CONCEPTUAL OVERVIEW

BOX 1 BOX 2 BOX 3

Is there a valid K? Is the K breached? What is the remedy?
1. FORMATION 1. INTERPRET 1. INJUNCTIVE RELIEF
2. TERMS 2. PERFORMANCE 2. DAMAGES (expectation,
INADEQUATE reliance, punitive,
restitution, nominal)
3. PUBLIC POLICY 3. EXCUSES 3. SPECIFIC
PERFORMANCE

Introduction
___________________________________________________________
I. What is a contract?
a. All state law
Her definition: conduct that creates binding commitment enforceable by the
legal system

II. fundamental conflict in contracts:

economic necessity v. individual autonomy
Example 1: rules v. standards (see Kennedy CS 244-248)
• distinction between rules and standards is not rigid
• rules take power away from the judiciary
• standards provide a lot more leeway
1. rule are good : certain/consistent/prevent discretion, but over/under inclusive
2. standards are good: standards result in transaction costs, lack of certainty;
perhaps result in a more just outcome
Example 2: formalities v. informalities
• formalities increase transaction costs (?), make it easier for people who
don’t know formalities to be taken advantage of
• informalities are less certain (see Williams CS 248-251))
1. formalism-RULES focused; founded by Langdell and Williston –
mechanical application of the rules to reach a correct result
2. realists- STANDARDS focused; rejects formalism; Pound, Llewellyn –
results of a decision-making process in which both the finding of facts
 and the applications of rules were affected by the personalities, povs,
interests, and goals of decisionmakers (not neutral)
3. economists (‘Chicago School’): seem to be big on the rules?; Posner
two fundamental beliefs:
1. rules increase efficient outcomes
2. inefficient rules should be modified in favor of more efficient ones
4. CLS: deconstruction – cant develop system of decisionmaking within our
legal system as it now exists; functions as political ideology- preserves
distributions of weath/power

III. Two ways to view doctrines, contracts, etc:

a. formalist/classical
b. pragmatist/modern
Section 2: Enforcement/Remedies
____________________________________________________________________
I. DAMAGES
a. nominal – a fixed sum without regard to the amount of loss
b. restitution – goal: preventing the breacher from unjust enrichment; strongest
c. reliance- goal: to undue harm of the reliance on the promise has done to the
nonbreacher
d. expectation (“normal remedy”) – goal- to put the plaintiff in as good a position as
he would have occupied had the promise been performed
▬ remember: doctrines of foreseeability, certainty, causation, and mitigation may prevent
recovery of damages
Reliance Damages:
Wartzman v. Hightower Productions, Ltd (p. 925)
Issue: (1) Whether trial judge correctly permitted jury to consider the issue of “reliance
damages”? (2) Whether trial court correctly refused jury to consider prejudgement interest?
(actually there are 4)
Facts: poll-sitter went to attorney to incorporate. Attorney did a bad job which destroyed
the endeavor.
Holding: Trial court judgement affirmed ($170000 for plaintiff)
Rule:
• reliance damages when expectation damages are too difficult to calculate
Arguments for Wartzman
1. Bring up limitations -- foreseeability, mitigation, and causation
2. Their damages are speculative (that's why no expectation damages) -
court says that attorneys should foresee
3. Mitigation - equal opportunity -- firm could have mitigated
No duty on hightower to hire a security attornery bc they did not have the
funds (and the wartzman firm knew that)

