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Forms of Liability: K Proper a. Mutual Assent: the manifestation of mutual assent to an exchange ordinarily takes the form of an offer or proposal by one party followed by an acceptance by the other party or parties (§ 22) i. Rule: in determining whether there is mutual assent, court utilizes the objective theory of K’s. Do not look to whether there is “meeting of the minds”, but rather look at their objective manifestations of assent 1. Ray v. Eurice Bros: A developer signed K without reading it and later tried to get out of the demands the property owner made. Court held that the standard for evaluating a contract is objective. Absent fraud, duress, or mutual mistake, signing is binding. b. Bi-Lateral Contracts i. Offer: what constitutes an offer? 1. § 24: The manifestation of the willingness to enter into a bargain, so made as to justify another person in understanding that his assent to the bargain is invited and will conclude it. a. Contains specific terms, which are directed to a particular party b. “Next to last step” 2. Lonergan v. Scholnick a. Written communication between parties: D writes that this is “form letter” and P must “act fast…expect a buyer soon.” D’s letters did not constitute an offer 3. 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. a. Izadi v. Gus Ford i. Car dealer put ad in the paper. Purchaser thought ad constituted an offer b. General Rule: Ads do NOT constitute offer; instead invite to negotiate ii. Acceptance: once offer is made, offeree has “power of acceptance,” however, offeror is still “master of the offer” 1. § 50 (1): Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or required by the offer.

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2. § 50 (3): Acceptance by a promise requires that the offeree complete every act essential to the making of the promise 3. Counteroffer (§ 39) a. (1) A counter-offer is an offer made by an offeree to his offeror relating to the same matter as the original offer AND proposing a substituted bargain differed from that proposed by the original offer b. (2) An offeree’s power of acceptance is terminated by his making of a counter-offer, unless the offeror has manifested a contrary intention or unless the counter-offer manifests a contrary intention of the offeree 4. Revocation: a. Direct (§ 42): Offeror directly communicates revocation to offeree b. Indirect (§ 43): An offeree’s power of acceptance is terminated when i. The offeror takes definite action inconsistent with an intention to enter into the proposed contract ii. AND the offeree acquires information to that effect from a reliable source iii. For offer to truly be revoked, offeree must have full knowledge of revocation before acceptance is given 5. Normile v. Miller a. D put house up for sale. P made offer, D made counteroffer. Before P accepted CO, D indirectly revoked (“you snooze you lose”) and sold house to someone else. c. Unilateral Contracts i. Offer: Offeror offers promise in exchange for a performance of an action ii. Acceptance 1. Traditional rule: Offeror can revoke offer at any time prior to complete performance a. Petterson v. Pattberg: revocation of offer valid b/c D revoked before P tendered $ 2. Modern Rule (§45): Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an option K is created when the offeree tenders or begins the invited performance or tenders a beginning of it

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or 2. Bargain Theory (§71): A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promisee in exchange for his promise. iii. or 3. Pre-acceptance Reliance i. gamble. A gain. “Mutuality of obligation” iv. 1. American Ash: American Ash gave Pennsy AggRite for free. Sidway: Uncle agrees to give nephew $ if he does not drink. Consideration i. Pennsy Supply v. D tried to revoke offer when P left the company. smoke. etc. there is NO additional requirement of 1. advantage. which they had to pick up semi-monthly) I. Forms of Liability: Promissory Estoppel a. Court held that American Ash sought to get rid of AggRite. mere recital of consideration not sufficient (Dougherty v. Court held that a unilateral contract is binding on offeror once substantial performance has occurred. Past Consideration: services already rendered are NOT sufficient consideration (Plowman v. Salt) 2.a. court requires a promise 3 . There is NO consideration if the exchange falls under the following: 1. but Pennsy Supply assumed the responsibility of disposing of the hazardous material.: employees were laid off and received a pension. or detriment to the promisee. Coldwell Banker: D announced a bonus sales program that would reward great sales with bonuses paid out at end of the program. or benefit to the promisor or a loss. until he is 21. 1. Cook v. promise to give gift in the future is unenforceable. Indian Refining Co. Donative gift: In general. Court held that giving up a legal right with respect to the promise constitutes consideration. Equivalence in the values exchanged (Batsakis v. so there is sufficient consideration. ii. disadvantage. Hamer v. Demotsis). Benefit/Detriment Test: either the promisor must enjoy a benefit in relation to the promise. §79: If the requirement of consideration is met. d. Traditional rule: Doctrine of promissory estoppel is NOT applicable where an offer is made for an exchanged act or promise AND the offeror has not received any consideration. OR the promisee must suffer a detriment in relation to the promise.

