Contracts

Fall 2014
Professor John Kettle
I.

Contract as legally binding agreement

a. Contract is binding once the exchange is made.
b. Contract law is different that criminal and tort law.
i. No legally binding duties other than anything contracted.
ii. First question to ask is Was there a contract between the
parties?
iii.
Legal duty comes into existence when parties start with no
contractual obligations to one another, then at some point in time
they do something that creates a legal obligation.
c. Definition of Contract
i. A promise or set of promises for the breach of which the law
gives a remedy, or the performance of which the law in some
way recognizes a duty.
1. Use the word promise loosely. As society changes, so do
the terms and motions of the word promise (handshake,
cross my heart hope to die, other culture submissions into
promises)
2. Implicit action may also count as a contract
a. A asks for bag of flour, and implicitly promises that
he will pay for it (even if A hasnt said so outright).
ii. A contract doesnt need to be a written document.
1. The writing is a physical thing, the contract is that physical
things legal effect.
2. A written contract may not represent the entire contract
between both parties (keep that in mind).
3. Although contract is the product of agreement, a contract is
not simply what the parties have agreed to.
d. Who Contracts?
i. With a few exceptions, U.S. law of contract doesnt provide
different rules for different sorts of parties.
ii. Four categories of contracts:
1. Firm sells to Firm
2. Individual sells to Individual
a. Primarily regulated by family law, real property
law.
3. Firm sells to Individual
a. Primarily regulated by consumer protection law,
leases, securities law.
4. Individual sells to Firm
a. Regulated by laws governing the employment
relation.

iii.

II.

III.

Commonly known contract law is usually used for contracts

between two firms (a corporation or other legal entity).
1. Firms are less likely to be prey to cognitive error, firms are
more often legally sophisticated, firms are subject to other
forms of legal regulation, and firms are designed with a
single goal in mind: maximizing profits for their
shareholders. (TB pg. 4).
e. Questions to always keep in mind
i. Which promises will be enforced?
ii. When enforceable, what is the scope and content of a promissory
obligation?
iii.
How will these promises be enforced?
iv. Which of the foregoing answers can the parties contract around
(and how?)
Sources of Contract Law
a. The Common Law of Contract
i. Most contracts in US are governed by state law
1. Almost all of these different bodies of law spring from the
English Common Law (except Louisiana whose contract
law derives from the French Civil Code)
ii. General law of contract in the US is a product of judicial
decisions in individual cases.
iii.
The restatement of contracts
1. Arthur Corbin and the American Law Institute was to
restate the law as it is, not make new laws (First
Restatement).
2. Systematically restated the prevailing law of contract in the
United States.
Law and Equity in Contract
a. Distinction between law and Equity
i. In English law, there exists to courts: The courts of law and the
courts of chancery.
1. Courts of law upheld the kings law and was governed by
generally applicable rules laid down by earlier judicial
decisions.
2. Court of Chancery was the court of equity. It empowered to
dispense justice where the relief available in courts of law
was inadequate.
a. It could also award injunctive relief (non-monetary
relief.)
3. Ross v. Bernhard (1970)
a. Actions were no longer brought as actions at law or
suits in equity. There was no only one action a
civil action in which all claims may be joined
and remedies are available.

4. In applying the contemporary rules of contract law, courts

attend to whether the rules derived from law or from equity.
a. When the rule comes from equity, trial courts have
greater discretion to take into account the
considerations of morality, fairness, and justice,
which are not part of the law as such (TB pg. 10)

Class #1
I.

U.C.C.
a. Uniform Commercial Code: Has to do with sales and commercial
transactions.
b. A sale of goods over $500.00.
II.
Restatement
a. Sale of services
b. If the service is performed within the year, you do not need a written
contract.11
III. C.I.S.G.
a. International transactions. Contracts for international sale of goods.
IV. Bilateral contract
a. Promise for a promise
V. Unilateral contract
a. Promise for an act, may not become binding until the future.
b. Person is frozen once they start beginning the act.
c. The act must be completed for contract to be binding.
VI. Adhesion Contracts
a. Enforceable contracts. No bargaining.
VII. Express contract (1)
a. Written contracts (could even be in email, or letters, or anything with
physical proof).
b. Best kind of contract.
VIII. Implied contract (2)
a. The law will imply the obligation to make good.
b. Action may imply the law.
c. Pg. 13 reference.
d. This will be based on the outward manifestation.
IX.
Quasi Contract (pg. 14 at bottom) (3)
a. Hardest contract to establish.
b. No evidence of BFE, ITK, MOM.
c. Prevent unjust enrichment.
X. Counteroffer
a. Absolutely expires the old offer. Someone can bring up that exact offer
again, but it would be considered a new offer.

XI. Not all agreements between parties are contracts. There needs to be criteria for it
to be a contract.
XII. Go to UCC to cite statutes regarding contracts.
a. i.e. statute of frauds, you can find it in the UCC.
XIII. Output contracts vs. Requirement contracts
a. The buyer is entitled to the entire output of the seller. Whatever the output
is, they have to buy it. Seller has to sell all of it.
b. The buyer is entitled to buy whatever requirement was contracted, and the
seller has to sell it.
XIV. When talking about service, look to Restatement. When talking about goods,
look to UCC.
XV. Illusory Contract
a. When one person has the power to perform or not perform a duty in a
contract. There is a condition that is completely in control of the parties.
This is not enforceable.
XVI. Option Agreement/Contract
a. Freezes offeror from offering during the option period. Exclusive option to
reject or accept is given solely to the person who froze the offer.
b. Partial Performance can create an option agreement. It creates a unilateral
contract.
XVII. Unilateral contracts, offerors are frozen once an offeree starts performance of
the act (Partial performance is the equivalent of an option contract). Can the
offeree stop performance before completing it? Yes, because they dont have
to exercise their option. But, most of the time, it depends on the
circumstances.
XVIII. Courts dont look at the adequacy of a contract unless there was fraud.
XIX. Quantum Meruit
a. Another way to say there was unjust enrichment through a quasi contract.
b. Lefkowitz v. Great Minneapolis Surplus Store.

XX. What do we need in order to have a contract? (Beginning of checklist)

a. Mutuality
b. An offer, acceptance, and consideration (O/A/C)
i. Who made the offer, and who had the power of acceptance of the
offer?
c. Bargain for Exchange (B.F.E.)
i. Was there evidence that the parties bargained?
ii. Help establish the intent to contract.
iii. Adhesion contract: bargained for.
d. Intent to Contract (I.T.K.)
i. Intent to contract. Was there evidence of attention? If not, then it
cant be binding.
ii. Dont always need it.
e. Meaning of the minds (M.O.M.)

f.
g.
h.
i.

j.

k.

l.

m.

n.
o.

i. Meaning of the minds. Whats in your mind and the way you
explained it might not be what the recipient heard. A mutual
understanding of the offer is meaning of the minds.
ii. If no MOM then usually not a binding contract.
Outward Manifestation (O.M.)
i. The objectivity of parties statements. What would have a
reasonable person would have thought what the offer was?
Statute of Limitations (S.O.L.)
i. Varies based on state law.
Statute of Frauds (S.O.F.)
i. Legal statute that specifies what contracts need to be in writing.
Frustration of purpose (F.O.P.)
i. Frustration of purpose. Content of contract become frustrated
because of third party action.
1. Was purpose clearly known by both parties?
ii. Impossibility of Performance
1. Whole process has been frustrated by something outside of
their control.
Assumption of Risk (A.O.R.)
i. Whos assuming the risk that this would go wrong?
ii. Always try to anticipate what that risk might be, plan for it, and
have the assumption of risk on the other party when drafting
contracts.
Master of Offer (M.O.O.)
i. When court looks to dispute, it will be against the master of the
offer (offeror).
ii. Cover as much in the offer to protect client if they are offeror.
Mirror Image Rule in relation to contracts (M.I.R.)
i. The acceptance has to mirror the offer; whatever the terms and
conditions of the contract are.
ii. Can only accept what was offered.
Promissory Estoppel (P.E.)
i. Restatement section 90
ii. NY promissory rule is a difficult state to win PE. Had to show that
the promise left an unconscionable detriment.
iii. Remedies as justice requires. IMPORTANT
iv. Common law doctrine used by courts to enforce promises that have
been made and subsequently relied upon.
v. Usually comes into play when there is no formal contract.
vi. Have to show that the promisee reasonably relied on that promise
to his or her detriment.
vii. The detrimental reliance has to be reasonably foreseeable.
Preexisting duty (P.E.D.)
i. A prior obligation cannot serve for a existing/future consideration.
Anticipatory Repudiation (A.R.)

p.
q.
r.
s.
t.
u.

v.
w.
x.
y.
z.
aa.
ab.

ac.
ad.

Reading #2

i. Establish that there is likely to be a breach, go to court, and seek a

remedy.
ii. Trying to seek cover.
Parole Evidence Rule (P.E.R.)
i. Reference to outside evidence.
Moral Obligation (M.O.)
Material Benefit Rule (M.B.R.)
i. Courts will look at MO and only hold it to be consideration if a
material benefit was received.
Illusory (ILL)
i. Seems like a contract.
Mutual Assent (M.A.)
i. If there is no mutuality, then it is illusory.
ii. If you do this, Ill give you $5 if I feel like it.
Free on Board (F.O.B)
i. Where risk of loss occurs on land.
ii. If youre a buyer then you want it free on board destination (not
free on board shipment) because the risk of loss is still on the seller
till it arrives on the destination. If its free on board shipment then
assumption of risk on the buyer. Insurance can be obtained.
Free Alongside (F.A.S.)
i. Same as FOB except shipment is by sea, not by land.
Reasonable Person Rule (R.P.R.)
i. Subjective test for determining whether a reasonable person would
have assumed an offer, or contract, etc.
Objective Reasonable Person (O.R.P.)
Is advertisement Invitation or Offer?
Contract of International Sale of Goods (C.I.S.G.)
Mailbox Rule (M.B.R.)
i. Acceptance of an offer is when a letter is sent (on dispatch).
ii. Adams v. Linsell
Battle of Forms (B.O.F.)
i. Submitting a purchase order, which has terms. Receiving an
invoice that also has terms that may be different.
ii. Which one is the binding one?
Knock out rule (K.O.R.)
i. UCC 2-207 will get rid of provisions that are in debate, or
contradictory, and replace with UCC rules.
Memorandum of understanding (M.O.U.)
i. Evidence of intent to contract.
ii. Some build in enough terms to become a option contract.

I. Howard E. Bailey v. Richard E. West (Implied Contract Issue)

a. Facts:
i. Plaintiff alleges that the defendant owes him for the reasonable
value of his services rendered in connection with feeding, care, and
maintenance of a racehorse names Bascoms Folly.
ii. Defendant bought the horse from Dr. Strauss and arranged to have
the horse shipped on April 27, 1962. Once horse arrived,
defendants horse trainer advised him that the horse was lame, and
defendant wanted to return it by re-shipping the horse by van back
to the seller.
iii. The seller refused to accept the delivery on May 3, 1962, and the
driver named Kelly called the trainer to ask for further instructions.
The horse was then dropped off to the plaintiffs farm where the
horse resided until July 3, 1966.
iv. Plaintiff sent bills for feed and board to defendant at regular
intervals, but the first of such bill wasnt received until two or
three months later.
v. Defendant immediately returned bill with notice that he was not
the owner of the horse nor was the horse sent to plaintiffs farm by
his request (it was the trainers).
vi. Judge decided that there was a contract Implied in fact between
the plaintiff and defendant to board the horse and that this contract
continued until plaintiff received notice from defendant that he
would not be responsible for the horse.
vii. Bailey appealed and now the matter becomes a question of quasi
contract.
b. Contract Implied In Fact
i. Essential elements are mutual agreement and intent to promise, but
the agreement and the promise have not been made in words and
are implied from the facts.
c. Was there bargain for exchange?
i. No
d. Was there an offer made?
i. Unclear. The bills could be the evidence of an offer, or an attempt
to make an offer.
ii. Defendant denies it and denounces ownership.
e. What was the outward manifestation?
i. No.
f. The issue:
i. Was there an implied contract or quasi contract in the case?
ii. Was there intent to contract, or actions to imply a contract?
iii. Was there unjust enrichment? Was West unjustly enriched by the
services provided by Bailey?

II. Bolin Farms v. American Cotton Shippers Assoc. (Changed Circumstances

Contract Issue)
a. 11 cotton farmers made contracts with buyers to sell whatever was planted
by these farmers on a specific acreage at a price agreed upon between
January and March.
i. Output contract
b. There was intent to contract, BFE, OAC, etc.
c. Suddenly, the price changes. Is that a contractual out?
i. No, there couldve been a provision written into the contract. It
was not.
d. Plaintiffs seek declaratory judgment to invalidate the contract
i. Admit contract was enacted, but they were looking to get out of it.
e. Plaintiffs say price change was unforeseeable (changed circumstances).
f. Commercial impractibility or impossibility
i. Frustrated by event outside the control makes it impractical or
impossible to keep the terms of the contract,
ii. Courts do not see this issue in the categories because they couldve
anticipated these risks.

III. Ora Lee Williams vs. Walker-Thomas Furniture Co. (Unconscionable Contract
Issue)
a. Furniture can be purchased on a payment plan; if there were multiple plans
then all the money owed would be added to balance still owed. If they are
late on a payment, the furniture company can repossess everything.
b. There is BFE, OAC, MOM, OM, ITK, etc. Definitely a contract. But was
there a breach?

I.) Williston (Pg. 7)

a. Formalist
b. Dont look at prior dealings, just look at the contract
II.) Corbin (Pg.7)
a. Realist
b. Look at contract, but theres other factors outside the contract that factor
into the contract.
Reading 3
I.

Sullivan v. OConnor
a. Name & Procedural history

i.
ii.
iii.
iv.
b. Facts
i.
ii.

Supreme Judicial Court of Massachusetts, 1973.

363 Mass. 579
Plaintiff: Ms. Sullivan
Defendant: Dr. OConnor

Plaintiff is suing defendant for breach of contract and negligence.

P and D contractually agreed on a nose job that would take place in
two sessions, which D allegedly promised to make the P more
attractive
iii. D makes Ps nose look worse, and also does a third operation that
was painful and traumatic for P.
iv. Jury found for P on the breach of contract count, and found for D
on the negligence count.
c. Issue
i. Are pain and suffering damages that can be compensable for the
breach of contract?
ii. Is a promise between a patient and a doctor something that can be
enforced?
d. Holding
i. Court says yes to both of the issues above. There must be clear
proof of a promise for there to be a breach of contract between a
doctor and a patient
ii. Suffering and pain is something that should be compensable
because of a plaintiffs:
1. Expectation interest
2. Reliance interest
3. Restitution interest
4. (All of these can be found in more detail on pg. 34.)
II.

Joseph and Jonah Hadley v. Joseph Baxendale

a. Procedural history & Name
i. Court of Exchequer, 1854
ii. 9 Exch, 341
iii. Joseph and Jonah Hadley, Plaintiff
1. Mill owners
iv. Joseph Baxendale, Defendant
1. Pickford & Co.
b. Facts
i. Plaintiffs operated a mill. An shaft on their steam engine broke,
and the mill was immediately shut down.
ii. Joyce & Co., who created the original shaft, agreed to remake the
old model, and they needed the broken shaft delivered to them.
iii. Plaintiffs decided to use defendants to deliver the broken part to
Joyce. The plaintiffs servant failed to mention the direness of the

situation, and that the mill was going to stay shut until they
received the new part.
iv. Defendant notified Plaintiffs servant, when he had asked when the
shaft would be delivered, that if they received the component prior
to noon on a given day, then the part would be shipped the
following day.
v. Due to defendants neglect, the delivery to Joyce was delayed and
the Plaintiff is suing for the loss of profits for the several days that
the mill was shut down.
vi. There was a unilateral contract. The plaintiff is making the offer
with the plaintiff asking when they could have the shaft delivered,
and the defendant giving an answer. (The defendant had a power of
acceptance.)
1. The plaintiff never incurred a time frame for the delivery in
which the defendant could have made a counter offer and
assume the risk. This never happened.
c. Issue
i. Is the defendant liable to the plaintiffs for the loss profits suffered
by the plaintiffs?
ii. Who had the assumption of risk? (A.O.R.)
d. Holding
i. The courts said that, since the defendants werent made aware of
the direness of the situation (that the mill was being shut down)
there was no way to foresee the damages as a probable result of
their breach of contract.
ii. As a consequence of the breach, a consequence that is foreseeable
will make breaching party liable
1. Special circumstances were not communicated, so
consequence was not foreseeable. Therefore, defendant is
not liable.
e. Rules (pg. 42)
i. 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 contract was made.
ii. 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.
Class #3
I.

Expectation
a. Benefit of the Bargain (B.O.B.)
b. Whole difference in value between condition promised and
outcome.

II.

III.

IV.

V.

c. In Sullivan, she did not get benefit of bargain. The court did not
reimburse her for any loss of earnings in the future.
Reliance
a. Reimbursed for any expenses because of the breach.
b. Being put in as good a position as he would have been if the
contract had been performed. Difference between condition precontract and post-contract.
c. In Sullivan there was reliance in the form of reimbursement for the
pain and suffering of the third surgery, which was not agreed upon
in the contract.
i. This is the issue at hand.
Restitution
a. To restore any benefits conferred on the breaching party back to the
plaintiff.
b. In Sullivan, there was restitution in the amount of $622.65 for the
fee given to the defendant.
i. This is not fully in plaintiffs best interest.
Mitigation
a. Allowing to reduce harm or damage.
b. Non-breaching party does this.
c. In Sullivan, by agreeing to the third surgery, she allowed
mitigation.
Cover
a. When you attempt to mitigate, youre attempting to replace or
recover the goods you didnt receive.

Class #4
I.)

II.)
III.)
IV.)
V.)
VI.)

Elements of a contract
a. Benefits
b. Detriments
i. Once you have both of these, you have consideration.
Mirror Image Rule in relation to contracts (M.I.R.)
a. The acceptance has to mirror the offer; whatever the terms and conditions
of the contract are.
Invitation
a. Inviting someone to make an offer.
b. Hailing a cab
Offer
a. When passenger states their destination that needs to be made at a certain
time.
Acceptance
a. Cab driver accepts the offer or denies it.
Counteroffer

a. Cab may state that they can get the passenger at a later time. Passenger
can accept or deny this.
VII.) Breach of contract
a. Both parties can breach (passenger doesnt pay, or driver doesnt get to
destination/get there in time).
b. If driver breaches, was there foreseeability of the consequences.
VIII.) Foreseeability
a. Restatement (2nd) section 351
i. Regarding foreseeability and liable damages thereafter.
ii. Promise for an act
b. UCC section 2-715
i. Sale
ii. Exchange of goods
iii. Regarding foreseeability and liable damages thereafter.
IX.) Industry custom and practice
a. Why dates that are not time of the essence may not be finite, or
nonflexible.
X.)
Purchasing Insurance
a. Assumption of risk. Allocating the risk to an insurance company.
b. Business interruption insurance
i. A policy that can be obtained by someone in a contract who is
assuming a risk (Bloat Novelties agreeing to purchase microchips,
and getting insurance incase the contract is not fulfilled).
Class #5
I.)

All contracts need consideration

a. Consideration consists of a benefit to the promisor a detriment to the
promisee.
i. Detriment is defined by Williston as the giving up of something
which immediately prior thereto the promise was privileged to
retain, or doing or refraining from doing something which he was
then privileged not to do, or not to refrain from doing.
(PARAPHRASE THIS).
1. A detriment is when someone gives up something their
privileged to have or refraining from something which they
have the right to do.
b. Consideration must actually be bargained for as the exchange for the
promise.
c. The detriment to the promise must be the quid pro quo or the price of
the promise.
i. If a promisor just wants to make a gift to the promise according to
the performance of a condition, the promise is gratuitous and not a
contract.

d. We insist on consideration because The existence of a bargain so

frequently corresponds to the existence of a manifested intention to be
legally bound.
i. Randy E. Barnett, Some Problems with Contract as Promise, 77
Cornell L. Rev. 1022, 1029 (1992.)
e. Consideration is a requirement because parties that are to exchange
agreements are more likely to expect and want legal enforcement, unlike
with gratuitous promises.
I.)

Isaac Kirskey v. Angelico

a. Facts
i. Women did not have the equivalent rights of men back then.
ii. Isaac Kirskey (brother in law) offered his sister in law (Angelico)
to come stay with him now that she is a widow with children. If
you will come down and see me, I will let you have a place to raise
your family, and I have more open land than I can tend
iii. He lived 60 miles away.
iv. She had to abandon the land she had occupied with her husband.
v. She moved there, and after two years, he ejected her from the
property and into the woods.
vi. Because of his outward manifestation, Isaac made it seem like
there was an intent to contract.
vii. Promissory estoppel (page 90 in restatement)
b. Issues
i. Was there a contract with consideration?
c. Holding
i. No, it was a mere gratuity (A present).
ii. Promissory Estoppel

II.)

Louisa Hamer v. Franklin Sideway (LOOK IT UP)

a. Facts
i. Uncle promised nephew that if he would refrain from drinking,
using tobacco, swearing, and playing cards or billiards for money
until he became 21 (nephew was 14 at the time).
ii. At 21, uncle writes him a letter stating that nephew had earned the
money, but hes not appropriate age to have the money. He said he
would give nephew money at a later date with interest.
iii. Uncle died twelve years later without having transferred the funds
to his nephew.
iv. Nephew sues executor of estate.
b. Issue
i. Is there a contract that has been breached by failure to pay the
money?
c. Holding
i. NY court of last resort says that this is not a contract, its purely
gratuitous.

III.)

William F. Langer v. Superior Steel Corp.

a. Name & Procedural history
i. Superior Court of Pennsylvania, 1932
ii. 105 Pa.Super. 579
iii. Plaintiff, Langer
iv. Defendant, Superior Steel Corp.
b. Facts
i. Plaintiff received a letter from defendant stating that, upon his
retirement from the Superior Steel company as the superintendent
of the annealing department, the company was sending him a
pension of $100.00 a month for as long as he lives so long as he
preserves his present attitude of loyalty to the company by not
employing with any competitive companies.
ii. After four years, the plaintiff was notified that the company no
longer intended to continue the payments.
iii. A demurrer was filed by the defendant.
iv. Trial court says it was gratuitous promise.
c. Issue
i. Does the letter portray a gratuitous promise or an enforceable
contract?
d. Holding
i. Reversed.
ii. There was sufficient consideration to support a contract (unilateral
contract).
iii. Upon Remand, the plaintiff obtained the jury verdict but plaintiffs
judgment was reversed on appeal because the president didnt have
the power to make the contract to begin with.
e. Reasoning
i. Court says that because the defendant gained an advantage while
the plaintiff suffered a detriment when the letter stated that the
plaintiff could not work for any competing companies. This was
sufficient consideration to support a contract.
1. It is reasonable to conclude that it is to the advantage of
the defendant if the plaintiff, who had been employed for a
long period of time as its superintendent in the annealing
department, and who, undoubtedly had knowledge of the
methods used by the employer, is not employed by a
competitive company; otherwise such a stipulation would
have been unnecessary.
2. By receiving the monthly payments, the plaintiff implied
with the conditions imposed and was thus restrained from
doing what he had a right to do (work for other companies).

IV.)

Pennsy Supply, Inc v. American Ash Recycling Corp

a. Name & Procedural History

i.
ii.
iii.
iv.
b. Facts
i.
ii.
iii.

iv.
v.

Superior Court of Pennsylvania, 2006.

895 A.2d 595
Plaintiff, Pennsy Supply, Inc.
Defendant, American Ash Recycling Corp.
Plaintiff is a paving subcontractor in a construction project.
Defendant supplied an alternate material called AggRite for no cost
to the plaintiff, even though defendant was not party to any of the
contracts to the construction project.
Pennsy contacted American Ash and obtained 11,000 tons of
AggRite for paving work on the project. The work developed
many cracks, and Pennsy had to remedy the defects for a cost of
$251,940, and spent $133,777 to dispose of the AggRite because it
was considered hazardous waste.
Pennsy believed that there was an implied warranty on the product
so American Ash shouldve helped with disposal costs.
Trial courts ruled that any agreement between the parties was
unforeseeable because of lack of consideration.
Trial court also ruled that the AggRite was a conditional gift.

vi.
c. Issue
i. Was there consideration between the two parties by the defendant
avoiding disposal costs in return for offering the AggRite free of
charge?
d. Holding
i. Reversed.
ii. Court held that there is consideration, and therefore a contract.
This means that American Ash is in breach when they did not help
dispose of the hazardous material.
e. Reasoning
i. A promise (providing AggRite free of charge) induced a detriment
on the plaintiffs (high disposal costs), and the detriment (high
disposal costs) induced the promise for the defendant (providing
AggRite free of charge.)
ii. Consideration was American Ash getting rid of the material, and
Pennsy thinking that they received free material to work with.
f. Rule
i. A promise inducing a detriment, and a detriment inducing a
promise is sufficient consideration for a contract.
V.)

In re Edwin Farnham Green

a. Name and Procedural History
i. United Stated District Court, Southern District of New York, 1930.
ii. 45 F.2d 428
iii. Plaintiff, claimant
iv. Defendant, bankrupt
b. Facts

c.

d.
e.

f.

i. Claimant and bankrupt had an affair which ended on 1926.

ii. Bankrupt had promised to marry the claimant after his wife
divorced him, but the bankrupt denied this.
iii. Both parties underwent an agreement under seal whereby the
defendant agreed to pay the plaintiff $1,000 a month, assign the
plaintiff a $100,000 life insurance policy on his life (beneficiary)
as well as paying the defendant $100,000 in case the policy should
lapse for nonpayment of premiums, and pay rent for four years on
an apartment the plaintiff had leased.
iv. The agreement had an instrument in the preamble that stated as
consideration the payment of $1 by the plaintiff to the defendant,
along with other good and valuable consideration. The defendant
would be released from all claims prior.
v. Plaintiff sued defendants bankrupt estate.
vi. Trial referee held the claim valid and the estate appealed on the
grounds that the agreement was unenforceable.
Issue
i. Was there actual consideration that would require an enforceable
contract?
ii. Was the agreement to be held as a legitimate contract?
Holding
i. Reversed.
Rule
i. Intent to be legally bound is not sufficient to create a contract.
ii. Past consideration cannot be considered consideration for the
present.
iii. Nominal consideration is not consideration for a contract.
Reasoning
i. Even though the agreement was made under seal, there was no real
consideration. Seals are presumptive evidence.
1. Presumptive assumptions can be rebutted.
ii. Releasing the defendant from imaginary claims is not valuable
consideration.
iii. What the bankrupt obviously intended in this case was an
agreement to make financial contribution to the claimant because
of his past cohabitation with [the claimant], and, as already pointed
out, such an agreement lacks consideration. (pg. 81.)
iv. Lack of consideration nullified the seal.

Class
I.)

Consideration
a. Detriment to promise (maybe sometimes promisor)

II.)
III.)

IV.)

V.)
VI.)
VII.)

i. Detriment is someone giving up their right to do something.

Restatement 2d Section 81
a. Says that initial bargaining doesnt have to be consideration; there can still
be consideration.
Option Contract
a. Someone has a power not to exercise the option (which would be
committing yourself).
b. Freezes offeror from withdrawing the offer.
c. In unilateral contracts the offeror is not allowed to withdraw offer once
performance has started unless they give a reasonable amount of time.
William F. Langer v. Superior Steel Corp.
a. ITK
i. The letter
b. No BFE
c. One contract with continuing obligation.
Pennsy supply v. American Ash
a. American Ash invited other companies to make offers
b. Pennsy made the offer
Consideration
a. Adequate vs. Sufficient
i. Courts look into the sufficiency of consideration.
TINALEA
a. This is not a legally enforceable agreement.

Reading
I.)

Nominal Consideration
a. Pretense of bargain
b. It is a token payment given in exchange for something of greater value.
c. Courts tend to look behind the value of consideration.

II.)

Dan Cohen v. Cowless Media Co.

a. Name & Procedural History
i. Supreme Court of Minnesota, 1990
ii. 457 N.W.2d 199, reversed
iii. 501 U.S. 663 (1991), opinion on remand
iv. 479 N.W.2d 387 (1992)
v. Appellate court dismisses claim based on fraudulent
misrepresentation.
vi. Appellate court affirms allowance of the breach of contract claim.
b. Facts
i. Plaintiff offered a Star Tribune reporter and Pioneer Press reporter
documents in regards to a gubernatorial election campaign, and
only offered them under a promise of confidentiality.
ii. Plaintiff was an active Republican associated with the Wheelock
Whitney campaign, opposing the Perpich-Johnson campaign.

c.
d.

e.
f.

