1 Contracts Outline Fall 2006 – Popovich

OVERVIEW OF CONTRACTS: A. What is a contract? • Restatement (2nd) of Contracts: a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in come way recognizes as a duty o A Contract represents the agreement, not the piece of paper. By writing it, it just memorializes it. o K = Contract B. Where does contract law come from? • There is no one rule book that contains all contract law • There is a majority rule, minority rule, the modern trend, and the traditional approach • Mostly state law; no fed body of law for contracts (with minor exceptions). This means that a valid K in one state may not be valid in another o Examples of exceptions: UCC; agencies of fed gov; copyright law • Possible places it might come from: o Common law (case law, precedent); some state statutes (i.e. tax law) o Restatement of Contracts: written by the American Law Institute (ALI), which consists of a body of lawyers, judges, scholars  Currently we’re in 2nd restatement (1981)  Group of scholars look through all cases and determine nature and change and attempt to summarize the state of the law  Is it law? No. Does it carry weight? Yes, in some jurisdictions more than others – the restatement tends to be progressive and some states prefer tradition. The Restatements often refer to the direction of the law or what direction they think it should take. o Uniform Commercial Code (UCC): National Commissioners of State Laws put together a code that addressed some issues of contracts in the ‘50s and ‘60s.  Had to be adopted by each state individually; adopted by all except LA  Only applies to sale of goods (for our class) between merchants and casual sellers (v. real estate) C. Who does not have the capacity to enter into a K? • Children • Persons of low mental capacity • Inebriated individuals • Persons in a shocked state D. What are the remedies for a breach of K? • Damages o Restitution: out of pocket expenses o Expectancy: benefit of the bargain measurement of damages o Reliance: put the person back to where they were before – fix the detriment suffered as a result of reliance on the contract and subsequent breach

2 • I. Specific performance (enforce the K)

THE AGREEMENT PROCESS A. Intent to contract • The outward expression of a person manifests his intention, not his secret and unexpressed intention. The law imputes to a person an intention corresponding to the reasonable meaning of his words and acts. • Mental Assent of the parties is not a requisite for the formation of a contract. If words or acts have one reasonable meaning, the undisclosed intention is immaterial except where an unreasonable meaning which he attaches to his manifestation is known to the other party • What is this reasonable meaning standard? o Objective Theory of Contracts – Reasonable Person Standard: what a reasonable person would understand the meaning of the words or acts to be  Subjective theory of contracts: meeting of the minds principle that an offer, acceptance, and “mind meld” is necessary to reach a mutual mental assent. This standard is no longer used • Why? Subjectively, everyone has a different standard so it will always be at issue. Lucy v. Zehmer – D claimed that he was joking through K negotiation, acceptance, and agreement. Court found that the appearance of the situation was a good faith offer, a good faith acceptance, and the execution and delivery of a written K to a reasonable person that he intended to be bound, which was enough to bind him. What if the P knew he was kidding? No K! What if P didn’t’ know he was kidding, but most people would have picked up on it? No K b/c it wouldn’t meet the reasonable person standard. • Look to at the offer objectively to see if it is reasonable and valid – if I say I’ll give anyone $1 Mil to get me a glass of water, a reasonable person wouldn’t expect me to really intend such an offer o What about an inducement for someone to risk his life to save a human being? (I’ll give someone $1 mil to save my wife from the burning house) – that is reasonable b/c there is no way to put a price on a human life, unlike a glass of water. • Not all agreements between parties are Ks o There must be an intent to be legally bound – if the parties did not intend that they be attended by legal consequences at the time the agreement was made it is not a K  Determine if a reasonable person would think they intended their agreement to have legal consequences o If the parties don’t say they have legal consequences, even if it would normally seem like a K, then it is not. Balfour v. Balfour: husband and wife have allowance agreement that he doesn’t uphold. Beside the fact that the court didn’t want to regulate a spousal agreement, it held that the parties did not intend to legally bind themselves to the agreement because initially they were living in harmony

3 IF they were not living together at the time, they may have intended legal consequences. However, determine state laws regarding family law requirements. • What if the K is a contract of adhesion (a K entered into between parties with unequal bargaining power)? o Must look at facts to determine if it was grossly unreasonable to bind party without fair bargaining power o If it was grossly unreasonable, court will: 1) find the obnoxious clause “ambiguous thus making it unnecessary to fulfill; or 2) find the clause against public policy and declare it unenforceable; or 3) hold that the clause prohibits the P from recovering by K, but not in tort. • Exceptions to a valid contract, regardless of intent – do not have capacity to make a valid K o Children o Persons of low mental capacity o Inebriated individuals  If a Party is intoxicated to the extent of being unable to comprehend the nature and consequences of the instruments he executes, it is invalid o Persons in a shocked state • Are rewards Ks? Would a reasonable person think that a certain item was worth reward amount? What was the emotional state of offeree? Are items sentimental? If so, does reward state that (people can’t just assume such things for reasonable factor) • Human life doesn’t have value (it’s priceless) The offer • General overview o A contract has an offer (made by the offeror/promisor) and an acceptance (of the offeree/promise)  Sometimes the offeror is not really the offeror. They may just be making an invitation to contract and the offeree actually becomes the offeror o “The offer creates in the offeree a power to bind the offeror”  If there’s a valid offer, it creates in the person to whom it is made the ability to accept and then bind the offeror  Better be careful if you make an offer – if it is valid, you might get stuck b/c someone might accept it and bind you o “The offeror is the master of his or her offer  Offeror controls the terms; offeror sets up the offer that if accepted becomes a binding contract o Two types of Ks  Unilateral Contract: reward type contracts, i.e., I’ll give $100 to whoever finds my car. Acceptance is through performance of the term  Bilateral Contract: exchange of promises, i.e., I promise to give you $100 if you promise to give me your car • Restatement definition of an offer: 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 


.e. and 2) ad on tv and/or catalogue wouldn’t constitute an offer • P’s demand can’t prevail because: 1) commercial was mere ad with no clear promissory language. and price • Clear. method of obtaining it (first to arrive). definite. an offer to receive offers. 2) tongue-in-cheek attitude of commercial (no reasonable person would conclude what P did). but they do not modify contract law o Commercials in themselves are not definite and are merely advertisements  Leonard v. (Clear. explicit and leaves nothing open for negotiation)  Lefkowitz v.e. Court held there was no offer. If I am successful in settling this matter. McGee (hairy hand case): doctor guaranteed a perfect hand after a skin grafting procedure. O’Connor: entertainer’s nose does not look more attractive after plastic surgery o Needs substantial proof o Most professionals will avoid making unnecessary opinions Offers Distinguished from Advertisements o An ordinary newspaper ad is not an offer for a K. prophetory language (i. there is a breach of K and damages o Professional opinions are not offers unless they go beyond therapeutic nature (reassurance) and there’s some reliance on the part of the patient  Hawkins v. If there is acceptance and the person does not end up more beautiful after the surgery. definite.4 • Offers Distinguished from Opinions o An opinion to make a person more beautiful with plastic surgery was part of an offer.  Craft v. Pepsico: Leonard wrote check for $700. Elder & Johnston: Ad offers sewing machine deal and when P goes to buy it for advertised price. and 3) no writing between parties to satisfy statute of frauds o Exception: if ad is actually a unilateral offer that has promissory language and contains details. Great Minneapolic Surplus Store: Store advertised one stole worth a certain amount of money awould be sold to the first customer for $1. simply an invitation to make an offer o Published price is not an offer to sell goods at that price b/c ad is simply an invitation to enter into a bargain o Statutes may protect consumers from false advertisements and bait and switch tactics. and explicit details with “first come. Court held this was an offer because it contained quantity. the balance due will be paid) • . D refuses to sell it at that price. There is no offer because: 1) Commercial isn’t definite. i. first serve” promissory language is sufficient to constitute an offer  Promissory language: • Not. but an offer to negotiate. but not found to be liable when patient ended up with “hairy hand” because doctor promises do not always constitute an offer • In most jurisdictions a promise will be equivalent to an offer  Sulliven v.000 through an attorney because he intended to purchase a jet as advertised on tv.