Gimbel Bros. D then stated that it made an error and could not perform—attempt to withdraw offer. (1933): D mistakenly sent out price to general contractors. no reason to rely on it. ii.1. Relying on this assurance. IF justice cries out d. A promise ii. Court says that since he did not pay. but later realized they made a mistake calculating price. AND which does induce such action or forbearance is binding iv. P did not renew its current lease. Two days later. Resorts: P was involved in extended negotiations with D to open TCBY franchise in D’s casino. ii. no consideration. b. Court held that offer by subk’er includes subsidiary provision to accept if k’er wins bid. Court holds D liable. D never pays and P sells land to another buyer. Berryman v. Cases 4 . P took the job. c. Baird v. Modern Rule: An offeree’s reasonable reliance on a promise binds the offeror to K even if there is no consideration. not a promise. 2. therefore. Rule: Option K discussed in § 87 (2) requires separate consideration B. despite lack of conventional consideration. D informally told them that their deal was as good as complete. Drennan v. Kmoch: Option K formed between P and D to purchase land in the amount of $10. Court said D made offer. Pop’s Cones v. Star Paving (1958): P won K from school to build based in part on quote from D. § 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 1. When P had to made decision about their present lease. Promissory Estoppel can be a proxy for consideration i. P received price offer and made their bid based on D’s bid. D withdrew its offer. Which the promisor should reasonably expect to induce action OR forbearance on the part of the promisee or a third person iii. § 90 Promise Reasonably Inducing Action or Forbearance i.

Good Samaritans unable to collect restitution iii. D refuses to pay for hospital bills b/c he was not enriched. recover is denied so that one will not have to pay for a benefit forced upon one against one’s will. Credit Bureau Enterprises v. 1. Unjust enrichment: conferrer intended to charge for the good/service AND did not receive payment for it from the recipient 1. Under this rule. Wright v. Non-Promissory Restitution: no promise to pay for services rendered. Newman iv. If benefit conferred officiously (rendering services that opposite party would not want). Exception: In certain circumstances. Kirksey v. Elements: i. ii. then restitution cannot be claimed c. however. Greiner iii. Restitution: used to remedy situation where one party is unjustly enriched at the expense of another b. restitution for services performed will be required even though the recipient did not request or voluntarily consent to receive such services (Restatement of Restitution § 116) 1. Pelo: D has mental breakdown and he is forced to be hospitalized by police. Greiner v. implied–in-law quasi K i. Katz v. Forms of Liability: Restitution a. No request: party receiving services is incapable of accepting or refusing services iv.i. Unofficious: good/services are not forced upon the recipient without their implied desire/value of the good/service 1. Court says he was unjustly enriched. Kirksey ii. Enrichment: a party receives a good or service of which they value ii. 5 . General Rule (Restatement of Restitution § 2): a person who officiously confers a benefit upon another is not entitled to restitution therefore. Usually professional because a professional would typically expect payment for their service 2. Danny Dare II.

a Good Samaritan. K’s that CANNOT be fully performed within one year from the time the K is made ii. D offered to care for P and pay him $15 every two weeks for the rest of his life. Statute of Frauds a. K for the transfer of land d. General Rule: a promise may be upheld based on past consideration IF the promisor himself received a benefit for which promisee could justly demand compensation. but never did. other than gratuitously. a subsequent promise to compensate the person for rending such benefit is enforceable. Court held that promise to be enforced III. d. Purpose: evidence that agreement exists in order to avoid fraud and other legal issues that could otherwise arise b. 2. Material Benefit Rule: If a person receives a material benefit from another. 1. Rule: When services are rendered in order to prevent bodily harm there is a promise implied-in-law to pay for them. Webb v. where you must have some kind of writing in order for K to be enforceable c. Rule that identifies certain types of Ks. McGowin: P saved D’s life. and P was hurt in the process of saving D. Promissory Restitution i. and therefore payment is required. Mills v.2. iii. § 86 Promise for Benefit Received 1. does NOT apply to third party promises 1. D promised to pay P for services. If the promisee conferred the benefit as a gift OR for other reasons the promisor has not been unjustly enriched. A promise made in recognition of a benefit previously received by the promissory from the promisee is binding to the extent necessary to prevent injustice. What kind of writing do you need in these kinds of cases? 6 . A promise is not binding under Subsection (1) A. Court said D was not bound by promise to pay b/c he was not the party that was enriched. OR B. To the extent that its value is disproportionate to the benefit ii. cared for D’s dying son. What kind of situations? i. Wyman: P.

