Fall Semester Outline
326 office hours T/R 10-12 am 2-4pm
What is a contract?
Is a promise or set of promises for which the law recognizes as some sort of duty. All contracts have a promise by
at least one person. We can have some promises for the breech of which the law does not recognize as carrying
with it a duty to perform. The law chooses to enforce only some of them.
In chapter 1 out first goal are which promises fall within the subset of contacts in the sense of being legally
“Bases for Enforcing Promises”
I. General Definitions
1. Consideration-a promise or performance given in exchange fro the promise of another. It makes an agreement binding
2. Unilateral Contract-a promise given in exchange for an act
3. Bilateral Contract-a promise given in exhange for another promise (majority of cases). Why can a mere promise be
Because people “order their conduct” (make plans exc.) according to the commitments they receive-
called expectations. This is the policy reason for enforcing contracts that are purley executory-where
neither party has done anything yet
4. Quid pro quo-mutual consideration which makes a contract binding. For there to be a valid contract there must be be a
quid pro quo arrived by way of a bargain
5. Gratuitous promsise-there is no consideration given in return therefore can be retracted.
6. Gratuitous Transfer-a gift that has already been given and can’t be taken back
Delivery signifies the promisors genuine intent to perform
The court likes to leave things as they are
7. Restatement 2nd ed §73-past consideration is not a valid for a new contract-there is no exchange (Feinberg v Pfeiffer)
8. Restatent 2nd ed. §74- forbearance to accert a claim which turn out to be invlaid is not consideration unless:
(a) the claim is uncertain
(b) the forbearing party believes the claim is valid (Feige v Bohem)
9. Restatement 2nd ed §79-Adequacy of consideration: Mutuality of Obligation-if the requirement of consideration is met,
there is no additional requirement of:
(a) a gain, advantage, or benefit to the promisor, or a loss, disadvantage, or detriment to the Promisee; or
(b) equivalence of the values exchanged; or
(c) “mutuality of obligation (Hammer v Sidway)
II. Consideration as a Basis for Enforcement
A. Fundamentals of Consideration
a. Consideration can either be a return promise or actual deeds: requirements!
1. There needs to be a detriment to the promissee or benefit to the promisor
2. There must be a bargained for exchange
3. In unilateral contracts the promissee has to induce the detriment (the detriment can’t just occur
anyway without the promise
1. Hamer v. Sidway (uncle/ nephew—giving up any legal right is valid consideration)
2. Fiege v. Boehm (not bringing suit is valid consideration if made in good faith)
Hammer v Sidway
Facts-William Story Sr. promised his nephew William Story 2 nd that if he didn’t drink, use tobacco,
smoke, or gamble until he was 21 then he would pay him 5,000. The nephew did this and when he turned
21 asked for the money. The uncle died before he got the cash. (This is a UNILATERAL CONTRACT)
Legal Issue- Did the uncle receive consideration for his promise? YES
Is William Story Sr. indebted to his nephew by a valid contract on his 21 st b-day for the sum of 5,000? Yes
Rule of Law-if a legal right is wavered at the request of another party then that is sufficient consideration
for a promise, or any damage, suspension or forbearance of a right is sufficient consideration.
Decision or Holding-The nephew won and the uncle owed him 5,000
Reasoning- because the nephew gave up his legal right to do these things then it was sufficient
consideration and therefore a valid contract since there was detriment to the nephew. Consideration doesn’t
have to be an economic value. It can be a peace of mind exc. It constitutes a detriment (suffering a
loss/surrendering a legal right) on the nephew.
b. Rest. 2nd ed 71-The requirement of exchange; types of exchange
1. To constitute consideration, a performance or a return promise must be bargained for .
2. A promise or return promise is bargained for if it is sought by the promisor in exchange for his
promise and is given by the promisse and exchange for that promise
3. The performance can consist of:
a. an act other than that promise
b. a forbearance, or
c. the creation, modification, or destruction of a legal relation
4. Performance or return promise may be given to the promisor or some other person. It may be
given by the promise or some other person
c. Hypothetical pg 32 casebook
Promisor- Hurley, he is making the promise not to compete
Trust- making the payment before the 5 year waiting period incurs the detriment
Since it is Hurley’s promise, is the payment by the trust constitutes consideration. So can payment
by a 3rd party serve as consideration as a bargained for exchange.
The law does not require the consideration for the promise comes directly from the Promisee (sec
4 of rest. 71 on p. 191) the consideration doesn’t directly have to flow b/n the promisor or
Promisee. It can be given to the Promisee by another person. So this is sufficient consideration.
d. Gratuitous Promises- an introduction:
They are not binding!
Fiege v Boehm pg 34
Facts- Plaintiff got pg and defendant thought it was his. Defendant agrees to pay expenses if she didn’t sue
in criminal court for bastardy The quid pro quo=that she wouldn’t institute bastardy claims against him as
long as he made the payments.
She fulfilled her end of the deal and didn’t bring bastardy claims against him until he ceased payments (b/c
he found out it wasn’t his baby)
Issue-Did the contract have sufficient consideration and it was an enforceable contract? YES
Holding-the contract had sufficient consideration
restatment 2nd ed §74- Restatent 2nd ed. Sec 74- forbearance to accert a claim which turn out to
be invlaid is not consideration unless:
(a) the claim is uncertain
(b) the forbearing party believes the claim is valid (Feige v Bohem)
The court held:
(1). SUBJECTIVE Element: Must be bone fide (made in good faith)-
At the time the agreement was made she honestly believed that he was the father of the child-even
though the claim was invalid. The forbearance to acert an invalid claim can still be consideration.
(2.) OBJECTIVE ELEMENT there was a reasonable basis for her claim- aka an outsider would
have believed the baby was his
Significance: What is the broader policy of the decision? *the key point! The law encourages parties to
settle disputes privately instead of though litigation. That may be the read driving force behind the decision.
