Contracts Outline2 by yaosaigeng

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									                                       Contracts Outline – FitzGibbon
                                               Austin Evers




I. Is there an agreement? _______________________________________________________ 8
 A. Was there an offer?______________________________________________________________ 8
   i. Manifested intent to enter a contract? _________________________________________________________ 8
      Lonergan v. Scolnick _____________________________________________________________________ 8
      Southworth v. Oliver _____________________________________________________________________ 8
      a. Ambiguous words that often disqualify: ____________________________________________________ 9
         Appropriate, Reasonable, Fair ____________________________________________________________ 9
      b. Ambiguous words that often qualify: _______________________________________________________ 9
         Requirements, Only, Solely, All___________________________________________________________ 9
      c. Context of Communication ______________________________________________________________ 9
         1. Advertising _________________________________________________________________________ 9
            § 46. Revocation Of General Offer _______________________________________________________ 9
            Fisher v. Bell (flick knife) ______________________________________________________________ 9
            Lefkowitz v. Great Minneapolis Surplus Store (Fur) _________________________________________ 9
            Rewards ___________________________________________________________________________ 9
         2. Price Quotes ________________________________________________________________________ 9
         3. Custom ____________________________________________________________________________ 9
          Embry v. Hargadine McKittrick Dry Goods Co. ____________________________________________ 9
 B. Had offer been terminated? _______________________________________________________ 9
   i. 3 Ways To Terminate _____________________________________________________________________ 9
      § 36. Methods Of Termination Of The Power Of Acceptance _____________________________________ 9
      a.. Death ______________________________________________________________________________ 10
      b. Lapse of Time _______________________________________________________________________ 10
      c. Revocation __________________________________________________________________________ 10
         Does Offeror Have Right To Revoke? _____________________________________________________ 10
           Lyon v. Adgraphics __________________________________________________________________ 10
           § 42. Revocation By Communication From Offeror Received By Offeree _______________________ 10
           §43 Indirect Communication of Revocation _______________________________________________ 10
           Dickinson v. Dodds (Nuddum Pactum) ___________________________________________________ 10
           § 87. Option Contract (consideration or rbl. reliance) _______________________________________ 10
           1. Option Contract (promise to keep open + payment for that promise)__________________________ 10
           2. Firm Offer (Art.2) (Express written promise not to revoke by merchant) ______________________ 10
           3. Reasonable and Foreseeable Reliance (K-SubK) _________________________________________ 11
           4. Unilateral Contract (performance only) ________________________________________________ 11
              § 45. Option Contract Created By Part Performance Or Tender__________________________ 11
 C. Was offer accepted? ____________________________________________________________ 11
   i. Who Can Accept? _______________________________________________________________________ 11
      DeVaux v. American Home Insurance (Lawyer secretary) _______________________________________ 11
   ii. How can they accept? ___________________________________________________________________ 11
         Wucherpfenning v. Dooly ______________________________________________________________ 11
      a. Performance _________________________________________________________________________ 11
         1. Unilateral vs. Bilateral contracts _______________________________________________________ 11
            § 53. Acceptance By Performance; Manifestation Of Intention Not To Accept
 
 
 _______________ 12
            § 54. Acceptance By Performance; Necessity Of Notification To Offeror ________________________ 12
            Ever-Tite Roofing v. Green ___________________________________________________________ 12
            Marchiondo v. Scheck _______________________________________________________________ 12
            Carhill v. Carbolic Smoke Ball Co. _____________________________________________________ 12
            Industrial America, Inc. v. Fulton Industries, Inc. __________________________________________ 13
            Russell v. Texas Co. (use my land at cost) ________________________________________________ 13
            McGlone v. Lacey (lawyer never paid) __________________________________________________ 13
            § 69. Acceptance By Silence Or Exercise Of Dominion _____________________________________ 13
      b. Mailbox Rule ________________________________________________________________________ 13
                                   Contracts Outline – FitzGibbon – Austin Evers



      c. Mirror Image Rule/Counteroffers ________________________________________________________ 13
         1. Counteroffer _______________________________________________________________________ 13
            Minneapolis & St. Louis Railway v. Columbus Rolling-Mill Co. _______________________________ 13
         2. Conditional Acceptance ______________________________________________________________ 14
         3. New Terms/Mirror Image Rule ________________________________________________________ 14
            Langellier v. Schaefer ________________________________________________________________ 14
            LaSalle Nat’l Bank v. Vega ____________________________________________________________ 14
         4. Battle of the Forms __________________________________________________________________ 14
         5. Relaxation of Mirror Image ___________________________________________________________ 14
             Acceptances with suggestions ______________________________________________________ 14
             Acceptances with grumbling _______________________________________________________ 14
             Acceptances plus offer of modification _______________________________________________ 14
             Trying to find in the original offer some element of the changes requested ___________________ 14
             Acceptances with conditions favorable to offeror _______________________________________ 14
   iii. When can they accept? __________________________________________________________________ 14
         Xerox 69-82 (silence) ________________________________________________________________ 14
II. Is the agreement legally enforceable? _________________________________________ 14
 A1. Clear and Definite Terms _______________________________________________________ 14
   Varney v. Ditmars (Fair share architect) ______________________________________________________ 14
    ALS Baseball _________________________________________________________________________ 15
   MGM v. Scheider (film the pilot) _____________________________________________________________ 15
   John Martin, Jr. Delicatessen (Market Price Deli Rent) ___________________________________________ 15
   Corthell v. Summit Thread Co. (Inventor) ______________________________________________________ 15
   Oglebay Norton v. Armco (Price of ore, custom) ________________________________________________ 15
 A. Consideration (Bargain) _________________________________________________________ 15
   i. A bargained-for exchange ________________________________________________________________ 15
      § 71. Requirement Of Exchange; Types Of Exchange __________________________________________ 15
      § 73. Performance Of Legal Duty __________________________________________________________ 16
      Dougherty v. Salt (pay your nephew) ________________________________________________________ 16
      Hamer v. Sidway (Stay sober) _____________________________________________________________ 16
      Kirksey v. Kirksey (Stay with me) __________________________________________________________ 16
      Use Trusts to make gifts (x119, Gordley) ____________________________________________________ 16
      Spooner v. Reserve Life Insurance (sales bonus) _______________________________________________ 16
   ii. To Assess ____________________________________________________________________________ 16
      a. Who is ∆ (person refusing to follow thru on promise)? ________________________________________ 16
      b. Did ∆ ask for anything in exchange for her promise? _________________________________________ 16
      c. Who is π? ___________________________________________________________________________ 16
      d. Did π give anything or give up anything in return for promise? _________________________________ 16
   iii. 4 Question types _______________________________________________________________________ 16
      a. Adequate consideration? _______________________________________________________________ 16
         Thomas v. Thomas (Dying husband) ______________________________________________________ 16
         Jones v. Star Credit Corp. (Fridge) ________________________________________________________ 17
         Wood v. Lucy, Lady Duff-Gordon ________________________________________________________ 17
          Bogigian v. Bogigian (Adequacy of Consideration) ________________________________________ 17
      b. Past consideration ____________________________________________________________________ 17
         § 86. Promise For Benefit Received _______________________________________________________ 17
         Mills v. Wyman (Dead sailor son) ________________________________________________________ 17
         Webb v. McGowan (Saved you, moral obligation) ___________________________________________ 17
      c. Contract Modification _________________________________________________________________ 18
         § 89. Modification Of Executory Contract __________________________________________________ 18
      d. Free Way Out, Illusory Promise _________________________________________________________ 18
         Rehm-Zeiler v. Walker (Whiskey) ________________________________________________________ 18
         McMichael v. Price (Sand) ______________________________________________________________ 18
         Omni Group v. Seattle-First National Bank (Satisfactory report) ________________________________ 18



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        Grouse v. Group Health Care _________________________________________________________ 18
       Casebook 100-108 (implicit promises) ____________________________________________________ 18
       Xerox 177-80 (refrain from suit) _________________________________________________________ 19
 Substitution for Consideration _______________________________________________________________ 19
    § 82. Promise To Pay Indebtedness; Effect On The Statute Of Limitations __________________________ 19
    i. Promissory Estoppel ___________________________________________________________________ 19
       Elvin Associates v. Franklin (Aretha) _____________________________________________________ 19
       Ricketts v. Scothorn (Grandpa) __________________________________________________________ 19
    ii. Reasonable, foreseeable reliance _________________________________________________________ 19
       § 90. Promise Reasonably Inducing Action Or Forbearance ____________________________________ 19
    iii. Implied in fact, in law, unjust enrichment _________________________________________________ 19
       2-302 ______________________________________________________________________________ 19
        Bailey v. West (12-16) §69 ___________________________________________________________ 19
       Chase v. Concoran (x201) (Contract implied in fact) ________________________________________ 20
       Tom Growney Equipment v. Ansley (x203) (unjust enrichment) ______________________________ 20
       Whitfield v. Lear (x191) (implied in fact) ________________________________________________ 20
 iv. Approach ____________________________________________________________________________ 20
    a. Is there an agreement? _________________________________________________________________ 20
    b. Is there a contract? ____________________________________________________________________ 20
    c. Is there consideration? _________________________________________________________________ 20
    d. If not, can it be enforced with promissory estoppel? __________________________________________ 20
B. Who Accepted? (Dealings) _______________________________________________________ 20
 i. Can’t enforce acceptance against: __________________________________________________________ 20
     Incapacity _________________________________________________________________________ 20
     Minors/Infants ______________________________________________________________________ 20
     Intoxicated to the point where offeree lacked capacity to understand ____________________________ 20
     Mentally incompetent/Insane __________________________________________________________ 20
     Note: They can enforce the offers they accept, however. _____________________________________ 20
     Note: Necessaries: even people who lack capacity must perform contracts for food, shelter, medical care,
    however price is fair market not K price (Quasi Contract) _______________________________________ 20
C. Duress (Dealings) ______________________________________________________________ 20
 § 175. When Duress By Threat Makes A Contract Voidable _______________________________________ 20
 § 176. When A Threat Is Improper ___________________________________________________________ 20
 i. Economic Duress _______________________________________________________________________ 21
    Austin Instrument v. Loral Corp. (Navy) _____________________________________________________ 21
    Standard Box (Box monopoly) _____________________________________________________________ 21
       Refusal to deal not always duress. ________________________________________________________ 21
 ii. Two Requirements _____________________________________________________________________ 21
    a. Improper threat, and ___________________________________________________________________ 21
    b. Victim of improper threat must have no reasonable alternative. _________________________________ 21
 Austin v. Loral ___________________________________________________________________________ 21
 Port Caledonia & The Anna (Duress) _________________________________________________________ 21
D. Undue Influence (Dealings) ______________________________________________________ 21
 § 177. When Undue Influence Makes A Contract Voidable ________________________________________ 21
 i. Unfair persuasion _______________________________________________________________________ 22
 ii. Domination ___________________________________________________________________________ 22
    Methodist Mission Home v. B. _____________________________________________________________ 22
    a. Domination vs. Duress _________________________________________________________________ 22
E. Misrepresentation (no bad intent nec.) (Dealings) ____________________________________ 22
 § 161. When Non-Disclosure Is Equivalent To An Assertion _______________________________________ 22
 § 162. When A Misrepresentation Is Fraudulent Or Material _______________________________________ 22
 § 168. Reliance On Assertions Of Opinion _____________________________________________________ 22
 § 169. When Reliance On An Assertion Of Opinion Is Not Justified _________________________________ 23



