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Contracts

Outline
Thursday, August 28, 2014 1:14 AM

CONTRACTS OUTLINE
Contract: a promise or a set of promises for the breach of which the law gives a remedy, or the
performance of which the law in some way recognizes as a duty. Rest. 1.
Primary authority is common law. Secondary is ArGcle Uniform Commercial Code (Sale of
Goods).
Goods- . . . all things that are movable at the Gme of idenGcaGon to a contract for sale. .
.including future goods, specially manufactured goods, the unborn young of animals,
growing crops, . . .UCC 2-103(1)(k).
Does NOT include- info, money in which the price is to be paid, investment securiGes
under ArGcle 8, the subject maQer of foreign exchange transacGons, or choices in
acGons.
Promise: a manifestaGon of intenGon to act or refrain from acGng in a specied way, so made as to
jusGfy a promisee in understanding that a commitment has been made.
CONTRACT FORMATION:
ObjecGve theory- stresses the outward manifestaGon of assent, in contrast to the older subjecGve idea
that a contract was a true "meeGng of the minds."
Whether or not there is a contract depends on whether a reasonable person would expect that
there is based on objecGve facts.
Contracts enforceable only when there is Mutual Assent and ConsideraHon.
MUTUAL ASSENT = Oer or proposal by one party + Acceptance by the other.
Assent can be manifested by conduct. Verbally or non-verbally by acGon, or failure to act.
The conduct is a manifestaGon of assent if one intends to engage in it and knows, or has reason to
know, that the other party may reasonably infer from it that he assents. Rest. 19.
Intent-
One's intent is irrelevant as long as a reasonably prudent person would construe his
words/acGons as assent. Lucy v. Zehmer
If there is objecGve evidence to show that the parGes do not wish to be bound, then there
is no assent and there is no contract.
Intent to formalize-
If parGes reach agreement but agree not to be bound unGl it is wriQen and formalized, then they
are not bound.
If they intend that a future wriGng be memorializaGon of their agreement merely as a
convenience, then they are bound regardless of whether that wriGng ever takes place.
Interna1onal Casings Group, Inc v. Premium Standard Farms, Inc
The Eect of misunderstanding (Rest. 20):
1. There is no manifestaGon of mutual assent to an exchange if the parGes aQach materially
dierent meanings to their manifestaGons AND
a. Neither party knows or has reason to know the meaning aQached by the other; or
b. Each party knows or each party has reason to know the meaning aQached by the other.
2. The manifestaGons of the parGes are operaGve in accordance with the meaning aQached to them
by one of the parGes if
a. That party does not know of any dierent meaning aQached by the other, and the other
knows the meaning aQached by the rst party; or

b.

That party has no reason to know of any dierent meaning aQached by the other, and the
other has reason to know the meaning aQached by the rst party.


Certainty of Terms:
Even though one or more terms are le] open, a K for a sale does not fail for indeniteness if the
parGes have intended to make a K AND there is reasonably certain basis for giving an appropriate
remedy.
UCC 2-204(3).
The Open Price Term
1. The parGes if they so intend can conclude acontract for sale even though the price is not
seQled. In such a case the price is a reasonable price at the Gme for delivery if
i. Nothing is said as to price; or
ii. The price is le] to be agreed by the parGes and they fail to agree; or
iii. The price is to be xed in terms of some agreed market or other standard as set or
recorded by a third person or agency and it is not so set or recorded.
2. Where, however, the parGes intend not to be bound UNLESS the price be xed or agreed,
and it is not xed or agreed, there is nocontract. . .
OFFER AND ACCEPTANCE:
Oer- A manifestaGon of a willingness to enter into a bargain, so made as to jusGfy another person in
understanding that his assent to that bargain is invited and will conclude it.
Requires a commitment to be bound immediately upon acceptance.
DeterminaGon of whether or not an oer has been made depends on a global analysis, including
the nature of the communicaGon and any preexisGng relaGonship between the parGes.
The Oeror is the master of the oer.
He dictates the manner of acceptance, who may accept the oer, and may prescribe the
Gme, place, and manner of acceptance.
TerminaGon of oers (Rest. 36):
TerminaGon revokes oeree's power of acceptance.
Can occur via 4 ways:
1. RevocaGon of the oer by the oeror
An oer proposed may be withdrawn before oeree begin performance (acceptance
of the oer) and no obligaGon is incurred thereby. The power to accept is limited by
the terms of the contract or at the end of a reasonable Gme. Ever-Tite Roong Corp.
v. Green
Depends on whether contract is unilateral or bilateral.
2. RejecGon of an oer by the oeree
SomeGmes coupled with counter-oer

The lapse (or expiraGon) of the oer in accordance with its terms, or as default, in a
reasonable Gme.
Reasonable Gme varies depending on circumstances.
4. Death or incapacity of the oeror or oeree.
In a commercial transacGon:
Firm oers-
UCC 2-205. An oer by a merchant to buy or sell goods in a signed wriGng which by its
terms gives assurance that it will be held open is not revocable . . . during the Gme stated or
. . . a reasonable Gme.
Acceptance- A manifestaGon of assent to the terms thereof made by the oeree in a manner invited or
required by the oer. (Rest. 50).
An acceptance must
1. manifest a willingness to be bound in a contractual relaGonship, and
2. Reect the terms of the oer and be provided in the way in which the oer instructs.
Common law "Mirror image rule"
EXCEPTION: UCC 2-207. [Regarding a sale of goods] An acceptance need not be
the mirror-image of the oer.
UCC rules allow that a non-conforming shipment of goods is not an acceptance
IF accompanied by proper noGce that it is an excepGon or accommodaGon.
UCC 2-206(b).
Corinthian Pharmaceu1cal Systems, Inc. v. Lederle Laboratories
A reply to an oer which purports to accept it but is condiGonal on the oerors assent to terms
addiGonal to or dierent from those oered is NOT an acceptance, but is a counter-oer. Rest.
59.
EXCEPTION: An acceptance which requests a change or addiGon to the terms of the oer IS
a valid acceptance, so long as it is not condiGonal on assent to the changed or added terms.
Rest. 61.
The Mailbox Rule: This is a default rule and not a mandatory one.
Acceptance is given and the contract is complete and binding when the oeree mails the
acceptance to the oeror. Receipt is not necessary.
Except in OpGon K- Acceptance eecGve when received by the oeror.
Parallel rejecGon and acceptance:
Rest. 40.RejecGon by mail does not terminate the power of acceptance unGl received by
the oeror.
But, if acceptance is sent a]er sending an eecGve rejecGon, it is only a counter-oer
unless the oeror receives the acceptance rst.
Manner of Acceptance:
Acceptance of goods occurs when buyer:
(a) a]er a reasonable opportunity to inspect the goods signies to the buyer that he will
take them, or
(b) fails to reject them a]er a reasonable opportunity to inspect, or
(c) does anything inconsistent with the sellers ownership. UCC 2-606.
Oeree's "power of acceptance" is terminated when the oeror takes denite acGon inconsistent
with an intenGon to enter into the proposed K AND the oeree acquires reliable informaGon to
that eect. Rest. (2d) Contracts 43.
Default rules when oerors do not specify how the oer may be accepted:
Rest. (2d) Contracts 32. In the absence of specicaGon of whether oeror seeks a
bilateral of unilateral contract, the oeree may accept by either promise or performance.
Rest. (2d) Contracts 60. If oeror fails to prescribemanner of acceptance, the oeree
3.

may accept in any reasonable way.


Rest. (2d) Contracts 30. In the absence of the oeror direcGng that acceptance be
indicated with parGcular words or act(s), the oeree may indicate acceptance in any
reasonable manner or medium under the circumstances. The oeror may not consider
oeree's silence or inacGon as the means of acceptance (this would undermine the req. of
mutual assent).
Silence or inacGon CAN indicate acceptance if the context indicates oeree's consent
to such a manner of acceptance. Rest. (2d) 69.
1. Where an oeree fails to reply to an oer, his silence and inacGon operate as an
acceptance . . . where an oeree takes the benet of oered services . . . and
reason to know they were oered with the expectaGon of compensaGon.
2. An oeree who does any act inconsistent with the oerors ownership of
oered property is bound in accordance with the oered terms . . .
Rest. (2d) Contracts 54. If oer fails to specify that oeree must noGfy the oeror of
acceptance, oeree who accepts by promise MUST provide noGce unless the oeror
otherwise receives seasonable noGcaGon. Rest. (2d) Contracts 56. An oeree who
accepts by performance, however, need not provide noGce unless he has reason to know
the oeror is not likely to learn of the performance seasonably.
Where an oer may be accepted either by promise or performance, the tender or beginning of
performance is an acceptance by performance and such an acceptance operates as a promise to
render complete performance. Rest 62.
In a commercial transacGon:
UCC 2-206
Unless the parGes indicate otherwise, an oer can be accepted in any manner reasonable
under the circumstances. An oer to purchase goods "for prompt or current shipment shall
be construed as inviGng acceptance either by a prompt promise to ship or by the prompt or
current shipment of conforming or non-conforming goods.
However, a shipment of non-conforming goods is not acceptance if the seller "seasonably
noGes the buyer that the shipment is oered only as an accommodaGon to the buyer."
Finally, where performance is a reasonable manner of acceptance, an oeror who is not
noGed of the acceptance can treat the oer as having lapsed (the power of acceptance
has been revoked).
Acceptance varying from the oer:
Common law: Mirror Image Rule. If oer and acceptance are not idenGcal, then no contract.
UCC 2-207- AddiHonal Terms in Acceptance or ConrmaHon:
1. A denite and seasonable expression of acceptance or a wriQen conrmaGon, which is sent
within a reasonable Gme, operates as an acceptance, even though it states terms addiGonal
to or dierent from those oered or agreed upon, UNLESS acceptance is expressly made
condiGonal on assent to the addiGonal or dierent terms.
2. The addiGonal terms are to be construed as proposals for addiGon to the contract. Between
merchants such terms become part of the contract UNLESS:
A. The oer expressly limits the acceptance to the terms of the oer;
B. They materially alter it; or
C. NoGcaGon of objecGon to them is already given or is given within a reasonable Gme
a]er noGce of them is received.
[Merchant: a person who deals in goods of the kind or otherwise by his occupaGon
holds himself out as having knowledge or skill peculiar to the pracGces or goods
involved in the transacGon.]
3. Conduct by both parGes which recognizes the existence of a contract is sucient to