III.)

iii. The documents provided information about Marlene Johnson in

regards to a prior case in which she was charged for three counts of
unlawful assembly, and another in which she was convicted of
petit theft.
iv. Both reporters intended to keep their promises, but editors
overridden that and decided to use the plaintiffs name in the
articles.
1. Star Tribune did it because they endorced the PerpichJohnson ticket, and editors feared if they didnt publicize it
this way, then they would be vulnerable.
2. In general, disclosing the plaintiffs name increased their
credibility.
v. Cohen was fired by his employer.
vi. After such bad press and words were written about him, the
plaintiff couldnt sue for defmation because the information
disclosed was true.
Issue
i. Should an ethical promise in the journalism world be legally
binding?
Holding
i. Supreme court held that contract theory on this arrangement puts
unwarranted legal rigidity on a special ethical relationship.
ii. Affirm appellate courts decision to dismiss the case brought for
misrepresentation and fraud.
iii. For promissory estoppel, the first amendment barred such a claim.
1. US supreme court overruled this.
Rule
i. Intent is sometimes necessary when a contract/promise is to be
legally bound.
Reasoning
i. Journalists keep their confidentiality promises because its
honorable and if they didnt, sources would dry up.
ii. Journalists dont have the authority to make/keep the promise. The
editors are the only people who had the authority.
iii. Courts were wondering if keeping a confidential promise was
legally enforceable, not whether it was ethically required.
1. Should the courts superimpose a legal obligation on a
moral and ethical obligation?
iv. They reason that a source and a reporter dont ordinarily believe
they are engaged in making a legally binding contract, so the law
does not create a contract where the parties intended none. (89).
1. No intent to make a legally binding contract.

Samuel Thomas v. Eleanor Thomas

a. Name & Procedural History
i. Queens Bench, 1842

ii.
iii.
iv.
b. Facts
i.
ii.

iii.

iv.

v.

2 Q.B. 851
Lower court found for defendant. Plaintiff appeals.
Judge Langenbach
On his deathbed, John Thomas orally expressed a wish to make
further provisions to his will for his wife, the defendant.
John Thomas possessed a row of seven dwelling houses in Merthyr
Tidvil, one of which he and his wife resided in. In his will, all of
this was appointed to his brother, the defendant, with the plaintiff
as the executor. This was subject certain payments which were
charges in money for the benefit of the plaintiff.
The deceased declared orally, in the presence of two witnesses, that
it was his will that his wife should have either the house in which
he lived and all that it contained, or an additional sum of 100
pounds instead as long as she remains unmarried.
After his death, the executors of his estate (Samuel Thomas and
Benjamin Thomas) entered into an agreement with Eleanor in
consideration of Johns desires whereby Eleanor would take
possession of the house and in return pay 1 pound per year for the
ground rent, as well as maintain the house.
After the death of his co-executor (the brother), the defendant
refused to complete the conveyance claiming that there was no
consideration, and therefore, no contract.
The trial court ruled in favor of the plaintiff on all counts.
Defendant appeals.

vi.
vii.
c. Issue
i. Is fulfilling the wishes of John Thomas (motive) sufficient
consideration?
ii. Will the court loo into the reasoning behind the consideration if
there is actually a consideration?
d. Holding
i. Appeal dismissed, ruling in favor of plaintiff.
e. Reasoning
i. The court holds that motive is not consideration, that consideration
must have something of value.
ii. In this case, however, there is clear consideration by the agreement
that the plaintiff pays 1 pound a year for rent directly to the
executors. The house was not just a gift, and this proved that there
was sufficient consideration.
iii. The one pound was not a token consideration, and she also gave up
the right to marry and keep the property clean.
IV.)

Robert C. Browning v. O. Arthur Johnson

a. Name & Procedural History
i. Supreme Court of Washington, 1967
ii. 70 Wash.2d 145

b.

c.

d.
e.

iii. Trial court concluded that the canceled sale contract had lacked
mutuality and had been too indefinite in its terms for enforcement,
but nevertheless, the contract canceling the sale contract was sup
ported by adequate consideration.
Facts
i. The appellant and respondent entered into a contract of sale, which
stated that the seller would sell his practice and equipment over to
the buyer.
1. Written contract so statute of frauds was satisfied.
ii. The seller then changed his mind and wanted to be released from
the contract.
iii. The parties entered into another contract cancelling the contract of
sale as long as the seller fulfilled his promise to pay the buyer
$40,000.
iv. Seller then wanted to cancel this contract and filed an action for
declaratory judgment and restitution. He believed that the parties
entered into the first contract under the influence of a mutual
mistake, and it lacked definite terms [too indefinite] such as
contract price, equipment inclusion, etc. and no mutuality.
1. Declaratory judgment wants to declare the second
contract null and void because of the mutual mistake,
2. Seller is asking for restitution which means some kind of
money was sent over to the buyer.
v. Trial courts hold that the contract canceling the contract of sale
was supported by adequate consideration.
vi. Seller appeals.
Issue
i. Instead of adequate consideration (which considers the value), the
court was figuring out if there was sufficient consideration to
support the promise.
ii. The court held that the sellers promise was supported by sufficient
consideration and the case did not require the court to consider the
values of the promise/contract.
Holding
i. Court affirms in favor of buyer.
ii. Restatement section 74
Reasoning
i. This was a unilateral contract, and the requirement for sufficient
consideration of this kind of contract was met by the detriment
incurred by the seller in exchange for the buyers act of giving up
the contract of sale.
ii. Contract one was valid, and subsequently, that belief is based on
something unsupported, but at the time of contract there was still
the belief that they each had a legal right to buy and sell. Therefore
second contract must be enforced.

V.)

Robert C. Apfel v. Prudential-Bache Securities, Inc.

a. Name & Procedural History
i. Court of Appeals of New York, 1993
ii. 81 N.Y.2d 470
iii. Judge Simons
iv. Plaintiff, Apfel
v. Defendant, Prudential-Bache Securities (investment bank)
vi. Trial court finds for plaintiff, appellate holds for defendant.
b. Facts
i. Plaintiffs, an investment banker and lawyer, entered into a contract
with the defendants predecessor regarding a system that
eliminated paper certificates and allowed bonds to be sold, traded,
and held exclusively by means of computerized book entries.
ii. The contract stated that the plaintiffs would convey their rights to
the techniques and certain trade names while the defendant agreed
to pay a stipulated rate based on its use of the techniques.
1. The time period for the contract was October 1982 to
January 1988.
2. Under the provisions, the defendants were obliged to pay
even if the techniques became public knowledge or
standard practice in the industry, and if the applications ofr
patents and trademarks were denied.
iii. During the first year, the defendants were the only company using
these techniques, but by 1985, following a change in personnel, the
defendant refused to make any further payments because, they
argued, that the ideas brought forth by the plaintiffs had been in the
public domain at the time of the sale agreement.
iv. Many charges were brought forth, but the trial court dismissed all
of them except for the breach of contract claim.
v. The appellate court modified the order by reinstating defendants
claim that the sale agreement lacked consideration. Appellate court
held that novelty was required before an idea could be valid
consideration but concluded that the question was one of fact to be
decided at trial.
vi. Defendants appeal because they believe there is no contract
between the parties because the sale of agreement lacked
consideration.
1. They contend that an idea cannot be legally sufficient
consideration unless it is novel.
c. Rule
i. Plaintiff have to show idea was novel, concrete form, defendant
used plaintiffs idea, and plaintiff expected money.
d. Issue
i. Is novelty required to validate sufficient consideration for a
contract?

ii. Does the novelty of an idea matter in regards to consideration, or

does its value?
e. Holding
i. A showing of novelty is not required to validate the contract.
ii. Modified appellate division holding accordingly.
f. Reasoning
i. Lack of novelty does not constitute lack of value.
ii. Parties who contract are free to bargain, even if consideration
between parties is unequal.
iii. Defendants still benefitted from the contract.
iv. The fact that the sellers may not have had property right in what
they sold does not, by itself, render the contract void for lack of
consideration. Courts say defendants still gained something of
value.
Class
I.)

II.)

III.)
IV.)

Statute of frauds
a. When one contractor is required to perform something, then there should
be something in writing
i. Look it up
Sufficiency vs. Adequacy
a. Not looking at the value of the bargain (adequacy) or the value of the
consideration (whether there was balance on both sides), but just if the
consideration was sufficient.
b. Sufficiency is detriment to the promisee and benefit to the promisor.
c. Courts dont want to get into the mindset of the bargain/contract.
Efficient Breach
a. Although they are not encouraged, there is an understanding of the reason
for the breach and they are not discouraged.
Quasi contracts are the contracts that need the highest level of novelty (Apfel
v. Prudential-Bache)
a. Depending on the kind of contract defines the level of novelty that is
required. Express requires the least level.

Reading
I.)

Clifton Jones V. Star Credit Corp

a. Name & Procedural History
i. Supreme Court of New York, 1969
ii. 59 Misc.2d 189
b. Facts
i. Plaintiff bought a freezer purchased for $900 which was actually
valued at $300

ii. Plaintiffs paid $619.88 toward their purchase and there was still a
balance of $819.81.
iii. There was intent, offer, acceptance, and consideration
iv. This was a door to door transaction.
v. UCC Section 2-302
vi. Second Restatement section 79
c. Issue
i. Is transaction unconscionable according to UCC?
d. Holding
i. Yes.
ii. Court said that the defendant can keep the payments that are made,
but no further payments need to be made.
iii. Public policy dictates that uneducated consumers should be
protected from greedy merchants and the dangers of unequal
bargaining power. UCC Section:2-302 provides for a moral sense
of community in commercial transactions and if a clause of a
contract is unconscionable at the time it was made, the court may
refuse to enforce the contract. The UCC applies to the price term of
a
contract.
There is a public necessity and desirability for installments sales
contracts. However, the pricing scheme on such contracts must
afford some protection to the seller for the risk of selling to those
who may default on payment. The price terms set in the subject
contract are in excess of any assurances and the result is an
unconscionable contract.
e. Reasoning
i. There was a gross inequality of bargaining power.
ii. Court was looking into the adequacy of the consideration (which
they sometimes will do) when there is a gross inequality of
bargaining power.
iii. The UCC section does have the morality built into it.
iv. In this case there is substantive unconscionability.
1. Was there unconscionability in the making of the contract?
2. If not, was there substantive unconsionability after the
contract was made?
Reading
I.)

William Levine v. Anne Blumenthal

a. Name & Procedural History
i. Supreme Court of New Jersey, 1936
ii. 117 N.J.L. 23.
iii. District court ruled that oral agreement was not supported by a
lawful consideration. Plaintiffs appeal.
iv. Plaintiff, lessor
v. Defendant, Lessee

b. Facts
i. Defendant agreed to pay $2,100 of rent for the first year of rent,
and $2,400 for second year of rent.
ii. Defendant was then unable to pay for the increase the second year.
iii. The plaintiff and defendant orally agreed that the defendant could
pay the same amount as the first year of rent during the second
year.
iv. Defendant leaves before completion of second year, and doesnt
pay the last months rent.
v. Plaintiff brings lawsuit to recover last months rent due for the
second year at the higher rate.
vi. District court found that there was a verbal agreement, but that it
did not count as lawful consideration.
c. Issue
i. Can the promise to perform a preexisting duty (to pay the same
amount of rent) count as consideration?
d. Holding
i. Supreme court affirmed trial courts decision. A promise to do
what the defendant is already bound to do is unreal consideration.
e. Reasoning
i. The plaintiffs mere fear that the debtor will fall into bankruptcy is
not enough to form sufficient consideration.
ii. Any consideration to perform the new undertaking is satisfactory
condition.
iii. The fact that the agreement has been executed by the payment and
acceptance of the reduced rent, does not mean the substituted
performance stands.
iv. Promissor is bound to what he is already obligated to do, unless
there is a new consideration to replace the prior agreement.
v. Court said there needed to be new consideration.
f. Rule
i. Preexisting duty cannot count as consideration for the purposes of
contract formation.
II.)

Alaska Packers Association v. Domenico

a. Name & Procedural History
i. United States Court of Appeals, Ninth Circuit, 1902
ii. 117 Fed. 99
iii. Trial court ruled in favor of the plaintiffs
iv. Defendants appeal.
v. Judge Ross
b. Facts
i. The plaintiffs, who are sailors, agreed to work in Alaska for the
defendants for a set sum. Once the workers arrived at the location,
they demanded an increase in that sum to the superintendent, who

ii.

iii.

then informed them that he did not have the authority to make that
change to their contract.
The plaintiffs threatened to stop working unless their pay was
increased, and the superintendent given the situation in which it
was impossible to bring other workers, the shortness of the season,
and the remoteness of the location agreed to the pay increase.
Once back in San Francisco, the sailors were informed by the
appellant that they would only be paid to what was agreed in the
original contract.
Trial court found for plaintiffs.
Defendants (appellants) appeal.

iv.
v.
c. Issue
i. Is there consideration when one party refuses to do what it is
already legally obligated to do (refuses to uphold the terms of the
contract) to the detriment of the other party?
d. Holding
i. No. The court affirms the trial courts decision and remands.
e. Reasoning
i. The workers new contract was based on the agreement to render
services already contracted for (preexisting duty).
ii. When the sailors refused to do what they were contractually
obligated to do, and put the superintendent in a tough situation, the
new agreement was not a contract because there was no real
consideration and bargain for exchange.
1. A party who refused to perform and coerces a promise from
the other party to pay increased compensation takes an
unjustifiable advantage of necessities of the other party
(PARAPHRASE)
iii. To permit plaintiff to recover under such circumstances would be
to offer a premium upon bad faith, and invite men to violate their
most sacred contracts that they may profit by their own wrong.
(pg. 116, King v. Railway co., 61 Minn.482).
iv. The sailors gave nothing for the extra money. They were only
doing what they were already legally bound to do.
f. Rule
i. Once a contract is modified by a coerced promise for increased
compensation for what a party is already legally obligated to
perform, there can be no consideration.
III.)

Alfred L. Angel v. Murray, Jr.

a. Name & Procedure
i. Supreme court of Rhode Island, 1974
ii. 113 R.I. 482
iii. Roberts, Chief Justice
iv. Alfred represents the citizens
v. John Murray, director of finance of the city

b. Facts
i. A garbage collector contracted with the city of Newport. Theres a
contract for 5 years, in writing, for $137,000,00 per year to collect
the garbage.
ii. Dwelling units increased by 400 more dwelling units, and the
anticipation was 20-25. Contract price was alluded to the fact that
their may be a change but only by 20-25 (unforeseeable changed
circumstance).
iii. In 1967 he asked for another $10,000.00 which was approved
iv. In 1968 he asked yet again for another $10,000 which was
approved by the city, as well.
v. The city now wanted the money back. They said that he already
had a pre-existing duty to pick up the garbage, so the extra money
is not entitled.
vi. Contract needed to be in writing to the city manager to be
approved, but it wasnt. The services however had already been
rendered by being paid the extra money.
c. Holding
i. There is a contract, and there was consideration.
ii. Court decision below was reversed.
d. Reasoning
i. The preexisting duty rule will not be applied when there are
unforeseen circumstances, or changed circumstances.
ii. Using UCC Section 2-209 and Restatement 89D(a), the courts use
the idea of changed circumstances to weaken the preexisting duty
rule.
Class
I.)

II.)
III.)
IV.)

Consideration Exceptions
a. UCC
i. 1-107 Waiver/Renunciation
ii. 2-205 Firm Offer
iii. 2-209 Modifications
b. Alfred L. Angel v. John E. Murry, Jr. exceptions.
UCC 2-302
R2nd Section 89
Preexisting Duty
Accord and Satisfaction
a. Must be based on the new agreement for it to be binding.
b. A debt collector will say you owe $10,000 by pre-existing duty. If you
cant or wont pay that much, a debt collector will negotiate. The collector
will then say okay send us $8,000.00. Can they come back to you for the
other $2,000.00? Yes unless there is accord and satisfaction (written
agreement, signed by both parties, and binding if each party believes they
had a legitimate dispute as to the original amount.)

V.)

VI.)

c. This a way to get out of a pre-existing duty!

d. Eliminates uncertainty.
Changed Circumstances
a. One of the ways to amend the original contract.
b. Need to prove that circumstances have changed to the point that the
original contract puts a burden (?) on one party?
c. The changed circumstances need to be unforeseeable.
i. This is what the fisherman tried to do in the courts with the nets
argument in Alaska Packers v. Domenico
Implied Duty of Good Faith & Fair Dealing
a. To perform a duty to the best of ones ability?

Reading
I.)

Rehm- Zeiher Co. V. F.G. Walker Co.

a. Name & Procedural History
i. Court of Appeals of Kentucky, 1913
ii. 156 Ky. 6.
iii. Rehm-Zeiher, Plaintiff
iv. F.G. Walker Co., Defendant
v. Trial court ruled in favor of defendant. Plaintiffs appeal.
b. Facts
i. Plaintiff and defendant enter into a contract which allowed RehmZeiher to acquire 2,000 cases of whiskey in 1909, 3,000 cases of
whiskey in 1910, 4,000 cases of whiskey in 1911, and 5,000 cases
of whisky in 1912 from Walker Co. The contract only stated that if
walker lost its whiskey and bottling room, then it would be
excused from the contract, and that if Rehm-Zeiher required less
than the full amount walker would release it from the amount
stated in the contract.
ii. Prices of whiskey rose in 1911 so Walker shipped less than half of
the order for the year.
iii. Plaintiff sues for enforcement of the contract.
c. Issue
i. Is there consideration if only one party has the ability to modify the
contract using their own discretion?
d. Holding
i. No.
ii. Appellate court affirms trial courts decision.
e. Reasoning
i. There was no mutuality in the consideration for this contract.
ii. A contract that excuses a party to the contract from performing at
its own discretion is not binding on either parties, and is not
enforceable.
iii. Both parties needed to have an equal obligation towards each
other.

iv. The plaintiff, by terms of the contract, could decide not to take any
of the bottles all together while the defendant could not do
anything.
v. There is a lack of consideration.
f. W.M. McMichael v. Harley T. Price
i. Name & Procedural History
1. Supreme Court of Oklahoma, 1936
2. 177 Okla.186
3. Osborn, Vice Chief Justice
4. Plaintiff, Harley T. Price
5. Defendant, W.M. McMichael
6. Trial court found for plaintiff.
ii. Facts
1. 10 year contract, defendant was contractually obligated to
sell all the sand that the plaintiff could sell.
2. Plaintiff instituted action against defendant to recover
damages for breach of a contract. A verdict was returned in
favor of plaintiff and defendant appealed. Plaintiff alleged
that defendant failed to furnish sand which plaintiff had
sold for shipment and that defendant renounced the
contract. Defendant alleged that plaintiff breached the
terms of the contract by failing and refusing to pay for sand
shipped each month as required by the contract and advised
plaintiff he would cease making further shipments unless
he paid as provided in the agreement. Defendant contended
that the contract was a mere revocable offer and was not
binding for want of mutuality. (PARAPHRASE)
iii. Issue
1. Is there mutuality of obligation where the obligations to
buy and sell differ?
iv. Holding
1. Yes.
2. Supreme court affirms trial court.
v. Reasoning
1. There was intent of the parties to enter into a mutually
binding contract.
2. The plaintiff had experience in the sand business, and with
the good faith claim, the courts didnt think that the
plaintiff would say I dont want to buy anymore sand
because Im not selling.
a. So saying that he would stop selling contradicts the
idea that people enter into contracts with good-faith.
vi. Rules
1. Where the terms of a contract are susceptible of two
significations, that will be adopted which gives some

operation to the contract, rather than that which renders it

inoperative? (PARAPHRASE)
II.)

Otis F. Wood v. Lucy, Lady Duff-Gordon

a. Facts & Procedural History
i. Court of Appeals of New York, 1917
ii. 222 N.Y. 88
iii. Cardozo Judge
iv. Plaintiffs, Wood
v. Defendants, Duff-Gordon
vi. Trial Court Denied Lady Duff-Gordon a motion for judgment, and
the appellate court reversed on the grounds that the contract lacked
mutuality because wood never promised to do anything explicitly.
b. Facts
i. The defendant, a famous creator of fashions, contracted with the
plaintiff so that the plaintiff had an exclusive right to market and
license all of the defendants designs with her name.
ii. This exclusive right required that both parties split the profits from
Woods sales, but there was no clause that explicated that the
plaintiff would have to perform.
iii. The defendant placed endorsements on clothes without Woods
knowledge, and the plaintiff sued on breach of contract for profits.
c. Issue
i. 1) May a promise to use reasonable efforts be implied from the
entire circumstances of a contract? 2) Can an implied promise to
use best efforts be considered valuable consideration? 3) Can the
duty of good faith compensate for vagueness in an agreement to
avoid invalidation of a contract clearly intended by the parties?
(PARAPHRASE)
d. Holding ( PARAPHRASE ALL)
i. 1) Yes. A promise to use reasonable efforts may be implied from
the entire circumstances of a contract. 2) Yes. An implied promise
to use best efforts in contract performance can be considered
valuable consideration. 3) The duty of good faith can compensate
for vagueness in an agreement to avoid invalidation of a contract
clearly intended by the parties.
ii. A contract may lack an explicit promise to further its goals. The
acceptance of the exclusive agency meant that Wood had accepted
the duties of that agency. Because Lady Duff-Gordons sole
compensation was a split of the profits, there would be no efficacy
to the transaction unless there was an implied promise to use best
efforts.
iii. The court held that it was clear from the terms and recitals and
duties under the contract that both parties intended to do what was

reasonably necessary to make it a success so that would be profits

to divide. Woods promise to pay Lady Duff-Gordon one-half of
the profits and revenues resulting from the exclusive agency and to
render accounts monthly demonstrated that he had some
obligations under the contract, and there was a promise to use
reasonable efforts to bring profits and revenues into existence.
Class

I.)

Consideration vs. Illusory

a. Implied Duty of Good Faith and Fair Dealing
i. It is in every contract, and is relevant.
b. Best Efforts (Duff-Gordon case)
i. Both of these can be considered consideration of a contract.

II.)

Omni Group, Inc. V. Seattle-First National Bank

a. Name & Procedural History
i. Court of Appeals of Washington, 1982
ii. 32 Wash.App.22
iii. James Judge
b. Facts
i. The Plaintiff, Omni Group, Inc. (Plaintiff), sued to enforce an
earnest money agreement for the purchase of real estate from the
Defendant, Seattle-First National Bank (Defendant). The
agreement stated that the final sale was subject to receiving an
architects report satisfactory to purchaser. If the report was
satisfactory the Defendant would give Plaintiff his acceptance
within 15 days otherwise if no notice is given the transaction is
null and void. Plaintiff decided to forgo the study and the parties
entered negotiations of certain terms. Defendant however refused
to sale. Defendant argues that the waiver of a satisfactory report to
Plaintiff made the promise illusory. Plaintiff argues that the clause
only created a condition subsequent that Plaintiff could waive.
(PARAPHRASE)

c. Issue
i. Was the engineers report a necessary precondition for the contract
to occur?
d. Holding
i. Reversed.
e. Reasoning
i. No. Reversed.
ii. The promisor's duty to exercise his judgment in good faith is an
adequate consideration to support the contract.
A party cannot create an unenforceable contract by waiving the
condition which renders his promise illusory. A promise given for a
promise is sufficient consideration and does not necessarily render
the contract illusory or affect its validity.
A condition precedent to the promisors duty that the promisor be
satisfied may require performance personally satisfactory
[Subjective + Good Faith] to the promisor or it may require
performance acceptable to a reasonable person [Objective]. It is a
question of fact. Neither case renders it illusory.
The promise given is that the promisor will exercise his judgment
in good faith. Because it requires good faith, the ability to cancel
the contract is not unfettered. Such provisions are valid where the
option can be exercised upon the occurrence of specified
conditions. (PARAPHRASE)
III.)

Andrew D. Ricketts V. Katie Scothorn

a. Name & Procedural History
i. Supreme Court of Nebraska, 1898
ii. 57 Neb. 51
iii. Judge Sullivan
iv. Plaintiff, Katie Scothorn
v. Defendant, Andrew D. Rickets.
vi. Trial court found for the plaintiff. Defendant Appealed.

b. Facts
i. Plaintiff is suing the executor of the estate (defendant) of her
deceased grandfather.
ii. Her grandfather wrote her a note stating that he would pay her
$2,000.00 with 6% interest every year. In person, he told her to
abandon her occupation as a bookkeeper, which she did.
1. Plaintiff claims that she relied on this money with the
interest as a means of support.
iii. For a year she did not work until with the consent and help of her
grandfather, she worked as a bookkeeper with Messrs.
iv. Her grandfather did pay one years interest and a short time before
his death expressed regret that he had not been able to pay the
balance.
c. Issue
i. Was the note considered a contract or a gratuitous promise?
d. Holding
i. Supreme court affirms trial courts decision.
e. Reasoning
i. The courts do not find the note, or the fact that the plaintiff quit her
job, sufficient consideration for a contract.
ii. They say that the plaintiffs termination of her occupation was
voluntary, and a consequence of her grandfathers gift.
iii. While there is no contract, the court finds that there can be
equitable estoppel (the effect of the voluntary conduct of a party
whereby he is absolute precluded, both at law and in equity, from
asserting rights which might perhaps have otherwise existedas
against another person who in good faith relied upon such conduct.
IV.)

Allegheny College v. National Chautauqua County Bank of Jamestown

a. Procedural History
b. Facts

c. Issue
d. Holding
e. Reasoning

V.)

Congregation Kadimah Toras-Moshe v. Robert A. Deleo

a. Name & Procedural History
i. Supreme Judicial Court of Massachusetts, 1989
ii. 405 Mass. 365
iii. Trial court and appellate court rule in favor of the defendant.
iv. Plaintiff, Congregation
v. Defendant, Robert A. DeLeo (executor)
b. Facts
i. Decedent promised $25,000 dollars while he was suffering a
prolonged illness throughout which he was visited by the
Congregations spiritual leader.
ii. The congregation planned to use the money to build a library in the
decedents name.
iii. After his death, and before any money was given, the congregation
asserts that the decedents oral promise is an enforceable contract
under our case law.
c. Issue
i. Was decedents oral promise an enforceable contract?
d. Holding
i. Supreme court says no.
ii. Affirms trial and appellate court
e. Reasoning

i. Even though the congregation says they relied upon the promise
(planning to build library, fit it into their budget plan), the court
declares that it is not a relied upon detriment, but rather a hope or
expectation.
ii. Did not enforce this charitable subscription because it was not
enforced.
VI.)

First Hawaiin v. Zukerkorn

a. Name & Procedural History
i. Intermediate court of appeals of Hawaii, 1981
ii. 2 Haw.App. 383.
iii. Judge Burns
iv. Bank, Plaintiff
v. Zukerkorn, Defendant
vi. Trial court found for the plaintiff on all three counts (two notes and
master charge) with summary judgement.
b. Facts
i. Defendant executed two demand notes in 1965 and 1966
respectively.
ii. In 1975 he wants to apply for master charge credit card, and the
bank says that since he owed a small amount of money on an old
account, issuance of the card was conditioned on his agreement to
pay $100 a month on the old account.
1. He did not know these were for the two notes.
iii. Defendant agrees to this and pays $200.00 at the time the
agreement was made, and $100 for three months after.
iv. Plaintiff sues defendant for the two notes and the balance due on
the master charge account.
c. Issue

i. Whether the new promise to pay off past debt constituted

consideration to re-invoke old promise top pay off debt.
d. Holding
i. Affirms for master charge, and reversed and remanded for further
proceedings for two notes.
e. Reasoning
i. (1) a question of fact precluding summary judgment was presented
on issue whether a new promise to pay balance owing on notes,
collection of which was barred by applicable six-year statute of
limitations, was created by an express promise on part of
debtor to pay balance to bank, by an express acknowledgment, or
by part payment
ii. (2) even if debtor expressly acknowledged balance owing on note
executed in favor of bank, collection of which was barred by
statute of limitations, or made part payment of balance
owing, such action on part of debtor was only prima facie evidence
of a new promise which could be rebutted by other evidence and
by circumstances under which it was made.
iii. SOL can be revived because clients have a moral obligation to pay
off these debts.
VII.)

Daniel Mills v. Seth Wyman (PARAPHRASE ALL)

a. Name & Procedural History
i. Supreme Judicial Court of Massachusetts, 1825
ii. 20 Mass. (3 Pick.) 207
iii. Common Pleas court directed a nonsuit. Plaintiff subsequently
filed expectations.
b. Facts
i. Following a long voyage at sea, Levi Wyman fell ill and found
himself in Hartford, Connecticut. He did not know anyone in the
community. Plaintiff Daniel Mills took Levi in and provided him
with room, board, and care. After a two-week illness, Levi passed
away. Thereafter, Levis father, Seth Wyman, wrote to Mills and
agreed to pay for the expenses he had incurred on behalf of
Wymans son. At the time of his illness and the provision of
services, Levi Wyman was twenty-five years old and thus not a
minor. Defendant Seth Wyman did not have a pre-existing
relationship with Mills nor did he agree to pay any expenses on
behalf of his son until after the debts had been incurred. Seth
Wyman reneged on his promise to pay his sons expenses, and
Plaintiff brought suit in assumpsit. At trial, the Court directed a
nonsuit for failure of legal consideration, and this appeal followed.
c. Issue
i. Is a moral obligation alone, flowing from a promise to pay,
sufficient consideration to create a valid contract to repay debts
that have already been incurred by an adult child of the promisor?

d. Holding
i. No, a promise- and moral obligation- alone is insufficient
consideration to create a legal obligation to perform a moral duty.
e. Reasoning
i. Chief Judge Parker delivered the opinion of the Court. The
majority began by explaining the universally recognized principle
that putative contracts, absent consideration, are not actually
enforceable agreements, even where refused enforcement leads to
a regrettable result. While admitting that moral obligations, and
accompanying promises, are at times given legal effect by Courts,
Judge Parker explained that such a holding was hardly compelled.
Rather, a promise to pay a debt that has already been incurred is
insufficient to form a legal obligation. The majority distinguished
this case from others in which mere promises were given legal
effect, such as where collecting a debt is barred by the statute of
limitations but revived by subsequent promise. In those cases,
however, the enforceable promise merely served to waive a legal
limitation on an otherwise valid contract. In this case, the plaintiff
attempted to enforce a binding agreement based solely on the
promise of payment. While the defendant violated a moral duty to
keep his word, and make good on his promises, the general rules of
contract construction lead to the unavoidable conclusion that no
contract was created; accordingly, no legal obligation to make
payment was incurred. The majority distinguished this case from
that of a parent paying expenses incurred by a child, as the child
in this case was well past the age of majority. Finally, the Court
determined that a state statute requiring relatives to pay for the
expenses that would otherwise be incurred by the community did
not apply on the facts before the Court. While additional factual
findings regarding the expenses of the deceased and the means of
the defendant may have made the statute applicable, the Court
could not apply it here absent additional findings. Furthermore, the
statute in questions was limited to the specific instances cited and
the Court had inadequate information to conclude that the
circumstances here compelled payment. In the absence of a valid
contract or a statutory duty to make payment, judgment was
properly rendered for the defendant.
f. Rule
i. Moral obligations alone are insufficient to provide valid
consideration for a binding contract. The Court will not enforce a
moral obligation; rather, the Court will only enforce a valid
contract following a determination that the contract in question is
legally sufficient.
VIII.) Joe Webb v Floyd and Joseph F. McGowin
a. Name & Procedural History
i. Court of Appeals of Alabama, 1935

ii.
iii.
iv.
v.
b. Facts
i.

