Friday, November 22, 2013

6:09 PM

CHAPTER ONE: REMEDIES

I. Expectancy Principle - Put P in the position they would have been in if D had performed
fully
A) Encompasses reliance and restitution
B) The preferred measure of damages in K law
II. Construction Contract Breached by Builder
A) Nature of breach is Examined
i. Groves v. John Wunder (P leased farm to D, where at end they were to level
gravel. D refused to level gravel) Is measure for damages cost of completion
($60k) or diminution in value ($12k) Court used cost of completion is necessary
to put P in expectancy.
1) R2 RULE: Measurement of damages in a construction K breached by
builder is cost of completion UNLESS you would have to tear structure
down at excessive and unreasonable cost ("Economic Waste")
2) RULE: If industrial property owner leases on condition of improving land
at the end, cost of completion is used, even if much more than
diminution in value.
3) RULE: If breach is concerning a central term of K, cost of completion will
be preferred
ii. Peavyhouse v. Garland Coal (Same facts as Groves - court used diminution in
value)
1) RULE: No person can recover more from a breach than they would have
received as a result of full performance (No Windfalls)
iii. Laurin v. DeCarolis Construction (P purchased lot under construction from D.
After purchase, D removed gravel. Because breach was willful, diminution was
inadequate. P recovered FMV of value of gravel in ground, not including D's
labor to remove
1) RULE: Deliberate and willful breach will result in the courts favoring
FMV/Cost of Completion
B) Comparing Valuation Methods: How to put injured party in expectancy position
i. Cost of Completion or Replacement Cost (Groves)
1) Appropriate measure unless it involves economic waste
2) More accurately reaches expectancy objective
3) Diminution in value rejects the K in favor of the breaching party
4) Factfinder can determine that P will use damages to actually complete
a) Advanced Inc. v. Wilks
ii. Diminution of Value (Groves Dissent, Peavyhouse)
1) Correcting defect would involve disproportionate economic waste
2) In commercial construction K's, primary objective is value of construction
a) But can be applied to non-construction contracts
iii. How to choose between Cost of Completion and Diminution in Value?
1) Likelihood that damages will be used to complete the work
2) Personal aesthetics or hope for increased value?
a) Fountain Hypo
3) Subjective significance of work?
III. Construction Contract Breached by Owner of Property
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III. Construction Contract Breached by Owner of Property

A) Rockingham v. Luten Bridge Co (County repudiated bridge contract at partial
performance. Builder completed anyway.
i. RULE: Damages for an owner breaching a K with a builder are: K price MINUS
expenses avoided OR Profits to be made on job PLUS Expenses to date of
repudiation MINUS any other savings owner can prove builder would have
saved
ii. RULE: Damages incurred after repudiation which could have been reasonably
avoided are not recoverable (Doctrine of Avoidable Consequences)
B) Liengang v. Mandan Weed Board (Ruled that overhead/fixed costs were
recoverable, if they were not, P would have to pay for them twice)
i. RULE: Do not deduct fixed costs/overhead as part of expenses saved
1) Car maker hypo
C) Kearsarge Computer v. Acme Staple Co. (D terminated services of data processor P, P
had no additional costs to provide services, full K price was recoverable, as no
expenses were saved)
i. RULE: If NBP does not save any expenses by not performing, full K price is
recoverable.
ii. RULE: When a NBP can procure work elsewhere, that they would not have
been able to but for the breach, then the BP can prove this amount and reduce
from damages
IV. Contract for Sale of Goods Breached by Seller
A) Damages = Market Value @ Time and Place of Delivery MINUS K Price
i. Acme Mills v. Johnson (D was to deliver wheat. Because K price was higher than
Mkt price, no recovery)
1) RULE: Sale of goods, expectancy is: MV @ T&P - K
a) EXTENSION: even though seller sold goods to third party at higher
price
b) RULE: NEVER award profit made by selling to 3rd Party
c) RULE: Value is of goods on ground, not on truck (Laurin v. DeCarolis
Const.)
B) What if Buyer Covers?
i. UCC says that a buyer can cover at a reasonable price, without unreasonable
delay
1) Cover Rule: Cost of Cover MINUS K Price PLUS incidental costs MINUS
expense saved
2) Cover isn't mandatory, but buyer won't be able to get lost profits if they
could have covered but didn't
C) Illinois Central RR v. Crail (P ordered Coal, some missing in transit. Was replacing
stock, P lost no sales, so recovery based on wholesale price, not retail price, since
that was the market they covered from. P only receives actual loss and injury
suffered.
i. RULE: When dealing with multiple markets, court must determine from which
P will recoup from based on capital and options
1) Markets: Mfg. Dist. Wholesale Retail Consumer
2) If K price is more than FMV, NO recovery
V. Contract for Sale of Goods breached by Buyer
A) Damages are: Mkt price at T & P MINUS K Price PLUS incidental/consequential
MINUS Exp saved
B) Lost Volume Seller - can resell product with same value and same expenditures
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B) Lost Volume Seller - can resell product with same value and same expenditures
upon breach
i. UCC RULE: Damages are lost profits only
VI. Employment Contract breached by Employer
A) GENERAL RULE: If comparable work available:
i. Damages = Unpaid K price MINUS Amount Earned from other work ER can
prove
ii. Parker v. 20th Century Fox (D offered P to star in musical, repudiates and offers
role in western for same pay in diff location with less approval rights. Court
ruled western was employment of "different and inferior kind" and awarded K
price
1) RULE: If only other employment available is of a different and inferior
kind, even if salary is the same, EE still recovers full K price
2) RULE: ER has burden of proving that EE could have mitigated damages
with employment of a similar kind.
3) Billetter v. Posell (EE discharged, then offered same job for less pay. Does
not have to accept to mitigate damages)
a) RULE: EE not required to accept same job to mitigate
b) RULE: Can't deduct unemployment payments from damages
B) Collateral Source Rule - Courts are not supposed to reduce damages when P has
already been compensated through other means
i. Metoyer v. Auto Club Family Insurance - P's house destroyed by Katrina.
Insurance dispute followed. Court ruled that Gov't grants not deducted from
settlement.
ii. Courts apply inconsistently
1) Reasons to apply:
a) P has paid into whatever system he is recovering from
b) May be preferable for P to be paid twice than D escape liability
c) SS/Unemployment would encourage ER's efficient breach
d) Benefits intended to alleviate P's distress, not reduce D's damages
2) Reasons not to apply:
a) If nature of breach is in good faith, why apply a torts rule?
b) CSR is bad for productivity
c) Could be punitive to D
d) Legislative intent to compensate
e) D also bears expense of social problems
VII. Employment Contract Breached by Employee
A) Damages: Cost of replacement employee MINUS K price of breaching employee
i. Speech Therapist Hypo (EE at $40k per year quits, replacement can only be
found for $43k per year. Breaching employee owes $3k difference.
VIII. Foreseeability
A) Hadley v Baxendale (P's crank shaft at his mill broke, stopping operations. D said
they would have new crank next day. Took several days so P seeks lost profits. Bc D
never told of importance, court denied lost profits damages.
i. RULE: Breaching Party is only responsible for:
1) Losses occurring in the normal course of things
2) Special circumstances that were communicated
3) Events foreseeable at inception of K
ii. RULE: Damages must be able to be "reasonably contemplated by the parties"
at K's inception.
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at K's inception.
1) Although you can't always recover all foreseeable damages. Limited by K.
B) Victoria Laundry (D supposed to deliver industrial laundry steamer, but 5 mos. Late.
Court said that lost profits were liable to result from the ordinary course of things.
Denied dyeing profits as D did not know.
i. Rule: Course of dealing can be used to determine foreseeability.
C) Hector Martinez Co. v. Southern Pac. Trans. (D carrier was a month late in delivering
dragline, P sued for rental values he lost due to delay. Court awarded those damages
as foreseeable.
i. RULE: Test is "what should be foreseen?" P need not show that the harm
suffered was the MOST foreseeable result, just that it would have been
foreseeable to a reasonable man at the time of contracting.
D) Lamkins v. Int'l Harvester (P purchased tractor from D, at time of K, P wanted $20
light, to be delivered a few weeks later. Took a year, P sued for lost profits from
being unable to use tractor at night. Court denied. Not reasonable to think that D
tacitly agreed to that much liability.
i. RULE: Tacit Agreement test - would D have assented to liability for damages at
time of contract formation? It is not enough he was aware of possibility.
(Contrast w/Hadley)
1) EXTENSION: Can't award damages disproportionately high compared to K
amount.
ii. R2 RULE: Court may limit damages for foreseeable loss by excluding lost
profits, limiting only to reliance, or otherwise if required to avoid
disproportionate compensation.
iii. UCC: Rejects limits of damage award by K, tacit assent test, and losses only in
reliance in favor of "reason to know."
E) R2 RULE - Unforeseeability and Limitations on Damages:
i. Not recoverable if party did not have reason to see them as the probable result
of a breach when K was made.
ii. Loss may be foreseeable as a probable result of a breach if:
1) it is in the ordinary course of events OR
2) D had reason to know of special circumstances.
iii. Court may limit damages to reliance to avoid disproportionate compensation.
IX. No Damages for Emotional Distress
A) Valentine v. Gen Am Credit (EE terminated ER's K and ER claims that emotional
damages were foreseeable, thus recoverable. Denied, as the law doesn't protect
from all damages.
i. RULE: Emotional Distress damages are not recoverable, even if foreseeable
ii. EXCEPTION: If K is not economic, but personal in nature, or "emotional
tranquility is of the contract's essence(Hancock v. Northcutt)
B) R2 RULE: No recovery for emotional disturbance unless the breach also caused
bodily harm or the K is of the kind that serious emotional distress was particularly
likely to result
X. Avoidability - Can't recover for loss that could have been reasonably avoided
A) Damages: Deduct Savings from damage award
B) RULE: Reasonable mitigation expenses ARE recoverable
i. Ex: Long distance calls looking for a replacement buyer
C) Ways to Mitigate:
i. Find other employment (Parker v. 20th Cent Fox) or other
buyer/seller/builder/whatever
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buyer/seller/builder/whatever
ii. Use defective equipment if reasonable, and if you didn't use would cause more
damage
XI. Damages must be established to a "Reasonable Degree of Certainty"
A) Chicago Col Club v. Dempsey (Could not recover lost profits because they were too
speculative)
i. Particularly common for profits, especially for new businesses
ii. Higher standard than other elements of a P's case
B) Victoria Laundry (Courts award lost profits by looking at receipts, etc)
i. BUT: Court can look at past receipts and fixed costs to try to establish lost
profits.
XII. Factors Affecting Adequacy and Availability of Expectancy Damages
A) Difficulty in proving damages, especially profits, to a degree of reasonable certainty
B) Difficulty procuring a suitable substitute performance, with only money
C) The likelihood that a damage award can be collected
XIII. Reliance Damages: Puts P into position he was in before the K was formed
A) Chicago Coliseum Club v. Dempsey (P contracted with D for fight where D gets $10
then more in future. D breached and couldn't establish profit with reasonable
degree of certainty. P can only recover reliance damages from special expenses after
the contract was signed and before repudiation, which are necessary and reasonable
in furtherance of the contract)
i. RULE: NBP is limited in recovery to expenses incurred after contract signed
(unless in preparation for K) and up until repudiation (unless reasonable)
1) EXCEPTION: Pre-K expenses recoverable when spent in preparation for K,
and BP was aware of them
2) EXCEPTION: Post-repudiation expenses can be recoverable when spent
on legitimate attempt to seek performance from BP
ii. RULE: Employee wages can only be recovered if shown to be necessary in
furtherance of the contract or special expenses. Regular salaries of employees
are not recoverable
iii. R2 RULE: As an alternative to expectation interest, injured party may recoup
damages from reliance for expenses made in preparation for performance less
any loss that the party in breach can prove with reasonable certainty that the
injured party would have suffered from full performance
1) Essential Reliance - preparation for this contract
2) Incidental Reliance - preparation for collateral transactions
iv. CONTRAST WITH: Security Stove v. Am. Express (D delivered items late for P's
convention)
1) RULE: Reliance interests expended before contract recoverable when D
has a common law duty to perform (public business - could reasonably
rely on)
2) RULE: Employee wages and salaries were recoverable as special expenses
v. CONTRAST WITH: Anglia TV v. Reed (D breached K to be on P's show. All
reliance recoverable because they could be reasonable anticipated by D as a
result of his breach.)
1) RULE: Reliance expenses that D can "reasonably anticipate" as a result of
his breach are recoverable, including both before the K and after
repudiation
B) Reliance in Compelling Performance (Equitable Remedy)
i. RULE: Incidental expenses are usually recoverable to put P back in starting
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i. RULE: Incidental expenses are usually recoverable to put P back in starting