If there is no reference. Contains essential terms C. 4. then the documents CANNOT be pieced together. (a) Reasonably identifies the subject matter of the K. If YES. a K within the SoF is enforceable IF is evidenced by any writing.i. If yes. (c) States with reasonable certainty the essential terms of the unperformed promises in the K e. then summary judgment for the D 3. Elizabeth Arden: Court applies New Rule 7 . Traditional Rule: the signed writing must explicitly reference the unsigned writing. 2. If NO. Signed by party to be charged ii. which 1. Reasonably identifies subject matter of K iii. Is this the type of K to which the SoF applies? 1. § 131: Unless additional requirements are prescribed by the particular statute. Evaluating the Applicability of the SoF: i. (b) Is sufficient to indicate that a K with respect thereto has been made between the parties OR offered by the signer to the other party. then K sued on is within the statute D. Sufficient to indicate that a K has been made iv. New Rule: A sufficient connection between the documents (signed and unsigned) is established IF they refer to the same subject matter or transaction B. then YES 2. § 132: The memorandum may consist of several writings IF one of the writings is signed AND the writings in the circumstances clearly indicate that they relate to the same transaction. D. then has the SoF been fulfilled (are there essential terms and writing signed by the party against whom the enforcement is sought)? B. signed by or on behalf of the party to be charged. Crabtree v. Either K that cannot be performed in less than a year or K for the transfer of lands. AND 3. Writing exists and includes: i. Allows for oral testimony to confirm the reference and connection between the signed and unsigned documents C.

Principles of Interpretation a. Party v. Alaska Dem. P does not give her job. Rice: D made oral agreement to work for the AK Dem Party. the following circumstances are significant: 1. (d) Reasonableness of action or forbearance 5.5. § 201 Whose Meaning Prevails 8 . (e) Extent to which the action or forbearance was foreseeable by promisor C. If it is the kind of K to which the statute of frauds applies and the statute of frauds is not satisfied. (1) A promise (must be established by clear and convincing evidence) which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person AND which does induce the action or forbearance is enforceable notwithstanding the SoF IF injustice can be avoided only by enforcement of the promise. (c) Extent to which action or forbearance corroborates evidence of the making an terms of the promise. Court holds that you can use PE to enforce oral agreements that would normally fall w/in SoF. (b) Definite and substantial character of the action or forbearance 3. § 139: Enforcement by Virtue of Action in Reliance i. (2) In determining whether injustice can be avoided only by enforcement of the promise. (a) Availability and adequacy of other remedies 2. can you use promissory estoppel to circumvent the SoF? B. ii. IV. When she arrives. OR the making and terms are otherwise established by clear and convincing evidence 4. so she quits her current job and moves from MD to AK.

the following standards of preference are generally applicable: 9 . any course of performance accepted OR acquiesced in without objection is given great weight in the interpretation of the agreement v. it is interpreted in accordance with that meaning. 1. (a) where language has a generally prevailing meaning. iv. the manifestations of intention of the parties to a promise or agreement are interpreted as consistent with each other and with any relevant course of performance. even though the result may be a failure of mutual assent b. neither party is bound by the meaning attached by the other. or usage of trade. and IF the principal purpose of the parties is ascertainable it is given great weight ii. ii. (1) Words AND other conduct are interpreted in light of all the circumstances. (3) Unless a different intention is manifested. OR 2. AND the other had reason to know the meaning attached by the first party iii. (4) Where an agreement involved repeated occasions for performance by either party with knowledge of the nature of performance and opportunity for objection to it by the other. and the other knew the meaning attached by the first party. iii. (2) A writing is interpreted as a whole. (2) Where the parties have attached different meanings to a promise or agreement or a term thereof. (1) Where the parties have attached the same meaning to a promise or agreement or a term thereof.i. (3) Except as stated in this Section. (a) that party did NOT know of any different meaning attached by the other. it is interpreted with that meaning. (b) that party had no reason to know of any different meaning attached by the other. 2. In interpretation of a promise or agreement or a term thereof. c. § 203 Standards of Preference in Interpretation i. (b) technical terms and words of art are given their technical meaning when used in a transaction within their technical field. it is interpreted in accordance with the meaning attached by one of them IF at the time the agreement was made 1. course of dealing. (5) Wherever reasonable. § 202 Rules in Aid of Interpretation i. and all writings that are part of the same transaction are interpreted together.

Partial Integration 1. Intended to honor the integrity of certain types of writings and prevent a situation where there is oral testimony that would confuse a jury b. Adams: P and D had different interpretations of what the term “developed” meant in the context of K. (d) separately negotiated or added terms are given greater weight than standardized terms or other terms not separately negotiated d. e. (a) An interpretation which gives a reasonable. and effective meaning to all terms is preferred to an interpretation which leaves a part unreasonable. 3. Complete v.1. Evidence of consistent additional terms INADMISSIBLE 10 . unlawful or of no effect. Is the type of evidence that potentially triggers the application of the PER? i. oral and written agreements or understandings AND contemporaneous oral agreements ii. (c) specific terms and exact terms are given greater weight than general language 4. 2. course of dealing. New Rule: the determination of whether a party to a K had knowledge of the other party’s interpretation is essential to properly enforce a disputed provision of an agreement i. lawful. Traditional Rule: K should be enforced with the meaning of the innocent party (the party who did not have knowledge of the other’s interpretation. The Parol Evidence Rule a. Complete integration [§ 210 (1)]: an integrated agreement adopted by the parties as a complete an exclusive statement of the terms of the agreement B. Joyner v. the court held the K unenforceable V. (b) express terms are given greater weight than course of performance. NOT Subject to Rule: Subsequently made written or oral agreements c. and course of dealing is given greater weight than usage of trade. Since D did not know or have reason to know of P’s interpretation. Is this the kind of writing to which the PER applies (two tests)? i. and usage of trade. course of performance is given greater weight than course of dealing or usage of trade. Subject to Rule: Prior to the writing.

