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Contracts Outline Prof.

Chang Fall 2002

Legal Basis for a Claim
• Breach of K
• Promissory Estoppel / Reliance
• Restitution: a) in the absence of promise
b) promissory restitution

Types of Ks
• Bilateral K: mutual promises of performance – benefit/detriment test
• Unilateral K: exchange of a promise for performance – once offeree begins
performance, offer becomes irrevocable

• Express K: standard K, stated in words, either oral or written, express in words
• Implied-in-Fact K: an implied promise by social norms (ex. sitting at a
restaurant, bill comes) or where words + conduct = K per court
• Implied-in-Law K: (quasi-K) no agreement established by words or actions (ex.
emergency aid)

Damages
• Monetary damages are awarded when an action sounds in law – when $$ will
make the non-breaching party whole.
• Specific damages (equitable remedies) are awarded when an action only
sounds in equity (does not sound in law) – when $$ will not make the non-
breaching party whole.

I. CONTRACT FORMATION (CLASSICAL CONTRACT THEORY):
When determining contract formation, ask 3 questions:
• Was there mutual assent?
• Was there consideration?
• Are there any defenses to K formation?

A. MUTUAL ASSENT: “meeting of the minds” – 1st requisite of a K
Valid Offer + Valid Acceptance = Mutual Assent

1. The Objective Standard:

a. Court determines mutual assent by an objective standard: Would a
reasonable person in the offeree’s shoes think there had been an offer
which they had accepted, forming a contract?

b. A subjective standard is not sufficient – you do not need a “literal”
meeting of the minds, only the outward (objective) manifestation of
mutual assent.
(1) Ray v. Eurice (1952): D claimed he didn’t know what he had
signed when he signed K with P. P’s argument: duty to read &
understand what you sign, hence must be bound. RULING: P wins,
overruling TC’s application of a subjective standard in negating
mutual assent. *A unilateral mistake does not negate mutual
assent.*

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Contracts Outline Prof. Chang Fall 2002

2. Offer (§24): An offer is the manifestation of willingness to enter into a
bargain, so made as to justify another person in understanding that his
assent to that bargain is invited and will conclude it.

a. Intent: Language of commitment
(1)ex. “I will” (offer) v. “I may” (not an offer)

b. Content: Relatively complete and definite terms:
(1) identity of the parties
(2)description of subject matter (including quantity if more than one
unit)
(3)price
(4)time for performance

c. Communicated to the party such that a reasonable person in their
position would believe that their assent was invited and would close
the deal.
(1)Offer must be communicated to offeree so offeree will have the
power to accept.
(a) Just because one overhears an offer directed to someone else
does not mean an offer has been made to that person, otherwise
multiple liability could result if everyone in earshot said yes.
(2)No further negotiations or assent are required to close the deal.

d. EXCEPTIONS (Not offers):
(1) Lack of Intent: “I am interested in...” contains no language of
commitment; “I want to buy…” merely expresses interest in buying
but not actual intent to buy
(2)Estimates: typically not offers; but one may accept an estimate as
an offer under certain circumstances. Ex. A tells B that he estimates
the cost of the plumbing job to be $10,000. B says “Go ahead.”
After the performance, A tells B that the real cost is $12,000. A
may recover full amount ($12,000), unless B had said: “Go
ahead and do it at that price.”
(3) Quotes: typically not offers, unless there is further language for
immediate acceptance: ex. “We quote you Mason fruit jars, in one
dozen boxes, delivered in LA: $4 pints, $5 half gallons, shipment no
later than May 10, cash in ten days.” That is an offer.
(4) Preliminary Negotiations (§26): A manifestation of willingness
to enter into a bargain is not an offer if the person to whom it is
addressed knows or has reason to know that the person making it
does not intend to conclude a bargain until he has made a further
manifestation of assent.
(5)Surrounding Circumstances (Bluffing, Joking, Intoxicated,
etc): A jokingly promises to sell B his car for $10. B reasonably
understood offer to be serious. Then statement is an offer

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hence buyer did not have power to accept an offer. consider. If the offeror can say. Rejection by offeree (§38) (effective upon receipt) Knapp 3 5/1/2011 . Ex. the more likely the courts will view the communication as merely a solicitation of an offer (except for reward offers). (4)Offeror CANNOT revoke when an option K exists. AND (b)Offeree receives reliable information to that effect. (7)Use of Broad Communications Media: the broader the communicating media. 3. Revocation by offeror (effective upon receipt): (1) Direct revocation: communication from the offeror saying “I revoke” or other words expressing he is no longer willing to go through with the deal (2) Indirect revocation: §43: (a) Offeror takes definite action inconsistent with intention to enter into proposed K. Contracts Outline Prof. (3) Note: offeror may see the offeree approach and know that an acceptance is contemplated. “I revoke” before the offeree accepts. first served” basis. OR (2)reasonable period of time (time to receive. the promise is not legally enforceable (6)Advertisements are not offers – they are mere invitations to negotiate. courts vary. Offer to sell diamonds: time period may be long because item is not perishable and price is not volatile. terms are certain and definite. Scolnick (1954): Buyer relied on seller’s newspaper ad and subsequent correspondence as an offer to sell property and sued for breach of K when seller sold property to 3rd party. hence no K. (b)EXCEPTION: If language of ad can be construed as containing a promise. This is a valid offer to first person accepting on this basis as nothing was left open for negotiation. then it is an offer. (a) Lonergan v. But if A and B understand the statement to be a joke. Ex. Store advertises coat worth $100 on sale for $1 on a “first come. Chang Fall 2002 because it is interpreted objectively. What terminates an offer? (§36) a. c. the offer is terminated. b. Lapse of time: failure to accept within: (1)stated expiration time/date. however brief the interval of time between the two acts. and reply) (3)Note: reasonableness of period of time depends on circumstances. and offeree(s) is clearly indicated. Offer to sell bananas: time period would be short because bananas are perishable and price may fluctuate depending on supply & demand. RULING: Seller wins b/c there was no offer.