position, minus attorney fees.
1) Courts can award temporary injunctions if P's need is "sufficiently
compelling"
a) Maybe Chi Col Club's need wasn't
XIV. Restitution - A P has conferred a benefit to D, and P is attempting to recover damages.
Not a contract.
A) Two Components of Restitution
i. P confers a benefit upon D
ii. Retaining that benefit without payment unjustly benefits D
B) US v. Algernon Blair (P terminated K with D, over not paying for a crane rental.
Although a losing K, so P couldn't recover at law, P still able to recover value of
services rendered
i. RULE: Contractor is entitled to recover restitution for expenses in labor and
equipment already provided in fulfillment of a K.
1) EXTENSTION: Even if it is a losing K for P, blocking a remedy at law
2) PROBLEM: Arises when NBP invests in preparation for performance, but
hadn't actually done anything for the D's benefit yet
ii. RULE: Measure of damages is the market value at T & P of services rendered,
undiminished by any loss that would have occurred upon full performance.
iii. RULE: The K price does not limit recovery for a non-breaching party
iv. Kearns v. Andree (P was going to sell property to D, but D made P make certain
improvements. D refused to buy and improvements made land less saleable.
Eventually sold for less and K was unenforceable. P able to recover
improvements minus benefit
1) RULE: P can recover any benefit work conferred on D MINUS any benefit
that the work gave to P
a) OBSERVATION: Court looked at whether work was done in good
faith, and whether P believed that the agreement would be
enforced
v. Olsson v. Moore (P wanted to buy land from D, obtained permission to begin
improving. Before sale, house burned down. No K for sale of home. P was able
to recover
1) RULE: Benefit does not have to be retained, just conferred.
a) OBSERVATION: Courts look to see whether D could have stopped
benefit
vi. Oliver v. Campbell (Lawyer agreed to defend D for $850, trial required $5k. P
fired near end of trial, tried to void K and sue in restitution. Was unable to get
restitution bc he had substantially performed)
1) RULE: Substantial performance bars restitution because the K governs.
C) Britton v. Turner (P entered year employment K with D. Abandoned after 9 mos.
And had not been paid. Despite breaching K, P can recover reasonable value of work
performed
i. RULE: For breaching Party, Damages are reasonable sum for services provided
MINUS damages caused by breach AND limited by K price.
1) FLAW: Because restitution, they should have focused on value of service
in the market, not with the K price
ii. Community College Prof Hypo
1) RULE: Limit to restitution for a breaching party is the Contract Price
2) RULE: If damages are caused (having to pay someone more) that is
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2) RULE: If damages are caused (having to pay someone more) that is

deducted
3) RULE: FMV can change over a period, and is what restitution is measured
by
iii. Thach v. Durham (P gave D down payment for sale of sheep and repudiation of
down payment. No recovery because it would deprive the seller of the purpose
of the down payment, protection, and encourage breach and litigation)
1) RULE: No recovery of down payments
a) EXTENSION: And presumably any payment BP understands would
not be refunded if breach were to occur
iv. Kelley v. Hance - P agreed to install sidewalk, after ripping ground up he
abandoned project. Mere retention of land does not constitute a benefit.
1) RULE: Mere work is not enough, there must be some benefit conferred
v. UCC RULE: The defaulting seller is allowed recovery for partial delivery at
apportioned K price MINUS buyer damages
vi. R2 RULE: Supports restitution recovery, even in cases of willful breach
XV. Equity - Only applicable if P proves remedy at law is inadequate. Equity fills the gaps to
prevent injustice
A) Contracts for Land - the most common time specific performance comes into play is
for contracts for the sale of land. The court presumes the land is unique to the buyer
i. EXCEPTION: If land is being bought simply to lease out at a determined value
ii. City Stores v. Ammerman (D trying to get land rezoned, promised P a store in
plaza for support. Would not lease store after rezoning. Court gave spec. perf. damages incalculable
1) RULE: Specific performance is available when damages are incalculable
and inadequate
B) Van Wagner Advertising Co v. S&M Enterprises (P had billboard on building that
was sold to D, who terminated that lease. P wanted Spec Perf. Court found space
could be valued, was not unique
i. RULE: If damages are sufficient, then NO specific performance
ii. Curtis Bros v. Catts (P canned tomatoes with output K with D. D refused to sell
and was granted specific performance. Court felt they couldn't get more
tomatoes, which would have a ripple effect of hard to calculate damages.
1) RULE: Courts typically will not award specific performance for sales of
goods.
2) EXCEPTION: Possible when replaceable goods are unable to be found
a) EXTENSION: Especially when failure of specific performance would
result in far reaching ripple effect - lost profits, plant shutdown, loss
of employees, etc
C) Fitzpatrick v. Michaels (D promised P in life estate among other things for service,
companionship, nursing, etc. D kicked her out. P denied spec perf bc it is a service K)
i. RULE: Court will not grant positive specific performance for a service contract
1) EXTENSION: Even if it results in injustice
2) EXCEPTION: If a performer/worker has unique or exceptional skill or
ability (Pingley v Brunson)
ii. Pingley v Brunson (Organ player agreed to play at P's restaurant for three
years. D breached. P wanted to enjoin D from playing elsewhere. D didn't have
exceptional skills and no express covenant, so court refused)
1) RULE: Court will not enjoin an EE in absence of an express covenant, and
even then, only when it is deemed reasonable and necessary.
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D)

E)

F)

G)

even then, only when it is deemed reasonable and necessary.

iii. Fullerton Lumber v. Torborg (D managed P's lumberyard. D quit to start his own
despite a 10 year non compete clause. Court ruled they could have one, but
ten years is excessive.
1) RULE: Non compete clauses will not be enforced unless they protect
trade secrets, customer contacts, unique services, and are reasonable
and necessary.
Grayson-Robinson v. Iris Const. (D agreed to P to erect building, but unable to
support a mortgage. Arbitrator ordered specific performance and court upheld,
despite it being impossible
i. RULE: Courts very hesitant to overrule arbitrator, even when they make a bad
ruling that would likely be impossible to perform.
RULE: Disproportionate burden: Court will not order specific performance that
results in undue hardship to D and disproportionate benefit to P.
i. EXTENSION: Specific performance cannot create its own inequity
RULE: Hard or unconscionable bargain will not be enforced by Specific Performance
(Woollums v. Horsely)
i. EXTENSION: Cannot go to equity court without "clean hands" (party seeking
relief must exhibit good faith and fairness)
RULE: Court will not enjoin/enforce a negative covenant, unless a breach of the
negative covenant will cause a loss more than what would just be caused by a
normal breach (Chi Col Club v. Dempsey)

