good faith and fair dealing can be implied which forbids the acts and
conducts authorized by express terms in the contract
 Right to refrain and right to e
o 3. When contract expressly provides a party with discretion regarding performance
 Limit on discretion of party conveyed by express terms of contract
 Like satisfaction clause
 § 228. Satisfaction of the Obligor as a Condition (MAJORITY) if practicable to
determine whether reasonable person in obligor position would be satisfied, use
this objective test. JURY DECIDES.
 Sometimes, a contract will say that the other party’s work must be accepted as
satisfactory before payment/other terms are fulfilled.
 How do you determine whether the work is acceptable? Look at kind of contract:
o If the work is about functionality: (Morin-GM wall case)
 Use an objective standard. Would a reasonable person in that party’s
position accept the work?
 Some can still use boilerplate stuff to overcome this preference, look if
merely form language or designed to give party aesthetic
o If the work is creative or about aesthetics:
 Use a subjective standard. Was that party actually satisfied?
 GIVES THIS PARTY A LOT OF POWER
 BUT: the accepting party is still bound by duty of good faith. They’re free
to reach any conclusion they want but have to reach it fairly and honestly.
Defenses to Avoid Enforcement: the Bargaining Process
 Other than being voidable bc the individual lacked ability to consent for age/mental capacity/intoxication
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  BALANCE WITH THE INTERESTS OF FREEDOM OF CONTRACT AND PRIVATE DISPUTE RESOLUTION
 1. Duress
o R § 174 - By Physical compulsion – traditional type
 If assent to K is induced by physical compulsion, K is void, no K has been formed and law will not
enforce it regardless of whether party wants to ratify it later.
o R § 175 - By improper threat -
 1. Wrongful/coercive acts or improper threats by the other party
 2. Inducing involuntary assent of wronged party
 3. With circumstances permitting no alternative
 If assent to K induced by improper threat, K is voidable – can choose to void it, they are binding
unless disaffirmed
o What is an improper threat? (R § 176)
 Threat of a crime OR of a tort or of criminal prosecution
 Bad faith threat of a lawsuit
 Threat which is a breach of the duty of good faith under an existing K (TOTEM)
 If the terms of the K are unfair, then:
 Threats which hurt the threatened party but don’t help the party making the threat
(threats made just to hurt someone) (Odorizzi)
 Threats which are enhanced by previous unfair dealing
 Threats of use of power for illegitimate ends
 2. Undue Influence (R § 177)
o Undue influence:
 Unfair persuasion (excessive or high pressure) + Domination (undue susceptibility) or
confidential/SR
 SR - who by virtue of the relationship is justified in assuming that the person won’t act in a
manner inconsistent w/ his welfare : SR/ Fiduciary Duty/ Trusted advisor
o Remedies
 UI by other party: voidable by victim
 UI by 3dP: voidable by victim, unless other pty acted in good faith and relies on transaction w/o
rxn to know of UI
o Markers of UI (need multiple but not all) (Odorizzi v. School)
 Inappropriate location / time
 “Must do it now” / Extreme emphasis on bad consequences if there is a delay
 No access to advisers / Multiple persuaders
 Person who made the decision didn’t make a voluntary indp decision
 Didn’t give effective consent
o Does not require nefarious intent or belief that they are doing something agst the law
o No Reliance required
o Inverse relationship: The weaker the victim, the less force needed
 3. Misrepresentation and Nondisclosure (R § 162-69)
o Examples
 Actual fraud is fraudulent inducement – Syvester and R § 164
 Fraudulent nondisclosure – fraud by silence, R § 161
 Fraudulent concealment – Hill v. Jones , R § 160
 Misrep of material facts as basis for action to rescind even if made innocently under R § 164
o Elements of a misrepresentation claim
 1. Fraudulent intent OR (non-fraudulent) materiality of misrepresentation : (R § 162)
 Fraud when consciously false and intended to mislead
o 1. Knows or believes that assertion is not in accord with facts

16
 o 2. Does not believe his own assertion
o 3. Knows that he does not have the basis for his assertion
 Material when – likely induce a reasonable person to manifest his assent OR INDUCE
THIS RECIPIENT TO DO SO
o EASIER TO PROVE THAN FRAUD- question for jury
 2. Justifiable reliance
 Not justified unless (R § 169
o 1. Fiduciary trust relationship
 With fair terms(R § 173)
 And all parties beneficially interested manifest assent with full
understanding of their rights
o 2. Or reasonably believe that the person has special skill/judgment or objectivity
of the subject matter as compared to themselves
o 3. Or is particularly susceptible to misrepresentation of type involved (old lady
Syvester)
 3. That induces recipient assent
o Opinion is misrepresentation when (question for jury)
 Opiner does not honestly believe it (R § 159) or Opiner falsely implies that it does not know facts
incompatible with opinion or opiner knows facts supporting it (R § 168(2)
 When relying is justified bc confidential relationship under (R § 169a
 OR REASONABLE BELIEVE IN SPECIAL SKILL/JUDGEMENT 169b
 Or opine is particularly susceptible to misrep of that type 169c
 Can rely on an opinion as to facts not disclosed or otherwise unknown if you lied about your
state of mind: (R § 168)
o Remedies if K is found to have misrepresentation § 164
 1. Rescission: avoid enforcing K
 Injured party must return any benefits received
o If cant, then cant rescind
o If misrep. by 3dP, the K is voidable unless the other pty to the K acted in good
faith and w/o rxn to know of misrep and relies materially on the K.