consider. but will you take $9K?) (e) Rejection to an option K has no effect. it must mirror the offer (mirror image rule). when acceptance includes additional terms that do not “materially alter” the terms of the agreement and do not call for separate acceptance become part of the contract. and reply). What constitutes acceptance? a. d. Chang Fall 2002 (1)Express rejection: “I reject” (2)Counter offer (§39): (a) acts as a rejection of original offer: KILLS ORIGINAL OFFER. (1) An acceptance becomes binding the moment it leaves the offeree’s possession. (1)common law: Acceptance must be completely unequivocal and unconditional. Termination by death or insanity of either party (before acceptance) or by death or destruction of the good(s) (prior to acceptance) (1)EXCEPTION: Option Ks survive death of offeror or offeree. and the latter then dispatches an acceptance which reaches the offeror before the rejection. Contracts Outline Prof. original offer is now GONE (b)terminates offeree’s original power of acceptance (c) acts as a substitute for original offer (d)EXCEPTION: you can use qualifying language to keep original offer open while negotiating (I am still considering your offer of $10K. Knapp 4 5/1/2011 . (3)Transmittal information (fax number. nor do they alter any remedies that would be available under original offer. d. Offeree must have the power of acceptance created by offeror extending a valid offer. (3)EXCEPTION: UCC 2-207: between merchants. the acceptance is valid and will control. (2) Acceptance must be transmitted in either the same manner as the offer was transmitted or in a better (quicker. unimportant changes to offer permitted. mailing address) must be complete and correct for offeree to gain protection of rule. b. Mailbox Rule §40 & §63: Acceptance is effective upon dispatch. Acceptance must be timely (reasonable time to receive. Acceptance must be unequivocal and unconditional. 4. (2)modern rule: Minor. more reliable) manner. c. (4)Where a rejection has been mailed by the offeree. provided they are not material.

Unilateral Ks – Formation Differences: a. opens it. Contracts Outline Prof. Full performance = unilateral K formation c. Ex. for a reasonable time. A leaves a gift basket on B’s doorstep. Knapp 5 5/1/2011 . Revocation: a unilateral K offer can be revoked anytime before acceptance (full performance). “I will pay you $5 if you mow my lawn”. (3)§45: Once performance has begun an option K has been created. 5. Offer: A unilateral K offer is offering a promise in exchange for a performance (or forbearance). Ex. the offer may be revoked. containing complete terms & language of commitment such that her continued employment and awareness of handbook constituted acceptance. MAJORITY rule is to treat employee handbooks as rising to the level of contractual obligation. I’d prefer to pay less. (4)§87: If a person is merely preparing to perform (as opposed to actually beginning performance). Request for clarification of terms does not amount to a rejection or a counter offer. St. d. RULING: P wins b/c handbook was offer. Acceptance: only method for accepting a unilateral K offer is performing the requested act. b. g. Silence (§69): normally silence is not acceptance except for: (1)When prior dealings between the parties make it reasonable for offeror to expect the offeree to give notice of rejection. B takes the basket. remaining open for the duration of the time set or if none. (2)modern rule: Most courts say no revocation once performance has begun. and does not. and consumes the candy inside. B has given silent acceptance. but I agree to your terms. Chang Fall 2002 e. Employee Handbooks: Employee handbooks or other policy statements create enforceable unilateral contractual rights if the traditional requirements of K formation are present. “Well. Mary’s (1987): P is terminated w/o proper notice & claims that employee handbook gave rise to enforceable contractual rights. (2)If an offeree accepts something like property/services with a reasonable ability to return them. Ex.” f. (1)Duldulau v. (1)common law: Unilateral offer is revocable until full performance. Grumbling Acceptance: an acceptance accompanied by an expression of dissatisfaction is effective as an acceptance as long as it stops short of actual dissent.

(2)The offer is generally open to all. Chang Fall 2002 e. Contracts Outline Prof. In D’s lapse. hence P had power to revoke and sell to third party. Bilateral K a. the UCC and Restatement provide that offer may be accepted by performing the requested act or by a timely promise to do so. b. Reward offers: (1)A reward offer is a unilateral K offer. one party only has a right and the other party only has a duty. rejection or death. (2)The effect is a Super Offer – it is resistant to revocation. P made changes to offer. K is formed and offer is terminated to others. Express Option K (1)An express option K is supported by consideration and also requires mutual assent (I will pay you $10 for you to hold your offer to sell me your car for $5. Miller (1985): P receives D’s offer (w/time provision) to buy P’s house. (4)If someone performs who didn’t know about offer. and hence no option K. there is no K. resulting in a counter offer which D snoozed on accepting. c. Option Ks (4 types): a. 6. b. (3)Normile v. K is bilateral. Knapp 6 5/1/2011 . (3)Once one person performs. P sold house to third party. thinking D had option K to accept P’s counter within his time provision. Construe Ambiguous Offers as Bilateral: Courts will construe an ambiguous offer as a bilateral offer b/c bilateral Ks provide immediate rights and protection for both parties. each party has a right and a duty. K is unilateral. Test: (1)If at the time K is formed. Unilateral K v. 7. (2)If at the time K is formed. RULING: P wins b/c time provision did not become a part of counter offer.000 open for a period of one week). Allow Acceptance by Act or Promise: Unless an offer expressly limits acceptance to an act. Unilateral Option K (§45) (1) Unilateral Option K is created when a unilateral offer is following by beginning (majority rule) or substantial (minority rule) performance.