27 Ala.App. 82
Plaintiff, Floyd
Defendant, McGowin
Trial court and appellate court sustained a demurer.
Webb (P) and McGowin (D) worked at a mill. Webb was releasing
a 75-pound block of wood to the floor of the mill below when he
noticed McGowin standing where the block would have fallen.
Webb fell with the block in order to save McGowins life and
broke his arm and leg and ripped his heel off, leaving him
permanently disabled and incapable of performing either physical
or mental work. McGowin promised to pay Webb $15 every two
weeks for the rest of Webbs life. Webb received the payments
until McGowin died eight years later. Webb sued the executors of
McGowins estate when the payments stopped. At trial, D obtained
a nonsuit against P and P appealed. (PARAPHRASE)

c. Issue
i. Can moral consideration create an enforceable promise if the
promisor has received a material benefit constituting a valid
consideration for his promise?
d. Holding
i. Yes.
ii. Reversed and remanded.
e. Reasoning
i. In this case, the fact that P saved McGowin from death or grievous
bodily harm was a material benefit to McGowin. Upon receiving
this benefit, McGowin became morally bound to compensate P and
as such expressly agreed to compensate P. When the promisee
cares for, improves and preserves the property of the promisor,
even without a request to do so, it is sufficient consideration for the
subsequent agreement to pay for the service because of the
material benefit received directly by the party. Once P saved
McGowin from death or grievous bodily harm and McGowin
subsequently agreed to pay him for the service rendered it became
an enforceable contract.
ii. Most courts do not allow moral consideration. This case is a
minority.
IX.)

Embry v. Hargadine, McKittrick Dry Goods

a. Name
i. St. Louis Court of Appeals, Missouri, 1907
ii. Lower court found for the defendant, plaintiff appealed.

b. Facts
i. P was employed by D as manager of the sample department. He
had a one year contract running through December 15.
ii. P asked D several times about renewing the contract prior to
December 15 but had been put off.
iii.

December 23, P asked D to renew his contract or he would quit. P

testified that D said to get back to work, that everything was
alright, and to get his men out without worry.

iv. On February 15, D told P that his services were no longer needed.
v. P sued D for breach of contract.
c. Issue
i. Can an enforceable contract be formed without reference to the
subjective intentions of either party?
d. Holding
i. An enforceable contract can be formed without reference to the
subjective intentions of either party.
ii. If a man conducts himself such that a reasonable person would
believe that he was assenting to the terms proposed by another
party, and that other party upon that belief enters into the contract,
that man would be equally bound whether or not he had actual
subjective intent.
e. Reasoning
i. The inner intention of parties to a conversation alleged to create a
contract cannot either make a contract of what transpired, or
prevent one for arising, if the words used were sufficient to
constitute a contract.
ii. The intention in contracts is embodied in the words which the
parties used, in both written in oral contracts.
iii. Though D may not have intended to employ P by what transpired
between them, if what D said could be taken by a reasonable man
to be a contract, and P understood it that way, then it was a valid
contract.

X.)

W.O. Lucy v. A.H. Zehmer

a. Name
b. Facts
i. One evening in December 1952 after several drinks, Zehmer (D)
wrote a contract on a restaurant bill in which he agreed to sell his
farm to Lucy (P) for $50,000. Zehmer later insisted that he had
been intoxicated and thought the matter was a joke, not realizing
that Lucy had been serious.
ii. Lucy claimed that he was not intoxicated and believed that Zehmer
was also sober. Zehmer testified that he was already high as a
Georgia pine when he began drinking with Lucy. He claimed that
he was merely bluffing to try to get Lucy to admit that he did not
actually have $50,000.
iii. Lucy brought suit for specific performance when Zehmer refused
to complete the transaction. The trial court ruled for Zehmer
holding that Lucy had not established a right to specific
performance.
c. Issue
i. In determining whether a party has made a valid offer, how does
the court determine whether the party had the intent to contract?
d. Holding
i. Yes.
e. Reasoning
i. In determining whether a party has made a valid offer, the words
and actions of the party are interpreted according to a reasonable
person standard. If the words or other acts of one of the parties
have but one reasonable meaning, his undisclosed intention is
immaterial except when an unreasonable meaning which he
attaches to his manifestations is known to the other party.
ii. The court looks to the objective, outward expression of a person
and not to their secret and unexpressed subjective intent. The test is
whether a reasonable person would conclude that the partys words

and actions constituted an offer. In this case Zehmers acts and

words could be reasonably interpreted by Lucy as an offer to sell
his farm. The parties discussed the matter for over forty minutes,
addressed the issue of examination of title, and both Zehmer and
his wife signed the agreement.
XI.)

Raffles v. Wichelhaus
a. Name & Procedural History
i. Court of Exchequer, 1864
ii. 159 Eng.Rep. 375
b. Facts
i. Raffles (P) contracted to sell 125 bales of Surat cotton to
Wichelhaus (D). The goods were to be shipped from Bombay to
Liverpool, England on the ship Peerless. Neither party was
aware that there were two ships names Peerless carrying cotton
from Bombay to Liverpool, one arriving in October and the other
in December.
ii. Wichelhaus thought he had purchased the cotton arriving on the
October ship, but Raffles sent his cotton on December ship.
Wichelhaus refused to accept delivery of the cotton arriving on the
December ship and Raffles brought this lawsuit for breach of
contract.
iii. There was a mutual misunderstanding.
iv. If there is a material understanding, there is no contract (court
says).
1. Mistakes are outs and voidable, misunderstandings state
that there are no contracts at all.
c. Issue
i. If a latent ambiguity arises that shows that there had been no
meeting of the minds, have the parties given mutual assent to
contract?
ii. Is parol evidence admissible to determine the meaning each party
had assigned regarding a latent ambiguity?

d. Holding
i. No. If a latent ambiguity arises that shows that there had been no
meeting of the minds, there is no mutual assent to contract.
ii. Yes. Parol evidence is admissible to determine the meaning each
party had assigned regarding a latent ambiguity.
XII.)

Wrench, LLC v. Taco Bell Corp.

a. Name
b. Facts

i. The artists (P) developed a Chihuahua character that appeared on

apparel as well as other merchandise.
At a trade show, the P's discussed their character with the
defendant corporation's representative.
At the same time, another firm was also promoting the same
character to another representative of the defendant.
During this time period, the D hired a new advertising agency.
The new agency pitched the idea of using a Chihuahua.
The defendant used the Chihuahua that was developed by the
advertising agency and the plaintiffs sued for conversion, breach of
contract, misappropriation, and unfair competition.
The defendant moved for summary judgment.
ii. This was a sale of services rendered (the sale of an idea). An
express contract was drafted, but it was not accepted or rejected.
c. Issue
i. Was there a breach of implied contract?
d. Holding
i. Summary judgment was granted and the case was terminated.
The court stated that the plaintiff's established an implied in fact
contract, however, their claims were preempted by the Copyright
Act because the implied contract created legal rights that were
equivalent to the rights that were within the general scope of
copyright.
XIII.) Joseph Longeran v. Albeert Scolnick
a. Name
b. Facts
i. Plaintiff brought an action against defendant for specific
performance or damages. The parties corresponded about a plot of
land defendant had advertised for sale. Plaintiff set up an escrow
account in the event that he decided to purchase the land.
Defendant sold the land to another party, resulting in this action.
The trial court found that plaintiff and defendant did not enter into

a contract as alleged in plaintiff's complaint, and that defendant

was entitled to judgment against plaintiff. Defendant's
advertisement in the paper was a mere request for an offer.
ii. An advertisement can be an offer, or it can be an invitation. It
depends on the specificity of the ad.
c. Issue
i. Must there be a manifestation of contractual intent in order to
create an enforceable contract?
ii. Was there an offer created by the seller to the buyer?
d. Holding
i. Yes. There must be a manifestation of contractual intent and it
must be unequivocal and show that the parties intended to create a
binding agreement.
e. Reasoning
i. There can be no contract unless there has been a meeting of the
minds and the parties have mutually agreed upon some specific
thing. This is usually evidenced by one party making an offer
which is accepted by the other party. Section 25 of the Restatement
of the Law on Contracts reads: If from a promise, or manifestation
of intention, or from the circumstances existing at the time, the
person to whom the promise or manifestation is addressed knows
or has reason to know that the person making it does not intend it
as an expression of his fixed purpose until he has given a further
expression of assent, he has not made an offer.
ii. The court held that the language used by the defendant in his
letters indicated that they were not intended as an expression of
fixed purpose to make a definite offer. The advertisement in the
paper was a mere request for an offer. The letter of March 26
contained no definite offer because it merely gave further
particulars and told the plaintiff how to locate the property if
interested. The letter of April 8 answered some questions asked by
the plaintiff, and stated that if he were really interested he would
have to act soon. That the defendant expected a buyer in a short
time indicated that he intended to sell to the first-comer (Buyer
gave power of acceptance to multiple people). Lonergan was not
being given a right to act within a reasonable time after receiving
the letter.\

XIV.) J.W. Southworth v. Joseph Oliver

a. Name & Procedural History
i. Supreme Court of Oregon, 1978

ii. 284 Or. 361

b. Facts
i. Defendant approached plaintiff to determine his possible interest in
purchasing grazing land.
ii. Plaintiff was interested, but price and other terms were not yet
determined.
iii. Plaintiff told defendant that he had the money ready for the
purchase, and the defendant stated that he was making progress
with the information and would have it soon.
iv. Several days later, plaintiff received a letter from the defendants
with pricing information (pg. 202).
1. Defendant testified that this letter was not made as an offer.
v. Plaintiff says that he accepts the offer.
vi. Defendant consults an attorney before sending another letter to the
plaintiff saying that the plaintiffs misconstrued the prior
negotiations, and that they did not have any binding enforceable
contract.
vii. Plaintiffs file suit.
c. Issue
i. Did the defendant make an offer to the plaintiff binding him to a
contract of sale once the plaintiff accepted?
d. Holding
i. Yes.
ii. Affirmed
e. Reasoning
i. The surrounding circumstances under which this letter was
prepared by Defendants and sent by them to Plaintiff were such to
have led a reasonable person to believe that Defendants were
making an offer to sell to Plaintiff the lands described in the letters
enclosure and upon the terms as there stated.

If a price quotation is expected, addressed to a definite group and

includes explicit language such as price, exact location, terms and
sale date a reasonable person would believe that Seller is making
an offer to sell. It is the manifestation of a previous intention that is
controlling, rather than a persons actual intent. The failure to add
the word offer and the use of the word information are also not
controlling and an offer may be made to more than one person.
ii. The acceptance of this offer was also a timely acceptance.
XV.)

Lefkowitz v. Great Minneapolis Surplus Store

a. Name
b. Facts
i. Great Minneapolis Surplus Store (D) published advertisements in a
newspaper for a sale on fur coats, mink scarves, and a lapin stole.
Each of the advertisements indicated that the sale items would be
sold on a first come first served basis, stated the quantities of each
item available, and stated that they would be sold for one dollar
each. Lefkowitz (P) was the first customer to present himself and
offer the one dollar price per the terms of the advertisement. The
defendant refused to sell the sale items to Lefkowitz and told him
that according to the house rules the offer was intended for
women only.
ii. At trial, the court determined that the advertisement was clear,
definite, and explicit and left nothing open for negotiation. The
court held that Lefkowitz was entitled to performance by the
defendant because he complied with the terms of the advertisement
and offered the stated purchase price. The court granted judgment
in favor of the plaintiff and awarded damages equal to the stated
value in the advertisement for the mink stole minus the $1
purchase price. The court denied the claim on the coat, ruling that
the value was too speculative and the defendant appealed.
c. Issue
i. Under what circumstances does an advertisement for the sale of
goods constitute an offer?
d. Holding

i. An advertisement involving a transaction in goods is an offer when

it invites particular action, and when it is clear, definite, and
explicit and leaves nothing open for negotiation.
e. Reasoning
i. Offer has to be clear, definite, and leaves nothing open for
negotiation.
ii. Great Minneapolis Surplus Store contended that a newspaper
advertisement constitutes a unilateral offer which may be
withdrawn without notice. The general rule is that advertisements
are invitations to contract rather than offers; for contract formation
purposes the prospective purchaser makes the offer and the seller
can accept or reject the offer when received. An advertisement
construed in such a manner does not become a contract for sale
until a buyers offer is accepted by the seller, and the advertised
terms can be modified or revoked without notice.
iii. The test is whether the facts show that some performance was
promised in positive terms in return for something requested.
Whether such an advertisement is an offer rather than an invitation
to make an offer depends on the legal intention of the parties and
the surrounding circumstances. As for the Lapin fur, the offer was
clear, definite, explicit, and left nothing open to negotiation. While
the offeror has the right to modify his offer prior to acceptance, he
cannot change his offer after acceptance.
XVI.) John Leonard v. Pepsico, Inc.
a. Name & Procedural History
i. United States District Court, Southern District of New York, 1999
ii. 88 F.Supp2d 116, affd, 210 F.3d 88 (2d Cir. 2000).
iii. Defendant moved for summary judgment
b. Facts
i. Pepsi was advertising a promotion called Pepsi Stuff, which they
made a commercial about.
1. The commercial contained a teenage boy sporting different
pepsi items worth a different amount of pepsi points. The

comical commercial ended with a harrier jet worth

$7,000,000.00 pepsi points.
ii. Plaintiff believed that this item was actually part of the promotion,
even though it wasnt listed on the catalog (which was actually part
of the commercial)
iii. Plaintiff objects to the implication that because an item was not
shown in the catalog, it was unavailable.
iv. Pepsi points could be bought for ten cents each after at least fifteen
original pepsi points were acquired.
v. The plaintiff raised $700,000 dollars with his 15 original pepsi
points in order to obtain the harrier jet. Pepsi declined his offer
claiming that the advertisement is humorous.
vi. After reaching out to an attorney and sending Pepsi a formal letter,
the vice president of the advertising company sends the plaintiff a
letter stating that the use of the Jet was clearly a joke, and that no
reasonable person would agree with his analysis of the
commercial.
c. Issue
i. Was the advertisement an offer for the public?
ii. No reasonable person would have understood the commercial to be
an offer.
d. Holding
i. No. Grants defendants motion.
e. Reasoning
i. In order for an advertisement to be an offer, there must be clear,
definite, and explicit, and leave nothing open for negotiation. The
court says that this is not the case with the pepsi ad because it
specifically reserved the details of the offer to the Catalog.
ii. The court also said that no reasonable person would have
considered the commercial an offer because it was clearly done in
jest.

1. An actual harrier jet is worth roughly $23 million dollars

and a military airplane. An objective reasonable person
would at least conclude that purchasing a fighter plane for
$700,000 is a deal too good to be true.
XVII.) L.R. Bretz v. Portland General Electric Co.
a. Name & Procedural History
i. United States Court of Appeals, Ninth Circuit, 1989
ii. 882 F.2d 411
iii. District court granted PGEs motion for summary judgment,
holding that the exchange of letters between Bretz and PGE did not
satisfy Montanas statute of frauds.
b. Facts
i. The plaintiff, Bretz, was a special agent in Montana for Western
States Energy Venture.
ii. He offered to buy Beartooth stock, a wholly-owned subsidiary of
defendant PGE, for $2 million dollars.
iii. He sent out a letter detailing an elaborate procedure for PGE to
accept the offer and complete the transaction.
iv. PGE revised the version of the offering letter, sent it back, and
asked the plaintiff to resubmit another letter as an offer with the
changes.
v. Plaintiff did that, sent the letter, and PGE made another revision.
1. They asked for a change in the purchase price
vi. Plaintiff took this as a counteroffer and accepted the terms,
claiming that a contract for sale then existed.
vii. Plaintiff then made a contract with a third party dependent on the
contract with the defendant.
c. Issue

i. Can the letter from PGE asking for another amended offer be
considered a counter offer with the power of acceptance given to
the plaintiff (buyer?).
d. Holding
i. No.
ii. Affirmed. Court says PGEs second letter was just an invitation for
the plaintiff to revise his offer.
e. Reasoning
i. Plaintiff wanted to use parole evidence to fill in the gaps of the
contract and claim equitable estoppel.
1. Court said that parole evidence cant be used to supply
essential terms, but can be used to clarify ambiguities.
ii. The court looked as to whether the defendants letter asking again
to amend the contract letter could be reasonably construed to be an
offer, or whether it was merely an invitation.
1. The language contained in the letter clearly shows this:
resubmit offer on the above basis.
iii. Court says that Bretz did not reasonably rely on any
representations from PGE, and that he simply jumped the gun and
he has no one but himself to blame for the losses he may have
suffered as a consequence.
XVIII.)

La Salle National Bank v. Mel Vega

a. Name & Procedure

i. Appellate Court of Illinois, Second District, 1988
ii. 167 Ill.App.3d 154
iii. Trial court granted partial summary judgments to Borg on the
grounds that the contract was unenforceable because it was not
signed in accordance with its terms and provisions.
1. Borg filed a counterclaim naming plaintiff and defendants
as codefendants; damages from defendants for fraud or

failure to disclose to plaintiff would go to Borg. Seller

made a contract to them.
b. Facts
i. The defendant entered into a real estate contract of sale with the
plaintiff. Defendant was seller, plaintiff was buyer.
ii. The contract rider stated that the contract which was executed by
the agent for the purchaser, must then be executed by the seller,
and then the trust for full and complete execution.
iii. The document was signed by the agent and then the defendant, but
not the trustee for the seller.
iv. Seller made the contract and the offer (which is not typical of most
real estate contracts).
v. Borg is saying there is no enforceable contract between plaintiff
and defendant, so he wants the property.
c. Issue
i. Was there ever a contract of sale?
d. Holding
i. No.
ii. Judgment affirmed by court.
iii. Partial summary judgment in favor of Borg.
e. Reasoning
i. The rider clearly states that the agents presentation of the
documents he had executed to the defendant was not an offer
because it did not give the seller the power to make a contract by
accepting it.
1. Mel executed the document and then gave it back to the
agent of the plaintiff, therefore making an offer, which
could be accepted by execution by the trustee.
ii. Since the trust did not execute the document, there was no
acceptance of the offer, and therefore, there was no contract.

XIX.) Steve Henderiks v. Eugene Behee

a. Name
b. Facts

c.
d.
e.

f.

i. -Plaintiff was the escrowee of $5,000 paid by defendant Behee as a

deposit accompanying Behee's offer to purchase real estate owned
by defendants.
-A dispute between Behee and the Smiths as to whether their
dealings resulted in a binding contract prompted this action.
-After Behee, as prospective buyer, and the Smiths, as prospective
sellers, had engaged in unproductive negotiations, Behee, on
March 2, 1987, made a written offer of $42,500 for the real estate
and $250 for a dinner bell and flower pots.
-On March 3 the offer was mailed to the Smiths, who lived in
Mississippi, by their real estate agent.
-On March 4 the Smiths signed the proposed agreement in
Mississippi.
-Before Behee was notified that the Smiths had accepted the offer,
Behee withdrew the offer by notifying the real estate agent of the
withdrawal
-Prior to this communication, Behee had received no notice that his
offer had been accepted by the Smiths."
Issue
i. Is an uncommunicated intention to accept an offer an acceptance?
Holding
i. No.
ii. Affirmed
Reasoning
i. A contract is not formed until acceptance has been communicated
to the offeror. An uncommunicated intention to accept an offer is
not an acceptance. Notice of acceptance is required where an offer
calls for a promise from the offeree. Communication of acceptance
to an agent of the offeree is not sufficient and is not a valid
acceptance. An offeror may withdraw his offer at any time before
acceptance and communication of that fact to him unless the offer
is supported by consideration. To revoke an offer revocation must
be communicated to the offeree before the offeree has accepted.
Notice given to an agent within the scope of the agents authority is
notice to the principal.
ii. In this case Behee withdrew the offer before Smith communicated
his acceptance. Notice to Smiths agent was sufficient to withdraw
the offer.
Rule

i. An offeror can withdraw the offer before notice of the acceptance

is given.
XX.) Louisa Elizabeth Carlill v. Carbolic Smoke Ball, Co.
a. Procedural facts and Name
i. Court of Appeal, 1893
ii. [1893] 1 Q.B. 256
iii. Trial court found for plaintiff to recover the 100 pounds. Defendant
appealed.
b. Facts
i. Defendants were vendors of a medical preparation called The
Carbolic Smoke Ball, which, in an advertisement, stated that a
100 pound reward would be paid by the company to any person
who contracts the increasing epidemic influenza colds, or any
disease caused by taking cold, after having used the ball three
times daily for two weeks according to the printed directions
supplied with each ball.
ii. They deposited 1000 pounds with Alliance bank to shew their
sincerity.
iii. The plaintiff, on faith of the advertisement, bought one of the balls
and used it three times a day from November to January (almost
three months) when she was attacked by influenza.
iv. Trial court found for plaintiff to recover for 100 pounds, and
defendant appeals on the grounds:
1. There was no consideration for the promise
2. And that the offer was never explicitly accepted.
c. Issue
i. Did the plaintiff accept the offer portrayed by the defendants add?
ii. Was there an enforceable contract?
d. Holding
i. Yes to both.
ii. Appeal denied.
e. Reasoning
i. Judge Lindley interprets the vagueness of the advertisement to
mean that the reward is offered to any person who contracts the
epidemic or other disease within a reasonable time after having
used the smoke ball. Therefore, the plaintiff is in favor.
1. Also says that there is no denial that a contract was formed.
ii. Judge Bowen says that the advertisement is an offer, and that it
impliedly indicates that it does not require the notification of the
acceptance from the offeree.
1. Uses the lost dog example: No one is going to sit down and
write a formal letter saying the accept the offer to look for
your dog in accordance to the cash reward.
iii. The performance of using the product was an acceptance of the
offer.

iv. Also says that there is consideration:

1. By using the product, there was an inconvenience
(detriment) to the plaintiff for going through the trouble of
using the smoke ball.
2. There is a benefit to the defendant by promoting their sale.
f. Corinthian Pharmaceutical Systems, Inc. v. Lederle Laboratories.
i. Name & Procedural History
1. United States District Court, Southern District, Indiana,
1989
2. 724 F.Supp. 605
3. Defendant is moving for summary judgment.
ii. Facts
1. Defendant is a pharmaceutical manufacturer, and plaintiff is
a pharmaceutical distributor. Plaintiff bought DTP vaccine
from the plaintiff from 1984.
2. In early 1986, product liability lawsuits concerning DTP
increased, and the defendant decided to self-insure against
the risks. In order to cover the costs, Lederle concluded that
a substantial increase in the price of the vaccine would be
necessary.
3. Defendant sent out a letter on May 19th to its own sales
people that the price for DTP would go up from $51.00 to
$171.00. This did not go to the customers.
4. The defendant did send a letter out to its customers,
including plaintiff, on May 20th explaining the situation, but
the plaintiff somehow gained knowledge of the letter on
May 19th and sent in an order for 1,000 vials of DTP
through the telephone computer ordering system.
a. Plaintiff also sent two written confirmation of its
order stating that the order is to receive the $69.32
per vial price.
5. On June 3, fifty vials from the plaintiffs order were sent to
them for the $64.32 price with a letter that stated: enclosed
represents a partial shipment of the order for DTP vaccine,
which you placed with Lederle on May 19, 1986. The
letter stated that under Lederles standard terms and
conditions of sale the normal policy would be to invoice the
order at the price when shipment was made. As a courtesy
because of the large increase in price, they sent the 50 vials
for the lower price as an exception.
6. Plaintiff sues for the 950 remaining viles.
iii. Issue
1. Was an offer made by the plaintiffs when they filled the
order form which was accepted by the defendants?
iv. Holding

1. No.
2. Summary judgment granted.
v. Reasoning
1. All the price lists from the company are invitations for the
buyers to make offers. The defendant then has the power to
accept or reject these offers.
2. Court says that the order for the 1000 vials for the lower
price was the first over made, and that nothing done by the
seller prior to this point can be interpreted as an offer.
3. There was no acceptance to this offer by the defendant
prior to the shipment of the 50 vials
a. Computer automated confirmation forms are not
acceptances, they are just tracking information.
4. There was no acceptance to the offer after the 50 vials were
sent.
a. The vials were sent as an accommodation, or a
favor, to the plaintiffs. (UCC Article 2 Section 5.5 at
53) (UCC Section 2-206).
b. Accommodations dont need consideration.
5. The 50 vials were also sent as a counteroffer, which in the
letter stated, that the plaintiff could cancel his order at any
time for the remaining 950 vials.
g. Rule
i. Accommodations are not acceptances, they are favors or counter
offers.
ii. Automated telephone systems are not acceptances.
iii. What constitutes a manner of acceptance? Answers these
questions.
XXI.) Industrial America, Inc. v. Fulton Industries, Inc.
a. Name & Procedural History
i. Supreme court of Delaware, 1971
ii. 285 A.2d 412
iii. Trial judge submitted the issue of subjective reliance to the jury,
and they found for the defendant saying that plaintiffs subjective
intention to accept defendants offer was not recognizable.
b. Facts
i. P was a broker who helped in facilitating mergers between
corporations. P communicated with Bush Hog about the possibility
of a merger with a larger company.
ii. Bush Hog was interested in the merger, but talks broke down. P
later approached Bush Hog with another merger opportunity; it
failed as well.

iii. P learned that D was looking for a merger. P found an ad in the

WSJ saying that D was interested in a merger and "Brokers fully
protected".
iv. P hooked up Bush Hog with D, the two companies negotiated
without the help of P, and the merger went though.
v. P sued Bush Hog and D for broker's commission; judgment was
entered against Bush Hog for P in the amount of $125k. However,
jury ruled for D over P in answering the question "Did P in fact
rely on D's ad in submitting the name of Bush-Hog to D?"
vi. The jury instruction said that the creation of the contract between P
and D depended on if the P was consciously and intentionally
acting for the purpose of fulfilling the terms of the advertisement.
(must find subjective reliance)
c. Issue
i. Does the intent of a offeree in a performance only offer have any
bearing on whether the acceptance of the offer is valid?
d. Holding
i. No.
ii. Reversed.
e. Rule
i. The intent of the offeree in a performance only offer has no
bearing on whether the acceptance of the offer is valid.
ii. An offer that invites an acceptance by performance will be deemed
accepted by such performance unless there is a manifestation of
intention to the contrary.
f. Reasoning
i. It is basic that overt manifestation of assent, not subjective intent,
controls the formation of a contract. Motive in the manifestation of
intent is immaterial.
ii. A unilateral contract may be enforceable when the promisor has
received the desired service even though the service was primarily
motivated by a reason other than the offer.

iii. It follows that a unilateral contract may arise even though at the
time of performance, the offeree did not rely subjectively upon
(was not primarily motivated by) the offer.
iv. An offer that invites an acceptance by performance will be deemed
accepted by such performance unless there is a manifestation of
intention to the contrary.
v. P knew of the offer at the time of performance and, indeed, did
perform.
vi. "A unilateral contract may be enforceable when the promisor has
received the desired service even though the service was primarily
motivated by a reason other than the offer. The motivating causes
of human action are always complex and are frequently not clearly
thought out or expressed by the actor himself. This being true, it is
desirable that not much weight should be given to the motives of
an offeree."
vii. Plaintiff started the act of accepting the offer by providing
defendant with B-Hs information. There was acceptance once the
act was completed; i.e. when the merger was completed.