 2. Restitution: tort action for damages to compensate
o Nondisclosure (R § 161): fraud by silence
 § 161: non-disclosure is equivalent to affirmative misrep that a fact doesn’t exist only if
 (a) where A knows that disclosure of the fact is necessary to prevent some previous
assertion from being a misrepresentation or from being fraudulent or material.
 (b) where A knows that disclosure would correct a mistake B as to a basic
assumption and if non-disclosure of the fact amounts to a failure to act in good
faith/fair dealing. (Hill v. Jones – termite damage)
 (c) where A knows that disclosure of fact would correct a mistake of B as to the
contents or effect of a writing, embodying an agreement in whole or in part.
 (d) where B is entitled to know the fact because of a relation of trust and confidence
between them.
 elements
 D has knowledge of material facts that P did not and could not have discovered thru
rxable diligence
 D was under obligation to communicate these facts to P
 D intentionally failed to communicate to the P material facts
 P relied on D to communicate those material facts
o Non material facts become material once party asks about them
 P sustained damages as a result of D’s failure to comm. Mat. facts.
 Factors to consider to determine whether fairness requires disclosure

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  Diff in intelligence b/w parties/ Fiduciary relationship: Terms of the transaction must be
fair and must be fully explained to the other party. Must prove compliance.
 Manner in which info was acquired (chance v. effort)/Whether fact was discoverable
 Whether person failing to make disclosure was seller
 Materiality of the fact/ Was there active concealment.
 Then plug this into misrep and talk about justifiable reliance
o Fraud (Park100 v. Kartes)
 Elements of the tort of fraud: if one is strong, can have wiggle room with others
 1. Misrep of a material fact - substantially contributes to the decision to manifest assent
 2. Scienter: bad intent: Either intent to defraud or reckless disregard for the truth
 3. Rxable reliance on the misrepresentation
o Don’t have to read document and instead rely on representation - Different than
usual duty to read the document like in Ray v. Eurice bc time constraints,
circumstances portrayed as exigent.
 4. Loss caused by the misrepresentation
 objective standard: would a rxable person believe the misrepresentation to be material?
 Subjective standard: did the person making the statement know that it would induce assent?
 Remedies:
 Fraud: only if a tort, punitive damages
 Rescission: K’al remedy;
o right to avoid enforceability of the K
o Injured party must return any benefit received
 4. Unconscionability (R § 208): K that is unrxably favorable to one and lack meaningful choice for the other
o Unconscionability is tested on a sliding scale; it can be any combo of procedural and substantive as
long as it adds up to a K which is sufficiently unconscionable
 Doesn’t need to rise to the level of shocking the conscience, but it needs to be pretty bad
 Determined by the total circumstances
o 1. Procedural unconscionability: defect in bargaining process
 A K may be procedurally unconscionable if the parties had seriously unequal bargaining power
when the K was formed. Ex. Adhesion K - take it or leave it
 Consider relative sophistication of the parties and who drafted it
 Suggests lack of meaningful choice, evaluated by what is available at time K is made
 Whether a K is an adhesion K can be evidence of procedural unconscionability but it’s not
conclusive on its own
o 2. Substantive unconscionability: unfair terms (Higgins – foster kids tv studio)
 Is K unfairly One sided?