State Farm: D settled with victims for an amount higher than P’s policy limits. Contextual Approach (Corbin Approach): Look at the context of how the writing came into existence B. d. only some allow fraud in the inducement g. Libby: Oral warranty. BUT evidence of a consistent additional term may be introduced e. releasing D of any bad faith claims. contradictory evidence CANNOT be admitted. Thompson v. Fraud. “Four Corners” Approach: Just look at the writing itself to determine integration B. mistake 1. Partial integration [§ 210 (2)]: an integrated agreement other than a completely integrated agreement ii.2. Court held that release was partially integrated and extrinsic evidence was admissible. All courts allow evidence of fraud in the execution. If writing is a partial integration. so since on its face K was complete. Taylor v. 2. P signed document. duress. Court applied 4 corners approach. SEE COURSE OF PERFORMANCE 11 . Evidence of an invalidating cause is admissible ii. “Cash it in”—Is the evidence admissible? i. NO extrinsic evidence admissible ii. so testimony about oral warranty inadmissible. Parol evidence is admissible to explain language in the writing (two tests to determine this 1. Latent ambiguity: allows ambiguities that arise from the context surrounding the K f. Qualifications i. Literal Approach: requires that there be patent ambiguity (ambiguity on the face of the writing) 2. Exceptions i. Court used Corbin Approach to analyze extrinsic evidence to determine whether the agreement was completely integrated. Methods for Determining Integration 1. If writing is a complete integration.

b. Supplementing the Agreement—Implied Terms a. at least when the minor is seeking to recover payment made to the adult 1. Defenses to Contract Enforcement a. b. or surrounding circumstances. However. situations. Can deduct the depreciation of the truck from Dodson’s payment. external circumstances. VII. he can disaffirm or avoid K before the age of majority (18) or within a reasonable time thereafter 1. Shrader v. Wood v. when a term is NOT included in K and CANNOT be determined from K. Locke v. Mental Incapacity i. the court will use a legal rule to create a meaning for the termWHAT THE PARIES WOULD HAVE OR SHOULD HAVE MEANT i. Court holds that discretionary powers affecting rights of others must be exercised with good faith. Implied-in-Law: good faith. Lady Duff: No term directly establishing agency between P and D. Lucy. then K wouldn’t make sense. the understandings of the parties. Use Rule (EXCEPTION): requires the disaffirming minor to make restitution for either the benefit received under the K OR the depreciation in value of the property.VI. This is true even if there has been full performance AND the minor cannot return to the adult what he received in the exchange 2. Implied-in-Fact: when a term is NOT included in a K. General Rule: a person seeking rescission on grounds of mental incapacity may rescind IF they can return everything they received from the K ii. but given the circumstances the parties must have intended that one term of the agreement would be Wood making reasonable efforts to sell. and exploitation by overreaching merchants ii. Warner Bros.: Nothing in agreement that explicitly imposes obligation upon Warner Bros. Dodson: application of the Benefit Rule. to actually consider her projects. Minority i. If this term is not implied. ALTHOUGH ITS UNEXPRESSED i. and other terms in the K can discern what the term would be if it was includedWHAT THE PARTIES ACTUALLY INTENDED. Traditional Rule (§ 14):When a minor enters into a K. Justified to protect minors from their poor judgment. Exception: 12 . Shrader does not have to give Dodson all of his money back.

Court allows rescission. Union State Bank: Exception to the general rule that would suggest that they MUST give back what they originally sought. Hauer v. but does not require Hauer to give money back because the Bank did not act in good faith. c. Consummation of the tract in an unusual place D. 1(b)]: he is unable to act in a reasonable manner in relation to the transaction AND the other party has reason to know of his condition. 1(a)]: (a) he is unable to understand in a reasonable manner the nature and consequence of the transaction. Insistent demand that the business be finished at once E. Factors of Overpersuasion: B. Standard for Determining Incapacity 1. Extreme emphasis detriments of delay 13 . General Rule: Economic duress can be a valid reason to rescind K B. iii. Selmer Additional Requirement to § 176: the threatening party must have substantially contributed to the constraining circumstances of the other party 3. OR C. See §176 2. then the K is voidable i. Duress: If party makes improper threat that induced the other party’s assent. Alyeska d. A person incurs ONLY voidable contractual duties by entering into a transaction if by reason of mental illness or defect B. Improper threat 1. Undue Influence i. Totem v. where that party lacked a reasonable alternative. Discussion of the transaction at an unusual or inappropriate time C. §177(1): Unfair persuasion of a party who is under the domination of the person exercising the persuasion OR who by virtue of the relation between them is justified in assuming that the person will not act in a matter inconsistent with his welfare 1.1. Cognitive Test [§ 15. Volitional Test [§ 15.