There is an extremely strong public policy for people to solve disputes privately though contracts-this is
implicit by the recognition of this court that it would undermine what they are trying to do, if they let
people to walk away from a private settlement with no consequence.
e. Hypothetical from class: Feige was driving down the street and Bohem was a pedestrian, he hits her and
she is injured. Feige alleges that she is at fault b/c she didn’t look both ways. She says he was not
exercising reasonable care and driving the speed limit so it was his fault. They enter in agreement that if
she doesn’t sue then he will pay her 5,000. is that okay?
Yes disputes get compromised all the time regardless of the validity of the claim. Each party is
suffering a detriment and surrendering a right ( his money and her day in court).
f. Other Hypothetical examples
1. I will give you my share of Microsoft stock after class. This is gratuitous promise and lacks
2. Suppose I endorse the certificates and then hand it to you and say it’s yours. If I change my mind, do you
have the legal right to get it back? Yes b/c gratuitous gifts are enforceable contracts.
3. we make an agreement that if you give me $10 Monday morning I will sell you my car. Do we have a
contract? Yes, why?
Restatement 2nd ed sec 79-Adequacy of consideration: Mutuality of Obligation-if the requirement of
consideration is met, there is no additional requirement of:
(a) a gain, advantage, or benefit to the promisor, or a loss, disadvantage, or detriment to the
(b) equivalence of the values exchanged; or
(c) “mutuality of obligation” (Hammer v Sidway)
Why do we have this?
(a) undermine contract law -So that we can have stability of transactions and that we recognize the freedom
of contract in our capitalist society. If people could claim that there wasn’t any consideration it would
undermine contract law.
(b) “freedom to contract principal”-the courts try not to interfere in people’s right to contract
4. If it is bargained for , can Peppercorns can be sufficient consideration? Yes
Some students come into school with a notion about written contracts that is inaccurate, the idea that
written vs. oral agreement-that the truth is ordinarily there is nothing magic about the parties agreement in
writing in terms of enforceability…most of the time oral is just as enforceable.
Statute of frauds-all of the 49 states have this, a special statute that says (although most oral are
enforceable) “certain categories” of contracts are only enforceable if they are written. We will
encounter this for the sale of land this is fundamental to be written.
There is nothing magic in terms of enforceability as oral/ written, that doesn’t mean that it’s not
important! There is his desirability, when you represent a contract for the contract to be written b/c
it shows evidence of the terms of the contract and lessens the dispute (swearing matches).
B. The Requirement of Exchange: Action in the Past
Requirments of exchange
1. Feinberg v. Pfeiffer (old lady retired…Past services is not sufficient Consideration) (Note—could recover under
reliance) no bargained for exchange
Feinberg v Pfeifer Co-pg 39.
Facts- The defendant agreed to pay the plaintiff upon her retirement for her many years of service and she
can quite whenever she wants. She quit and received the pension for awhile but then the new president cutt
Procedural Background- Heard in the circuit court of St. Louis which ruled in favor of the plaintiff. The
defendant appealed to the St. Louis Court of Appeals.
Issue- was there any consideration to force the co to make the payment to her? NO!
Reasoning- Past consideration is not binding.
She makes Three different points that the court rejects:
1. Her past service is not consideration- There must be a bargained for exchange. “past
consideration” can’t be consideration in exchange for a present promise
2. Her continuing to work after the promise was made is not consideration .She could have quit
at any time(“doctrine of employment at will”-when an employee is hired for an indefinite
time either party can walk away for any reason) There was no bargain and exchange-critical
3. There must have been a benefit to the promisor
a. Hypothetical in class 43:
Problem-he asks another question. “if you were wanted there be an enforceable
contract what would you change? Add in the draft IF she continues to work for 6
months then she will get 200 for life. Then there would be bargain and an
C. The Requirement of a Bargain
Bargained for Exchange
1. Kirksey v. Kirksey (brother in law’s farm) (no bargained for exchange…but she may have been able to recover under
2. Central Adjustment Bureau v. Ingram (non-compete clause…enforceable if employee works for certain time, look
at what the employers did under the agreement)
Kirskey v Kirskey –pg 50
Facts: The plaintiff was the wife of the defendant’s brother. He wrote her a letter that said “IF you will
come and see me I will let you have a place to raise your family.” She moves and he later kicks her out.
Reasoning-the court said there was no binding contract b/c she gave no consideration. His offer was a
gratuitous promise. The court says here that he wasn’t seeking for her to do that SO there was no bargained
Pg 51 Note 1. Compare Hammer with this case and think of it in terms of conditional gifts. The court here looks
at the frame of mind of the promisor at the time he made the promise. In order for there to be a bargain the
promisor must have a purpose.
Hammer-“If he gave up these rights”-his forbearance was consideration, his uncle was seeking this
Kirsey-“If you come and see me”- He wasn’t seeking for her to do anything-so it’s a gratuitous promise.
In order for there to be a bargain the promisor must have a purpose
1. Employment Agreements
Central Adjustment Bureau v Ingram pg 53
Facts-The defendants (Ingram) signed a covenant not to compete with the Plaintiff (central) after they had begun to
work for the Π. They later quite and violated the covenants
Issue- When the covenant is signed after employment has started….is the covenant not to compete sufficient
*the employee’s implied promise not to exercise his right to fire the ∆’s was in exchange for the ∆’s to
sign the covenant and…
they were allowed to for work for a substantial period of time -that can be consideration-top 58.
“what are we concerned about” dissent= “concerned with the bargaining process itself” or majority= “
they fictionalize a convent based on what happened”
2. employee handbooks
(a)Pg 62-employee handbooks
A very popular method for modification of the agreement is though co. handbooks that set out
certain terms or conditions.
Metille case pg 62 he didn’t follow the policies in the handbook –the handbook was given after
employment so his continuance of employment is consideration-it becomes an unilateral contract b/n
(b)Note #1 pg 62-do all policies in a handbook become a unilateral contract? No you have to separate
aspirational statements(like the guy that the business industry is stable w/ch meant job security) vs.
specific statements (such as disciplinary measures specifically laid out in 1,2,3)
(c) Pg 63 case
The employers decide to establish uniform procedures in a handbook. is enough to make them
enforceable w/out the trad. Theories of offer and acceptance? So long as it gives reasonable
notice for the change.