Correspondence goes back and forth regarding price and location. not an offer  Saying the lowest amount you would be willing to sell something for is not an offer – it is not promissory. but A’s (by saying consider) was an invitation to negotiate. then they are promissory Offers Distinguished from Preliminary Negotiations and Price Quotations o Negotiations are preliminary and follow-up discussions regarding offers do not constitute binding offers  Lonergan v. Upon completion.” D then sent telegram stating that they could not fill the order and court held that they had made an offer. invitation to negotiate (like an ad)  A states to B that he wants certain work done and asks for an estimate.e. I will promise to make good on this debt) • According to Restatement 2nd – promissory language is not necessary. B promptly replies: “I will buy your house for $200. I would consider $200. B gives a bill for greater than the estimate. especially with regard to bids. each case must turn largely on the language used  Using the work “quote” does not make it a quote instead of an offer  Fairmount Glass v. D mentions other potential interested buyers. just negotiations  Like Buying a house – purchaser makes the offer o Price Quotes are usually not offers. an estimate may come back in the form of an offer o Bids: asking for bid is a request for an offer. however. “go ahead and do the work and I promise to pay you a reasonable amount”)  What if A says “yes. B names a price and A says “I accept” Is there a K? No.” Is there a K? No. estimates are not preliminary when they are in response to a bid. Grunden-Martin: after correspondence regarding prices and other info. land has been sold to someone else.000 for it. and not upholding it resulted in a breach  A writes to B: “I am eager to sell my house. Court held there was no offer from D. but informative and part of a negotiation • • • .5 Must be clearly promissory in nature (i. but it is reasonable. A’s expression became the offer and B accepted on his terms. (Basically. no promise.000. preliminary. in writing. May B collect? Yes. Scolnick: P responds to D’s ad in newspaper about J-Tree land for sale. P sent request for order in response to D’s correspondence stating “for immediate acceptance. go ahead at that price”? Then estimate price becomes part of A’s offer terms o Exception: In a commercial setting. the estimate was not promissory so it was not an offer  A states to B that he wants certain work done and B gives an estimate. B’s response could be a viable offer. By the time P makes offer. A says “go ahead” and B does the work. but more evidence  Ad with a clear promise can be an offer: Carbolic Smoke Ball Offers Distinguished from Estimates o Estimate: cannot be accepted.

it is binding without putting it in writing  No express manifestation that they will or won’t be bound by writing (there will be some kind of writing). personal property (esp. but you don’t have it yet.  Parties say they will not be bound until they have memorialized it – binding  If parties say they have an agreement. Invitation to offer o Form letters v. With respect to personal property. if it’s unsolicited or a response to something) o Did the offeror have capacity to make an offer? • • • C. you might be prevented from withdrawing your quote. but there is no clear indication if the writing is necessary to bind • Traditionally: no K • Modern trend: look at factors and consider facts and circumstances . it could constitute an offer • Form letters are not offers • Need terms of acceptance  Exception: Promissory Estoppel. it’s still a factor) o What does it call itself? (May or may not be an offer – depends on the trier of fact and other circumstances/factors) o Does this involve real v.6 Scholarly approach: promissory nature not necessary Most courts would view it as “I will not entertain an offer of less than $” especially with real property. responding to a specific inquiry (might lead towards being an offer) o Is the “offer” specific as to quantity. and just plan on memorializing it later. it’s possible it would be viewed as an offer  A quote that is not in response to anything is more like an ad (unsolicited). INTENT TO MEMORIALIZE AND INDEFINITENESS • Memorialization o Parties are negotiating terms back and forth. various terms including terms of acceptance (more specific might be leaning towards an offer rather than an ad/quote)? o Is there promissory language or a hint of it? (This is becoming less of an issue with respect to personal property. addressed to specific person or company o Does the “offeree” know the seller is bargaining or negotiating with others? o If seller initiated the communication v. If you make a statement or promise that has foreseeable and substantial acts that you know will be relied on. you might be precluded from withdrawing it and it will be held as a valid offer. The party who backs out doesn’t want the K and the other party does. price. but if it’s in response to something that contains details. and then one party backs out. If someone has detrimentally relied on this statement and has some injury as a result. Factors to consider when evaluating if something constitutes an offer o Offers v. but plan on putting agreement into writing (memorialize it)  Issue: know there is going to be some writing. nevertheless.

o Need to know intent of parties (either to be bound by memorialization or not). and whether either party takes any action in preparation for performance during the negotiations. whether the amount involved is large or small. they have then concluded the contract. before the final writing is made. b. and that the final writing whall contain these provisions and no others. whether it has few or many details. This they may do orally or by exchange of several writings. whether a standard form of contract is widely used in similar transaction. On the other hand. whether it is a common or unusual contract. Among the circumstances which may be helpful in determining whether a contract has been concluded are the following: the extent to which express agreement has been reached on all the terms to be included. If parties have definitely agreed that they will do so.7 o Factors for determining whether parties intend to be bound:  Whether a party expressly reserved right to be bound only where a written agreement is signed  Whether there was any partial performance by one party that the party disclaiming the contract accepted  Whether all essential terms of the alleged contract had been agreed upon  Whether the complexity or magnitude of the transactions was such that a formal. Look to words. It is possible thus to make a contract the terms of which include an obligation to execute subsequently a final writing which shall contain certain provisions. c. whether the contract is of a type usually put in writing. agree upon all the terms which they plan to incorporate therein. Parties who plan to make a final written instrument as the expression of their contract necessarily discuss the proposed terms of the contract before they enter into it and often. if either party knows or has reason to know that the other party regards the agreement as incomplete and intends that no obligation shall exist until other terms are assented to or until the whole has been reduced to another written form. whether it needs a formal writing for its full expression. deeds. executed writing would normally be accepted Restatement Approach (Cont sec 27): Manifestations of assent that are in themselves sufficient to conclude a contract will not be prevented from so operating by the fact that the parties also manifest an intention to prepare and adopt a written memorial thereof. Such Circumstances may be shown by oral testimony or by correspondence or other preliminary or partially complete writings. the preliminary negotiations and agreements do not constitute a contract. Comment: a. and factors:  Whether a party expressly reserved the right to be bound only when a written agreement is signed . but the circumstances may show that the agreements are preliminary negotiations.

City of NY: City had K for sewage lines with no duration in terms – P argued perpetual obligation. court held a reasonable amount of time  Missing term. timeframe. trend is to “GAP FILL” • Filling in missing terms or make a determination on a vague or agree to agree term (Policy: want to make Ks. vague. while material. etc. D argued at will. just morally wrong)   • . or agree to agree in the future on a term?  Historically: law required to have everything definite (specific in material terms such as price. Arcadian – language in prelim agreement refers to possibility of negotiation failures – not binding)  The context of the negotiations o Promissory estoppel:  Definition: The principle that a promise made without consideration may nonetheless be enforced to prevent injustice if the promisor should have reasonably expected the promisee to rely on the promise and if the promisee did actually rely on the promise to his or her detriment  Elements: • A clear and unambiguous promise • A reasonable and foreseeable reliance by the party to whom the promise is made • An injury sustained by the party asserting the estoppel by reason of his reliance  Damages: out-of-pocket  Policy: Don’t want parties to get stuck in a K they didn’t intend. Although they might grant some relief if there was reliance (out-of-pocket)  Modern Trend: Under influence of UCC. but don’t want them to benefit or other party to be hurt b/c of it either INDEFINITENESS o What if some terms are omitted. (Doesn’t have to be criminal. He may not fire for bad cause – that which violates public policy.8 Partial performance Whether essential terms had been agreed upon/existence of open terms • Texaco  Whether the complexity or magnitude of the transaction was such that a formal executed writing would normally be expected/necessity of putting agreement in final form  The language of the agreement • Promissory language – Texaco • API v. is not fatal o At-will Employment Ks can be modified by three exceptions (Wagenseller):  Public Policy Exception: An employer may fire for good cause or no cause. not break them) • How: consider REASONABLENESS and parties’ intent to make the determination  Haines v.) and were reluctant to find a K if terms were vague or had an agree to agree term in it.