Knows OR believes that the assertion is NOT in accord with the facts. Bloomfield School District: demonstrates how a combination of a high level of vulnerability and low level of persuasion can suffice for rescission based on undue influence e. then K is voidable ii. Fraud in the execution: misrepresentation as to the content to which someone is assenting (§ 166) 14 . these are just factors the court considers ii. Don’t need all elements. B. is it fraudulent or material? 1. The use of multiple persuades by the dominant side against the single servient party G. Misrepresentation i. taste. Rule: an untruthful opinion from a professional of their professional subject matter can constitute grounds for rescission iv. or preference. Statements that there is no time to consult financial advisor or attorney 2. OR D. General Rule: ONLY a misrepresentation of fact constitutes fraud.F. OR C. § 164(1): When assent is induced by fraudulent of material misrepresentations. it should not be ground for rescission under a claim of fraud. Odorizzi v. § 162: A Misrepresentation is fraudulent IF the maker intends his assertion to induce a party to manifest his assent and the maker B. Absence of third-party advisers for servient party H. Syester v. Banta: Crazy old woman buys lots of dance lessons and the instructor tells her she will become a professional dancer. If you find the misrepresentation. Does NOT have the confidence that he states or implies in the truth of the assertion. in some circumstances a dishonest opinion or false promise can constitute a fraudulent misrepresentation (§ 169) 1. An opinion or a prediction should be understood as nothing more than an expression of personal belief. Fraud in the inducement: party induced into assent by misrepresentation v. However. so even if it is not honest. Knows that he does NOT have the assertion iii.

Jones: Hill was buying house from Jones. Rule: when trying to prove fraud in the execution. f. Unconscionability: provide equitable relief when standards of other defenses are not met i. iii. Hill seeks to rescind K. Where he knows that disclosure of the fact would correct a mistake of the other party as to the contents or effect of a writing. Where the other person is entitled to know the fact because of a relation of trust and confidence between them. Court rescinded personal guarantee. Procedural: absence of meaningful choice B. Jones knew of termite damage to the home. Duty to disclose: Modern view that a vendor has an affirmative duty to disclose material fact where the information affects the value of the property (differs depending on jurisdiction) 1. Where he knows that disclosure of the fact would correct a mistake of the other party as to a basic assumption on which the party is making the K AND if non-disclosure of the fact amounts to a failure to act in good faith and in accordance with reasonable standards of fair dealing 3. Does NOT negate the general duty to read.1. Where he knows that disclosure of the fact is necessary to prevent some previous assertion from being a misrepresentation or from being fraudulent or material 2. § 162: A person’s NON-DISCLOSURE of a fact known to him is EQUIVALENT to an assertion that the fact does not exist in the following cases: 1. Boilerplate terms 15 . Non-disclosure i. but did not inform Hill. Hill v. Park 100 Investors v. evidencing or embodying an agreement in whole or in party 4. Rule: Non-disclosure can be equivalent to an assertion g. Requires both procedural AND substantive unconscionability (can be sliding scale) 1. PER will not bar the introduction of new evidence 2. Factors: i. while D thought they were signing a lease agreement. Kartes: P tricked D into signing personal guarantee. ii.

Complex language iii. or both parties misunderstood the basic facts at the time of contract formation i. M. Very rare that K would be voidable based on an appeal to public policy iii. K is inconsistent with another law 3. Commercial needs: Is there a legitimate commercial function for having a clause such as this one? 3. Substantive: relates to the fairness of the terms of the resulting bargain B. How public policy might void K: 1. Mistake: situation where one. R. Justifications for Non-Performance a. Hidden terms vii.R. “Take it or leave it” agreement iv. Differences in financial standing/education/bargaining power v. Lack of reasonable alternative viii. Factors: i. Quasi-duress or quasi-undue influence 2. Compare with other similar kinds of transaction—whether the terms are “so extreme as to appear unconscionable according to the mores and business practices of the time and place. which allows mothers to have 4 days before giving child up for adoption. “Gut check” ii. Williams v.ii.” iii. K that directly violates a statute 2.: Court voided surrogacy K because it was inconsistent with the state adoption statute. Walker-Thomas Furniture h. Public Policy i. The K would have required the mother to give up her child before 4 days. v. Deceptive sales practice vi. § 152: When Mistake of Both Parties Makes K Voidable 16 .H. K offends our deeply held values ii. Mutual Mistake 1. VIII.