CHAPTER 2: ENFORCING PROMISES

I. General/Background
A) Why we should enforce promises:
i. Upholding fixed purpose of promisor
ii. Utilitarian (Nec. In advanced economy)
iii. Legal protection and formality
iv. Functioning of society
B) Functions of Consideration
i. Evidentiary
ii. Cautionary
iii. Channeling
II. Formality of Promises
A) Congregation Kadimah v. DeLeo (D promises money to church on deathbed, died
intestate. Ruled not enforceable because it was merely a gratuitous promise)
i. RULE: Characteristics of a gratuitous promise:
1) No Consideration - no benefit to promisor or detriment to promisee
2) No Bargaining - No demands either way
3) No delivery
ii. Pitts v. McGraw (P working independently. Retired, gave away contacts, still
received 1% on commissions from contacts. Court ruled no consideration, no
K)
1) RULE: An action must be required to be considered
bargaining/consideration
2) In Re Bayshore Yacht (P bought condos with no elevator access, after D
promised to build one but never did. No promise due to no
consideration.
III. Consideration
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III. Consideration
A) General Rules:
i. Consideration- Benefit to promisor OR detriment to promisee
ii. Mutual Inducement - there must be a bargain
iii. Courts will not look to adequacy of the bargain
B) Hamer v. Sidway (D offered to pay P $5k to abstain from smoking, drinking,
gambling, and cursing until he turned 21. Was ruled to be consideration
i. RULE: Consideration is some right, interest, profit, or benefit accruing to one
party OR some detriment, or loss, or responsibility given, suffered, undertaken
by the other.
1) EXTENSION: a Legal detriment does not have to be an actual detriment,
forbearance of some right works
2) Sharon v. Sharon (D promised to pay P for a year to leave D alone, didn't
pay for 3 months. Ruled enforceable. Leaving D alone considered
consideration)
ii. Earle v. Angell (D offered to pay P $500 to attend funeral, ruled consideration
and enforceable)
1) RULE: A promise in exchange for an action after death has consideration
iii. Whitten v. Greeley-Shaw (Having an affair, P loaned D money and gave
allowance, didn't ask for anything in return, although D added that she would
not call him, no consideration)
1) RULE: Even if there is consideration, if it is not bargained for, K is
unenforceable
iv. R2 RULE: For consideration, return promise or performance MUST be
bargained for (sought after in exchange for). Performance can consist of an act
other than a promise, a forbearance, or the creation, destruction, or
modification of a legal right. That which is bargained for does not OF ITSELF
induce the other party does not prevent consideration (other factors OK)
C) Fisher v. Union Trust Co - (D gave his disabled daughter deed in exchange for $1. Gift
valid, but K would have included paying off mortgage. Consideration found but no
bargain. Dollar was formality to make promise binding, like a seal. No K
i. RULE: The court doesn't care if it is a good deal or a bad deal, but want some
assurance that it was an actual deal and not phony consideration
ii. Military College v. Brooks (P brought action to be paid for D's promissory note,
which postponed any possible trial)
1) RULE: Postponing/giving up legal action constitutes consideration.
2) R2 RULE: Forbearance to assert or surrender a claim or defense proven to
be invalid, is not consideration UNLESS the claim is doubtful due to
uncertainty in facts or law AND the forbearing party believes the claim
may be valid. Execution of a written instrument is consideration if
bargained for.
IV. Promises Grounded in the Past
A) General Rule: Because there is no mutual inducement for actions done in the past, it
is up to the promisor whether he wants to perform.
B) Mills v. Wyman (P nursed D's dying adult son. D offered to pay expenses, then
withdrew offer. Not enforceable because of no consideration)
i. RULE: Moral obligation does not count as a preexisting obligation.
C) CONTRAST WITH: Webb v. McGowin (P was mill worker who paralyzed himself to
keep a block from falling and killing the owner. D gave him payments until he died.
Promise enforceable even though P did not assent beforehand.
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Promise enforceable even though P did not assent beforehand.

i. RULE: Material consideration in exchange for moral obligation is enough to
enforce a K
1) EXTENSION: If P had asked if D wanted his life saved, he would have said
yes.
2) CONTRAST WITH: Harrison v. Taylor (D was about to be killed by spouse,
P stopped ax swing but fucked hand up. D promised to pay after.
Voluntary humanitarian act does not count as consideration at law)
3) R2 RULE: Restitution may be allowable in exceptional situations to
encourage ppl to intervene in affairs of others. However, acting for
humanitarian reasons does not constitute consideration. Although
performing as part of a profession is evidence of intent to charge.
ii. R2 RULE: Promise made in recognition of benefit previously received is binding
to extent necessary to prevent injustice. Exceptions if benefit was agift, or for
other reasons there was no unjust enrichment and to the extent its value is
disproportionate to its benefit.
D) Promise Binding when Performance was asked for
i. Edson v. Poppe (P, at request of D, drilled a well. D promised to pay for it. Act
was not gratuitous or of voluntary courtesy. Valid K)
1) RULE: If D asks for performance, with no expectation of it being
gratuitous, it is not
ii. Muir v. Kane (D had P, real estate broker, find buyer for their home . Later K to
sell included promise to pay. Promise is enforceable)
1) RULE: Combination of requesting performance and later written
agreement to pay is sufficient to create a K.
iii. In Re Schoenkerman's Estate (D's wife died, and he asked his family to move in
and issued two payment notes then died. Promise ruled valid)
1) RULE: While notes to family are generally considered gratuitous, they
acknowledged a moral obligation and are binding
V. Reliance on a Promise
A) General Rule: Sometimes, even if there is no consideration for a promise, the courts
will still enforce it if the promissee relied on it to make expenditures
i. Some older cases expanded consideration to do this, but were really just
looking for ways to enforce a promise that was not enforceable.
B) Kirksey v. Kirksey (D brother of P's dead husband offered to have P move into a
home on his property. Later demanded that she leave. Promise ruled to be
unenforceable)
i. OBSERVATION: Form 1845, and only one that didn't enforce bc consideration
was only way
C) Seavy v. Drake (D gave P land. P gave father $200 note he had against him and D
gave P more land, which P improved and paid taxes on, and occupied. Not
enforceable at law, because it was not written, but in equity, performance and note
provide consideration, Spec Perf granted)
i. RULE: Even if contract is not enforceable, may be enforced through equity
upon reliance
1) EXTENSION: Statute of Frauds does not prevent conveyance through
reliance
D) Ricketts v. Scotthorn - (D told granddaughter that his grandchildren don't work and
gave her a promissory note. P quit job and after D died, P sued to recover. No
consideration, but P weakened her position based on reliance of the note, it is
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consideration, but P weakened her position based on reliance of the note, it is