nor one complete book of K laws. 2-204(3): Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a K and there is a reasonably certain basis for giving an appropriate remedy) • When the parties have covered a material term. Suggested set of uniform rules for sale of goods (can be influential for real property or services. but omit terms of payment. if material terms are missing. pg 92 – courts would be unlikely to gap fill duration because of At-will doctrine) **Cannot Gap fill Quantity – no reasonable amount**  When can you gap fill? IF parties have clear intent to make a binding K and not too many terms are open  UCC sec. as part of agreement. Martin Tractor) o Where parties have reached an enforceable agreement for sale of good. then more likely NO K Good Faith and Fair Dealing Exception: Employee cannot be terminated for bad cause b/c there is a presumption of continued employment Comment: courts not eager to gap fill re: employment b/c employment law is pretty specific and you don’t want to encourage litigation every time someone gets fired   o UCC  Not Fed law. but not binding) that must be adopted by states in order to become law  Goods: things movable at time of K o Gap Fill: UCC fills in gaps if there is intent to contract despite missing terms (or agree to agree terms)  UCC Gap Fillers • 2-310(a): Terms of payment • 2-305(1): Price (rx – fair market price) • 2-308: Place of delivery • 2-309(1): Time of delivery • 2-309(2): Duration of contract (rx period) (IMPORTANT!!! – see problem 34. then most jurisdictions hold as part of K o Generally. law will imply.9  The Personnel Policy Manual Exception: Whether any particular personnel manual modifies any particular employment at-will relationship and becomes part of the particular employment K is a question of fact. Evidence relevant to the factual decision include language used in the manual as well as employer’s course of conduct and oral representations regarding it • States are mixed in how to approach significance of personnel manuals o If terms very clear and employee must agree to terms for employment. that payment is made at time of delivery • When Parties are silent as to a material term • Parties agree to agree on a material term (Ogelbay – prior behavior and pricing mechanisms show intent to be bound) . but just haven’t agreed upon it (Southwest Engineering v.

Where the parties manifest an intention not to be bound unless the amount of money to be paid by one of them is fixed or agreed and it is not fixed or agreed there is no contract. Uniform Commercial Code § 2-305(1). relief may be limited to the recovery of benefits conferred and specific expense incurred in reliance on the contract. and if the contract is entirely executory and specific performance is not an appropriate remedy. via good faith and fair dealing. o When there is a reasonable standard with which to gap fill – absent objective reasonable standard – no gap filing o Severability Clauses: If any of the terms is invalid. Others say just because there’s a renewal provision. they may not because specificity is of great importance. no legal obligation arises until such future agreement is make (Copeland v.) the court may find a K. there is no implication of an intent to be bound and shouldn’t gap fill rent  Where any of essential elements of a promise are reserved for future agreement of both parties. Uniform Commercial Code § 2. and the price is not settled. but can be inferred (a neat and tasteful r. implies an intention to renew and come up with new reasonable term. the price is a reasonable price at the time of delivery if (a) nothing is said as to price. or (c) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency and it is not so set or recorded. But substantial damages cannot be recovered unless they can be estimated with reasonable certainty (§ 352). Baskin Robbins) o A material term is included. or (b) the price is left to be agreed by the parties and they fail to agree. Where they intend to conclude a contract for the sale of goods.10 o Traditional Rule – Do not gap fill for agree-to-agree situations o Modern Trend – Gap fill if parties clearly intended to be bound o But first must have manifestation of requisite intent (Joseph Martin Deli – provision regarding re-negotiating lease is not sufficient to show intent to be bound)  A mere agreement to agree. that term can be omitted and will not invalidate entire K.305(4). the less vague you can be  If it’s vague. in which a material term is left for future negotiations. Similar principles apply to contracts for the rendition of service. Or one party may be given power to fix the price within limits set by agreement or custom or good faith. . is unenforceable  Courts are split on leases – some say that a lease.r. Sharman)  Must look at all material terms  May speak to intent to bind *Restatement §33(3): The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance. however. but is vague  The more material. no legal obligation arises until such future agreement of both parties. K must be valid in the first place for this to hold up (Eckles v. With a home. Comment (e): Indefinite price.

In such cases the consideration paid. EXCEPTION: If an offer looking to a bilateral K is made and the offeree begins to perform in the presence of the offeror with the offeror’s knowledge and the offeror doesn’t say anything. started in his presence. Example: I promise to give you $100 to walk across the Brooklyn Bridge (one promise. K formed = Completion of Performance iv. If offer is ambiguous. restatement says to look towards bilateral K. Other indefinite terms. acceptance is through return promise) ii. I promise to pay you $25. Bilateral Contracts a. The provision for future agreement as to price strongly indicates that the parties do not intend to be bound. Generally. Illustration 8: A promises to do a specified piece of work and B promises to pay a price to be thereafter mutually agreed. Even when the parties intend to enter into a contract. minor items are more likely to be left to the option of one of the parties or to what is customary or reasonable. Acceptance = Promise from offeree in return. 2. even though consideration is paid for it. the stronger the indication is that the parties do not intend to be bound. Reverse Unilateral Contract: Offeror performs and acceptance is through a promise 1. imply a return promise from the offeree’s conduct b/c an Rx would infer acceptance. Example: I promise to pay you $100 if you promise to walk across the Brooklyn Bridge (two promises.11 . If they manifest an intent to be bound. Unilateral v. Unilateral Contracts: one party makes the promise and acceptance is through performance i. or its value. if you promise to rake my lawn. 2. the less likely you can infer via performance. K is formed when offeree gives return promise . K formed = promise is made b. Bilateral Contracts: both parties make promises i. Ambiguous as to unilateral or bilateral i. When does K form? When promise is made in return (promise to cross bridge) iii. uncertainty may be so great as to frustrate their intention. Acceptance = Performance. Traditional Rule: Ambiguous offers defaults to an offer looking to a bilateral K. v. Thus a promise by A to give B employment. 1. Knowledge could be enough to infer depending on facts and circumstances. Example: A says to B. Acceptance = Promise. does not provide a basis for any remedy if neither the character of the employment nor the compensation therefor is stated. the price is a reasonable price at the time for doing the work. When does K form? When act is performed (crossed the bridge). B starts raking in A’s presence.e. Example: Will you ship 15 units at $100 each? We have deposited $1500 in your account. acceptance is through performance) ii. iii. Promises may be indefinite in other aspects than time and price. D. The more important the uncertainty. The more time that passes after the offer is made. K formed = return promise is made iv. i. c. 3. ACCEPTANCE 1. can be recovered.