Expectation Damages:
• net expectation (value of performance promised – cost of performance promised by
plaintiff)
• total breach – four elements for this claim
a. loss in value (value in what was promised – what was actually
received)
b. other loss – incidental/consequential damages
• reasonable attempts to avoid loss
• general principle is that all loss is recoverable
c. cost avoided
d. loss avoided
• if risks cannot be priced, they are not considered (foreseeibility)
• partial breach- general principle applies (as does the first two calculations (a+b) for total
breach)
• pre/post judgement interest might be available (p. 820 n5)
 • doctrines that normally apply to mitigate these damages: foreseeability, causation,
certainty, mitigation
• restitution damages are as close to punitive damages as we get.
FORMULA:
Loss in value + other loss – cost avoided – loss avoided
Turner v. Benson (SC of TENN., 1984) (p. 913)
Issue: whether proper measure of damages was applied to a vendee’s breach of a real estate
contract?
• Uses the general rule: proper measure of damages available to a vendor against a
breaching vendee is difference between K price and the fair market value at the
time of the breach (p. 814)
• Facts: real estate contract that was breached by buyer (child care)
• Holding: affirm liablely and remand with damages to be determined acc. To
principles
• Damages are not easy to calculate – shows calculation of expectation damages
Limitations on Damages:
Hadley v. Baxendale (Court of Exchequer 1854) (p. 831)
Issue: whether jury was properly instructed about the liability for
expectations damages (arising from lost profit) in original case?
Facts: mill owner’s crank shaft broke. Sent it to Greenwich for new one
via pickford & co. told clerk to hasten the production/delivery but it was
delayed – mill did not resume for several days. Appeal for misdirection by
judge to jury (jury awarded 25l)
Holding: new trial. Loss of profits cannot be considered – not foreseeibile
in new trial.
Rule: damages are recoverable only if they were reasonably foreseeable
at the time of the contract; in certain kinds of recurring disputes, there might
be a best cost avoider -- economics says make that person liable bc they can
prevent
consequential damages are limited to what is forseeabile
• Hadley is still with us. Reasons:
1.Disincentive to enter into contracts if liable for stuff that we cannot foresee
(incentive to gain knowledge -- avoid risk)
2.reduce litigation costs
3.unfair to change
• No attorneys fees even if breacher loses
Rockingham Country v. Luten Bridge Co. (US Court of Appeals – 4th
Circuit) (p. 848)
Issue: Whether a non-breaching party has an obligation to mitigate damages
upon notice of breach?
Facts: contract made by county with construction company to build a bridge.
Notice of cancellation of contract was given to Luten before bridge
construction began.
Holding: Obligation for nonbreaching party to mitigate damages exists.
Plaintiff awarded profit + expense up until the contract was cancelled.
Rule: Non-breaching party has a duty to mitigate damages. (otherwise
construed as a limitation on plaintiff’s recovery of damages

Restitution Damages:
• Restatement provides for restitution in a variety of circumstances (see
Restate § 349, 373-377), but no restitution is if the only breach is that the
person did not pay.
K situations for restitution:
a. Partial performance
b. It turns out no K (incapacity, person is a minor, crazy, fraud,
duress) -- box 1 isssues
c. Rescission
• Rationale is to prevent combination of unjust impoverishment with
unjust gain—interest strongest for judicial intervention
• Quantum meruit allos a promise to recover the value of services he gave
to the D regardless of whether he would have lost money on the K and been
unable to recover in a suit on the K
• Liability for benefits received disgorge unjust enrichment of a defendant
at plaintiff's expense
• Measurement of restitution damages = “as justice requires”
o This can mean either market value, the increase, or other value
Pro (of market value rule) Con
• Prevents unjust gain by • Makes Ks less efficient
breacher • Doesn’t make non-breacher
come out ahead

United States ex. Rel Coastal Steel Erectors, Inc v. Algernon Blair (p.
943)
Issue: Whether a subcontractor who ceases work because of contractor’s
breach recover in quantum meruit the value of labor + equipment already
furnished?
Facts: Blair contracted to provide steel erection for Coastal. Coastal refused to
provide money for crane as per contract. That was material breach.
Holding: The court found that the sub is entitlted to recover.
Rule: You can recover the value of the service that you have provided so that
you can be saved from loss if the other party breaches.

II. SPECIFIC PERFORMANCE

Pros Cons
• Sometimes not ineff • Broken relationship – doesn’t
• Provides remedy when damages work so well
just wont do (land, etc) • Sometimes Ineff
 • Hard to supervise/enforce
• Coercion/slavery
• Free compensation in labor
market (w/employ situations)
Two reasons to grant (when asked for):
1. Expectation remedy is undercompensatory
Frustration and anger
2. The plaintiff is in best position to choose the lesser of 2 evils

▬ courts consider: hardship to def or others, hostility to the merits of the P’s
case, values (freedom of speech, freedom from compulsory service)
• Law and equity relationship is important (p. 314)
o In personam relief = injunction or spec performance (awarded
trad by equity courts)
o To achieve these, it is necess to show that damages (default)
are inadequate
o Discretionary remedy that the court can choose to use

City Stores Co. v. Ammerman (p. 967)

Issue: Whether a company who was promised a lease is entitled to specific
performance of this lease when the conditions set forth in the alleged contract
are met?
Fact: City Stores claims that a letter (constituting a contract?) was written
promising them a lease if the shopping center was constructed.
Holding: Letter in question was a binding unilateral contract, which gave P
option to accept lease at Tyson’s Corner.
Rule: Important that specific performance not interfere with the rights of a
third party.
Two criteria for spec performance: (1) damages must be inadequate and (2)
damages are impractical. Court ordered specific performance.