Fraud: Reliance upon misrepresentation must be reasonable in order for fraud to negate mutual assent. P performs earning out of all commission bonus levels. (1)Park 100 v. P attempts to pay but D revokes before P can pay & P sues for breach of K. the attempted revocation or rejection is ineffective. an option K has been created and can’t be revoked by the offeror. Offeree CAN accept firm offer AFTER 3 months if offeror hasn’t revoked. But CHANG thinks opinion is incorrect. on the other hand. Option Ks can only be TERMINATED by the lapse of the term (time) specified in the option K. GC may not revoke and an option K arises. hence option K arose and SC has no power to revoke. D changes terms after her performance and refuses to pay P. (2)Law arose based on Drennan decision. EXCEPTIONS TO MUTUAL ASSENT: the following can negate mutual assent a. e. did not lift his arm to begin performance of paying). c. offer cannot be revoked – P’s performance constituted acceptance. Coldwell Banker (1998): D offers bonus program to realtor. Kartes (1995): P used misrepresentation to obtain D’s signature on personal guaranty by disguising it within the lease agreement. D made unilateral offer for P to pay off mortgage early at a reduced rate.e. RULING: D wins b/c although a party must use ordinary Knapp 7 5/1/2011 . has the power to revoke or reject because they are offeree. for a reasonable period of time – neither of which can exceed 3 months. Option K arising by Statute (only applies to merchants who sell goods) (1)UCC 2-205: Firm Offers: offer by a merchant to buy or sell goods in a signed writing which gives assurance offer will be held open is not revocable (despite lack of consideration) during time stated. RULING: D wins b/c P had not BEGUN to perform when D revoked (i. RULING: P wins b/c once substantial performance is rendered. 8. Chang Fall 2002 (2)Unilateral Option K AROSE: Cook v. (2)NOTE: 3 month period only applies to period of irrevocability – not acceptance. If the offeror or offeree attempts to revoke or reject during the period of the option K. Option K arising from Reliance (§87(2)) (1)If offeree relies on the offer to their legal detriment. GC. Contracts Outline Prof. Only applies to GC/SC situation in which GC relied on SC’s bid. or if no time stated. d. once the bids are open. (3)Government Ks: When a GC is making a bid to the government. (3)Unilateral Option K DIDN’T ARISE: Petterson v. Pattberg (1928): D owned P’s mortgage.

Promise made must be seeking the (exact) Return Promise or Performance (act. but a child can hold a K against the adult but an adult cannot hold K against the child (2)Mentally incapacitated: only if person’s mental capacity is so deficient that he doesn’t understand the implications of the K. Contracts Outline Prof. 3. forbearance. Chang Fall 2002 care and diligence to guard against fraud (when relying on another’s representation). e. Consideration Test §71 (applied at the moment of K formation) 1.”) c. (f) Illegality of K: If you enter into a contract for a good or service that is illegal. Return Promise or Performance must be a legal detriment to the Promisee. (g)Ambiguity of a term that goes to the heart of the K itself: If both parties are innocent regarding an ambiguous K term. Lack of capacity: the following parties lack capacity in entering Ks: (1)Minors (under 18): minors can enter into a K. b. then the courts will not punish anybody – just restore the parties back to their original positions. Rejected Unilateral Mistake: Under special circumstances. Mutual Mistake: If both parties err on the terms of the agreement. Steps to identify consideration: Knapp 8 5/1/2011 . (3)Extremely Intoxicated or Drugged: you must be drunk or drugged to the point that you don’t understand the implications of the K you are entering into. the contract is not binding. d. Duress: (“I’ll kill you if you don’t sign this K. the K cannot be enforced in court. B. unilateral mistakes can negate mutual assent (ex: mechanical miscalculations). creation/modification/destruction of legal relation) 2. the law will not ignore an intentional fraud practiced on the unwary. CONSIDERATION: BARGAINED FOR EXCHANGE: Consideration is a test for enforceability of promises. 1. Return Promise or Performance must be given in exchange for (or induced by) the Promise.

Return promise or performance must be given in exchange for (or induced by) promise (1)Baehr v. separation. Look for candidates for consideration (a return promise or performance) c. Relationship between promise and return promise or performance a. divorce. RULING: D wins because the court found that the forbearance was not bargained-for. Can the return promise or performance be characterized as a legal detriment to offeree (or legal benefit to the offeror)? d. c. D promised to pay rents to P. Return Promise or Performance must be a LEGAL DETRIMENT to the Promisee a. employer/employee. Contracts Outline Prof. The forbearance of an invalid claim will count as consideration IF the validity of the claim was uncertain due to facts or law OR IF forbearing party believed the claim was valid (good faith forbearance). Was it bargained for? 2. Chang Fall 2002 a. Identify the promise the suing party is trying to enforce b. Promisor is either seeking the performance or a return promise of a performance a. Promise must be seeking the (exact) return promise or performance b. Performance (or return promise to perform) must take the form of: (1)an act (2)a forbearance OR (3)the creation/modification/destruction of a legal relationship (a) ex. Penn-O-Tex (1960): P leased gas stations to 3rd party who assigned them to D. marriage. the court will interpret the promise as seeking promissory acceptance (the return promise to perform). Legal Detriment When Party Gives up Legal Right: Ex. Forbearance from an act the party has a legal right to perform. (§74) 4. If it is hard to tell whether the promise is seeking a performance or a return promise. 3. Knapp 9 5/1/2011 . claiming his consideration was his forbearance to sue D. but didn’t so P sued D. doctor/patient b. adoption.