XXII.) Mary Glover v. Jewish War Veterans of United States

a. Procedural history & Name
i. Municipal Court of Appeals for District of Columbia
ii. 68 A.2d 233
iii. Trial court found for the defendant
b. Facts
i. Plaintiff aided in leading the police to a murderer in a criminal
case.
ii. The murderer was the boyfriend of plaintiffs daughter, and when
police came to question her, she supplied them with information on
where the murderer could be located.

iii. She found out the next day that the defendants had put up a
rewards ad (a conditioned offer) in the newspaper a few days prior
to the police visiting her.
iv. She sues the defendant for the $500 reward claiming that she was
entitled to it.
c. Issue
i. Can someone claim an award if they did not know about an offer?
d. Holding
i. No.
ii. Appellate court affirms trial court.
e. Reasoning
i. An offer cant be considered accepted if offeree did not know
about the offer.
ii. There can be no contract unless the claimant when giving the
desired information knew of the offer of the reward with the
intention of accepting such offer.
iii. The plaintiff gave the information only after police offers
questioned her.
XXIII.)

Ever-Tite Roofing Corp. v. G.T. Green

a. Name & Procedural History

i. Court of Appeal of Louisiana, 1955
ii. 83 So.2d 449
iii. Trial court found for defendants because they reasoned that
plaintiffs were given timely notice once they arrived to defendants
house that they wanted to withdraw from contract.
b. Facts
i. Defendants executed and signed an instrument for the purpose of
obtaining services of plaintiff in re-roofing their residence. The

instrument was signed by plaintiffs sale representative, who was

not authorized to sign for him.
1. Court says this doesnt matter because the plaintiff had the
intent to sign the contract.
ii. This agreement shall become binding only upon written
acceptance hereof, by the principal or authorized officer of the
Contractor, or upon commencing performance of the work. This
contract is not subject to cancellation
iii. Work was to be performed entirely on credit, so defendents had to
obtain credit reports and approval from lending institutions; this
was to finance the contract. This took a few days.
iv. 8 or 9 days later, plaintiff engaged its workmen and loaded two
trucks with items that were necessary for the roof work.
v. Once he got to the defendants residence, people were already
working on the roof, and the defendants told the plaintiffs that
services werent needed.
c. Issue
i. When does an offer terminate if no time is specified?
d. Holding
i. Reversed and remanded
e. Reasoning
i. The court held that in this case the record disclosed no
unreasonable delay by P in receiving, processing or accepting the
contract or in commencing the work. The parties understood that
there would be a delay before the acceptance of the contract and
the commencement of the work because P needed to comply with
requirements related to financing the job through a lending agency.
The evidence shows that P proceeded with due diligence.
ii. The power to create a contract by acceptance of an offer terminates
at the time specified in the offer, or after a reasonable time if no
time is specified. A reasonable time is a question of fact based on
the nature of the contract proposed, the usages of business, and
other circumstances surrounding the offer. The delays sustained
under these facts were not unusual. D breached the contract by
having others perform the work.

f. Rule
i. Rescind offer for prior contract before starting another contract
with third party.
I.)

II.)

Theodore Russell v. Texas Co. Missed class

a. Procedural History
i. Trial court found for the plaintiffs, appellate court (this one)
affirms.
b. Facts
i. The Plaintiff, Russell (Plaintiff), acquired the ownership of a parcel
of land, referred to by the court as Section 23. Section 23 had
previously been owned by the Northern Pacific Railway Company,
who retained the mineral rights to the land, when they sold it in
1918. The Defendant, the Texas Company (Defendant), leased the
mineral rights from Northern Pacific and made daily use of Section
23 and adjacent lands owned by Plaintiff. The Plaintiff presented
Texas Company with a license, asking that it pay $150 per day for
the use of the land, which Texas Company ignored, later
contending that it did not intend to accept this license. Plaintiff
brought suit for fees collectable on the license. The trial court
rendered Judgment in favor of Plaintiff and against the Defendant.
The Defendant appealed this judgment, saying that it did nothing
in acceptance of Plaintiffs offer of licensure.
c. Issue
i. This case presents the issue of whether a Defendant, in the act of
exercising dominion over land through a valid lease, must pay
reparation to the owner of the land, when the owner requests it.
d. Holding
i. Appellate court affirms
e. Reasoning
i. The Court found that, per the principals of property law, Defendant
overstepped the terms of its lease in exercising its rights on the
sections of land adjacent to Section 23. Because their action was
tortuous, in that it impinged in Plaintiffs rights, the offer of
licensure was valid and Defendants continued use of the land
constituted a valid assent to the license agreement.
f. Rule
i. When an offeree exercises dominion over the object of an offer, his
action is generally seen as acceptance.
RL Ammons v. Wilson and Co. Missed Class
a. Procedural History
i. Trial court found for defendants. Appellate court (this court)
reverses.
b. Facts

III.)
IV.)

i. P was a wholesale grocer and D is a meat packing co. which also

dealt in the sale of shortening. P, through Ds travelling salesman,
booked 60,000 pounds of shortening at 7 cents apiece.
ii. Booking meant nothing more than D was willing to receive orders
at that price from P but the offer was still dependent upon
acceptance by D.
iii. Salesman had no authority from D to enter into contractual
obligations as an agent.
iv. P was also not bound to order all or any part of the 60,000 pounds.
v. The contract was merely tentative.
vi. P, after having dealt with D a number of times and having been
shipped his product within one week of ordering ordered for
prompt service on the 23rd or 24th or August 43,916 pounds.
vii. P heard nothing from D for 12 days on which date they heard that
D declined their offer.
c. Issue
i. Whether D should be charged with an implied acceptance of the
orders from P as a result of its silence for 12 days?
d. Holding
i. Where because of previous dealings it is reasonable that the offree
should notify the offeror if he does not intend to accept and that
there is reason for offeror to understand that silence on the part of
the offeree will constitute an acceptance there will be a contractual
obligation it will be up to the jury to decide if there exists a
contract.
e. Reasoning
i. The court argues that it is a question for jury to decide whether Ds
delay of 12 days before rejecting, in view of past history between
two parties, constituted an implied acceptance.
ii. Holding is taken from restatement of contracts 69 and 72.
Beneficial National Bank, USA v. Obie Payton
George Dickinson v. John Dodds
a. Name & Procedural History
i. Court of Appeal, Chancery Divison, 1876
ii. Trial court ruled for plaintiff, defendant appeals.
b. Facts
i. OnWednesday,June10,1874Dodds(D)sentDickinson(P)a
memoranduminwhichheagreedtosellaspecifiedpieceofland
for800poundswiththeofferheldopenuntil9AMthefollowing
Friday.DickinsonallegedthathehaddecidedtoacceptDodds
offeronThursdaymorningbutdidnotcontacthimimmediately
becausehethoughthehaduntilFridaymorningtoaccept.On
ThursdayafternoonDickinsonlearnedthatDoddshadofferedor
agreedtosellthelandtoathirdparty.Dickinsonwroteanote
acceptingtheofferanddeliveredittohishome,leavingitwithhis

motherinlawwhoneglectedtogivethenotetoDodds.OnFriday
morningbeforetheoriginaldeadlinetoaccepttheoffer,both
DickinsonandhisagentgaveDoddsawrittenacceptanceofthe
offer.Doddsstatedthathehadalreadysoldthelandtoanother
partythepreviousday.
ii. Dickinsonsuedforspecificperformance.Thetrialcourtfoundin
DickinsonsfavorandorderedthatDoddsconveythepropertyto
himandDoddsappealed.
c. Issue
i. Whether a promise to hold an offer open is binding
where the other party does not accept until after he
learns that the offeror has already conveyed the
property.
d. Holding
i. No.
ii. Reversed.
e. Reasoning
i. Anopenoffertosellterminateswhentheoffereelearnsthatthe
offerorhasalreadyagreedtoselltosomeoneelse.
ii. ThecourtstatedthatsinceDickinsonknewthatDoddsofferhad
beenimplicitlywithdrawnwhenhelearnedthathehadsoldthe
propertytosomeoneelse,therewasnomeetingofthemindsatthe
timeacceptancewasmadeandthereforeabindingcontractwasnot
formed.
V.)

HumbleOil&RefiningCo.v.WestsideInvestmentCorp
a. Name&ProceduralHistory
i. SupremecourtofTexas,1968
ii. Trialandappellatecourtfoundfordefendantssummaryjudgment
motion.
b. Facts
i. Petitionerenteredintoanagreementwithrespondenttopurchase
realestatethroughanoptioncontract.Awrittenoptioncontract
wasexecutedbetweenthepartiesandearnestmoneyexchanged.
Subsequently,aletterofamendmenttothecontractofsale,subject
totheoptioncontract,wassenttopetitionerrequestinghis
signature;petitionerdidnotreplybutdepositedtheremainderof
theearnestmoneyintoescrowpursuanttothetermsoftheoption

contract.Respondentcontendedthatpetitionerrejectedtheoption
contractbyrespondent'ssubsequentletterofamendment.
c. Issue
i. The prominent issue in this case is whether an option
is terminated by a qualified acceptance.
d. Holding
i. ThePetitionersuccessfullyarguedthattheoptioncontractwasan
independentagreementthatrequiredhimtodonomorethanhe
did.
ii. Thecourtreversedthejudgmentofthetrialcourtandheldthat
petitionerwasentitledtospecificperformanceoftheoption
contract,becausetheoptioncontractwasanindependent
agreementbetweenthepartiesanddidnotterminatenegotiations
regardingthecontractofsale.
e. Reasoning
i. Additionally,hewasnotforeclosedfromnegotiationsrelativeto
thecontractofsale,asdistinguishedfromtheoption.
ii. Assuch,petitionerdidnotsurrenderorrejecttheoptionandit
wasabindingobligationbetweentheparties.
f. Rules
i. Whereanoriginalofferisanirrevocableoffer,creatinginthe
offereeabindingoption,therulethatacounterofferterminatesthe
powerofacceptancedoesnotapply.
Evenifitisreasonabletoholdthatitterminatesarevocable
power,itshouldnotbeheldtoterminaterightsandpowerscreated
byacontract.
Abindingoptionissuchacontractandanofferinwriting,that
allowsatimeforacceptanceeitherdefiniteorreasonableandthat
isirrevocablebyvirtueofastatute,isitselfaunilateralcontract.
Acounterofferbysuchanofferee,orothernegotiationnot
resultinginacontract,doesnotterminatethepowerofacceptance.
VI.)

A.A.Marchiondov.FrankScheck
a. Name&ProceduralHistory
i. SupremecourtofNewMexico,1967
ii. Trialcourtdeniedplaintiffsrequestedfindingconcerninghis
partialperformance.
b. Facts
i. Plaintiffislookingforcommissionforpropertythatnevergotsold
becausesellerbackedoutofcontract.

VII.)

ii. Defendantisseller
iii. Plaintiffclaimspartialperformancebecausehewasdoinghis
dutiesandjobasarealtor,soheneededanopportunitytocomplete
theact.
iv. Salewasnotmade.
c. Issue
i. Doespartialperformanceofanactcompleteacceptanceoftheact
forarealestateagent,whoscustompracticesonlyallowagentsto
getpaidafterclosings?
d. Holding
i. Remanded.
e. Reasoning
i. Thiscourtsaidtrialcourterred.
ii. Saysthatwhatconstitutespartialperformancewillvaryfromcase
tocasesincewhatcanbedonetowardperformanceislimitedby
whatisauthorizedtobedone.
iii. Courtsaysthatoncepartialperformanceisbegunpursuanttothe
offermade,acontractresults.
JamesBairdCo.v.GimbelBrothers,Inc.
a. Name&ProceduralHistory
i. UnitedStatesCourtofAppeals,SecondCircuit,1933
ii. Trialcourtfoundforthedefendant.
b. Facts
i. GimbelBrothers(D)sentsubcontractorbidstoapproximately20
to30contractors,offeringtosupplyallofthelinoleumforthe
constructionofabuildingforthePennsylvaniaDepartmentof
Highways.InpreparingthebidGimbelBrothersunderestimated
thesizeoftheprojectbyonehalfoftheproperammountand
thereforemistakenlyquotedapricethatwasonlyhalfthe
necessaryamount.ContractorJamesBairdCo.(P)receivedthe
offerandusedthequotedpricetosubmitabidonthemain
contract.LaterthesamedayGimbelrealizedthemistakeand
retractedthebidbytelegraphandquotedanewprice
approximatelytwicethatoftheoriginal.JamesBairddidnot
receivetheretractionuntilaftersubmittingthebidonthemain
contractandwasawardedthemaincontracttwodayslater.
ii. JamesBairdformallyacceptedGimbelBrothersoffertwodays
afterreceivingGimbelBrotherswithdrawaloftheoffer.Gimbel
BrothersrefusedtorecognizetheexistenceofacontractandJames
Bairdsuedfordamages.Thetrialcourtenteredjudgmentfor
GimbelBrothersandJamesBairdappealed.
c. Issue
i. 1) Can promissory estoppel be used to enforce an
offer that is not meant to become binding until

consideration has been received? 2) Does promissory

estoppel render a subcontractors bid irrevocable?
d. Holding
i. No.
ii. Affirmed.
e. Reasoning
i. 1) No. Promissory estoppel cannot be asserted to compel an
offeror to perform where the offer is not meant to become a
binding contract until consideration has been received. 2) No.
Promissory estoppel does not render a subcontractors offer
irrevocable even if the contractor has relied upon it in submitting a
bid for a general contract.
ii. The court held that if an offer is withdrawn before it is accepted,
the acceptance is too late. James Baird argued that Gimbel
Brothers offer should have been irrevocable in the event James
Baird used it to submit its bid for the general contract and that it
would have been an unreasonable hardship to expect it to lose the
contract and forfeit its deposit. Offers are ordinarily made in
exchange for a consideration; either a counter-promise or some
other act. In such cases they propose bargains and presuppose that
each promise or performance induces the other. The doctrine of
promissory estoppel is used to avoid the harsh results of allowing
the promissor to repudiate when the promisee has acted in reliance
upon the promise.
iii. The court held that an offer for an exchange is not meant to
become a promise until a consideration has been received; either a
counter-promise or whatever else is stipulated. Gimbel Brothers
offered to deliver the linoleum in exchange for James Bairds
acceptance, not in exchange for James Bairds bid on the general
contract. That offer could become a promise to deliver only when
James Baird promised to take and pay for it. Promissory estoppel is
not applicable in this case.
f. Rule
i. promissory estoppel does not make a subcontractors
bid irrevocable even though the contractor may have
relied upon it in submitting its bid to the owner.
VIII.) William Drennan v. Star Paving Co.
a. Facts & Procedural History
i. Supreme Court of California, 1958
ii. 51 Cal.2d 409
iii. Justice Traynor
iv. Trial and appellate court found for plaintiff
b. Facts
i. Plaintiff is a general contractor that wanted to place a bid on a
project called the Monte Vista School Job.

ii. On the day of bidding, plaintiff got a call from several

subcontractors for various jobs related to the project. He received
between fifty and seventy-five subcontractors bids for various
parts of the school job.
iii. Defendant sent in the lowest bid for paving work.
iv. Plaintiff drafted his bid to the Monte Visa School based on
defendants paving bid, and then was awarded the contract.
v. When visiting the defendant, one of the defendants workers said
that their bid was a mistake and refused to do the work for the
amount they offered.
vi. Plaintiff sues.
vii. All courts found no option contract or bilateral contract.
c. Issue
i. Canreasonable,justifiable,andforeseeablereliancerenderanoffer
binding?
ii. Whatisthetestforapplyingpromissoryestoppel?
d. Holding
i. Affirmed.
e. Reasoning
i. Yes.Anofferthatthepromissorshouldreasonablyexpectto
induceactionorforbearanceofadefiniteandsubstantialcharacter
bythepromisee,andwhichdoesinducesuchactionor
forbearance,isbindingifinjusticecanbeavoidedonlyby
enforcingthepromise.SeeRestatement(2d)ofContracts90.
ii. Inorderforpromissoryestoppeltoapplytheremustbe:1)aclear
anddefiniteoffer;2)areasonableexpectationthattheofferwill
inducerelianceintheotherparty;3)actualandreasonablereliance
bytheofferee;and4)adetrimentwhichonlycanbeavoidedby
enforcementoftheoffer.
iii. StarPavingssubcontractorbidconstitutedapromisetoperform
underconditionsbothexpressandimplied,accordingtothe
circumstances.Itwassilentonrevocationandthereforethecourt
determinedwhethertherewereconditionsimposedbylawor
reasonablyinferred.ThecourtturnedtoRestatement(2d)of
Contracts45;merelyactinginjustifiablerelianceonaunilateral
offerissufficienttomakethatofferirrevocableforareasonable
periodoftimetocompleteperformance.

IX.)

Adamsv.Lindsell
a. Name&ProceduralHistory
i. CourtofKingsBench,1818
ii. 106Eng.Rep.250
iii. Trialcourtruledforplaintiff
b. Facts
i. Defendants,dealersinwool,offeredcertainquantityofwoolto
plaintiffsatacertainprice,requestingananswerinduecourseof
post.
ii. Bymistake,defendantsmisdirectedthemail.Itwasnotreceived
untilthreedayslater.Theyacceptedthatday,butanswerwasnot
receivedbydefendantsuntilfourdayslater.
iii. Defendantswereexpectingtheacceptanceearlier,sotheday
beforetheyreceivedplaintiffsacceptance,theysoldthewooltoa
thirdparty.
iv. Plaintiffsues.
c. Issue
i. Wasthereacontractbetweentheparties?
d. Holding
i. Yes.
e. Reasoning
i. Acontractismadewhenmailissent,notwhenitisreceivedby
theofferor.
ii. Becausethiswasamistakebythedefendants,whosenttheletter
tothewrongplace,itmustbetakenagainstthem.

X.)

Minneapolis&St.LouisRailwayCo.v.ColumbusRollingMillCo.
a. Facts

i. OnDecember5,1879,Minneapolis&St.LouisRailwayCo.
(P)sentalettertoColumbusRollingMillCo.(D)requestinga
quoteforthepriceof2,000to5,000tonsofironrails.
ii. ColumbusrepliedinalettersentDecember8th,statingthatit
wouldsellbetween2,000and5,000tonsofironrailsfor$54.00
perton.
iii. OnDecember16th,MinneapolissentatelegramColumbus
witharequestofanorderof1,200tonsofironrailsat$54.00per
ton.
iv. OnDecember18th,Columbusrepliedbytelegramstatingthat
itwouldnotfulfilltheorder.
v. OnDecember19th,Minneapolissentanothertelegramto
Columbusrequestinganorderof2,000ironrailsat$54.00per
ton.
vi. Columbusdidnotreplytothistelegram.
vii. AfterrepeatedinquiriesbyMinneapolis,Columbusdeniedthat
anycontractexistedbetweenthepartiesonJanuary19,1880.
viii. MinneapolisbroughtsuitagainstColumbusforbreachof
contract.
ix. ThetrialcourtenteredjudgmentforColumbus,and
Minneapolisappealedthejudgment.
b. Issue
i. Whenanofferismade,musttheacceptancebebaseduponthe
exacttermsthatarecontainedintheoffer?
c. Holding
i. TheCourtaffirmedthejudgmentandfoundsinceplaintiffdidnot
acceptdefendant'soffer,nocontractwasformed.
d. Reasoning
i. Plaintiffappealedajudgmentofthelowercourtfindingavalid
contractdidnotexistbetweenthepartiesbecauseplaintiffrejected
defendant'soffer.
ii. Onreview,theCourtaffirmedandfoundthatwhenplaintiff
receiveddefendant'soffertoselltoplaintiffbetweentwothousand
andfivethousandtonsofsteel,plaintiffrejectedtheofferby
placinganorderfortwelvehundredtonsofsteel.
iii. Byacceptingdefendant'sofferedprice,butorderinglessthan
thespecifiedquantity,plaintiffmadeaqualifiedacceptanceof
defendant'sofferandthusrejecteddefendant'soffer.
iv. Onceplaintiffrejectedtheoffer,theplaintiffcouldnotreviveit
byacceptingdefendant'soffer.

v. Defendant'snotificationtoplaintiffthattheordercouldnotbe
filledclosednegotiationsbetweentheparties.
XI.)

DTEEnergyTechnologies,Inc.V.BriggsElectric,Inc.
a. Facts
i. 1.May2002PL,aMIcorp.withprincipalplaceofbusinessin
MIbegannegotiationswithHoagforsaleofelectricgeneratorat
Hoag'ssiteinNewportBeach,CA.
ii. 2.May6,2003HoagandDPRConstructionenterintoKwhere
DPRactsasgeneralconractorforProject
iii. 3.August1,2003HoaginformedPLthatitwouldnotbe
enteringintoaKwithPLandinsteaddirectedPLtoattemptto
negotiateasubKforsaleofelectricgeneratorwithunspecificed
subcontractorofDPR
iv. 4.DFDlaterwonbidassubcontractorandpartoftheirobligation
wastoperformelectricalworkonProjectwhichincludingthe
electricgenerator.
v. 5.October21,2003DFDsentapurchaseordertoPLwhichthey
contendthatPurchaseOrderconstitutedanofferfurthermoredfd
arguesthatPLaccepteditspurchaseorderonNovember10,2003
whenRickColesentanemailtoRonCalkins,arepofDFD,
stating:"Ron,/Perourdiscussion./Rick"theemailalsoborethe
subjectline"Waukeshaextendedwarranty"
vi. 6.December4,2003PLsubmittedanorderacknowledgementto
DFDPLcontendsthattheOrderAcknowledgementandthe
standardtermsandconditionsofsaleattachedtotheorder
acknowledgementshouldbeconstruedasoffer
vii. 7.Therewassomewhatofanissuewiththeextendedwarrantybut
otherwisethepurchaseorderwasaccepted.
b. Issue
i. Wasthereanofferandacceptancemadebydfd?
c. Holding
i. Courtbelievesthiswas.
ii. DFDnotboundbyforumselectionclause.Forumselectionclause
wasinfineprintonorderacceptance,itchangedtheoffermade
andthusisnotenforceablebecauseDFDdidnotagreetoitupon
acceptingit
iii. Forumselectionclausemateriallychangedthecontract,soitdoes
notbecomepartofthecontract.
d. Reasoning
i. The October 21, 2003 purchase order constituted an offer An
acceptance must be expressly conditional on offeror's assent to the
new "counteroffer" terms
ii. UCC generally favors that the law of the state of the purchaser
(offeror) be applied to the contract.

XII.) Textile Unlimited, Inc. v. A. BMH and Company, Inc.

a. Name & Procedural History
i. 9th circuit difference (west coast, usually different).
b. Facts
i. ThePlaintiffandDefendantdealtwithoneanotherfortenmonths
andconductingapproximately38transactionswithoneanother.
PlaintiffreceivedsomeyarnfromDefendantthatitcontendedwas
defective.
Defendant,inaccordancewiththecontracttermsofitsinvoices
submittedthemattertoarbitrationinAtlanta,Georgia.
Plaintifffiledsuittoenjointhearbitration,claimingitdidnot
agreetoarbitrationintheiroriginalcontractualarrangementand
thatarbitrationwasprejudicialtothePlaintiff.
TheDefendantarguedthatthePlaintiffaccepteditsagreement
becausetheircontractprovidedthatPlaintiffacceptedtheseterms
infull.
c. Holding
i. Theinstantcourtfoundthatthedistrictcourtcorrectlyconcluded
thatvenuewasproperinthedistrictcourtunder28U.S.C.S.
1391.
ii. Theorderwasaffirmed;theactionwasproperlyvenuedinthe
districtcourt,itwasnotanabuseofdiscretiontograntthe
preliminaryinjunction,andplaintiffneverenteredintoan
arbitrationagreement.
d. Reasoning
i. Contrarytodefendant'sarguments,nothingintheFederal
ArbitrationAct,9U.S.C.S.1etseq.,requiredthatplaintiff's
actiontoenjoinarbitrationbebroughtinthedistrictwherethe
contractdesignatedthearbitrationtooccur.Thedistrictcourtdid
notabuseitsdiscretioningrantingthepreliminaryinjunction.The
districtcourtfoundthatplaintiffwouldhavesufferedirreparable
harmifthearbitrationwerenotstayed,thatthebalanceof
hardshipstippedinplaintiff'sfavorandthatitwasinthepublic
interesttostayarbitration.Seriousquestionswereraisedand
plaintiffhadshownaprobabilityofsuccessonthemerits.The
supplementaltermstothecontractproposedbydefendant,
includingthearbitrationclause,didnotbecomepartofthe
contract.Finally,plaintiffdidnotwaiveitsobjectiontoarbitration
byfailingtoobjectwithinthetimeperiodspecifiedinthe
arbitrationrules.
XIII.) RichHillv.Gateway2000
a. Name&ProceduralHistory
i. UnitedStatesCourtofAppeals,SeventhCircuit,1997
ii. 105F.3d1147

b.

c.

d.
e.

iii. Trialcourtfoundforplaintiffssayingthattherewasntadequate
noticegivenregardingthearbitrationclauseinthetermspacked
intothebox.Gatewayappeals.
Facts
i. Plaintiffspurchaseacomputeroverthephonewiththeircredit
card.
ii. Thecomputerarriveswithtermsintheboxthatsaysthatthe
costumercanreturnthecomputerwithin30days.
iii. Plaintiffskeptthecomputermorethan30daysbeforecomplaining
aboutitscomponentsandperformance.
Issue
i. Werethetermscontainedintheboxadditionstoacontractthat
wasalreadyformed(oradditionsthatcannotbeaddedtoan
alreadyformedcontract),orareimplicitacceptanceoftheterms
theformationofthecontract?
Holding
i. Reversedandremanded
ii. Courtrulesfordefendant.
Reasoning
i. UsingthereasoninginProCD,Inc.v.Zeidenberg,thecourtstates
thattheformationofthecontractwasaftertheplaintiffskeptthe
productformorethan30days.
1. Thevendor(defendant)invitedacceptancebyconduct
(approveorreturnin30days),andoncethatconductis
done,thenthevendorcantreatitasacceptance.
ii. Theplaintiffscontendthatthecontractwasformedoncethey
purchasedtheproductanditwasdeliveredtotheirhome.
iii. TheyurgedthecourtnottoapplyProCDforthefollowingreasons:
1. ProCDislimitedtosoftware.
a. Courtsaysthatnotonlyarecomputerssoftware,but
thefindinginProCDhadnothingtodowiththelaw
ofsoftware,butofthelawofcontracts.
2. ProCDislimitedtoexecutorcontracts(tolicensesin
particular)anditdoesntapplybecauseperformanceofthe
contractwascompletewhentheboxarrived.
a. Courtsaysthatitisnotamatteroftheperformance
ofthecontract,butratheraquestionofthecreation
ofit.Thecontractwasnotcreatedwhenshipment
wasdelivered,butinstead,itwascreatedonce30
dayshadpassed.
3. ProCDhadtodowithmerchants,andplaintiffsarenot
merchants.
a. Courtsaysthatthebattleoftheformssectionof
theUCC2207(2)aremeantformultipleformsin

whichadditionscanbemadetothecontract.But
thiscaseisdealingwithonlyoneform.Theydonot
applythisUCCprovision.
b. ThequestioninProCDwasnotwhetherterms
wereaddedtoacontractafteritsformation,buthow
andwhenthecontractwasformedinparticular,
whetheravendormayproposethatacontractbe
formed,notinthestore(oroverthephone)withthe
paymentofmoneyorageneralSendmethe
product,butafterthecustomerhashadachanceto
inspectboththeitemandtheterms.
iv. PlaintiffsacceptedGatewaysofferafterthe30days,includingthe
arbitrationclause.
XIV.) WilliamKlocekv.Gateway
a. Name&ProceduralHistory
i. UnitedStatesDistrictCourt,D.Kansas,2000
b. Facts
i. PlaintiffclaimsbreachofcontractandwarrantywhenGateway
saiditscomputerwouldbecompatiblewithstandardperipherals
andstandardinternetservices.
ii. Hewantstoreturn,butcannotbecauseheispastthe5day
warrantylimit(StandardTermsAgreement).
c. Issue
i. Wasthereacceptanceofthetermsofagreementafterthe5day
periodwasup?
ii. Whowasthemasteroftheoffer?Whohadpowerofacceptance?
d. Holding
i. Defendantsmotiontodismissisdenied.
e. Reasoning
i. DefendantwantsthecourttoadoptthereasoninginHillv.
Gateway(previouscase),sayingthattheplaintiffsacceptedtheir
offerafterthe5dayperiodexpired.
ii. CourtdoesntfindHillv.Gatewaytobepersuasive:
1. HilldoesntuseUCCsection2207becausethecourt
claimedtherewasonlyoneformatdispute.Thecourthere
statesthat2207doesntprecludetheapplicationofacase
thatinvolvesonlyoneform.Therefore,itcanbeadopted.
a. If2207isadopted,thenthetermsandagreements
areadditionalprovisionstothecontract.
2. ThecourtherealsodoesntagreewithHillsconclusion
thatGatewayisthemasteroftheoffer.Inmostcommercial
transactions,thepurchaseristheofferor,andtheselleris
theofferee.Thecourtsaysthetermsandagreementare,

therefore,acounteroffertotheplaintiff,andtheplaintiff
mustexpresslyagreetoitinorderforittobinding.
a. Theremustbeanexpressagreementbecausethe
plaintiffisNOTamerchant.
iii. Sincetheplaintiffdidnotexpresslyagreetothetermsand
conditions,therewasnocontract.Defendantcantprovethat
plaintiffexpresslyagreed.
XV.) Spechtv.NetscapeCommunicationsCorporation
a. Name&Proceduralhistory
i. UScourtofappeals,SecondCircuit,2002
b. Facts
i. Christopher Specht and other, similarly situated plaintiffs
downloaded the SmartDownload plugin from a website available
from defendant Netscape Communications Corporation. (Specht,
while the lead plaintiff, did not actually download the application
at issue. Rather, he operated a website where others using the
download allegedly gathered information, unknowingly, because of
the plugin.) Specht and the other plaintiffs allege that the software
they downloaded allowed Netscape to spy on their online
activities, in violation of federal law. Specht brought suit in federal
district court on behalf of named plaintiffs and others similarly
situated in a putative class action case. However, Netscape moved
to stay the proceedings pending arbitration as a result of the license
agreement for the plugin application at issue. Specht and the other
plaintiffs argued that the license agreement was not readily
available at the time of download, was not a click-through
agreement, and was only available on another, linked web page
from the location where the download at issue was available. The
district court ruled that plaintiffs did not manifest their assent to
the license agreement and therefore were not bound by the
arbitration clause. Netscape appealed.
c. Issue
i. Are consumers bound by the terms of a license agreement
governing use of downloaded software notwithstanding knowing
assent or the reasonable likelihood that they knew of the terms of
the license agreement?
d. Holding
i. No, the plaintiffs bare act of downloading did not unambiguously
manifest their assent to the license terms, including the arbitration
agreement at issue in the instant appeal.
e. Reasoning
i. Judge Sotomayor delivered the opinion of the Court. First, Judge
Sotomayor explained that the Court below did not err in in
deciding contract formation as a matter of law, pointing out that the
record below was sufficient to make that determination and

accordingly denied defendants motion to compel a trial on that

issue. Next, the Court turned to applicability of the license
agreement. Citing substantial precedent, the Court pointed out that
under the UCC and at common law, contract formation requires
manifestation of assent, measured by an objective assessment of
actual actions. The Court concluded that a reasonable offeree
would not have been aware of the license terms, contrasting this
case with that of receipt of a paper contract and pointing to
distinctions in online downloads where users are typically
presented with license terms directly as part of the download
process. The Court drew distinctions between the instant case and
two other classes of cases. First, the Court pointed out that users
here were not similarly situated with purchases of computers who
are provided with the terms of the agreement upon purchase.
Second, the Court again highlighted the differences between the
nature of the download here and the majority of online transactions
in which license terms are not only readily available but mandatory
to click through prior to downloading the software subject the
agreement. The Court then turned to enforceability of the
arbitration agreement, concluding that it was inapplicable where
plaintiffs did not actually manifest assent. As to Mr. Specht, the
Court rejected the defendants argument that he was bound by the
terms of the license agreement because he benefited from its use.
The Court concluded that any benefit was abstract and intangible,
and that Specht was not a direct beneficiary. As binding third
parties generally turns on the intention of the contracting parties,
the Court here determined that applying license terms to Specht
would be inappropriate. The Court affirmed denial of the
defendants motion to stay proceedings and compel arbitration.
f. Rule
i. Online users are not bound to the license agreements to which they
have not unambiguously manifested assent. Plaintiffs were not
provided with reasonable notice of the terms of the agreement, and
were not required to receive the terms as part of downloaded the
plugin at issue. Accordingly, they could not be bound by the terms
of an agreement they did not have reasonable notice of nor provide
reasonable assent to.
XVI.) Cairo, Inc. v. Crossmedia Services, Inc.
a. Name & Procedural History
i. United Sates District Court, N.D. California, 2005
ii. 2005 WL 756610
b. Facts
i. -Both parties operated websites that allowed users to search for
products on sale at local retailers. Each of defendant's web pages
displayed a notice that, by using the site, a user agreed to abide by
the "Terms of Use" for the site.