Economic argument for spec performance:expectation damages

systematically undercompensate people and difficult for a court to do (see p.
977 n7)

American Broadcasting v. Wolf (p. 978)

Issue: Whether ABC is entitled to spec perform of K provision against Wolf
(sportscaster)?
Fact: Wolf signed a K w/ good faith negotiation provision. ABC claims that he
violated it.
Right of first refusal - if he gets an offer, ABC can shoot it down first -- give
them a chance to match
•No court would enforce first right of refusal indefinitely
Holding: Wolf did violate the provision, but equitable relief (spec performance)
will not be granted. Would unduly burden Wolf who would be kicked off the air.
Rule: Courts don’t order spec performance of services. Courts will consider
the role/rights of third parties. Timing is key. Thirteenth amend (involuntary
servitude) could be a problem. Only $ available. In this case, it was too late
anyway bc Wolf was already working for CBS.
• Court also said that enforce non-comp when trade secrets, spec harm
after K expiration; public policy = more comp without non-comp
provisions
• Dissent would have enforced a 90-day injunction
▬ Restatement (Second) says that injunctive relief is ok, but only if the
restrained engagement would have been for a competitior of the P.
• Injunctive relief (negative enforcement) when (1) services are unique
(2) employee expressly or impliedly convenanted not to work for
others during the period
• Different states have different laws on post-employ comp Ks
Lumley v. Wagner (p. 986)
Facts: Wagner contracted to be in several operas in London at Lumley’s opera
house during 1852 season. She Ked not to be in any other operas at the time.
She then agreed to perform for another company
Holding: court held that she could be enjoined.
• Restatement § 367 says that negative enforcement ok, but positive
enforcement is not in most circumstances
Do we need promise/covenant?
• Yes, if strictly following Lumley
• No, if court says such a promise is implied -- could use pattern of fact
(i.e. pattern of behavior proves) also could be implied in law
(different)
▬ trailing clause – agreement not to reveal trade secrets. Courts generally don’t like.

III. Agreed Remedies

Pros Cons
• Certainty • Overreaching (excessive
• Less court time compared to actual loss)
• Lower admin costs • Greater bargaining power -
• Freedom of K not really agreeing
• Parties are better able to • Retribution and deterrence is
evaluate risks and what K is for the state, not for
worth to them individuals (pub v. private)
o Deter = util
o Retribution = kantian

• When non or defective performance has occurred, parties can agree

to compromise or setltle their dispute
 • Agreed remedy provisions (called liquidated damages clause)
o Must pass certain test to be enforceable:
THE TEST…ex ante
1. Actual damages must be difficult to know at the time of the K
2. The stipulated sum must be a reasonable estimate of the actual
damages
o Has to not be a penalty since penalty damages are not allowed
Wasserman’s v. Township of Middletown (p. 989)
Issue:
Facts: township owned land and leased to wasserman in 1971 -- for thirty
years with a fixed cost regardless of inflation, etc. The agreed remedies in the
lease: (1) Pro rata of improvement costs and (2) 25 % of 1 year gross receipts
(Fighting about 2 not 1)
Holding: Court endorses a reasonableness standard for evaluating liquidated
damages. Gross receipts was arbitrary and had no relation to actual damages.
Rule: Court doesn’t like “conclusary”. Remanded for assessment of
reasonableness.

IV. Analysis of Remedies

Underlying question here: Is there a role for the state in cases where the
parties can agree?
Efficiency v distribution
o Efficiency - if we end up with more gain for society as a
whole (size of the pie, not slices)
o Distribution - size of slices
Cooter and Ulen: if we didn’t have glitches, everything would be taken care
of by agreed remedies. Frictionless model…
Friedmann – no difference between eff breach and conversion; view as
incentive structure – think about the implication of changes in structure on
behavior – if breaches are deterred, breachers may refuse to K unless they
can get a better price. LOTTERY TICKET???
Craswell- Risk preferences - preferant (like risks) or avoidant (avoid risks)
o Overcompensation is going to mess up the market -- if you prefer
risks, go bet on a horserace; OVERCOMP = too many precautions
o Undercompensation results in too few precautions
o Remedies give you incentives to take precautions against
bad stuff