establish a contract for sale although the wriGngs of the parGes do not otherwise establish
a contract. In such case the terms of the parGcular contract consist of those terms on which
the wriGngs of the parGes agree, together with any supplementary terms incorporated
under any other provisions of this Act.
Usually in "BaQle of the Forms" situaGon:
Serves two main funcGons:
1. To determine whether there is a K.
2. If there is a K, then what are its terms?
OpHon Contracts:
An opGon contract- a promise that meets the requirements for the formaGon of a contract and limits
the oeror's power to revoke an oer. (Rest. 25)
Rest. 87. Bilateral OpGon Contract
1. An oer is binding as an opGon contract if it
A. is in wriGng and signed by the oeror, recites a purported consideraGon for the making of
the oer, and proposes an exchange on fair terms within a reasonable Gme; or
B. is made irrevocable by statute.
2. An oer which the oeror should reasonably expect to induce acGon or forbearance of a
substanGal character on the part of the oeree before acceptance and which does induce such
acGon or forbearance is binding as an opGon contract to the extent necessary to avoid injusGce.
(Equitable Op-on).
OpGon Contract created by Part Performance or Tender (Rest. 45.)
1. Where an oer invites an oeree to accept by rendering a performance and does not invite a
promissory acceptance, an opGon contract is created when the oeree tenders or begins the
invited performance or tenders a beginning of it.
2. The oeror's duty of performance under any opGon contract so created is condiGonal on
compleGon or tender of the invited performance in accordance with the terms of the oer.
CONSIDERATION: The element of exchange required for a contract to be enforceable as a bargain.
To consGtute as consideraGon, a performance (or a promise for future performance) must be
"bargained for" by the promisor.
Bargained-for Exchange vs. Gi]: A performance or return promise that is sought by the promisor in
exchange for his promise and is given by the promisee in exchange for that promise.
The PROMISE SHOULD INDUCE THE OTHER PROMISE
The performance may be
1) an act other than a promise, or
2) a forbearance, or
3) the creaGon, modicaGon, or destrucGon of a legal relaGon. (Rest. (2d) 71.)
A valuable consideraGon may consist either in some right, interest, prot, or benet
accruing to one of the parGes or some forbearance, detriment, loss, or responsibility
given, suered, or undertaken by the other party.
CondiGonal Promises:
CondiGonal promises exchanged for consideraGon, IF the provision of the performance that
serves as consideraGon is also the condiGon that must be saGsed.
The condiGonal nature of a promise does NOT necessarily indicate the presence of consideraGon,
because the promisee's saGsfacGon of the condiGon might not induce the promisor's promise.
A promise of future performance can be consideraGon for another party's promise (or present
performance), even if the obligaGon to provide that future performance is expressly condiGoned
on the occurrence of an event that is not certain to occur.
Not consideraGon:
Gratuitous promise: a promise oered as a gi], with no performance on the part of the recipient

required.
Not bargained for.
"Past consideraGon"
Promises to pay a pre-exisGng debt.
Promise to pay for past services received.
Illusory Promises:
If the occurrence of a condiGon of performance is enGrely within the discreGon of the
promisor, the element of commitment can be so enGrely absent that a promise, though
cloaked in the language of obligaGon, does not consGtute consideraGon.
Rest. (2d) 77. A promise is not consideraGon if by its terms the promisor reserves a choice
of alternaGve performances unless
A. Each would be consideraGon, or
B. One would be consideraGon and the other is unlikely to materialize because of
supervening events.
A promise condiGonal upon the promisor's saGsfacGon is not illusory when his judgment of
his dissaGsfacGon with the performance of the contract is made in good faith, and not
arbitrarily or unreasonably. MaFei v. Hopper.
AFFIRMATIVE DEFENSES TO CONTRACT ENFORCEMENT:
If there is Mutual Assent and ConsideraHon, there is an enforceable contract, however one party can
someGmes avoid enforcement by asserGng an armaGve defense. ArmaGve defenses must be raised
in the answer by the defendant, or it is waived.
The Statute of Frauds: Protects against the enforcement of alleged contracts that were never
actually formed, or those that were arguably formed but ill considered by the parGes.
Infancy and Incapacity (two dierent defenses): Oer protecGon for groups that, due to their
status, seem parGcularly likely to enter into contracts that do not serve their deeper interests.
Duress and MisrepresentaGon (two dierent defenses): Enable courts to police behavior by one
contracGng party that can lead the other to enter contracts that are either not truly voluntary or
not suciently informed.
Unconscionability: A modern innovaGon that can be understood as combining concerns about the
status of one party and the behavior of the other.
Public Policy: Provides courts with a tool to protect the interests of individuals not party to a
contract, and society generally, when contracts that are both voluntary and desirable for the
contracGng parGes threaten to create unjusGed external harms.

The Statute of Frauds:


The American legal system generally does not require wriQen evidence of a contract's terms as a
prerequisite for enforcement. The Statute of Frauds gives excepGons to this rule.
A contract that falls within the statute of frauds does not technically need to be a "wriQen
contract" as long as there is a wriQen memorandum evidencing its existence and essenGal terms
that is signed by the party against whom the contract is being enforced. Rest. (2d) 131.
The memorandum of agreement does not have to be one document. It may be mulGple
documents if they are linked together expressly or internally by evidence of subject maQer and
occasion. Crabtree v. Elizabeth Arden Sales Corp.
Memorandum must:
Reasonably idenGfy the subject of the K
Indicate a K has been made
State with reasonable certainty the essenGal terms
Be signed by or on behalf of the party to be charged.
Contracts that are subject to the Statute of Frauds:
1. (Executor-administrator)- A contract of an executor or admin to answer for a duty of his
decedent.
2. (Suretyship)- A contract to answer for the duty of another. It is basically a guarantor
agreement.
3. (Marriage)- A contract made upon consideraGon of marriage.
4. (Land contract)- A contract for the sale of an interest in land.
A party may admit the sale of land by a verbal contract, and yet plead the Statute of
Frauds to defend an acGon for specic performance. Only the "Doctrine of Part
Performance" can take the oral contract out of the Statute of Frauds. Chomicky v.
BuFolph.
"Doctrine of Part Performance" is invoked to give relief to those who
substanGally and irretrievably change their posiGon in reliance on the oral
agreement.
It CAN be used to validate the conveying of real-estate pursuant to an
oral contract.
5. (One-year)- A contract that is not to be performed within one year from the making
thereof.
A contract for lifeGme of employment should be treated as one including a
performance that is "not to be performed within the space of one year from the
making thereof." McInerney v. Charter Golf, Inc.
6. Contracts for the Sale of Goods priced at $500 or more governed by UCC SofF:
Contracts governed by UCC's Statute of Frauds provisions:
1. *(UCC 2-201)- A contract for the sale of goods priced at $500 or more.
2. (UCC 8-319)- A contract for the sale of securiGes.
3. (UCC 1-206)- A contract for the sale of personal property not otherwise covered, to
the extent of enforcement by way of acGon or defense beyond $5000 in amount or
value of remedy.
Also, UCC requires a wriGng signed by the debtor for an agreement which creates or
provides for a security interest in personal property or xtures not in the possession
of the secured party.
Rest 131: A contract within the Statute of Frauds is enforceable if it is evidenced by any wriGng,
signed by or on behalf of the party to be charged.
UCC 2-201: Between merchants if within a reasonable Gme a wriGng in conrmaGon of the K and
sucient against the sender is received, and the party receiving it has reason to know its

contents, it saGses the SoF against the recipient, unless the recipient les a wriQen objecGon
within 10 days of receipt.
The State of Frauds Does NOT Apply when:
One party has fully performed.
One party has performed in part.
UCC 2-201(3)
Infancy:
The law of infancy provides one of the clearest rules in contract law:
Contracts entered into by an individual under the age of majority are voidable at the elecGon of
the minor, or "infant," before or within a reasonable Gme a]er reaching the age of majority,
UNLESS the K was for necessaries.
Goals: Protect minors from themselves, and deter adults from contracGng with minors.
Important quesGon that arises:
Whether a minor who disarms a contract must compensate the adult for depreciaGon of
or damage to the assets provided by the adult prior to disarmance.
If entered into for "necessaries" then the contract receives special treatment.
Factors to use to conclude whether a product or service is a necessary depends on:
the social posiGon and situaGon in life of the infant
Infant's (and his parent's) fortune.
The infant's need for the arGcles furnished
RULE: Absent misrepresentaGon or torGous damage to the property, a minor who disarms a
contract for the purchase of an item which is not a necessity may recover his purchase price
without liability for use, depreciaGon, damage, or other diminuGon in value. Halbman v. Lemke
Minor sGll has to give back what is in his possession.
Done to protect minors from themselves.
ConicGng RULE: Absent overreaching and unfair bargaining, a seller may receive
reasonable compensaGon for the use of, depreciaGon of, or damage to goods sold to a
minor. Dodson v. Shrader
It protects minors from exploitaGon from adults. (contrasted to Halbman rule).
Much more dicult to enforce and is very fact intensive.
RULE: An infant is liable for the value of necessaries furnished him. A good or service is not a
"necessary" if infant is already supplied with sucient arGcles of the kind, or if he has a parent or
guardian who is able and willing to supply them.
Policy: "The policy of the law of infancy is to discourage adults from contracGng with an
infant; they cannot complain if, as a consequence of violaGng that rule, they are unable to
enforce their K's." Webster Street Partnership, LTD v. Sheridan
Encourages minors who ran away to return home.
Incapacity:
The law protects individuals who lack mental capacity by virtue of mental illness or intoxicaGon,
similarly as it protects Infants. There two dierences:
It is less clear what signs of mental impairment jusGfy paternalisGc legal protecGon.
ParGes are potenGally enGtled to avoid or rescind contractual obligaGons if they are either
unable to understand the nature and consequences of a transacGon ("cogniGve test") or if
they are unable to act reasonably in relaGon to the transacGon ("aecGve" or "voliGonal"
test). Rest. (2d) 15(1).
RULE: A person is deemed competent under the cogniGve test, if she has the
capacity to understand the nature of the act and to apprehend its consequences. A
person's acts made while competent, under this test, will be held, even if they agree
to inequitable agreements. In Re Marriage of Davis

CogniGve Test tries to advance the principle of autonomy.