(a)Rewards are a classic form of unilateral contract
The flip side to kirsey v kirsey “promisor has to seek” so this case is the other side, “in ordering for
there to be a bargain the promise must be “given by the Promisor” you can’t get som. in exchange for a
promise that you don’t know exists.
§ 51 of RS “as long as you learn of the offer before the completion of performance” does motive
matter?-no Rest. §81-the promise itself doesn’t have to be the inducement of the performance-so long
as he did what he was bargained for. Aka the consideration given doesn’t have to be the motive of the
promisor or Promisee.
(b) Pg 66-“the one that didn’t get away”
A guy hears about a fishing contest in the paper and accidentally catches the “tagged fish” He
is entitiled to the prize b/c he knew about the promise-even though he didn’t set out to catch
the fish, we don’t worry about motive, he was aware of the prize so he get’s the cash!
D. Promises as Consideration
Promises as Consideration
1. Strong v. Sheffield (illusory promise…promisor could be bound or not bound at his own whim—contradicts Central
Adjustment bureau—consideration must be at time agreement made. Different from CAB b/c here they say at the
time of promise, not under promise)
2. Mattei v. Hopper (Satisfaction clauses not illusory.)
3. Eastern Air lines v. Gulf Oil (Requirements K. neither indefinite nor lacking mutuality. Industry customs. Good
4. Wood v. Lucy, Lady Duff Gordon (implied term of reasonable efforts as consideration)
(a) Bottom of pg 66-“case about buying a farm”
Lucy strikes a deal to buy Zelmers farm for 50 grand then later they refuses to go though with the deal, she
sues. Supreme court held that since there was a bargained for exhange of promises therefore enforceable.
The court held that the simple fact that they made the promise is all that is necessary.
Why doesn’t the law adopt a policy that there has to be a bargained for exchange plus the person seeking
the promise has a reliance? The simple answer HOW MUCH! RELEIENCE MUST YOU SHOW? there’s
no way to est. a rule for how much reliance is enough to justify the contract.
(b) Rest. §71: “consideration can take the form of a return promise”-relevent portion
(c) RS 75: “a promise for a promise is sufficient consideration to make a contract binding-but only if the
promised performance would be consideration” for example- after signing a contract to sell your
house you decide you don’t want to. Even though no actions were taken yet the promise of the other
party to give you $ is consideration So you are bound to the contract buddy!
(a). what constitutes a promise?
Strong v Sheffield
Facts- ∆’s husband had a previous debt to the Π. ∆ acted as security on the debt and gave the Π a check for the amount
after he promised no to cash the check until he needed it.
Issue-Was the plaintiff’s promise not to cash the check a “real” promise therefore making the contract valid and
enforceable? NO! The promise was illusory.
Reasoning/rule of law
Illusory promise-for a bilateral promise to be valid both promises must be real, not illusory. A real promise
means there must be an obligation, the promising party must give something up and a real promise entails
incurring an obligation.
Test: What did the promising party give up? If the answer is nothing then the promise is illusory
Here the promise is illusory b/c strong didn’t give anything up. He could have needed the money right away
and cashed the check that day. There was no agreement to forbear for a fixed time or for a reasonable time.
(a) Note #B-now guaranteeing the debt of someone else is consideration in itself-due to the law of
(b)Note#1-top of pg 71-he would have been liable b/c she specifically asked him to forbear a right for 2
years and he did, she would have sought him to do something.
(b). contracts for the sale of real-estate
(1) Contracts for the sale of land and goods often have different features
sale of land-they must be in writing in order to be enforceable
sale for the sale of goods-must follow article 2 of the UCC
Mattei v Hopper
Facts-Hopper agreed to sell his land to Mattei (a real-estate developer) under the terms that1. that Π would pay
1,000 now and then the rest after a 120 day period. 2. the Π would obtain leases satisfactory to him. -∆ says
that the contract lacked consideration b/c It was “illusory” and lacked “mutuality” b/c of the satisfaction clause.
(b/c he could just walk away is the leases were not satisfactory)
His exercise of judgment or discursion-in good faith is enough consideration. His obligation to exercise his
judgment in good faith is adequate consideration.
→satisfaction personal to the promisor has to have a subjective standard of good faith.
If the satisfaction clause deals with the commercial quality of goods they will use the “reasonable man
If the satisfaction cause relies on “taste fancy, or personal; judgment” they will judge on a good faith standard
ex. b/c there is no “reasonable shoppers standard”
Btw since the 19th century the courts are more eager to enforce contracts (don’t like to let people get out of
Suppose Hopper was a painter and Mattei was a dad who wanted a pic painted of his kid. They enter into
an agreement that Hopper will paint the pic and M says he will pay if he is satisfied with it.→this is
subjective if it involves “fancy, taste, or jugement”→he may relieve himself of the contract if he does so in
(c). contracts for the sale of goods
Eastern Airlines Inc v Gulf Coast Oil Cooperation
Facts –Eastern had a contract w/ Gulf to buy all the gas they needed: They had a requirements contract- supplier
promises to sell/supply the amount of goods the buyer needs. The price of oil increased now gulf wants the
contract to be invalid b/c they say it lacked mutuality and obligation. (since eastern didn’t have to buy anything
ex. if they went out of business exc.) Court said it was a binding contract and it was not commercially
Reasoning- eastern was acting in good faith,
UCC §2-306(1) says
Requirements and outputs contracts are enforceable as long as :
1. the buyer acted in good faith-the essential test
2. the demands were reasonably proportional-or not “unreasonably disproportionate”
*the court says that neither party had a disadvantage, no one could have predicted the gas price increase.*
the situation was not foreseeable
The remedy they issued eastern- the court required specific performance- gulf must comply with
the terms of the contract
(d) Breech of contract
Wood v Lucy, Lady Duff-Gordon
Facts-D employed the P to help her sell her clothes (she was not to indorse anything w/out his consent-to last
for at least one year) and in return she was to have half of all the sales and revenue’s from any contracts he
might make. Lucy ended up letting others sell under her name do Wood sued. Her defense is that she wants out
of the contract: b/c she alleges it lacked the elements of a contract (lacked mutuality) b/c he didn’t bind himself
Reasoning- The court ruled in favor of Wood (Π) b/c there was an implied promise of his part.-
Lucy’s detriment-she gave up right to have anyone else endorse her product
Woods detriment: he promised to pay ½ of revenues and to make monthly reports-this is seen as a promise
that he will use reasonable efforts to bring profits and revenues into existence.