 Only binds one side?
 Does it shock the conscience?
o UCC 2-302 factors (Williams -furniture case)
 Terms considered in light of general commercial background and commercial needs
 Reasonableness of fairness
 What do businesses in the area usually do? Is it a common kind of clause or term?
 Are the terms so extreme that mores and business practices would think you are a fool or
madman? No honest or fair person would sign it.
o What happens if K found unconscionable?
 § 208/ ct may refuse to enforce or enforce remainder of K w/o the unconscionable term, or limit
the application of any uncons. Term to avoid uncons. Results.
Justification for Nonperformance = perf. is not due
o Mistake (R §§ 151-54) constructively allocate risk for unanticipated contingencies
 Who bears the risk of a mistake under 154?
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  risk is allocated to him in agreement “As is” clause = sometimes no relief on mut. Mistake
(dep. On ct)
 Or party aware that at time mistake was made he only had limited knowledge but treats
as sufficient, went ahead: Was there due diligence?
 Or when: the ct determines it is rxable to allocate it to a certain pty based on facts.
(better positioned to discover relevant facts and prevent mistake – typically the seller or
contractor who drew up specifications.
 Mutual mistake (R § 152)
 A K is voidable by a party if:
o When the K was formed, both parties were mistaken about a basic assumption on
which the K was formed, and
 Basic – FUNDAMENTAL assumption of K – like barren v. pregnant cow
 Collateral – quality or value, not as important, no Rescission allowed
o The mistake had a material effect on performance, and
 Advantageous to one party ad bad to other party
o That effect was adverse to the party claiming mistake, and
o The party claiming mistake didn’t bear the risk of the mistake under § 154
 Remedy: Rescission of K, along w/ restitution when appropriate OR Reformation: if the
mutual mistake is in the express K, to match parties’ intent. Must be convincing evidence
 Unilateral mistake (R § 153)
 A K is voidable by a party if:
o Unilateral mistake
o about a basic assumption on which the K was formed, and
o The mistake had a material effect was adverse to the mistaken party, and
o The mistaken party didn’t bear the risk of the mistake, and
 Risk allocated by agreement – as is
 Party aware it lacked knowledge and went ahead
 Court assigns risk
o Either:
 The mistake makes enforcement unconscionable, or
 substantive – oppressive, severe, inflict hardship
 The other party had reason to know of the mistake, or
 PALPABLE MISTAKE – knew other’s mistake, duty to tell them
 The mistake was the other party’s fault
 Parallel unilateral mistake – PEERLESS
 If a bid is 50k lower than the next lowest bid, should hint that a mistake was made
 What if a mistaken party is at fault for their mistake? (R § 157)
 Negligence doesn’t necessarily prevent recovery as long as acted in good faith
 But if the fault rises to the level of willful ignorance or gross negligence then that party
probably bears the risk of mistake under R § 154.
 For unilateral mistake, gross negligence on the part of the mistaken party is a per se bar to
recovery. The courts will never grant rescission in that case.
 Mistake of Fact but NOT mistake of judgement
o Changed Circumstances
 Occur b/w the making of the K and the time set for performance - NOT SAME AS NONPERFORM,
goal is to transfer loss from one side to the other.
 Impracticability – no longer makes sense for party to perform
 If a party’s performance becomes impracticable b/c circumstances change in a way contrary
to basic assumptions of the K
o Unless any of the following: §261
 The parties could have foreseen the changed circumstances
 The parties allocated the risks in the K
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  long term contracts allocate for market changes
 The party asking for rescission was at fault for the changed circumstance
o Courts are also less likely to grant rescission if the party asking for it could have
protected themselves through something like insurance
 Elements: Disadvantaged pty must show
o Subst’al reduction in value of K : extreme and unrxable difficulty
o b/c of occurrence of an event, the non-occurrence wh/ was the basic
assumption of the K
o w/o the pty’s fault
 Could not be protected by due diligence
 Was not FOS or at least unFOSeen
o Pty seeking relief does not bear the risk of the occurrence under the lang. Of the K or
surrounding circumstances
 For performance to be impracticable, it must involve extreme & unrxable difficulty
 Commercial impracticability (Hemlock)
o Courts don’t like granting rescission based on changes in markets or the economy.