Lenawee County BoH v. Wil-Fred’s Inc. the K is voidable by him IF he does not bear the risk of the mistake under the rule stated in § 154. at the time the K is made. The other party had reason to know of the mistake or his fault caused the mistake 2. Court granted rescission to Wil-Fred’s because the price differential was so 17 . that he has only limited knowledge with respect to the facts to which the mistake relates BUT treats his limited knowledge as sufficient. “As is” term in K allocated risk to the buyer. v. OR D. Mutual mistake is actually about assent—If the parties are really mistaken about something fundamental about what is being bargained for. § 154 Allocation of risk determines when party can rescind 1. The risk is allocated to him by agreement of the parties. The risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so. AND B. A party bears the risk of mistake when B. Messerly: K where both buyer and seller were unaware of problems with the septic tank. OR C. Metropolitan Sanitary: Construction company submitted bid on a K and then attempted to withdraw the bid when it discovered its calculations were based on a subcontractors error. The effect of the mistake is such that enforcement of the K would be unconscionable (outrageous). As to a basic assumption on which K was made D. Mistake at the time of K C. they did not assent to what they thought they were assenting to v. Where a mistake of one party at the time a K was made as to a basic assumption on which he made the K has a material effect on the agreed exchange of performances that is adverse to him. Unless he bears the risk of mistake under § 154 ii.B. He is aware. and adopts Restatement Test iv. therefore they cannot rescind. OR C. Court rejects Sherwood test. Unilateral Mistake (§ 153): When Mistake of One Party Makes K Voidable 1. That has a material effect on the agreed exchange of performance E. iii.

his duty to render that performance is discharged. however. Rules: 1. And other party can be placed in the status quo b. Modification i. 3. Unforeseen. § 261: Where. singular events (i. war. unless the language or the circumstances indicate the contrary ii. Illinois Test: B. Impracticability: performance of the K is still possible. embargo. out of nowhere. International Harvester: Court does not allow International Harvester to use impracticability as an excuse when market downturn renders K with Karl Wendt extremely unprofitable d. Impossibility i. OR 18 . a party’s performance is made impracticable without his fault by the occurrence of an event the non-occurrence of which was a basic assumption on which the K was made. etc) that effect the supply and therefore the price of raw materials may warrant services/product rendered impracticable 2.e. Reasonable care must have been exercised D. due to a change in circumstances (not subject to either party’s control) there would be no reason to e. but circumstances have changed where it is really difficult to perform i. renders a K unprofitable B. such a market downturn.great between their bids and other bids that D had reason to know something was off. Mistake must relate to material feature of K C. Subjective: impossible based on personal circumstances c. § 89: A promise modifying a duty under a K not full performed on either side is binding 1. A party’s performance is not excused where the occurrence of a foreseeable event. Enforcement of K is unconscionable E. Karl Wendt v. after a K is made. Objective: no one could perform the K because its physically impossible ii. If the modification is fair and equitable in view of circumstances not anticipated by the parties when the K was made. Frustration of Purpose: the K can actually be performed.

§ 235: When performance of a duty under K is due. fisherman demand more money and won’t work until company agrees to increase their salary. duress. To the extent that justice requires enforcement in view of material change of position in reliance on the promise ii. Even if there is consideration. unless its nonoccurrence is excused. OR 3. Rule: Court requires literal compliance with express conditions. Express Conditions. v.2. Constructive Conditions of Exchange 19 . Excuses 1. Waiver: intentional relinquishment of a known right. Rep for company agrees to increase salary. Court says that consent to fisherman's’ demands was without consideration IX. substantial performance is NOT enough ii. To the extent provided by statute. which must occur. §229: To the extent that the non-occurrence of a condition would cause disproportionate forfeiture. Alaska Packer’s Association v. Estoppel: reasonable reliance on some statement or conduct by the other party. OAD: Court held that Oppenheimer’s substantial performance is NOT enough. is there a defense (i. before performance under a K becomes due i. Conditions of Performance and Consequences of Nonperformance a. K must include specific language that shows that performance is in reliance on the opposite party’s performance and therefore is conditional (requires an if. then statement) i. undue influence. Rule: Modification of a K requires additional consideration for that modification. Forfeiture: B.) 1. Oppenheimer & Co. and therefore they breached the K d. a court may excuse the nonoccurrence of that condition unless its occurrence was a material (important) part of the agreed exchange 2. Domenico: While out at sea. etc. Conditions (§ 224): An event NOT certain to occur. cannot be with respect to a material part of the K 3. Prevention: party seeking to enforce condition took steps to make it more difficult for condition to occur b.e. any non-performance is a breach c. can be material or immaterial 4.