ii. -The Terms of Use contained a forum selection clause.

iii. -After plaintiff filed suit, defendant filed a motion to dismiss for
improper venue, contending that plaintiff was bound by the forum
selection clause.
iv. The plaintiff would use a robot or Scraper that would
automatically visit retailers websites and record the relevant sales
information weekly. This computer was not able to read terms of
uses on websites.
v. After CMS was aware that the plaintiff was using CMSs website
by posting thumbnails with deep links to CMS (which is
prohibited in their terms of use), they sent plaintiff a letter that its
conduct constituted a breach of the terms of use and demanded that
they cease their actions. Cairo still persisted.
vi. Cairo filed a declaratory relief action in US district court for
Northern District of California, and defendant files a motion to
dismiss because of the forum clause located in their terms of use:
1. The clause states that any claims arising under the
agreement shall be exclusively heard in Chicago, Illinois by
arbitration.
c. Issue
i. Was Cairo bound by CMSs Terms of Use at all?
1. If they are then the case cannot proceed in the current
jurisdiction.
d. Holding
i. Yes. Cairo was bound to CMSs terms of use
e. Reasoning
i. Because Cairo continued to deep link CMSs website, especially
after the letter that CMS sent, they accepted CMSs terms.
1. Court cited Register.com, Inc. v. Verico, Inc. which stated
that when an offeree makes a decision to take benefit of an
offer with knowledge of terms of the offer, they are
accepting to the terms and are bound.
Indefinite Agreements and Gaps
I.)

George Varney v. Issac Ditmars

a. Name & Procedural History
i. Court of Appeals of New York, 1916
ii. 217 N.Y. 223
iii. Trial court found for the defendant, and plaintiff appealed.
b. Facts
i. Varney (P) was an architect and draftsman who accepted a position
for $35 per week with Ditmars (D). A few months later Varney
informed Ditmars that he had been offered another position at a
higher salary and Ditmars gave Varney a raise. Ditmars was very
pleased with Varneys work and promised him that when he closed

II.)

his books the following January he would give him a fair share of
the profits.
ii. P became ill and did not go to the office for a month and was
subsequently fired. P sued D for $1,680 for lost wages and profit
sharing. P was the only witness to testify to the alleged contract
and the complaint was dismissed. P appealed.
c. Issue
i. How specific must the material terms of a contract be in order to
be enforceable?
d. Holding & Rule
i. The material terms of a contract must be definite and certain in
order for a contract to be enforceable at law.
e. Reasoning
i. The court held that there could be no definite and certain meaning
attached to the words fair profit and the alleged contract relating
to that provision was therefore uncertain and indefinite. The court
held that there is no contract so long as any essential element is
open to negotiation.
f. Dissent (Cardozo)
i. P failed to supply data essential to the computation of a fair profit.
I cannot concur that he failed to make his case regarding the extent
of his lost salary. The hiring was not at will and the plain
implication was that P was to continue until the end of the year
when the books were closed. The evidence presented would allow
a jury to find that P was discharged without cause and his damages
could be proven.
Ogelbay Norton Company v. Armco, Inc.
a. Name & Procedural History
i. Supreme Court of Ohio
ii. 52 Ohio St.3d 232
iii. Trial court and appellate court find for the plaintiff.
b. Facts
i. Plaintiff and defendants have been longtime business partners for
27 years.
ii. Ogelbay would provide transportation of iron ore from Armcos
mines in the lake superior district to Armcos plants in the lower
great lake regions
iii. Both parties had a long lasting relationship, even a partnership in
another venture.
iv. The contract had a primary and secondary pricing mechanism:
1. Using Skillings Mining Review, which published a rate
from a leading independent iron ore shipper. (Primary)
2. Looking at other leading iron ore shippers prices (Still
Primary)
3. Mutually agreeing upon a rate (Secondary)
4. Asking the court to get involved by use of a mediator.

v. The contract was restructured four times in the next 23 years after
its formation (including the plaintiff upgrading their trucks for
Armco.)
vi. In 1984, Skillings Mining Review suffered a downturn in
business with a rise in prices. Both parties couldnt agree on a price
until they compromised.
vii. Finally in 1986 they couldnt agree on a rate.
viii. Oglebay sought declaratory judgment asking the court to declare
the contract rate to be the correct rate, or in the absence of such a
rate, to declare a reasonable rate.
ix. Parties continued to perform pending resolution of the suit in
1987, Armco filed a counter-claim seeking that the contract was no
longer enforceable.
c. Issue
i. Did the parties intend to be bound by the terms despite failure of
primary and secondary arrangements?
ii. If parties did intend to bound may the trial court be allowed to
establish a 6.25 rate?
iii. May the trial court continue to exercise its equitable jurisdiction
over the parties and is the court allowed to utilize a mediator if
they are unable to mutually agree.
d. Holding
i. Yes.
ii. Yes.
iii. Yes.
e. Reasoning
i. Armco states that they did not intend to be bound by the contract
after the primary and secondary pricing mechanisms failed.
1. Court says that it seems like they did intend to by their
long-lasting business relationship.
ii. Armco states that it was impossible to ascertain new prices through
the mechanisms after 1985 because Skillings no longer
published prices, and the information of other shippers was no
longer publicly available.
iii. Armco says that the trial court lacked jurisdiction to impose a
shipping rate of $6.25 and order parties to negotiate or mediate.
iv. 1. The parties intended to be bound despite failure of pricing
mechanisms.
1. Long-standing relationship of parties, joint ventures,
interlocking directorates, and ownership of stock.
2. Parties continued to perform pending 1987 dispute.
3. Parties contractually recognized Armcos vital and unique
interest in Oglebays vessel fleet.
v. 2. Since parties intended to be bound, trial court stated it had
authority to determine a reasonable mechanism since the contract
failed to do so.

III.)

1. When parties intend to be bound, the price is to be fixed in

terms of some agreed market or other standard as set or
recorded by a third person or agency.
2. Based this upon parties extensive course of dealings.
vi. Trial court did not exceed its jurisdiction.
1. Specific performance was necessary.
2. Other performances were too hard to figure out.
a. Fluctuation of prices, and long-standing relationship
would be impossible to create damages.
b. Since parties intended to be bound, the court did not
exceed jurisdiction.
vii. Restatement section 33 and 34
Robert Blinn v. Beatrice Community Hospital and Health Center, Inc.
a. Name & Procedural History
i. Supreme court of Nebraska, 2006
ii. 270 Neb. 809.
iii. Trial court found for the defendant, appellate court found for the
plaintiff.
b. Facts
i. Plaintiff, Robert Blinn, was an executive director at Beatrice
Community hospital.
ii. He was offered a job in Kansas that would offer him more
responsibility and more money.
iii. Plaintiff was 67 years old and whether he chose the Kansas job or
stayed with defendant, he wanted to be assured that he could work
somewhere up until retirement.
iv. It was important for the plaintiff to know if he was wanted/needed
at the defendants hospital, because if he was assured that, he
would stay until retiring.
v. He approached Beatrice administrator and he, in turn, assured the
plaintiff that there was at least five ore years of work to do.
vi. He also went to the chairman of Beatrices board and they assured
him that they wanted him to stay and that he could stay until
retirement.
vii. A year later, the plaintiff was asked to leave the hospital.
viii. Plaintiff sues on the basis of (1) breach of oral contract and (2)
promissory estoppel.
c. Issue
i. Did the defendants statements constitute an offer resulting in a
oral contract?
d. Holding
i. No for breach of contract.
ii. Holds that there is a genuine issue of material facts in terms of
promissory estoppel.
e. Reasoning

i. The Supreme Court looked at the outward manifestation of the

defendants promise and found that the mention of at least five
years of work left is not a clear offer of definite employment and
does not manifest to create a unilateral contract.
ii. Regarding promissory estoppel, the court says that the promise
does not need to be definite to create a contract if there is
consideration. All that is required is that it was foreseeable and
reasonable that the plaintiff would rely on the promise to the point
of injustice.
1. There is sufficient evidence, if believed by the trier of fact,
to conclude that Blinn reasonably and foreseeably relied on
Beatrices assurances of a fixed term of employment, and
Beatrice breached that promise (369).
2. Genuine issue of material fact as to whether Blinn was
promised terms of employment that could reasonably have
been expected to induce Blinn to forgo the job opportunity
under promissory estoppel.
Precontractual Liability (agreements to negotiate, etc.)
IV.)

Metro-Goldwyn-Mayer, Inc. v. Roy Scheider

a. Facts
i. Actor entered into a contract to do a pilot episode of a television
series that might develop after the movie.
ii. Parties had entered into an oral contract where Scheider agreed to act ina pilot
film, and in the TV series which might develop. After performing thepilot, and
being fully compensated for it, Scheider refused to perform in thesubsequent
TV series. There were negotiations made over a period of time, andthe only
essential term left unspecified was the time the filming for the TVseries would
begin, but with the understanding that further agreements were tofollow
(according to industry practices, which both parties were aware of).
b. Issue
i. Whether the oral contract is enforceable, although indefinite.
c. Reasoning
i. Actors lawyer argues that it was just an oral contract, not a
completed contract.
ii. There were many negotiations and a good faith understanding that
agreement on unsettled matters would follow. Court says there was
a contract even though the indefinite matter was when the series
would start, because it was custom industry practice, and both
parties understood this. There was enough agreement on enough
terms so court enforces.
d. Rule
i. Restatement (2nd) 230, Comment d:[Where] the parties have
completed their negotiations of what they regard as essential
elements, and performance has begun on the good faith

V.)

understanding that agreement on the unsettled matters will follow,

the court will find and enforce a contract even though the parties
have expressly left these other elements for future [...] negotiation
and agreement, if some objective method of determination is
available, independent of either party's mere wish or desire. Such
objective criteria may be found in the agreement itself, commercial
practice or other usage and custom. If the contract can be rendered
certain and complete, by reference to something certain, the court
will fill in the gaps.
Joseph Martin, Jr., Delicatessen, Inc. v. Henry Schumacher
a. Name & Procedural History
i. Court of Appeals of New York, 1981
ii. 52 N.Y.2d 105
iii. TrialcourtfoundforD,dismissedP'sclaim,contractwas
unenforceableforuncertainty.
iv. Appellatecourtreversed,foundforP,contractenforceable,court
setrentalprice.
v. NYCOAreversed,dismissedP'sclaim,contractwas
unenforceableforuncertainty.
b. Facts
i. PleasedaretailstorefromDforafiveyearterm.Therentwas
graduatedupwards,startingat$500andendingat$650inthefinal
year.
ii. TheleasesaidthatPcouldrenewtheleaseforanother5yearterm
"atannualrentalstobeagreedupon".
iii. PrenewedtheleaseandDaskedfor$900/morent.Phiredan
appraiserwhosaidthatfairmarketvaluewasonly$550/mo.
iv. PsuedDtogetthelowerrate.
c. Issue
i. Canarealestateleasecontractbeenforceableiftherentfora
renewalperiodisnotincludedinthelease?
ii. Ambiguousextensionenforceable?
d. Holding

i. Arealestateleasecontractisnotenforceableifimportantdetails,
suchastherentamountfortherenewalperiod,isnotincludedin
thelease.
ii. Amereagreementtoagree,inwhichamaterialtermisleftfor
futurenegotiations,isunenforceable.
e. Reasoning
i. Definitenessastomaterialmattersistheveryessenceincontract
law.Impenetrablevaguenessanduncertaintywillnotdo.
ii. Itwouldhavesufficedifamethodologyfordeterminingtherent
wastobefoundsomewhereinthelease.
iii. Therenewalclausesaysnothingelsebesidesthefactthat"annual
rentals[are]tobeagreedupon".
iv. Nowhereisthereaninklingthateitherofthepartiesassentedto
havetherentsetbyajudge,anarbitrator,orsomeotherthird
party.
v. TheUCCislimitedtothesaleofgoodsandisnotapplicableto
realestatecontracts.
f. Dissent
i. TheUCCshouldbeallowedtoapplyincasesinvolvingrealestate
contracts.
ii. Thecourtshouldbeabletosettherentatareasonablerateinorder
toavoidaforfeiture.
VI.)

Hoffmanv.RedOwlStores,Inc.
a. Name&ProceduralHistory
i. SupremeCourtofWisconsin,1965
ii. 26Wis.2d683
b. Facts
i. Hoffman(P)ownedandoperatedabakeryandsoughttoobtaina
supermarketfranchisewithRedOwlStores(D).RedOwlStores

assuredHoffmanthathis$18,000wassufficientandadvisedhim
toacquireandoperateasmallstoretogainexperience.Three
monthslaterRedOwlStoresadvisedhimtosellthatstorewiththe
assurancethathewouldbegivenalargerstore.Hoffmanwas
reluctanttomissthesummertouristseasonbutsoldthestoreon
RedOwlsassurances.
ii. AfewmonthslaterRedOwltoldHoffmaneverythingisreadyto
go.Getyourmoneytogetherandweareset.DtoldPtoraisethe
restofhisfinancialcontributionbysellinghisbakery.Psoldthe
bakeryfor$10,000andtookajobonthenightshiftatalocal
bakery.
iii. RedOwlinformedHoffmanthathewouldhavetocontributea
greateramountofmoney.RedOwlagreedtopermitHoffmans
fatherinlawtocontribute$13,000andbecomeapartnerinthe
store.Hoffmanwasthentoldthathewouldhavetosignan
agreementthatthe$13,000waseitheragiftoraloansubordinate
toallgeneralcreditors.NegotiationsterminatedandHoffmansued
RedOwlforreliancedamages,lostprofits,andexpenses.
iv. RedOwlsdefensewasthatthepartieshadneverreached
agreementonessentialfactorsnecessarytocreateavalidcontract.
ThejuryawardedHoffman$16,735forthesaleofthestore,$2000
forthesaleofthebakery,and$1250forotherexpenses.Thetrial
courtorderedanewtrialregardingthe$16,735forthesaleofthe
store.RedOwlappealed.
c. Issue
i. 1)Doespromissoryestoppelrequirethat,asidefromthelackof
consideration,thepromisesueduponmustbeabletosustaina
causeofactionunderabreachofcontract?2)Oncepromissory
estoppelisapplied,towhatremedyistheplaintiffentitled?
d. Holding
i. 1)No.PromissoryEstoppeldoesnotrequirethatthepromisesued
upon,asidefromthelackofconsideration,mustbeabletosustain
acauseofactionunderabreachofcontract.2)Oncepromissory
estoppelisapplieddamagesshouldbethosedesignedtoprevent
injustice,nottoenforcethepromisesmade.
e. Reasoning
i. Thecourtthenconsideredthesignificanceofthepartiesnever
havingreachedagreementonessentialfactorsnecessaryto
establishabindingcontract.Thecourtheldthatthedoctrineof
promissoryestoppelwasinvokedasasubstituteforconsideration
renderingagratuitouspromiseenforceable.RestatementSection
90doesnotimposetherequirementthatthepromisemustbeso
comprehensiveinscopeastomeettherequirementsofanoffer
thatwouldcreateabindingcontractifacceptedbythepromisee.

ii. Forafindingofpromissoryestoppel,therequirementsare:a
promisewhichthepromissorshouldreasonablyexpecttoinduce
actionorforbearanceofadefiniteandsubstantialcharacter,that
thepromisedidinducesuchactionorforbearance,andwhether
injusticecanbeavoidedonlybyenforcementofthepromise.
iii. Thecourtheldthatunderthesefacts,injusticewouldresultifP
werenotallowedreliefbecausePreliedtohisdetrimenton
promises,whichDfailedtokeep.Thecourtheldthatalldamages
asawardedweresustainedexceptthatthedamagesregardingthe
saleofthegrocerystoreshouldbelimitedtothedifference
betweenthesalepricereceivedandthefairmarketvalueofthe
assetssold,givingconsiderationtoanygoodwill.Whendamages
areawardedinpromissoryestoppel,theyshouldbeonlysuchas
arenecessarytopreventinjustice.Justicedoesnotrequirethatthe
damagesawardedshouldexceedanyactuallosssustained.
VII.)

EmproManufacturingCo.,Inc.v.BallCoManufacturing,Inc.
a. Name&ProceduralHistory
i. UnitedStatesCourtofAppeals,SeventhCircuit,1989
ii. 870F.2d423
iii. Trialcourtfoundforthedefendant.
b. Facts
i. BallCoManufacturing(D)madespecialtyvalvecomponentsand
soughtabuyerforitsassets.EmproManufacturingCo.(P)
expressedinterestandafterpreliminarynegotiationssubmitteda
threepageletterofintenttopurchaseBallCofor$2.4million.The
letterconditionedthepurchaseuponcertainconditionsprecedent
includingtheapprovalofEmprosboardofdirectors.
c. Issue
i. Whatisthetestforestablishingintenttobeboundincontract
formation?
d. Holding
i. Anobjectivetestisusedtodetermineintentinthecontextof
contractformation.
ii. Affirmedtrialcourt.
e. Reasoning
i. Intentincontractlawisevaluatedunderanobjectiveratherthana
subjectivestandard.Apartywhomakesadealsubjecttoalater
definitiveagreementhasmanifestedanobjectiveintentnottobe
bound.Undertheparolevidencerulethisbecomesthedefinitive
intentevenifonepartylaterclaimsthatitstruesubjectiveintentat
thetimewasdifferent.
ii. Emprosletterstatestwicethatitwassubjecttoalaterdefinitive
agreement.Italsostatestwicethatitcontainsgeneraltermsand

conditionsbutthateachsideretainstherighttomakeadditional
demands.Emproinsulateditselffurtherfromthetransactionby
makingthedealsubjecttoboardapproval.
iii. TheletterwasnotaonesidedcommitmenttobuyBallCobecause
fromthebeginningBallCoassumeditcouldnegotiateterms
differentfromthosecontainedintheletter.Whileapproaching
agreementinstagesisavaluablemethodofdoingbusiness,inthis
casetherewasnobindingagreement.
VIII.) FrankDixonv.WellsFargoBank,N.A.
a. Name&ProceduralHistory
i. UnitedStatesDistrictCourt,DistrictofMassachusetts,2011
ii. 798F.Supp2d336
b. Facts
i. PlaintiffsappliedforamortgageloanmodificationwithWells
Fargo,whichheldamortgageontheplaintiffsproperty.
ii. WellsFargoinstructedtheDixonstostopmakingpaymentson
theirloan,andsupplycertainfinancialinformationinorderfor
WellsFargotochecktheireligibilityforthemodification.
iii. Plaintiffsstoppedpayments.
iv. WellsFargothenproceededwithaforeclosureontheplaintiffs
homeafterpaymentswerestopped.
c. Issue
i. Canaplaintiffrecoverdamagesinvokingpromissoryestoppelfor
apromisemadeduringnegotiationsforanagreement?
d. Holding
i. Yes.
e. Reasoning
i. PlaintiffsreliedonWellsFargospromiseandstoppedmaking
theirpayments,whichallowedWellsFargotoinitiateforeclosure
proceedings.
1. Whetherthiswasdoneingoodorbadfaithdoesnotmatter
innegotiation
ii. Courtsunderstandtheargumentthatallowingplaintiffstorecover
duringnegotiationsofanagreementmayrestrictpartiesfreedom
tonegotiation,theyarguetwothings:
1. Therelianceonapromisemustbereasonable,foreseeable,
andalsodetrimental.
2. Thisrecoveryofdamageswontrestrictfreedomto
negotiate,butitwillpromotepeopletodosobyoffering
themreassurance.
RecoverywithoutAgreement:UnjustEnrichment

I.)
II.)

HowardBaileyv.RichardE.West
PeterKossianv.AmericanNationalInsuranceCo.
a. Name&ProceduralHistory
i. CourtofAppeal,FifthDistrict,California,1967
ii. 254Cal.App.2d647
b. Facts
i. PlaintiffappealedajudgmentfromtheSuperiorCourtofFresno
County(California)thatgranteddefendant'smotionforsummary
judgmentregardingplaintiff'sactiontorecoverinsurancemoney
forworkperformedinvolvingcleanupandremovalofdebrisafter
fire.
ii. Ownerofaninnthatburneddowncontractedwithplaintiffto
cleanupthedebris,butdeclaredbankruptcyafterthecleanupwas
finished.Thepropertywassubjecttoadeedoftrustinwhich
defendantwasthebeneficiary.Defendanthadnoknowledgeofthe
agreementbetweenownerandplaintiff.Thelowercourtgranted
defendant'smotionforsummaryjudgmentregardingplaintiff's
actiontorecoverinsurancemoneyforworkperformedinthe
cleanupandremovalofthedebris;plaintiffappealed.
iii. Defendantarguedthatplaintiffwasnotapartytotheinsurance
contracts,whiledefendanthadacontractrighttocollectindemnity
forlossesresultingfromthefire,includingthedebrisremovalcost.
Plaintiffarguedthatdefendantshouldnothavebeenallowedto
havethefruitsofplaintiff'slaborandalsothemoneyvalueofthat
labor.
c. Issue
i. Propertyownerandinsurancetogetmoney(landlord),andhehas
thepolicyforfiredamage.Shouldtheplaintiffbeabletorecover?
d. Holding
i. Thecourtreversedthelowercourt'sjudgmentbecausethedoctrine
ofunjustenrichmentappliedtosituationsregardlessoftheintent
oftheparties.
e. Reasoning
i. Defendant'sindemnitypaymentwasbasedinpartuponaclaimof
lossthatdidnotexistbecauseplaintiffhadalreadyremediedthe
lossbyhisworkforwhichhewasnotpaid.
ii. Themostprevalentimpliedinfactcontractrecognizedunderthe
doctrineofunjustenrichmentispredicateduponarelationship
betweenthepartiesfromwhichthecourtinfersanintent.
However,thedoctrinealsorecognizesanobligationimposedby
lawregardlessoftheintentoftheparties.
Intheseinstancesthereneedbenorelationshipthatgives
substancetoanimpliedintentbasictothecontractconcept,rather
theobligationisimposedbecausegoodconsciencedictatesthat

III.)

IV.)

V.)

VI.)

underthecircumstancesthepersonbenefitedshouldmake
reimbursement.
iii. OUTCOME:Thecourtreversedthetrialcourt'sjudgmentbased
uponthedoctrineofunjustenrichmentunderwhichdefendant
couldnothavebeenindemnifiedtwiceforthesameloss,onceby
plaintiff'slaborandmaterialsandagainbytheproceedsofthefire
insurance.
f. Whywasthiscaseputintothebook?
i. Adirectprivitydoesnthavetoexistbetweenathirdpartyanda
contract,butaslongasthereisunjustenrichment,theycan
recover.
RequiredWriting(Select)
a. Section111ExecutortoPayDebtofEstate
b. Section117Suretyship
i. Onewhoisagreeingtopayadebtofanotheriftheprincipalinthat
doesntmakethepayments.
c. Section124Promisesinconsiderationofmarriage
d. Section125Land
e. Section130K>1Year
f. Section12201Good$500more.
OralRescission(Section145)
a. OralModificationofSOFKintononSOFK=OKSection148
b. OralModificationofNonSOFintoSOFK=NotOkSection149(2209
(3))
ExceptionstoSOF
a. BothPartiesAdmit
b. BothPartiesPerformedSection(145)2201
c. P.E.Section139
ProfessionalBullRiders,Inc.v.AutoZone,Inc.
a. Facts
i. AutoZone(D)sponsoredeventsfortheProfessionalBullRiders
(P).ProfessionalBullRiderspreparedawrittenagreementto
secureAutoZonessponsorship.Theagreementwasfortwoyears
butprovidedDwiththeoptiontocancelwithinthefirstyear.D
neversignedtheagreement.DperformedbutnotifiedPinJanuary
2002thatitwouldnotbesponsoringPseventsin2002.Thiswas
wellaftertheAugust2001dropdeaddateinthewritten
agreement.PsuedDforabreachoftheoralsponsorship
agreement.Thedistrictcourtgrantedsummaryjudgmentinfavor
ofDonthegroundsthattheoralcontractcouldnotbeperformed
withinoneyearandwasthereforeunenforceableunderthe
Coloradostatuteoffrauds.
b. Issue

i. Isanoralagreementvoidwhen:theagreementcontemplates
performanceforadefiniteperiodofmorethanoneyearbut
allowsthepartyanoptiontoterminatetheagreementbyacertain
datelessthanayearfromthemakingoftheagreementeven
whenthepartyhasnotexercisedtheoptiontoterminatethe
agreement?
c. Holding
i. No
ii. Reversed
d. Reasoning
i. Courtstendtoconstruetheoneyearprovisionofthestatuteof
fraudsverynarrowlytovoidthefewestnumberoforalcontracts.
Theoneyearperiodrunsfromthetimethatthecontractwasmade
tothetimeforcompletionofperformance.Theprovisionis
universallyunderstoodtoapplyonlytoagreementsthat,bytheir
terms,areincapableofbeingperformedwithinoneyear.A
promiseoftwoormoreperformances,inthealternative,doesnot
fallwithintheoneyearprovisionifanyoneofthealternatives
couldbefullyperformedwithinoneyear.Nocontractiswithinthe
oneyearprovisionthatmaybefairlyandreasonablyinterpreted
suchthatitmaybeperformedwithinoneyear.Wherethetermsof
anagreementcanfairlyandreasonablybeinterpretedtodefine
alternateobligations,oneormoreofwhichcanbeperformed
withinoneyear,theagreementinquestionmaybefairlyand
reasonablyinterpretedsuchthatitmaybeperformedwithinone
year.
ii. InthiscaseDhadtwoalternativemeansforsatisfyingits
obligationsandoneofthemcouldbeperformedwithinoneyear;
thereforethecontractdoesnotfallwithintheoneyearprovision
andisnotvoid.
e. NateL.Crabtreev.ElizabethArdenSalesCorp.
i. Facts
1. Crabtree(P)negotiatedanemploymentcontractforasales
managerpositionwithElizabethArdenSalesCorporation
(D).CrabtreeacceptedArdensofferofatwoyearcontract
basedonanannualsalaryof$20,000forthefirstsix
months,$25,000forthesecondsixmonthsand$30,000for
thesecondyearplusexpenses.
2. Ms.Ardenspersonalsecretarypreparedamemorandumon
atelephoneorderblank.Apayrollchangecardwas
preparedandinitialedandforwardedtothepayroll
department.Crabtreereceivedthefirstscheduledincrease
butArdenrefusedtoapprovethesecond.Pfileda
complaintforbreachofcontract.Ddeniedtheexistenceof

anyagreementtoemployPfortwoyearsandfurther
contendedthat,evenifonehadbeenmade,thestatuteof
fraudsbarreditsenforcement.Thetrialcourtfoundinfavor
ofPandawardeddamagesof$14,000.Dappealedandthe
AppellateDivisionaffirmed.
ii. Issue
1. IstherequirementofawritingundertheStatuteofFrauds
satisfiedbyoraltestimonythatestablishestherelationships
betweenseveraldocuments,somesignedandothers
unsigned?
iii. Holding
1. Thewritingrequirementmaybemetbyseveral
documentsbothsignedandunsignedandtheirrelationships
maybeestablishedbyoraltestimony.
2. Affirmed.
iv. Reasoning
1. Thecourtheldthatthewritingscombinedcontainedallof
theessentialtermsofthecontractthepartiestoit,the
positionthatPwastoassume,andthesalarythathewasto
receiveexceptatermrelatingtothedurationofPs
employment.Thecourtheldthatitwasofnoconsequence
thatthewritingswerenotpreparedorsignedwiththe
intentionofevidencingthecontract,orthattheycameinto
existencesubsequenttoitsexecution.Thestatuteoffrauds
demandsthattheyweresignedwithintenttoauthenticate
theinformationcontainedtherein,andthatsuch
informationdoesevidencethetermsofthecontract.
2. ItisnotarequirementundertheStatuteofFraudsthata
contractbeinasingledocument.Itmaybepiecedtogether
fromseparatewritingswhichmaybeconnectedexpressly
orthroughevidenceofsubjectmatterandoccasion.The
courtheldthatitwouldpermitthesignedandunsigned
writingstobereadtogether,providedthattheyclearlyrefer
tothesamesubjectmatterortransaction.TheStatutedid
notimposetherequirementthatthesigned
acknowledgmentofthecontractmustappearfromthe
writingsalone,unaidedbyoraltestimony.
3. Theparolevidencethatwasadmittedattrialonly
connectedtheseparatedocumentsandshowedthatthere
wasassentbythepartytobechargedtothecontentsofthe
oneunsigned.Itwasapparentfromtheevidencethatall
threereferredontheirfacetothesametransaction.
Evidenceregardingtheconductofthepartiesatthetime

VII.)

thecontractwaspreparedpersuasivelydemonstratedDs
assenttoitsterms.