 If they did, then every time the economy shifted, tons of people would use it
as a way to get out of their Ks
 Impossibility – not very common
 Must be literal, objective impossibility (“no one can do that” rather than “I can’t do that”).
o 262: death or incapacity of person necessary for performance
o 263: destruction, deterioration, or failure to come into existence of thing necessary
for performance
o 264: gov’t order or regulation preventing such acts
 Frustration of Purpose
 The exchange called for by the K had lost all value to the D b/c of supervening change in
extrinsic circumstances (R § 288 & 265
 Elements
o Supervening events frustrate the PRINCIPAL purpose without that party’s fault,
o the non-occurrence of which was a basic assumption on which the contract was
made
o remaining duties to render performance are discharged
 Like impracticability, but replace impracticable performance with frustration of the principle
purpose of the K
 Mel Frank – if you can still use the lease for some of your initial purpose like to store
chemicals and you can’t store just a certain kind of chemical, then not frustrated purpose
 The principle purpose of a K has to be something more specific than general ideas like
“mutual profitability”
o Almost every K is for the purpose of mutual profitability. If the court allowed
rescission every time a K became unprofitable for one party, that would be bad
 if you got a hotel room to see a coronation but the coronation got postponed, you don’t need
that hotel room anymore on that date, the value of the other side’s performance has dropped
o Modifications of Contracts
o Restatement § 89
 Modifications to Ks normally DO need new consideration in order to be binding
 One way to make this happen: terminate the original K and sign a new one with the
modified terms (then the original consideration is enough)
 Can’t promise to do the same thing as the original agreement and regard that as a modified
contract with additional payment, there is no sufficient consideration – (Alaska Packers)
 a similar performance is consideration if it differs from what was required by the duty in
a way which reflects more than a pretense of bargain § 73.
 BUT: sometimes a modification is binding even without new consideration (R § 89)
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  Binding without consideration if:
o The modification is fair & equitable given changed circumstances, or
o A statute says it’s ok
o justice requires enforcement in view of material change of position in reliance on
the promise.
o UCC § 2-209
 Modifications to Ks DO NOT need new consideration in order to be binding
 SOF
 Modifications must comply w/ the SOF
 Majority: Any modifications require a writing
 Minority:
o A writing is only required if the quantity is changed OR if the change raises the
price above $500
 Because the only term required to be in writing for the UCC SOF is the
quantity term, and the UCC only requires writings for Ks for over $500
 No-oral-modification clause:
o Creates a private SOF governing modification by requiring that all modifications
be in writing. 2-209(2)
o Can be waived if pty shows that it detrimentally relied on oral arg.
Overcome by actual performance.
Consequence of Non-Performance
o When is performance of that duty due?
 Conditioned duty: Usually not due unless something specific has taken place
o What Didn’t Happen
 Promise
 A promise imposes an obligation on a particular party
 When time of performance comes and there is not satisfactory performance, it is a breach.
 Failure to fulfill a promise is a breach
 But breach doesn’t necessarily terminate the K or excuse the other party from performing
 Express Contractual Conditions (§225
 Express condition: express terms of the agmt that will state that perf. Is not due unless, if, or
until some expressly specified event has happened. K term that has an operating force
o Created by the parties themselves
o Must be stated in unambiguous language = Only enforced if unambiguous
o Must be literally performed; substantial performance not enough.
o If the condition isn’t fulfilled by the time performance is due, then the party the
condition protects may terminate the K
 Promissory condition
o A promissory condition is a condition backed up by a promise
o It’s a condition but it also imposes an obligation on a particular party to satisfy the
condition
o Failure of that party to satisfy the condition is a total breach AND the injured
party may terminate the K
 How do you know whether a term is a promise, condition, or promissory condition?
 If it puts an obligation on one party, it’s a promise.
 If it seems to determine whether the K will go forward, it’s a condition.
 If it does both, it’s a promissory condition.