Many jurisdicGons have adopted the adapGve test due to psychological
advances.
RULE: A contract entered into by someone who lacks mental capacity is voidable.
Further, if one party has knowledge, either actual or construcGve of the other parGes
lack of capacity, the party with such knowledge may not be restored to their previous
posiGon if it is impossible to do so. Hauer v. Union State Bank of Wautoma
Policy: The protecGon of jusGable expectaGons and of the security of
transacGons, and the protecGon of persons unable to protect themselves
against imposiGon.
RULE: If an individual takes advantage of another's demenGa and enters into a
contract with him/her, the contract is voidable, and should be rescinded to arrive as
far as possible to the restoraGon of the status quo before the transacGon being
cancelled. Farnum v. Silvano.
Competence involves comprehending "what is going on" and an ability to
comprehend the nature and quality of the transacGon, with an understanding
of its signicance and consequences.
The concern that protecGng an inrm party can interfere with the legiGmate expectaGons of a
contracGng partner who has no reason to know of the inrmity is arguably more signicant in the
case of incapacity than in the case of infancy.
There are limits placed on the right to avoid contractual obligaGons where a contracGng
partner lacks reason to know of the party's condiGon and judges are allowed the exibility
to limit relief when providing resGtuGon cannot prevent unjust results. Rest. (2d)
15(1)(b), 15(2).
IntoxicaGon:
1. Because of intoxicaGon a party is unable to understand in a reasonable manner the nature
and consequences of the transacGon, or is unable to act in a reasonable manner in relaGon
to the transacGon, and
2. The other party has reason to know. Rest. (2d) 16.
CogniGve Test: Inability to understand what is going on.
VoliGonal or AecGve Test: Understanding of what is going on, but inability to control ones acGons or to
act reasonably.
And the other party must know of this condiGon, if being asserted as a defense.
Limits on the right to rescind:
Where the contract is made on fair terms and the other party is without knowledge of the mental
illness or defect, the power of avoidance . . . terminates to the extent that the contract has been
so performed in whole or in part or the circumstances have so changed that avoidance would be
unjust. In such a case a court may grant relief on such equitable terms as jusGce requires. Rest.
15(2).
Duress:
The doctrine of duress allows courts to protect parGes from the consequences of agreements that
saGsfy the technical requirements of contract but were not entered into voluntarily.
Courts struggle to disGnguish between negoGaGng behavior that consGtutes impermissible coercion
and ordinary hard bargaining on the part of a party upon whom the circumstances have endowed
superior bargaining power.
O]en, one party will reluctantly accept a disagreeable proposal made by another for the lack of
alternaGve courses of acGon.
A rule that would render these K's voidable would threaten to undermine condence in the
certainty of contractual obligaGons and disincenGvize parGes with bargaining power to

enter into mutually benecial transacGons.


The balance between acceptable leverage and unacceptable coercion is struck by permiung
parGes to avoid enforcement of K's coerced by an "improper threat" by the oeror that he oeree
has no reasonable alternaGve but to accept. Rest. (2d) 175, 176.
Improper threat:
1. Threat is a crime or a tort
2. It threatens a criminal prosecuGon
3. It threatens civil liGgaGon and is made in bad faith
4. It is a breach of the duty of good faith and fair dealing
Rest. 172. A threat is improper if the resulGng exchange is not on fair terms and
1. the threatened act would harm the recipient and would not benet the party making
the threat, or
2. what is threatened is a use of power for illegiGmate ends.
RULE: A contract made by a party under compulsion (or duress) is void, because there is no
consent where there is compulsion. Duress by threat exists where the threat excites a fear of
some grievous wrong, as of death, or great bodily injury, or unlawful imprisonment. Duncan v.
Hensley.
RULE: Duress can be personal or economic, if against free will. For Econ duress, prove that
"immediate possession of needful goods is threatened," or that a party threatened to breach K by
withholding goods, unless more demands agreed to. Aus1n Instrument, Inc v. Loral Corp.
A mere threat to breach K is not by itself "economic duress."
The threatened party must prove that it could not obtain the goods from another source,
and that the ordinary remedy for break of K would not be adequate.
K ModicaGon: Rest. 89. Contract modicaGon is enforceable without addiGonal consideraGon if:
A. ModicaGon is fair and equitable, in light of unanGcipated circumstances that arose a]er
the K was made, or
B. JusGce requires enforcement of the modied K in view of material change of posiGon in
reliance on the promise.
MisrepresentaGon:
The misrepresentaGon doctrine enables parGes to avoid enforcement of contracts that are inconsistent
with their autonomous preferences. In cases of misrepresentaGon, assent itself is not coerced, but
instead the complaining party lacked informaGon at the Gme of contracGng that, if known, would have
caused that party to withhold consent.
Nonenforcement can be jusGed by the observaGon that the rst party's behavior violated
accepted social norms of fair dealing, that the agreement did not reect the counterpart's
autonomous choice, or that the transacGon would likely violate the principle of Pareto eciency.
Principle of Pareto eciency- at least one party is made subjecGvely beQer o by the result
and that neither is made subjecGvely worse o.
Generally, if a party can show misrepresentaGon, he may use it as a defense in a breach of K
acGon brought by the other party, or Use it as grounds for rescission or damages in a suit brought
by him.
Must be a misstatement of Fact, not opinion:
UNLESS, special circumstances such as a duciary relaGonship or if the person making the
statement holds out as an expert.
Nondisclosure: Half truths, posiGve concealment, failure to correct,
Elements of MisrepresentaGon:
1. Deceiwul act:
ArmaGve representaGon
Half truth

AcGve concealment
Non-disclosure, Rest. 161: Nondisclosure is equivalent to an asserHon:
Failure to prevent some previous asserGon from being a misrepresentaGon.
Failure to correct the other partys mistake as to a basic assumpGon and non-disclosure
consGtutes bad faith.
Failure to correct a known mistake as to the contents of a wriQen K.
RelaGonship of trust and condence.
1. Fraudulent or material
2. JusGable reliance:
The party must show he jusGably relied on the misstatement.
3. Damaged in a pecuniary way
RULE: A condiGon that materially impairs the value of property, known to the seller and le] undisclosed
to the buyer can consGtute a basis for rescission of the contract. Stambovsky v. Ackley.
Fraud:
Elements:
1. MisrepresentaGon of fact, opinion, intenGon or law
2. Fraudulent:
If the person making the statement knows or believes it is:
Not in accord with the facts, or
Does not have condence that is the truth
Knows that he does not have the basis that he states or implies for the asserGon.
1. Made to induce another to act on it in reliance,
2. Another jusGably relies,
3. Causes pecuniary (nancial) loss.
Used to recover damages, but cannot rescind contract.
Unconscionability:
The unconscionability doctrine reects a somewhat uneasy suspicion that some contracts might fail to
reect true party autonomy or fail to make both parGes beQer o than they otherwise would be
notwithstanding the inapplicability of these other doctrines.
In these cases, plainGs o]en challenge the validity of specic terms rather than of the enGre
agreement, which raises quesGons to the appropriate remedial acGon subsequent to a nding of
unconscionability.
Courts may:
Refuse to enforce the enGre contract, or
Refuse to enforce the oending term while leaving the remainder of the contract intact, or
Reform the oending term.
Rest. 208 and UCC 2-302:
1. If the court as a maQer of law nds thecontract or any clause of the contract to have been
unconscionable at the Gme it was made the court may refuse to enforce the contract, or it may
enforce the remainder of the contract without the unconscionable clause, or it may so limit the
applicaGon of any unconscionable clause as to avoid any unconscionable result.
2. When it is claimed or appears to the court that thecontract or any clause thereof may be
unconscionable the parGes shall be aorded a reasonable opportunity to present evidence as to
its commercial seung, purpose and eect to aid the court in making the determinaGon.
Unconscionability generally recognized to include absence of meaningful choice on the part of one of
the parGes, and contract terms that are unreasonably favorable to the other party.
Factors relevant to choice: manner in which K entered, did parGes understand terms, bargaining
power?, fairness of the terms of K
In determining reasonableness or fairness, the primary concern must be with the terms