Epstein: state shouldn’t intervene; His argument is in favor of fixed

undercompensatory damages ---
1. Law is too biased in favor of using the remedies of the state -- let the
parties decide more
DUALISM -- courts are only committed to freedom of contract beforehand --
then they step in afterward
-say that it is inefficient
-in a world with litigation where it is costly --- fixed sums would be better than
all the rules applied in the common law
-attorney fees ensure that the courts are systemically undercompensatory
-nonideal assumptions
• He loves the fedex contract because it is systemic compensation and
limits damages
If plaintiffs know that they will be compensated, then plaintiffs don’t mitigate
-reputational constraints will ensure that sellers don’t breach
-financial losses also provide this constraint
(doesn’t work for monopolist)

Babchek: Two conclusions:

1. Buyer with the high risk should convey to seller -- seller could charge
more and take precautions
-make carrier the insurer
Other way…
2. They shouldn’t have to be the insurer --- buyer with the high risk should
be liable -- carrier shouldn’t be (buyer is the best cost avoider)
-buyer gets own insurance
Social valuable - increases sum total of wealth (efficiency) according to
Babchek

Radin: there is a role for the state.

World is not ideal (ec theories tend to assume that)
Some observations:
• Certain remedy structure influences selection of parties -- we will change
who we contract
• REMEDIES = INCENTIVE STRUCTURES
o If OVER is remedy -- then underselection of riskier sellers
• Risk of error with rule-based system -- rule sweeps under people who
shouldn’t be there
Still may be better bc it is more certain
o Rules are subdivided (conditioned, more specific) to try to
avoid the possibility that a rule is misapplied
o Imperfect information
• People value stuff differently
• These args do not concern themselves with who is richer or poorer ---
distributive justice not considered -- these issues are not considered
• System runs on trust
Section 3: Justification for K enforcement
I. autonomy and consent
A. Fried – makes two key arguments for promises:
1. Reciprocity/scope of freedom of will (kant)
2. Convention (wittgenstein) - institution of social prac -- people under it
are bound
Force in particular case depends upon the existence of the practice
Argues against other justifications:
o Truth-telling? - concludes that if you were honest at the time
(and then change our mind) - not a lie
o Harm to other and benefit to self? - can be unjust, but not
always
o People's expectations? (reliance) - cant have a world in
which expectations of me could limit my freedom (unless I make a
promise)
• Need reciprocity of future commitment to increase freedom of will (known
as autonomy due to the kantian basis - autonomy vs. heteronomy (can be
manipulated)
1. It's obligatory (morally) to have an institution of promising ---
freedom of will demands that the institution of promising has to be
available
2. For individuals to keep promises - must keep promises bc
you have invoked the moral convention (you have chosen)
otherwise you would be using the other person
• He thinks that self-interest is a bad grounding for doing this --- bc people
will change their minds
Craswell- answers Fried.

II. economic efficiency, social welfare maximization

Theory of efficient breach:
III. public/private distinction
IV. personhood and the limits of K
Section 4: Classical System of K Law
Three grounds for making a promise enforceable:
1. consideration – something given in exchange for a promise
2. promissory estoppel – reliance on the promise
3. unjust enrichment – restitution
Two prominent characteristics of classical K theory:
1. preference for clear rules (legal formalism) over standards
2. indifference to morality or social policy (other than promises should be
kept)
I. Mutual assent
• Classical view – binding commitment immed – magic moment of the
meeting of the wills
• Modern view – may be relational over time (no meeting of the minds
require)
Theories:
Subjective theory - what did you really have in your mind
Objective theory -- reasonable person would have expected/done
(normally socialized language practictioner)
- under both classical and modern theory, can be legally bound to promise
without express intent (or actual intent) -- §21
Ray v. Eurice Bros (p. 27)
Issue: Whether a contract requires intent of parties to be bound?
Facts: Rays are suing Eurice Bros for breach of written K to build their house.
Holding: Eurice Bros breached K. Eurice Bros responsible for cost of
completion of K.
Rule:K has nothing to do with the intent of the parties. K = force of law to
certain acts of the parties which ordinarily accompany and represent a known
intent (Hand) Key test of a true interpretation is what a reasonable person in
the position of the parties would have thought it to mean (OBJECTIVE)

II. Doctrine of Consideration (bargained-for exchange)

-existence of a promise alone will not be enough for the law to uphold the
promise – need consideration (although not the only basis now)
• Ways to find no consideration
1. No promise
2. Was donative or gratuitive
3. Illusory promise
4. Moral consideration

Hamer v. Sidway (p. 41)