(6) However.i. the following circumstances are significant: B. § 241: In determining whether a failure to render or to offer performance is material. Only used in cases where the cost to complete would be grossly and unfairly out of proportion to the good to be attained 20 . Sometimes. The extend to which the party failing to perform or to offer to perform will suffer forfeiture E. (2) Impose constructive condition of exchange v. court will use difference in value between what was promised and what was actually received B. General measure of damages is cost to complete 2. (5) If no material failure. (7) What are the damages for that breach? 1. The extent to which the injured party will be deprived of the benefit which he reasonably expected C. (4) Was there a material failure? 1. The extent to which the behavior of the party failing to perform or to offer to perform comports with standards of goo faith and fair dealing G. (1) NO explicit clause addressing this question iv. (3) What does it take to satisfy constructive condition or exchange? 1. do not need express language to satisfy (can be implied) ii. The likelihood that the party failing to perform or to offer to perform will cure his failure. Performance of a party relies on the opposite party to satisfy a condition. taking account of all the circumstances including any reasonable assurances F. there is still a breach ix. Non-breaching party is NOT discharged of its obligations viii. No uncured material failure vi. The extent to which the injured party can be adequately compensated for the part of the benefit of which he will be deprived D. Cardoza Test Addition: Was the transgressor willful? vii. Does breach by one party justify non-performance by the other party? iii. what does it mean? 1.

P CANNOT recover lost profits. or humiliation 21 . burden. (4) If there is a material failure. Cost avoided: Cost of materials 4. Restrictions to Expectation Damages 1.x. Forseeability B. Other loss: Consequential/incidental loss not directly related to the value of the K 3. damages are NOT recoverable for loss that the injured party could have avoided without undue risk. Baxendale: Crankshaft breaks and they give it to carrier to make duplicate. is it a partial breach or total breach? 1. Total breach: non-breaching party is justified in “walking away” 3. Loss in value: the loss received from the K which was not performed 2. D did not know that the mill would shut down because it was the only crankshaft. (§ 350) i. 2. However. Loss avoided: mitigating damages iii. Reasonably considered to arise naturally from a breach of K. Remedies for Breach of K a. He promises to deliver it on time and it arrives late. Expectation Damages i. Duty to mitigate B. OR ii. Hadley v. General Measure= loss in value + other loss – cost avoided – loss avoided 1. Expectation interest [§ 344(a)]: his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the K been performed ii. (1) Except as stated in Subsection (2). Partial breach: non-breaching party must “wait around 2. Those damages within the reasonable contemplation of the parties at the time of contracting C. Rule: An injured party may recover those damages i. § 242 X. §351 D.

Erlich v. Court said emotional damages not available because negligence alone is insufficient.ii. Non-Recoverable Damages i. As a result. Reliance Damages 22 . Punitive Damages are generally not available for breach of K 1. Court held that Luten should not have proceeded to build the bridge. § 353: Recovery for emotional disturbance will be excluded unless the breach also caused bodily harm OR the K OR the breach is such of a kind that serious emotional disturbance was a particularly likely result B. (2) The injured party is not precluded from recovery by the rule stated in Subsection (1) to the extent that he had made reasonable but unsuccessful efforts to avoid loss C. GTE: There was evidence to establish that GTE should have foreseen that a breach would have caused losses beyond that which directly flowed from K (i. Rule: Damages must be able to be proved with “reasonable certainty i. Unless the conduct constituting the breach is also a tort for which punitive damages are recoverable (§ 355) ii. the court was willing to award Florafax loss profits. despite the difference in estimation between Florafax and GTE. c.e. Florafax v. and therefore will not allow them to recover K price. but it had a lot of errors. FACT OF INJURY REASONABLY CERTAIN b. than court usually willing to speculate on quantity C. Luten Bridge: County informed Luten to stop construction on bridge. Lost Profit Clause). Luten completed construction anyway. Emotional Distress 1. Fact of injury is certain. v. Damages Cannot Be Speculative B. 3. P sought damages for emotional distress. Rockingham Co. Menezes: D constructed “dream home” for P.

Restitution interest [§ 344 (c)]: His interest in having restored to him any benefit that he has conferred on the other party ii. certainty.i. the injured party has a right to damages based on his reliance interest. less any loss that the party in breach can prove with reasonable certainty the injured party would have suffered had the K been performed. Reliance Interest [§344 (b)]: His interest in being reimbursed for loss caused by reliance on the K by being put in as good a position as he would have been if the K had not been made ii. preparation. 1. v. (1)Subject to the rule stated in Subsection (2). Rule: Reliance damages are often used as the measure of damages when expectation damages cannot be measured with reasonable certainty although losses have been sustained 1. §349 Damages Based on Reliance Interest: As an alternative to the measure of damages stated in § 347 (expectation damages). Performance of Wartzman was fundamental to the success of Hightower’s venture. The non-breaching party (§ 373): B. Walser v. Wartzman v. and mitigation iv. on a breach by nonperformance that gives rise to claim for damages for total breach or on a repudiation. Also limited by foreseeability. causation. or reliance on a K are recoverable iii. Hightower: Flagpole record case. the injured party is entitled to restitution for any benefit that he has conferred on the other party by way of part performance or reliance C. (2) The injured party has NO right to restitution IF he has performed all of his duties under the K and no performance by the 23 . Restitution is available to BOTH 1. Both expectation and reliance damages available 2. Restitution Damages i. Monies spend in part performance. Toyota: d. including expenditures made in preparation for performance or in performance. Court awards Hightower reliance damages. Promissory Estoppel 1.