(substance) being considered in light of the circumstances exisGng when the K was made.
RULE: A]er an unconscionable K is ruled unenforceable, the other party should be able to recover
its net costs plus reasonable prots, in addiGon to any charges necessarily incurred. Fros1fresh
Corp v. Reynoso.
Public Policy:
Courts will refuse to enforce an otherwise valid contract if the agreement contravenes "public policy."
ID-ing Public policy requires courts to analyze statutory pronouncements of legislatures and, in
some cases, the well-established judicial pronouncements resolving disputes in common law
cases.
RULE: Courts can use Public policy doctrine to declare a K invalid when it is in direct conict with
exisGng statutes, or if it is in conict with public policies of the jurisdicGon. In the MaFer of Baby
M; HewiF v. HewiF.
CONTRACT INTERPRETATION:
Standard Form Contracts:
Most standard form contracts are presented as contracts of adhesion (meaning that the dra]ing party
oers the terms as a single, nonnegoGable, take-it-or-leave-it proposiGon).
Courts have avoided the enforcement of these contracts to protect against: Surprise, oppression,
unreasonable terms.
RULE: A party who has no knowledge of the existence of an (unreasonable?) term in a contract, cannot
be said to have assented to it, and thus, is not bound by it. Healy v. NY Central & Hudson River RR Co.
Rest. 211(3): Where the other party has reason to believe that the party manifesGng assent would not
do so if he knew that the wriGng contained a parGcular term, the term is not a part of the agreement.
Rest. 69: (1) Where an oeree fails to reply to an oer, his silence and inacGon operate as an
acceptance . . . where an oeree takes the benet of oered services . . . and reason to know they
were oered with the expectaGon of compensaGon. (2) An oeree who does any act inconsistent with
the oerors ownership of oered property is bound in accordance with the oered terms . . .
RULE: AddiGonal terms included in a box shipped by the seller do become part of the contract between
the parGes, even if the purchaser is unaware of the addiGonal terms and the purchasers acceptance of
the terms is by not returning the item purchased. Hill v. Gateway 2000, Inc.
COUNTER RULE: This case stands for the proposiGon that online contracts must be held to the
same standards as other wriQen documents and terms therein must also be conspicuous. If a
reasonably prudent person is not alerted to terms, he cannot assent to them. Specht v. Netscape
Communica1ons Corp.
RULE: An exculpatory clause is generally enforced "unless (1) it would be against the seQled public
policy of the State to do so, or (2) there is something in the social relaGonship of the parGes militaGng
against upholding the agreement." O'Callaghan v. Waller & Beckwith Realty Co.
RULE: Whether exculpatory clause aects the public interest depends on whether it:
Concerns a business that is generally thought to be suitable for public regulaGon.
The party seeking exculpaGon is providing service of great importance to the public, as a
maQer of necessity.
The party is willing to perform this service for any who seeks it.
The party has superior bargaining power, and confronts the public with a standardized
adhesion contract of exculpaGon. Tunkl v. Regents of the University of California.
RULE: One-sided arbitraGon agreements are unconscionable. Such agreements must have an element
of mutuality. Armendariz v. Founda1on Health Psychcare Services, Inc
The Last Shot Rule:
Rest. 30(2) and[ UCC 2-206]:
Unless otherwise [unambiguously indicated] . . . an oer invites acceptance in any
reasonable manner.

The BaQle of the Forms:


This is when both contracGng parGes simultaneously aQempt to impose standard form contracts, and
the terms embodied in the two forms are inconsistent.
Under the common law "mirror image" rule, a purported acceptance that does not precisely
mirror the terms of the oer, is a counteroer.
It acts like a "last shot" rule: the party that sends the last form controls the terms of the
agreement.
Under the UCC 2-207. Recognizes that a buyer and a seller can enter into a contract by one of
three methods:
1. A denite and seasonable expression of acceptance or a wriQen conrmaGon which is sent
within a reasonable Gme operates as an acceptance even though it states terms addiGonal
to or dierent from those oered or agreed upon, unless acceptance is expressly made
condiGonal on assent to the addiGonal or dierent terms.
2. The addiGonal terms are to be construed as proposals for addiGon to thecontract.Between
merchants such terms become part of the contract unless:
A. the oer expressly limits acceptance to the terms of the oer;
B. they materially alter it; or
C. noGcaGon of objecGon to them has already been given or is given within a
reasonable Gme a]er noGce of them is received.
Merchant: A person who deals in goods of the kind or otherwise by his occupaGon
holds himself out as having knowledge or skill peculiar to the pracGces or goods
involved. UCC 2-104.
If not merchant, oeror must explicitly consent to addiGonal terms.
3. Conduct by both parGes which recognizes the existence of acontractis sucient to
establish acontract for sale although the wriGngs of the parGes do not otherwise establish
a contract. In such case the terms of the parGcular contract consist of those terms on which
the wriGngs of the parGes agree, [and default provisions of the UCC].
ConicGng terms:
"Knockout Rule": A majority of courts subscribe to this rule. The conicGng clauses knock each
other out of the contract, so neither enters the contract. A UCC "gap-ller" provision will be used
instead if one is relevant; otherwise, the common law will control.
AlternaGve approach: The clause proposed in the second form fails to have any eect.
Klocek v. Gateway, Inc. P's were given ve days to return their computer or submit to an arbitraGon
clause, to which they disagreed.
RULE: This case stands for the proposiGon that the vendor is not necessarily the master of the
oer and that a consumer should not be held to a vendors level of knowledge when entering into
a contract.
The Parol Evidence Rule:
Under certain circumstances the parol evidence rule renders unenforceable agreements entered into
prior to or simultaneously with the adopGon of a wriQen contract.
Applies to oral and wriQen evidence.
Its primary purpose is to protect parGes' reasonable expectaGon that a nal wriQen agreement
supersedes earlier agreements and preliminary discussions that otherwise might be understood
as promises.
ONLY applies to prior and contemporaneous agreements.
Three QuesGons to ask:
1. Does the dispute raise a parol evidence issue?
2. Is the wriGng completely or parGally integrated?
Rest 209(1): An integrated agreement is a wriGng consGtuGng a nal expression of one or

more terms of an agreement.


Rest 210(1): A completely integrated agreement is an integrated agreement adopted by the
parGes as a complete an exclusive statement of the terms of the agreement.
Rest 210(3): Whether an agreement is completely or parGally integrated is to be
determined by the court as a quesGon preliminary to determinaGon of a quesGon of
interpretaGon or applicaGon of PER.
If totally integrated: No evidence of prior or contemporaneous agreements may be
admiQed if it would either contradict or add to the wriGng.
If parGally integrated: No evidence or prior or contemporaneous agreements may be
admiQed if it would contradict a term of the wriGng.
Prior evidence admissible if it does not contradict a term.
Merger Clause: A clause indicaGng that the wriGng consGtutes the sole agreement between
the parGes.
It will conclusively establish that the document is a total integraGon, unless the
document is obviously incomplete or the clause was included as the result of fraud or
mistake.
If no merger clause, then the whole wriGng will be examined. If incomplete (no
menGon of price or only expresses the duty of only one party) then treat it as a
parGal integraGon.
Four Corners Approach (textual analysis)-
To determine integraGon, only look exclusively at the document. Assess
whether reasonably people in the posiGon of the contracGng parGes would
have naturally put the terms of the alleged oral agreement into the nal
wriGng, or would have le] them out.
Modern (contextual analysis)-
Look at the actual intenGon of the parGes. If all evidence shows that they did
not intend the wriQen contract to contain all the terms of their agreement, and
that other oral agreements were made and were intended to be binding, this
evidence should be given to the jury.
No Parol evidence rule is necessary for this general rule to be followed.
UCC 2-202 approach (see below).
If the addiGonal terms were such that the parGes would have CERTAINLY
included them within the wriGng, then they are not admissible.
3. If the wriGng is only parGally integrated, what addiGonal terms are consistent with the terms
nalized in the wriGng?
Four corners, textual analysis
Modern, contextual analysis
UCC 2-202 Parol Evidence Rule:
Terms with . . . set forth in a wriGng intended by the parGes as a nal expression of their
agreement with respect to such terms as are included therein may not be contradicted by
evidence of any prior agreement or of a contemporaneous oral agreement, but may be explained
or supplemented
A. by course of dealing or usage of trade or by course of performance; and
B. by evidence of consistent addi-onal terms unless the court nds the wriGng to have been
intended also as a complete and exclusive statement of the terms of the agreement.
Jury is only present a]er it has been decided whether the contract is fully or parGally integrated. That
decision is le] for the judge.
Contemporaneous and Subsequent expressions:
Contemporaneous Oral agreements are barred by PER.

Contemporaneous wriGng will be treated as if part of the nal wriGng.


RULE: Where parGes, without any fraud or mistake, have deliberately put their engagements in wriGng,
the law declares the wriGng to be not only the best, but the only evidence of their agreement. Gianni v.
R. Russell & Co.
RULE: Evidence of oral collateral agreements is excluded only when the nder of fact is likely to be
misled. Masterson v. Sine.
Policy: WriQen evidence > Human memory, fraud or unintenGonal invenGon by witnesses will
mislead the fact nder.
ExcepGon to PER: An oral collateral agreement to the main agreement that is supported by
separate consideraGon may be demonstrated, even though it may have been made prior to what
seems to be a completely integrated wriGng.
RULE: Even when extrinsic evidence is admissible, it may not be used to demonstrate an intent that
contradicts or adds to the intent expressed in the wriGng. Nelson v. Elway.
ExcepGons:
Evidence to prove all the tradiGonal defenses that show a lack of contract formaGon: oer,
acceptance, consideraGon, capacity, illegality, duress, fraud, mistake and what not.
Evidence to show the existence of a condiGon.
InterpretaGon of Ambiguous Terms:
When parGes intend dierent meanings, the ignorant party's meaning wins against the other party's.
When both parGes have dierent intent and neither knows the meaning intended by the other, the
court will search for the most objecGvely reasonable meaning. Rest. 201.
1. First, Judge determines whether the disputed term is suscepGble to more than one meaning.
The Four Corners Rule: Judge may not consult any extrinsic evidence whatsoever.
The Plain Meaning Rule: Judge will not hear evidence about the parGes' preliminary
negoGaGons, but will hear evidence about the circumstances, or "context," surrounding the
making of the agreement.
The Liberal Rule: The judge will admit evidence of prior negoGaGons for the limited purpose
of determining whether the language in dispute lacks the acquired degree of clarity.
Rest. 201:
1. If the parGes share the same intent as to the meaning of terms, that meaning
governs.
2. If the parGes intend dierent meanings, but one party understands the others
meaning (and the opposite is not true), the meaning intended by one and
understood by the other governs.
3. If the parGes have dierent intenGons unknown to each other, Cts search for
the most objecGvely reasonable meaning.
2. Then, determine the relevance and the relaGve probaGveness of evidence oered to support
compeGng interpretaGons of the ambiguous terms.
UCC 2-208:
1. Where K for sale involves repeated occasions for performance, course of performance accepted
to acquiesced in without objecGon shall be relevant to determine the meaning of the K.
2. Express terms, course of performance, course of dealing and usage in trade should be construed
consistently.
If inconsistent, express terms and course performance control over course of dealing and trade
usage.
Maxims of InterpretaGon:
If the primary purpose of the parGes in making the K can be ascertained, that purpose is given
"great weight."
All terms will be interpreted, where possible, so that they will have a reasonable, lawful, and