UCC 2-306 codified this concept-
(1)Hypothetical-say wood failed to try to sell her goods or make endorsements-could she sue him
for damages? Yes
(2) Termination clauses-we talked about this with Mattei v Hopper. Traditional rule s that
if either party (or both) can terminate the contract AT WILL then the contract lacks consideration
and not enforceable. There are many ways to circumvent this rule.
(3)now we pretty much stop talking about consideration per say. Now for the reminder of this
chapter we are talking about alternative basis for relief, when the law requires som. other than
consideration. COVER AND OUTLINE IN THE ORDER WE COVER IT IN CLASS
III. Reliance as a Basis for Enforcement
Reliance as Consideration
1. Ricketts v. Scothorn (grandfather/Granddaughter—relies on promise of $$. Estoppel in pais)
2. Feinburg v. Pfeiffer (relied on retirement…quit a good job. Sufficient to estop employer from paying benefits)
3. Cohen v. Cowles Media (leak to newspaper. Promissory estoppel enforced…promissory estoppel applies only where
it is necessary to prevent an injustice)
4. D&G Stout v. Bacardi (question if like moving expenses or lost wages. Only reliance damages will be granted in a
promissory estoppel case, not expectation.)
(1) In general-these situations, we technically don’t have a contract b/c there is no consideration. This material is
useful in (1) review and think about the material we have covered thus far (2) and why the parties have no
consideration and why in spite the court recognizes that contract as enforceable.
(2). Rickets v Scothorn
Facts- The grandfather John Rickets wrote in the form of a promissory note which promised to pay Katie $2,000 at
6% interest. (suggests so she doesn’t have to work). She quit her job, he died so the executor refused to pay the note.
Π claims that the note induced her to quit her job b/c she planned to rely on that $ as a means of support.
Issue-Was there consideration for the promise-no b/c he wasn’t asking for anything, there was no quid pro quo.
the note did not serve as consideration b/c the plaintiff did not have to give anything up to receive the
money. (she quit her job voluntarily) It was merely a gratuitous promise from her uncle. He was not
seeking anything from her-there was no quid pro quo (bargained for exchange).
However the court ruled in favor of the plaintiff on the basis of “equitable estoppel”-definition-they
use this language-“a right arising out of acts, admissions, or conduct which have induced a change of
position in accordance with the real or apparent intention of the party against whom they are alleged”
1. the promisor had reason to believe she would rely on it
2. she did rely on it
3. payment to her is the only way to avoid gross injustice -The court awarded her the $2000
that she relied on.
(a) Restatement § 90
(1) Hypo:-suppose he just walked in handed her the note and walked out…then she quit her job, would they still
enforce? NO In RS § 90-he did not “reasonably expect the action on her part” What if he said nothing, handed her
the note then she went and bought a horse to get to work? Could he have reasonable expected her to get a horse? Yes
maybe under those circumstances he might have reasonable expected to spend the money.
(2) In another context: Kirsey v Kirsey-would that have allowed the woman to recover for promising her a place to
raise her family? YES Under a promissory estoppel theory, it was reasonable for his to expect her to move her
family. And that it would induce action or forbearance of a def and sub nature on her part and injustice could only
have been avoided by enforcing the promise.
(3)Take this to heart-why promissory estoppel isn’t always a better way for Π to enforce the contract. DON’T EVER
START TO ANSWER THE EXAM ON PROMISSORY ESTOPPEL, THE FIRST THING WE WANT TO
KNOW→is if there is consideration…was there a contract to begin with.
(4)Even by the 19th-20th century reliance was a basis for enforcing a promise. The doctrine of promissory estoppel is
based on “equitable estoppel”-like in rickets. In equitable estoppel a party would make a mis-representation of fact-
the person making the misrepresentation might be estopped (prevented) to take a stance inconsistent with the
Ex. In LA a sub developer is negotiation w/ couple for a lot. They asked hm if anything could keep them
from building a house the size we want, he lies and says no then they sue. Then the court says you are
equitably estopped b/c he made the misrepresentation rep of a fact.
(b) Promissory Estoppel
(1) this theory is based on the assumption that a promise has been made- no promise, no enforcement
(c) Restatement §90-listed below
(2) Feinberg v Pfeifer-pg 91
Issue-was the promise to pay her $200 for life enforceable b/c of her reliance on it under the doctrine of promissory
estoppel? (i.e. her retirement and abandonment to continue in employment) YES
Look at RS §90-element by element
1. was there a promise? Yes
2. could the co (promisor) reasonably expect action on her part? Yes
3. was quitting her job definite and substantial on her part? Yes she was old w/ cancer and couldn’t work.
4. can injustice only be avoided by enforcing the promise? YEP
(3) a parallel pension promise: page 93: The guy announced his retirement then had a convo with the boss who said
“I’ll take care of ya” b/c you are nit eligible for pension. The guy LOST. -he did not decide to retire b/c of the
promise, he had decided prior. RS§90 “promisor should reasonably expect forbearance.. and induce such
forbearance” he lost b/c→the promise did not induce such forbearance.