 Remedies for failure of promises, conditions, or promissory conditions
 Breach of promise – gives you opp to claim damages
o Allows party to stop its work if material and total

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 o Something can be neither promissory nor condition, could be event described by
contract, important but not discharge of duties
 Condition
o Non occurrence of condition does not give claim to damages but release you from
performing contract
o Not a breach unless under a duty that that condition occur (§225)
o Failure to secure expressed condition means other side does not have to perform
 Promissory condition
o Claim for breach AND K discharged
o Have express condition and duty to pursue that condition in good faith
o Was the condition waived or excused?
 temporary impracticability
 if accounts for relevant deadlines, would make difference if totally unexpected
 disproportionate forfeiture – §229
 the cost associated with failure of condition is too great so courts excused
 denial of compensation that results when oblige loses right to agree exchange after relying
substantially in preparation for performance
 Weigh importance, risk and balance of interests in excusing condition
 Unless occurrence was material part of exchange we are not inclined to excuse its
nonoccurrence on basis of forfeiture
 Prevention
 Requires breach/wrongful conduct by obligor materially contributing to non-occurrence
 When party breach of non-performance contribute materially to the nonoccurrence of the
condition then the non-occurrence can be excused
o So if you study for the bar and law firm agreed to pay for bar review at it did not, they
contributed to the nonoccurrence of passing the bar
 Waiver §84
 A condition can be waived by the party it protects: parties whose performance is conditioned
 Material conditions are not waivable unless other party oblige has given consideration for
waiver or relied on it
 If both parties’ performance are conditioned, either one of them can invoke the non-
occurrence of that condition as grounds for their own nonperformance.
o If condition is only one side’s duty than party can waive duty by itself
 Retraction
o A waiver can be retracted, unless:
 There was consideration for the waiver (which really makes the waiver a
modification), or
 There was reliance on the waiver (i.e. promissory estoppel)
o Material Breach
 Full performance -not a breach, other side must perform
 Partial (§ 235)
 P must continue performance but may sue for direct damages under §236
 substantial but defective performance, so other side cannot stop
 Guideline: If the breaching party has completed around 90% or more of their performance,
breach is probably just partial
 Material (§237)
 P may suspend performance & demand a cure for the breach
 Generally, a party is in material breach if they fail to substantially perform
 Factors to consider: (R § 241)
o To what extent is nonbreaching party deprived of expected outcomes?

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 o Can nonbreaching party be compensated adequately by getting partial breach or
direct damages?
o If there is a declared material breach, to what extent will breaching party suffer
forfeiture? (balance w/ 1 & 2)
o Likelihood breaching party is willing cure the breach (Good faith & fair dealing)
o Extent to which breaching party acted in good or bad faith (Good faith & fair dealing)
 Willful transgression is not substantial perf, so at the min. Material breach
 Total Breach (§242)
 P is discharged from the K & may seek all breach remedies §243
 When is a breach total? (R § 242) Meet one of the factors in R § 241
o To what extent is nonbreaching party deprived of expected outcomes?
o Can nonbreaching party be compensated adequately w/ partial breach or direct
damages?
o If there is a declared material breach, to what extent will breaching party suffer
forfeiture? (balance w/ 1 & 2)
o Likelihood breaching party is willing cure the breach (Good faith & fair dealing)
o Extent to which breaching party acted in good or bad faith (Good faith & fair dealing)
 How likely can nonbreaching party make be prevented from making
rxable substitutes if there is delay in perf ?
 Is there a “time is of the essence” clause?
 R § 243: When the promisee’s expectations under the K have been
completely dashed and may have the right to terminate the K
 A breach by non-performance + repudiation => total breach
 Otherwise:
 A breach is total if it’s bad enough to justify terminating the K
 Would failing to terminate the K make it hard for the non-
breaching party to find substitutes?
 Does the K indicate that the parties needed performance to be
faster than this?
 Results of a Breach:
 In all instances nonbreaching party CAN SUE FOR DAMAGES
 Constructive Conditions of Exchange: Each party’s duty of perf is implicitly conditioned
on there being no uncured material failure of performance by the other party
o R § 237 Comment: SO if party A breaches their promise and fails to perform as
promised, then B’s performance of B’s duties are prevented from being due temporly
o If A’s failure to perform is never cured, then B is discharged from his duty to perform
o Minor or immaterial deviations from K provisions =/= failure of a condition to the
other party’s duty to perform
● Anticipatory Repudiation
o Anticipatory Repudiation: advanced refusal to perform, before actually due.