eecGve meaning.
An ambiguous term will be construed against the dra]er.
A negoGated term will control over a standardized porGon of the agreement that is not separately
negoGated.
Can use "Course of Dealing" or "Usage of trade" to help interpret meaning.
Extrinsic Evidence for ambiguous terms:
It is the job of the jury to evaluate extrinsic evidence, NOT the judge.
RULE: A K must be interpreted in accordance with the plain meaning and intent of parGes. When
there is ambiguity, the Court may look to extrinsic evidence, including industry custom.
Atmel Corp v. Vitesse Semiconductor Corp.
RULE: Extrinsic evidence may not be introduced to explain an unambiguous contract provision.
Extrinsic evidence cannot be used to introduce ambiguity. WWW Associates, Inc v.
Giancon1eri.
RULE: Extrinsic evidence IS admissible to explain the meaning of a wriQen agreement if the
oered evidence is relevant to prove a meaning to which the language of the instrument is
reasonably suscepGble.
Pacic Gas & Electric Co. v. GW Thomas Drayage & Rigging Co.
RULE: Where a party to a contract is not a member of the trade and the usage of a term, common to
the trade, is challenged, the party that is in the trade has the burden of proving that the party not in the
trade had actual knowledge of the usage or that the usage is "so generally known in the community
that his actual individual knowledge of it may be inferred." Frigaliment Impor1ng Co v. BNS
Interna1onal Sales Corp
Rest. 201: Whose Meaning Prevails:
1. If the parGes share the same intent as to the meaning of terms, that meaning governs.
2. If the parGes intend dierent meanings, but one party understands the others meaning (and the
opposite is not true), the meaning intended by one and understood by the other governs.
3. If the parGes have dierent intenGons unknown to each other, Cts search for the most objecGvely
reasonable meaning.
The Implied Duty of Good Faith and Fair Dealing:
Rest. 205. Every K imposes upon each party a duty of good faith and fair dealing in its performance and
in its enforcement.
UCC 1-304. Every contract of duty within the U.C.C. imposes an obligaGon of good faith in its
performance and enforcement.
It is invoked most o]en
When one party acts in a way that appears to deprive the other party of its legiGmate
expectaGons under the contract, or
When one party exercises discreGon that is allocated to it by the contract in an arbitrary or
exploitaGve way.
DEFINING PERFORMANCE OBLIGATIONS:
CondiGons and Excuses:
When a K obliges a party (the obligor) to perform an act, the obligor is said to have a "duty."
Rest. 235:
1. Full performance of a duty under a contract discharges the duty.
2. When performance of a duty under a contract is due, any non-performance is a breach.
CondiGons:
Some duGes in contracts are absolute, while others become due only if a condiGon occurs.
CondiGon- An event that triggers a duty. Rest. 224.
CondiGon precedent- any event, other than Gme, which must occur before performance is due.
CondiGon subsequent- any event that discharges a duty a]er it has become absolute.

Ordinary condiGons- events that are beyond the control of either party and thus are not
obligaGons of either.
When these are not saGsed, the duty never becomes due, but neither party has a
legal cause of acGon against the other.
Promissory condiGons- are a duty of one party as well as condiGons of the other party's
duty. Rest. 225.
When these are not saGsed, it consGtutes as a breach of contract, which means that
the condiGonal duty is not triggered and that the non-breaching party has a cause of
acGon for breach.
"Express" and "ConstrucGve" CondiGons:
Express- can be ordinary or promissory. Requires Strict compliance
ConstrucGve- Events that consGtute condiGons by operaGon of law. Req. substanGal
compliance.
RULE: If there is any doubt as to the parGes' intenGon, we interpret a clause in a contract as a
promise (a duty) rather than a condiGon. Main Electric, LTD v. Printz Services Corp
This rule expresses the policy of avoiding harsh results of forfeiture against a party who has
no control over the occurrence of the condiGon.
Rest. 227. (1)In resolving doubts as to whether an event is made a condiGon of an obligors
duty, . . . an interpretaGon is preferred that will reduce the obligees risk of forfeiture, unless
the event is within the obligees control or the circumstances indicate that he has assumed
the risk.
POLICY for preferring an interpretaGon that creates a duty on the obligee's part:
If the performance of an act is treated as a condiGon to another's duty, a
non-performance of that act completely discharges the laQer from his
obligaGons, even if the failure of the condiGon to occur has damaged him
liQle.
A party that breaches is liable only for damages he causes by the breach.
Rest. 237: ConstrucGve condiGons, sequenGal performances:
. . . It is a condi-on of each partys remaining duGes to render performances to be
exchanged under an exchange of promises that there be no uncured material failure by the
other party to render any such performance due at an earlier -me.
Rest 234.
1. Where performances can be rendered simultaneously, they are to that extent due
simultaneously, unless the language or circumstances indicate to the contrary.
2. . . . Where the performance of only one party under an exchange requires a period of Gme,
his performance is due rst . . . , unless the language or circumstances indicate to the
contrary.
Promises vs. CondiGons:
Intent (more important than words).
InterpretaGon as a promise preferred.
SubstanGal Performance and Material Breach:
In some cases, the failure of a minor condiGon may threaten to impose a signicant hardship on
the party expecGng a subsequent performance.
The doctrine of "Material Breach"- The breach of a promissory condiGon is treated as the failure
of the condiGon only if the breach is material. If it is not material, the non-breaching party retains
the right to sue for any damages, but subsequent condiGonal duGes must be performed. Rest.
229.
Material or not is a quesGon of fact. Factors to consider:
DeprivaGon of expected benets.

The extent to which the non-breaching party can be adequately compensated.


Part Performance: The greater this is, the less likely the breach will be deemed material.
Likelihood of cure of breach.
Willfulness of breach.
Delay in performance
The doctrine of "SubstanGal Performance"- SubstanGal but incomplete performance saGses the
construcGve condiGon, although the injured party may sGll demand compensaGon for the harm
caused by the breach of duty. Rest. 237(d).
If a party fails to substanGally perform, but the defects in the performance could be fairly
easily cured, the other partys duty to give a return performance is merely suspended.
If the defect is so substanGal that it cannot be cured within a reasonable Gme, then the
other party is completely discharged from any duty to perform and may sue for breach of
contract.
The UCC takes a dierent approach (concerning the sale of goods).
"Perfect Tender" Rule- The Buyer has the right to reject goods that do not conform to exact
contractual requirements. UCC 2-601.
The buyer may reject the whole, or accept the whole, or accept any unit(s) and reject
the rest.
If the buyer rejects a non-conforming shipment, the seller has the opportunity to
correct any breach if Gme remains for performance on the contract. UCC 2-508,
2-602, 2-605.
If the buyer does not reject imperfect goods within a reasonable Gme a]er delivery,
the buyer must pay but can sue for damages due to any breach. UCC 2-606, 2-607.
Not strictly applied by courts. Generally only allow buyers to reject if the defects are
substanGal ones.
RaGonales:
1. Courts might look at trade usage, course of dealing, and course of performance
to determine whether there was a defect at all, and then conclude there
wasn't
2. May nd that a buyer failed to follow the UCC procedures for rejecGng the
tender.
3. The court may hold that the seller "cured" the defect.
RULE: Where a contract has been substanGally performed and the cost of replacement would be
grossly out of proporGon to the dierence in value, the correct measure of damages is the
dierence in value. Jacob & Youngs v. Kent.
RULE: A contractor who tenders performance so decient that it can only be remedied by
completely redoing the work for which the contract was established has not substanGally
performed his duGes. O.W. Grun Roong & Construc1on Co v. Cope.
Excusing CondiGons: PrevenGon, Waiver, Divisibility, and ResGtuGon
PrevenGon Doctrine- (hindrance doctrine) The courts will consider a condiGon excused--
and the duGes dependent on the condiGon thus triggered-- if the obligor of a duty
interferes with the saGsfacGon of the condiGon.
RULE: A party has an implied obligaGon not to do anything that would prevent,
hinder, or delay performance. The non-occurrence of a condiGon of a duty is
"excused" by the prevenGon or hindrance of its occurrence through a breach of duty
of good faith and fair dealing. Cantrell- Waind & Associates, Inc v. Guillaume
Motorsports, Inc.
Waiver- A party may waive a condiGon of that party's duty.
RULE: A waiver of an express condiGon occurs when a party who owes a condiGonal