(d) Restatement Second §90
(4) what are the differences b/n the first and 2nd restatement
deletion of the term “definite and substantial character”-removed those adjectives
forbearance on the part of the Promisee OR a third person.
the remedy granted for breach may be limited as justice requires
is there a relationship b/n omitting #1 coupled with the inclusion of #3 that the court has discretion of what
the remedy would be? Yes there is a difference b/n awarding a party expectation interest (the value of the
promise)as opposed to their reliance.( restoring the status quo→basically putting you in the same shape you
were in before the promise was made.)
consider two of the cases we have talked about: In Rickets what is more appropriate, the $2,000 promised
to her, or the value of her having quit her job→the 2,000 b/c that way is a lot easier to place her in the
status quo. Kirsey v Kirsey she was promised “a place to raise her fam,” what is easier her expectation or
her reliance? How could we measure the value of a place to raise a family? her reliance would be easier to
calculate ex. ,moving expenses exc.(4) 2 points the editor is trying to make
the court should think about compensating the Promisee for their reliance ex. Moving costs
court may be influenced to choose b/n the two is b/c it’s easier to measure one over the other sometimes.
(5)Page 94 How far has promissory estoppel gone? Note 3 pg Vastoler v American Can CO-
he says the trial court is missing a very basic point-the CO wanted him to accept the promotion, he
didn’t want to accept it unless he got a higher pension benefit…..this is consideration! “if you accept
the new position then we will pay you a higher pension” We don’t even need to talk about promissory
estoppel! –the parties had a bargained for exchange-so that is all that is necessary to say
here.*remember prof holmes wants us to make sure there is no consideration before we try to push it
under promissory estoppel for the exam!*
(6) Cohen v Cowles Media Company
Facts-the action induced on the Π’s part was that he would give them the information and they(reporters) promised
to keep his identity anonymous. Reporters broke the promise-
Issue-can Cowen recover under promissory estoppel? YES
Reasoning-even though there was a “form” of a bargain they lacked contractual intent (a contract-makin state of
mind) when they entered into the agreement. They said Cowen can recover under P.E.
promisor could reasonable foresee it would induce him to do the action requested
is enforcing the promise the only way to avoid injustice-probamatic b/c cowen was divulging bad info
about his opponents political campaign-they still said even though it was morally ambiguous-still
enforcing the promise would be necessary to prevent injustice.
(7)Problems a contractor asks a guy to renovate his office-guy says nothing but goes and buys a bunch of building
materials.#1 Is there reliance in the fact that he went and purchased the material? No they asked him to return the
promise and he didn’t-it doesn’t seem reasonable to buy the material for the job before accepting the job.
(8). D&G Scout Inc. v Bacardi Imports Inc. pg 97
Pro Background-district court entered a summary judgment for the ∆.
Facts-Two of general’s main supplier’s withdrew taking away 50% of their profit so general was left to decide
whether to sell out for top dollar or continue operating on a smaller scale. Bacardi promised General that they
would continue to let them be their distributor General relied on this promise and turned down an offer to sell
the company at top price. A week later Bacardi withdrew it’s offer so General ended up having to sell for over
500,000 less than the first offer.∆ says that their relationship was terminable at will and not legally forcible thus
not one on which General might reasonably rely.
Issue- Did General reasonable rely on the promise? Yes
Promissory estoppel requirements:
1. the promissor or a 3rd person reasonably believed the promisse would rely
2. the promisse did rely on the promise
3. the only way to avoid injustice s to enforce the promise
the injuries are analogous to moving expenses-they represent a reliance injury, not an injury to future profit
and what they expected to gain (b/c that isn’t recoverable under ID promissory estoppel law).
(9)Hypo: suppose they had never deal with each other enforce and ∆ changes their mind and Π sues for breech-they
could not recover. Had general been seeking recovery for lost of future wages they couldn’t in light of the at will
relationship b/c they couldn’t reasonably rely on profits from an at will relationship.
(10) Mills v. Wyman
Facts: Mills, ∏, cared for Levi Wyman on the way back from a sea-faring voyage after he became deathly
sick. Levi died, and his father Wyman sent Mills a letter promising to reimburse Mills for the medical bills
that incurred on his son’s behalf. Seth Wyman then decided not to pay.
Issue:Does a past expense incurred support a later promise to reimburse the expenses?
Holding: No, there was no consideration.
Reasoning: classic past consideration case. The services he rendered were after the promise (ex. Feinberg v
piper) The moral duty to pay him doesn’t give rise to legally enforceable rights. Even if not paying is
disgraceful. Seth did not gain anything, nor did the ∏ agree to incur a detriment. FT: A promise to pay for
past expenses is not supported by consideration
(11)Webb v. McGowin-confused about this case
Facts: The ∏ was clearing a 2nd level floor and throwing 75 lb. wooden blocks to the ground. Before
releasing the block in one instance, he noticed that McGowin was standing beneath him and that the block
would have dealt a serious bodily injury or death to him. To prevent this, the ∏ launched his body off with
the block at the last moment and suffered severe injuries himself. McGowin agreed to pay the ∏ $15 every
two weeks until the ∏’s death. In that time, McGowin himself died and the payments stopped (after 10
years of payments). The ∏ is seeking recovery for the unpaid payments and future payments from
Issue: Did sufficient consideration exist to legally enforce this promise? Are past acts of saving a party
from death or serious bodily harm sufficient consideration to support a subsequently induced promise?
Reasoning: ***Notes on Webb***charlie
Did McGowen get anything in exchange for his promise to Webb? No. What’s the court’s
rationale? The court talks about the benefit → the promisor has received a material benefit, whish
constitutes a valid consideration for his promise. §71 consideration consists of a bargained-for
exchange. Logically there could not have been a bargained-for exchange with these facts – no, not
after the fact.
Reversed the demurrer, and he then gets his day in court.
What does Webb v. McGowin mean? McGowin made the payments for many years, where in
Note 2 Taylor only paid a small sum. Today, Webb is the rarest of birds in which a court
has seriously entertained an enforcement of a case. Taylor represents the most common
Look at Restatement Second §86 → supported by very little actual authority. “Promissory
restitution” – limited to cases where an unambiguous written promise
Note 3 → resolve these cases by statute? In Wyman, there was a written letter. What else?