Sullivanv.Porter
a. Facts
i. Porter(D)offeredtosellhispropertytoSullivanandAndrews(Ps)
for$350,000witha$20,000downpaymentandSullivanaccepted
orally.Portersaidthathewouldhavehisattorneypreparethe
paperwork.SullivantookpossessionofthepropertyinSeptember
2000andbeganimprovingthestableandtrails.Thiscontinued
untilNovember24,2000whenPorterarrivedatthefarmwitha
realestateagent.PortertoldSullivanthatanotherbuyerwas
interestedbuttoldSullivanthathewouldhonortheiragreement.
Thenextday,Porteraccepteda$3000downpaymentfrom
Sullivan.SullivanandAndrewsbeganrenovationsand
improvementsontheproperty,startedtheirnewbusiness,placed
advertisementsinthelocalnewspaper,andpaidforanappraisalof
theproperty.Porterregularlyvisitedthepropertyandreceived
updatesabouttherenovationsbutdidnotproducethepaperwork
necessarytocompletethetransaction.Porterthenofferedtosell
thepropertyfor$450,000witha$50,000downpayment.
ii. Sullivanfiledacomplaintforbreachofcontract,promissory
estoppel,andspecificperformanceandPorterassertedthestatute
offrauds.Porterappealedthecourtsjudgmentandawardof
specificperformanceinfavorofSullivan.
b. Issue
i. Whatmustapartyshowinordertoinvokethedoctrineofpart
performance?
c. Holding
i. Toinvokethedoctrineofpartperformanceapartymustproveby
clearandconvincingevidence(1)thatthepartiesdidenterintoa
contract;(2)thatthepartyseekingtoenforcethecontractpartially
performedthecontract;and(3)thattheperformancewasinduced
bytheotherpartysmisrepresentations,whichmayinclude
acquiescenceorsilence.
d. Reasoning
i. Thecourtheldthattheagreementencompassedtheessential
materialtermsforacontracttosellthefarm.Theyidentifiedthe
property,determinedapurchaseprice,adownpayment,andthe
typeoffinancing.Partperformanceisgroundedintheprincipleof
equitableestoppelorestoppelinpais.Suchconductinvolves
misrepresentations,includingmisleadingstatements,conduct,or
silence,thatinducedetrimentalreliance.
ii.
DoctrineofPartPerformance:Onceinducingorknowingly

permittinganothertoperforminpartanagreement,onthefaithof
itsfullperformancebybothpartiesandforwhichhecouldnot
wellbecompensatedexceptbyspecificperformance,theother
shallnotinsistthattheagreementisvoid.
iii. Porterremainedsilent,awarethatSullivanandAndrewswere
incurringexpensesonimprovementsandothermatters.Porter
repeatedlyrepresentedthathewashavinghislawyerdrawupthe
paperworkforthesaleofthefarm.Thissilentacquiescencewasa
misrepresentationthatinducedSullivanandAndrewstopartially
performtheircontractualobligations.Theoralcontractforthesale
oflandwasremovedfromthestatuteoffraudsbasedonthepart
performancedoctrine.
e. Remedy
i. Specificperformance:Specificperformanceiswithinthe
equitablepowerswhenalegalremedyiseitherinadequateor
impractical.Suchanordermaybeappropriatetoenforceacontract
forthesaleoflandbecauseoftheuniquenessofeachparcelofreal
propertyandtheinadequacyofmoneydamagesinacontractfor
thepurchaseofrealestate.Sullivanssubstantialinvestmentmade
LakewoodFarmsouniquethattherewasnoadequateremedy
otherthananorderofspecificperformance.
f. Restatement125129
i. LandandStatuteofFrauds
g. Restate139
i. PromissoryestoppelinregardstoStatuteofFrauds
h. UCC2201
i. StatuteoffraudsinUCC
VIII.) DFActivitiesCorpv.DorotheaF.Brown
a. Name&ProceduralHistory
i. UnitedStatesCourtofAppeals,SeventhCircuit,1988
ii. 851F.2d920
b. Facts
i. Brown(D)livedinahousedesignedbyFrankLloydWright
knownastheWillitsHouse.AWrightenthusiastcontrolledDF
ActivitiesCorporation(P)andPsoughttopurchasetheWillits
Chair.Psartdirectorcontendsthatthepartiesenteredintoa
verbalagreementonNovember26,1986tosellfor$60,000intwo
equalinstallmentsdueonDecember31andMarch26.Aletter
includingthefirstinstallmentwasmailedbutitwasreturnedwith
anoteindicatingthatthechairhadbeensoldtoanotherparty.P
suedforbreachofcontractandsoughtthedifferencebetweenthe
agreeduponpriceandthepriceatwhichDsoldthechairtothe
otherparty.PappealedthecourtsgrantofDsmotiontodismiss

underRule12(b)(6)onthegroundsthattheclaimwasbarredby
thestatuteoffrauds.

c. Issue
i. Whetheradefensebasedonthestatuteoffraudsmustalwaysbe
determinedattrial.
d. Holding
i. No.
ii. Affirmed.
e. Reasoning
i. Aplaintiffinasuitonacontractwithinthestatuteoffraudsshould
notbeallowedtoresistamotiontodismissthatisbackedbyan
affidavitthatDdeniesthecontractwasmadeonthegroundsthat
evidencesupportinghisclaimmayariseduringdiscovery.There
wasnopointtokeepthelawsuitaliveonthemerehopethatD
wouldmakeajudicialadmissioninadeposition,andsomecourts
evenallowDssimpledenialinapleadingtodefeatajudicial
admission.
f. Rule
i. Ifsomeoneswearsunderoath,throughaffidavit,thenthereis
nothingthatcanbedone.
g. Dissent
i. Idisagreewiththeholdingthatadditionaldiscoveryisprohibited
wheneveradefendantraisesastatuteoffraudsdefenseand
submitsasworndenialthatsheformedanoralcontractwithP.
Courtsshouldhavetheauthoritytoexercisediscretionto
determinepermissiblediscoveryandnotbeforcedtoruleeither
wayinsuchsituations.Thisiscritical,asDsaffidavitdoesnot
containaconclusivedenialofcontractformation.
MentalCapacity
IX.)

LarryBowlingv.MaxSperry
a. Name&ProceduralHistory
i. AppellateCourtofIndiana,1962
ii. Trialcourtfoundfordefendantbecausetheyheldthatthecontract
wasnotvoidablesinceLarrysauntandgrandmotheraccompanied
himwhenhemadethepurchase.
b. Facts
i. SixteenyearoldLarryBowling(P)purchasedausedcarfrom
Sperry(D)for$140.BowlingattemptedtoreturnthecartoSperry
afterdiscoveringthatthemainbearingwasdefectiveandwas
informedthatrepairswouldcost$45$95.PleftthecarwithDand
mailedaletterdisaffirmingthecontract.PsuedDforthereturnof
hismoneyandthetrialcourtenteredjudgmentforDonthe

X.)

groundsthatthecontractwasnotvoidable,becausePsauntand
grandmotheraccompaniedPwhenhepurchasedthecarandgave
himthemoneytopurchaseit.Pappealed.
ii. Minorsareallowedtodisaffirm(void)theircontracts.
c. Issue
i. Isapurchasecontractbyaminorvoidabledespitetheparticipation
ofanadultinthetransaction?
d. Holding
i. Yes
ii. Contractisstillvoidableevenifadultispresent.
iii. Reversedandremanded.
e. Reasoning
i. ThecourtheldthattheparticipationofPsauntandgrandmother
inthetransactiondidnotchangetherulethatcontractsbyaminor
regardingpersonalpropertyarevoidable.
1. DefendantknewthatLarrywasaminor,anditishisname
onthecontractandtitle.
ii. TheevidenceshowedthatthesalewasmadebetweenPandDand
notoneoftheadults.DwasfullyawareofPsagewhenthesale
wasnegotiatedandPhadeveryrighttodisaffirmthesale.Dhad
theburdentoshowthatthecarwasanecessityandDdidnotmeet
thatburden.
iii. Restatement1216(capacity)
1. Infancy
2. MentalIllnessorDefect
3. Intoxication
4. Possibleexceptions:
a. MisrepresentationofAge
b. Marriage
c. Necessaries
d. Ratification.
HeightsRealty,Ltd.V.E.A.Phillips
a. Name&ProceduralHistory
i. SupremecourtofNewMexico,1988
ii. TrialcourtfoundfordefendantongroundsthatMrs.Gholsonwas
incompetent.
b. Facts
i. Mrs.Gholsonsignedalistingagreementwiththeplaintiffsforthe
saleofherhome.
1. Sheagreedtosellthehousefor$250,000.00witha
$50,000downpayment.
2. Shelaterexecutedanaddendum,increasingthedown
paymentto$100,000dollars.

XI.)

ii. Abuyeragreedtopurchasethepropertyfor$255,000,butGholson
didnotaccepttheoffer.
iii. Theplaintiffsfileacomplaintseekingitscommissionforhaving
performedunderthetermsofthecontractbyprovidingabuyerto
purchaseMrs.Gholsonsproperty.
c. Issue
i. Wasthereenoughclearandconvincingevidencethatovercamethe
presumptionofcompetencyinregardstoMrs.Gholson?
d. Holding
i. Yes.
ii. Supremecourtaffirmstrialandappellatecourts.
e. Reasoning
i. Mrs.Gholsonssoninlawandgranddaughterbothtestifiedtoher
deterioratingmentalcompetencyoncountlessoccasions.
ii. Thereweretwodoctorsthatgavetestimony,onethatrepresented
theplaintiffandonethatrepresentedthedefendant.
1. Dr.Muldawer(defendantsdoctor)examinedandmetwith
Mrs.Gholsonandtestifiedthathecouldntsay
conclusivelythatshewasincompetent,buttherewas
reasonablemedicalprobabilitythatshewas.
2. Dr.Farber(plaintiffsdoctor)onlyexaminedthenotesand
documentsformDr.Muldawer,butnevermetwithMrs.
Gholson.HebelievedthatFarberdidnothavesufficient
evidencetosaythatMrs.Gholsonwasincompetent.
iii. Thecourtsaysthatthedoctorstestimonieswerenotsufficientto
overcomethepresumptionofcompetencies,butGholsons
familystestimonywasenoughbecausetheiropinionswere
predicatedontheirmanyexperienceswithMrs.Gholson,andthey
hadmanyopportunitiestoobservehermentalcapacity.
Jacqueline Ervin v. Hosanna Ministry, Inc.
a. Name & Procedural History
i. Superior Court of Connecticut, 1995
ii. 1995 WL 681532 (unpublished)
b. Facts
i. Defendants,aministrythatranadrugtreatmentprogramandits
agent,filedamotionforsummaryjudgmentinanactionfiledby
plaintiffs,apatientandherhusband,forclaimsofnegligence,
nuisance,misrepresentation,violationsoftheConnecticutUnfair
TradePracticesAct(CUTPA),specifically,Conn.Gen.Stat.
19a491and2074p,andlossofconsortium.Theministryclaimed
thatthepatientwaivedherclaimsinarelease.
ii. Theministryadmittedthepatientintoanalcoholanddrug
addictionprogram.Duringtheprogram,thepatientslippedandfell
onaslipperyfloor.Sheallegedthattheministrywasnegligentin
maintainingitpremises,thatitmaintainedanuisance,andthatthe

ministry'sagentfraudulentlymisrepresentedthattheministrywas
adrugtreatmentcenterlicensedbytheStateofConnecticutand
thathewascertifiedasaConnecticutsubstanceabusecounselorin
violationofCUTPA.Theministryanditsagentpledcontributory
negligenceandclaimedthatthepatientwaivedherrighttobring
anyclaimbysigningageneralrelease.Thepatientclaimedthat
shedidnotremembersigningthereleaseandthatshewasina
diminishedcapacityifshedidsignone.

XII.)

c. Issue
i. Is a contract voidable when one party did not have the mental
capacity to enter into a contract when she was under the influence
of drugs and alcohol?
d. Holding
i. It is an issue of material fact that is for the jury to decide.
ii. Summary judgment on behalf of defendant is denied.
e. Reasoning
i. Thecourtheldthattherewereseveralissuesofmaterialfactfora
jurytodeterminesuchaswhetherthepatientactuallysignedthe
generalrelease,andwhethershesignedthereleasefreelyorwith
fullcomprehension.
ii. Specifically,thecourtheldthatthepatient'saffidavitraiseda
genuineissueofmaterialfactastoherassenttothegeneralrelease
andwhethersheevenhadthementalcapacitytoexecuteit.
iii. RestatementSection16
Adjudicatedincompetencyistheonlyonethatmakesacontractvoidfrom
inception,notvoidable.
Mistake(Beliefnotinaccordwiththefacts)
(RescissionorReformation)
I.)

Mistake
a. Restatementsections151158
b. UCCsections2313,2314

II.)

BoiseJuniorCollegeDistrictv.MattefsConstructionCo.
a. Name&ProceduralHistory
i. SupremecourtofIdaho,1969
ii. 92Idaho757
b. Facts
i. MattefsConstructionCo.(Mattefs)(defendant)submitteda
bidof$141,048foraconstructioncontractwithBoise
JuniorCollegeDistrict(Boise).Boiseexpectedtopay
$150,000fortheconstructionproject.Mattefsbid
containedacustomarybidbondinvolvingapromisetopay

thedifferencebetweenitsbidandthenexthigherbid
actuallyacceptedbyBoiseifMattefsrefusedtocontract
withBoiseforsomereason.UnbeknownsttoMattefsatthe
time,itsbidcontainedaclericalerrorwhich,ifcorrected,
wouldhavemadeMattefscostsaround$151,000rather
than$141,048.Boiseultimatelyawardedthecontractto
Mattefs,butMattefsrefusedtosignthecontract.Boise
awardedthecontracttothenexthigherbidder,Cainand
Hardy,Inc.,whobid$148,915.Boisethenbroughtsuit
againstMattefsinIdahostatecourtseekingtorecoverthe
differenceinpricebetweenMattefsbidandCainand
Hardy,Inc.sbid.Mattefssoughttheequitableremedyof
rescissionbasedonitsclericalerror.Thetrialcourt
permittedrescissionforMattefs,andBoiseappealed.

c. Issue
i. Canabidderrescindabidaftertherewasamaterial
clericalmistake,tothedetrimentofthecontractor?
d. Holding
i. Yes.
e. Reasoning
i. Thecourtsaysthatonewhoerrsinpreparingabidfora
publicworkscontractisentitledtotheequitablereliefof
rescissionifhecanestablish:
1. Themistakeismaterial
2. Enforcementofacontractpursuanttothetermsof
theerroneousbidwouldbeunconscionable
3. Themistakedidnotresultformviolationofa
positivelegaldutyorfromculpablenegligence.
4. Thepartytowhomthebidissubmittedwillnotbe
prejudicedexceptbythelossofhisbargain
5. Promptnoticeisgiven.
ii. Thecourtsaysthatthemistakemadebythebidderwas
materialmistakebecauseitmadeupalargeenough
percentageofthebid.Thecourtsdidntwanttobetoo
harshinwhatpercentagecountsasmaterial.
iii. Thecourtsaysthatthemistakedidrenderthecontract
unconscionablebecauseitwouldleadtoabiglossforthe
bidders(atleast10,000.00).
iv. Thecourtsaysthatthebidderwasnotactinginagrossly
negligentway,nordidheviolatealegalduty.
1. Itsnotagrosslynegligentmistakebecausethese
thingssometimesoccurintheconductofa
reasonableandcautiousbusinessman.

III.)

IV.)

v. Thecourtssaidthatthiswouldnotputasubstantial
hardshipontheschooldistrict.
1. Theygottheworkdoneforlessthan$150,000so
therewasnoharm.
BeachcomberCoins,Incv.RonBoskett
a. Name&ProceduralHistory
i. SuperiorCourtofNewJersey,AppellateDivision,1979
ii. 166N.J.Super.442
b. Facts
i. Plaintiffisacoindealer,andtheyboughtthecoinfromthe
defendant.
ii. Thecoinwasactuallyacounterfeit.
iii. Thecoinshoppaid$500forthecoin
iv. BeachcomberCoins(P),aretailcoindealer,purchased
fromBoskett(D)acointhatbothpartiesbelievedtobea
valuable1916DenverDime.AttrialBeachcombershowed
thatthecoinwascounterfeit.Boskettallegedthatthefake
coinwasnotthesamecoinBosketthadsold.Thetrialcourt
enteredjudgmentforD,holdingthataccordingtotrade
industrypracticesthepurchasingpartyboretheriskof
genuineness.
c. Issue
i. Doesthenegligentfailureofapartytodiscoverfacts
regardingwhichbothpartiesaremistakenpreclude
rescissionorreformationofthecontract?
d. Holding
i. No.
ii. Reversed.
e. Reasoning
i. Thenegligentfailureofapartytodiscoverfactsregarding
whichbothpartiesaremistakendoesnotpreclude
rescissionorreformationofthecontract.
ii. Thetrialjudgesuseofcustomoftradeisnotsupportedby
theevidence.Thefactthatadealerwouldcheckthecoin
undermagnificationandthensendittotheAmerican
NumismaticCertificationservicedoesnotestablishthat
practiceasausageoftrade.Thecourtheldthattradeusage
mustbesoprevalentastowarranttheconclusionthatthe
partiescontractedwithreferencetoandintendedtheir
agreementtobegovernedbyit.
iii. Thiswasamutualmistakeoffact.
T.C.Sherwoodv.HiramWalker
a. Name&ProceduralHistory
i. SupremecourtofMichigan,1887

ii. 66Mich.568
iii. Trialcourtfoundforplaintiffsandenforcedthecontract.
b. Facts
i. Plaintiffsdecidedtobuyacowfromdefendantstobeused
asmeat.
ii. Thedefendantsagreedtosellthecowthinkingthatitwas
barrenandcouldnotbreed.
iii. Plaintifftalkedtothedefendantsbytelephone,andthe
termsofthesalewereagreedupon.
iv. Whentheplaintiffswenttopickupthecow,anemployee
ofthedefendanttoldhimthathewasinstructednottogive
theplaintiffsthecow.
v. Itturnedoutthecowwasactuallypregnantwithacalf,and
theplaintiffdidnotwanttosellitforthecontractprice
sinceshewasworthmuchmore.
vi. Thedefendant,soonafter,offeredthedefendant$80
dollars,buttheplaintiffrefusedtoacceptthemoneyorsell
thecow.
c. Issue
i. Isacontractmadeonamutualmistakestillenforceable?
d. Holding
i. No.
ii. Reverses.
e. Reasoning
i. Thiscourtfoundthatacontractmayberescindedifitwas
madeinrelianceuponamutualmistakeoffact.
ii. Partieswouldnothavemadethecontractiftheyhadknown
thatthecowwasabreeder.Thismistakeaffectedthe
substanceofthewholeconsiderationanditmustbe
consideredthattherewasnocontracttosellthecowasshe
actuallywas.
iii. Themistakewasmaterialtothevalueofthecow.If,for
example,thecowwasthewrongcolorormissinganear,
thatwouldntaffectthevalueofthecow,soitwouldnt
makethecontractvoid.
f. Rule
i. Mutualmistakeofmaterialfactwouldmakethecontract
unenforceablebecauseitsnotacontract.
g. Dissent
i. JusticeSherwooddoesntthinkthedifferencebetweena
barrencowandabreederwasadifferenceinsubstance,but
onlyofquality.
ii. Racinghorseanalogy.

iii. Materialfactsofthecontractwerenotchangedbecauseit
wasstillthesamehorse.
h. RestatementSection151158,UCCSection2213,214
V.)

LenaweeCountyBoardofHealthv.WilliamandMarthaMesserly
a. Name&ProceduralHistory
i. SupremeCourtofMichigan,1982
ii. 417Mich.17
iii. LowercourtfoundPickleshadnocauseofaction,
foreclosureorderedagainstthePickles.
iv. CourtofAppealsreversed,foundthePicklesdidhavea
causeofaction.
v. MISupremeCourtreversed,foundthePickleshadno
causeofaction,foreclosureorderedagainstthePickles.
b. Facts
i. ThePicklesboughtatractoflandcontaininganapartment
buildingfromtheMesserlyswiththeintentionofusingthe
landforrentalincome.
ii. BeforetheMesserlysownedtheproperty,theprevious
ownerinstalledaseptictankwithoutapermitandin
violationofthehealthcode.NeithertheMesserlysorthe
Picklesknewanythingaboutthis.
iii. Thecontractcontainedan"asis"clause.
iv. Afterthesale,thePicklesnoticedrawsewageonthe
ground.Thehealthboardcondemnedtheland.
v. ThePicklessoughtrescissionofthecontractundermutual
mistakeandmisrepresentation.TheMesserlyssuedfor
foreclosure.
c. Issue
i. Howshouldacourtdecidecasesofmistakebetweentwo
equallyinnocentparties?
d. Holding

i. Incasesofmistakebytwoequallyinnocentparties,the
courtshoulddeterminewhichblamelesspartyshould
assumethelossresultingfromthemisapprehensionthey
shared.
e. Reasoning
i. Thepartiesinthiscasewerelaboringunderamutual
mistakeoffactwhichmateriallyaffectedtheessenceofthe
contractualconsideration.
ii. Thebestapproachtodecidecasesofmutualmistakeisby
thecourtsdoingcasebycaseanalysiswherebyrescission
isindicatedwhenthemistakenbeliefrelatestoabasic
assumptionofthepartiesuponwhichthecontractismade.
1. Acourtneednotgrantrescissionineverycasein
whichthemutualmistakerelatestoabasic
assumptionandmateriallyaffectstheagreed
performanceoftheparties.
iii. Rescissionisnotavailable,however,torelieveapartywho
hasassumedtheriskoflossinconnectionwiththemistake.
iv. Thecourtshouldlooktowhetherthepartieshaveagreedto
theallocationoftheriskbetweenthemselves.Throughthe
"asis"clause,theriskwasallocatedtothebuyers.
VI.)

OneBeaconAmericaInsuranceCo.v.TravelersIndemnityCo.of
Illinois
a. Name&ProceduralHistory
i. UnitedStatesCourtofAppeals,FirstCircuit,2006
ii. 465F.3d38
iii. Plaintiffinsurersoughttorecoverunderamotorvehicle
liabilitypolicythatdefendantinsurershadissuedtoa
vehicleleasingagency.Citingdefendants'policy,plaintiff
soughtreimbursementofthepolicy'slimit.Defendants
arguedmutualmistakeandaskedtohavethepolicy
reformed.TheU.S.DistrictCourtfortheDistrictof
Massachusettsrefusedtoreformthepolicyandordered
defendantstopay.Defendantsappealed.

b. Facts
i. OneBeaconAmericanInsuranceCo.(OneBeacon)
(plaintiff)isavehicleliabilityinsurancecompany.
OneBeaconprovidedupto$1,000,000invehicleliability
insurancecoverageonrequesttoLeasingAssociates,Inc.
andLAITrust(collectivelyLAI).OneBeaconsinsurance
agreementwithLAIdefinedaninsuredasyouforany
coveredauto,andanyoneelsewhileusingwithyour
permissionacoveredautoyouown.LAIisavehicle
leasingcompanythatleasescommercialvehiclestoother
businesses.Capform,Inc.(Capform)isonesuchbusiness
thatusedLAIsvehicles.WhenLAIentereditsleasing
agreementwithCapform,LAIprovidedtheoptionto
Capformofeitherapplyingforvehicleliabilityinsurance
fromOneBeacon,orprovidingitsownindependentfull
coveragevehicleliabilityinsurancepolicyfromanother
insurancecarrier.Thisgeneralpolicy,whichwasavailable
toallLAIscustomers,wasdescribedinawritten
AgreementforJudgmentexecutedbetweenLAIand
OneBeacon.Capformchosenottoapplyforinsurancefrom
OneBeaconwhenitleasedvehiclesfromLAI.Rather,
Capformobtaineditsownfullcoveragevehicleliability
insurancepolicyfromTravelersIndemnityCompanyof
Illinois(Travelers)(defendant).TheTravelerspolicy
coveredanydamagesincurredbyCapformwhileoperating
avehicleleasedfromLAI.WhiledrivinganLAIowned
vehicle,oneofCapformsemployeesstruckandseverely
injuredapedestrian.Thepedestrianreacheda$5,000,000
settlementwithCapform,whichwastobepaidby
Travelers.Afterthesettlement,Travelersdiscovered
OneBeaconspolicyprovidinginsurancecoverageto
vehiclesleasedfromLAI.Travelerssought$1,000,000
fromOneBeaconaspaymentforCapformsdamages.
OneBeaconfiledapetitionforadeclaratoryjudgment
againstTravelersinfederaldistrictcourt.OneBeacon
arguedthatevenifthelanguageofitsinsurancepolicy
agreementwithLAIcouldbeinterpretedasproviding
coverageeventoLAIleasedvehiclescarryingindependent
insurancepolicies,thisresultwasnottheintentofeither
OneBeaconorLAIinmakingtheagreement,andthusthe
agreementshouldbereformed.BothOneBeaconand
Travelersfiledmotionsforsummaryjudgment.Thetrial
courtgrantedTravelersmotionforsummaryjudgment,
andOneBeaconappealed.

VII.)

c. Issue
d. Holding
i. Districtcourtsummaryjudgmentreversed
ii. SummaryjudgmentforOneBeaconprovidingreformation
isconsistentwithruling.
iii. Thecourtreversedthedistrictcourt'ssummaryjudgment
forplaintiff.Thedistrictcourtwasdirectedtoenter
summaryjudgmentfordefendants,providingfor
reformationofthepolicyconsistentwiththecourt'sruling.
iv.
e. Reasoning
i. Thereviewingcourtagreed.
ii. Mutualmistakesjustifyingcontractreformationcould
resultsimplyfrominattention,andsuchwasthemistake
urgedbydefendants.
iii. Theevidence,includingtheleaseagreementandthecourse
ofconduct,wascompellingthattheinsured/leasingagency
intendedthatitsowninsurancecoverageforaparticular
vehiclewouldterminateoncethevehiclewasleased,and
defendants'coverageappliedonlyifthelesseespecifically
optedforit.
iv. Defendantsmettheirburdentoprovidefull,clear,and
decisiveproofofmistake,andtherewerenoequitable
barrierstoreformation.
f. Rule
i. REFORMATION:fixesmistakesinwriting,butdoesnt
changetheagreement.Thiscourtsaysthatacontractwill
reformonlywhen(1)thewritingdifferedfromtheactual
intentionsharedbythepartiesand;(2)Noconsiderationof
equityjustifiespreventingreformation.
Ayerv.WesternUnionTelegraphCo.
a. Name&ProceduralHistory
i. SupremeJudicialCourtofMaine,1887
ii. 79Me.493
b. Facts
i. ThePlaintiff,Ayer(Plaintiff),deliveredamessagetothe
Defendant,WesternUnionTelegraphCo.(Defendant),
whichwastobetransmittedtoathirdparty.Plaintiffhad
enteredintoacontractwiththethirdpartyforthesaleof
goodsat$2.10,butDefendanttransmittedtheofferat
$2.00.Whenthethirdpartyacceptedtheoffer,heaccepted
andenforceditat$2.00.Plaintiffbroughtsuitagainst
Defendantforthedifferenceinprofit,basedonthemistake
madebyDefendant.