enforceable.
i. RULE: Even without consideration, if P relies on a promise and suffers and
detriment/weakens her position, it is enforceable.
1) NOTE: Courts differentiate between promissory and equitable estoppel
a) Equitable Estoppel - Stops a party from claiming a fact they induced
you to believe
i) Prescott v Jones - 1898 (D sent a letter to P's home saying they
would renew insurance, didn't house burned down. Estoppel
not valid because it was not a statement of fact)
b) Promissory Estoppel - Reliance on a promise, not a statement of
fact
ii. R2 RULE: Promise that can be reasonably expected to induce action or
forbearance, if it occurs, promise can be binding to prevent injustice. May also
be limited as justice requires.
iii. Stewart v. Cendant Mobility Services (P's husband fired from her company,
which told her there would be no retaliatory action from them. P was fired
when husband started work with competing firm. No K, still able to recover
under promissory estoppel)
1) RULE: Even if P doesn't do anything, reliance on a promise that stops a P
from pursuing alternative options qualifies as promissory estoppel.
2) Mahban v. MGM Hotels (P rented store from D's arcade. They could
terminate with disaster. There was a fire, and D told P to prepare to
reopen. P bought inventory then D terminated. No K breach, but can
recover under promissory estoppel)
E) Charitable Subscription Reliance i. RULE: Generally enforced without evidence that it produced reliance or
forbearance
1) POLICY: To protect charities and promote sincere donation
2) CONTRAST WITH: Congegation Kadimah
F)
VI. Mutuality of Obligation, Illusory Promises, Promises of Limited Commitment
A) Mutuality of Obligation: Both parties are bound or neither party is
i. Look at inception of K, not future actions
B) Illusory Promise - One that does not bind at least one of the parties
i. Davis v General Foods (P sent idea to D, D replied that compensation at their
discretion. No binding agreement because of no obligation)
1) RULE: Promise must be some legal restraint, restricting the promisor in
some way in the future. Both parties must have obligation (mutuality of
obligation)
2) Nat Nal Service Stations v. Wolf (D would give discounts on gas as long as
it was purchased from D. Because agreement was at will w/no specific
amount of time, neither party obligated themselves to anything, so
nothing enforceable until P ordered a specific quantity and D accepted.
a) RULE: An agreement without mutuality of obligation can be a
framework for valid agreements, but isn't one in of itself.
C) Obering v. Swain-Roach Lumber (D was going to buy land, sell it to P, and harvest
the trees w/in 4 years. K was unenforceable when signed, as it was conditional, but
once P satisfied the first condition, it became valid.
i. RULE: If a contract is dependent upon a future act of plaintiff, that act will
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i. RULE: If a contract is dependent upon a future act of plaintiff, that act will
provide an acceptance of the offer and consideration.
1) EXTENSION: Conditionals can be used to create mutual obligation
2) OBSERVATION: One party being able to opt out makes a K
unenforceable. One party having the ability to opt in, does not.
ii. R2 RULE: A promise or apparent promise is not consideration if by its terms the
promisor or purported promisor reserves a choice of alternative performances
UNLESS each of the parties performance would have been consideration if it
alone had been bargained for or one of the alternative performances would
have been consideration, and events arise that eliminate the alternatives
1) Cabin/Jet ski Hypo
iii. Paul v. Rosen (D agreed to sell liquor store to P and its stock after inventory
conditioned upon P receiving a lease. Before P secured a lease (accepted) D
repudiated. No contract for lack of mutual obligation. P should have won
because there was obligation at inception - he couldn't buy other businesses.
1) RULE: If a party is to accept by an act, fulfilling a condition, either party
can repudiate before that condition is fulfilled.
2) OBSERVATION: Shows why it is important to look at obligation at
inception
iv. Lima Locomotive v. Nat'l Steel Casing (P entered into input K with D. Because
they HAD to purchase all needed steel from D, rights were restricted, and K is
valid)
1) RULE: Output or Input K's are valid obligation
a) Input Contract - Must order all needed from specific place
b) Output Contract - Must sell all produced to specific place
D) Wood v. Lucy Lady Duff-Gordon (D hired P to be her agent with exclusive rights
(output K) D breached by endorsing without P's knowledge. P's obligation was
implied, as he could not make any money without efforts to market her products.
i. RULE: We can imply that a promise has been made to perform a service to
render a promise enforceable in a requirements or output contract.
ii. RULE: Mutuality of obligation can be implied
CHAPTER THREE: THE ENFORCABILITY OF PROMISES
I. Mutual Assent
A) Generally offer + acceptance. Both parties must agree to the same thing
i. Objective manifestation - look to what a reasonable person would perceive in a
certain circumstance, in combination with P actually perceive it that way
ii. Latent ambiguity (not apparent) - NO mutuality of assent, prevents formation
1) Parol evidence admissable to clear up latency
2) Both parties had unequivocal concept of the two terms at hand
iii. Patent Ambiguity (apparent) - mutuality of assent, doesn't prevent formation
1) Parol evidence only admissible to determine what parties meant
B) R2 RULE: There is no manifestation of mutual assent to an exchange if the parties
attach materially different meanings to their manifestations AND:
i. Neither party knows or has reason to know the meaning attached by the other
OR
ii. Each party knows or has reason to know the meaning attached by the other
1) Furthermore, there is mutual assent based on the meaning attached by
one party IF that party has no reason to know different meaning, but the
other party does.
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other party does.

C) Raffles v. Wichelhaus (Peerless Case) (Buyer ordered cotton from ship Peerless from
Bombay, but arrived from a different Peerless ship from Bombay at a different time.
K not enforceable, as parties had in mind different subject matter on a material term
and no basis for holding one party responsible for knowing.
i. RULE: If parties have something different in matter when it comes to a
material term, and neither has reason to know (Latent ambiguity) there is no
mutual assent.
1) Subjective standard of intent - "A meeting of the Minds"
ii. CONTRAST W/ Warehouse Hypo - If same goods stored at a different
warehouse or on different side of warehouse, it is not a material fact and does
not prevent mutual assent
1) RULE: Different meanings must be material to prevent mutual assent.
iii. COMPARE W/ Winery Hypo - Wine from two different vineyards with same
name would constitute a material difference and prevent mutual assent
iv. Flower City v. Gumina - Flower agreed to paint apts, and took to mean interior,
Gumina was expecting exterior, Gumina cancelled K. Could be interpreted two
ways. Industry standard was both, but Flower was a new contractor and had
no reason to know.
1) RULE: If K can reasonably be interpreted two different ways and neither
had reason to know other's interpretation, NO mutual assent.
2) OBSERVATION: Can use trade usage and custom to determine what was
reasonable
a) EXCEPTION: If a party can't be reasonably expected to know usage.
v. Dickey v. Hurd (S offers land to B to be accepted by a date. S actually meant
payment by that date, but since B made his interpretation clear, it is mutual
assent)
1) RULE: If one party knows or should know about the other's
interpretation, and the other party has no reason to know different, that
constitutes mutual assent
D) Embry v. Hargadine-McKittrick (EE asked ER about renewing yearly K, saying he
would quit if not renewed. ER said to get back to work and not worry. EE later fired
and sued. Bc ER conducted himself in a way that a reasonable man would
understand the formation of a K, one exists (objective theory of intent) even though
subjective intent was never discussed)
i. RULE: If a reasonable person would believe that mutual intent exists, and does
believe that, an agreement is created.
1) EXTENSION: Even if intent is never actually mentioned or discussed.
ii. Laughing while accepting an offer hypo - A person would not reasonably
believe assent exists
iii. NY Trust Co v. Island Oil and Transport (Company fixed books with phony
agreements with subsidary companies, which were sold off. Buyer tried to
enforce, Court said no because they were phony)
1) RULE: Phony or scam agreements will never be enforced.
iv. Robbins v. Lynch (Intent is a conclusion, rather than a fact, denotating
agreement)
II. Offer and Acceptance - Advertisements and Ambiguity
A) General Rules:
i. Seller sends ad - No assent
ii. Buyer sends interest letter - seller sends prices - buyer gives ambiguous
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ii. Buyer sends interest letter - seller sends prices - buyer gives ambiguous
order - Yes
1) Damage options for Buyer repudiation on ambiguous order:
a) Very least seller would have earned had buyer not breached
b) Extrapolation from what was ordered from one car
c) Historical pattern of orders
d) Custom or Industry standard
e) No damages (Wilhelm Lubrication)
B) Moulton v. Kershaw (B telegrammed S saying he had cheap salt for sale("authorized
to offer") S wrote back asking for 2k units. B withdrew. Court decided that it was an
ad, not offer.
i. RULE: Advertisement language is typically not enough to become an offer
1) OBSERVATION: Line between ad and offer is very fact based. If offerree
can reasonably consrue as offer, that is what it will be.
ii. RULE: A letter sent from a business to a potential buyer offering an unspecified
amount of goods at a specific price does not constitute an offer to sell any
amount
iii. Explanation: Buyer should reasonably see it is an advertisement subject to
stocking limitations
iv. CONTRAST W/ Lefkiwitz (Store sent out ad offering special deal to first person
in store. Same guy kept winning and they were dresses. Was told he couldn't
do that anymore, still did and court enforced because it was stated "in
absolute terms, leaving nothing to negotiation" - but after being told he
couldn't have reasonably thought those were offers.
C) Fairmont Glass v. Crunden-Martin Woodenwars (B requested quote "for immediate
acceptance" from S, who gave prices. B ordered but S was out of stock. Court ruled
that context created an offer
i. RULE: When a buyer initiates interest in purchase for immediate acceptance
and seller agrees to quality, but not quantity. K is formed and seller is liable
1) EXPLANATION: We need certain definitiveness not only for K, but remedy
a) Courts have tended to enforce agreements despite SOME
uncertainty
ii. CONTRAST W/Willhelm Lubrication v. Brattrud (D agreed to buy 11.5k gal of
oil, repudiating before selecting a grade. No mutual assent, and can't compute
damages)
1) RULE: If quantity and price is set, but not quality, no mutual assent or K
a) Awarding damages under any formula would add a term to the K
iii. CONTRAST W/ William Whitman v. Namquit Worsted (B agreed to buy 50k lbs
of yarn, only specifying a type for only 1k, refusing the rest. B cannot escape
obligations by refusing to specify type. Damages measured by least profit S
could have made from types to pick from
1) RULE: Buyer cannot escape obligation by refusing to specify type
III. Timing of Acceptance
A) Generally - Offeror is the master of the offer. Look to intention of the offer.
B) Caldwell v. Kline (P rec'd letter dated 1/29 from D for farm purchase giving 8 days to
accept. P received it on 2/2 and accepted on 2/8, rec'd on 2/9. K enforceable
because time starts when received, not sent.
i. RULE: If given a time limit for acceptance of an offer, that time starts when
offer is received, not sent.
1) EXCEPTION: Offeror's intent is still crucial
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1) EXCEPTION: Offeror's intent is still crucial