Signed, yes. Must say that consideration is expressed, in writing. One problem with statute → we
have to give meaning to/interpret the language. Problem 2: wouldn’t
help Webb b/c there was no writing.
IV. Restitution as an Alternative Basis for Recovery
Restitution as alternative basis for Recovery (unjust enrichment)
1. Cotnam v. Wisdom (doctor can recover for helping in emergency…implied K. Quasi- Contract…public
policy…want to encourage doctors)
2. Callano v. Oakwood Park Homes (restitution employed by courts w/ causation. If no relationship w/ a party,
then no restitution. Or if original party is available)
3. Pyeatte v. Pyeatte (restitution granted—extraordinary unilateral effort by the spouse. Unjust enrichment.)
Recovery is based on the principle of preventing unjust enrichment, and not on a promise at all
Topic of restitution is a very broad
A person who is unjustly enriched at the expense of another is required to make restitution.
o The extent that the benefit was incurred gratuitously – acting without the expectation of
o We also don’t give restitution to the person acting officiously – “acting as an officious
intermeddler” → someone making an unjustified intrusion into another’s affairs
a. restitution can’t be recovered if (above)
a. Cotham v Wisdom-pg 103
Facts-Harrison was thrown from a streetcar and the Π, a doctor performed surgery on the guy while he was unconscious.
Harrision dies anyway but the doctors want to be paid for their services.
Issue-is there an enforceable contract b/n that of a doctor and persons who are incapable of contracting? YES
Reasoning-As a practical application it sustains recovery for doctors (or nurses who perform on infants, drunkards exc.) it is
an implied contract-it is implied by the law. Sometimes called quasi or constructive contracts.
Implied in fact contract-like when you go to the doctor’s office it is implied you will pay for the visit.
o The Π was not acting officiously
o The Π did not do so gratuitously-when doc’s perform service they expect to be paid. Mills and McGowan -no
restitution when the person acts as a good Samaritan the law presumes it was gratuitous
b. Callano v Oakwood Park Homes Corp-pg 108
Pro Background-∆ appeals from a judgment rendered n favor of the Π callano.
Facts-two contracts (1)Oakwood apts sold a lot to Mr. Perdergast. (2) Mr. Pendergast made a contract with the Π callano to
plant shrubs which he did. Mr. P never paid the Π and died oakwood sold the lot to a 3 rd party. Π claims the ∆ was unjustly
enriched b/c they sold the lot and plants.
Issue-Are the ∆’s required o pay the $400 for the shrubs on the theory of quasi-contractual liability? NO
Reasoning-Quasi contract (constructive contacts)-based on the doctrine of unjust enrichment and rests on the equitable
principle that a person shall not be allowed to enrich himself unjustly at the expense of another.
Π must prove
1. the ∆ was enriched-the court accepts that the property was enhanced.
2. the ∆ received √
3. and the retention of that benefit (enrichment) would be unjust.
Court hold the ∆ was not unjustly enriched. (1)The Π expectation would be from Prendergast, not the ∆. (2) the callano’s
were not operating under some mistake-ex. if P was an agent of oakwood and not disclosed that to them-he was not. The Π
were not acting officiously but gratuitously in terms of oakwood. And there was not fraud
Note6-talks about fraud! He was entitled to recovery b/c the agreement was based on fraud
c. Pyeatte v Pyeatte-pg 112
Facts: An actual promise: couple married and agreed to put each other though school Mr. Peyatte first. He went to law
school, (meanwhile she lost her job-they lived on her savings) then he wanted a divorce. ∆ claimed the agreement too
indefinite to be legally enforceable-the court said the promise was too indefinite
Reasoning-but she may have a case for restitution b/c it is appropriate when the efforts were extremely unilateral on the part
of one source which insure solely to the benefit of another spouce by the time of termination-this is the case here
Note 1-the court may be more apt to give her a claim when there is no prop. To divide for her to get. The
outcome may be diff if she had been living with him for 10 years she has had the benefit of his career and
lifestyle so the enrichment wasn’t unjust
Note 2: restitution claims b/n spouses have traditionally failed b/c they are seen as gratuitous and lacking
A CA statute presumes that after 10 years of the education happened that the community has benefited from
the education so no restitution required.
Note 3-while unmarried couples they do not usually uphold promises b/n unmarried people-the policy behind
this is that they don’t want to reward non-marital sex.
“The Bargaining Process”
(assignment #6 119-166)
THE BARGAINING PROCESS
1) Lucy v. Zehmer (a contract is enforceable despite one party’s subjective belief that they are joking. Objective theory and good faith.)
2) Owen v. Tunison (responding to a price quote may be considered an invitation to negotiate, not a binding offer. No power was conferred.
3) Harvey v. Facey (Bumper Hall Pen—Lowest price quote-did not answer question #1. Stating a sale price is not binding as an offer for that
price. When something specific like land involved, courts are reluctant to say there was an offer.)
4) Fairmount Glass Works v. Crunden (specific/detailed quotations of price and delivery, “for immediate acceptance” constitutes an offer, power
5) Lefkowitz v. Great Minneapolis Surplus Store (nothing left for negotiation…offer was explicit, definite. Clear offer. Fur stole.
Advertisements as offers.)
6) Elsinore School District v. Kastorff (mistake material to K as grounds for rescission)
1. The Nature of Assent
o An extreme emphasis on language in this chapter
o Avoid too much paraphrasing and focusing what they actually said and wrote
o The nature of assent-whether or not the parties actually intend to be bound
Lucy v. Zehmer (a contract is enforceable despite one party’s subjective belief that they are joking. Objective theory and good faith.)
a. Lucy v Zehmer
Facts-Lucy sought specific performance of a contract the Zelmers allegededly sold for a tract of land ∆ -Zelmer
wrote on a piece of paper(on the back of a restaurant ticket) an offer to sell his farm for 50,000. Lucy accepted
and tried to pay $5 to seal the deal. Then for the first time the ∆ realized the Π was serious. He thought since
They had been drinking and ∆ thought the offer was made in jest and tried to convince the Π that he had no
intentions of selling the farm.