Thomas: e. §359 Effect of Adequacy of Damages 24 . (2) To the extent that. New Rule: Breach is not immoral. U. Coastal sought restitution damages.S. Algernon Blair: Blair breached the K by refusing to pay Costal for crane rental. ex rel Costal Steel v. Court grants Coastal restitution damages for services they performed regardless of the fact that it was a losing K for Coastal (they would have lost more money if K had been performed) 2. The breaching party (§ 374): B. Is the remedy at law (monetary damages) inadequate? (Threshold question) 1. under the manifested assent of the parties. breaching party should not be penalized and able to collect restitution F. Lancellotti v. Rule: Basis for recovery under restitution damages are “off the K”. the party in breach is entitled to restitution for any benefit that he has conferred by way of part performance or reliance in excess of the loss that he ahs caused by his own breach C. Old Rule: if breaching party was willful and deliberate. it is just a choice. but it does NOT govern i. that party is NOT entitled to restitution if the value of performance as liquidated damages is reasonable in the light of anticipated or actual loss caused by the breach and the difficulties of proof of loss D. Specific Performance i. a party’s performance is to be retained in the case of breach. (1) Subject to the rules stated in Subsection (2). K is an important fact in determining damages. Therefore.other party remains due other than payment of a definite sum of money for that performance D. they will NOT be able to recover restitution E. IF party justifiably refuses to perform on the ground that his remaining duties of performance have been discharged by the other party’s breach.

(2) The adequacy of damage remedy for failure to render one part of the performance dues NOT preclude specific performance or injunction as to the K as a whole D. Coercing someone to do something 2. The difficulty of procuring a suitable substitute performance by means of money awarded as damages. definite in material respects. AND D. (1) Specific performance or an injuction will NOT be ordered if damages would be adequate to protect the expectation interest of the injured party C. Indefiniteness of duties B.B. The likelihood that an award of damages could not be collected ii. contains some terms. Rule: As a matter of law. BUT such remedy may be considered in exercising discretion under the rule stated in § 357 2. if in the court’s discretion specific performance should be granted 25 . the following circumstances are significant: B. the mere fact that a K. which are subject to further negotiation between P and D will NOT bar a decree for specific performance. § 360: In determining whether the remedy in damages would be adequate. 3. §366: A promise will NOT be specifically enforced IF the character and magnitude of the performance would impose on the court burdens in enforcement or supervision that are disproportionate to the advantages to be gained from enforcement and to the harm to be suffered from its denial. §362: Specific performance or an injunction will NOT be granted UNLESS the terms of the K are sufficiently certain to provide a basis for an appropriate order C. (3) Specific performance or an injunction will NOT be refused merely because there is a remedy for breach other than damages. The difficulty of proving damages with reasonable certainty C. Supervision and monitoring B. Pragmatic concerns 1.

Does party seeking relief have “clean hands” 2. 26 . Whether the liquidating damage clause is intending to provide as penalty or a legitimate way of allocating loss C. Agreed Remedies i. City Stores v. Ammerman iii. (1) Damages for breach by either party may be liquidated in the agreement BUT only at an amount that is reasonable in light of the anticipated or actual loss caused by the breach AND the difficulties of proof of loss. Evaluate good faith bargaining 3. of Madison. C. If not difficult to estimate.C. Kramer: Court refused to enforce Reier’s injunction against Kramer to provide his services to Clear Channel. Must consider: B. Is the injury caused by breach difficult to estimate at the time of contracting? i. despite the exclusivity clause in the Reier-Kramer K f. Are the stipulated damages a reasonable forecast of the actual or anticipated harm caused by the breach? 3.i. § 367 (2): A promise to render personal service exclusively for one employer will NOT be enforced by an injunction against serving another IF its probable result will be to compel a performance involving personal relations the enforced continuance of which is undesirable OR will be to leave the employee without other reasonable means of making a living 3. points to penalty D. Specific Performance of Personal Service Ks 1. Rule [§ 367 (1)]: Specific performance will NOT be granted for personal service Ks 2. Harm to third parties iv. Westhaven Associates v. § 356 Liquidating Damages and Penalties 1. Equitable concerns 1. Inc. Reier Broadcasting v. A term fixing unreasonably large liquidated damages in unenforceable on grounds of public policy as a penalty 2.

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