basic rule: you don’t have to give notice of acceptance on an offer in a unilateral contract (know different views on this!) c. the offer can apply to anyone who knows about the specifics even if they haven’t seen the ad! 2. this agreement shall be become binding only upon written acceptance or upon performance of the work). Offeree has a choice. Modern Trend (majority): offeree must know of the offer at some time before completion of performance. Fulton b. 2.e. Knowledge of offer: Usually inherent in fact pattern – know about the original promise in order to make a return promise. d. Can have offers expressly looking to both (i. If an ad can be considered a unilateral contract (clear. Majority rule: Overt manifestation. Bilateral K’s 1. Knowledge of the Offer and Intent to Accept i. Majority (UCC & Restatement): Ambiguous offer can be accepted either by promise or performance. Minority rule: offeree does not need to know about the offer. Preliminary Problems with Respect to Acceptance a. not subjective intent controls formation of K. (Carbolic Smoke Ball) 1. i. performs) otherwise the performance is not done in reliance of the offer (often to one’s detriment or risk). UCC is a deal maker. to prove that the offer was the inducement to act. c. ii. ii. 2. Normally. Broadnax: must know about reward for escaped prisoner in order to collect b. 1. When do they have to know of the offer? i. Intent to accept offer: overt manifestation (return promise) is sufficient. (Restatement – assume intent unless manifestation to the contrary. offeree must be induced offer. don’t need to prove intent because of objective theory of Ks. 2. Traditional view (minority): offeree must know of offer BEFORE starting to perform ii. promissory language) then anyone who chooses to perform can accept. K is formed when offeree either makes a promise or completes performance.12 ii. Unilateral K’s 1. the person or group to whom the offer is made. i. Industrial America v. not a deal breaker. Minority rule: offeree needs to prove intent to act upon offer. Necessity for notice to offeror of acceptance return by . (State v. Who may accept an offer? i. act done shows intent). b.e. Intent to accept offer: a. Knowledge of offer: offeree must know about the offer when he accepts (i. Malm) a.e. 2.

not promise in . K is formed when offeree completes performance (even if that is before actual notice is sent/communicated). 2. 4. 1. ii. Offeree exercises rx diligence to notify the offeror of acceptance. Bilateral K’s: i. K is formed when notification is communicated/sent. Policy: don’t want offeree to make multiple offers 3. If an offeree has reason to know that the offeror has no adequate means of learning of the performance with reasonable promptness and certainty. the contractual duty of discharged unless: i. Before acceptance: Do not need to tell offeror that you are starting to perform unless it is explicit in the offer. Example: I promise to pay you $3500 if you paint my house within two weeks. very. Offeror learns of the performance w/in a rx time.13 Unilateral K’s: i. or ii. rx diligence to notify the offeror of acceptance is a. 2. Small Minority/Oldest View: There is no requirement that the offeree give notice of performance to the offeror under any circumstances. Return promise must usually be communicated to the offeror ii. but if the offeree has rx knowledge that the offeror has no adequate means of learning performance. b. Must make return three days OR paint house in three days. If offer is open for a certain amount of days: must either make return promise during timeframe or complete performance in that time. Very. or iii. not by performance. however… a. Offer indicates that notification of acceptance is not required. Minority: No general requirement to give notice. The offer is open for three days. a. Exception to return promise requirement: if offeree begins performance in the presence of offeror with his knowledge iii. Majority view (Restatement/UCC): no notification is necessary unless the offer requests such notification. K is formed when notification is communicated/sent. very small minority: Requires offeree give notice of completion unless it was expressly noted in the offer that it is necessary. Bilateral Contract: the offeror is of the required. After acceptance (performance): 1. Policy: protect offeror from being obligated in multiple offers c. 3. ACCEPTANCE BY SILENCE AND CONDUCT (typically NOT looking at unilateral K) a.

one does not accept by their silence or conduct – one must accept by a return promise ii. especially since they knew what was going on and were benefiting 3. Silence until Sunday = acceptance 4. (Miller v. General Rule: Gift.14 i. 3. percentage. Cannot force someone to accept by silence. iii. Exception: Infer acceptance via conduct 1. Beck) iv. Exception: Prior Dealings 1. then silence will – it’s inferred. facts and circumstances show a reasonable expectation of payment the other person could reasonably know about this (Wilhoit v. If I hear from you by [a specified time]. a. General Rule: In an offer looking to a bilateral contract. What if are given silence offer and you want to accept it? Two views. 2. NBD Band.A. N. do not have to return it to avoid acceptance and binding K. Unsolicited mailings a. don’t my offer necessarily on subjective be acceptance member. Look at facts and circumstances. Rebuttal Presumption: weren’t acting like family. Cannot require affirmative act or otherwise bind.) 2. but silence is not acceptance if it’s not intended to accept. If offeree voluntarily accepts or avails self of services rendered for his benefit with the rx opportunity to reject and where an Rx should understand the expectation of payment. testimony if admissible i. etc. What if. shall not be a competent witness as to such matters against such estate. 1. Minority view (small minority): If offeree is silent there is no true acceptance unless it is communicated.) Based intent. a. D should know that a reasonable person would be expected to pay. Dead Man’s Statute: any person whose interest is adverse to such estate. a. Example: Realtor sends unsolicited letter to seller saying “I hear you’re selling your house and I want to be your exclusive realtor. b. services and expectation. Silence can be acceptance (if it’s in the offer. Exception to exception: Presumption of gratuity: “family” doesn’t expect to be paid when you provide services for a “family” And a recipient would not have expected to pay for a. Silence can be used as acceptance. . Majority view: Offeree is silent intending to accept. in realtor example.)” No – cannot do this. Day v. you just cannot force someone into acceptance using silence. the seller responds “if you don’t hear from me by Sunday then I will have accepted”? a. I will assume you accept (including fees. Caton: ∏ builds wall on both his property and ∆’s and expects ∆ to pay for part of it.

an . the offer is irrevocable.e. Both offeree and offeror are bound once offeree starts performing 3. the completion of performance c. If you receive property and exercise dominion over it. offer is performance. D states he declined to accept skins. Minority/Traditional Rule: Offer was revocable (i. then no. unsolicited sending of goods can be kept. Neither party is bound until completion of performance 2. not used much. b/c of previous dealings. can be revoked) at any time up until acceptance. Offeree is now obligated to perform and irrevocable. then you’re deemed to have accepted it *(NY Statute: if something is voluntary. a. Massasoit Whip (eel skins were sent to D and kept for an unreasonable period of time before being destroyed. Small Minority (in disfavor. Exception: will infer acceptance where. then he does not have obligation to stop in order to minimize damages. Starting of performance = return promise b. What if offeree continues to perform after offeror has revoked the offer? a. ii. If offeree continues just to get full amount of K out of offeror as damages. he has a duty to stop performing. Exception: Dominion over property 1. but the offeree is not bound b/c acceptance is still completion of a. Hobbs v. Postal Laws: unsolicited sending = unconditional gifts) E. WHEN MAY AN OFFER LOOKING TO A UNILATERAL K NO LONGER BE REVOKED? Rules 1. Depends on offeree’s reasoning b/c parties have a duty to mitigate or minimize damages: i. 1.e. also known as an option K Miscellaneous 4. 1. The offeror is bound once the offeree starts performing. i. If offeree continues because he wants the money and because there is a future business incentive for the work to be completed. commentators do not like it): Once the offeree starts to perform. Acceptance = Completion of Performance b.15 b. that creates a bilateral K. Offeree is also not bound until acceptance. Cannot force offeree to stop performance that will be beneficial to him. but not the offeror. but the offer becomes irrevocable b. a. c. Starting of performance does not create a K. it is reasonable that the offeree should notify the offeror if he doesn’t intend to accept. but P never received notice of this and D’s outward manifestation to the contrary) (see below exception) v. Majority/Modern Trend (Restatement): Once the offeree starts to perform.