Issue-is an offer made in jest a valid contract? Yes The offeree thought it was a good faith contract despite the
offoror’s subjective belief it was a joke.
Reasoning-court rules that the contract was enforceable
court rejects that he was too drunk to make a valid contract-he had changes the terms exc.
It doesn’t matter if the offeror is joking or not, it is how it appears to the offeree
Objective reasonable person test “would a reasonable man have considered this to be an offer”- is used in
determining if it is an offer. If not people could back out of contracts saying they were joking and it would
undermine contracts-would create an easy out
The test: were they in a “contract making” frame of mind. What things did Lucy do to show he thought the
offer was valid 1) got his brother to put up ½ the money 2) incurred attorney fees 3)offered at the time to
give a $5 down payment to seal the deal
objective theory “your actions speak louder than your words, doesn’t matter what you mean subjectively”
You will still see court use the UN OBJECTIVE phrases “meeting of the minds” he doesn’t agreed NOT
ANSWER ON THE EXAM THAT THE CONTRACT WAS VALID B/C A MEETING OF THE MINDS-
Notes the top of pg 125
What if they said I’ll sell it for $50-o contract b/c no reasonable person would believe that the farm could
b. Intent to be bound
(1)Sullivan v O’Connor- we will talk about it in chap 5Π went to the doctor b/c she was unhappy with the shape of
her nose in malpractice and contract (THAT HE WOULD IMPROVE HER APPEARANCE)
Required for the Π to make out a prima facie case the Π must satisfy a heightened burden of proof. 1. the existence
of the contract by clear proof beyond the preponderance of the evidence, not all the way to reasonable doubt.
(2) courts suggest situations in which an offer isn’t valid
if the promise is insufficiently serious to indicate the promisor intent to be bound-The Pepsi case where
they offer a jet for Pepsi points
Optimistic statements made by doctors to patents ex. Sullivan v O’Connor
Contracts b/n family members-I agree to pay my son $ if he gets A’s b/c he is a minor and lacks capacity
and relevantly contracts b/n family members (living in the same house) the law assumes they are gratuitous.
If they are fraudulently induced or signed under coercion, duress, or adhesion (someone has more
Social engagements, restaurant reservations
(2b) contracts are valid
If you sign a contract and outwardly appear to agree- even if you didn’t read it! Assuming there is no mis-
representation and you didn’t sign it under coercion, duress, or adhesion
(3) pg 127 the “Hairy Hand” the Dr. said the boys and would be healed in 4 days and it took a month. The father
sued for breech of contract. The physician was giving his opinion-he did not give his guarantee. Pg 126 the court
awarded damages to the person based on a promise, then after this judgment the legislature of Mich. enacted:
Mich. Statute: A promise made by a physician- is void unless it is in writing was upheld-to protect doctors
c. “Gentleman’s Agreements”
Ex. Letters of intent that look like a contract and stipulate terms but the parties say they don’t indeed to
RS § 21 “they may prevent the formation of a contract-if they don’t intend to be bound”-
d. “Formal Contract Contemplated”
Pg 128 Winston v Medifare set out 4 guidelines to determine if the parties intended to be bound-the court
may find there might be an informal agreement-the court may assume the parties didn’t intend to have a
a. express reservation-not to be bound in writing
b. partial performance
c. if all the terms have been agreed upon
d. if the contract is usually in writing
e. the size of the transaction
2. The Offer
a. offer-an offer is an act whereby one person confers upon another the power to create contractual relations between
b. addressee of the offer: the offer only applies to the party that was invited to furnish consideration-a different party
c. R.S. §24 –the definition of an offer!
d. R.S. §26- what we distinguish offers from which is preliminary negotiations
The most useful way to draw the line is: “read §24 not only is invited but WILL CONCLUDE THE
BARGAIN” that makes us scrutinize what’s been said and ask “would that statement lead to the conclusion
that there is a contract b/n the parties if the offeree says yes?”
b. Owen v Tunison
Owen v. Tunison (responding to a price quote may be considered an invitation to negotiate, not a binding offer. No power was conferred
Facts-Π (Owen) made an offer b/c he wrote the ∆ a letter asking to buy the Bradley Lot for a certain amount (6,000)
and the ∆ (Tunison) responded in writing that he couldn’t sell it less than 16 thousand, the Π wrote back and said
I’ll take it. ∆ then said he didn’t want to sell his property and Π sues for damages and unjust refusal to sell.
Issue-was his statement “I won’t take less than 16,000” an offer in terms of sec 24? NO
Reasoning-In sec 24 “would the statement justify a reasonable person to think his assent closes the deal? Not here
b/c of the discrepancy in price. ruled in favor of the ∆
c. Harvey v Facey
Harvey v. Facey (Bumper Hall Pen—Lowest price quote-did not answer question #1. Stating a sale price is not binding as an offer for
that price. When something specific like land involved, courts are reluctant to say there was an offer.)
Pro Background-Jamaica Ct
Facts-Π asked ∆ in a telegraph 2 questions, if he would sell him the property (Bumper Hall Pen )and what was his
lowest price. ∆ only answered to the 2nd question of the lowest price.
Issue-does the fact he responded with the lowest price create an offer and implied contract? NO
Reasoning-there was no offer to sell- there was ambiguity of what Facey had in mind-a reasonable person could not
conclude that it was an offer to sell-
The courts take a very cautious approach to this case b/c Facey was in negotiations at the time to sell the
property to other people (he could have already sold it by the time Harvey replied)
d. Pg 133 notes: an offer can be accepted only by the person the offeror has invited to furnish consideration
e. Pg 134 Cats and Dogs hypothetical:
Is this an offer or preliminary negotiations? Could a reasonable person conclude that they could close the
deal simply by accepting the offer?
The language is ambiguous ex. “if you are willing…in the way I suggest”
Holmes would say this falls a little short of lang. that established
f. Hypothetical to set up this case. WIDGETS
Holmes “I offer you widgets for a certain price”-this is not an offer, just a price quotation. The reason it is
not an offer b/c there is a crucial term missing (the quantity he is willing to sell). DOesn’t matter that the
word offer is in the quote.