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 § 173. When Abuse Of A Fiduciary Relation Makes A Contract Voidable ____________________________ 23
 Vokes v. Arthur Murray Dance Studio (Dance) §161, 169 _________________________________________ 23
F. Non-Disclosure (Dealings) _______________________________________________________ 23
 Laidlaw v. Organ (War of 1812) §161 ________________________________________________________ 23
 Hill v. Jones (Termites) §160 _______________________________________________________________ 23
 Stambovsky v. Ackley (Haunted) _____________________________________________________________ 23
G. Good Faith (Dealings) __________________________________________________________ 23
 i. Four Situations _________________________________________________________________________ 23
    a. Prevention, hindrance, failure to cooperate _________________________________________________ 23
    b. Exercise of Discretion granted by contract _________________________________________________ 23
       Dalton v. ETS (SATs) _________________________________________________________________ 23
    c. Contract modifications _________________________________________________________________ 24
    d. Termination of contracts for reasons other than breach ________________________________________ 24
       Market Street Associates (JC Penney) _____________________________________________________ 24
H. Mistake (Belief) ________________________________________________________________ 24
    § 154. When A Party Bears The Risk Of A Mistake ____________________________________________ 24
 i. Mistake vs. Misrepresentation _____________________________________________________________ 24
 ii. Unilateral Mistake ______________________________________________________________________ 24
    § 153. When Mistake Of One Party Makes A Contract Voidable __________________________________ 24
    Boise Jr. College District v. Mattefs Construction (Contractor oops) (153) __________________________ 25
 iii. Mutual Mistake _______________________________________________________________________ 25
    § 152. When Mistake Of Both Parties Makes A Contract Voidable ________________________________ 25
    Beachcomber Coins v. Boskett (Coins) 154 ___________________________________________________ 25
    Sherwood v. Walker (Cow Case) §154 ______________________________________________________ 25
    Lenawee County (Mutual Mistake) (§154) ___________________________________________________ 25
    a. The key is finding whether mistake was MATERIAL. ________________________________________ 26
       1. Mistakes as to fair market value are not material. __________________________________________ 26
 iv. Scrivener’s Error ______________________________________________________________________ 26
     Konic International v. Spokane Computer Services (Scrivener’s error) ___________________________ 25
I. Ambiguity _____________________________________________________________________ 26
 §201. Whose Meaning Prevails ______________________________________________________________ 26
 §202. Rules In Aid of Interpretation __________________________________________________________ 26
 i. Elements ______________________________________________________________________________ 26
    a. Two or more reasonable meanings ________________________________________________________ 26
    b. Each party must have a different meaning in mind, and _______________________________________ 26
    c. Neither party knows or has reason to know that the other has attached a different meaning. ___________ 26
       Ex. UK/USA transaction in gallons. _______________________________________________________ 26
       Ex. Buying signed prints. Does that mean physically signed or signature in block? _________________ 26
    d. Courts rarely find ambiguity is reason not to enforce. _________________________________________ 26
    Raffles v. Wickelshouse (Peerless) __________________________________________________________ 26
       1. Usually one party’s meaning is more reasonable. __________________________________________ 26
          Frigaliment Importing Co. v. BNS Int’l Sales Corp (Mistake) §201 ____________________________ 26
J. Illegality ______________________________________________________________________ 27
K. Public Policy __________________________________________________________________ 27
 i. Elements ______________________________________________________________________________ 27
    a. Reasonable interest to protect ___________________________________________________________ 27
    b. Geographic terms are reasonable _________________________________________________________ 27
    c. Time limits are reasonable ______________________________________________________________ 27
L. Unconscionability ______________________________________________________________ 27
 i. Measured at creation ____________________________________________________________________ 27
    a. Unconscionable Bargaining Power _______________________________________________________ 27
       Hennigsen v. Bloomfield (Wife, not purchaser) ______________________________________________ 27


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          Caspi v. Microsoft (Forum Selection Clause) _____________________________________________ 27
      b. Unconscionable Procedure ______________________________________________________________ 27
         Williams v. Walker-Thomas Furniture (Keep buying, never pay off) _____________________________ 27
   ii. Blue pencil available ____________________________________________________________________ 28
      Jones v. Star Credit Corp. (Fridge) _________________________________________________________ 28
      Weaver v. American Oil _______________________________________________________________ 28
III. Statute of Frauds? ________________________________________________________ 28
 i. Article 2: $500 or more sale of goods _______________________________________________ 29
 ii. Transfer of real property with duration over 1 year __________________________________ 29
   a. lease for 1 year does not qualify (1 year < over 1 year) __________________________________________ 29
 iii. Service contract over 1 year to complete. ___________________________________________ 29
 iv. Tricks ________________________________________________________________________ 29
   a. Anytime a fixed period over 1 year, SoF applies. ______________________________________________ 29
   b. A lifetime K is never within SoF b/c parties could die tomorrow. _________________________________ 29
   c. If possible to do in < 1 year, no SoF ________________________________________________________ 29
      1. Oral contract to build power plant does not fall under SoF because theoretically it could be built in < 1
      year. _________________________________________________________________________________ 29
   d. Courts are hostile to SoF. ________________________________________________________________ 29
   e. Given a date, X/X/XX, of K and date of performance, Y/Y/YY. If it is more than 1 year away, SoF. ______ 29
 v. Under SoF _____________________________________________________________________ 29
   a. Prenups ______________________________________________________________________________ 29
   b. Guarantee to pay debt of another ___________________________________________________________ 29
   c. Promise by estate rep. to pay debts of estate from her own pocket. ________________________________ 29
 vi. Writing must be: _______________________________________________________________ 29
   a. Signed by defendant ____________________________________________________________________ 29
   b. Contain all material terms ________________________________________________________________ 29
      1. “I accept your offer” in writing does not satisfy. _____________________________________________ 29
      2. Article 2: writing only needs to have quantity. ______________________________________________ 29
 vi. Exceptions ____________________________________________________________________ 29
   a. Real Property Part Performance ___________________________________________________________ 29
      1. Buyer has made part or whole payment. ___________________________________________________ 29
      2. Buyer is in possession. _________________________________________________________________ 29
      3. Buyer has made permanent improvements. _________________________________________________ 29
   b. Real Goods Part Performance _____________________________________________________________ 29
   c. Service Contracts (Part Performance never enough) ____________________________________________ 29
      The only exception is full performance. _____________________________________________________ 29
IV. What are the terms of the agreement? ________________________________________ 30
 i. Parol Evidence Rule _____________________________________________________________ 30
   § 209. Integrated Agreements _______________________________________________________________ 30
   § 210. Completely And Partially Integrated Agreements __________________________________________ 30
   § 213. Effect Of Integrated Agreement On Prior Agreements (Parol Evidence Rule) ____________________ 30
   a. 3 Step Framework ______________________________________________________________________ 30
      1. Integrated Agreement? _________________________________________________________________ 30
          Court will not even look at PE that is inconsistent with integrated agreement. ____________________ 30
          If completely integrated, no PE to add or contradict, period. _________________________________ 30
         Mitchill v. Lath (Icehouse) ______________________________________________________________ 30
      2. Is agreement completely or partially integrated? _____________________________________________ 31
          PE is admissible to add or supplement a partial integration, but not to contradict. _________________ 31
         Masterson v. Sine (Keep land in family) §214 _______________________________________________ 31



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      3. Exception to PER? ____________________________________________________________________ 31
          PE always admissible to explain ambiguity. ______________________________________________ 31
         Frigalement Chicken __________________________________________________________________ 31
          PE always admissible to establish a defense to enforceability of an agreement. ___________________ 31
   b. PER vs. SoF ___________________________________________________________________________ 31
   c. Hierarchy of Interpretation Rules __________________________________________________________ 31
 ii. UCC Warranty of Liability of the Seller, Puffing. ____________________________________ 31
   a. Express vs. Puffing _____________________________________________________________________ 31
   b. Implied by law _________________________________________________________________________ 32
V. Did Parties Perform?_______________________________________________________ 32
VI. Excuses for failure to perform ______________________________________________ 32
 A. The other party breached first____________________________________________________ 32
   i. Standard of measuring performance _________________________________________________________ 32
      a. Must be material breach; perfection not req’d. ______________________________________________ 32
      b. Consequences of material breach _________________________________________________________ 32
         1. Excuse for non-performance __________________________________________________________ 32
         2. Cause for damages __________________________________________________________________ 32
      c. Consequences for partial/immaterial breach ________________________________________________ 32
         1. Every breach gives cause for damages of breach. __________________________________________ 32
         2. Not an excuse for non-performance. ____________________________________________________ 32
         3. Article 2 the standard is Perfect Tender Rule. _____________________________________________ 32
          Hochster v. De La Tour ______________________________________________________________ 32
 B. The other party’s statement created anticipatory repudiation. _________________________ 32
   i. Unequivocal advance statement showing intent to breach. _______________________________________ 32
 C. Unforeseen Events______________________________________________________________ 32
   i. Impossibility ___________________________________________________________________________ 32
      § 261. Discharge By Supervening Impracticability _____________________________________________ 32
      a. Not more expensive; impossible, impracticable, commercially infeasible. _________________________ 33
      b. Tends to be a Seller’s Excuse. ___________________________________________________________ 33
      Taylor v. Cauldwell (Music Hall) __________________________________________________________ 33
      Mineral Park Land v. Howard (Gravel) _____________________________________________________ 33
      US v. Wegematic (Computer)______________________________________________________________ 33
          Alcoa v. Essex Group, Inc. ___________________________________________________________ 33
   ii. Frustration of Purpose ___________________________________________________________________ 33
      a. Tends to be Buyer’s Excuse. ____________________________________________________________ 33
      Krell v. Henry (Coronation) ______________________________________________________________ 33
      Paradine v. Jane (844) (Frustration of Purpose) ______________________________________________ 33
      Washington Hop Producers (Frustration of Purpose) ___________________________________________ 34
 D. Condition Failed _______________________________________________________________ 34
   Dove v. Rose Acre Farms (Show up) __________________________________________________________ 34
    Clark v. West (Condition) _______________________________________________________________ 34
   i. Express conditions are risk-shifting provisions. Seller agrees because all buyers would attach that condition.
   _______________________________________________________________________________________ 34
   ii. Consequences _________________________________________________________________________ 34
      a. Condition not met, no performance required. _______________________________________________ 34
      b. A condition creates no new duty, just limits existing duties. ____________________________________ 34
      c. Language of condition requires strict compliance. ____________________________________________ 34
VII. Remedies _______________________________________________________________ 34
 A. Specific Performance ___________________________________________________________ 34
   i. Real Estate where seller breaches ___________________________________________________________ 34



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   ii. Article 2: SP only avail. if goods are unique. _________________________________________________ 34
      a. Unique: one of a kind, custom, sentimental value. ____________________________________________ 34
      b. Scarce goods ________________________________________________________________________ 34
      c. Requirements Contracts ________________________________________________________________ 34
   iii. Never service contracts _________________________________________________________________ 35
 B. Monetary Damages (norm) ______________________________________________________ 35
   i. Calculation ____________________________________________________________________________ 35
      a. Expectation Interest ___________________________________________________________________ 35
         1) Sellers tend to breach in rising markets; buyer’s breach in falling markets. ______________________ 35
      b. Reliance Interest _____________________________________________________________________ 35
         1) Rarely awarded since usually less than expectation interest. __________________________________ 35
      c. Restitution Interest ____________________________________________________________________ 35
         1. Usually the smallest _________________________________________________________________ 35
   ii. No Punitive damages ____________________________________________________________________ 35
   iii. Service Contracts ______________________________________________________________________ 35
      a. Damages or Injunction (D can’t work for someone else) _______________________________________ 35
   iv. Liquidated Damages ____________________________________________________________________ 35
      a. Fixed Sums = Shotgun Clauses __________________________________________________________ 35
   iv. Limitations on Damages _________________________________________________________________ 35
      a. Only recover what you prove with rble. certainty. ____________________________________________ 35
      b. Rule of Mitigation ____________________________________________________________________ 35
         1. Usually employment arrangement. ______________________________________________________ 35
   v. Consequential Damages _________________________________________________________________ 36
      a. Must be foreseeable by other party at time of contract. (P should have told D) _____________________ 36
 C. Rescission of Agreement _________________________________________________________ 36
VIII. UCC vs. Common Law ___________________________________________________ 36




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I. Is there an agreement?
A. Was there an offer?
i. Manifested intent to enter a contract?
If it is a real estate offer it must describe the price, and the RE.

Lonergan v. Scolnick
Scolnick placed an ad in a paper to sell a 40 acre tract of land in California. Lonergan inquired into the ad
to which Scolnick replied with a description of the property and diretions on how to get there on March 26,
1952. Scolnick also stated his fixed price to be $2500 and that his response was a “form letter.” On April
7, Lonergan wrote to Scolnick confirming that Lonergan had visited the correct property based on his
description, and suggested a bank to be used as an escrow agent provided that he wished to buy the
property. On April 8, Scolnick replied that Lonergan had found the correct property and that the
suggested bank was acceptable. Scolnick added that Lonergan should make a decision quickly about
whether to buy the land because he expected to have a buyer within one week. Lonergan received the
letter from April 8 on April 14, but Scolnick had already sold the property on April 12. Upon receipt of the
April 8 letter, Lonergan sent a letter to Scolnick on April 15 stating that he would proceed with escrow
immediately. On April 17 he opened an escrow account with $100, with the understanding that he was
ready to put in $2400 more at any time. On April 28, Scolnick refused to turn over the deed to the
property. Lonergan argues that the letter of April 8 constituted an offer and that he replied as promptly as
possible, thereby entering into a contract. Scolnick argues that his letter did not constitute an offer.
Holding: The Court of Appeals affirmed the lower court’s decision but disagreed with its reasoning. It
found that none of Scolnick’s letters constituted an offer since they all sought to determine Lonergan’s
interest. The March 26 letter merely replied to Lonergan’s questions about the property. The April 8
letter suggested that specific actions were necessary for Lonergan to demonstrate intention to buy the
property, namely opening escrow. The statement in the April 8 letter that Scolnick expected to have a
buyer within a week indicated that he would sell to the first comer, suggesting that he had not made a
direct offer to Lonergan.