(a) Dougherty v. If an officer catches a criminal where there is a reward. so it does qualify as a legal detriment (b)MULTIPLE MOTIVES are OK. employee sues for breach of K. NOT CONSIDERATION: a.000 and nephew tried to collect against estate. Legal Duty (§73): If promisee is under a legal obligation or duty to perform or promise in return. Sidway (1891): Uncle promised nephew that if nephew forbore in drinking.000. Although new position (because of higher salary) seems like a legal benefit not a legal detriment. 5. the officer has no K because there can be no consideration. swearing & gambling. employee can argue that increased responsibilities are a detriment and win. company asserts no consideration. Economic Benefit not Required (1)Employee is offered a pension in exchange for a new position which entails a high salary and increased responsibilities. Company stops paying pension. Ex. As long as one of the motives qualifies as a legal detriment. Chang Fall 2002 (1)Hamer v. smoke. that uncle would give him $5. Just because you love pets doesn’t mean that are under a legal duty to rescue them. RULING: Estate wins b/c there was no consideration. smoking. If B gives up nothing. RULING: Nephew wins b/c there was consideration (forbearance by the nephew) even though it constituted no legal benefit to the uncle because there was a legal detriment to nephew because he had a legal right to drink.000. b. the act can qualify as consideration. court will not enforce A’s promise. Salt (1919): Aunt gave nephew promissory note “for value rec’d” for $3. Donative or Gratuitous Gift Promises: (1)A promises to pay B $5. Employee retires after being offered a generous pension and financially relies on pension. Contracts Outline Prof. Since employee’s position has changed from being employed to not being employed – that change of position counts as consideration to enforce a breach of K claim. Legal Detriment When Party’s Position is Changed: A change in (legal) position counts as a legal detriment. then no consideration (1) Examples with legal duty (NO CONSIDERATION): (a) Police: Officer is under a legal duty to catch criminals. (1)Ex. d. (2)Examples lacking legal duty (CONSIDERATION): (a) Finding Lost Kitten: a good Samaritan is not under a legal duty/obligation to find a lost kitten. note was unenforceable donative promise lacking bargained for Knapp 10 5/1/2011 . c. These promises are often made by family members and are informal. swear & gamble.

f. RULING: Father wins b/c promise is not enforceable – there was no bargain and moral obligation does not count as consideration. he may pursue a claim of Promissory Estoppel against A. RULING: Company wins b/c obligation to pick up check is a condition of the a gratuitous promise and doesn’t count as consideration. If note said “in consideration of my nephew being good for the last 10 years”: aunt would not have to pay since nephew’s performance had already taken place. Contracts Outline Prof. The act of going around the corner is a condition to receive a gift. Indian Refinery (1937): Elderly workers are promised a pension in light of their past service to the company and assert that obligation to pick up pension checks at personnel office counts as consideration. it is irrevocable. (2)NOTE: When promisor has been unjustly enriched with material (significant) benefit previously received (ex. d. (a) Mills v. Wyman (1825): Promise by father to reimburse Good Samaritan for expenses incurred in treating the final illness and burying an adult child. NOTE: If note said “in consideration for my nephew being good until he is 21”. Conditions of Promise: (1)The Tramp Hypo: Gentleman says to a tramp.000. Indian Refinery (1937): Elderly workers are promised a life long pension in light of their past service to the company & after 2 yrs payments cease. a court will enforce the promise to pay under Promissory Restitution. c. RULING: Company wins b/c past performance is past consideration and doesn’t qualify to enforce promise of pension. b. You saved my life so I will pay you $1. Chang Fall 2002 exchange (she didn’t want anything from him). (2)Promissory notes fall under this category. aunt would have to pay b/c his “being good” would qualify as consideration. “If you go around the corner to the clothing shop there. (3)Once a donative gift has been given. not consideration for a promise. Moral consideration: (1)A promise motivated by a sense of honor or moral obligation is not “valuable” because the bargain element is missing. e. you may purchase an overcoat on my credit”. (2)Plowman v.000). (2)EXCEPTION: If B relies on A’s promise to his legal detriment. Past Consideration: prior acts do not constitute consideration (1)Plowman v. Mere Recital of Consideration: (1)I’ll give you $1 for $500 – this is not consideration. Sham Consideration: Knapp 11 5/1/2011 .

You must rule out the possibility of a breach of contract claim first. Most promissory estoppel claims fail. PROMISSORY ESTOPPEL / RELIANCE: A promise which is not supported by consideration may be enforced if promisee justifiably relied upon it to his detriment. Illusory Promise (§77) (empty promise) (1)Return promise must have content – w/o content it is illusory. Son knows about contract law & says I will give you $1 for the $1000 you are giving me so we have consideration – but this is a sham. but judges often decide against them. Chang Fall 2002 (1)Court may declare that consideration given was a sham. Promisee Acts or Forbears in Reliance Upon the Promise 1. B. A party may be allowed to assert such a claim. Injustice can only be avoided by enforcement of the promise. Reliance was foreseeable by the promisor. which court may declare as a sham. h. Promise made and broken by promisor. Look for a “change in position”. General 1. 2. g. Promissory Estoppel Test: 1. but it’s really a pretense. court will not look or inquire into the adequacy of the consideration unless there is an obvious discrepancy. 3. II. Father wants to give $1000 to his son. Knapp 12 5/1/2011 . Adequacy of Consideration (§79) (1)As a general matter. Contracts Outline Prof. before you pursue a claim based on promissory estoppel. 3. 4. Ex. 2. It has the form of consideration. (2)“I will forbear until I want the money. Damages under promissory estoppel claims are less than under breach of contract claims. Promisee acts or forbears in reasonable or justifiable reliance upon the promise.” (so party is really not forbearing at all) (3)In a bilateral K where both promises have content consideration is double sided: Promise A supports Promise B AND Promise B supports Promise A. A.