trying to tender the money is performance b. Wheeler: Prosecutor made an initial plea bargain to ∆. but rescinded the offer before he accepted it. When ∏ went to the ∆’s house to pay him (attempted to perform). they would have use and income of the premises and would house after she died. the withdraw from any plea bargain prior to actual entry of a guilty plea. Majority: Cannot revoke b/c performance is started 3. i. Brackenbury: ∆ sent letter to ∏s proposing that they move to Maine to take care of her and that if they did. evict necessary. They did. Showing and listing house is start of performance c. If offeror somehow prevents offeree from performing and offeree has a desire to go forward for a reason outside the K. Offeree would get the benefit of the bargain on a pro-rated basis 5. Majority: acceptance is either by return promise or performance b. but still can’t revoke after start of performance get the leave. but a partial one. ii. not a full K. Secondary view: Start of performance converted it into a bilateral K. (dissent disagrees) 7. Completing a loan to pay back a debt is preparation. ∆ refused to take his money and informed him that he’d sold the debt. There is a difference between preparation and start of performance a. If it was looking to a bilateral K (which is default when unclear). A K at this point will have been formed. Petterson v. Court held that that the offer was revoked b/c gave him notice before the tendering of money.16 b. . Court held that absent some detrimental reliance by the defendant. it might be a partial contract. Traditional view: ∆ could revoke offer b/c performance is not complete (will not be complete until ∆ dies) 2. Rules: i. ACCEPTANCE OF INDIFFERENT OFFERS AND ACCEPTANCE BY PROMISE 1. the promise was to take care of her – it was implied b/c they moved and started performing in ∆’s presence. Traditionally: offer looking towards a bilateral K. acceptance is return promise ii. Court held that acceptance of the offer was the moving and continuous performance of the specified acts in the offer and no return promise was i. a. Plea bargain = unilateral K b. Pattberg: ∆ offered ∏ that he would forgive part of his debt if he paid it off early. If it was looking to a unilateral K: 1. *Must ask: what constitutes the start of performance to determine if offer is revocable Cases 6. but trouble developed and she ordered them to When they refused she tried to transfer the property to her son and he tried to them. Ambiguous Offers a. ∆’s plea or detrimental reliance = acceptance he State may F.

(Offeree is bound. One of the parties must carry the risk of loss and inconvenience and it should be the offeror who has the merit of closing the deal more and enabling performance more promptly. c. b. A effective when sent But. In a bilateral K. R = Rejection Time  Scenario #1: |------------------|---------------------|-----------------------|-------------- A sent R sent A received R received Binding K b/c of mailbox rule. Also called Deposited Acceptance Rule or Adams v. i. When is acceptance of an offer looking towards a bilateral K effective? 2. (Rejection terminates offer) Scenario #4: |--------------------|---------------------|-------------------|---------------- R sent A sent A received R received quickly the . the offeree is estopped from enforcing the K even though it would be valid – not bound if offeror then makes offer to another offeree. Rationale: mailing is overt manifestation of assent to the proposal. does not apply if there is an unreasonable method and(/OR???) amount of time ii. A effective when sent Scenario #2: |-------------------|----------------------|----------------------|-------------- A sent R sent R received A received Binding K b/c of mailbox rule. if offeror relies on rejection received first. Also. for parties at a distance. rejections are effective when received iii. Example Scenarios: A = Acceptance. not offeror) Scenario #3: |------------------|----------------------|-----------------------|-------------- R sent A sent R received A received Rejection received first – mailbox rule does not apply. he has invited acceptance. an offer can be revoked prior to acceptance. Later received acceptance will be deemed a counter offer b/c once there’s a rejection the offer is off the table. Parties at a distance: a. 1. Lindsell Rule iv. Applies only to acceptances. Applies when mail is the proscribed method and when it is not. Mailbox Rule: Acceptance (and K formation) is effective upon dispatch.17 iii. Partial performance here b/c K would be complete when ∆ died so it’s at least a partial K.

If rejection is sent first  negates mailbox rule and whichever one is received first prevails. offeree called atty and cancelled. they are valid upon receipt. Despite postal laws (and email capabilities) that allow one to recall mail. if offeree has some to know that offeror may not hear it (reasonableness!) then neither will bound. received K before completed the were sent not return the acceptance their intent to reason be . because mail was not identified as an exclusive method. but if he does not. mailbox rule still applies vi. UCC is in accord with this approach b. Summary of Mailbox Rule rules: i. The offeror can put in exact means of a proscribed/exclusive method of acceptance. then there is acceptance. but receipt. offeree is estopped from binding the offeror. but if rejection is received first and is relied on. If A is before rejection. but did docs. ii. Fuijimoto v. After mailing. 3. They did return to work. acceptance and formation. However. Giving the acceptance to one’s own agent is not mailing b/c one still has control. That is ok. When parties are on the phone: (should these be switched??) i. Docs to ∏s. Use mailbox rule when it is mailed before the rejection. K is valid – acceptance is received before the rejection – K forms when A is received. K is formed. v. iv. d. ∆ offered Ks with a profit sharing provision. c. ii. iii. ∏ signed them. i. Courts: parties on the phone are at a distance so the mailbox rule applies. Thoelke: Offeror executed a K for sale of property and mailed it to offeree. any reasonable customary method will suffice.e. Rio Grande Pickle Co. Courts are hesitant to find exclusive methods: 1. d. If mailing is the proscribed method or there is no proscribed method.: ∏s worked for ∆ and demanded more compensation in writing. Acceptance methods a.18 Don’t apply mailbox rule b/c something was done before A was sent. Morrison v. Rejections do not follow the mailbox rule. Court held mailing acceptance K and they were bound. Commentators: parties on the phone are equivalent to face-to-face so K is formed when acceptance is heard or should have been heard. ii. as soon as acceptance is mailed. Giving it to a private messenger = mailing. but did not specify method of acceptance. If I send an offer and say “write me back if you accept” and you call me. Offeree executed it and mailed it to offeror’s attys. Court held the b/c the Ks contained no method. When parties are face-to-face: K is formed when acceptance is heard or should have been heard. i. d. Acceptance is effective when dispatched. Ks were valid b/c ∏s overt act of returning to work express accept and their return was known by the offeror.

Majority: Offer automatically terminates at the death of the offeror w/o knowledge of the offeree. Very small minority: Offer terminates when the offeree knows or should have known of the death of the offeror. offer expires in a reasonable amount of time. i. 3. modern day equivalent could be something like having an intermediary discuss translate between two parties who don’t speak the same language. b. b. decedent was adjudicated incompetent. In the middle of their continuing guaranty. Adjudication of Incompetence of offeror: a. Court held ∏ could recover b/c he didn’t know. then there will be a valid acceptance on dispatch (Mailbox Rule). If offeror isn’t declared incompetent. Reasonableness requirement for true mailbox rule too  if a huge flood is coming and you stick an acceptance in the box and then jump out of the way as it is washed away – acceptance not valid b/c unreasonable. G. the offer terminates automatically regardless of whether the offeree knows about it. However. c. you might be able to void the K by mistake if you were sleep walking. Minority: When offeree is adjudicated incompetent. DOES NOT APPLY TO E-MAIL! 1. only if it arrives in offeror’s hands within the same time frame it would arrived had the offeree used care H. If not clearly stated. the offer terminates when the offeree knows or should have known about the person’s incompetence (majority and minority rule). Death of offeror: a. Traditional Rule: If you misaddresss something. the offeree is not able to take advantage of the mailbox rule so acceptance is effective when received. TERMINATION OF A REVOCABLE OFFER 1. Traditional rule of transmission: The received (incorrect) transmission is binding. the offer terminates unless the offeror doesn’t know and doesn’t have reason to know about the offeree’s incapacity. as long as you were not negligent in your actions. ∏ had no knowledge of this. Swift v. However. what was transmitted). 2. . even if it gets to the offeror. Smigel: ∏ held guaranties by decedent for payment of indebtedness.19 1. you are bound. 2. 3. If you decide not to mail an offer or acceptance and it accidentally gets mailed anyway. Modern Trend: If one is sloppy in their acceptance. MISTAKE IN TRANSMISSION *Most of this is usually out of date because the classic cases deal with telegraphs (what was sent v. unless the recipient knew or had reason to know that there was a mistake. Majority: When offeree is adjudicated incompetent. Can clearly state in the offer the period of time it is open and after that it terminates a. b. Misaddressed mailed acceptances a.