Southworth v. Oliver
Defendant, Oliver, approached Plaintiff, Southworth, to see whether he was interesting in purchasing a tract of land.
Southworth said he was very interested. Subsequently, Southworth called Oliver to renew his interest in the land and
to confirm that he had the money to buy it. He inquired about the terms, such as the price. On June 17, 1976,
Southworth received a letter from Oliver detailing the market value of the land according to an appraiser. The letter
detailed the price, down payment, payment terms, and sales dates. Also included were prices for two land grazing
permits and another tract of land. Southworth replied to this letter accepting the offer. Oliver replied to this letter
stating that no offer had been made but rather that his June 17th letter should be understood as a “starting point for
further negotiations.” Southworth sued for specific action on the grounds that the June 17th letter constituted an offer
to sell and that his subsequent acceptance created a binding contract. Oliver contended that the June 17th letter did
not describe the land in question legally and that since the letter describes other land and 2 permits that are for sale.
The letter uses “approximately” to describe the acreage and is not definite in the legal boundaries of the parcel. For
these reasons, the letter was not definite in terms and therefore was an invitation for offer. The trial court ruled for
Southworth. The decision was affirmed on appeal by Oliver. The Supreme Court affirmed.
Holding: An offer can be determined by three tests. First, would a reasonable person in the given circumstances
perceive an offer to have made to him? This perception outweighs the unstated intent of the offeror. Second, was
the language used in specific or definite enough to indicate promise, undertaking, or commitment? Third, to whom
were the words or actions addressed? If the offeror addressed a specific person or party it is more likely that an offer
was made. Some exceptions, such as offers for rewards, are exceptions to this test. The June 17th letter was the
third communication between the parties. It included a specific price, terms for payment and two dates for sale. It
was addressed to the Plaintiff. The Court found that a reasonable person would perceive this to be a formal offer
given the previous conversations. The Defendant’s second letter stating the misunderstanding based on his unstated
intentions cannot outweigh the initial explicit intentions.



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a. Ambiguous words that often disqualify:
         Appropriate, Reasonable, Fair
b. Ambiguous words that often qualify:
         Requirements, Only, Solely, All

c. Context of Communication

1. Advertising
Ads are not generally offers. Ads usually lack definite terms. Making them binding would risk overacceptance.
Exceptions: Lefkowitz, rewards.

§ 46. Revocation Of General Offer
Where an offer is made by advertisement in a newspaper or other general notification to the public or to a number of
persons whose identity is unknown to the offeror, the offeree's power of acceptance is terminated when a notice of
termination is given publicity by advertisement or other general notification equal to that given to the offer and no
better means of notification is reasonably available.

Fisher v. Bell (flick knife)
Appellee displayed a flick knife that was illegal to sell in his store window with a price tag. He was arrested for selling
the knife and convicted in trial court.
Holding: Display for sale is not an offer but rather an invitation for an offer.

Lefkowitz v. Great Minneapolis Surplus Store (Fur)
Store placed an ad in the paper for fur items at sale prices of $1 on a first come, first served basis. Plaintiff was
denied sale.
Holding: The ad in question was clear in its intent to sell, the price and value of the item, and the conditions to be met
for the sale (first come first served). That the ad was addressed to the entire public does not reduce the definiteness
of the offer. The house rules cannot be appended to the offer after it is accepted. Over-acceptance not a problem
because of the first-in-line condition.
Conditions for exception: definite terms + intention to make a bargain OR specific action invited OR overacceptance
unlikely.

Rewards
Advertisements that state that a reward will be paid are offers since the rewarded act is specified and those who act
on the ad rely on it. No problems of over-acceptance.

2. Price Quotes
A price quote alone is not an offer and can be sent to multiple parties. If a price quote is accompanied by other
definite terms, it will be an offer.

3. Custom
Local custom may add definiteness to a conditions such as dates. Harvest time, etc.


 Embry v. Hargadine McKittrick Dry Goods Co.

B. Had offer been terminated?
i. 3 Ways To Terminate

§ 36. Methods Of Termination Of The Power Of Acceptance
(1) An offeree's power of acceptance may be terminated by
       (a) rejection or counter-offer by the offeree, or
       (b) lapse of time, or



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        (c) revocation by the offeror, or
        (d) death or incapacity of the offeror or offeree.
(2) In addition, an offeree's power of acceptance is terminated by the non-occurrence of any condition of acceptance
under the terms of the offer.


a.. Death
Offers die when people do.

b. Lapse of Time

c. Revocation
Revocation must be communicated or offeree must be aware.

Does Offeror Have Right To Revoke?
Generally, offeror creates power of acceptance and thus may destroy it at will. 4 Situations where revocation is not
allowed.

Lyon v. Adgraphics
Holding: Acceptance must be communicated to offeror in a timely fashion and before revocation.

§ 42. Revocation By Communication From Offeror Received By Offeree
An offeree's power of acceptance is terminated when the offeree receives from the offeror a manifestation of an
intention not to enter into the proposed contract.

§43 Indirect Communication of Revocation
An offeree's power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to
enter into the proposed contract and the offeree acquires reliable information to that effect.

Dickinson v. Dodds (Nuddum Pactum)
On June 10, Dodds sent a letter to Dickinson offering to sell specific land to him for 800 pounds. The letter stipulated
that the “offer to be left over until Friday, 9 o’clock A.M.” The plaintiff, believing that he had until Friday at 9am to
accept, did not reply immediately. On Thursday afternoon, Dickinson was informed by his agent that the defendant
had offered or agreed to sell the same property to another. Dodd had in fact sold the property on Thursday. The
plaintiff promptly delivered a letter of acceptance to the home of defendant but the letter never reached defendant.
The next morning (Friday), plaintiff’s agent tried to give defendant a copy of the letter but was refused. The
defendant said he had already sold the property. Dickinson is suing for performance either from Dodds, the original
owner, or Allan, the purchaser.
Holding: Awareness that an offeror has changed his mind demands that the offer has terminated. Offeree cannot
bind offeror after he learns that the offeror has entered another agreement unless consideration was given for
promise to be kept open. Dodd’s initial letter was an offer but the condition that it be left open was a nuddum pactum)

§ 87. Option Contract (consideration or rbl. reliance)
(1) An offer is binding as an option contract if it
          (a) is in writing and signed by the offeror, recites a purported consideration for the making of the offer, and
          proposes an exchange on fair terms within a reasonable time; or
          (b) is made irrevocable by statute.
(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
contract to the extent necessary to avoid injustice.

1. Option Contract (promise to keep open + payment for that promise)
Typical in real estate. The offeree is buying time. No requirement for writing.

2. Firm Offer (Art.2) (Express written promise not to revoke by merchant)
Arises only if there is a sale of goods, the promise is written.



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3. Reasonable and Foreseeable Reliance (K-SubK)
Generally only in Contractor-Subcontractor relationships will reliance on an offer before acceptance be protected. In
most cases, such reliance is not reasonable to rely without accepting. A construction contract b/w a contractor and a
subcontractor. Contractor asks subK how much a flooring subcontract would cost and subK says it will cost $X. K
relies on that bid in its overall bid. SubK cannot revoke/change mind because contractor reasonably relied on subK
offer in a foreseeable.

4. Unilateral Contract (performance only)
Performance is the only means of acceptance. This rarely comes up because most offerors do not prescribe only
one way to accept. Part performance of unilateral contracts destroys right to revoke in order to protect offeree’s
reasonable reliance. To identify unilateral contracts look for “only by” followed by –ing words.

§ 45. Option Contract Created By Part Performance Or Tender
(1) Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory
acceptance, an option contract is created when the offeree tenders or begins the invited performance or tenders a
beginning of it.
(2) The offeror's duty of performance under any option contract so created is conditional on completion or tender of
the invited performance in accordance with the terms of the offer.




C. Was offer accepted?
An offer creates a power of acceptance. An acceptance must be absolute, unequivocal, unconditional, and may not
introduce additional terms or conditions. An acceptance must meet the conditions of an offer.


i. Who Can Accept?
The only person who can accept an offer is the person to whom the offer is made.

DeVaux v. American Home Insurance (Lawyer secretary)
A secretary for ∆ responds to inquiries regarding legal services for personal injury by advising π to write store where
injury happened, get a medical exam and finally write to ∆ requesting assistance. The secretary misfiled the letter
and ∆ did not learn of it until after statute of limitations had expired on π’s claim. ∆ never returned π’s calls. π argues
that (1) secretary had authority to act in the way she did and thus spoke and acted for ∆, and (2) π reasonably relied
on ∆ to provide assistance (thus forming an attorney-client relationship).
Holding: If secretary had authority as agent and if plaintiff’s reliance was reasonable, a contract existed.


ii. How can they accept?
If there is not language controlling the method of acceptance then any reasonable method will do (giving a promise,
performing, starting to perform).


Wucherpfenning v. Dooly
Defendant offered to sell her portion of the land to plaintiff at $200 per acre provided that the transaction is done
promptly and in cash. Plaintiff replied by letter to say that he had made arrangements to secure funds to buy the
land. He then asked for an exact dollar amount that the defendant expected to receive. The defendant revoked her
offer to sell. Plaintiff sued for specific performance.
Holding: It was not an acceptance because it was not absolute, unequivocal, and unconditional.


a. Performance

1. Unilateral vs. Bilateral contracts




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Where offer was an offer to enter into a bilateral contract then the start of performance is acceptance, which carries
an implied promise to finish the job. Where the offer was an offer to enter into a unilateral contract then the start of
performance is not an acceptance, but destroys power of revocation.

§ 53. Acceptance By Performance; Manifestation Of Intention Not To Accept
 
 

(1) An offer can be accepted by the rendering of a performance only if the offer invites such an acceptance.
(2) Except as stated in §69, the rendering of a performance does not constitute an acceptance if within a reasonable
time the offeree exercises reasonable diligence to notify the offeror of non-acceptance.
(3) Where an offer of a promise invites acceptance by performance and does not invite a promissory acceptance, the
rendering of the invited performance does not constitute an acceptance if before the offeror performs his promise the
offeree manifests an intention not to accept.

§ 54. Acceptance By Performance; Necessity Of Notification To Offeror
(1) Where an offer invites an offeree to accept by rendering a performance, no notification is necessary to make such
an acceptance effective unless the offer requests such a notification.
(2) If an offeree who accepts by rendering a performance 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 the offeror is
discharged unless
        (a) the offeree exercises reasonable diligence to notify the offeror of acceptance, or
        (b) the offeror learns of the performance within a reasonable time, or
        (c) the offer indicates that notification of acceptance is not required.


Ever-Tite Roofing v. Green
π, a roofing company, and ∆, residents in need of roof repair. ∆ signed an order for roofing services. The order
included terms of payment and services. An unauthorized agent for the π signed it, too. The order stipulated that
order was accepted either by signature by company principal or by commencement of work. Upon receipt of order,
π commenced due diligence by getting a credit report, a step understood to be part of the process by ∆. Upon
approval of credit report 9 days after order was originally signed, π loaded trucks and sent workers to home of ∆
where they found other workers doing the roofing. π was denied right to work so company sued for breach.
Holding: Notification of revocation must be communicated prior to acceptance, provided that acceptance is made
prior to end of offer period or, in absence of time limit, within a reasonable period as dictated by custom and practice.
∆ made no attempt to notify π. As such, work commenced on part of π--thereby constituting acceptance--when
trucks were loaded and wage workers dispatched. π did not delay in acceptance of offer. Custom/circumstances +
understanding b/w parties showed that due diligence was necessary and therefore some delay was expected before
work would commence.

Marchiondo v. Scheck
∆ entered into a unilateral contract with π in which π, a broker, would receive a percentage of a sale of land he so
arranged. Through π, ∆ made an offer to a buyer that he revoked in writing to π just prior to buyer’s acceptance. π is
suing for breach of contract since he commenced the performance in the unilateral contract and therefore ∆ had no
right to revoke--the contract was binding.
Holding: The partial performance by an offeree of an offer of a unilateral contract results in a contract with a condition.
The condition is full performance by offeree. Right to revoke depends on whether offeree had partially performed
before he received offeror’s revocation.