ii. Mailbox Rule: When no deadline is given, the acceptance is made when reply
is placed in mailbox. However, when deadline is given, acceptance effective
when offeree recieves it, and is just enforceable if prior to deadline.
iii. Textron Inc v. Froelich (Nothing said about time limit, Buyer tried to accept 5
weeks later. No)
1) RULE: Offer terminates after a reasonable time, if no limit is specified.
a) EXTENSION: This is a question of fact
IV. Unilateral and Bilateral Contracts
A) Unilateral K - Contract for performance (look for "please ship promptly")
i. Greenfield notes that the offeror, as the master of the offer, is requiring
performance for acceptance
B) Bilateral K - Promise for promise
C) Davis v. Jacoby (Sick D asks P to move in with them to help. After P agreed, D
committed suicide. P was promised an inheritance. Offer assumed to be bilateral if
ambiguous. Court looked to close relationship and decided that it was biilateral and
enforceable.
i. RULE: Court will look at the intent of the offeror to determine whether
unilateral or bilateral
1) Did offerer ask for something that could be performed in finite period of
time
2) Circumstances surrounding offer:
a) Dealing at arms length? (Relationship between parties)
b) Language used by offeror ("let me hear from you as soon as
possible)
3) Jordan v Dobbins RULE: Power of acceptance terminates at offerors
death.
D) To Distinguish between Unilateral and Bilateral
i. R2 RULE: When there is doubt, the K is assumed to be bilateral BECAUSE:
1) Bilateral immediately and fully protects both parties
a) Bridge hypo: A offers B $100 to walk across bridge. If A reneges
after B has started B is protected because:
i) Power of A to revoke is terminated
ii) B can't revoke either so A is protected
iii) Ease of administration
2) Ordinarily offeror is seeking promissory acceptance so he can stop
looking for other buyers
ii. Ways a Unilateral offer can be terminated:
1) Rejection of counter-offer from offeree
2) Lapse of time
3) Revocation
4) Death or incapacity
5) Nonoccurrence of any condition of acceptance
E) Brackenbury v. Hodgkin - Mom, D asked daughter, P to come live with her for rest
of her life in exchange for land. D was a bitch so P left. Court claimed it was
unilateral, and offeror can NOT rescind once P starts performance, and has relied.
i. RULE: Even in a unilateral contract, Offeror cannot revoke after performance
has begun.
1) However, in this case, the only way to truly accept the offer was care
until death
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until death
2) But this result is preferred because:
a) Offeree relied on promise
b) Offeror desired reliance and induced it
ii. R2 RULE: Language of unilateral K disappears and it becomes an option K
1) Option K formed when offeree tenders or begins invited performance
2) BUT offerors duty is contingent upon completion
3) AND offeree can stop performance with no liability
a) e.g. kids could have left
4) AND offeror cannot revoke
a) e.g. Mom couldn't revoke her offer
F) Mier v. Hadden (P entered into options land K with D. Paid $1 in consideration to
keep that option open. P refused to purchase property but found a third party to, D
refused. Offer was to be open for a certain period of time)
i. Option Contract - Contract to keep an offer open for a certain period of time.
1) Valid because it is supported by consideration
2) According to G: 1$ was trivial, like in Fisher and the $8k sales price
induced it.
a) Consideration to keep option open may not have to follow same
standards
G) RULE: Offers must have same requirements as promise. Must have: consideration,
mutual reciprocal inducement, detriment to offeree, benefit to offeror.
i. An offer can be revoked at any time prior to acceptance
V. Pre-Contractual Obligation
A) James Baird v. Gimbel Bros. (D sent subcontractor bid to P, contractor, that relied
on it for their offer to the land owner. D only bid half of what they meant to. D
withdrew offer, but P was awarded K. P hired someone else to do work and sued for
difference. Ruled that because P had not yet accepted D's offer, it is unenforceable
and acceptance of bid is not promissory estoppel.
i. RULE: You can revoke because use of an offer price in a bid does not constitute
acceptance
1) Promissory Estoppel can't be used until offer is accepted and become a
promise
2) Very little "reliance" when SC's portion was small part of GC
3) "Does not promote justice to seek protection for those who didn't
protect themselves"
B) Drennan v. Star Paving (Same as above, but this court ruled it enforceable because
D could have reasonably foreseen that it would induce reliance) - NOTE: this is
majority
i. RULE: There is an implied subsidiary promise not to revoke, bc there is
consideration if it is a unilateral contract, and reliance if it is a bilateral contract
1) Implicit in the SC's bid is a promise to keep open for a reasonable amount
of time
CHAPTER FOUR: IDENTIFYING THE BARGAIN
I. Acceptance
A) Common Law Rule - Acceptance must be a mirror image of the offer
i. Offeror is proposing the exchange and is the master of the terms, if it doesn't
mirror, offeror can become bound to something he didn't agree to
ii. Deviant Acceptance Rule - Introduction of a new or variant term means offer is
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ii. Deviant Acceptance Rule - Introduction of a new or variant term means offer is
dead and process must start over
1) Exceptions:
a) Immaterial variances
b) If acceptance makes terms explicit that were implicit in offer
already
c) If offeree suggests terms without insisting on their inclusion
d) If it is a "grumbling acceptance"
e) If a new term or counter offer is made during an option period
2) Main issue to determine is whether purported acceptance is absolute or
conditioned
a) Ask whether if proposed changes were rejected, would offeree still
accept?
iii. Livingstone v. Evans (D offered to sell land to P, who said he would take it at a
lower price. D said he couldn't lower price. P said he would accept at original
price. D sold land to someone else.)
1) RULE: A counter-offer is a rejection of the original offer.
2) RULE: A rejection of a counter offer ("can't lower price") can renew an
original offer
a) Uses reasonable man standard
B) UCC 2-207 - The Battle of the Forms - A written acceptance is valid even if it states
terms that are additional to or different than those offered or agreed upon unless
acceptance is expressly made conditional on assent to the different or additional
terms
i. Additional terms are to be construed as proposals for addition to K. Between
merchants they become part of K UNLESS:
1) The offer expressly limits acceptance to terms of the offer
2) They materially alter the offer, OR
3) Notification of objection to them is given w/in a reasonable time after
notice is received
ii. Conduct by both parties recognizing existence of a K is sufficient to establish a
K, even if writings otherwise do not establish one
1) In such a case, K consists of terms on which writings agree, combined
with any supplementary terms incorporated under the UCC
C) UCC 2-207 - authorizes formation of a K for sale of goods in any manner sufficient to
show agreement and declares unnecessary an actual identification of offer, offeree,
and moment of making a K
i. Restatements agrees with this approach
II. Silence as Acceptance - Generally silence can not be acceptance w/o a course of dealings
A) Hobbs v. Massasoit Whip Co. (P sent eel skins to K, as he had previously done. D
kept them without saying anything, then they were destroyed. A course of previous
dealings between parties created a reasonable expectation and made K enforceable)
i. RULE (R2): Where an offeree fails to reply to an offer, his silence and inaction
operate as an acceptance ONLY in the following cases:
1) Offeree takes the benefit of the services with reasonable opportunity to
reject them and knows they were offered with the expectation of
compensation
2) Offerer has given offeree reason to know that silent assent constitutes
acceptance
3) Previous dealings gives offeree reason to know that silence is assent
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3) Previous dealings gives offeree reason to know that silence is assent

a) Court says seller reasonably understands
ii. Austin v. Burges (D paid for subscription to P's paper. After it ran out, they
continued to deliver, even after D paid and tried to cancel. D ordered to pay, as
he had no reason to assume gratuity)
iii. Insurance before fire/flag to accept Hypo - difference is whether the offeree
wanted K. We can't impose a K, but can uphold offer accepted as designated.
1) Homeowner of fire loses under Prescott v. Jones but wins under
restatements
III. Silence as Acceptance to Agreement to Arbitrate A) Hill v. Gateway 2000 (P ordered PC from D over phone. Rep didn't mention terms. P
got PC, with terms saying he accepts unles he returns in 30 days. Court held terms to
be enforceable.
i. RULE: If buyer purchases good delivered by mail accompanied with terms, the
K is enforceable, even if consumer was never orally given terms
1) EXCEPTION: Buyer must have reasonable opportunity to decline the
terms
2) EXPLANATION: Court decided this way, because it would be unrealistic to
insist on Gateway reading and explaining the terms in full to every
customer.
3) CONTRAST W/ Hobbs v Massasoit Whip and Prescott v Jones saying they
could not impose a K with silence. This doesn't fall into the exceptions
4) CONTRAST W/ Embry v Harragadine-McKitrick - Reasonable person
would think those forms were warranties, not clauses limiting rights.
5) So when was the K formed?
a) Court - when the 30 day return period expired
b) G - when they took his CC #
i) Under law of mutual assent, agreement is NOT ENFORCEABLE
6) CONTRAST W/ Klocek v. Gateway 2000 (same facts, but found that buyer
was the offeror and Gateway the offeree, and therefore, buyer's silence
was not assent)
a) RULE: The buyer is typically considered the offeror
b) OBSERVATION: Both parties want to be offeror, making them the
master of the offer and helping with a favorable verdict
B) Grosvenor v. Qwest Corp (P bought internet from D. Upon installation window
comes up asking P to review terms, specifically mentioning arbitration on inaccesible
site, requiring several clicks to reach. After installation, letter reminding giving 30
days given. Sufficiently conspicuous for a reasonable user and enforceable.
i. RULE: Terms must be sufficiently conspicuous to a reasonable user to be
enforceable
ii. RULE: If one party maintains unfettered ability to modify terms, agreement is
illusory.
IV. Parol Evidence Rule (PER) - "If parties have put their agreement in writing that they
intend as the final, complete, and exclusive expression of their agreement, a prior or
contemporaneous agreement may not add to, vary, or contradict the terms of the
writing."
i. Don't limit to oral, can be anything supplementary
ii. Don't use contract to prefer to written agreement
iii. Does not include subsequent agreements
1) GF: Think in terms of the enforceability of the prior, contemporaneous
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1) GF: Think in terms of the enforceability of the prior, contemporaneous