duty may indicate that he will not insist upon the occurrence of the condiGon before
performing. Clark v. West.
A]er Contract:
Normally, this would require consideraGon because the contract is being
modied.
If the condiGon being waived was not an important part of the original bargain,
courts will usually nd a subsequent waiver to be binding, even without
consideraGon.
A]er a non-occurrence, waiver does not need consideraGon.
Implied waiver by: 1) conGnuaGon of performance by the person who would have
beneQed by the condiGon, and 2) the acceptance of benets under the contract by
that person.
Rest. 246 and UCC 2-606.
If series of condiGons, a waiver of one will generally not be considered a waiver of all.
However if one accepts several similarly defecGve performances without objecGon,
this may lead the other party to jusGably conclude that all condiGons were intended
to be excused.
Divisibility- When courts a contract divisible, saGsfacGon of certain condiGons will trigger
associated duGes of the non-breaching party.
RULE: A contract is severable if one partys performance consists of several disGnct
items and the price to be paid is apporGoned to each item to be performed But if
the consideraGon to be paid is single and enGre, the contract must be held to be
enGre, although the subject of the consideraGon may consist of several disGnct and
wholly independent terms. Gill v. Johnstown Lumber Co.
RULE: When a person agreed to something for another for a sum of money to be paid
on full performance, he is not enGtled to any part of the money unGl he has done
what he agreed, unless performance has been excused, delayed or prevented by the
other party. Lowy v. United Pacic Insurance Co.
Test for divisibility:
Whether, had the parGes thought about it, as fair and reasonable people, they
would be willing to exchange part performances in quesGon irrespecGve of
what transpired subsequently or whether the divisions made are merely for the
purpose of requiring periodic payments as the work progresses.
Rest. 240. A K is divisible if it can be "apporGoned into corresponding pairs of
part performances so that the parts of each pair are properly regarded as
agreed equivalents"
Courts will consider whether treaGng a K as divisible is fair to the non-breaching
party.
UCC discourages K's as being divisible.
UCC 2-307. Unless the parGes have agreed to permit delivery in installments,
"all goods called for by a contract for sale must be tendered in a single
delivery."
ResGtuGon-
Rest. (2d) Contracts 370. A party is enGtled to resGtuGononly to the extent that he has
conferred a benet on the other party by way of performance or reliance.
ResGtuGon in favor of the breaching party:
(1) . . . if a party jusGably refuses to perform on the ground that his remaining
duGes of performance have been discharged by the other partys breach, the party in
breach is enGtled to resGtuGon for any benet conferred by way of performance . . .

in excess of the loss that he has caused by his own breach. Rest. 374
Excuse of Non-performance of duGes:
Mistake- A mistake is a belief that is not in accord with the facts. Rest.151.
TradiGonally, courts would not allow avoidance of a K if there was a "mistake of law."
Modern rule does allow this. They treat the law in existence at the Gme of K'ing as part of the
total state of facts at the Gme.
Mutual Mistake allows a party to avoid enforcement of a K when three criteria are met:
1. Both parGes must be mistaken at the Gme of contracGng as to a basic assumpGon of the
contract.
Test: search the facts for unexpected, unbargained-for gain and unexpected,
unbargained-for losses.
Market condiGons and nancial ability are not "basic assumpGons"
Existence of "subject maQer" is usually a basic assumpGon.
Quality of subject maQer is o]en viewed as a mistake. Smith v. Zimbalist.
A party may avoid a K if "the thing actually delivered is dierent in substance from
the thing bargained for, and intended to be sold."
CONTRARY RULE: Quality of subject maQer is not always a mistake. Wood v.
Boynton.
It held that there was no mistake as to the "idenGty" of the thing sold, and that
mere "adequacy of price," no maQer how extreme, could not by itself be
grounds for rescission.
Under the Restatement, the quesGon would be whether the characterisGc on which
the parGes were mistaken was a "basic assumpGon."
2. The mistake must have a material eect on the bargain.
The party must show "that the resulGng imbalance in the agreed exchange is so severe that
he cannot fairly be required to carry it out. Rest. 152.
Courts more likely to view this showing to have been made where the mistake not
only disadvantages the party seeking avoidance is , but also advantages the other
party, than where the other party's posiGon is not improved by the mistake.
Courts will also consider whether there are other types of relief apart from rescission are
available to undo the eect of the mistake, and thereby render avoidance unnecessary.
3. The party who is adversely aected by the mistake must not "bear the risk" of that mistake. Rest.
152.
Rest. 154. AllocaGon of risk
A party bears the risk of a mistake when
1. The K allocates risk to him, or
2. The party is aware of having limited knowledge and proceeds anyway, or
3. The court allocates risk to that party.
SomeGmes when dealing with mutual mistakes, the parGes can actually agree as to the thing and sGll
both be mistaken. Beachcomber Coins, Inc v. BoskeF.
Unilateral Mistake elements Rest. 153:
1. At the Gme of entering in the K, one party was mistaken as to a basic assumpGon of the K.
2. The mistake must have a material eect on the bargain.
3. The disappointed party did not assume the risk of that mistake, AND
A. The enforcement of the K would be unconscionable, or
Must show that the party would be severely harmed if forced to perform AND that
the other party has not relied on the mistake.
B. The other party had reason to know of the mistake, or
"Snapping up" of oer- If the recipient of a bid should know that it was too low to

have been intended, he cannot "snap up" the bid, even if the recipient has relied on
it.
C. The other party's fault caused the mistake.
Most common kind of mistake in bidding is a Clerical error. Courts are most likely to grant relief
for this mistake.
ImpracGcability- This doctrine is invoked when facts that were unanGcipated at the Gme of contracGng
prove to be detrimental to the interests of one of the parGes.
It arises from an unexpected change in circumstances that occurs subsequent to contracGng and
renders performance by one party (usually the seller) actually impossible or far more dicult
("impracGcable") than anGcipated at the Gme of contracGng.
Where, a]er a contract is made, a partys performance is made impracGcable without his
fault by the occurrence of an event the non-occurrence of which was a basic assumpGon on
which the contract was made, his duty to render that performance is discharged, unless the
language or the circumstances indicate the contrary. Rest. 261.
Elements: 1)occur a]er the K is made, 2)the non-occurrence of the event is a basic assumpGon of
the K, 3)the adversely aected party is not at fault, and 4)the adversely aected party did not
assume the risk of that event.
Commercial impracGcability:
If due to changed circumstances, performance would be infeasible from a commercial
viewpoint, the promisor is excused as if he would be if performance were literally
impossible. Rest. 261.
Cost increase must be extreme, and must show the K did not implicitly, or explicitly, cast the
risk of impracGcability on the party asserGng that defense.
The more foreseeable the cost increase was, the less likely it is that the buyer would
bear the risk of a large cost increase.
Court will almost always hold that the seller/supplier implicitly assumed the
risk in xed price contracts.
UCC 2-615. In accord with the modern view that extreme impracGcability will excuse
performance on sellers part.
Sellers non-delivery is excused "if performance as agreed has been made
impracGcable by the occurrence of a conGngency the non-occurrence of which was a
basic assumpGon on which the contract was made"
Increased cost alone excuses performance only if the rise in cost is due to an
unforeseen conGngency which alters the essenGal nature of the performance.
Ex: Severe shortage of raw materials or supplies due to war, embargo, local
crop failure, unforeseen shutdown of major sources of supple, etc.
Impossibility through destrucGon of subject maQer:
A partys duty, under a contract is discharged if performance of the contact involves
parGcular goods, which without fault of either party are destroyed, rendering performance
impossible. Taylor v. Caldwell.
RULE: If performance of the K involves parGcular goods, a parGcular building, or some other
tangible item, which through the fault of neither party is destroyed, or otherwise made
unavailable, the contract is discharged.
If property which the performing party expected to use is destroyed, the party is discharged
only if the destroyed party was specically referred to in the contract, or at least
understood by both parGes to be the property that would be used.
FrustraGon of Purpose-When unanGcipated, supervening events reduce the value of execuGng the
contract to buyers.
Where, a]er a K is made, a partys principal purpose is substanGally frustrated without his fault

by the occurrence of an event the non-occurrence of which was a basic assumpGon on which the
K was made, his remaining duGes to render performance are discharged, unless the language or
the circumstances indicate the contrary. Rest. 265.
Factors to be considered:
The extent to which the event that thwarted the promisor's object was foreseeable
by the parGes when the K was made. The less foreseeable, the more likely the court
will excuse performance under FofP.
The extent to which the parGes implicitly or explicitly allocated the risk of the event
to the promisor. If they did, performance will not be excused.
The extent to which the event deprived the promise of all of his anGcipated benet
from the K.
Whether the party seeking discharge was at fault in bringing about the event.
UCC view: The UCC does not expressly grant the FofP defense to sellers or to buyers, however
both may nonetheless be able to use the doctrine.
It's more likely that a buyer would qualify.
A seller might be able to use UCC 2-615's general impracGcability to support a FofP
defense.
Their duty to perform should be discharged because the purpose for which they entered into
agreement to procure a good or service no longer exists.
RULE: A partys duGes are discharged where a partys purpose is frustrated without fault by
the occurrence of an event, which the nonoccurrence of which was a basic assumpGon on
which the contract was made. Krell v. Henry.
Elements: 1)occur a]er the K is made, 2)the non-occurrence of the event is a basic assumpGon of
the K, 3)the adversely aected party is not at fault, and 4)the adversely aected party did not
assume the risk of that event.
RULE: A force majeure clause cannot be invoked to protect a party against normal risks of a
contract, i.e. higher energy costs due to the duraGon of the contract and cost of coal versus other
sources. Therefore, the PlainG cannot escape liability under the contract because of bad
business dealings. Northern Indiana Public Service Co v. Carbon County Coal Co.
REMEDIES:
Rest. 235(2): When performance of a duty under a contract is due any non-performance is a breach.
Purpose of remedies, Rest. 344: To protect one's:
A. ExpectaGon interest- which is his interest in having the benet of his bargain by being put in as
good a posiGon as he would have been in had the K been performed;
B. Reliance interest- which is his interest in being reimbursed for loss caused by reliance on the K by
being put in as good a posiGon as he would have been in had the K not been made, or
C. ResGtuGon interest- which is his interest in having restored to him any benet that he has
conferred on the other party.
PuniGve Damages:
PuniGve damages generally are not recoverable in breach of contract acGons. This is due to contract law
not considering breach as a moral wrong, and thus damages meant to punish are inappropriate. Rest.
355.
ExcepGon: When the breach of K also consGtutes a tort, puniGve damages are recoverable. Delzer
v. United Bank of Bismarck.
Example: fraud, bad faith (according to some courts a party's bad faith conduct in
connecGon to a contract is considered a tort).
Some courts, if one breaches voluntarily to nd a beQer deal elsewhere, will consider
it bad faith conduct that can be punishable by puniGve damages.
Damages for mental suering:

Only recoverable where the breach has also caused bodily harm, or the contract or breach is "of
such a kind that serious emoGonal disturbance is a parGcularly likely result." Rest. 353.
Specic v. SubsGtuGonal Performance:
General principle: Damages are the standard remedy for contract breach, and that injuncGve relief is
extraordinary.
Rest 359. Courts will not order specic performance or other injuncGve relief "if damages would be
adequate to protect the expectaGon interest of the injured party."
SubsGtuGonal performance is the presumed remedy.
Rest. 360. Factors to consider to determine adequacy of damages:
A. The diculty of proving damages with reasonable certainty,
B. The diculty of procuring a suitable subsGtute performance by means of money awarded
as damages, and
C. The likelihood that an award of damages could not be collected.
Whether Equitable Relief is granted depends on the fulllment for 3 principal pre-condiGons:
1. Money damages must be inadequate to protect the injured party. Van Wagner Adver-sing Corp v.
S & M Enterprises.
2. The contract's terms must be denite enough to allow the court to frame an adequate order.
Laclede Gas v. Amoco Oil Co.; City of Columbus v. Cleveland, Cincinna-, Chicago, & St. Louis
Railway Co.
3. The court's task of enforcing and supervising the relief must not be unduly dicult. Ryan v. Ocean
Twelve Inc.
UCC 2-716 Buyer's Right to Specic Performance:
1. Specic performance may be decreed where thegoods are unique or in other proper
circumstances.
2. The decree for specic performance may include such terms and condiGons as to payment of the
price, damages, or other relief as the court may deem just.
RULE: A court should award specic performance in breaches of real estate contracts (sales, not leases)
and in other breaches where the uniqueness of the property in quesGon raises uncertainty in valuing it.
Van Wagner Adver1sing Corp v. S & M Enterprises.
"The point at which breach of K will be redressable by specic performance lies not in any
inherent physical uniqueness of the property but in the uncertainty of valuing it"
RULE: Specic performance is appropriate when the terms of the contract are express, so that the court
can determine what specic performance should be, the contract has a denite end, and remedy at law
is inadequate. Laclede Gas Co v. Amoco Oil Co.
RULE: If the work is suciently dened such that damages may not be adequate, specic performance
can be ordered. City of Columbus v. Cleveland, Cinn., Chic., & St. Louis Railway Co.
RULE: As a general rule, specic performance will not be ordered of a building contract in a situaGon
where it would be impracGcal to carry out such an order unless there are special circumstances or the
public interest is directly involved. Ryan v. Ocean Twelve, Inc.
"It would be inappropriate to grant specic performance in this case due to all the apparent
complexiGes of the situaGon and the disparity, duraGon and nature of the work to be
performed."
ExpectaGon Damages:
Contract law achieves its goal of compensaGon in most cases by awarding damages based on the
non-breaching party's expectaGon interest.
The damages are the amount of money to make the party as well o as it would have been had
the contract been performed.
Rest. 347: The injured party has a right to damages based on his expectaGon interest as measured by:
A. The loss in the value to him of the other partys failed or decient performance, PLUS

Incidental and consequenGal loss caused by the breach, LESS


Any cost or other loss that he has avoided by not having to perform
Rest. 348. Two Measures of ExpectaHon Damages:
1. The diminuGon in the market price caused by the breach: the dierence in the market value
between perfect performance and performance that the defendant delivered.
2. Reasonable cost of compleGng performance or remedying the defects, if that cost is not clearly
disproporGonate to the probable loss in value to him.
Incidental Damages, UCC 2-715:
Incidental damages: Reasonable expenses to inspect, receive, transport and care for goods
righwully rejected, commercially reasonable charges, expenses or commissions to eect cover,
and other reasonable expenses incident to breach.
CalculaGng ExpectaGon Damages:
Easy way: D = [(Promised Perf. - Actual Perf.) + (Incidental costs - (MiGgaGon actual/reasonable +
ConsequenGal Costs))+ (Cover cost - original K Price)] - Benets.
Some other ways:
Damages = [K price minus resale price (cover)] + (Incidental costs - (MiGgaGon
actual/reasonable + ConsequenGal Costs)
Damages = [net prot plus out-of-pocket expenditure] + (Incidental costs - (MiGgaGon
actual/reasonable + ConsequenGal Costs)
Cover, UCC 2-712:
1. A]er a breach the buyer may "cover" by making . . . any reasonable purchase of
goods in subsGtuGon of those due from the seller.
2. The buyer may recover as damages the dierence between the cost of cover and
contract price together with any incidental or consequenGal damages, but less
expenses saved in consequence of the breach.
RULE: Where the breach is willful, damages equal the cost of performing the contract, not the
dierence between the value of the property at the Gme of contracGng and the value the property
would have had if the defendant fully performed. Groves v. John Wunder Co.
Cost of Performance rule.
Cost of CompleGon v. Decrease in Value:
Peevyhouse. D K's with P to conduct a strip mining operaGon on P's farm. K has a clause that says
D will perform restoraGon work at the compleGon of the mining operaGons. D fails to perform.
Cost to D to perform would be $29K but loss of value to P's property is only $300.
Ct. Ruled that P should only recover the $300 reecGng loss of value because:
1. The restoraGon provision of the K was only incidental to the main purpose, and
2. The economic benet to P would receive from full performance would be grossly
disproporGonate to the cost of performing the work.
The MiGgaGon Principle:
Under this principle, the law treats non-breaching parGes as if they took whatever steps necessary,
within reason, to minimize the extent of damages suered as a result of the breach.
Even if P does not miGgate, when calculaGng damages, the courts will do so on the assumpGon
that P took reasonable steps to reduce the harm.
Bars recovery for losses suered by a non-breaching party that could have been avoided by
reasonable eort and without risk of substanGal loss or injury.
Failure to miGgate is an armaGve defense against contract enforcement.
RULE: Once a contract has been breached, the non-breaching party has a duty to not increase the
resulGng damages. Rockingham County v. Luten Bridge Co.
In Re Worldcom.
Lost Volume Seller theory- A lost volume seller is one who has the capacity to perform the K
B.
C.

that was breached in addiGon to other potenGal K's due to unlimited resources or
producGon capacity.
Applies to K's for services as well as goods. Rest. 347, 350.
Does NOT need to minimize its damages by nding another K because it would have
had the benet of both even if the rst were not breached.
P has the burden of demonstraGng that P is a lost volume seller.
It has to show that it could have and would have entered into subsequent
agreements.
To recover lost prots, must prove:
1. The seller of services had the capability to perform both (the breached
and subsequent contracts) contracts simultaneously;
2. That the second contract would have been protable; and
3. That the seller of service would have entered into the second contract if
the rst contract had not been terminated.
UCC 2-708.
2. If the measure of damages in (1) is inadequate to put the seller in as good a
posiGon as performance, then the measure of damages is the prot (incl.
reasonable overhead) from full performance, together with incidental
damages.
RULE: The measure of damages owed to a wrongfully discharged employee is the amount of
salary agreed upon for the period of employment reduced by the amount the employer proves
the employee has earned or with reasonable eort may have earned from other employment.
A wrongfully discharged employee is enGtled to his lost salary, but he must miGgate
damages by seeking alternaGve employment. However, he does not need to accept
dierent or inferior employment. Parker v. Twen1eth Century-Fox Film Corp.
The Foreseeability Requirement:
When no subsGtute transacGon is available to the non-breaching party, the compensaGon principle
suggests that the breaching party is liable for the dierence between the contract price and the full
value of performance expected by the non-breaching party.
This could become extreme and even undesirable economically, so overGme limitaGons were put
on the breaching party's liability.
Hadley v. Baxendale. The damages to which a non-breaching party is enGtled are either those
arising naturally from the breach itself (ordinary damages) or those that are in the reasonable
contemplaGon of the parGes at the Gme of contracGng.
A type of damage which was plainly foreseeable as a real possibility but which would only occur
in a small minority of cases cannot be regarded as arising in the usual course of things or be
supposed to have been in the contemplaGon of the parGes. C. Czarnikow, LTD v. Koufos.
Generally, damages for mental suering or injury to reputaGon are not recoverable for breach of
contract.
ExcepGon:
Certain contracts which so aect the vital concerns of the individual that severe
mental distress is a foreseeable result of the breach, and for these contracts,
damages for mental distress may be recoverable. Allen v. Jones.
Rest. 351.
1. Damages are not recoverable for loss that the party in breach did not have reason to foresee as a
probable result of the breach when the K was made.
2. Loss may be foreseeable as a probable result of a breach because it follows from the breach
A. In the ordinary course of events, or
B. As a result of special circumstances beyond the ordinary course of events that the party in

breach had reason to know.