Carhill v. Carbolic Smoke Ball Co.
A company placed an advertisement that offered anyone who, having used the product according to the directions for
two weeks, 100 pounds if they catch the flu. To “shew” their seriousness, the ad states that the company has
deposited 1000 pounds in a bank. Plaintiff used the product as directed for two weeks and continued to use it for an
additional one and half months, after which time she contracted the flu. She sought the 100 pounds and was denied.
Holding: An advertisement that presents a proffer to people who perform specific performances and meet certain
conditions is an offer that can be accepted by people through performance rather than by notification of profferor.
Right of notification can be waived implicitly by making performance an acceptable form of acceptance.
Application: Intent to bargain (£1000), definite parties (product users who meet conditions), definite terms (conditions
and £100), acceptance (use of product according to conditions).
Policy: Acceptance by performance without notification is expedient and allows certain offers (rewards, e.g.) to be
made.




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Industrial America, Inc. v. Fulton Industries, Inc.
Broker connects two companies for merger. Merger occurs but outside of broker. Broker demands commission but
defendant claims it had decided to stop using broker before deal occurred, even though it had never told broker.
Holding: A unilateral contract is enforceable when performance is redered.

Russell v. Texas Co. (use my land at cost)
Plaintiff writes to defendant and says that if defendant keeps working on plaintiff’s land then a fee of $150 per day will
be charged. Defendant continues to work on the land.
Holding: Where the offeree exercises dominion over things that are offered to him, such exercise of dominion in the
absence of other circumstances showing a contrary intention is an acceptance. Silence plus conduct can equal
acceptance. See §69.

McGlone v. Lacey (lawyer never paid)
π suing attorney for negligence for not informing her that the statute of limitations on her personal injury suit was
about to run. π sent a letter to ∆’s firm requesting services. ∆’s partner replied that ∆ was currently not available but
that he would be in contact in the coming weeks. ∆ wrote “fine” on reply letter. π contends that his formed an
attorney-client relationship and thus owed her a duty of performance or notification. ∆ never took $ not did he or his
firm provide any service or advice.
Holding: Until services or money is exchanged, no contract or attorney-client relationship could exist. ∆’s silence is
insufficient to constitute acceptance, especially given that custom would dictate further negotiation as to his price.


§ 69. Acceptance By Silence Or Exercise Of Dominion
(1) Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance in the following
cases only:
          (a) Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and
          reason to know that they were offered with the expectation of compensation.
          (b) Where the offeror has stated or given the offeree reason to understand that assent may be manifested
          by silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer.
          (c) Where because of previous dealings or otherwise, it is reasonable that the offeree should notify the
          offeror if he does not intend to accept.
(2) An offeree who does any act inconsistent with the offeror's ownership of offered property is bound in accordance
with the offered terms unless they are manifestly unreasonable. But if the act is wrongful as against the offeror it is an
acceptance only if ratified by him.


b. Mailbox Rule
Look for people not in the same place, delays between receipt of communication, inconsistent communications. An
acceptance is effective upon dispatch. By contrast, other communications are only effective upon receipt. This
protects the offeree so that s/he may rely on acceptance.

c. Mirror Image Rule/Counteroffers
A rejection by offeree terminates offor.

1. Counteroffer
Destroys offer.

Minneapolis & St. Louis Railway v. Columbus Rolling-Mill Co.
A railway company inquired about the price 2000-5000 pounds of a steel company’s railroad rails in a
December 5, 1879 letter. In its December 8 response, the steel company set the price for 2-5K lbs. of
rails at $54 per ton and instructed the railway company to accept its offer before December 20. On
December 16, the railway placed an order in a telegram for 1200 tons of rails based on the conditions of
the December 8 offer. On the 18th, the defendant told the plaintiff by telegram that the order could not be
filled at the offered price. The plaintiff sued on the grounds that the steel company had made an offer and
that it had been accepted.
Holding: An acceptance must mirror the terms of the offer. Any new conditions or terms present in an
attempted acceptance constitute a rejection of the initial offer and instead qualify as a new offer. The offer


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was for no less than 2000 tons of rails. The order was for 1200 tons. This constituted a new term and
thus a rejection of the initial offer. At that time it was up to the steel company to accept the counteroffer,
which it opted not to do.

2. Conditional Acceptance
Look for acceptances with “provided that, but, as long as.” Applies under common law and Art. 2.

3. New Terms/Mirror Image Rule
The terms of the acceptance must mirror the terms of the offer. (Does not apply to Art. 2, see BarBri notes) Common
law. An offeror has control over the offer. An acceptance of an offer must match the exact terms of the offer and
may not introduce new terms. Requests or suggestions or inquiries or grumbling do not disqualify an acceptance.
Exception: when custom & practice dictate more terms or requirements than made in the offer (buying used car, e.g.).
Acceptances that do not mirror offer are counteroffers.
Test: Counteroffer or inquiry? A counteroffer would be reasonably perceived to be an offer itself that can be accepted.

Langellier v. Schaefer
Plaintiff sent a letter to defendant inquiring whether he could purchase his lot and for what price, or whether
defendant would consider buying his. Defendant replied in a letter that he would sell the land for $800 cash and that
he would like to know the plaintiff’s interest promptly. Plaintiff replied that he accepted the offer and then listed a
number of conditions and options for how payment could be made, how title could be delivered, etc. Plaintiff’s suit for
specific performance dismissed.
Holding: An acceptance of an offer must match the exact terms of the offer and may not introduce new terms.

LaSalle Nat’l Bank v. Vega
Initial suit is between Bank and Vega. Borg brings a counter claim. Offer b/w bank and Vega included a provision,
written by bank, that the bank’s trustee had to also sign the contract, which it did not, therefore no contract.
Holding: Offeror has control over offer, i.e. terms and conditions.


4. Battle of the Forms

5. Relaxation of Mirror Image
As a way to soften the harshness of mirror image rule, some courts relax it by allowing
        Acceptances with suggestions
        Acceptances with grumbling
        Acceptances plus offer of modification
        Trying to find in the original offer some element of the changes requested
        Acceptances with conditions favorable to offeror


iii. When can they accept?

Xerox 69-82 (silence)

II. Is the agreement legally enforceable?
A1. Clear and Definite Terms
Varney v. Ditmars (Fair   share architect)
Company that employed architects and drafters hired π at $35 per week. In Feb. 1911, ∆ promised to pay π $40 per
week and to give him a “fair” share of the years profits at the end of the year. When, in Nov., π fell ill and did not
come to work he was fired. He brought suit for wrongful discharge and sought damages of the amount he would
have made thru end of the year + a fair share.
Holding: A fair share may be a binding promise only in situations in which fair may be determined from a market
price. The promise for a fair share of the business was too indeterminate to qualify. The courts cannot aid parties in



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such a case when they are unable or unwilling to agree upon the terms of their own proposed contract. π could only
recover for wages up to the date he was fired and only if he could prove he was paid less than market rate.
Dissent by Cardozo: Just because he was unable to prove the enforceablitity of the fair share promise doesn’t mean
that π was not justified in asking for the remaining year’s wages. Thus court is only half right in its affirmation. This is
an unjust enrichment argument.

 ALS Baseball

MGM v. Scheider (film the pilot)
Actor and studio agreed on a number of terms of a contract for a pilot film and ensuing tv series but left the series
start date unspecified. Actor refused to begin filming series after he filmed pilot but the trial court found an
enforceable contract existed.
Holding: A valid contract may be formed if elements are left for future negotiation and agreement if negotiation over
the essential elements has been completed, performance has begun in good faith, and an objective criteria in the
agreement, custom and practice, or other form is available to render the unspecified elements certain and compete.
“The Court will fill in the gaps.”

John Martin, Jr. Delicatessen (Market Price Deli Rent)
Landlord leases a commercial lot to a deli for 5 years. The lease includes a provision for the tenant to renew the
agreement at a rent to be agreed upon. When the tenant tries to renew, the LL offers a rent of $900 (tenant had been
paying $650). Tenant responds with an appraisal of fair rent at $545. Tenant moves to have lease renewed at that
or another reasonable rate. LL moves to evict.
Holding: What can be made certain is certain. Agreeing to agree in the future is not an enforceable contract: the
material terms are left open. Nowhere is there an inkling that either of the parties directly of indirectly assented, upon
accepting the clause, to subordinate the figure on which it ultimately would insist, to one fixed judicially, as Appellate
Division decreed be done...

Corthell v. Summit Thread Co. (Inventor)
Corthell was a salesman for Summit Thread. He invented a new tool for the company and the two parties signed a
contract to increase his salary, pay him for the invention, and finally to have him bound to provide to the company for
“reasonable recognition” to be determined by company in “good faith.” Corthell makes three more inventions but
receives no recognition and sues.
Holding: Intent to be bound was shown: Corthell invented more things and the company took them. Performance had
begun. Court decides to enforce reasonable value based on market value of patents by reading that meaning into the
language of the K.

Oglebay Norton v. Armco (Price of ore, custom)
After parties were unable to agree on a price for shipping ore, court sets a price at $6.25. The court based its
determination upon the parties’ extensive dealings which showed that the parties meant to be bound even when they
couldn’t agree. Agreements to agree may be enforceable when the parties have manifested an intention to be bound
by their terms and when these intentions are sufficiently definite to be specifically enforced. The businesses were
dependent upon each other and had invested in common project and had people on each other’s boards. It was
similar to a partnership for its interdependence. This interdependence is also articulated in the contract.
Holding: Equity interest justifies court’s broad willingness to fill in the blanks.



A. Consideration (Bargain)
i. A bargained-for exchange
Giving someone what they ask for: act promise or forbearance.

§ 71. Requirement Of Exchange; Types Of Exchange
(1) To constitute consideration, a performance or a return promise must be bargained for.
(2) 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 that promise.
(3) The performance may consist of
       (a) an act other than a promise, or



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       (b) a forbearance, or
       (c) the creation, modification, or destruction of a legal relation.
(4) The performance or return promise may be given to the promisor or to some other person. It may be given by the
promisee or by some other person.

§ 73. Performance Of Legal Duty
Performance of a legal duty owed to a promisor which is neither doubtful nor the subject of honest dispute is not
consideration; but a similar performance is consideration if it differs from what was required by the duty in a way
which reflects more than a pretense of bargain.

Dougherty v. Salt (pay your nephew)
Upon cajoling by guardian, defendant aunt gave a note for $3K to her young nephew.
Holding: No consideration for gratuitous gift so not enforceable.

Hamer v. Sidway (Stay sober)
Uncle promises nephew $5K if he stays sober, etc. until 21. Nephew does and Uncle puts $5K in a bank account to
wait until nephew is ready. Uncle dies and estate refuses to pay.
Holding: Forbearance of rights can be consideration.

Kirksey v. Kirksey (Stay with me)
Brother-in-law invited brother’s widow to come live on his property so she should get out of the city and love
comfortably. 2 years later he ejects her.
Holding: That sister-in-law moved 60 miles did not qualify as consideration, thus the promise by brother-in-law was
mere gratuity.

Use Trusts to make gifts (x119, Gordley)

Spooner v. Reserve Life Insurance (sales bonus)
Bulletin from employer to insurance salesmen stated that performance would be rewarded according to a specific
schedule of bonuses. Bulletin stipulated that the bonuses could be withheld for any reason. When defendant
withheld bonuses, plaintiff sued to enforce.
Holding: The offer cannot be enforced because offeror has ultimate control over the offer. Employer is chastised
though.

ii. To Assess
a. Who is ∆ (person refusing to follow thru on promise)?
b. Did ∆ ask for anything in exchange for her promise?
c. Who is π?
d. Did π give anything or give up anything in return for promise?

iii. 4 Question types

a. Adequate consideration?
Peppercorn. There is no adequacy requirement although if a party is unaware of discrepancy in value, courts may
scrutinize.

Thomas v. Thomas (Dying husband)
Dying husband says he desires one of his houses be left to his wife for her use for her life. On his death, the
executors and plaintiff, the wife, agree to honor that request and put in writing an agreement that the wife would pay
$1 per year and agree to keep up the house in exchange for the house. Executors say that their “pious respect” for
the dying man’s wishes was a mere voluntary gift. π says the $1 and agreement to keep up repairs in exchange for
house was bargained for and was thus consideration.
Holding: The pious respect for his wishes was certainly not consideration. Wife agrees to $1 per year, to keep house
in good repair, and not to remarry. The marriage req. is not consideration. $1 and repairs: does it matter that $1 is
nominal? The law today in the US is that there is not substantive fair price doctrine. You can make an agreement to




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exchange for vastly disparate values. Court holds for π. Had no £1 been exchanged and only pious respect been the
source of agreement, no contract b/c π would have given nothing up.