agreement
A) Three Conditions to admit oral evidence to vary the K:
i. Must be collateral Agreement (related to, yet independent larger agreement)
ii. Must not contradict express or implied provisions of written contract AND
iii. Must be that one of the parties should not expect it to be in the writing
B) R2 RULE: Oral agreements not superceded/invalidated but subsequent integration if
they are not consistent AND made for separate consideration AND such would be
naturally made as separate agreement.
C) Three Possibilities:
i. Writing has terms but the parties do not intend them to embody all terms
ii. They have agreed on some of the terms, and the writing is final embodiment of
those, but not all (Partial Integration)
iii. Parties have made the writing the final expression of all of their terms (Full
integration)
D) Mitchell v. Lath (D selling P a farmm, also owned icehouse across street. D orally
agreed to, in consideration of purchase of farm, to remove icehouse. P bought,
improved land. D wouldn't remove icehouse. Bc K seems complete on its face, PER
applies.
i. RULE: If agreement is complete on its face, PER applies and there will be no
other enforceable agreement outside of the writing
1) DISSENT: Argues it was part of inducement , shouldn't be expected to be
in K, and was relied upon.
E) Hatley v. Stafford (P signed a lease to grow wheat on D's land. Provision the D could
buy out lease for $70 per acre, didn't say when. P claimed additional agreement that
it was only for first 60 days. Ruled that an oral agreement must contradict express
condition, combined with terms being so bad for P, allowed oral evidence.
i. RULE: Informal contracts do not require certain elements be naturally included
1) EXTENSION: When not a sophisticated business transaction, often natural
to leave out express terms
2) Some courts have allowed PE to contradict implied terms but not express
ii. To determine whether what should be naturally contained in the agreement
courts look at:
1) Parties business experience (counsel?)
2) Completeness and detail of the document itself.
iii. R2 Rule: If complete on its face, agreement is presumed to be integrated
unless other evidence shows that it is not
1) Can use parol evidence to determine if an agreement is integrated, for
invalidating clauses (fraud, distress, etc), or in equity.
2) PE of consistent additional term in an integrated agreement is admissible
unless courts find that it is completely integrated.
iv. UCC 2-202 - Focuses on parties intentions and allows use of course of dealing/
trade custom
v. The two views on interpretation are:
1) Reasonable person standard(objective)
2) Parties intentions (subjective)
V. Interpreting the Promise
A) Plain Meaning Rule - If the meaning is plain on its face, we won't consider extrinsic
evidence
B) WWW Associates v. Giancontieri - P negotiated land sale with D, with option to
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B) WWW Associates v. Giancontieri - P negotiated land sale with D, with option to

cancel if D's litigation isn't settled by 7/1. On 7/2, D terminated agreement. Bc clause
was for P's protection, P argued that D could not use. Courts refused to hear
evidence bc clause was unambiguous.
i. RULE: Regardless of whose protection a clause is for, either can utilize if that's
what it unambiguously says in the contract.
ii. RULE: If a clause is unambiguous, it will be given its plain meaning.
1) EXTENSION: When a party wants to use extrinsic evidence, the court first
wants to see the document.
C) Pacific Gas & Elec v. GW Thomas Drayage & Rigging (D agreed to replace cover on
P's turbine at its own risk and liability. Cover fell causing $25k in damages. D said
liabilty was meant to be for third parties only. PE can be heard to clarify a written K,
but can't add, detract, vary.
i. RULE: Parol evidence can be used to prove meaning of the K, not contradict
the writing.
1) EXTENSION: Even if the K is unambiguous on its face.
2) NOTE: PER not applicable here because it was not trying to change K, but
clarify meaning
ii. Columbia Nitrogen v Royster (P had K sell phosphate to D for 3 years at set
price. Mkt price dropped and D refused to buy. D claimed it is trade custom,
and prior dealings with P there were price adjustments based on mkt price
fluctuations. Evidence was allowed.
1) RULE: Ambiguity is not required for evidence of trade usage and prior
course of dealings to be admitted as evidence.
iii. Four corners rule has some merit in reducing litigation. Contract should not all
of a sudden become ambiguous when the parties disagree.
iv. Spaulding v. Morse (D set up trust to pay for P through UG, he joined military
instead, court said ok to stop payments because purposes were being covered
by army now)
1) RULE: Courts can look surrounding circumstances in such a way as to give
effect to the main end designated to be accomplished.
a) EXTENSION: Can even deem void if that purpose is no longer served
VI. Mistake and Misrepresentation
A) R2 RULES:
i. Mistake is a belief that is not in accord with the facts at the time the K is
initiated
ii. The adversely affected party can void the K if:
1) The mistake relates to a basic assumption of which the K was made
2) The party seeking avoidance proves the mistake had a material effect on
the agreement
3) Mistake must NOT be one as to which the adversely affected party bears
the risk of
iii. The offeree should reasonably understand what the offeror is assenting to and
vice versa
B) General Rules
i. If party has ability to investigate, they have the burden of self protection
ii. Information is power but knowledge is expensive, one should be able to
benefit from it.
C) Sherwood v. Walker (P purchased cow from D. Cow supposed to be infertile, which
changed value a ton. D found out cow had calf and refused txn. Mutual mistake
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changed value a ton. D found out cow had calf and refused txn. Mutual mistake
rendered K unenforceable
i. RULE: A K for goods can be rescinded if assent was based on a mistaken
material fact, and there was a mistake of both parties regarding:
a) Subject matter of sale
b) Price of the good
c) Some collateral agreement
d) Inducement of the agreement if mistake made by both parties
1) EXTENSION: Just because a party is disappointed doesn't render K
unenforceable
2) EXCEPTION: Sometimes a party accepts the risk of a mistake, rendering K
enforceable (Dissent in Sherwood)
a) To what extent do parties know risk is part of the deal?
3) EXCEPTION: Merely a difference in quality or accident, does not make a K
unenforceable
ii. RULE: One party being indifferent does not avoid a mutual mistake (Aluminum
Co v. Essex)
iii. Beachcomber Coins v. Boskett (D sold a coin to P that turned out to be
counterfeit, mutual mistake)
1) RULE: Even dealers/sophisticated buyers can have a mutual mistake
iv. Gartner v. Eikill (Contract can be rescinded bc each party thought property to
be valuable for commercial use. Not negligence to not check, P reasonably
relied on seller)
1) RULE: One party does not have to verify claims of another if reasonable
to rely on
D) Hinson v. Jefferson (P purchased property from D, for residential use. Land subject
to flooding and was denied septic system, making it worthless. Contract void
because of implied warranty)
i. RULE: When covenants restrict land use, if the land cannot be used for that
purpose, implied warranty applies.
ii. RULE: Implied warranty has to do with quality of subject matter at time of
transaction, not future expectations.
iii. In most states, seller must disclose serious defects that the seller knows of and
are not obvious to the buyer. Seller cannot actively hide defects
iv. Implied Warranty is extended over mutual mistake for:
1) Sale of house/land
2) Superior knowledge by developer contractor
3) Ability to inspect by the purchaser
v. Caveat Emptor (buyer beware) applies to other forms of property txns.
E) Consider:
i. Mistake: Bilateral or Unilateral?
ii. Mistake: Palpable (obvious) or impalpable (inconspicuous)
iii. Was one party unjustly enriched?
iv. Was the other unjustly impoverished?
v. Was risk assumed by one of the parties? (i.e. subjective ignorance)
vi. Was the mistake fundamental or collateral?
vii. Was the mistake related to present facts or future expectations?
F) Cushman v. Kirby (D sold house to P, who asked about water. D said it was a bit hard
but fine, D's spouse stayed silent. Water was sulphur water. D paid 5k to be
connected to city water. D made a fraudulent misrepresentation, as did spouse, jury
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connected to city water. D made a fraudulent misrepresentation, as did spouse, jury