UCC 2-715(2):
2. ConsequenGal damages resulGng from the sellers breach include
A. Any loss resulGng from general or parGcular requirements and needs of which the seller at
the Gme of contracGng had reason to know and which could not reasonably be prevented
by cover or otherwise, and
B. Injury to person or property proximately resulGng from any breach of warranty.
The "Reasonable Certainty" Requirement:
ParGes should not be permiQed to recover for speculaGve losses. Contract law requires non-breaching
parGes to prove damages with "reasonable certainty." Rest. 352.
Damages awarded for breach of contract must be contemplated by the parGes at the Gme of
formaGon. In Kenford Co v. County of Erie, P was not enGtled to damages resulGng from its lost
anGcipated appreciaGon in the value of its land.
Lost Prots:
RULE: Generally, Lost prots are recoverable so long as they are (1) foreseeable when the
contract was made; (2) they directly or proximately result from the breach and (3) they are
capable of accurate esGmaGon. Florafax Interna1onal, Inc v. GTE Market Resources, Inc.
Mere uncertainty as to the exact amount will not preclude recovery, if the evidence
shows the extent of damage by just and reasonable inference.
The evidence has to be sucient enough to take the maQer out of the realm of
mere speculaGon, conjecture, or surmise.
RULE: In some situaGons, where the out-of-pocket loss would not be sucient to
compensate the plainG, the PlainG's are enGtled to compensaGon for their distress,
inconvenience, mental anguish, etc. Deitsch v. The Music Co.
P contracted with D to perform at P's wedding recepGon. D never showed. P suing to
recover damages. The only out-of-pocket loss for P was a small security deposit.
Court ruled that was not sucient compensaGon for the P.
RULE: Pain, suering, and mental distresses are compensable damages for breach of
contract under either expectancy or a reliance measure of damages. Sullivan v. O'Connor.
An agreement between a doctor and a paGent which calls for a specied result can be
enforced.
Reliance damages compensate the plainG for the detriments she suered in reliance
upon the agreement.
The promisee is o]en said to receive the benet of the bargain and the
interest that is protected is called the expectaGon interest. The promisee has a
reliance interest if she has changed her posiGon to her detriment in reliance on
the promise. The promisee has a resGtuGon interest if she has not only relied
on the promise but has conferred a benet on the promisor.
SGpulated (Liquidated) Damages:
With a few excepGons, parGes may specify their own duGes by contract, reducing the role of courts to
interpretaGon and gap lling, and they may agree on any price they wish for an opGon.
Liquidated damages provision: An agreement regarding the consequences of a breach that is placed in
the contract itself.
In order to be enforceable, they must meet one (in some courts, both) of these requirements:
1. Reasonable forecast: The amount xed must be reasonable relaGve to the anGcipated or actual
loss from breach; and
All courts require this one.
2. Dicult calculaGon: The harm caused by the breach must be uncertain or very dicult to
calculate accurately, even a]er the fact.

Rest. 356.
POLICY: These two requirements reect a long-standing judicial policy against the enforcement of
penalGes for breach of K.
The purpose of damages is to put the P in the same posiGon he would have been if the K
was fullled, not a beQer one.
The courts may refuse to enforce a liquidated damages provision if it serves to penalize a
breaching party by an amount far beyond the loss suered by the P.
Time for measuring "Reasonableness":
TradiGonal view: At the Gme of contracGng.
If reasonable at the Gme of K'ing, clause will be enforceable even if P actually ends up
suering less damage.
If not, then unenforceable, even if damage suered turns out to be large.
Modern view: Per the Rest and UCC 356, clause should be enforced if either:
1. The clause is a reasonable forecast at the Gme of contracGng, or
2. The clause is reasonable in light of the actual damages which have occurred.
If reasonable, enforced even if P ends up suering less damage.
If unreasonable, can sGll be enforced if P's damages are unexpectedly high.
The party seeking to prove it is unenforceable has the burden of proof. TAL Financial Corp. v. CSC
Consul1ng Inc.
Also from the case: Failing to provide any recogniGon for the type, or Gming of default, while not
determinaGve, tends to indicate the purpose of the clause was not to esGmate the dierent types
of damages that might arise, but to penalize for any failure.
NPS, LLC v. Minihane. Lists the same requirements for enforcement as above.
Where damages are easily ascertainable, and the amount provided for is grossly
disproporGonate, or unconscionably excessive, the court will award the aggrieved party no more
than its actual damages.
RULE: No duty for the non-breaching party to miGgate if the contract has an enforceable
liquidated damages provision.
Trend is to enforce more of these clauses, over Gme.
Enforceability will also depend on whether the court is a "second look" jurisdicGon.
AlternaHve Bases for liability: Non-Contract Claims:
Promissory Estoppel:
Rest. 90. A promise which the promisor should reasonably expect to induce acGon or forbearance on
the part of the promisee or third person and which does induce such acGon or forbearance is binding if
injusGce can be avoided only by enforcement of the promise. The remedy granted for breach may be
limited as jusGce requires.
Rest. 139.
1. Restatement 90 holds even if the Statute of Frauds would prevent enforcement.
2. In determining whether injusGce can be avoided only by enforcement of the promise, the
following circumstances are signicant:
A. theavailability and adequacy of other remedies . . . ;
B. theextent of actual reliance;
C. the extent to which the acGon or forbearance proves the terms of the K;
D. thereasonableness of the acGon or forbearance;
E. theextent to which the acGon or forbearance was foreseeable by thepromisor.
Elements of Promissory Estoppel:
1. Promisor should reasonably foresee that his promise will induce the other party to act or refrain
from acGng in reliance on the promise.
2. Promise does in fact induce acGon or forbearance (actual reliance).

3. Enforcement of the promise is necessary to avoid injusGce.


RULE: A promise that induces an acGon or forbearance is binding if injusGce can be avoided only by
enforcement of the promise. Feinberg v. Pfeier (The case involved a company's promise to pay
pensions to an employee).
Here, the court did not look to her past services because past consideraGon does not count for
consideraGon. Therefore, the court applied the alternate theory of promissory estoppel to reach
the desired outcome.
RULE: An illusory promise can sGll be enforceable where the promisor should reasonably expect
to induce acGon on the part of the promisee and which does induce such acGon if injusGce can be
avoided only be enforcement of the promise. Grouse v. Group Health Plan, Inc.
RULE: Promissory estoppel could trump the statute of frauds if the addiGonal requirement of a promise
to reduce the contract to wriGng is present. Alaska Airlines, Inc v. Stephenson.
Pre-Contractual NegoGaGons Liability:
Rest. 45. (1) Where an oer invites an oeree to accept by rendering a performance and does not invite
a promissory acceptance, an opGon K is created when the oeree tenders or begins the invited
performance or tenders a beginning of it. (Unilateral OpGon Contract.)
Rest. 87. (2)An oer which the oeror should reasonably expect to induce acGon or forbearance of a
substanGal character on the part of the oeree before acceptance and which does induce such acGon
or forbearance is binding as an opGon K to the extent necessary to avoid injusGce. (Equitable OpGon
Contract. Bilateral.)
Homan v. Red Owl Stores, Inc. Liability in the franchise-negoGaGon situaGon may exist under a
promissory estoppel theory even though the contract contemplated by the parGes (but never entered
into) would not have been enforceable.
Promissory estoppel recovery is awarded on the grounds that such recovery is NOT "the
equivalent of a breach of K acGon."
Recovery can be granted to a party to unsuccessful negoGaGons for the losses reasonably and
foreseeably sustained by him as a result of the other party's negligence or lack of good faith
during the bargaining process.
RULE: Promises that a party can reasonably expect will be relied upon, and are relied upon,
may be enforced to prevent injusGce, even if the promise itself would not be suciently
denite to meet the requirements to form an oer for a binding contract.
RULE: A general contractor may enforce a subcontractors bid where there is reasonable detrimental
reliance under a theory of promissory estoppel. Drennan v. Star Paving Co.
Quasi-Contract (ResGtuGon):
Aka "implied-in-law contract," "construcGve contract," "quantum meruit," "unjust enrichment," and
"resGtuGon."
Quasi-contract claims do not require any type of promise at all. A party seeks to recover for the value of
an unsolicited benet conferred on another.
Courts are skepGcal of these out of fear that it rewards or encourages parGes who thrust benets
on the unwilling, so the criGcal quesGon is whether the claimant acted reasonably in conferring a
benet without rst obtaining a contractually enforceable promise of compensaGon.
Falls under category of ResGtuGon, which covers claims for specic or monetary resGtuGon to prevent
unjust enrichment.
Rest. (ResHtuHon) 1. A person who has been unjustly enriched at the expense of another is required to
make resGtuGon to the other.
Enrichment not unjust if it is done "gratuitously" or "ociously."
To recover on a quasi-contract theory:
1. P must demonstrate that she conferred a cognizable benet on the defendant, and
2. It would be unjust for the defendant to retain the benet without compensaGng P; and

P did not confer the benet on D "ociously," or against D's will or in circumstances where she
should have known that D would not want the benet; and
4. P did not confer the benet on D "gratuitously" or without expectaGon of compensaGon. PyeaKe
v. PyeaKe.
Emergency services supplied:
Most common example of recovery in quasi-contract where there has not even been an aQempt
at K formaGon.
Cotnam v. Wisdom. P may recover, in quasi-K, the reasonable value of his services, even though
there was never any aQempt to negoGate a K.
It is similar to how insane persons or minors may be held liable for necessaries furnished to
them in good faith while in their unfortunate and helpless condiGon.
In determining value of the services, it is irrelevant that D died, and did not receive any real
benet. Also irrelevant is D's nancial condiGon. The value of the services should be
determined by expert tesGmony as to the usual charge for such services.
RULE: A quasi-contract or implied contract is a legal cGon where although there is no
promise or contract in fact, one will be implied by the law to remedy unjust enrichment.
PyeaFe v. PyeaFe.
RULE: One circumstance under which a duty to compensate will be imposed is when there was an
expectaGon of payment or compensaGon for services at the Gme they were rendered.
Where the facts demonstrate an agreement between spouses and an extraordinary or
unilateral eort by one spouse which inures solely to the benet of the other by the Gme of
dissoluGon, the remedy of resGtuGon is appropriate.
Measure of recovery: For claims made by working spouse against the student spouse, Court
must make ndings as to whether the educaGon, degree or license acquired involved an
unjust enrichment of that spouse, the value of the benet, and the amount that should be
paid to the working spouse.
The award should be limited to the nancial contribuGon by the working spouse for
student spouse's living expenses and direct educaGonal expenses.
If anGcipated benet to the working spouse involves a monetary benet that is less
than the benet conferred by the student spouse, the award to working spouse
should be limited to the amount of the anGcipated benet to it. Working spouse
should not recover more than the benet of his/her bargain.
Farese v. McGarry.
Tenant can recover for the amount that the landlord was unjustly enriched by the mistaken
improvements. The landlord knew of tenants mistaken belief and did nothing to stop it. He was
complicit in the mistake because he stood by and watched it without saying anything. This
complicity makes the landlord liable for the cost of the improvements. Thus, the landlord must
compensate the tenant for the improvements to his property.

3.