Jones v. Star Credit Corp. (Fridge)
Sale price + financing of refrigerator sold to plaintiff was drastically above market price.
Holding: if contract is unconscionable at the time of its making it will not be enforced. Though market price was $300,
the plaintiffs had already paid $600 on their promised $1000+. The court ruled that the contract be reformed and
amended by changing the payments called for therein to equal the amount of payment actually paid by the plaintiffs.
We are not totally out from under Thomas v. Thomas fairness requirement. The judge here cited a gross inequality in
bargaining power.
         Disparity as to price
         Disparity as to power
         Disparity as to information --> seller took knowing advantage of plaintiff.
Not necessarily an overt lie, but knowing misrepresentation or failure to disclose.

Wood v. Lucy, Lady Duff-Gordon
∆’s endorsement of a fashion was valuable so she arranged for π to be her exclusive agent in endorsing products
and selling ∆’s own designs. ∆ was to receive 1/2 of all of π’s efforts and π was to make monthly accountings of
those profits. However, after contract was signed, π discovered ∆ to be endorsing on her own and keeping the
profits. π sued for breach.
Holding: Even though no obligation on part of π was explicitly named in contract, could the contract be enforced? The
promise of π in the contract to pay 1/2 of profits and to make monthly accountings of those profits conveyed implicit
obligations that were sufficient to establish the intention of the parties. By accepting to be ∆’s exclusive agent, π
assumes the duties of an exclusive agent. These duties include reasonable efforts to make a profit, thus π had an
implied obligation. Wood’s implied promise is codified in UCC 2-306(2): “A lawful agreement by either the seller or
buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed 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.”

 Bogigian v. Bogigian (Adequacy of Consideration)

b. Past consideration
Past consideration cannot be bargained for, so it is not enough to make a subsequent promise binding.
Exception: Moral force+

§ 86. Promise For Benefit Received
(1) A promise made in recognition of a benefit previously received by the promisor from the promisee is binding to the
extent necessary to prevent injustice.
(2) A promise is not binding under Subsection (1)
       (a) if the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly
       enriched; or
       (b) to the extent that its value is disproportionate to the benefit.


Mills v. Wyman (Dead sailor son)
Father promises by letter to pay for treatment provided by π given to his already dead son. The care had given
before the making of the promise.
Past consideration is problematic and is not qualified to support a contract.
Holding: Not enforceable; The care given by Mills could not be the prid pro quo for promise by Wyman since it had
already happened.
Hypo: promise for payment for continued care of son would be enforceable if Mills performed care. Consideration
does not have to be a good for the promisor, it could be action for another (i.e. son) provided that it is an action by
promisee that he had a right not to do. Promise to pay for care already given would also be enforceable by continued
care performance.

Webb v. McGowan (Saved you, moral obligation)
Defendant promised to pay plaintiff $15 every two weeks for saving his life/body while sustaining it himself. After
defendant died, the payments stopped one month later.




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Holding: Defendant’s promise was not mere gratuity; it was an affirmation of consideration and moral obligation, thus
enforceable. Where a promisee cares for, improves, and preserves the property of the promisor, though done without
his request, it is sufficient consideration for the promisor’s subsequent agreement to pay for the service, because of
the material benefit received. The subsequent promise obviates the objection that no request for service was made.
Moral obligation is also sufficient consideration to support a subsequent promise to pay where the promisor has
received a material benefit.


c. Contract Modification
Once agreement has been made, modifications require their own consideration. Parties already have pre-existing
contractual duties to each other, so carrying out that duty cannot warrant more than the other party’s original duty.
Ex. A agrees to paint B’s house for $1000. Later, A & B agree on a $1200 price. When B writes a $1000 check A is
out of luck.

§ 89. Modification Of Executory Contract
A promise modifying a duty under a contract not fully performed on either side is binding
      (a) if the modification is fair and equitable in view of circumstances not anticipated by the parties when the
      contract was made; or
      (b) to the extent provided by statute; or
      (c) to the extent that justice requires enforcement in view of material change of position in reliance on the
      promise.


d. Free Way Out, Illusory Promise

Rehm-Zeiler v. Walker (Whiskey)
Whiskey deal. Buyer could withdraw from contract if it had trouble selling the whiskey or for any other reason. Buyer
is trying to enforce contract. Court finds contract lacked “mutuality.” The plaintiff could get out of contract for
whatever reason whereas the defendant could not. One of plaintiff’s choices was to buy nothing at all, or to buy all,
or to buy some.
Holding: Since there was no mutuality of obligation there can be no contract.

McMichael v. Price (Sand)
Price agrees to provide to McMichael as much sand as he can sell at a certain price for 10 years. Defendant is trying
to get out of the contract because McMichael could always get out of the sand business, and yet court did not find
this to be a free way out. The only way for McMichael to get out is not really free since he would have to forfeit a line
of business.
Holding: Leaving a business not a free way out. Distinguish from Rehm-Zelher: Rehm-Zelher could opt not to buy
from Walker and still sell whiskey, even the same grade from another distiller.

Omni Group v. Seattle-First National Bank (Satisfactory report)
∆ aggrees to sell land but backs out. ∆ claims that π had a free way out by insisting on a satisfactory engineers
report. π argues that promise was based on a condition that they be satisfied.
Holding: Not a free way out because π can’t just claim lack of satisfaction even if they don’t do the report or they
ignore a satisfactory report. The condition that they be satisfied is reinterpreted by the court as though it came with a
condition that the decision not to be satisfied be made in good faith. Reserving the power to cancel the contract in
good faith does not make the promise illusory. Not inferring good faith would require all contracts to explicitly say
good faith. If good faith is not implied then all contracts would have to be iron clad which would limit the kind of
business people could engage in.

 Grouse v. Group Health Care
Holding: No contract in job offer and acceptance because of bilateral power of termination: neither party is committed
to performance and the promises are illusory. Custom and practice of job offers and acceptance are offers and
acceptances at will -- to be terminated whenever


Casebook 100-108 (implicit promises)




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Xerox 177-80 (refrain from suit)

Substitution for Consideration

§ 82. Promise To Pay Indebtedness; Effect On The Statute Of Limitations
(1) A promise to pay all or part of an antecedent contractual or quasi-contractual indebtedness owed by the promisor
is binding if the indebtedness is still enforceable or would be except for the effect of a statute of limitations.
(2) The following facts operate as such a promise unless other facts indicate a different intention:
        (a) A voluntary acknowledgment to the obligee, admitting the present existence of the antecedent
        indebtedness; or
        (b) A voluntary transfer of money, a negotiable instrument, or other thing by the obligor to the obligee, made
        as interest on or part payment of or collateral security for the antecedent indebtedness; or
        (c) A statement to the obligee that the statute of limitations will not be pleaded as a defense.

i. Promissory Estoppel
Even w/o consideration, a party may be estopped if other party reasonably and foreseeably relied on the promise.

Elvin Associates v. Franklin (Aretha)
A producer sought to make a musical starring Aretha Franklin, who was very receptive. They negotiated for several
months, working out many details including compensation. No final draft of an agreement was ever signed.
Meanwhile, after Franklin reassured plaintiff, the plaintiff went on making arrangements. Franklin backed out.
Holding: Though the parties were not bound contractually, recovery could occur under promissory estoppel Franklin
had unequivocally and intentionally committed herself to appear.

Ricketts v. Scothorn (Grandpa)
Acceptance of offer by grandfather to pay for granddaughter not to work. Consideration?: grandfather promised to
give money. Granddaughter gave up working. Estate objects on consideration grounds because granddaughter
went and got a new job, thus she was not bound to do or refrain from anything.
Holding: Promissory Estoppel: promisor must have reasonable expectation that promisee will take foreseeable action
as a result of the promise and the promisee must have taken action as a result of the promise. Reliance on promise
must be reasonable. A donor will be estopped from pleading want of consideration if the donee has incurred
obligations of the faith that the note would be paid. Defendant, executor of promisor’s estate, may not plead lack of
consideration if the promisee, grand daughter who quit work after grandfather promised to prevent her from needing
to work, acted in such a way as to prove the promise induced a change of position in accordance with the promise.

ii. Reasonable, foreseeable reliance
Restatement 2d approach to Estoppel.

§ 90. Promise Reasonably Inducing Action Or Forbearance
(1) A promise 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 such action or forbearance is binding if injustice can be avoided
only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.
(2) A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise
induced action or forbearance.


iii. Implied in fact, in law, unjust enrichment

2-302
“A lawful agreement by either the seller or buyer for exclusive dealing in the kind of goods concerned imposes unless
otherwise agreed 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.”


 Bailey v. West (12-16) §69
Buyer buys horse from seller. Horse turns out lame so buyer sends it back but it is refused so driver leaves it with
plaintiff at his farm. Plaintiff sues for caretaking and boarding fees.



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Holding:


Chase v. Concoran (x201) (Contract implied in fact)


Tom Growney Equipment v. Ansley (x203) (unjust enrichment)
Defendant, owner, sells a tractor to third party on security. Third party gets the tractor repaired. Third party defaults
on repairs and on tractor so plaintiff, repairer, sues defendant for repairs. The defendant now has the tractor, so
plaintiff argues he was unjustly enriched.
Holding: Defendant says he never requested the repairs. Held for defendant.


Whitfield v. Lear (x191) (implied in fact)

iv. Approach
a. Is there an agreement?
b. Is there a contract?
c. Is there consideration?
d. If not, can it be enforced with promissory estoppel?



B. Who Accepted? (Dealings)
i. Can’t enforce acceptance against:
          Incapacity
          Minors/Infants
          Intoxicated to the point where offeree lacked capacity to understand
          Mentally incompetent/Insane
          Note: They can enforce the offers they accept, however.
          Note: Necessaries: even people who lack capacity must perform contracts for food, shelter,
           medical care, however price is fair market not K price (Quasi Contract)


C. Duress (Dealings)
Violence or threat of violence. Agreements that arise from duress are not enforceable.

§ 175. When Duress By Threat Makes A Contract Voidable
(1) If a party's manifestation of assent is induced by an improper threat by the other party that leaves the victim no
reasonable alternative, the contract is voidable by the victim.
(2) If a party's manifestation of assent is induced by one who is not a party to the transaction, the contract is voidable
by the victim unless the other party to the transaction in good faith and without reason to know of the duress either
gives value or relies materially on the transaction.

§ 176. When A Threat Is Improper
(1) A threat is improper if
          (a) what is threatened is a crime or a tort, or the threat itself would be a crime or a tort if it resulted in
          obtaining property,
          (b) what is threatened is a criminal prosecution,
          (c) what is threatened is the use of civil process and the threat is made in bad faith, or
          (d) the threat is a breach of the duty of good faith and fair dealing under a contract with the recipient.
(2) A threat is improper if the resulting exchange is not on fair terms, and
          (a) the threatened act would harm the recipient and would not significantly benefit the party making the
          threat,



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         (b) the effectiveness of the threat in inducing the manifestation of assent is significantly increased by prior
         unfair dealing by the party making the threat, or
         (c) what is threatened is otherwise a use of power for illegitimate ends.


i. Economic Duress
When a party takes advantage of economic circumstances to get the other party to enter the agreement.

Austin Instrument v. Loral Corp. (Navy)
Loral was awarded large K by Navy and subcontracted with Austin to provide certain parts. After delivery began (but
had not completed), Loral won a second K. Austin then demanded a higher price for the remaining delivery and for a
second contract for new Loral K. Loral looked for other options but no one could deliver on time so Loral consented
to price increases. After final delivery under 2d contract, Loral sought recovery of the price increases.
Holding: Austin subjected Loral to economic duress because Loral had no choice other than risking entire reputation.
Contractor’s relationship with the govt. was significant because a failure to deliver carried penalties of liquidated
damages. Withholding by subcontractor would make delivery impossible. Plus, relationship with government was
essential for the business and default would jeopardize future Ks. These conditions were not self-imposed; contractor
was in an emergency situation.

Standard Box (Box monopoly)
Pay us more for these boxes or we will not sell them to you. Not duress even though a threat by a sole supplier. Box
was only company available so it charged market price, even though it was high.