can give full amount, as that's expectancy)
i. RULE: When there is reliance on the false word of the seller, seller is liable for
fraud and is responsible for costs incurred based on that expectation to reach
expectancy.
1) Damages either cost of repair or diminution in value
ii. RULE: Silence by a co-owner while the other misrepresents a fact, is
fraud/misrepresentation
iii. Eytan v. Bach (P bought 3 "old" paintings for $150. Turned out not to be.
Shopowner had no duty to tell buyers bc a reasonable person should have
known
1) RULE: Fraud requires a positive, direct, misrepresentation or
concealment of material fact
2) RULE: If facts are within the "diligent attention, observation, and
judgment, of a purchaser, vendor must disclose facts
a) "No duty to state obvious" - Would a reasonable buyer have
known?
VII. Frustration of Performance
A) General Rule: If a promisor's performance cannot be executed (objective or
subjective impossibility) or if both parties purpose of performance is frustrated and
neither party is at fault, an implied condition exists and neither party is liable.
B) You can have a K recession when:
i. The foundational purpose of the K is frustrated
ii. Failure of performance of a "foundational" K
iii. Impossibility of performance
1) Objectively impossible
2) Subjectively impossible
a) Access whether the cost of the greater burden is greater than the
lost value or at a prohibitive cost (Panama Canal Hypo)
b) Gravel and Sand Underwater Hypo
C) Taylor v. Caldwell (D agreed to let P use a concert hall. Due to no fault of either
party, it burnt down. Contract invalid due to impossibility.
i. RULE: If a K depends on the existence of a person or thing, if it ceases to exist,
K is void.
ii. Roberts v. Lynn Ice Co. (P leased D an ice company which burned down. P sued
to recover rent. Bc it was a lease, not a liscence loss of fire was D's loss and had
to pay rent.
1) RULE: If property is being leased, but not licensed, unforseeable loss can
fall on D
iii. Harrison v. Conlan (P was organist for church, Pastor died, church closed. P
wanted rest of K. Organist was at pastors personal service so his death
terminated the K)
1) RULE: If someone has a contract to provide personal services for a
person, when that person dies, the K is terminated.
a) EXTENSION: Death only qualifies if performance/payment was not
to be made prior and only if performance isn't intended for
another, living person.
D) Kel Kim Corp v. Central Markets Inc (P leasing from D, had to have insurance. Was
dropped, and couldn't find any more. Not getting insurance was not an impossibility
bc it was foreseeable.
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bc it was foreseeable.
i. RULE: An event being foreseeable precludes it from being considered an
impossibility
E) Krell v. Henry (D rented flat to watch Kings coronation. King got sick, so D refused to
pay. Performance was excused because the purpose of the K, within the
contemplation of both parties, was frustrated and neither party was at fault)
i. RULE: If both parties know a K is for a purpose, if that purpose is frustrated
through neither parties fault, the K is voidable.
ii. Lloyd v. Murphy (P leased land to D to sell cars, during WW2 car sales were
restricted. D unable to get out of lease because sales were not completely
banned and reasonably foreseeable)
REVIEW TO THIS POINT
I. Two Elements necessary for an agreement
A) Consideration (Ch 2)
B) Mutual Assent (Ch 3)
II. Courts will not enforce agreements, even if they have consideration and mutual assent IF:
A) Mistaken Language - Mutual Mistake
B) Obtuse terms in standard forms
C) Lack of mutuality of Obligation
III. Parties can make promises for any reason, the courts don't care why, as long as:
A) Promisor is induced in some way by exacting action from the promise
B) There is no coercion or extortion
CHAPTER FIVE: POLICING THE BARGAIN
I. Duress
A) Duress of goods: Enforceable when purchaser has no practical alternative to acquire
replacement goods upon vendor's refusal to deliver
B) Austin Instruments Inc v. Loral Corp (D won Navy K and P got SC for precision parts.
D awarded a second K and couldn't find anyone but P to fill order in time. P made D
retroactively increase prices for first SC, and allow them to fill all of second. After
fulfilling, D refused to pay increased price on first. Ruled that they didn't have to
because price increase was from economic duress)
i. RULE: Wrongful threats that deprive a party of his or her free will constitute
duress and can void a K, or permit recovery UNLESS:
1) When the non-forcing party has other options (spec perf in equity?)
2) The non forcing party does not have an urgent need
ii. Smithwick v. Whitley (P contracted to purchase and began clearing. 3 years
later, D informed P that deal was off but he could still have it for more per
acre, which was paid. P sued for duress. K made with free will, and P could
recover land in equity by enforcing first deal)
1) RULE: No duress when P has the option of suing in equity for specific
performance
iii. Wolf v. Marlton Corp (P contracted to buy land in subdivision. Put deposit
down and requested cancellation of K. Demanded most of the deposit back or
would sell to undesirables. Duress found.
1) RULE: Duress is analyzed by the state of mind produced in the person
receiving the threat and threats that are made maliciously and solely to
injure the other party are "wrongful"
C) Pre Existing Duty Rule (an alternative to Duress) - Consideration for a promise to
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C) Pre Existing Duty Rule (an alternative to Duress) - Consideration for a promise to
perform does not extend to a modification of the original agreement. A change is
not enforceable because there is no consideration for it.
i. The UCC did away with the Pre Existing Duty Rule.
II. Accord and Satisfaction
A) Marton Remodeling v. Jenson (P did work on D's house. Dispute about the price. D
wrote a check to P and wrote on it that it was full accord and satisfaction. P crossed
out and sued for difference. Did constitute accord.
i. RULE: If a person owing a creditor an unliquidated (uncertain of amount due)
and bona fide disputed amount presents a check for full accord and
satisfaction, the creditor accepts that full accord if he cashes the check.
1) Can view as a new agreement, consideration being to not pursue possible
legal action
2) Must be unliquidated (Gas company hypo)
ii. School Lines v. Barcomb Motor Sales (D bought busses from P and was
unsatisfied, gave a check, then cancelled and gave another one taking out
repair costs writing payment in full. Not full accord because not a bonafide
dispute or unliquidated sum
iii. Kilander v. Bickle - A tendered "final payment" of a lesser amount doesn't need
to have consideration to be an accord and satisfaction.
III. Employment Handbooks and Agreements
A) Sheets v. Teddy's Frosted Foods (EE was a quality control manager and told ER that
quality was bad and noncompliant with the law. He was later sued. Bc that act
protects public interests, at will employees cannot be fired for refusing to violate it.
i. RULE: Discharge is illegal when EE is seeking to comply with a statute that
noncompliance would violate public policy
ii. Price v. Carmack Datsun Inc. (EE was injured in car accident and ER tried to
discourage from filing insurance claim. P did and was fired. OK because it didnt
violate a mandated public policy
B) McDonald v. Mobil Coal Producing Inc. (EE was forced to resign due to rumors of
sexual harrasment. P claimed employee handbook constituted a K even though it
said it didn't. It did create a K because disclaimer was not conspicuous.
i. RULE: Employee Handbooks are unilateral contracts in exchange for showing
up to work
ii. RULE: If it is not intended to be, disclaimer must be conspicuous
1) Reasonable person would believe that handbook constituted a K
(objective assent)
IV. Enforcability of Specific Clauses
A) Henningsen v. Bloomfield Motors, Inc (P purchased car from D, ten days later, car
malfunctioned and caused injury. Form contained an express waranty in lieu of all
others express or implied. Ruled to not be effective because of gross inequality of
bargaining position and against public policy
i. Lack of given notice and knowledgeable assent - not conspicuous and
layperson wouldn't know that it meant what it did.
ii. Construe language of the K against the author (insurance policies)
iii. Against public policy to enforce partially due to unequal bargaining power
iv. RULE: A term that discharges manufacturer of implied warranty will not be
enforced if the mfg is in a superior bargaining position and the consumer does
not have a choice due to monopoly.
B) Richards v. Richards (P wanted to ride in husbands work truck. ER made her sign
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B) Richards v. Richards (P wanted to ride in husbands work truck. ER made her sign
waiver/authorization form. They wrecked, sued for damages. Court ruled K
unenforceable because purpose of K not clear, too broad, and no room to bargain.
i. RULE: An exculpatory clause is void when inconspicuously labeled, broad, and
inclusive, especially if the weaker party had little opportunity to bargain.
ii. Strict Construction - Would a reasonable man have construed a form labeled
"Passenger Authorization" to be a release, even if it was clear? -No
iii. Notice and knowledgable assent - P may have tried to negotiate if she knew
iv. Against public policy
C) Woollums v. Horsley - P an uneducated country guy who agreed to sell land to D for
pennies on the dollar. Court refused to grant spec perf. Due to unclean hands,
disparity in sophistication, and no room to bargain.
i. RULE: Unconscionable contracts will not be enforced in equity
1) NOTE: K may still be enforceable
2) Must be to degree of fraud which shocks the conscience
D) Williams v Walker-Thomas Furniture (D purchased household items from P,
defaulted on one and they repossessed all due to cross collateral clause. She
defaulted and they repossesed all items. Court ruled unconscionable and they would
not enforce K in law)
i. Unconscionable - lack of meaningful choice AND unreasonably favorable
terms
1) Lack of Meaningful choice
a) Deceptive terms
b) Contract for necessary goods and services and you can only buy
them there
i) Problem: Trade practices as a whole may produce this
c) Gross disparity of bargaining power
d) Must be something other than, can walk away
2) Unreasonably Favorable terms
a) Look to commercial setting
b) Can compare value to one party to value of the other
ii. UCC agrees
Chapter 5: Maturing and Breach of Contract Duties
I. Interpreting Conditions
A) Condition - Some operative fact subsequent to acceptance and prior to discharge. A
fact on which the rights and duties of the parties depend
i. Can be express or constructed (implied)
ii. Construction - process of determining the legal effect of language
iii. Condition or promise?
1) A condition creates a duty, fulfillment of a promise discharges a duty
a) Non-occurrence of a condition prevents existence of duty in other
party
b) Non-occurrence of a promise creates a breach
iv. Condition Precedent - Duty to render immediate performance, almost all
conditions in K
1) RULE: Neither party has a duty if a condition does not occur
B) Howard v. FCIC (D insured P's tobacco crops. P submitted a claim from rain damage
and plowed to reharvest before adjustor saw them. Was the rule that "crops can't
be destroyed" a condition? No, it was a promise.
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be destroyed" a condition? No, it was a promise.