Attrialofthismatter,theDefendantofferednoevidence,
whichcreatedapresumptionthatthemistakeresultedfrom
itsfaultytransmission.Plaintiffcontendedthatitshould
receivethedifferenceintheamountofthecontractto
whichitwasforcedtoagreeandtheamountitofferedvia
Defendant.Defendantcontendedthat,initsmistake,itonly
owedPlaintiffthereturnofitstelegraphfees.
c. Issue
i. ThiscasequestionstheextentofliabilityofaDefendant,
notinprivitytoacontract,whenhisfaultcausesmistake
betweenthepartiesandalosstooneparty.
d. Holding
i. Foundfortheplaintiff
e. Reasoning
i. TheCourtheldthePlaintiffcouldrecoverthedifference
causedbythemistakeoftheDefendant.
WhileWesternUnionwasnotapartytothecontract
betweenPlaintiffandthethirdpartypurchaser,itsactions
causePlaintifftobeheldtotermstowhichitdidnotagree.
BecausePlaintiffalsohadanagreementwithWestern
Uniontotransmititsoffer,itwasnotfarfetchedforthe
courttoholditliableforthedamagescausedbyitserrorin
transmission.
ii. BecauseDefendant,inthecourseofitsdealingswith
Plaintiff,failedtoperformasexpected(i.e.transmitthe
correctmessage),Plaintiffwasinjuredanditholds
equitablethatDefendantshouldpayforsuchmistake.
iii. Asaconsequenceoftheirbreachofdutytosendthings
accurately,theyreresponsibleforthelosstotheplaintiff.
1. Thereareincidentalandconsequentialdamages.
Thiswasconsequentialdamage.
FraudandNondisclosure
I.)

PeterLaidlawv.HectorM.Organ
a. Name&ProceduralHistory
i. SupremeCourtoftheUnitedStates,1817
ii. 15U.S.178
iii. LowercourtfoundforP.
iv. SCOTUSreversed,juryshouldhavedecidedtheissueofwhether
anyimpositionwasplacedbythebuyerontheseller.

b. Facts
i. Organ(P)enteredintoacontractwithLaidlaw(D)tobuy111
hogheadsoftobaccofor$7.5k.
ii. ThesaletookplacethedayaftertheWarof1812endedandthe
blockadeofNewOrleanswasdiscontinued.
iii. Pdiscoveredthatmorningbeforethetransactionthattheblockade
hadendedsothepriceoftobaccowouldincreasewhiletheDdid
notknow.
iv. Beforethetransaction,DaskedPiftherewasanynewswhich
mightincreasethepriceoftobacco.Premainedsilent.
v. Afterthesale,Dheardthenewsandtookbackthetobaccohesold
P.
vi. PsuedDtoenforcethecontract.
c. Issue
i. Ifthebuyerinanagreementhasknowledgeofanyexternalfactors
thatmightaffectthevalueofthegoodsintheexchange,isthe
buyerrequiredtosharethisknowledgewiththeseller?
d. Holding
i. Abuyerisnotrequiredtoshareknowledgeofanyexternalfactors
thatmightaffectthevalueofthegoodsinanexchangewiththe
sellerofthosegoodsaslongasthereisnoimpositionofoneparty
ontheother.
e. Reasoning
i. Itwouldbehardtodetermineifthemeansofintelligencewere
equallyaccessibletobothparties.
ii. Eachpartyshouldtakecarenottosayordoanythingthatwould
imposeupontheother.
iii. Lawandethicsareseparatethemaximcaveatemptorwouldnot
bepartofthelawiftheywereboundtogether.
II.)

AudreyE.Vokesv.ArthurMurray,Inc.

a. Name&ProceduralHistory
i. DistrictCourtofAppealofFlorida,SecondDistrict,1968
ii. 212So.2d906
b. Facts
i. Vokes(P)decidedtobecomeanaccomplishedprofessionaldancer
atage51.ArthurMurray(D)wasthefranchisorofArthurMurray
DanceSchools.VokesallegedthatArthurMurraysemployees
usedflattery,cajolery,andawardstoleadhertobelievethatshe
wasapromisingstudentcapableofacareerasaprofessional
dancer.ArthurMurrayconvincedhertosignupfor$31,000in
dancelessons.
ii. Vokesbroughtsuittocanceltheremainderofthe2,300hoursof
lessonsforwhichshehadcontracted.Inhercomplaintshealleged
thatshehadattainedlittleornoskillasadancerandhadno
aptitude,thatArthurMurraysemployeeshadpurposefully
misrepresentedherskillsandtakenunconscionableadvantageof
her,andthatshehadrelieduponArthurMurraysemployees
superiorknowledgetoassessherability.Dcontendedthatits
employeesrepresentationswerestatementsofopinionand
thereforenotactionable.Psfourthamendedcomplaintwas
dismissedwithprejudiceandPappealed.
c. Issue
i. 1)Underwhatcircumstancesmayastatementofopinionberelied
uponasfact?2)Underwhatcircumstanceswilla
misrepresentationastovalueamounttofraud?
d. Holding
i. 1)Statementsmadebypartieshavingsuperiorknowledgeto
partieswithoutsuchknowledgecanberegardedasstatementsof
fact.2)Inordertoamounttofraud,arepresentationastovalue
mustbecoupledwithsomeuntrueormisleadingstatementoffact
usedtoreinforcetheopinion.
e. Reasoning
i. Generallyforamisrepresentationtobeactionableitmustbeoneof
factratherthanofopinion.Thisgeneralruledoesnotapply
howeverwherethereisafiduciaryrelationshipbetweenthe
parties,orwheretherehasbeensomeartificeortrickemployedby
thepartymakingthemisrepresentation,orwherethepartiesdonot
ingeneraldealatarmslength,orwherethepersontowhomthe
representationismadedoesnothaveanequalopportunityto
becomeapprisedofthetruthorfalsityofthefactrepresented.A

III.)

IV.)

V.)

VI.)

statementofapartyhavingsuperiorknowledgemayberegarded
asastatementoffacteventhoughitwouldbeconsideredan
opinionifthepartiesweredealingonequalterms.
ii. Evenwhenapartytoatransactionowesnodutytodisclosefacts
withinhisknowledgeortoanswerinquiriesrespectingsuchfacts,
theruleisthatifheundertakestodosohemustdisclosethewhole
truth.Dwasinapositionofsuperiorknowledgetoproperly
evaluatewhetherPinfacthadrealpotential.Thecourtheldthatby
virtueofthesheervolumeofflatteryandthevolumeofpurchases,
ArthurMurrayowedadutytobehonestwithVokes.
CatherineC.Mitchillv.CharlesLath
a. Name&ProceduralHistory
b. Facts
c. Issue
d. Holding
e. Reasoning
RebeccaD.Mastersonv.LuE.Sine
a. Name&ProceduralHistory
b. Facts
c. Issue
d. Holding
e. Reasoning
AlaskaNortnernDevelopmentInc.v.AlyeskaPipelineServiceCo.
a. Name&ProceduralHistory
b. Facts
c. Issue
d. Holding
e. Reasoning
FrigalimentImportingCo.v.B.N.S.InternationalSalesCorp.
a. Name&ProceduralHistory
i. UnitedStatesDistrictCourt,S.D.NewYork,1960
ii. 190F.Supp.116
b. Facts
i. BNSInternationalSalesCorp.(D)enteredintotwocontractsto
sellchickentoFrigaliment(P).Whentheinitialshipmentarrived
inSwitzerland,Frigalimentfoundthattheheavierbirdswere
stewingchickensorfowl,notyoungchickenssuitableforbroiling
andfrying.BNSInternationalbelievedthatanytypeofchicken
wouldmeetthecontractspecificationsregardingweightand
quantity,includingstewingchickens.Frigalimentontheother
handbelievedthatchickenmeantayoungchicken.Frigaliment
broughtthislawsuitforbreachofwarrantyonthegroundsthat
BNSInternationaldeliveredgoodsthatdidnotmeetthe
specificationsofthecontract.

ii. Thisisabreachofwarrantycase.
c. Issue
i. Doesapartywhoseekstointerpretacontractsordinarytermsina
narrowersensethanisusedineverydaytradehavetheburdenof
prooftoestablishthatmeaning?
ii. Isparolevidenceadmissibletoshowthemeaningofanambiguous
termanditsusageinacontract?
d. Holding
i. Yes.Apartywhoseekstointerpretacontractsordinarytermsina
narrowersensethanisusedineverydaytradehastheburdenof
prooftoestablishthatmeaning.
ii. Yes.Parolevidenceisadmissibletoshowthemeaningofan
ambiguoustermanditsusageinacontract.
e. Reasoning
i. Thecourtheldthatthemakingofacontractdependsnotonthe
agreementoftwomindsinoneintention,butontheagreementof
twosetsofexternalsignsnotonthepartieshavingmeantthe
samethingbutontheirhavingsaidthesamething.Theword
chickenstandingaloneisanambiguousword.Thecourtmustfirst
turntowhetherthecontractitselfoffersanyaidtoits
interpretation.
ii. BNSInternationalnotesthatthecontractcallednotsimplyfor
chickenbutforUSFreshFrozenChicken,GradeA,Government
Inspected.Itcontendsthereforethatthecontractincorporatedby
referencetheDepartmentofAgriculturesregulations,whichfavor
itsinterpretation.
iii. Regardingtheparolevidenceissue,thecourtfirstexaminedthe
negotiations.ThecommunicationsbetweenFrigalimentandBNS
InternationalwereinGermanbuttheyusedtheEnglishwordfor
chicken.Whenaskedwhatkindofchickensitwanted,BNS
Internationalrepliedanychickens.Frigalimentclaimedthatthis
wasdonebecauseitunderstoodchickentomeanyoungchicken
whereastheGermanwordHuhnincludedbothbroilersand
stewingchicken,andthatBNSInternationalwouldhave
understoodthedistinctionbecauseitsofficerswerethoroughly
conversantwithGerman.
iv. ThecourtrejectedthisargumentandheldthatFrigalimentfailedto
meetitsburdenofproofonthemeaningofthewordchicken.

VII.)

v. UCCsection2615,RestatementSection152,266
UnitedStatesv.WegmaticGroup
a. Name&ProceduralHistory
i. UnitedStatesCourtofAppeals,SecondCircuit,1996
ii. 360F.2d674
b. Facts
i. TheFederalReserveBoard(TheBoard)(plaintiff)invited
manufacturerstosubmitproposalsforcomputingsystems.Early
deliverywasidentifiedasakeyconsiderationinselectingthebest
proposal.WegematicCorp.(Wegematic)(defendant)submitteda
detailedproposalforanewcomputer,whichitclaimedwas"a
trulyrevolutionarysystemutilizingallofthelatesttechnical
advances,"andoffereddeliveryninemonthsfromthedatethe
contractorpurchaseorderwasreceived.TheBoardorderedthe
computersandWegematicaccepted.Wegematicsubsequently
twicedelayedshipmentandultimatelycancelledthecontract,
citingengineeringdifficulties.TheBoardfiledsuit,andthecourt
awardeditliquidateddamagesunderthecontract,damagesforthe
excesscostofprocuringreplacementequipment,andfor
preparatoryexpenses.Wegematicappealed.
c. Issue
i. Whetherdifficultiesinengineering,whichpreventstimely
delivery,constitutecommercialimpracticabilityexcusing
performance?
d. Holding
i. No.Judgmentisaffirmed.
e. Reasoning
i. Commercialimpracticabilitythatwouldexcuseperformancedoes
notincludebasicengineeringdifficultiesthatpreventtimely
delivery.IfthecourtadoptedDefendantsargumentthatwould
meanthatalthoughapurchasermakesabindingchoicebecauseof
thesellersrepresentation,thesellerisfreetoexpresswhatare
aspirationsandtakeachanceonmereprobabilitiesoffulfillment
withoutanyriskofliability.InsteadDefendantcouldhavelimited
hisliabilitythroughexculpatorylanguagebutnotbyfailingto
followthroughwithhisrepresentations.
Defendanthasshownthatwithadditionaltimeandmoneyhecould
havedevelopedthesystem.Whatdidbecomeimpossiblewas
deliveryontime.Therefore,theevidencedemonstratesthattrue
impracticabilityisfarfromcompellingandtheDefendantcannot
usethedefensetoexcusehisperformance.
ii. Ifanessentialbutintangibleaspectofthecontractbecomes
impossible,thecontractmaybedischarged,justaswherethe
subjectmatterwasdestroyed.Ifcertainspecificationsaredrawnup

bythevendoranditturnsoutthatthestateoftheartisnot
sufficienttoenablethevendortomeetthespecificationsheis
unlikelytobeexcusedfromperforming.
iii. Liquidateddamageprovision:aremedythatisreasonably
computed;calculatingwhatharmwouldbedowntheroad.Itisfair
andreasonable,butitisnotmeanttopunishorpenalize.
Impractibility
VIII.) KaiserFrancisOilCo.v.ProducersGasCo.
a. Name&ProceduralHistory
i. UnitedStatesCourtofAppeals,TenthCircuit,1989
ii. 870F.2d563
iii. TrialcourtfoundforthePlaintiffs
b. Facts
i. KaiserFrancisOilCo.(Kaiser)(plaintiff)isasellerofnatural
gasoline.ProducersGasCo.(PGC)(defendant)isapurchaserof
gasoline.KaiserenteredintotwocontractswithPGCforthesale
ofgasolinetakenfromwellsinwhichKaiserhadapercentage
interest.Eachcontractcontainedaforcemajeureclauselimiting
theliabilityofeitherpartytoperformunderthecontractifan
unforeseeneventbeyondthecontrolofthepartiesmade
performanceimpossible.Manyqualifyingforcemajeureevents
werespecificallystatedinthecontracts,includingactsofGod,
strikes,governmentalorregulatoryorders,andtheinabilityto
securelaborormaterials,amongothers.AfterKaiserandPGC
enteredthecontract,theresalepriceofnaturalgasolinedeclined.
PGCdidnotpayKaiserforgastakenfromKaiserswellsonthe
theorythatitwaspurchasingthegasfromKaiserscoownersat
reducedprices.PGCalsodeclinedtopayKaiserfortheminimum
contractquantitiesofthegas,whichwerenottaken.Kaiser
broughtsuitinUnitedStatesdistrictcourtseekingtoenforcethe
contractwithPGC.PGCraisedseveraldefenses,includingthatit
wasexcludedfromperformanceduetothecontractsforce
majeureclauses.PGCarguedthatadeclineintheresalepriceof
gasolineamountedtoaqualifyingforcemajeure.Thedistrict
courtgrantedsummaryjudgmentforKaiser,andPGCappealed.
Onappeal,PGCmadeseveralarguments,includingthattheforce
majeureprovisioninthecontractsextendstoapartiallackof
demandforgasolinecausedbymarketforces.
c. Issue
i. Canachangeinresalepriceconstitutevoidingacontract?
d. Holding
i. No.

IX.)

ii. Judgmentaffirmed
e. Reasoning
i. Neitheradeclineindemandorinabilitytosellgasatorabovethe
contractpriceconstitutesamajeureevent,whichwouldprovide
relieffromthetakeorpayobligationsunderthecontract.Ifthe
forcemajeureprovisionextendedtolackofdemandforgasand
providedrelieffromthetakeorpayobligation,Defendantcould
beexpectedtotakeonlywhenthedemandforgasresultingina
resalepriceabovethecontractprice.Thus,Plaintiffwouldnotbe
abletosellgasduringadropindemandandwouldnothaveany
abilitytosellinothermarkets.
Thepurposeofatakeorpayprovisionistoapportiontherisksof
gasproductionandsalesbetweenthebuyerandseller.Sellerhas
riskofproductionandtocompensateforthatthebuyeragreesto
taeaminimumquantityofgas.Thebuyerbearstheriskofmarket
demand.
ii. Atakeorpayprovisionstatesthatasellershallsellanddeliver
andbuyershallpurchaseandreceivefromsellerforavailablebut
nottakenquantity.Forcemajeureincludesactsofgod,strikes,
lockouts,industrialdisputes,civildisturbances,arrests,wars,riots,
fires,explosions,breakeroraccidenttomachinery,freezingof
wells,inabilitytoobtaininterestsinrealty,makingofrepairs,and
partialorentirefailureofgassupplyordemandoverwhichneither
sellernorbuyerhavecontroloranyothercause.
WashingtonStateHopProducers,Inc.v.GoschieFarms,Inc.
a. Name&ProceduralHistory
i. SupremeCourtofWashington,1989
ii. 112Wash.2d694
iii. PlaintiffWashingtonStateHopProducers,Inc.broughtanaction
againstDefendantGoschieFarms,Inc.toenforcethecontract.
PlaintiffappealsfromajudgmentoftheCourtofAppeals,which
affirmedthetrialcourtsdecisiontograntsummaryjudgmentto
Defendant.
b. Facts
i. From1965until1985,theUnitedStatesDepartmentofAgriculture
(USDA)requiredhopgrowerstoobtainFederalallotmentsin
ordertomarkettheirhops;thiswascalledahopbase.Hopbase
becameascarce,expensivecommodityandasecondarymarket
developedfortrading.Plaintiffwasorganizedin1979toacquire,
leaseandsellfederalhopbase.Sincethesystemrestrictedentry,
theUSDAconsideredmakingvariouseffortstochangeit,butby
June1985substantialchangesinthemarketingorderwerenot
expected.OnMay31,1985,Plaintiffmailedinvitationstobidon
twopoolsofhopbaseforsale.OnJune21,1985,Plaintiffmailed

noticesofawardtobidsinthe$0.5to$0.76range,including
Defendantandotherrespondents.OnJune27,1985,theUSDA
terminatedthemarketingordereffectiveDecember31,1985.
Defendantrefusedtoperformonthecontract.Plaintiffwasableto
sell50%ofoneofthepoolsforpriceof$0.7perpoundcompared
withearliersuccessfulbidsof$0.6perpound.Plaintiffbroughtan
actiontoenforcethecontracts.Thetrialcourtgrantedsummary
judgmenttotheDefendant.TheCourtofAppealsaffirmedand
Plaintiffappealed.
c. Issue
i. WhetherDefendantisentitledtoreliefunderthedoctrineof
frustrationofpurpose?
d. Holding
i. Yes,affirmed.
ii. Acontractmayberescindedunderthedoctrineoffrustrationof
purposebydeterminingthattheprincipalpurposeofthepartyto
enterintothecontractwasfrustratedwithoutfaultofeitherofthe
contractingparties.
e. Reasoning
i. TheRestatementSecondofContractsSection265statesthatthe
doctrineofdischargebysuperveningfrustrationoccurswherea
partysprinciplepurposeissubstantiallyfrustratedwithouthis
faultbytheoccurrenceofaneventthenonoccurrenceofwhich
wasabasicassumptiononwhichthecontractwasmade,andthus
hisremainingdutytorenderperformanceisdischargedunlessthe
languageorthecircumstancesindicatethecontrary.TheStateof
WashingtonhasnotpreviouslyadoptedtheRestatementSeconds
doctrineofsuperveningfrustration.
Undertheformula,thepurposethatisfrustratedmustbethe
principlepurposeformakingthecontract.Here,theprinciple
purposeofthiscontractwastopurchaseahopallotmentbase
provideandcreatedpursuanttoahopmarketingagreement.Since
Defendantsoughttopurchasehopbase,theinferenceisthatfuture
marketaccesswastheprinciplepurposeforenteringintothe
contract.Itisclearthatthispurposewasfrustratedduetothe
declineinvalueofhopallotments.However,theirrelevanceof
controlofhopbaseafter1985thatsuppliestherealfrustrationof
purpose.
Further,PlaintiffheredidnotallocatetherisktoDefendant
growersandDefendantdidnotincludeanyallocatinglanguagein
itsacceptance.Theterminationherewasunforeseeable.The
RestatementSecondstatesthatforeseeabilityismerelyarelevant
factorindeterminingwhethernonoccurrenceofthefrustrating
eventwasabasicassumptionofthefrustratedpartyinenteringthe

transaction.However,ifthebasicassumptionisfound,asitis
here,theissueofforseeabilitybecomesirrelevant.Thefactthatit
wasnotforeseeabledoesnotarguethecontraryconclusion.The
languagethatsuggeststhatunforseeabilityisaprerequisiteof
superveningfrustrationdoesnotapplyinthiscase.Forseeabilityof
apossiblefrustratingeventismeaningfulonlywheretheparty
seekingreliefcouldhavecontrolledcouldhavecontrolledthe
languageofthecontracttoallocatetherisk.Here,exclusive
controlofthecontractwasinthehandsofPlaintiff,andPlaintiff
didnotdoallocatesuchrisk.
III.

AmericanMechanicalCorp.v.UnionMachineCo.ofLynn,Inc.
a. Name&ProceduralHistory
i. AppealsCourtofMassachusetts,1985
ii. 21Mass.App.Ct.97
b. Facts
i. PlaintiffandDefendedenteredintoacontracttosellPlaintiffs
equipmentandrealestateandequipmentfor$135,000.00.Atthe
timeofthecontract,DefendantknewthatPlaintiffwashaving
financialproblems,andthatPlaintiffsmortgager,Saugus,would
probablyforecloseonthemifthesaledidnotgothrough.
Defendantrepudiatedthecontract.Saugusheldaforeclosuresale
whenSaugussoldtheequipmentfor$35,000.00andtherealestate
for$55,000.00.Inthesuit,following,thetrialcourtentereda
judgmentforPlaintiff,butonlygrantednominaldamages.
c. Issue
i. Wasthetrialcourtcorrectinassigningonlynominaldamages?
d. Holding
i. No.
ii. ThiscourtawardsPlaintiff$45,000.00indamages
e. Reasoning
i. Thetrialcourtassumedthat,becausetheforeclosuresalewas
properlydone,thatfairmarketvaluewasobtainedfortheproperty.
ii. Thetraditionalruleforrepudiationforacontractforsaleofreal
estateisthecontractpriceminusfairmarketvalue.Thetrialjudge
didnotbelievethepriceobtainedattheforeclosuresale,seven
monthslater,representedthefairmarketvalueatthetimeofthe
contract.
iii. Inthiscase,itisclearthatifthesaledidnotgothrough,themost
likelyresultwouldbeaforeclosuresale.Defendantknewthisat
thetimeofthecontract.
iv. DefendantarguesthatPlaintiffdidnotputtherealestateand
equipmentbackonthemarket.IfitwerepossibleforPlaintiffto

getabetterprice,Plaintiffsdamageswouldbereduced.The
burdenofproofisonDefendanttoprovethat,butDefendanthas
not.
v. ThefactthatDefendantknewthelikelyresultofthebreach,led
thecourttoawardPlaintiffactualdamages,whichwasthecontract
priceminusthepricePlaintiffactuallyobtainedfortherealestate
andequipment,ratherthanthefairmarketvalueoftherealestate
andequipment.
vi. Plaintiffhadadutytoavoidlossesbyreasonableeffort(mitigate
damages).CourtsaidthatthereisntevidencethatAmerican
couldvedonemuchtoavoidforeclosure.
vii. Consequentialdamagesmustbeforeseeable.
IV.

NewEraHomesCorp.v.EngelbertForster
a. Name&ProceduralHistory
i. CourtofAppealsofNewYork,1949
ii. 299N.Y.303
iii. Trialcourtandappellatedivisiongavetheplaintiff$1,500.
b. Facts
i. Plaintiff,abuilder,contractedwithDefendanttoextensivelyalter
defendantshousefor$3,075.00.Thecontractprovidedthatthe
DefendantwouldpayPlaintiffastheworkprogressed.For
example,$1,000.00wouldbepaidwhenDefendantdeliveredthe
materialsandstartedwork.WhenPlaintiffcompletedtherough
work,itwastimeforDefendanttopaythethirdinstallment.
Defendantrefusedtopaytheinstallment.Plaintiffstoppedwork
andsuedDefendantforthethirdinstallment.
c. Issue
i. WasthePlaintiffentitledtothethirdinstallmentasdamagesorto
thewholeamountofthecontractminuswhatPlaintiffdidnot
complete?
d. Holding
i. Plaintiffisentitledtothewholecontractpriceminusthevalueof
theworknotdone.
e. Reasoning
i. Eventhoughthecontractsetvariousstagesintheprojectwhere
installmentsofvariousamountsweretobepaid,itdoesnotfollow
thatthesestagesoftheprojectwereworththeinstallmenttobe
paidupontheircompletion.Forexample,$450.00dollarswasto
bepaiduponsigningthecontract.Signingthecontractwasnot
worth$450dollars.
ii. Amereinstallmentplandoesnotmakeadivisiblecontract
(separatecontracts).
f. Dissent

i. Thebehaviorofthepartiessuggeststhattheybelievedthatthe
variousstagesintheprojectwereworththeamountofthe
installments.
V.

JerryLocksv.GeraldWade
a. Name&ProceduralHistory
i. SuperiorCourtofNewJersey,AppellateDivision,1955
ii. 36N.J.Super.128
iii. LowercourtfoundforP,awarded$836($20/weekfortwoyears
lessthecostsPwouldhavepaidhadheperformedthecontractand
depreciation).
iv. NJSuperiorCourtaffirmed,awarded$836.
b. Facts
i. PleasedajukeboxtoDfor2years.Pagreedtosupplyrecordsand
replacewornoutparts.
ii. Proceedsoftheoperationweretobesharedonaspecifiedbasis,
butwithaminimumof$20/weektobepaidtoPbyD.
iii. Drepudiatedthecontractbeforetheequipmentwasinstalled.P
leasedthisequipmentsomewhereelse.Psuedfordamages.
c. Issue
i. Isalessorentitledtodamagesforbreachofcontractevenifthe
lessorisabletoleasetheproducttoanotherparty?
d. Holding
i. Gainsmadebyalessoronaleaseenteredintoafterabreachare
nottobedeductedfromhisdamagesunlessthebreachenabled
himtomakethegains.
e. Reasoning
i. Wherealessoragreedtoleaseanarticleofwhichthesupplyinthe
marketisnotlimited,thenthelawwouldbedeprivinghimofthe
benefitofhisbargainifonthebreach,itrequiredhisclaimagainst
thelesseetobereducedbytheamountheactuallydidor
reasonablycouldrealizeonarelettingofthearticle.

ii. Incaseofthebreachonthefirstlease,alessorshouldhavethe
benefitofbothbargainsandnotbelimitedtotheprofitofthe
secondofthem.
iii. Withoutthebreach,thelessorcouldhaveboughtanotherjukebox
andleaseditouttoanotherparty.Thus,hedeservesthebenefitof
twobargains.
iv. Inthecaseofrealty,however,thelessorcouldnotproperlyleaseit
outtoanotherpersonunlessthefirstleasewerebroken.Insucha
case,thelessorshouldnotbeawardedtwoprofitsmerelybecause
ofthefirstlessee'sdefault.
VI.