Refusal to deal not always duress.
Threats when no monopoly exists is not duress, it’s the market. Wrongful monopoly--monopoly through misconduct.
Natural monopolists: by nature of service provided (trollies, natural gas, electricity). Courts will scrutinize and
regulate such companies to set a fair price.
New monopolist (new product): sole supplier owing to fortuity (hard work, chance, advanced thinking). High prices
encourage new entries into the industry, thus refusal to deal is not duress.


ii. Two Requirements
a. Improper threat, and
b. Victim of improper threat must have no reasonable alternative.

Austin v. Loral

Port Caledonia & The Anna (Duress)
Tug demands £1000 to tow Caledonia away from danger. This is a threat made by someone who has gained a
position of exclusive availability by fortuity but is not a natural, new, or wrongful monopoly. Physical safety of the crew
was at risk.
Holding: For the Anna, Unfairness of an offered price + state approaching panic/incapacity. Improper threat: admiralty
law requires rescue, and the threat left the captain no reasonable alternative.



D. Undue Influence (Dealings)
§ 177. When Undue Influence Makes A Contract Voidable
(1) Undue influence is 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 that person will not act in a
manner inconsistent with his welfare.
(2) If a party's manifestation of assent is induced by undue influence by the other party, the contract is voidable by the
victim.




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(3) If a party's manifestation of assent is induced by one who is not a party to the transaction, the contract is voidable
by the victim unless the other party to the transaction in good faith and without reason to know of the undue influence
either gives value or relies materially on the transaction.

i. Unfair persuasion

ii. Domination
Arising out of a confidential/trust relationship. Reasonable alternatives may exist without disqualifying domination
claim.

Methodist Mission Home v. B.
Capacity of plaintiff to make a reasoned decision reduced by pressure from defendant. “Campaign” to convince
mother to give up child immediately after birth. Mother was in a state of overcome will. Dominance over mother who
was visibly hysterical (lack of capacity is by common law not to be held to their bargain). Methodist mission in not a
neutral party, they have a fiduciary duty to mother. Mother was in a state of INCAPACITY. She was hysterical.
Consent in such a state may not be enforceable. additionally, Home had lots of influence, which is ok, but they
improperly exercised that influence.

a. Domination vs. Duress
Discuss both in cases where there is a strong person vs. a weak/vulnerable person. Tend towards economic duress
for business relations, undue influence for individuals.



E. Misrepresentation (no bad intent nec.) (Dealings)
No requirement that misrepresentation be intentional, fraudulent or negligent. The key is whether misrepresentation
is material.
Ex. Seller tells Buyer that house has no termites. It does but seller does not know. Misrepresentation lets buyer off
the hook.

§ 161. When Non-Disclosure Is Equivalent To An Assertion
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 only:
         (a) 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.
         (b) where he knows that disclosure of the fact would correct a mistake of the other party as to a basic
         assumption on which that party is making the contract 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.
         (c) 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, evidencing or embodying an agreement in whole or in part.
         (d) where the other person is entitled to know the fact because of a relation of trust and confidence between
         them.

§ 162. When A Misrepresentation Is Fraudulent Or Material
(1) A misrepresentation is fraudulent if the maker intends his assertion to induce a party to manifest his assent and
the maker
         (a) knows or believes that the assertion is not in accord with the facts, or
         (b) does not have the confidence that he states or implies in the truth of the assertion, or
         (c) knows that he does not have the basis that he states or implies for the assertion.
(2) A misrepresentation is material if it would be likely to induce a reasonable person to manifest his assent, or if the
maker knows that it would be likely to induce the recipient to do so.

§ 168. Reliance On Assertions Of Opinion
(1) An assertion is one of opinion if it expresses only a belief, without certainty, as to the existence of a fact or
expresses only a judgment as to quality, value, authenticity, or similar matters.
(2) If it is reasonable to do so, the recipient of an assertion of a person's opinion as to facts not disclosed and not
otherwise known to the recipient may properly interpret it as an assertion
             (a) that the facts known to that person are not incompatible with his opinion, or



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         (b) that he knows facts sufficient to justify him in forming it.

§ 169. When Reliance On An Assertion Of Opinion Is Not Justified
To the extent that an assertion is one of opinion only, the recipient is not justified in relying on it unless the recipient
         (a) stands in such a relation of trust and confidence to the person whose opinion is asserted that the
         recipient is reasonable in relying on it, or
         (b) reasonably believes that, as compared with himself, the person whose opinion is asserted has special
         skill, judgment or objectivity with respect to the subject matter, or
         (c) is for some other special reason particularly susceptible to a misrepresentation of the type involved.

§ 173. When Abuse Of A Fiduciary Relation Makes A Contract Voidable
If a fiduciary makes a contract with his beneficiary relating to matters within the scope of the fiduciary relation, the
contract is voidable by the beneficiary, unless
           (a) it is on fair terms, and
           (b) all parties beneficially interested manifest assent with full understanding of their legal rights and of all
           relevant facts that the fiduciary knows or should know.


Vokes v. Arthur Murray Dance Studio (Dance) §161, 169
Dancing School tells an old woman she is a great dance to induce her to buy an absurd amount of lessons. At issue
was whether the instructor engaged in mere puffing (inaccurate but vague praise).
Holding: This was a relationship of trust and confidence. Duty to speak when doing so would correct a mistake of the
other party as to a basic assumption on which that part is making the contract. Duty to speak when the other person
is entitled to know the fact because of a relationship of trust and confidence between the parties.Laidlaw v. Organ
173, 161

F. Non-Disclosure (Dealings)
A party withholds information. Not that there was misrepresentation but that the information was withheld. There is a
duty to disclose.

Laidlaw v. Organ (War of 1812) §161
Before news of its end broke (but plaintiff knew), defendant asked plaintiff if there was any news of the lifting of a
blockade that had depressed price of tobacco. Plaintiff said nothing.
Holding: By asking, defendant created a duty to disclose in plaintiff who could have spoken and prevented mistake by
defendant.

Hill v. Jones (Termites) §160
Hill bought a house that turned out to be infested with termites. He sues for misrepresentation and wins. Disclosure
problem: Hill asked about a ripple in the floor and the Jones’ didn’t say anything. A plant was placed over some of the
damage. MAYBE concealment, though facts are murky.
Holding: For plaintiff since Jones knew about the termites and Hill did not. The fact was material.

Stambovsky v. Ackley (Haunted)
Haunted House.

G. Good Faith (Dealings)
i. Four Situations
a. Prevention, hindrance, failure to cooperate
b. Exercise of Discretion granted by contract

Dalton v. ETS (SATs)
∆ would not release π’s SAT scores. Trial and Appellate courts found breach of good faith by ETS and ordered
specific performance of releasing scores. Supreme court found the same but ordered good faith performance of the
stated procedures, not release. ∆ took SAT twice and his scores went up. Review by ETS found different handwriting



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and evidence that someone else had taken the later test, so it cancelled the scores. K stipulated that suspicious
scores could be cancelled but that takers had options. π submitted more information corroborating that he was the
test taker and explaining his score increase. ETS confirmed its analysis and continued its cancellation. π challenged
in court, which found that ETS failed to act in good faith in determining the legitimacy of the score, thereby breaching
K. Court based its decision on ETS’s decision to disregard evidence that π was at the test that day as irrelevant to
the handwriting issue. The K clearly put burden on π to overcome ETS skepticism and required no external
investigation by ETS.
Holding: However, allowing the submission of relevant information came with a good faith duty (implied) to consider
that information. The letter to π about cancellation stated that the suspicion was that someone else had completed
the test, thus to ignore evidence that π was in the room was wrong. Plus, ETS manual for investigations included
consideration of information just like π had provided. This implied promise was strongly implied by outside evidence
(letter). It is common sense that ETS meant that it would consider the relevant submitted evidence FAIRLY even
though it didn’t say fairly.
Note: Specific performance is affirmed, but limited to the K provisions, not release of scores.

c. Contract modifications
d. Termination of contracts for reasons other than breach

Market Street Associates (JC Penney)
K involves (JC Penney) selling property to π (GE Trust) and then GE leasing it back to JCP. Furthermore, JC
Penney may request that π pay for improvements of more than $250K and that such negotiations will be in good
faith. If negotiations fail, JC Penney may buy back property at cost + 6%/year (this could enable JC Penney to buy
back property for less than market rate). JC Penney assigned lease to ∆, which then wanted to build a store on the lot
for a drug store. Wanting to obtain a mortgage, ∆ tried to buy back the property from Trust (π) and was given a high
price of $3M. ∆ returned with a $2M improvement plan and was told π was only interested in making loans of $7M or
less. ∆ then sent a lulling letter. ∆ then sought to exercise the lease buy back option at $1M, which is less than
market price. At trial, Trust won summary judgment b/c the judge felt that since ∆ had not mentioned the lease
clause in its letters that it prevented negotiations on all the conditions, and violated good faith because it appeared
that ∆ just wanted to buy the property for cheap on the assumption that Trust didn’t know about the clause.
Holding: This could be a breach of good faith. Not silence/non-disclosure because it was merely omitted information.
Posner says good faith takes a stab at the terms that parties would have agreed on had they foreseen problem. This
is constructive intent. Posner suggests that doing detriment to your contracting party with no benefit to yourself
(gratuitous harm) it is a violation of good faith.




H. Mistake (Belief)
§ 154. When A Party Bears The Risk Of A Mistake
A party bears the risk of a mistake when
       (a) the risk is allocated to him by agreement of the parties, or
       (b) he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to
       which the mistake relates but treats his limited knowledge as sufficient, or
       (c) the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.


i. Mistake vs. Misrepresentation
Misrepresentation involves a party telling something to the other party. Mistake involves a person who had a
mistaken idea about the facts on his or her own.

ii. Unilateral Mistake
Rarely grounds for holding unenforceable. One party is mistaken.

§ 153. When Mistake Of One Party Makes A Contract Voidable
Where a mistake of one party at the time a contract was made as to a basic assumption on which he made the
contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable
by him if he does not bear the risk of the mistake under the rule stated in § 154, and




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       (a) the effect of the mistake is such that enforcement of the contract would be unconscionable, or
       (b) the other party had reason to know of the mistake or his fault caused the mistake.


Boise Jr. College District v. Mattefs Construction (Contractor oops) (153)
Construction company forgot to include the price of glass in its bid. When plaintiff took that bid the construction
company deferred and plaintiff was forced to go to the next highest bidder, incurring some cost doing so. Under the
bid contract, defendant had agreed to pay difference.
Holding: Defendant’s mistake was material. Court has sympathy for the speed at which these bids have to be put
together and the likelihood of mistakes. AND the other party won’t really be hurt so much because it can just go to
the next highest bidder and loses only a slight benefit of a good bargain.

 Konic International v. Spokane Computer Services
One party said fifty six twenty meaning 5620, the other thought$56.20.


iii. Mutual Mistake
Both parties are mistaken (have a belief not in accord with the facts) about the same fundamental, material, mutual
understanding central to the agreement.

§ 152. When Mistake Of Both Parties Makes A Contract Voidable
(1) Where a mistake of both parties at the time a contract was made as to a basic assumption on which the contract
was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely
affected party unless he bears the risk of the mistake under the rule stated in § 154.
(2) In determining whether the mistake has a material effect on the agreed exchange of performances, account is
taken of any relief by way of reformation, restitution, or otherwise.


Beachcomber Coins v. Boskett (Coins) 154
π bought a counterfeit dime from ∆. π claims mutual mistake of fact as to the genuineness of the coin as Denver-
minted. Trial court found that π assumed the risk of counterfeiting according to custom of coin dealers that buyer
investigates. π examined the coin personally and bought it. Immediately afterwards, π received an offer for the coin
conditional on its authenticity, which was found to be lacking. π sued ∆. Classic case of mutual mistake in which
rescission is allowed when both parties rely on a basic fact, are both mistaken about it, and enforcing the contract
would be more onerous on one party than had the fact been as the parties believed it to be. Negligence by one party
to know a fact of which both parties are mistaken does not preclude rescission. Rescission will be allowed unless
status quo ante cannot be restored.
Holding: Where parties on entering into a transaction that affects their contractual relations are both under a mistake
regarding a fact assumed by them as the basis on which they entered into the transaction, it is voidable by either
party if enforcement of it would be materially more onerous to him than it would have been had the fact been as the
parties believed it to be.
Note: What about assumption of risk since coin dealing is inherently laced with doubt? Both parties were certain of
the coin’s authenticity. Custom was not set so as to require official results, and in fact included a “return privilege.”