i. General RULE: To determine whether a clause is a condition or promise, look
to:
1) The intent of the parties
a) Language
i) Expressio Unis - To express or imply one thing is the exclusion
of another
b) Were ramifications of either finding intended by the parties
c) Construction
i) Usage/subject matter/course of dealings
2) Policy against forfeiture
a) Presumption of a promise
b) Why? Maintain contractual obligations
c) Insurance payments count as forfeiture
ii. R2 RULE: Even if a promise, can still recover damages for breach of that
promise, even though K still stands
iii. CONTRAST W/ Merrit Hill Vineyard v Windy Heights Vineyard (D failed to get
insurance for a house sale, a condition precedent. P sued for damages, and
return of deposit. Only deposit return, no further damages.
1) RULE: Failure to fulfill a condition precedent excuses performance from
the other party, but without an independent promise to perform, does
not result in damages.
C) Berry v. Time Ins Co. (P purchased nursing home policy from D, Policy provides for
alternate care plan if agreed upon by parties. D misled then refused to negotiate one
and P paid out of pocket. Bc D prevented a condition, it was excused and they were
prevented from benefitting.
i. RULE: If a party hinders occurrence of a condition precedent, it is waived.
1) Prevention Doctrine (waiver by estoppel) - The party that prevents a
condition from occurring is estopped from benefitting from its nonoccurance
a) Generally questions of fact.
ii. Ewell v. Landing (Loaned cash to be repaid when D sold his timber. Payne died
w/o repaying. Merely a convenient time, not a condition precedent, and clearly
not the parties intentions)
1) RULE: Non performance of a condition is excused and the condition is
interpreted as a promise if the condition becomes impossible to satisfy or
one of the parties prevents the condition from occurring
a) EXCEPTION: When a loan is made far above market value, it is
speculative.
i) House sale after repairs hypo
iii. Amies v. Wesnofske (Real estate agents hired to find buyers, to receive fee half
on finding, half on closing. Found buyers, but they couldn't get financing. Agent
can't recover other half. "When" and "after" mean if, and because seller didn't
cause the condition not to happen, it stands.
iv. Semmes v. Hartford Ins Co (P had 12 mos to file and ins claim, brought five
years later. Because of the war, it was impossible and not created by either
party, that condition was excused)
1) RULE: If a situation out of the control of either party makes a condition
impossible, it is then excused.
D) Difference between waiver and estoppel:
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D) Difference between waiver and estoppel:

i. Waiver - a voluntary, knowing and intentional relinquishment of a known right
or privilege. Can't be revived.
ii. Estoppel- Must involve reliance on words or promises of another, reasonably
and to his own detriment. Can be revived after the insurer repudiates.
II. Conditions of Satisfaction
A) Fursmidt v. Hotel Abbey (P was performing laundry contract for D, that had to be to
their satisfaction. D terminated because it wasnt. Found to be ok, satisfaction didn't
need to be reasonable.
i. GENERAL RULE: Provisions requiring a standard performance fall into two
categories:
1) Relating to operative fitness, utility, or marketability - objective standard
2) Relating to fancy taste, sensibility, or judgment - subjective standard
B) Second Nat'l Bank v. Pan-Am Bridge Co (P building bank for D. Condition precedent
was certificate of approval from D's architect. Condition was unreasonably and
unfairly carried out, but still valid.
i. RULE: When a professional's approval is required as a condition, to excuse it
there must be fraud or mistake so gross to imply bad faith.
ii. CONTRAST W/ Haymore v. Levenson (Same, but with the buyer's approval.
Court ruled that there must be a reasonable justification.
1) RULE: When a party with a vested interest must approve, it has to be
reasonable.
a) Difference is that one is a professional, presumably unbiased.
III. Constructive Conditions - Order of performance
A) Constructive Conditions - Certain conditions that were not expressly provided by
the parties and which are not necessarily that type that the parties would have
agreed upon, may be implied by the court in the interest of fairness and justice
B) Three implied orders:
i. Independent or unconditional - no temporal element (immediate exchange)
ii. Conditional - one before the other
iii. Concurrently conditional - both must be performed contemporaneously
C) Nichols v. Raynbred (P promised to sell cow to D, who promised to pay. P sued bc D
did not pay, even though P did not provide cow.
i. OLD RULE: Enforceable bilateral contract which may be enforced, even if
vendor doesn't deliver.
1) Both Win.
ii. GF Hypo - Sell Norwood car, both wait in office.
D) Kingston v. Preston (P promised to work for D for 1 year and in consideration, would
give business to him and P would give security. D did not surrender premises
i. RULE: Promise to provide security in exchange for promise to give business
was a constructed condition precedent that must be completed prior to
transferring business.
1) Because there is no remedy for failure to provide security, it must be
viewed as a condition.
a) Although it wasn't the intention of the parties.
2) No one wins
E) Dual Nature of Promises
i. ALWAYS an obligation of the promisor
ii. SOMETIMES also a condition of the promisee's obligation to perform.
1) Look at the intent of the parties and intent of the transaction
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1) Look at the intent of the parties and intent of the transaction

a) Does a remedy for breach of promise exist?
b) Trade usage/commercial blackground
2) Other reasons:
a) Policy of law to minimize credit risk
b) Custom
IV. Concurrently Conditional
A) R2 Rule: Assume concurrent conditions if possible, unless language or circumstances
show the contrary. Cases that are concurrently conditional:
i. Time is fixed for both parties
ii. Time is fixed for one but not the other
iii. No time is fixed for either party
iv. Same time period is fixed for when each party has to perform.
B) Price v. Van Lint (P had not performed, neither had D due to extraneous
circumstances. He then became able to but refused. Promises ruled to be
dependent.
i. MODERN RULES - Assume performance is concurrent/dependent unless
special (extraordinary) circumstances indicate that it is not.
V. Render or Tender Rule - When an exchange of promises is due simultaneously, it is a
condition of each parties duties to either render or tender, with manifest ability to do so.
A) Ziehen v. Smith (P contracted to buy land which neither knew was encumbered at
the time of contracting and execution. P paid down payment and other expenses.
But sale could not be completed. P couldn't recover because he didn't render or
tender either.
i. RULE: In a land sale, a vendee cannot recover amounts expended in
furtherance of that K when performance by the vendor of that land was
impossible.
ii. RULE: When a contract calls for performance at the same time, the party suing
must tender or render performance. UNLESS:
1) Impossible for the other party to perform (no point in mere ceremony)
a) Risky to actually do. If buyer makes a mistake, it is their breach
2) Other party has repudiated
3) D can waive it by words or conduct
B) Courts of Equity have relaxed the requirement of tender, they may give P another
chance
C) Denial of restitution or rescission for refusing to tender performance
i. Neves v. Wright (A buyer can't rescind a K after finding out the seller didn't
have good title at the time of K formation without first inquiring into the
specifics.
ii. Basic Test: Can defect be removed as a practical matter, prior to date of
simultaneous performance? If yes - no rescission
iii. Bell v. Elder (P contracted to buy land from D, who was to provide water access
upon P getting permits and payment of fees. No time specified so concurrent.
D did not provide access so P sued to rescind and for down payment. Can't bc P
didn't render/tender
1) RULE: A K silent on time of performance is interpreted as concurrent.
VI. Protecting the Breach
A) Perfect Tender Rule - Seller cannot enforce buyer's promise unless seller has met all
specifications
i. Problem: They buyer may be taking advantage of seller's failure
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B)

C)

D)

E)

F)

i. Problem: They buyer may be taking advantage of seller's failure

Oshinsky v. Lorraine Mfg Co (P selling goods to D, K said 10/15, arrived 10/16 and D
refused shipment. D doesn't have to accept any day but the delivery date in the K.)
i. RULE: If a K for sale of goods is to be executed at a specific date, buyer doesn't
have to accept on any other date, before or after.
Jacobs & Young v. Kent (P build residence for D and due to some oversight, installed
a different brand of plumbing pipes. P sued for remaining balance, D wanted
damages for different plumbing. Doesn't have to, as it would involve economic
waste.
i. RULE: Non-performance resulting in sufficient fulfillment, while different, may
suffice if it was unintentional and causes no harm to injured party.
ii. Difference w/Oshinsky - Construction/Goods. And D never reaped benefit in
Oshinsky, but D was living in house in Jacobs & Young
1) RULE: Construction of conditions not as severe in construction K's
compared to goods K
2) UCC enforces perfect tender rule!
Plante v. Jacobs (P building house for D, P did not complete and D did not pay full
sum, but large portion. Each refused to complete obligations, like unfinished
furnishings and a misplaced wall. Ruled that builder specifically performed)
i. RULE: Substantial performance is sufficient to trigger a condition, but not to
meet the obligation to perform.
1) Substantial Performance - Essential Purpose. Not 100%, closer to 85%
a) Look at "purpose desired"
b) GF: This is on outer edge of substantial performance
ii. RULE: Damages go back to cost of completion v. Loss in Value (Groves)
iii. Every promise creates an obligation of performance (perfect performance) and
a condition of the other party's obligation to perform/pay (substantial
performance suffices)
Turner Concrete v. Chester (C substantially paid SC, SC terminated performance. SC
can't do that)
i. RULE: If paid substantially, in a bona fide dispute, and no material breach by a
party, a builder can't terminate performance.
1) They could suspend until dispute was settled though
ii. Material Breach - Defeats the essence of the Contract
1) Look at: cause of default, extent of breach, context of default, future
outcome
2) If an owner wants to stop a builder, ask whether there was subs. Perf.
Greguhn v. Mutual (P was a brick mason and fell, and was unable to continue
working. Had 2 ins policies which were paid for 9 mos, until they determined injury
didn't qualify. P sued to recover.)
i. RULE: Anticipatory Repudiation is a material breach.
1) Cannot apply to a unilateral K, or a bilateral K that P has already
performed
a) ONLY Bilateral K's where P hasn't performed
ii. RULE: Refusal to perform unless a new term is met is repudiation
1) P must be reasonably certain D would not have performed
2) Or anticipatory repudiation can only apply in situations where P has not
already tendered performance (Why Webb didn't sue for future
payments)
a) Problem if D is relying ON K.
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a) Problem if D is relying ON K.
b) May still need to perform if they sue
G) Alternatives to Damage Remedy
i. Restitution Return of value of performance
1) When payee has fully performed and payer refuses payment
a) In Gruehn that would be return of all insurance payments made to
D
ii. Declaratory Judgment - Used to require one party to do something by force of
law
iii. Judgment payable in installments - more radical
1) Some courts will file it away with option to redocket if Ins stops paying.
Burden on Ins company to file a counterclaim if disability seizes to exist.

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