HydraformProductsCorp.v.AmericanSteel&AluminumCorp.
a. Name&ProceduralHistory
i. SupremecourtofNewHamphsire,1985
ii. 127N.H.187
b. Facts
i. HydraformProductsCorp.(Hydraform)(plaintiff)manufactures
steelwoodstoves.InJuly1978,Hydraformcontractedtopurchase
atrialorderofsufficientsteeltomake40stovesfromAmerican
Steel&AluminumCorp.(American)(defendant).American
preparedadeliveryreceiptthatlimitedAmericansliabilityforany
consequentialdamagessufferedbyHydraforminconnectionwith
Americanssteel.Hydraformsagentssignedthedeliveryreceipt
foreachdeliveryfromAmerican.Hydraformlaterentereda
contracttopurchasesteelfromAmericanfor400stoves.American
requiredHydraformsagentstosignthesamedeliveryreceipt
limitingAmericansliabilityforconsequentialdamages.American
eventuallybeganmakinglatedeliveriesofsteeltoHydraform.
OtherdeliveriesfromAmericanweredefective.Asaresultof
Americanslateanddefectivedeliveries,Hydraformonlysold250
ofitsplanned400stoves.InSeptember1979,Hydraformsoldits
woodstovemanufacturingdivisionfor$150,000plusroyalties,a
priceHydraformspresidentbelievedtobesignificantlybelowthe
actualvalueofthebusiness.InDecember1979,Hydraform
broughtsuitinNewHampshirestatecourtagainstAmerican
seekingconsequentialdamagesforlostprofitsduetoAmericans
breachofcontract.Attrial,thejurywaspermittedtoconsider
Hydraformsdamagesbasedonitslossprofitsunderitscontract

withAmerican(150stoves),itsfuturelostprofitsfortwoyears,
andthelostprofitscausedbyHydraformssellingofits
woodstovesbusinessatapricebelowwhatitspresidentbelieved
thebusinesstobeworth.ThetrialcourtalsoheldthatAmericans
deliveryreceiptlimitingliabilitydidnotpreventHydraformfrom
recoveringconsequentialdamagesfromAmerican.Thejury
awardedHydraform$80,245.12indamages,andAmerican
appealed.
c. Issue
i. Didthelowercourterrorinnotenforcingthelimitationof
damagesclause?
Didthelowercourterrorinallowingthejurytoconsiderlost
profitsforthefollowingtwoyears?
Didthelowercourterrorinallowingthejurytoconsidertheloss
ofvalueofthebusiness?
d. Holding
i. Thelowercourtwascorrecttonotenforcethelimitationof
damagesclause,buterroredinallowingdamagesforthelostvalue
ofthebusinessandlostprofitsinfutureyears.
e. Reasoning
i. ThelimitationindamagesclauseisunenforceableundertheUCC
becauseitwouldhavebeenamaterialalterationofthecontractor,
alternatively,unconscionable.
Damagesforthelossofbusinessandfutureprofitswere
inappropriatebecauseconsequentialdamagesmustbeforeseeable,
ascertainableandunavoidable.Pg.952.
PlaintiffsdamageswereforeseeableandPlaintiffdidtryto
mitigatedamagesbyseekingothersteelsupplies.Plaintiffdidnot
seekthemsoonenoughbecauseofDefendantsassurancesthat
Defendantwouldcorrecttheproblems.
SincePlaintiffsoldthebusiness,andthereisnoevidencethat
Plaintiffcouldhavemadeandsold400stoves,Plaintiffsdamages
forlostprofitsarenotascertainable.
Plaintiffshouldnotreceivedamagesforthelossofvalueofthe
businessbecausetheevidencedoesnotprovethatDefendants
breachforcedPlaintiffsoutofbusinessandnowayofcalculating
whatthebusinessshouldhavebeenworth.

ii. Thecourtoutlinesathreeprongedtestforgettingconsequential
damages:theymustbeforeseeable,ascertainableandunavoidable.
Plaintiffsfailedtoprovethattheirdamageswereascertainable.
iii. UCC718,715

VII.

AngeloAcquistav.NewYorkLifeInsuranceCompany
a. Name&ProceduralHistory
i. AppellateDivisionofNewYork,2001
ii. 730N.Y.S.2d272
iii. Thephysiciancontractedadisease,which,healleged,disabled
himfrompracticingmedicine.Theinsurancecarrierdeniedhis
claimfordisabilitybenefits.Thetrialcourtfound,basedon
documentsfiledbythedefendants,thatthephysicianwasstillable
topracticemedicineincertainareasandwasnotentitledto
disabilitybenefits.
b. Facts
i. Acquista(P)wasaphysicianwhowasspecializingininternal
andpulmonarymedicine.
ii. InNovember1995,Acquistabecameill.
iii. Acquistawasinstructedbyhistreatingphysicianstoavoid
exposuretoradiation.
iv. Hisillnesscausedhimtocontinuallysufferfromfatigue,
headaches,aswellasmuscleandjointpain.\Acquistawasinsured
underthreedisabilityinsurancepoliciesissuedbyNewYorkLife
InsuranceCompany(D).
v. AfterdelayingitsdecisiononthemeritsofAcquistasclaim,
NewYorkLifedeniedinsurancecoveredtoAcquistaunderall
threeofthepoliciesonthegroundthatAcquistacouldstillperform
someofthesubstantialandmaterialdutiesofhisregularjoban,
assuch,wasnottotallydisabled.
vi. AcquistathenbroughtsuitinNYstatecourtagainstNewYork
Life,allegingclaimsforbreachofcontract,badfaithandunfair
practices,fraudandfraudulentmisrepresentation,andnegligent
inflictionofemotionaldistress.
vii. ThetrialcourtgrantedNewYorkLifesmotiontodismissall
ofAcquistasclaimsexceptforhisclaimbasedupontheprovision
inhisinsurancepolicyforresidualandpartialdisabilitybenefits.

VIII.

viii. Acquistathenappealed.
c. Issue
i. WasthetrialcourtcorrectindismissingPlaintiffsclaims
involvingbadfaithconduct?
d. Holding
i. No.
ii. Affirmed.
e. Reasoning
i. Originally,damagesavailableforplaintiffs,whowerewrongly
deniedcoveragebyinsurancecompanies,onlyconsistedofthe
valuetheywouldhavereceivedunderthepolicy.
ii. Thecourt,followingthetrendsetbyotherjurisdictions,findsthis
remedytobeinadequate.Thecourtfoundthataplaintiff,whohas
beendeniedinsurancemoneytowhichheisentitledinbadfaith,
mayrecoveradditionaldamages.
Thetrialcourtsclaimthat,asamatteroflaw,Plaintiffisnot
disabledaccordingtothedefinitioninthepolicy,wasincorrect.
Thatisaquestionoffact,thus,thetrialcourtwasincorrectin
dismissingthebreachofcontractclaims.
iii. Thiscasedealswithtwomajorquestions:first,wasPlaintiff,in
fact,entitledtotheinsurancepayoutandsecond,isPlaintiff
entitledtoanycompensationtocompensateforthewayDefendant
treatedhim.Thecourtdeclinedtoanswerthefirstquestionasitis
aquestionoffactand,thus,foratrialcourttodecide.Onthe
secondquestion,thecourtofferedthreepossiblewaysofdealing
withsuchissues.Thefirstistoframethequestionofthewrongful
denialifcoverageonlyintermsofbreachofcontractwhichwould
entitlethePlaintiffonlytothevalueofthepolicy.Thesecondisto
allowawrongfullydeniedPlaintiffatortactionagainsttheinsurer.
Thethirdistoconsiderabreachofcontractaction,buttoallow
damagesaboveandbeyondthevalueofthepolicy,iftheinsurers
actionsareparticularlynasty.Thecourtdeterminesthatimposing
tortliabilityonaninsurancecompanyisforthelegislaturetodo,
notthecourts,butthattheoriginalwayofdealingwithsuchclaims
isinadequate.
iv. UCC719
f. Dissent
i. PlaintiffallegesthatDefendantdidnotperformDefendantsduty
toinvestigateandnegotiatePlaintiffsclaim.Plaintiffalsoclaims
thatDefendantconcludedwrongly,thatPlaintiffisnotdisabled
accordingtothedefinitionofthepolicy.Acauseofactionfor
actinginbadfaithshouldbedismissedwhenitisbroughtwitha
breachofcontractactionbecauseitisduplicative.
Southwest Engineering Co. v. United States

a. Name & Procedural History

i. United States Court of Appeals, Eighth Circuit, 1965
ii. 341 F.2d 998, cert. denied, 382 U.S. 819
iii. Trial court dismisses complaint. American government entitled to
liquidated damages.
b. Facts
i. Plaintiff made several contracts with Defendant to do construction
projects. All of the contracts had a liquidated damages clause,
which excused Plaintiff if the reason for a delay was beyond
plaintiffs control. All of the projects were late. The Defendant
deemed that some delays were beyond Plaintiffs control and that
that some were in Plaintiffs control. Defendant deducted
liquidated damages accordingly for the delays in Plaintiffs control.
Plaintiff sued defendant, alleging that defendant contributed to the
lateness of the projects and Defendant had no actual damages.
c. Issue
i. Is Defendants liquidated damages clause valid?
d. Holding
i. Yes.
e. Rule
i. Forliquidateddamagestobejustified,theamountmustbefor
costsreasonablyforecastedasjustcompensationfortheharm
causebythebreachandthatharmmustbedifficulttoestimate.
Reasonablenessofliquidateddamagesisdeterminedfromparties
stateofmindatthetimethecontractwassigned.
f. Reasoning
i. Foraliquidateddamagesclausetobevalid,thedamagesmustbea
reasonableestimateofwhatdamagesfortheharmmentioned
wouldbeand,second,theharmthedamagesaremeanttocure
mustbedifficulttoaccuratelyestimate.Itisdifficulttosaywhat
beinglateonaprojectwouldcostDefendantbuttheamount
providedintheliquidateddamagescontractisareasonable
estimation.
Determinationofthereasonablenessoftheliquidateddamages
contractisdeterminedbywhatthepartiesknewatthetimeofthe
signing.Therefore,thefactthatDefendanthadnoactualdamages
isirrelevant(theredoesnthavetobeharm.Justabreach).
ii. ThecourtupheldDefendantsliquidateddamagesclausesbecause
iffoundthemtobereasonableestimationofwhatDefendants
damageswouldbeatthetimeofthesigningandthemerefactthat
therewasnoactualdamageswasirrelevant.

iii. UCCsection2718,RestatementSection356:Forliquidated
damagestobejustified,theamountmustbeforcostsreasonably
forecastedasjustcompensationfortheharmcausebythebreach
andthatharmmustbedifficulttoestimate.Reasonablenessof
liquidateddamagesisdeterminedfrompartiesstateofmindatthe
timethecontractwassigned.
IX.

CellphoneTerminationFeeCases
a. Name&ProceduralHistory
i. CaliforniaCourtofAppeal,FirstDistrict,2011
ii. 193Cal.App.4th298
iii. Trialcourtfindsforplaintiffs.
b. Facts
i. In2003,severalindividuals(collectivelyPlaintiffs)filedlawsuits
inanumberofCaliforniacountiesallegingthatthepracticeby
cellularserviceproviderSprintSpectrum,L.P.(Sprint)(defendant)
ofchargingearlyterminationfees(ETFs)toitscustomersviolated
1671(d)ofthestatesCivilCode.Thevariouscaseswere
consolidated.Attrial,PlaintiffsarguedthattheETFswereadopted
andusedbySprinttostoperosionofitscustomerbaseby
penalizingearlyterminationofcustomercontractsasarevenue
opportunity.Conversely,SprintclaimedthattheETFwasapartof
thepricethecustomerpaidforthebundleofthehandsetand
cellularserviceandwasnecessarytooffsetratereductionsinlong
termserviceplans.Additionally,tochallengePlaintiffsclaims
thattheETFswereunlawfulliquidateddamageprovisions,Sprint
soughttoprovethatitsactualdamagesweresubstantiallygreater
thanthefeescharged.ThejuryfoundforthePlaintiffsand
assessedover$225millioninactualdamages.Thecourtthen
orderednearly$74millioninrestitutiontobepaidtoPlaintiffs;
enjoinedSprintfromfurthereffortstocollectETFsassessed
duringtheclassperiod;andorderedSprinttoadvisethirdparty
assigneesofuncollectedclaimsofthecourtsorder.Thecourtthen
questionedthevalidityofthejurysdamagesawardandapplied
thesetoffinfavorofSprintandfoundthatneitherthePlaintiffnor
Sprintwouldbeentitledtoanymonetaryrecovery.Thetrialcourt
reasonedthatthejuryhadfailedtofollowitsinstructionson

Sprintsactualdamagesandgrantedtheplaintiffsmotionfora
partialnewtrialonthatissue.Sprintappealed.
c. Issue
i. WeretheETFsunlawful?
d. Holding
i. Itsnotunlawful,butitsapenaltyhere.
ii. Affirmed
e. Reasoning
i. ThecourtheldthatthefederalCommunicationsAct,47U.S.C.
332(c)(3)(A),didnotpreemptapplicationofCalifornialawto
thecarrier'sETFs.
ii. Acontractualagreementtoreplaceacalculationofactual
damageswithliquidateddamagesdidnottransmutethecalculation
ofcontractdamages(atraditionalstatefunction)intoawireless
carrier's"rate"(afederalconcern).
iii. InvalidationoftheETFsunderCalifornia'sconsumer
protectionlawswouldhaveonlyanindirectandincidentaleffect
onthecarrier'srates.
iv. Theevidencefailedtoestablishanyendeavor,reasonableor
otherwise,toevenapproximatethecarrier'sactualdamages
flowingfrombreachofthetermcontractsbyconsumers,and
insteadreflectedamarketingdecisionmadewithanentirely
deterrentpurposeandfocus.
v. Thecourtrejectedthecarrier'sclaimthattheETFsprovidedan
optionofalternativeperformancebypermittingsubscribersto
terminatecontractsbeforetheendoftheagreementbypayinga
fee.
vi. Thecarrierhadnotmetitsburdenofestablishingthatthe
predominanteffectoftheETFprovisionswastoprovide
consumerswithanalternatemeansofperformingtheircontracts.
vii. RestatementSection356:onlytortsallowpunitivedamagesona
breachofcontract.
X.

VincentJ.Douthwrightv.NortheastCorridorFoundations
a. Name&ProceduralHistory
i. AppellateCourtofConnecticut,2002
ii. 72Conn.App.319

XI.

XII.

iii. Trialcourtfindsforplaintiff
b. Facts
i. PlaintiffwasseverelyinjuredbyDefendantsnegligencewhena
loadofconcretepylonscrushedhisleg.PlaintiffandDefendant
agreedtoasettlementinwhichDefendantpromisedtopay
Plaintiff$2.5million.Defendantsinsurancepaidonemillion.
Defendantdeniedthattheywererequiredtopaytheremaining
$1.5millionrightaway.Plaintiffbroughtanactionagainst
Defendantfortherestofthesettlement.Defendantpaidthe$1.5
million,butnottheinterestbeforethecourtdate.
c. Issue
i. Shouldthedefendantpayinterestwherehetriedtoaccordand
satisfyadebtfromatortclaim?
d. Holding
i. Yes.
e. Rule
i. Adebtorisdischargedofhisdutytopayinterestonadebtwhen
theamountofthedebtordutytopayisundetermined.
f. Reasoning
i. Thecourtheldthatthepartieswoulddeterminehowtodistribute
themoneyatarbitration,butthecourtalsodeterminedthat
Plaintiffwasentitledtotheentire$2.5millionimmediately,not
afterthearbitration.
BecausePlaintiffwasentitledtotheentire$2.5million
immediatelyafterthesettlementagreement,theamountofmoney
wasnotinlimbo,andDefendantisnotexcusedfrompaying
interestonit.
ii. BecausetheDefendantwasobligatedtopaythePlaintiffright
away,Defendantisnotexcusedfrompayinginterest.
iii. Purposeofaccordofsatisfactionisdisputingtheamountowed,
andpartiesthensettleonadifferentamount.Theamountmustbe
inagoodfaithdispute,andifitisnot,thenitcannotbesubjectto
accordandsatisfaction.
1. Italsoneedstobeinwriting,andthereisevidenceofa
goodfaithdispute.
CarolOwenv.CNAInsurance/ContinentalCasualtyCo.
a. Name&ProceduralHistory
b. Facts
c. Issue
d. Holding
SallyBeautyCo.v.NexxusProducts
a. Name&ProceduralHistory
i. UnitedStatesCourtofAppeals,SeventhCircuit,1986
ii. 801F.2d1001

b. Facts
i. Defendantproducedhaircareproductswhichitsoldexclusivelyin
salonsandbarbershops.
ii. DefendantsproductsweredistributedinTexasbyBest.
iii. BestwaspurchasedbyPlaintiff.
iv. Plaintiffwasasubsidiaryofoneofdefendantsdirectcompetitors.
c. Issue
i. Wasthecontractassignable?
d. Ruling
i. No
e. Reasoning
i. Unlikethedistrictcourt,thecourtofappealsdoesnotfindthatthe
contractwasoneforpersonalservices.Insteaditfindsthatthe
contractisoneforthesaleofgoodsandisthusgovernedbythe
UCC.UndertheUCCsection2210,whichgovernsdelegationof
rights,theobligeeisentitledtorefusetoallowdelegationtoathird
partyifithasasubstantialinterestinhaving[the]original
promisorperformorcontroltheactsrequiredbythecontract.The
courtgoesontotalkabouttheimpliedpromiseinanexclusive
distributionagreementthatthesellermakeitsbestefforttosupply
thegoodsandthedistributormakeitsbestefforttopromotetheir
sale.Inthiscase,becausethedistributortowhomthecontracthas
beenassignedisadirectcompetitorwiththedefendant,and
becauseitoutrightpurchasedthecompanywithwhomtheoriginal
contractwasmade,theonlyoptionlefttothedefendantwasto
cancelthecontract.Thedefendanthadasubstantialinterestin
havingtheirproductsdistributedbyapartythatwasntindirect
competitionwithit.Becausetheplaintiffpurchasedthecompany
withwhomtheoriginalagreementwasmade,thedefendant,being
obligee,couldnotinsistonhavingthedutyfulfilledbythatparty.
Becauseofthecontractsdutiescouldnotbedelegated,itsrights
likewisecouldnotbeassignedtotheplaintiffbecausetheplaintiff
wouldbeunabletoprovidetheconsiderationinthecontractthat
wasoriginallybargainedfor.

f. Dissent
i. Inthedissentingopiniontothiscase,theargumentwasmadethat
thecorrectjudgmentwastoallowassignment.Thecorrectwayto
dealwiththesituation,thedissentargues,istoallowassignment
anddelegation,andtoallowthedefendanttoseekdamagesfrom
theplaintiffintheeventthattheydonotupholdtoimpliedpromise
tousetheirbesteffortstopromotethesaleofthedefendants
product.Supportingthisargumentisthefactthattheplaintiff
alreadydistributesanumberofotherproductswhichcompetewith
itsparentcompanysproducts.Shouldtheplaintiffdecidenotto
useitsbestefforts,itsreputationwouldsuffernotonlywiththe
defendantbuttheseothercompaniesastheparentcompanywould
havejustasmuchincentivetoseetheirdistributionandsale
diminishedthroughtheireffortsnottopromotetheirsaleasit
wouldindoingthesametothedefendant.Inadditiontothisthe
contractwasannual.Theplaintiffwouldnothaveenoughtimeto
doirreparabledamagethedefendantssalesanddistributioninthe
stateofTexasbecauseofthisfact,andevenifitdidthecorrect
courseofactionwassuitfordamagesinthatevent.
ii.
g. Rule
i. Apartymayperformhisdutythroughadelegateunlessotherwise
agreedtoorunlesstheotherpartyhasasubstantialinterestin
havinghisoriginalpromisorperformorcontroltheactsrequired
bythecontract.Delegationofdutiesisbarredifthereissome
reasonwhythenonassigningpartywouldfindperformancebya
delegateasubstantiallydifferentthingthanwhathehadbargained
for.
XIII.

KmartCorp.v.BalfourBeatty,Inc.
a. Name&ProceduralHistory
i. DistrictCourtoftheVirginIslands,1998
ii. 994F.Supp.634
b. Facts
i. DefendantenteredintoacontractwithTPLtobuildashopping
centerwherePlaintiffwouldbeatenant.Duringtheplanning,

Defendantsconstructionscheduleswererequiredtocomplywith
Plaintiffsscheduleandthedrawingsmadeinthedesignphaseof
performanceweretobesubmittedPlaintiff.InSeptemberof1995,
theroofoftheshoppingcenterwasdamagedbythewindsfrom
HurricaneMarilyn.IfPlaintiffisanintendedbeneficiaryofthe
contractbetweenTPLandDefendant,Plaintiffwillhavetoadhere
tothearbitrationclauseinthecontract.
c. Issue
i. IsPlaintiffanintendedbeneficiaryofthecontractbetween
DefendantandTPL?
d. Holding
i. Yes
e. Reasoning
i. Therearetwowaysinwhichthecourtsdeterminewhetheraparty
isanintendedbeneficiarytoacontact:(1)theyattemptto
determineiftheperformanceofthecontractrunstothepartor,the
modernapproach;and(2)theydeterminewhetherthepromisor
understoodthatpremiseshadintenttobenefitthethirdparty.
DuetotheinvolvementPlaintiffhadinthebuildingofthe
shoppingcenter,Plaintiffisanintendedthirdpartybeneficiary
undereitherapproach.
ii. Incidentalbeneficiariescannothavearightunderthecontract(pg
1102).Promisestorenderperformancesotherthanthepaymentof
moneyrequiresomeexpressionofintentbythepartiestogivethe
benefitofperformancetothebeneficiary.
iii. Anintendedbeneficiaryisanypersonwhothepromiseandthe
promisorintendtoreceivebenefitfromacontact.
iv. Anintendedbeneficiaryisapartywhothepromiseeand/or
promisorintendedtobenefitbythecontract.
XIV. HoraceN.Rubensteinv.NatalieRubenstein
a. Name&ProceduralHistory
i. SupremeCourtofNewJersey,1956

ii. 20N.J.359
iii. Chancerycourtdismisseditbecausetheydidntwanttolookinto
plaintiffsmind.
b. Facts
i. Mr.Rubenstein(plaintiff)andMrs.Rubenstein(defendant)are
marriedbutseparated.Theyhavetwochildren.In1952,their
oldestchildwasdiagnosedwithchildhoodschizophrenia.Mr.
andMrs.Rubensteinstronglydisagreedoverthebestcourseof
treatmentfortheirchild.Thisdisagreementledtotheirseparation.
Mr.andMrs.Rubensteinownedseverallargepiecesofpropertyin
tenancybytheentirety.Mrs.RubensteinaskedMr.Rubensteinto
transferallofthepropertysolelytoher.Shepromisedtocarefor
theirtwochildrenoutoftheincomeearnedfromtheproperty.Mr.
Rubensteininitiallyrefused.InDecember1952,Mrs.Rubenstein
beganthreateningMr.Rubensteintoattempttoconvincehimto
transferthepropertytoher.Mr.RubensteintestifiedthatMrs.
Rubensteinthreatenedhimwithgangsterviolence,arsenic
poisoning,andarrest.Mr.Rubensteinwasparticularlytroubledby
thethreatofarsenicpoisoning,andMrs.Rubensteinsfatherwas
currentlyinprisononachargeofmurdercommittedwhilehewas
amemberofanarsenicring.InApril1953,Mr.Rubenstein
respondedtothethreatsbyagreeingtotransferthepropertysolely
tohiswife.Mr.RubensteinbroughtsuitagainstMrs.Rubensteinin
NewJerseystatecourt,seekingtorecoverthepropertyonthe
groundthathewasinducedtotransferittoMrs.Rubenstein
throughduress.ThetrialcourtgrantedMrs.Rubensteinsmotion
todismiss,andtheappellatecourtaffirmed.Mr.Rubenstein
appealed.
c. Issue
i. Theissueofthiscaseiswhetherspousalduresscanservetovoida
contractofconveyance.
d. Holding
i. ReversedandRemanded
e. Reasoning
i. Thecourtfoundthattherewasaprimafaciecaseofduress,
regardlessofanyliabilitiesthePlaintiffwouldbegivingupandas

such,theDefendantshouldbeallowedtopresenthercasesothata
fairdeterminationofthefactscouldbemade.
ii. Courtsaysthatifthereisawrongfulthreat,thentheycanlookinto
theplaintiffsmindgiventhefacts.
iii. Whendealingwithcasesofduress,rememberthatnotallpressure
iswrongful.Onlyifitmeetstheleveloffearthatisinvokedby
duressshoulditbeactionable.
XV.

AustinInstrument,Inc.v.LoralCorp.
a. Name&ProceduralHistory
i. CourtofAppealsofNewYork,1971
ii. 29N.Y.2d124
b. Facts
i. LoralgotacontracttomakesomeradarstufffortheNavy.They
subcontractedtoAustintoproduceabouthalfofsomerequired
precisiongearcomponents.WhentheygotanotherNavycontract,
Austinbidagainandwantedtomakeallthecomponents.Loral
refusedandsaidtheywouldonlybeabletoproducethe
componentsthattheyhadthelowbidon.Austinthreatenedto
stopdeliveryonthecomponentsundertheoriginalsubcontract
unlesstheygottomakeall40componentsinthenewcontractand
getasubstantiallyhigherpriceforallthepastandpresent
components.Lorallookedforanothersupplier,butwaseventually
forcedtoaccedetoAustinsdemandsbecauseotherwisethey
wouldnthavebeenabletomeettheNavysdeadline.Austinsued
Loraltorecovermoneystilldueonthesecondsubcontract,but
LoralalsosuedAustinfortheamountofthepriceincreases,
claimedtheywereexactedillegallyunderduressandshouldntbe
enforced.ThelowercourtsfoundforAustin,andLoralappealed
totheCourtofAppealsofNewYork.
ii. Issue
1. WasLoralforcedtoagreetothepriceincreasesunder
circumstancesthatamounttoeconomicduressasamatter
oflaw?
iii. Rule

1. Acontractisvoidableonthegroundofduresswhenitis
establishedthatthepartymakingtheclaimwasforcedto
agreetoitbymeansofawrongfulthreatprecludingthe
exerciseofhisfreewill.
iv. Reasoning
1. ThecourtfindsthatwhathappenedtoLoralisaclassic
caseofeconomicduress.AustinsactionsleftLoralwith
nochoicebecauseitsgovernmentcontractwassobigand
important.

2. ThecourtfeelsthatLoralmetitsburdenofshowingthatit
couldntgetthepartsfromanothervendor.Thecourtalso
feelsLoralwasntwronginwaitingtosueuntilafterthe
lastdeliveryfromAustinbecausetheyfearedreprisals.

3. Tofindeconomicduress,thecourtsaystheremustbea
threatofbreachofcontractunlesssubmissiontoanother
demand,andthenthethreatenedpartycouldnotacquire
goodsfromanywhereelse,andtheordinaryremedyofan
actionforbreachofcontractwouldnotbeadequate.
4. Thedissentarguesthatthisisnotaquestionoflawbuta
questionoffactandthefactfindershouldbegivenmore
deference.Furthermore,thedissentsaysthattherewasa
factualissueastowhethertherewerealternativesuppliers
thatLoralhadntusedbefore.
5. UCC2302?Unconscionability?
XVI. CrossCollateralization
a. ????
XVII. Unconscionabiltydoesntrequirefraudormisrepresentation.
XVIII. InreLouisFleetv.UnitedStatesConsumerCouncil
a. Name&ProceduralHistory
i. UnitedStatesDistrictCourt,EasternDistrictofPennsylvania,
1989
ii. 95B.R.319
b. Facts
i. Fleet(plaintiff)isabankruptindividualwhosoughtfinancial
assistancefromUnitedStatesConsumerCouncil(USCC)
(defendant),afinancialadvisingservice.Throughitsmarketing
campaign,USCCofferedfinancialservicestomanybankruptand
financiallydistraughtindividual.Manyofthesetargetedcustomers

wereunemployed,disabled,orfacingthelossoftheirhomes
throughforeclosure.USCCpromisedservicestoitscustomers
whichitcouldnotandultimatelydidnotprovide.USCCthen
chargeditscustomers$195.00to$260.00forreferringthemtoan
attorney.Individualscouldreceiveattorneyreferralsthroughabar
associationreferralserviceforfree.Fleetbroughtsuitagainst
USCCinPennsylvaniaBankruptcycourtallegingthatunderthe
NewJerseyUnfair&DeceptivePracticeAct(NJUDPA),USCCs
actionswereunconscionable.
c. Issue
i. Thiscaseconsiderswhetheraservicecontractisunconscionable,
basedonthefactthattheconsumercouldgetthesameservice
elsewhereforalesserprice.
d. Holding
i. ThefeeschargedbytheDefendantwereunconscionable.
e. Reasoning
i. ThecourtfocusedontheUnfairandDeceptivePracticesAct,
notingthatafeeforserviceisunconscionablewhenthesame
servicecouldberenderedelsewhereforalowerprice.
Inthiscase,theDefendantprovidedattorneyreferralsforpersons
inneedoffinancialhelp.Whilethisserviceisfreetoanyonewho
callsthebarassociation,theDefendantwaschargingfeesbetween
$195.00and$260.00.MostofthepeoplewhocalledDefendantfor
assistancewerepeoplewhowereonpublicassistanceand/or
personsonthevergeofbankruptcy.Bychargingthemafeefora
referralthatwouldotherwisebefree,theDefendantwasprofiting
fromtheirpoorcircumstances.Anactionthatis,onitsface,
unconscionable.
ii. Whenacontractisfoundtobeunconscionableonitsface,a
disadvantagedpartyisexcusedformperformance.

Hypo(1)
1.) Over$500becauseofstatuteoffrauds,andSeanisaminor(bothmaybeminors).
Seancandisaffirmthecontract,andbecausetheyareminors,thecontractis
voidable(minorcandisaffirm).
a. WedontknowifSeanisemancipated,butifheis,thenwewouldhaveto
lookatwhetherthisequipmentasanecessity.
2.) Thecontracttoperformatgigsisaservicecontract,sotherestatementmustbe
used.Thecontractcouldbeconsideredillusory,unconscionable.ImaDeJayalso
delegatedhisjob(delegationofduties).

3.) Twodifferentcontracts,firstoneisbilateralsaleofgoodscontract,secondis
unilateralservicecontract.
4.) TherewaspartialperformanceafterSeanperformedatthefirstgig.
5.) The80%stipulationistoouncertain.
6.) WhenSeandidntpaythe80%,thatisunjustenrichment,soImaDejayisowed
restitution.
7.) Seanintentionallydestroyedtheequipment,sothiscouldbegroundsforatort.
8.) AnticipatoryRepudiation(sameastheoriginaloffer)???
9.) Giventheinformation,ifitsmorethanayearthenitviolatesthestatuteoffrauds
ifitisnotinwriting.Ifitslessthanayear,thencouldbeabreach.
10.)
Novationwhenonepartydelegatestheirresponsibilities,thedelegating
partyisnotheldaccountableanymore.