Sherwood v. Walker (Cow Case) §154
π and ∆ agreed to clear and written terms for π to purchase a specific cow, thought by both to be barren, from ∆.
When π went to take possession, ∆’s agent refused delivery. It had been discovered that cow was not barren and
was with calf and therefore worth considerably more (~$900) than the price to π ($80).
Holding: If the mistake is only a difference of some quality or accident, even though the mistake may have been the
actuating motive to the purchaser or seller, the contract is binding. Parties would not have made this deal had cow
not been considered barren. This mistake is more than a mere quality of the cow; a barren cow is substantially
different from a breeding one. The mistake is over the very nature of the thing that was being sold. Held for seller.

Lenawee County (Mutual Mistake) (§154)
Shortly after closing of land deal buyers’ new land is condemned for defective sewage. Buyers want to void the
transaction for non-disclosure and misrepresentation, but no one knew about septic problem nor was the problem
caused by any party. The past owner had installed a septic tank without a permit.




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Holding: There was a mutual material mistake and burden must be placed on one of two innocent parties. Here, the
as is clause in the contract of sale takes precedence over the mutual mistake and buyers bear burden.

a. The key is finding whether mistake was MATERIAL.

1. Mistakes as to fair market value are not material.

iv. Scrivener’s Error

I. Ambiguity
§201. Whose Meaning Prevails
(1) Where the parties have attached the same meaning to a promise or agreement or a term thereof, it is interpreted
in accordance with that meaning.
(2) Where the parties have attached different meanings to a promise or agreement or a term thereof, it is interpreted
in accordance with the meaning attached by one of them if at the time the agreement was made
         (a) that party did not know of any different meaning attached by the other, and the other knew the meaning
         attached by the first party; or
         (b) that party had no reason to know of any different meaning attached by the other, and the other had
         reason to know the meaning attached by the first party.
(3) Except as stated in this Section, neither party is bound by the meaning attached by the other, even though the
result may be a failure of mutual assent.

§202. Rules In Aid of Interpretation
(1) Words and other conduct are interpreted in the light of all the circumstances, and if the principal purpose of the
parties is ascertainable it is given great weight.
(2) A writing is interpreted as a whole, and all writings that are part of the same transaction are interpreted together.
(3) Unless a different intention is manifested,
          (a) where language has a generally prevailing meaning, it is interpreted in accordance with that meaning;
          (b) technical terms and words of art are given their technical meaning when used in a transaction within their
          technical field.
(4) Where an agreement involves repeated occasions for performance by either party with knowledge of the nature of
the performance and opportunity for objection to it by the other, any course of performance accepted or acquiesced in
without objection is given great weight in the interpretation of the agreement.
(5) Wherever reasonable, 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, course of dealing, or usage of trade.

i. Elements
a. Two or more reasonable meanings
b. Each party must have a different meaning in mind, and
c. Neither party knows or has reason to know that the other has attached a different meaning.
Ex. UK/USA transaction in gallons.
Ex. Buying signed prints. Does that mean physically signed or signature in block?
d. Courts rarely find ambiguity is reason not to enforce.

Raffles v. Wickelshouse (Peerless)
Plaintiff agreed to sell cotton at a certain price to defendant, and to deliver it. Defendant refused to accept delivery or
to pay for goods. The agreement was for cotton delivered on a ship called Peerless that arrived in October. Plaintiff
was not ready at that point and instead tried to fulfill order from another ship named Peerless which arrived in
December. The agreement included “to arrive ex Peerless.”
Holding: Defendant wins. Though there was no specific Peerless described in the agreement, once there was
ambiguity arising from the presence of multiple ships of that name it was open to the parties to claim which one they
meant.

1. Usually one party’s meaning is more reasonable.

Frigaliment Importing Co. v. BNS Int’l Sales Corp (Mistake) §201


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The issue is, what is chicken?" Court held that π had not met burden to prove that the contract used chicken in the
Narrow sense. The contract is plainly and unambiguously about “chicken” at certain weights and prices. However,
“chicken” is ambiguous. That the smaller sized chickens HAD to be young because only young chickens come that
way cannot imply necessarily that the heavier birds were to be young, too. π says that it used the English word
“chicken” even though the dealings were in German because π thought it meant Young, whereas German word
meant both broilers (young) and fryers (old). Since ∆ spoke German, it should have realized this, says π. This is not
sustained by evidence. The seller had an objective, although broad, understanding of chicken. The buyer failed to
prove that the seller knew or should have known that buyer wanted broilers only.
Holding: Since chicken is ambiguous, seller’s understanding was reasonable and buyer’s was not.
Note: This is not in violation of parol evidence because it is not allowing the court to enforce outside agreements but
in fact letting court enforce or not enforce contract at hand. The actual words or terms have to be unclear in light of
the transaction at hand. The court here looks in the dictionary: chicken CAN mean just younger birds.
Note: Distinguish from Peerless. There, neither party’s reliance was more reasonable than the other. Here, the seller
reasonably relied on the contract based on broad definition of chicken. Where there is an ambiguity in a term, court
must look to see which understanding is more reasonable. Thus, this is an interpretation case not a simple unilateral
mistake case.

J. Illegality
If contract violates any law, it is unenforceable.

K. Public Policy
Most frequently covenants not to compete, but also maternal surrogacy agreements, etc. Balance freedom of
contract with other social goods, such as making a living or restraining trade.

i. Elements
a. Reasonable interest to protect
b. Geographic terms are reasonable
c. Time limits are reasonable

L. Unconscionability
If it shocks the conscience, it is unconscionable.

i. Measured at creation
If a contract becomes unconscionable over time, it will still be enforced.

a. Unconscionable Bargaining Power

Hennigsen v. Bloomfield (Wife, not purchaser)
π, wife of purchaser, allowed to recover even without privity, against manufacturer and dealer. Court also invalidated
warranty that limited protection to only the purchaser and to the replacement of defective parts. Not invalidating the
warranty limit would have run contrary to public good.
Holding: Disclaimer of obligations and liability by car manufacturer to only replacing parts is held unconscionable.
Bargaining power: all car companies had this limitation in their contracts. This collusion makes it impossible to buy a
car, which people need, without such an agreement. Here, the warranty takes much and gives little. Modern economy
has brought the standard contract, imposed on buyers by strong bargaining power of enterprises. This resembles a
meting out of law, not meeting of the minds.

 Caspi v. Microsoft (Forum Selection Clause)
Forum selection clause in Microsoft online agreement is disputed as unconscionable.
Holding: Acceptance of online agreement to Sign Up or even Sell includes a number of collateral terms.


b. Unconscionable Procedure

Williams v. Walker-Thomas Furniture (Keep buying, never pay off)



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There are “Jones v. Star Credit” issues here: purchaser is very poor and uneducated. After the first purchase, were to
be prorated on all purchases then outstanding. You can’t pay off one item until all the items are paid off. PLUS she
didn’t understand the term and the court finds this lack of understanding to be reasonable. Important, too, that seller
knew that the buyer did not understand.
Holding: Terms are unreasonably more favorable to one party. Merely signing the K that has obscure provisions does
not necessarily manifest consent to all its terms
“important terms hidden in a maze of fine print and minimized by deceptive sales practices.” ARCHITECTURE of
the AGREEMENT PROBLEMS + MISREPRESENTATION-LITE

ii. Blue pencil available
Courts may use discretion to either strike entire contract or fix it.

Jones v. Star Credit Corp. (Fridge)
Sale price + financing of refrigerator sold to plaintiff was drastically above market price.
Holding: if contract is unconscionable at the time of its making it will not be enforced. Though market price was $300,
the plaintiffs had already paid $600 on their promised $1000+. The court ruled that the contract be reformed and
amended by changing the payments called for therein to equal the amount of payment actually paid by the plaintiffs.
We are not totally out from under Thomas v. Thomas fairness requirement. The judge here cited a gross inequality in
bargaining power.
         Disparity as to price
         Disparity as to power
         Disparity as to information --> seller took knowing advantage of plaintiff.
Not necessarily an overt lie, but knowing misrepresentation or failure to disclose.


Weaver v. American Oil

III. Statute of Frauds?
Most contracts do not have to be evidenced by a writing. If contract does not fall within legislatively defined SoF
category, then don’t worry about it. If it falls within category, then see if a writing exists or if the agreement is covered
by an exception.




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i. Article 2: $500 or more sale of goods

ii. Transfer of real property with duration over 1 year
a. lease for 1 year does not qualify (1 year < over 1 year)

iii. Service contract over 1 year to complete.

iv. Tricks
a. Anytime a fixed period over 1 year, SoF applies.
b. A lifetime K is never within SoF b/c parties could die tomorrow.
c. If possible to do in < 1 year, no SoF
         1. Oral contract to build power plant does not fall under SoF because theoretically it could be built
         in < 1 year.
d. Courts are hostile to SoF.

e. Given a date, X/X/XX, of K and date of performance, Y/Y/YY. If it is more than 1 year
away, SoF.

v. Under SoF
a. Prenups
b. Guarantee to pay debt of another
c. Promise by estate rep. to pay debts of estate from her own pocket.

vi. Writing must be:
a. Signed by defendant

b. Contain all material terms
1. “I accept your offer” in writing does not satisfy.
2. Article 2: writing only needs to have quantity.

vi. Exceptions
a. Real Property Part Performance
If there is a RE transfer for more than 1 year and there is part performance, no writing is nec.
1. Buyer has made part or whole payment.
2. Buyer is in possession.
3. Buyer has made permanent improvements.

b. Real Goods Part Performance
Applies to goods already acquired or already paid for. Very little chance of fraud if buyer has already accepted the
goods or already paid for them.
Ex. Bonds orally agrees to buy 50 bats at $100 each (within Art. 2 SoF). If none are delivered, Bonds is out of luck. If
20 are delivered or 20 have already been paid for, the seller cannot raise SoF with regard to those bats.

c. Service Contracts (Part Performance never enough)
The only exception is full performance.
Ex. Sesame Street orally agreed to hire Big Bird for 3 years but fires after 6 months. Big Bird out of luck. But BB can
recover under Quasi-K for 6 months reasonable value.



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Xerox 103-15


IV. What are the terms of the agreement?
i. Parol Evidence Rule
Based on sensible notion that a written version of a deal is more reliable than anything that came before it. PER
gives greater weight to a later written version of a deal than it does anything that came before.

§ 209. Integrated Agreements
(1) An integrated agreement is a writing or writings constituting a final expression of one or more terms of an
agreement.
(2) Whether there is an integrated agreement is to be determined by the court as a question preliminary to
determination of a question of interpretation or to application of the parol evidence rule.
(3) Where the parties reduce an agreement to a writing which in view of its completeness and specificity reasonably
appears to be a complete agreement, it is taken to be an integrated agreement unless it is established by other
evidence that the writing did not constitute a final expression.

§ 210. Completely And Partially Integrated Agreements
(1) A completely integrated agreement is an integrated agreement adopted by the parties as a complete and
exclusive statement of the terms of the agreement.
(2) A partially integrated agreement is an integrated agreement other than a completely integrated agreement.
(3) Whether an agreement is completely or partially integrated is to be determined by the court as a question
preliminary to determination of a question of interpretation or to application of the parol evidence rule.

§ 213. Effect Of Integrated Agreement On Prior Agreements (Parol Evidence Rule)
(1) A binding integrated agreement discharges prior agreements to the extent that it is inconsistent with them.
(2) A binding completely integrated agreement discharges prior agreements to the extent that they are within its
scope.
(3) An integrated agreement that is not binding or that is voidable and avoided does not discharge a prior agreement.
But an integrated agreement, even though not binding, may be effective to render inoperative a term which would
have been part of the agreement if it had not been integrated.


a. 3 Step Framework

1. Integrated Agreement?
√ Integrated means final. The court must conclude that the written agreement was meant to be final.
√ If there is a written agreement, PER may apply
√ PE is a written or oral statement made by a party before integrated agreement.
 Court will not even look at PE that is inconsistent with integrated agreement.
 If completely integrated, no PE to add or contradict, period.
PE will not be admitted to contradict later integrated writing. Presume reliability of later instrument.

Mitchill v. Lath (Icehouse)
Buyer is signs a contract to buy a property in from seller. Orally before the contract is signed, she buyer said that an
icehouse owned by the sellers on an adjacent property not owned by the sellers was objectionable. They seller
agrees to remove the icehouse. The written contract does not include a term to remove the icehouse. Buyer wants
to force seller to remove the house because the written contract was consideration for that agreement.
Holding: The court says that it will look only at the written agreement if it is complete. The icehouse deal was of the
type that would ordinarily be included in the written document. It wasn’t, so it’s unenforceable.
NOTE: outside written agreements that fail parol evidence conditions are also preempted by an integrated contract.