 Repudiation is total breach: gives rise to claim for damages and discharges other party’s
remaining duty to render performance §253
 Repudiation must be clear and unambiguous to be effective
o Courts don’t like reading things as repudiations when they don’t have to
o Wrongful repudiation: P repudiating as a result of a D’s partial or material
breach=> P committed total breach and is L for the K
 R § 243: any nonperf +statement of repudiation = total breach
 Could be implied expressed R § 250
 Expressly: written or oral statement indicated that obligor will commit a breach that
would of itself give the obligee a claim for damages for total breach under §243
 Implied: by conduct = affirmative act renders obligor unable to perform w/o such breach
o Makes performance practical impossibility
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  Financial difficulty that impairs perf. does not count
 Whether repudiation occurred is determined By a case-by-case basis
o Repudiation and retraction: “we’re done”
 Retraction of repudiation R § 256
 A repudiation can be retracted until:
o The repudiating party has notice that the other party has taken the repudiation
as final, or
o The other party materially relies on the repudiation
 Practical tip:
o If the other party repudiates and you want the repudiation to be binding, you
better give them a prompt response (or else they might be able to retract it)
o Demands for Assurance of Performance (R § 251)
 Elements:
 Rxable belief/insecurity that the other party will totally breach
o Must be based on circumstances that occurred after the K was formed, cannot be
about something that was known before
 Rxable request for assurances that the other party will perform
o Restatement: request need not be in writing
o UCC: unclear if writing is required, though preferred
 If that happens:
 Then the requesting party can (if rxable) suspend performance until they get the
requested assurance
o Rxable assurance deps. On the circumstances
 If the other party fails to respond in a rxable time (UCC: not more than 30 days):
 Then the requesting party can treat the other party’s actions as a repudiation (i.e. total
breach)
o Courts don’t like finding total breach this way, but they will if the breaching party
acted badly enough
Remedies
● 3 Types of Damages
o Expectation, reliance, and restitution are alternative forms of damage recovery under Rest. 344.
The plaintiff can make claims for all three, but he will only be allowed to recover one of them.
● Agreed remedies: puts a limit on remedies in the K
● Expectation Damages
o Expectation damages are forward looking.
 The goal is to put the injured party in the position they’d be in if the K had been completed.
 Does not matter if there were windfall benefits to the D, only matters is what were
expecting under the original contract. (Handicap children school teacher case)
 American Rule: award ED for any unexcused failure to convey, regardless of good/bad faith of P
 Foreseeability
o The damages must have been rxably FOS at the time the K was formed (or even better,
actually contemplated by the parties if special/consequential )
 Rxably FOS = “more likely than not”
 R § 351(2): FOS of damages
o Loss follows ordinary course of events
o As a result of special circum, the party in breach had rxn to know
 Qs:
 What did the parties know when the K was formed?
 What should the parties have rxably anticipated?
o The type of loss must be FOS, it does not matter how the loss occurred and whether the
manner was FOS
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 o FOS regarding the breaching party (did the breaching party see it coming?)
o FOS = probable result of breach
 Not just inevitable
 But don’t extend to remote: proximate cx
 Certainty
o Injured party cannot recover damages that are “speculative”, must prove damages w/ a
rxable certainty (Florafax)
 Fact of loss and Amount of damage
 Causation
o General v. Consequential Damages
 General/ direct: damages that arise naturally out of the breach
 No need to make special showing to recover
 Ex. diff. b/w K price and FMV
 Consequential Damages: special circumstances / indirectly caused by breach’s
RESULTS
 Ex. hurts collateral contracts and Lost profits
o For partial breach:
 ED = LVP +ID+CD; reduction in market value caused by breach
 Don't have to calculate in cost avoided or loss avoided b/c they are not avoided b/c
contract goes on, injured party will still have to perform
o For total breach:
 ED = LVP + ID + CD - CA - LA
 LVP = lost value of performance
 ID = incidental damages
 CD = consequential damages
 CA = cost avoided
 LA = loss avoided
 Loss value of performance: The difference of the value to the injured party of the performance
that should have been received and the value to that party of what was actually received.
 Incidental damages: additional costs incurred after the breach in P ‘s rxable attempts to
avoid loss, even if attempt is unsuccessful
o P has a duty to mitigate
o P can’t recover for damages they could have avoided through rxable mitigation
o P can recover costs of mitigation as incidental damages
o This means that when D is in total breach, P should take rxable steps to find a
replacement: a reasonably equivalent substitute.