Scholars say if there was a delay and the offeree knew or should have known about it. original offeror remains silent then it will be deemed accepted and K formed. not postmarked date* c. Modern trend: Start day after receipt *Date = date on letter. Slight Majority (Corbin): Measure from the time the offer is received 1. but use the modern trend sent date (traditional or modern trend start – When you should have received it probably use next day start. If B knows that A made an offer to C (or reasonably should have known). Off is still on the table – consider reasonableness. If B does not know. b. 4. BUT. If offer does not include a time period and reasonable amount of time has passed: a. it would be a counter-offer. then the acceptance is not an acceptance. I. then he cannot accept b/c it is revoked. Classic Majority: If period of reasonableness is gone. If offer says it is open for 8 days (rather than “acceptance must be received by 1/30): i. If there are conditions on the offer remaining open. offer terminates at the end of the conversation. Then he can bring a c/a against A. but a counter-offer. Replying “Keeping under advisement” indicates offeree’s intent to possibly accept and should not foreclose the original offer. then don’t get the advantage of the receipt date. Williston): Start counting from date of the letter 1. If A makes an offer to B and then later makes the same offer to C. “won’t you take less than amount offered?”) do not necessarily reject original offer. Traditionally (Restatement. the offer is open for a very short period of time otherwise it would be unreasonable. Counter-offers are rejections of the original offer. ii. b. Rejections terminate the offer. Indirect revocation: Any communications that state or imply that the offeror no longer intends to be bound (to contract) are viewed as a revocation. is B’s revoked? a. Counter inquiries (i. Traditional start: measuring day – start with date on the letter 2. What about if there is a delay? i. If offeree makes an acceptance at this point.20 i. 5. COUNTER-OFFERS AND THE BATTLE OF THE FORMS 1. . Modern trend start: start with next day after date on the letter ii. he can accept.e. If the market involved has rapid changes in prices. then the offer is terminated and there is no K. they will terminate the offer even if the offeree doesn’t know they occurred. Modern Minority: If acceptance is late but sent in a time that plausibly could be reasonable. if the b. a. b. 6. Traditional: start measuring day of receipt 2. (More than mere rumor) 7.) You are under duty to figure out what the delivery date would have been. In face-to-face offers that do not include amount of time offer will be open.

Example: disclaimer of warranties. 2-207: if the conduct of the parties recognizes a K. This is still true for non-goods related Ks. New proposed UCC Revisions: a. which must be accepted. . Easier way to look at UCC: -UCC 2-207(1): basically asks if you have a K even though response to offer has varying terms. Under UCC. 3. terms of latest . we still might find one here 5. knocked 6. they are out. If parties are not merchants: new terms are proposals. arbitration in NY courts (most courts disagree) b. iii. 2-206(3): Acceptance in a record operates as an acceptance even if it contains additional or different terms. §2-207(2): No proviso requiring express agmt i. If original offeror objects to them. then we look to 2-207(3): -which even though no K under 2-207(1). If parties perform despite no express agmt. They materially alter the K  then they drop out  gap fill where necessary a. Dismantle 2-207 and separate issues of K formation and what terms are included. a. ∏ would call in order to ∆’s order department and ∆ would mail back acknowledgement form. Collins & Aikens: ∏ and ∆ had continuous sales relationship. i. counter-offer is deemed accepted and its terms prevail. §2-207(3): Proviso requiring express agreement i. or 2. there is one. If they have different terms. If parties perform. then we look to 2-207(2): -helps us make determination and make K by figuring out terms -If no. Diamond Fruit Growers v. If the parties perform as if K existed. Under common law. no K would arise and the latest form would constitute a counteroffer. a. Use terms forms agreed on and gap fill any missing terms 4. 7. There was also an express provision re: acceptance. Common Law Mirror Image Rule: Acceptance must look identical to the offer. If parties are merchants: add new terms unless 1. which contained boilerplate terms. UCC §2-207(1): Acceptance that purports to be one despite having new or different terms is deemed an acceptance. unless it expressly requires agreement to new terms. Conduct can show acceptance. the terms are: terms that are in both records.If yes.21 2. ack form would have been a counter-offer which ∏ would have accepted via conduct. b. Dorton v. Any additional or different terms reject original offer and create a counter-offer. K is formed ii. c. must determine if term in question materially alters K  sent back to trier of fact. Acceptance is a counter-offer ii. Any inconsistent terms are out and missing terms are gap-filled. 2-207(3) creates a K 1. At common law. Krack: ∆’s acceptance form contained a disclaimer for all liability.

he would let her stay and give her land to tend. Court held there was sufficient consideration b/c he did suffer a detriment (refrained from something he was legally privileged to do). CONSIDERATION A. b. The detriment must induce the promise a. What if part of consideration is said to have happened. (Assume mistake. 5. he did so b/c of the promise.000. Legal detriment = promisee is doing something or promises to do something that he is not legally required to do OR refrains from doing something that he is legally privileged to do. At least a motive for the promisor making the promise is that he wants to exchange it for the promisee’s detriment. A’s value given is money and B’s value given is the object. swearing. who responded that he was entitled to the money. ELEMENTS OF CONSIDERATION: 1. ∆ wrote letter saying if she moved to his house. She did so. Promise must induce the detriment a. Nephew agrees. but he doesn’t. a. estate refuses to give nephew money.000 if he refrains from drinking. b. and play cards or billiards until he turns 21. but under 2-207(3).) B. A is going to buy something from B. Sidway: Uncle promises his nephew that he would pay him $5. B cannot recover b/c she didn’t suffer a legal detriment so there’s no detriment inducing the promise nor a promise inducing a detriment. A makes an offer to B and B accepts. A promise without consideration is just a promise – it is not enforceable. it is a sham. the parties conduct created the K.22 form would govern (KNOWN AS LOST SHOT RULE)No K. the good is enough for the whole agreement. WHAT IS IT? 1. but suggested keeping it in the bank for him to accrue interest. Kirksey v. ∆ cannot enforce disclaimer b/c it is not part of the K. . 3. Kirksey: ∏ was widowed wife of ∆’s brother. Giving up something of value. some deal that is considered as bargained for. After two years he notified her to leave. 2. and the uncle made the promise to induce him from refraining from such activities. Promisee (typically offeree) must suffer a legal detriment a. Minority (Restatement): If detriment is recited & based on good faith. If an agreement contains good and bad consideration. Was the reason the promise did what he did or refrained from what he could have done because of the promise? Did the promise induce him to perform? Example cases 4. smoking. it’s consideration. II. Majority: If recited detriment was supposed to occur and did not occur. Offensive terms drop out and are gap filled. but it does not? a. but may question bargained for elements if small. 3. A promises B he will give her $5. Court held that the promise induced her to move. if necessary (not here). 2. One detriment can support two promises. Hamer v. After uncle dies. 4. 5. something of value being exchanged in a bargained for transaction. Something of value that the parties are exchanging. Promisor must make the promise in exchange for the promisee’s detriment. When he turned 21 he wrote his uncle.