3 yrs later. Change in position does not have to be economically detrimental: Employee is offered a pension in exchange for a new position which entails a high salary and increased responsibilities. Kirksey v. RULING: P wins b/c he relied on D’s promise to his detriment (quitting in the first place – change in position). which they did although they let it lapse months before home was burnt to ground. RULING: Court sided with D and decided no K had been formed. Detriment must be caused by the promise. Promisor should have known that his promise would induce the promisee to rely on the promise. Reliance is Foreseeable by the Promisor / Inducement by Promisor to Rely 1. P left her home (not consideration. D promised generous pension to induce P to retire. Although new position (because of higher salary) seems like a legal benefit not a legal detriment. History of Promissory Estoppel / Reliance: Knapp 13 5/1/2011 . employee can argue that increased responsibilities are a detriment and win. Reliance must be detrimental (substantial in nature). Chang Fall 2002 a. Shoemaker v. P would have prevailed. C. leaving was a condition not sought by the promisor) and moved to the land. so he could not recover under the doctrine of promissory estoppel because there was no action taken by Pitts in reliance on the promise. a. D rehired P to work part time but then cut pension in half. HOLDING: Mortgagor wins b/c her reliance on mortgagor’s action induced her forbearance to act. 2. D. Katz v. a. E. Injustice Can Only Be Avoided by Enforcement of the Promise 1. Kirksey (1845): D promised his sister-in-law. Danny Dare (1980): Since P didn’t want to retire despite his bad performance due to job-related injury. 3. McGraw-Edison (1964): Pitts was informed that the company had retired him and would pay him a pension thereafter. Courts will only enforce the promise to the extent that the promisee is returned to their original position prior to the promise being made. Contracts Outline Prof. b. a house to live in and land to farm after her husband died. Pitts v. 2. P. Commonwealth Bank (1997): Mortgagee told mortgagor to renew her homeowner’s insurance or they would renew it for her. RULING: Pitts did not elect to retire on the promise of any payment. Case predated Doctrine of PE/R – if decided today. only to be thrown off later.

2. Test for Unjust Enrichment in the Emergency Situation of Preserving Another’s Life/Health (§116): A person who confers a benefit to save another’s life or health is entitled to restitution if: a. Doctrine of PE evolved out of court’s desire to enforce certain promises despite their lack of consideration such as gratuitous promises to convey land. Watts v. The enrichment must not have been imposed on the recipient. EMERGENCY SITUATIONS – PRESERVING ANOTHER’S LIFE/HEALTH 1. The person has received a direct material benefit at the expense of the other. Chang Fall 2002 1. Watts (1987): P & D were unmarried cohabitants w/ child. Knapp 14 5/1/2011 . 4. same name. He acted inofficiously – he did not impose his services on another. Post-breakup. i. Note: When parties are in a close relationship with one another.e. gratuitous promises for someone to hold something (bailment). gratuitous charitable promises. The retention of the benefit by the beneficiary w/o compensation to the benefactor would be UNJUST. III.. Elements of Unjust Enrichment: 1. RESTITUTION/ UNJUST ENRICHMENT (In the Absence of a Promise) A. P sued D for restitution and breach of an implied-in-fact K. 1. To overcome the presumption of gratuitousness. They had joint bank accounts. b. when A has been unjustly enriched at the expense of B. a doctor). D’s “promise to take care of her” may qualify as an “implied-in-fact” K. In the absence of a contract or promise. there must have been an intent to charge. B. (Ex: violin player in street). claiming he was retaining the material benefits he’d received from her. and P contributed to the wealth of the relationship. and gratuitous promises from family members. OR the benefit conferred must have been extremely burdensome or onerous. B can recover under restitution. 3. it is generally assumed that any benefits were given gratuitously. Contracts Outline Prof. He intended to charge (the person must have the expertise in that field to perform the services. 2. RULING: P wins on restitution claim b/c D’s retention of the direct material benefits would be unjust.

PROMISSORY RESTITUTION A. Prior Benefit + Later Promise = Promissory Restitution B. 2. EMERGENCY SITUATIONS – PRESERVING ANOTHER’S PROPERTY 1. Doctor never formally entered into a contract with Victim. Chang Fall 2002 c. d. Glenn v. c. b. Advance assent was impractical. He was in the lawful possession or custody of the things. d. Victim: Doctor sees victim unconscious on the side of the road & administers emergency treatment & victim survives. He intended to charge for his services. It was impossible to communicate with the owner of the goods before the person saved them. IV. P’s act was a voluntary act of courtesy. a quasi-K. Ex. and e. Contracts Outline Prof. RULING: D wins b/c this case was before Doctrine of Restitution. He had no reason to believe that the owner did not want him to act.e. he did not cause the person’s property to be in a position of danger. Test for Unjust Enrichment in the Emergency Situation of Preserving Another’s Property (§117): A person who has preserved the property of another from damage or destruction is entitled to restitution if: a. Victim should not receive the benefits of these services for free. An officious intermeddler is someone who acts without the request of another. but Doctor has a claim for recovery of fees for her services (had the Victim been conscious to enter into a K). Promissory Restitution Test (§86): Knapp 15 5/1/2011 . Since D did not request P’s services in advance & never offered to pay for them. P’s services cost $20 & P sued to recover $. 2. The services rendered were necessary to prevent the other from suffering serious bodily injury or pain. i. Savage (1887): P saw D’s building material fall into river and his crew rescued D’s property from being carried away. C. Doctor v. The person would have consented to the service had they been in a position to do so. so the court makes up a fictional K. which is a K implied-in- law. 3.