 P must attempt to find equivalent services at the lowest cost possible
 What if P chooses a more expensive replacement?
 If that was really the only adequate replacement:
o Then P can recover full costs of replacement
 If P could have chosen a cheaper one:
o Then P can only recover up to what the cheaper replacement
would have cost them
 Consequential damages: damages of injury to person or property resulting from the breach
o P may also be able also recover damages that arose as secondary consequences of
breach
o Must be able to show but-for and proximate cause
 The damages must have been rxably FOS at the time the K was formed (or
even better, actually contemplated by the parties)
 Harm must be meas w/ rxable certainty
 P has duty to mitigate those damage.

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  Cost Avoided: if injured party terminated any claims and damages for total breach, then
breach may have a beneficial effect on that party by saving it further expenditures that
would have otherwise incurred
o The additional expenditures that injured party no longer has to spend
 Loss Avoided: injured party successfully mitigate its damages, reallocating some or all of its
resources that otherwise would have been devoted to performance of the K.
o Subtracting successful mitigated efforts
o Computing the Value of P’s Expectation
 R § 348 Alternatives to LVP: What to do if damages cannot be proved w/ certainty?
 If loss of value in the property is not proved w/in a rxable certainty, he may recover
damages on the rental value of the property or interest on the value of the property
 Unfinished Construction: If breach results in defective or unfinished construction and LVP is
not proved w. Suff. certainty, he may recover damages based on:
 Cost-to-Complete: used when the actual injury to P may not be adequately reflected by
the market-value comparison
o Subjective: based on what it means “to him”;
o Makes more sense in construction for personal use, where people have personal
preferences that aren’t reflected by market value
 Market Price: diminution In market price of property cxed by the breach (American
standard)
o Makes more sense in construction for commercial use, where things are mostly
functional
 Pocket the difference windfall – Possibility that the money will go to nonbreaching party
to pursue cost of completion damages but they won’t use it to complete work.
 Breach of Employment K:
 Cost of obtaining other services equivalent to that promised but not performed +
Consequential damages
o Must try to find a rxable alternative
o This means that when D is in total breach, P should take rxable steps to find a
replacement: a reasonably equivalent substitute.
 P must attempt to find equivalent services at the lowest cost possible
 What if P chooses a more expensive replacement?
 If that was really the only adequate replacement:
o Then P can recover full costs of replacement
 If P could have chosen a cheaper one:
o Then P can only recover up to what the cheaper
replacement would have cost them
 Real estate contract
 If purchaser breaches, seller gets lost profit – difference between contract price and
market price at time of breach.
 Limited when disproportion in character – if excessive to underlying price
 Contract can limit them – exclude consequential damages
o Mitigation of Damages: STOP THE DAMAGES FROM FLOWING
 P may not recover for injurious consequences of the D’s breach that the P could have avoided by
taking rxable action.
 §350 – damages calculated not recoverable if you could have avoided them without undue
risk/burden
 Ex. if D gives P notice that it would not proceed w/ a project, P has a duty to stop working
any further and incurring additional expenses (Luten bridge)
 P must make rxable efforts
 If unsure of total breach but has some insecurity, can request rxable assurances
 D has burden to prove that P failed to mitigate damages

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  Ept Ks
 If breaching party offers to mitigate damages, and nonbreaching party turns their offer
down, breaching party can use that agst them as failure to mitigate damages
 Duty to mitigate includes acceptance of an unconditional offer of reinstatement where no
special circumstances exist to justify rejection
 Comparable Employment: not required to accept an unequal position BUT if you take a
non-comparable job, and couldn’t perform both jobs at same time, then it is a mitigating
factor
 Burden on employer to show that employee would have been able to obtain comparable
work.
 Nonrecoverable Damages: Items excluded from damages
 RULE: P should not be able to recover more than expectation damages
 3 types of damages that P may not recover
o Atty’s fees
o Mental distress
o Punitive
 WHY Expectation Damages?