but if it’s so nominal. stood in line. it can be a sham (i. Doesn’t matter if one party gets the bad end of a bargain. Court held there was sufficient consideration b/c the Greek money in-hand had more value that actual US value in the bank at the time they K was bargained for. But what about if it’s not clear whether he has a viable suit? 1. Batsakis v. Court held b/k b/c she had a good that he was the father when they entered into the K so there was consideration. Tropicana: P was member of D’s club. and played game. borrowed Greek money (equivalent to $25) from the ∏ b/c she could not access her US funds. 6. one of two modern views): Subjective good faith belief + objective reasonable basis of support = consideration vis-à-vis forbearance to assert a claim b. White v. Doesn’t matter if the bargained for elements are not equal in value.) 3. He wins and she brings suit for b/k.e. Different views: a. P went to hotel. Thomas: ∏’s deceased husband declared that he wanted his wife to have the house or 100 £ in addition to what was in his will. you can live in the house for a dollar. PRE-EXISTING DUTY RULE . Minority: Requires only that claimant had a subjective good faith belief. Traditional view (pretty much gone): Surrender of a claim that ends up being invalid could never have been consideration in the first place. He stops paying and brings suit. However. Gottlieb v.) 2. McBride: Courts look at equity for legal fees. They enter into an agreement that he will pay her if she does not bring a bastardy suit. Majority view (1st Restatement. not by states): Requires either the claimant has a subjective good faith belief or a reasonable person could believe that the claim was well-founded. SURRENDER OF AN INVALID CLAIM Not bringing a suit is a detriment because one is giving up the right to do something he is legally entitled to do. (Profess this but tend to analyze w/reasonableness. Modern view #2 (Restatement 2nd. 1. (∆ denies having sex). D. She claims she won. preferred by scholars. Boehm: ∏ and ∆ allegedly have sex and ∏ gets pregnant. she promised $2000 when she could access the money. 2. In return. Thomas v. Was there consideration? Court claims there was b/c both parties met requirements since P suffered detriment and D intended for detriment. for a while. d. It was decided that executors would convey the house to her for as long as she remained unmarried and paid ground keeping rent. but court held that it didn’t matter if the consideration was not equivalent. it calls into question whether the bargained for elements are met. There can be gratuitous motives within the consideration. during the war. 4. Spouse will generally get something 5. Fiege v. if it’s really small. He does she faith belief E. Demotsis: ∆. which tracks habits of casino customers. moving) did not induce him to promise (D’s intentions were out of C. In response to promotion for million dollar wheel. c. then investigates and learns he cannot be the father.23 but the detriment (her gratuity) No consideration. Executors then tried to say that there was no consideration.

Underlying circumstances that prompted changes were unanticipated by both parties iii. This case has been heavily criticized cuz recision wasn’t clear. i. it is valid. B comes back and says he will not uphold his part of the bargain unless A gives him more money. b. promise modifying K was fully performed on either side ii. made to the . B cannot do this b/c he has a preduty to perform and there is no new consideration for A to pay more i. 1.500 annually if they get married. Schweizer: ∏ was in K to marry ∆’s daughter. UCC §2-209: Can modify K if modified in good faith d. Murray: ∏ brought suit against city official b/c he paid refuse-collection service more than contract provided. Court claims that since consented to revoke 1st agreement and enter new one. not majority) Modification is enforced w/o new consideration if: i. this might be valid consideration for modification. Traditional Rule: 3rd party cannot make a K with one of the parties to follow through with the original K if they already have a pre-existing duty to do (No new detriment or inducement) ii. Modifications were voluntarily agreed to (no coercion or duress) *Criticism of this rule: parties take chances when they enter into a K v. If both parties mutually agree to rescind the old K and create a new one with the modification. Legal pre-existing duty: A police officer cannot receive a reward for a captured felon 3. Example: A and B have a K. DeCicco v. He offered to pay the couple $2. Change in circumstances exception (Restatement/MT. 2. Exceptions/Legitimate situation: a. 10 years later he stops Court found there was sufficient consideration b/c the offer was couple together and they both could have decided not to get create a both parties had so. 3rd party promises: i. iii. As long as there is derived from promisor. Service had requested more on two occasions b/c the number of units had increased and city agreed both times. They tear off the signatures on the old K and new one with more money at same time. Modern Trend/Slight Majority: Even though there is no additional detriment.24 existing money. Modification is fair and equitable iv. A pre-existing duty to uphold one’s part of a K will prevent valid consideration supporting the modification of a K. c. Example case: Angel v. Schwartzreich: ∏ enters into year long employment K and then is offered more money by a competitor. B is trying to carry out a “shake down” or “hold-up” b. Court followed MT and found that they had met the elements of this exception. a. If he offers to do something else (a better or different way to do the job). benefit paying. then sufficient consideration. this isn’t a shake down like we are trying to avoid.

but the debtor sends a check marked “payment in full.e.” P and his attorney did not see the fine print on the check stating it was for payment in full. its purpose G.25 married. iv. Ds get worse and most orders are late. determine which part is its predominant factor. Ps are forced to accept D’s compromised amount b/c they cannot find sufficient sources elsewhere.” Creditor cashes it. show desire to modify is a result of a factor. Good faith means: o The party’s conduct is consistent with “reasonable commercial standards of fair dealings in the trade. Sharon Steel: D threatens to stop selling a good price when market improves. Court held it was not A & S b/c the intent was not clear from the letter and no one noticed the fine print (suspicious opinion – if the letter had been more clearly stated. ACCORD AND SATISFACTION • Accord is an offer to pay less than one owes. Here. which would cause an ordinary merchant to seek a mod of the K o The parties were motivated to seek mod by an honest desire to compensate for commercial exigencies.e. Unilateral Ks: What if A and B both offer C $100 to walk across the Brooklyn Bridge separately. but debtor sends a check for less which reads “payment in full”  Debtor is offering to pay less  Cashing the check does not constitute acceptance. it performance existing duty to walk not have been consideration if the K was with only one induced them to go ahead with the wedding. P sent bill and D responded by sending a check for less and a note stating that the requested amount “was ridiculous. F. court probably would find A & S) o UCC is in accord with this approach. Frank Garrett & Sons: D hired P to harvest his wheat crop for unspecified amount. satisfaction is agreement to lower amount • For liquidated debts (undisputed claims). such as increased costs. but here. but does not require commercial paper (checks) to be very conspicuous that an offer is being made to pay less o To decide if a K is governed by UCC when K is mixed (goods and services). His can be for more than one promise since he never has a preacross the bridge.” i. creditor can still go after debtor for the balance o Unliquidated debt: The parties never come to an agreement regarding amount. a binding compromise is reached through accord and satisfaction • Cashing Checks o Liquidated debt: the parties agreed on an amount. legitimate commercial reason o Means used to obtain the mod must not be extortion or overreaching o Roth Steel v. i. P continues to . its thrust. usually have to pay whole debt • For unliquidated debts (disputed claims). They do not have a K until he performs. It would of them. there is accord & satisfaction  creditor cannot recover more b/c he accepted offer to pay less by cashing the check o Kibler v. DURESS AND STATUTORY CHANGES REGARDING THE MODIFICATION OF Ks • UCC §2-209(1): An agreement modifying a K within this article needs no consideration (but must be in good faith).

They then won a second K. More recently. D was evicted and did not want to pay. does not constitute economic duress. K can be avoided or voided. Court held this to be economic duress. That party can choose to ratify it  Examples: K made under fraud. However. K did not say what would happen in this event. Barrett: P had K with D for five year supply of gas to D’s property (they had a five year lease). Court held that there may have been biz reasons for D’s behavior. P threatened that they would stop delivering for first K. they intend to be bound) • Wood v. mistake. D had to agree b/c no one else could get them the parts on time. General obligation of good faith has two factors:  Whether party’s conduct is consistent w/ reasonable commercial standards of fair dealing in trade  Whether parties were in fact motivated to seek modification by an honest desire to compensate for commercial exigencies Duress: coercion. (courts presume that when parties make an agreement. but it exists • A promise that does not contain mutuality of obligation is illusory • Texas Gas Utilities v. if they were not 1) awarded second one and 2) given price increase on current parts. but it is usually at the option of the party that is being harmed. o Austin Instruments v. Lady Duff-Gordon: D was fashion guru and P had exclusive right to her endorsements and designs of which she would get half the profit. but did have exculpatory clause stating that P were not liable for a specific quantity or quality. though wrongful. Mutuality of obligation (dated term): Both parties must be bound or neither party is bound. Lucy. Threatened party must not be able to obtain the goods from another source and an ordinary remedy of action for breach of K is not adequate. it is void o Void = there is no K o Voidable = unenforceable. a mere threat by one party to breach the K by not delivering the required items. but they never rebutted the presumption of bad faith that developed from their coercive conduct. threat of economic harm o A K formed under duress is voidable.26 order b/c has no other choice and believes D excuse re shortage of raw materials (D actually selling to someone else). duress lacking capacity  Consideration may be bad. but told P they would only award them part of the subK. P sued for payment still due and D counter sued for increased prices. threat of physical violence. Court held there was valid consideration and mutuality of obligation despite clause b/c they were still bound to supply reasonable amounts. CONSIDERATION IN BILATERAL Ks AND MUTUALITY OF OBLIGATION 1. She placed them w/o . parties in a bilateral K must be mutually obligated to each other for something • Mutuality of consideration (new term): Each party must furnish consideration to the other party • If K lacks mutuality of obligation. Loral: D won Navy contract and gave P subcontract. • H. but can also be ratified o Economic Duress for modification of K: a K is voidable on the grounds of duress when the party making the claim was forced to agree to it by means of a wrongful threat precluding the exercise of free will.