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2. Is agreement completely or partially integrated?
√ Court looks at written agreement to see if it is completely integrated. If not everything is in instrument, or three are
terms that might still need to be agreed to then Partial Integration.
 PE is admissible to add or supplement a partial integration, but not to contradict.

Masterson v. Sine (Keep land in family) §214
Grantor (Matersons) conveyed land to Grantee (Sines) and reserved option to buy back. Husband of Grantor went
bankrupt and his wife moved to enforce the option, however Grantees said intent of contract was to keep the land in
the family, thus it should not go to bankruptcy trustee. Upon trying to enforce that option, extrinsic evidence was
admitted to define terms of price and depreciation value. Grantors are claimed to have held out a limit to the
assignability of their repurchase option to only members of the family. This is extrinsic evidence offered by the
defendant, but denied admission by trial court.
Holding: For Sines, grantee; The option in the deed was too ambiguous: price, terms, and assignability were
ambiguous or not stated -- K is silent on them. This undermines the character of the deed as a preempting
agreement. The court is willing to look outside the 4 corners to see if it should be considered integrated.
Note: Parol evidence rule does not exclude interpretive material. A court will go beyond 4 corners when necessary to
to interpret K (such as filling in ambiguous term like price). Parol evidence rule is used primarily to exclude outside
promises. See §214. Doesn’t exclude EVIDENCE, just other agreements.


3. Exception to PER?
 PE always admissible to explain ambiguity.

Frigalement Chicken

 PE always admissible to establish a defense to enforceability of an agreement.

b. PER vs. SoF
Both are designed to prevent fraud. SoF designed to prevent claiming a contract when there was none. PER
designed to prevent admission of past statements. SoF questions almost always involve oral agreement (is it
enforceable in absence of writing?). PER has to involve a writing (past terms as evidence?). PER is terms of
contract, SoF is whether contract exists.

c. Hierarchy of Interpretation Rules
1) The express wording of the oral or written agreement. If plain and unambiguous STOP. If not...
2) Look to circumstances and evidence.
Course of performance, which overrides
Inconsistent course of dealing, which overrides,
Inconsistent usage of trade.
3) If (2) does not answer a question, use legal supplementary rules (statutory or judge-made) to fill gap.
Specific rules (rules respecting commercial sales, eg) take priority over
General rules (applicable to any contract).
4) If 1-3 fail, general reasonableness and good faith will be used to fill gaps. Extreme.
THIS IS A PROGRESSION TOWARDS GENERALITY, AWAY FROM PARTIES’ INDIVIDUAL WILL TOWARDS
SOCIAL VALUES.
-Ambiguity will be held in favor of the party not drafting the language, especially in Adhesion Contracts.
-Insurance contracts, which tend to be adhesion contracts, that have ambiguous terms will be interpreted in light of
the reasonable expectations of the individual who signed the policy.



ii. UCC Warranty of Liability of the Seller, Puffing.
a. Express vs. Puffing
Any description of the goods or any statement of fact made by the seller about the goods. “This podium is 100%
mahogany.” Distinguish from “puffing” which is not actionable.




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b. Implied by law
Implied warranty of merchantability: fit for ordinary use. Only read in if seller is in the business of selling that
particular type of good out of regular inventory. Implied warranty of fitness: An assurance that the good is fit for the
purpose that the buyer has in mind. The key is not who seller is but what the seller knows.




V. Did Parties Perform?
Probably not.


VI. Excuses for failure to perform
Excuses for failure to perform indicate that an agreement has already been created.

A. The other party breached first
“I don’t have to because she didn’t.”

i. Standard of measuring performance
a. Must be material breach; perfection not req’d.
Under common law.
Ex. I hire a painter to paint my house, he only paints one side. I don’t have to pay. He fails to paint the door, I have
to pay him.
b. Consequences of material breach
    1. Excuse for non-performance
    2. Cause for damages
c. Consequences for partial/immaterial breach
    1. Every breach gives cause for damages of breach.
    2. Not an excuse for non-performance.
    3. Article 2 the standard is Perfect Tender Rule.


 Hochster v. De La Tour

B. The other party’s statement created anticipatory repudiation.
I don’t have to do what I agreed to do because she said she wasn’t going to perform her end of the bargain.

i. Unequivocal advance statement showing intent to breach.
Ex. I tell you I will pay you to paint my house. While you paint, I tell you I have decided not to pay. You don’t have to
continue.
Ex. I offer to pay you to paint my house. You start and I say the market has me worried I might not be able to pay at
the end. No excuse.

C. Unforeseen Events
Something unexpected happens after formation that makes performance impossible or substantially frustrates the
purpose of contract. Failure to perform is exuses.

i. Impossibility

§ 261. Discharge By Supervening Impracticability
Where, after a contract is made, 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 contract was made, his duty to render that
performance is discharged, unless the language or the circumstances indicate the contrary.




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a. Not more expensive; impossible, impracticable, commercially infeasible.
b. Tends to be a Seller’s Excuse.

Taylor v. Cauldwell (Music Hall)
Music hall case. Music hall burns down.
Holding: Classic common law understanding of impracticability was narrow: Where the parties must have known that
the contract could not be performed without the existence of the subject of the contract, they must have contemplated
the continuing existence of of the thing as the foundation of what was to be done. If, through no fault of either party,
the thing perishes, parties are excuses.

Mineral Park Land v. Howard (Gravel)
The thing in this case (gravel) was still in existence but it was under water, which was not anticipated, and was
prohibitively expensive to remove, thus performace became impracticable. This presents a problem, though, for the
existence of the thing doctrine. How is it overcome by court?
Holding: The court says that though more than anticipated costs to defendant are not grounds for excusing
defendant, prohibitive costs of a high degree may be. Fitz hates this. Too wide a door and does not hold parties to
contracts of their making.

US v. Wegematic (Computer)
Wegematic outbids other companies to build a computer. It then is forced to ask for a number of delays and finally
asks to be released from contract because it couldn’t figure out the technology to build its computer. Govt. has to hire
IBM and spend a good deal more and sues for difference.
Holding: The problem here may not have been Weg’s fault or negligence, but it was its project whose impossibility
that is at issue here. Weg was the best chooser, best cost avoider.


 Alcoa v. Essex Group, Inc.


ii. Frustration of Purpose
Still possible to perform despite later unforeseen event, but where mutually understood purpose of the K has been
frustrated.
a. Tends to be Buyer’s Excuse.
The buyer doesn’t want the goods/services anymore due to events.

Krell v. Henry (Coronation)
Defendant agreed to pay 75 to use plaintiff’s flat to watch a coronation parade. Defendant paid 25 deposit but the
parade did not happen on the expected day (which defendant had rented for). Plaintiff sued for remaining 50,
defendant counterclaimed for deposit of 25. Plaintiff advertised rental of window for viewing coronation, but contract
did not mention coronation, just dates.
Holding: The use of the rooms was let for the purpose of seeing the procession. Lease for a particular purpose and
no other. That purpose was frustrated. The object of the contract was frustrated, based on parole evidence that the
subject of the contract was rooms to view the coronation and not just rooms for general use. The non-happening of
the coronation frustrated the purpose.
Quote: I think that you first have to ascertain, not necessarily from the terms of the contract, but, if required, from
necessary inferences, drawn from surrounding circumstances recognised by both contracting parties, what is the
substance of the contract, and then to ask the question whether that substantial contract needs for its foundation the
assumption of the existence of a particular state of things. If it does, this will limit the operation of the general words,
and in such case, if the contract becomes impossible of performance by reason of the non-existence of the state of
things assumed by both contracting parties as the foundation of the contract, there will be no breach of the contract
thus limited.”
Krell had no excuse on impossibility; he could still pay, he could still go to apartment on that day. He wanted excuse
because his purpose had been frustrated and Henry knew it.

Paradine v. Jane (844) (Frustration of Purpose)
Defendant missed a payment of rent because England was invaded and defendant dispossessed and thus unable to
take profits. Nevertheless, defendant should have paid the rent.




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Washington Hop Producers (Frustration of Purpose)
Hop base: allotment to sell hops in US. Excess allotments could be transferred to other growers. Secondary market
for hop base grew, plaintiff was organized to acquire, lease and sell federal hop base. Plaintiff put out invitations to
bid on 2 pools of hop base. Bids came in and were accepted. However, then the government changed the system
effective before one of the pools would be effective and bbuyers refused to pay. Plaintiff sought to enforce the
contract but trial and appeals courts found a SUPERVENING FRUSTRATION and excused defendants.
Holding: One of the few US cases that does allow frustration of purpose excuse.



D. Condition Failed
There was a condition and that condition was not fulfilled.
Ex. Buyer agrees in writing to buy seller’s house for $200K on condition that house is appraised for at least $200K.
They buyer’s duty is not absolute, it depends on something happening first.

Dove v. Rose Acre Farms (Show up)
Dove not show up a minute late for work and then put in a full days work, as a condition for the promise for the bonus.
Dove doesn’t show up and then sues for the bonus. Dove is saying that he was sick, so excused. The contract
explicitly says that being sick is no excuse, though.
Holding: Doctrine of impossibility is not impossibility because Dove brought the action for not receiving a benefit.
Impossibility is an excuse for the conferrer of the benefit in most cases.

 Clark v. West (Condition)

i. Express conditions are risk-shifting provisions. Seller agrees because all buyers
would attach that condition.

ii. Consequences
a. Condition not met, no performance required.
b. A condition creates no new duty, just limits existing duties.
c. Language of condition requires strict compliance.

VII. Remedies
If no excuse, what are the remedies for failure to perform?

A. Specific Performance
This is the exception.

i. Real Estate where seller breaches
Buyer can always get SP because property is Unique. Money is never adequate.

ii. Article 2: SP only avail. if goods are unique.

a. Unique: one of a kind, custom, sentimental value.

b. Scarce goods
Buyer can’t find substitutes elsewhere

c. Requirements Contracts
Buyer agreed to acquire all he needed from seller. It might be hard to get a similar deal from someone else.




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iii. Never service contracts

B. Monetary Damages (norm)
i. Calculation

a. Expectation Interest
Contract damages are designed to protect the party’s expectation interest. Give injured party the benefit of the
bargain had the contract been fully performed.
Ex. I offer painter $500 to paint my house. He never shows. I have to pay another $600. My expectation damages
are $100.

1) Sellers tend to breach in rising markets; buyer’s breach in falling markets.

b. Reliance Interest
Putting injured party in exact position as if K had never been made.
Ex. I hire a painter to paint my house for $500. He goes out and buys $25 brushes, $50 paint. Painter’s reliance
interest is $75.

1) Rarely awarded since usually less than expectation interest.

c. Restitution Interest
Awards injured party the reasonable value of the benefit conferred.

1. Usually the smallest
Ex. Painter goes out to buy brushes. No benefit conferred, so no Restitution Interest.

ii. No Punitive damages

iii. Service Contracts
Never get SP because it smacks of indentured servitude.

a. Damages or Injunction (D can’t work for someone else)

iv. Liquidated Damages
Valid so long as they don’t constitute a penalty. Are damages designed to be a reasonable estimate of what will be
required to compensate injured party?

a. Fixed Sums = Shotgun Clauses
Generally not reasonable. Preferred method is some percentage or flexible damages ($100 per day or delay). In
shotgun cases, plaintiff can recover actual damages, just not shotgun.

iv. Limitations on Damages

a. Only recover what you prove with rble. certainty.
Ex. How much damages can a new business how since it has no track record?

b. Rule of Mitigation
You cannot recover for damages that you could have avoided with reasonable effort.

1. Usually employment arrangement.




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Ex. Professor at NYU is fired. There are other schools nearby where he could teach the same thing at the same
price. He doesn’t have to take the other damages, but his damages are limited. The law will not take a different and
inferior TYPE of available job into account (McDonald’s). Defendant has burden of proof of availability.

v. Consequential Damages
Special Damages that were suffered by this particular plaintiff that would not have been suffered by an ordinary
plaintiff. As a result of the breach, something else happened to the plaintiff that caused loss that most would not have
suffered.

a. Must be foreseeable by other party at time of contract. (P should have told D)



C. Rescission of Agreement
As though parties never signed it.



VIII. UCC vs. Common Law
UCC only covers moveable personal property.
Ex. K for carpet and installation: Are the goods more important than the services. If the goods predominate, apply
Art. 2.




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