Chang Fall 2002 1. Contracts Outline Prof. Test for Pre-Acceptance Reliance: a. An offer Knapp 16 5/1/2011 . The benefit was not given as a gift. E. After saving D’s life. 2. the balance of the debts are discharged and creditors are forbidden to collect. The promisor subsequently makes a promise in recognition of the benefit. PRE-ACCEPTANCE RELIANCE: There are certain rare circumstances in which an offeree has relied on an offer and changed her position in reliance on the offer remaining open for her to accept. Statute of Limitations (§82): When a debtor makes a subsequent promise to pay an earlier unenforceable debt barred by the statute of limitations. the promise is enforceable due to moral obligation and there is no need for new consideration. Promises to Pay Indebtedness: 1. C. The justification for giving relief is bolstered by a promise made after the receipt of a benefit. Bankruptcy (§83): When a debtor becomes bankrupt. In these cases. the court may limit the offeror’s power to revoke. This appears as “past consideration” and recovery would be unattainable from a breach of K claim. but yrs later D died and estate refused to pay. V. McGowin (1935): P seriously injured himself by physically making sure a block of lumber didn’t fall on his boss (D). giving the offeree the benefit of the deal. The promisor has been unjustly enriched by a benefit previously received from the promisee. only to have the offeror revoke his offer before she has made an acceptance. it is generally assumed that any benefits were given gratuitously. When parties are in a close relationship with one another. However. 1. D promises to pay P a pension for the rest of P’s life. moral obligation validates a later promise by the debtor to pay the discharged debt. OBLIGATION IN THE ABSENCE OF COMPLETE AGREEMENT A. D. Webb v. 1. 3. F. 2. Where no pre-existing obligation exists. RULING: P wins b/c the direct material benefit rec’d by D is sufficient consideration to support pension promise. a subsequent promise can be enforceable when the promisor receives a DIRECT MATERIAL BENEFIT.

Offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance c. RULING (Traynor): GC wins b/c SCs expect their offers to be used in GC’s bids and hence. a. (Modeled upon Drennan decision). Chang Fall 2002 b. but in no event may such period of irrevocability exceed three months. Test for Firm Offer under 2-205: (1)An offer to buy or sell goods Knapp 17 5/1/2011 . O accepted GC’s bid but then SC revoked its offer and GC had to find another SC consequently paying a much higher price. creating an option K when dealing with the sale of goods by a merchant. Contracts Outline Prof. not offers. SC was free to revoke. 2. RULING (Hand): SC wins b/c GC’s bid to O did not constitute a formal acceptance. OPTION K IRREVOCABLE BY STATUTE: THE “FIRM OFFER” 1. B. An offer by a merchant to buy or sell goods in a signed writing which by its terms gives assurance that it will be held open for the stated time. doctrine of promissory estoppel applies to promises. Gimbel Bros (1933): GC relied on SC’s offer when making final bid to O. a. Firm Offers (UCC 2-205): An offer may be made irrevocable by statute. Option K arising from Reliance (§87(2)): An offer which the offeror should reasonably expect to induce action or forbearance of a substantial character on the part of the offeree before acceptance and which does induce such action or forbearance is binding as an option K to the extent necessary to avoid injustice. Minority Rule: James Baird v. Note: BE CAREFUL WHEN USING §87 (2). GC’s reliance on bid was reasonable and foreseeable. Majority Rule: Drennan v. or if no time is stated for a reasonable time. Is binding as an option contract to the extent necessary to avoid injustice. Action or forbearance that is substantial in character is taken before acceptance by the offeree d. This has rarely been applied outside of the SC bid to the GC context. 3. Star Paving (1958): Same fact pattern as Baird case. b. Courts are reluctant to allow reliance upon an offer to create an option contract unless you have a similar scenario where an offer is made by A to B and A wants and expects B to rely on it.

Any such term of assurance on a form supplied by the offeree must be separately signed by the offeror. f. Requirements K: where the buyer contracts to purchase only from the buyer and no others. e. Property is not a good. UCC Definitions: a. BATTLE OF THE FORMS: UCC 2-207 (See flow chart) 1. A mere recital of consideration is fine according to § 87 (1). Someone whose dealings in the goods is casual or inexpert is not a merchant. Common Law Rules Knapp 18 5/1/2011 . for a reasonable time. Mid South Packers v. OR if no time is stated. Goods also includes the unborn young of animals and growing crops and other identified things attached to realty. RULING: P wins b/c firm offer (not to increase price w/p notice) lapsed after 90 days. b. Output K: where the seller contracts to sell only to the buyer and no others. and things in action. which D refused to pay. but 4 months later P increased price w/o notice. OR someone who by their occupation represents that he has the skill or knowledge in regard to the goods or the transaction. investment securities. But courts are very reluctant to adopt this. c. Contracts Outline Prof. Chang Fall 2002 (2)By a merchant (3)In a signed writing (4)Which gives an assurance that it will be held open during the time stated. “For valuable consideration” does not mean that valuable consideration has been exchanged. Shoney’s (1985): D agreed to purchase meats from P & agreed on price. Time effective: A firm offer becomes effective the moment it is put into writing (from that day forth). P promised 45 day notice of any increase in price. d. 2. A mere statement of consideration is not enough 3. Merchant (2-104): A merchant is one who by trade deals with the goods of the kind. Goods (2-105): Goods means all things which are moveable at the time of the contract for sale. but in no event exceeds three months. C.