Conditional Promises: • If K is conditioned on something and the condition is within the control of one of the parties. if there is an earthquake. D backed out claiming no mutuality of obligation. but they must give notice? (No specific amount of time given)  Common Law: illusory. If the party is required to give notice in reasonable time. it is not illusory b/c they promise to enforce the K for that amount of time o What if one party can terminate the K.e. o Example: A offers to buy steel from B if it rains within the next three days. an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale. that is detriment. The act of just giving notice is not a bargained for detriment  Modern Trend: Many courts will apply good faith and fair dealing implication so that the party needs to give some reasonable amount of time. 2. i. The K is void so if B decides to buy. A can say no. if you die. Ps applied for loan. 3. • A promise conditioned upon an event is not illusory if the promisor also impliedly promises to make a reasonable effort to bring about the events 4. the discretion must be exercised in a reasonable manner based upon good faith and fair play. The condition does not need to relate to the product. it is an illusory promise. • When one party has discretionary power affecting the rights of the other. then the promise is not illusory. When a party has a right to terminate a K w/o notice. Mezzanote v. Here. Court held K had implied promise by Ps to use reasonable effort to procure a loan and to exercise good faith in deciding whether terms were satisfactory. UCC §2-306(2): A lawful agreement by either seller or buyer for exclusive dealing in the kind of goods concerned imposes. B agrees to buy from him whenever he feels like it. unless otherwise agreed. he is not bound to buy any. Court held the K implied a reasonable effort to find potential biz. insurance – they pay if your car is hit. etc. only one party can get out with advanced notice or each party can have different required amount of time for notice . o IF they must give some amount of time. but could not get it.27 him and claimed that his promise was illusory b/c the K did not require him to do anything. does it make their promise illusory? • Traditional Rule: if one party has the right to terminate an agreement at any time w/o notice. the promise is illusory o For example: A offers B steel at $50/ton. • If the condition is not within the control of the person making the promise. o Can be uneven. Freeland: P and D enter into K to buy and sell property. One provision says agreement is contingent upon Ps securing a 2nd mortgage from NCNB on terms and conditions satisfactory to them. so they arranged other financing.

Output/Requirement Contracts • What is it? o Output K: Seller agrees to sell all his output for a particular item to a buyer for a particular price and the buyer agrees to buy it. o Requirement K: Buyer promises to buy from the seller all the requirements that the buyer needs and the seller agrees to sell all that buyer requires. Not sufficient reason to under-perform so greatly 6. o Miami Coca-Cola v.000 – that is unreasonable o What about an under-demanding case. Court held P’s promise was illusory. o Canusa: D’s output was never as much as the estimate and usually provided much less. • Are these deemed illusory b/c there’s no promise to require anything or output anything? o Traditionally: These Ks were void b/c they lack consideration and mutuality of obligation o Modernly: There is an implicit agreement of good faith that you are going to require or output something • UCC §2-306(1): Output Ks are ok b/c of good faith • What is the impact of an estimate on an output K? o Cannot be unreasonably disproportionate and force the other party to buy or sell a lot more than the estimate  For example: output/requirement K for 500 tons and other party comes back wanting 500. i. Although the courts look to a good faith requirement. D lost b/c its only excuse was the const and time it would take to output more. D backed out claiming K lacked mutuality of obligation.e. Orange Crush: D granted P exclusive right to manufacture. The rx time for notice = consideration • 5. rather the court looks to the good faith requirement. License was perpetual. D would supply concentrate and advertise.28 o UCC §2-309(3) is in accord: Termination of a K by one party except on the happening of an agreed even requires that reasonable notification be received by the other party and an agreement dispensing with notification is invalid if its operation would be unconscionable. but contained proviso that P could cancel at any time. Forging a good unilateral K out of a bad bilateral K • Sometimes courts will find a unilateral K out a void bilateral K that lacks mutuality of obligation • General Rules: o Need bad bilateral K – offer and acceptance lacking mutuality of obligation o Person asserting the K must have performed the act requested and incurred legal detriment in doing that . the party outputs/requires less than the estimate?  Don’t apply disproportionate language for an underperforming output K. Perfect example of traditional rule Modern Trend: Terminate at any time really menas w/some reasonable prior notice (implied standard of good faith). bottle and distribute OC under its trademark.

however the other party promises to pay for them anyway (past performance) o Majority view (probably?): However much the D should be impelled by common gratitude to alleviate the P’s misfortune. can he bring suit? Not on the bad bilateral K.e. is not consideration as would entitle one to recover at law  Harrington: D assaulted wife who hid at P’s house. A says. suffers the detriment. A promises B he’ll pay him. if statute of limitations has ended) III.” A has a pre-existing duty to pay and has no new detriment. Court held no K b/c it lacked consideration o Minority View: A moral obligation is sufficient consideration to support a subsequent promise to pay where the promisor has received a material benefit • P. it is fact sensitive and can vary depending on how sympathetic the parties are. Most common Types of Cases • Debt Cases: most common o A owes B $1000. etc. and P still doesn’t pay. But there are no bright lines. but were not requested by the other party. “if you wait 6 months and do not bring an action to collect. a humanitarian act voluntarily performed. MORAL OBLIGATION AND CONSIDERATION A. Performance is complete after 6 months (esp. but on a new unilateral K. D promised to pay for hand. I’ll pay. but the SOL has run or A is bankrupt. Deceased promised to pay 15 every two weeks.000. There is no consideration here. Court held the moral obligation was sufficient (probably b/c he was so seriously injured) o Restatement: § 86(1) (Minority/MT): A promise made in recognition of a benefit previously received from the promisor to the promisee is binding to the extent necessary to prevent injustice. • (2): Promise is not binding if promisee conferred benefit as a gift. B. which he did until he died. P intervened when wife tried to ax him. nor if value is disproportionate to the benefit • Service was requested and the other party was induced by the request. but parties do not discuss how much is owed and later on the requesting party makes a promise to pay a certain amount for what the other party has done (Less common) (Past performance) o Quantum Meruit: If there’s at least an implied K for the services. seeing he was about to drop a block on the deceased. threw himself with it and was horribly injured. However. There may be some Ks that are enforceable even if they lack consideration • Courts will sometimes allow moral obligation to replace legal consideration because the situation is unjust o Why? Good for society.29 • Example: A owes B $50. the P is owed the reasonable value for the services . then turn around an sue b/c this agreement is not enforceable. i. B can promise. but the court may find a moral obligation to pay b/c it’s fair • Services were performed. if he does wait. but paid only a small amount.

30 o IF the initial amount is vague and later the party sets it to be more than the quantum meruit. • Majority: in situation where you have requested services but the dollar amount owed is not specified. but not that specific amount .000. There’s legal consideration for fair value of the services. that person is bound by that amount o This is b/c party offering money in best position to know how much it’s worth to them o Sheldon: niece took care of aunt and her husband for 30 years and was promised 30. but the promising party agrees to pay a much higher rate than what would normally be offered. but was later contested by the executor • Minority: Notwithstanding the promise. the court reverts to the ruled of Ks and says there’s no legal consideration for that exact promise.