 There is some care, effort, and hidden reliance put into every K.
o foregoing other oppts and gains prevented as a result of reliance
o Intellectual efforts
 Risk Allocation: any fixed price K involves some risk. Protects people if something happens
o Alternatives to Expectation Damages
 Reliance Damages
 Purpose of undoing harm which P’s reliance on D’s promise caused, fALLBACK FOR WHEN
YOU CAN’T PROVE ED WITH REASONABLE CERTAINTY
 Default cure for PE claims and the preferable alternative remedy to K claims
 Rxns for reliance damages:
o When hard to prove chain of cxation from the breach to the damages the P is alleging
 Too remote
 unFOS
 Uncertain
 Types of Reliance Damages
Type of reliance damages Mitigation

Part performance Uncertainty? Can you prove performance?

Preparation for Performance Could D foresee that P would take these step?
Did P take steps outside of trade habits or
failed to give notice?

Foregone opportunities D must have reason to know of these oppts

Can P give a rxably certain # on what that
foregone oppt was worth?
 When det. Reliance damages, you must deduct any loss D would have suffered w/ rxable
certainty if K was performed
o D’s burden to prove w/ rxable certainty
 Duty to mitigate : avoidable consequences does not apply when both parties have equal opp
to mitigate the damages.
o Some courts argue that nonbreaching party always has duty to mitigate and can’t
rely on equal opportunity avoider.
 Limit:
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 o Cannot exceed K price
o Losing K : R 349
 When breaching party can show that nonbreaching party would have
suffered loss if K fully performed, you deduct that loss from damages
o Reliance costs incurred before K was made
 Restitutionary Damages
 K is no longer relevant : TARGET THE VALUE CONFERRED ON THE BREACHING PARTY and
prevent them from gaining by the transactions.
 3 ways to measure value of services
o Market value of the services – majority
o Measure the extent to which other party’s interests has increased in value
o Contract price
 P has in reliance on a promise of D conferred some value to D, so want prevention of gain by
defaulting promisor at expense of promisee.
 Restitution for non breaching party (R § 373)
o Damages = wrongful gain by D
 (R § 371) How you measure the beenfit: Meas. by the rxable value of what
the breaching party had received in terms of what it cost him to obtain it
from person in claimant’s position OR extent to which the OP’s property has
increased in value or his other interests advanced
 Normally: fair market value of services provided by P
 Exception: injured party has no right to restitution if he has fully performed
all his duties, only get what was owed under the K
 Don't have to deduct the loss b/c no longer bound by the K
o Restitution sought by breaching party (R § 374)
 Breaching party can still recover restitution
 Usually used as a defense, to reduce damages they have to pay to the
non-breaching party
 Cannot recover more than the benefit the breaching party would have gotten
under the K.
 (breaching party can’t get an unjust windfall)
o When is Restitution applicable?
 (R § 375) when unenforceable b/c of SoF
 (R § 376) when voidable bc of mistake or misrepresentation
 (R § 377) when discharged due to impracticability, frustration of purpose, or
failure of condition
 Specific Performance
 1. Adequacy?
o Will be refused if damages are adequate to protect (R § 359
 (R § 360) Factors affecting adequacy of damages
 Difficulty of proving damages with certainty
 Diff of procuring a suitable substitute – esp if unique
 Likelihood that an award of damages cannot be collected (Almost
never used) – but if D is bankrupt
 2. Definiteness
o §362 – not denied specific relief if some matters are left out of agreement, especially
when parties have agreed on all material terms.
 Courts hate micromanaging so if it definitely sees breach, determines
whether performance is appropriate or not.
o Can be denied if substantial part of agreed exchange for performance is not secured
to the satisfaction of the court §363
 3. Hardship
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 o Will be refused if unfair §364(1)
 The contract was induced by mistake or unfair practices
 Relief would cause unreasonable hardship or loss to party in breach or third
persons
 The exchange is grossly inadequate or the terms of the contract are otherwise
unfair
o Will be granted in spite of term of agreement if denial of such relief would be unfair
bc unreasonable hardship or loss to party seeking relief. §364(2)
 Do the balance of equities favor the P enough? NOT automatically entitled to
o CL and courts aren’t comfortable w/ physical compulsion
 More comfortable w/ requiring corps
 Injunctions
o (R § 376) K for personal service (E’pt)
 willing to grant injunction on someone jumping from 1 E’er to another IF E’es
are competitors and services offered by E’ee are suff’ly unique
 Don't need express covenant not to compete, its an implied term
 DO need express covenant not to compete after E’pt ends
 Suff’ly Unique
o Services are irreplaceable
o Irreparable harm

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