. sending and cashing a check. b. together with any supplementary terms incorporated under any other provisions of the UCC. (2)they materially alter it. c. In such case the terms of the particular K consist of those terms on which the writings of the parties agree. therefore no K. Between merchants such terms become part of the K unless: (1)the offer expressly limits its acceptance to the terms of the offer. 2-207 (1) applies where there is an offer for the sale of goods and where a definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon. Brunswick Co. Last Shot Rule: Whatever term is in the last communication before performance becomes part of the K. it must mirror the offer. then K is based on terms in LAST counter offer b/c the other party performed in agreement upon last counter offer. counter offer. UCC 2-207 (what to do with different or additional terms) a. Knapp 19 5/1/2011 . If there’s an initial order.e. In order to invoke unless rule. b. 2-207 requires you to says “our acceptance is expressly conditional to your assent to these terms”. 2. or (3)notification of the objection to them has already been given or is given within a reasonable time after notification of them is received. RULING: Pre-UCC court found that the transactions between the parties did not meet the mirror image rule. Unless Rule & Express Assent: a. Contracts Outline Prof. Mirror Image Rule: Acceptance must be unequivocal and unconditional. Acceptance / 2-207 (2): Additional terms are construed as proposals for addition to the K. unless acceptance is expressly made conditional on assent to the additional or different terms. Counteroffer / 2-207 (3): Conduct by both parties which recognizes the existence of a K is sufficient to establish a K although the writings of the parties do not otherwise establish a K. (1)Test for Conduct: Are both parties acting as though there is an agreement? (i. Chang Fall 2002 a. sending and receiving goods?) 3. then performance. counter offer . (1915) An offer was sent from P to D. D responded with a PO that had the exact same terms except it asked for acknowledgement. (1)Poel v.

Notice of objection: a. Contracts Outline Prof. D’s form was silent. b. 7. Material Alteration: a. then the offeror’s terms always control. RULING: D wins b/c there was no express assent to indemnity clause and hence it did not become part of K. P’s form request indemnity. Dale Horning v. 5. RULING: P wins b/c implied warranty of merchantability would materially alter the K and would result in a hardship on P. Majority Rule: Express notice of objection is required. Leading Minority Rule: The offeror’s terms control. Majority Rule: Knockout rule: Any terms that differ between forms get knocked out of K. c. What counts as express assent? (1)Express assent = “I agree to that term. Oral Agreements followed by Written Confirmations: Knapp 20 5/1/2011 . The following DO NOT qualify to invoke the unless rule: (1)“Subject to” is not the same as expressly conditional upon your assent. c. 4. Different Terms (3 approaches): a. Chang Fall 2002 (1)Brown Machine v. (3)Acceptance expressly conditional to all the terms on front and back of this form. Minority Rule: Treat different terms like additional terms. Minority Rule: If your term contradicts another term. b. 6. b. b. that is an objection. then it’s likely to be a material alteration. If notice of objection always applies. If term had a significant effect on each party’s risk. Falconer Glass (1990): D’s (SSC) error forced P (SC) to spend extra $$ in order to meet GC’s deadline. Hercules (1989) D’s employee sued P because of injuries incurred with machine D bought from P. TEST: a term is a material alteration if it would produce unfair surprise OR hardship. (2)Acceptance expressly subject to all of the terms and conditions.” (2)Conduct does not count as express assent. so there’s always a prior objection. (All different terms contradict a term in the offer though.

apply 2-207(2). Contracts Outline Prof. b. 8. c.5%. (1)EXCEPTION: Oral K followed by 2 written confirmations: (a) Oral K is silent on a term but both confirmations include the same term. Land Knapp 21 5/1/2011 . Agreements to agree are not enforceable. (Chang agrees w/ majority. one or more terms left to a future agreement 2. VI. D. a. a. Walker v Keith (1964) Renewal provision in lease K didn’t specify rental amount nor a finite method for determining one. ADDITIONAL TERMS: If confirmation includes an additional term (to the oral K). it does not become part of K (because it is not what was expressly agreed upon). RULING: An agreement to agree is not enforceable and court refused to make up a term that parties didn’t agree to. Even though technically each is an additional term to oral K. Arbitration: no UCC gap filler for arbitration c. since forms agree.) (c) Minority Rule: Other courts say even though you orally agreed upon it. Agreements to Agree An Agreement to Agree includes: 1. STATUTE OF FRAUDS (SOF) Is K within SOF? (LOGS) 1. we’ll make it 1. what you orally agreed upon should override what forms say even if forms agree with each other. Chang Fall 2002 a. the term becomes part of K.5%. but both confirmations say 1. parties contemplate a formal written K and draft a “letter of intent” 1. Note: Terms are compared from oral K to written confirmation – not between written confirmations. DIFFERENT / CONFLICTING TERMS: If confirmation includes a different or conflicting term (compared to oral K). since they coincide and oral K was silent. Gap Fillers: Default rules or provisions (most are found in the UCC). Warranty (UCC 2-314): implied warranty of merchantability b. Consequential Damages (UCC 2-715): Seller is liable for any consequential damages (ex: during shipping) which seller could have reasonably prevented. (b)Majority Rule: If Oral K agreed on 1% interest.