A statement of price is not normally an offer this Fairmount case is an ex. of the exception
A reasonable person would not understand that their assent alone would close the deal
c. Fairmount Glass Works v Crunden Martin Woodware co.
Fairmount Glass Works v. Crunden (specific/detailed quotations of price and delivery, “for immediate acceptance” constitutes an offer, power was
Pro Background-the court ruled in favor of the ∆ (woodware) now the Π (Glass works)appeals
Facts-∆ (woodware) wanted to recover for a breech of contract b/c they asked for a the lowest price of 10 carloads of
jars then after the Π (glassworks) responded with the price for “immediate acceptance”. ∆ Woodware responded
with a direction to send 10 carloads of jars. The Π (glassworks) then backed out with the reason that they were sold
Issue-does the request of a price followed by specific/ detailed quotation of price and delivery “for immediate
acceptance” constitute a valid contract? Yes
o the Π’s (Fairmount) words “for immediate acceptance” pg 135 meant to the court that if the ∆ agreed with
the price then there would immediately be a contract
o look at the contract as a whole
o there was specific quantity “ten car loads”-not too indefinite
o there was a specific price
o the fact that they try to limit their liability implies that Fairmont was in a contract making mode and if the
∆ accepted then they had a deal.
Essential requirements of a contract:
3. subject matter specific
* if lacking these it is not a valid contract/merely a quote-showing a willingness to sell, not an offer!!!
d. Advertisement as Offers-the general rule is that advertisements are not offers but rather an invitation by the seller to
the buyer to make an offer to purchase. They are merely invitations to negotiate b/c the store might run out of the item-
this rule protects sellers and encourages sales (no one would advertise if they are bound by the ad’s)
What about an offer to the public for a reward lost dog, purse exc? Different than an ad b/c only on person
is going to be able to accept the offer, the person who finds the dog exc.
e. Lekowitz v Great Minn. Surplus Store (the exception to the general rule)
Lefkowitz v. Great Minneapolis Surplus Store (nothing left for negotiation…offer was explicit, definite. Clear offer. Fur stole.
Advertisements as offers.)
Facts-Π went to the store to buy the Lapkin stole on sale for 1.00 b/c the newspaper ad said they were selling just
one for $1-first come first served.(important!) He was the 1st but the store refused to sell it to him b/c of the “house
rule” he wasn’t a girl.
Issue- did the ad constitute an offer? Yep Did the Π’s actions constitute an acceptance? Yes to both.
Reasoning: the test
an offeror can’t unilaterally modify an offer after it has been accepted
ad’s may be offers when: -“when the offer is clear, definite, and explicit and leaves nothing up for
negotiation, acceptance of which =a contract. Ex. “first come first serve, only one to be sold”
This case is an exception to the general rule: b/c specific price and quantity, the listing of the item to be
sold in the ad = a valid offer
f. Notes: problem: he knew that the offer was only for women (a little inconsistent b/c if he knew of the rule how could
he accept the offer?) The court suspects that the store is doing “bait and switch” and they are hostile towards that.
Can a seller discriminate on the basis of sex? Yes in general ex. insurance rates, haircuts, cover charge at the bar.
note 2 competitive bidding in an auction: ordinarily UCC 2-328: an auctioneer is the offeree. Unless it is “without
reserve, then he has to take whatever bid is offered-then the bidder is the offoree
g. problem page 141-buyers were disappointed when their orders were returned after they received a letter (of the coin
a. argument for: (to support it was offer) known quantity and price, tells how and when to
accept, said all sales are final (suggests that if they send back the form then the deal is closed) and the letter
said it would be “verified” the letter was only sent to prior customers-not the public at large
b. counter argument-(to support it was not an offer) doesn’t say first come first serve, says “please accept my order”
looks like the buyer asking the mint to accept an offer from them.
* the court ruled that there was not a contract. Unreasonable to think that it was an offer from the mint
f. “Mistaken Bids” Mutual v unilateral mistake §152-153
Ex. Elsinore case!
Sec §153 more restrictive-Ordinarily common law has been hesitant to allow recession on the basis of a
Sec §152:Law is more liberal when both parties are in error about the same thing-if both parties are
operating under the same thing-they both goofed therefore more of a basis for rescission classic
case=Sherwood v walker contracting for the sale and purchase of the cow
Type in §152-153 here
g. Elsinore Union Elementary School District v Kastorff (exception to the rule)
Elsinore School District v. Kastorff (mistake material to K as grounds for rescission)
the contractor submitted a bid to the school district for improvements, then after he found an honest clerical
error and promptly notified the Π and asked to be released from his bid-trial-DIDN’T DO THE WORK
Issue- is an honest mistake enough for a party to rescind a contract? In this case yes (but not usually)
the courts are normally much less willing to rescind contracts for unilateral mistakes (this case is an
the court treats the legal acceptance after they sent the written notification(bidding by gov. agencies there is
a protest period to challenge the contract)the board prob had to allow 2 wk protest period
A court may allow rescission for unilateral mistakes under the following circumstances:
1) Prompt notification √
2) status quo√- the other party can be placed in it’s prior position (before the mistake) reasonably-
3) material√-means enforcement would be unconscionable.
4) clerical error√- mistake of fact (less blameworthy than an error in judgment-can’t be a mistake in
h. the internet and ads:Courts are much more likely to see internet ad’s are offers-b/c the buyer can just point and click-
(customs can have an effect on contract laws)-it is understood that if you click on the add then you have accepted the deal.
I Problem pg ???????
in order for this to be an offer we have to assume there is nothing left to negotiate in terms of the transaction-a simple “yes”
(trade in options, financing)-point on the non-offer side there are a # of things still left to decide
under Kastorff we would have waned to know if a reasonable person would have known the price was an error. In this case
the price was not so low that a reasonable person would have known it was a mistake.
the court said it was an offer-b/c of the statute that said the ad=an offer
the supreme court let the automobiller off!