K cannot be enforced. K formation could occur. c. Con is SOF has the potential for denying enforcement of many nonperjured and nonfraudulent claims as well. If an SOF defense is applicable. Written memorandum evidencing agreement. 2. signed by party to be charged If requirements have been met. identifying parties & subject matter 3. SOF is a defense to K enforcement. Policy: to minimize the likelihood of fraud being successful. Knapp 22 5/1/2011 . written memorandum evidencing agreement 2. One Year Provision 3. Chang Fall 2002 2. (1)Writings need not be executed at time of K formation. SOF defense is applicable. SOF defense not applicable UNLESS there is an applicable exception. have the requirements of SOF been met? Requirements: 1. Writing must identify parties & subject matter. they can be bunched together. then memo is written and signed after to memorialize it. REQUIREMENTS: a. (a) Strict jurisdictions require signed writing refers to unsigned writing (before they will bring in unsigned document). SOF defense not applicable. 1. (b)Lenient jurisdictions (such as Crabtree) hold that reference to same subject matter or transaction is sufficient. A. (2)So long as there is a sufficient connection between pieces of writing. Goods: UCC 2-201 4. Writing must contain material terms & conditions. b. Crabtree v. RULING: P wins b/c all of the writings together could satisfy the elements of the requirement for the SOF. The writings identified the parties and subject matter. If requirements have not been met and there is no applicable exception. Elizabeth Arden: P produced evidence of several writings that created all of the elements to satisfy the statutes requirement of evidence of an agreement in writing. Contracts Outline Prof. If yes. Suretyship If no. containing material terms & conditions 4.

many courts say no. a. C. (2)Possession alone: some courts yes. Clause Specific Exception: If an exception applies. SOF fails as a defense. b. (In most cases. “There is a writing”. some courts say no. Chang Fall 2002 d. 2. c. B. Alaska Democratic v. 2. or “There will be a writing. Statement. Writing must be signed by party to be charged. Remedy will be limited as justice requires. Part Performance (1)Payment alone: most courts say no. Rice: Breached oral K w/D was reasonably relied upon by P to her detriment. (1)Party to be charged is the person against whom K enforcement is sought. b. Not all parties must sign. a. Buffaloe v. LAND 1. Hart: P had oral K to purchase 5 tobacco barns from D. (3)Payment + Possession: some courts yes. Signature requirement is intent to authenticate. Equitable Estoppel (reliance on a misrepresentation of facts). Not all jurisdictions follow §139. 1. Use of company letterhead can satisfy requirement (even if it’s unsigned) if it shows an intent to authenticate.) (2)Signing must be by the person who is asserting the SOF as a defense. Definition: Any K for a sale of interest in land (leases included). P sent D first payment of $5000. Promissory Estoppel: Promise to put it in writing that is reasonably relied upon. Letterhead on it’s own is not enough. (4)Possession + Improvements: enough to constitute exception. Broad view (§139): PE (foreseeable reliance on K) can negate SOF defense. RULING: P won b/c although court found that the check did not satisfy the SOF because the writing was not signed by the party upon Knapp 23 5/1/2011 . RULING: P wins b/c Promissory Estoppel is an exception to SOF defense. which D then returned.” that is reasonably relied upon. P proves 1 year provision w/ part performance (quitting her job and moving). Narrow view: I will not use SOF or I will produce a signed writing. Contracts Outline Prof. SOF fails as a defense. GENERAL EXCEPTIONS: If an exception applies. this is the D being sued. completely torn up. d.

so it’s within SOF. Clause Specific Exception: If an exception applies. a. Contracts Outline Prof. Definition: K that cannot be fully performed w/in one year falls within one year provision. Knapp 24 5/1/2011 . E. paid the insurance premiums. sold the property to others. NOTE: Unilateral K formation takes place AFTER full performance. a. P had paid new higher rent and relied on ability to assign lease to new buyer. ALTERNATIVE PERFORMANCE: K for A or B. d. FULL PERFORMANCE: Termination or excuse DO NOT EQUAL full performance (majority rule). it’s not fully performed. Short term leases (one year or less) are only under one year provision – not under land. 2. then X’s occurrence will be an excuse. ONE YEAR PROVISION 1. D asserted SOF. Summit Hills: D reneged on oral K to renew the lease. Part Performance: Full performance by one party (1)Winternitz v. (1)If language doesn’t specify that K will be terminated if X. A can’t be performed in a year but B can be = out of SOF. e. (2)Doesn’t matter offeror or offeree – BOTH performances have to capable of completion within one year. GOODS – UCC 2-201 1. b. but P asserted part performance. If it might be terminated within one year. c. advertised the sale. court found that P satisfied the partial performance requirement of the SOF b/c he made a partial payment. SOF fails as a defense. RULING: P loses b/c he was suing for compensatory damages & part performance exception is only available for specific damages. Definition: UCC 2-201: SOF for sale of goods greater than or equal to $500. One year begins from K formation not from the beginning of the term of K. D. Chang Fall 2002 which enforcement was being sought.

It’s ok if writing incorrectly states a term. 2. then it is an exception to SOF and defense fails and K can be enforced. a. SOF fails as a defense. Clause Specific Exceptions: If an exception applies. F. a. SURETYSHIP 1. Contracts Outline Prof. (Bazak v Mast) b. 2. Definition: A promise to a creditor to guarantee or pay another’s obligation. Clause Specific Exception: If an exception applies. Knapp 25 5/1/2011 . K will only be enforced to the quantity included in writing. Main Purpose/Leading Object: If it can be established that the main purpose of making the promise (or suretyship) is for the promisor’s benefit. SOF fails as a defense. 2-201(3): Three parts: (1)Specialty manufacturing / custom made goods (2)Admission in testimony (3)Part Performance – payment or shipment. Chang Fall 2002 a. although it must include the quantity of items being sold. 2-201(2) Merchants Exception: not tested on midterm.