Issue: Whether by virtue of K D’s testator, William Story, became indebted to
his nephew on his 21st birthday for $5000?
Facts: Uncle promised nephew $5000 in a letter.
Holding: Court held that it is enough that something is promised, done,
forborne, or suffered by the party to whom the promise is made as
consideration for the promise made by him… Order reversing trial court judgment in
favor of plaintiff was reversed on the grounds that plaintiff's promise to abandon his legal
right to use tobacco and alcohol was sufficient consideration to enforce the contract.
Rule:

Baehr v. Penn-O-Tex Corp (p. 47)

Issue:
Fact: Gas station. Lessee couldn’t pay rent.
Holding:
Rule:

Dougherty v. Salt (p. 54)

Issue: Whether there was any consideration for the promised payment (from
aunt to Charlie)?
Fact: Aunt promised Charlie $3000 in printed form. Trial court said Charlie
should win, trial judge set aside the verdict and dismissed.
Holding: The promise was an unenforceable promise of an executory gift. No
consideration -- gratuitious
Rule:

Two possible approaches to the document in Dougherty:

1. FORMAL WRITTEN DOCUMENT -- 4 corners approach - creates an
unambiguous approach - more predictive
2. Contextual (pragmatic) - look beyond it; see the context
Ways to solve the problem for Charlie:
1. Make a will
o Formality
o Could revoke
2. Trust
o Might have to go to lawyer
o Could be revocable
Dougherty v. Hamer: Why did Hamer win and Charlie not?
Hamer Dougherty
Formality Letter Printed form
Motive Refraining from Nice boy?
drinking/smoking?
Identity of P
Elapsed Time Suit right after aunt died
Consideration w/in Indicated behavior was No condition
the condition

-EISENBERG- on consideration…
• administrative problems with donative promises
(radin disagrees)
• donative promises are more likely to be less deliberative
 • fades out if you have ingratitude or improvidence

Plowman v. Indian Refining Co. (p. 64)

Issue:
Facts: Company promised to pay one-half salary for life when economic
conditions demanded that they let the workers go. When the company
Holding: The court held that there was no valid contract for the court to pay
the employee one half salary for life – no consideration, gratuitious. Court
rejects reliance (promissory estoppel) here.
Rule:
III. Offer and acceptance (meeting of the minds)
Classical doctrine test = did the minds meet?
Offer and acceptance labels need to be applied
K = element of futurity
Bilateral K = reciprocal commitmentl exchange of promises.
Classical K making goes something like…
1. parties engage in prelim negotiation
2. on party (offeror) makes an offer – direct, complete proposal
3. other party then has the power of acceptance – if acceptance is provided,
then K comes into being
Two defense to contract formation:
1. I never made you an offer
2. Even if I did, you didn’t accept properly

Lonergan v. Scolnick (p. 162)

Issue: Whether the K existed/entered into?
Facts: P says that D entered into K to sell some land for $2500.
Holding: Court held that specific performance was not required. Letter was not
giving P exclusive offer.
Rule: There can be no K unless the minds of the parties have met and
mutually agreed upon some specific thing.
• Whether an offer has been made or not is often decided by the courts
(use of the word “offer” is sometimes not even enough)
• Common law has held that offer and revocation must be
communicated to be effective, although sometimes an acceptance is
treated as effective as soon as dispatched.
Mailbox rule- *deposited acceptance” – is that offer/revocation is effective as
soon as dispatched. Justified in terms of the offeror’s designation of the post
as an agent of communication of acceptance. Later cases rejected this – focus
on the practical need of the offeree to have a firm basis for action in reliance
on the effectiveness of her acceptance once it had been dispatched.
→Mailbox rule is NOT applicable in situations in which the offeror has stated
(expressly or by implication) that the offer must acceptance must be received
to be effective. Underlying rationale: the offeror is the master of the offer
Technology:
-writing formalities
Contract formation:
a. early – lots of time to revoke
b. late – K not formed until done

Normile v. Miller (p. 171)

Issue: Whether changes to the terms of a contract for sale of property
amounts to a rejection/c.offer or modification of an existing option K offer?
Fact: Normile + Kurniawan signed written offer to purchase prop. K was
returned signed by D with substantial changes to the terms. N wasn’t sure,
Byer (realtor) took the K to another buyer (Segal) who accepted. Normile then
attempted to accept, but was notified that it was too late after an attempt at
acceptance. Normile claims he had an option K.
-change in terms was a c/offer (rejection of seller’s offer)
Holding: Court held that K can only exist w/meeting of the minds on all terms.
Meeting of the minds requires assent to the exact terms – if they change Segal
has the valid/binding K.
Rule: Changes to K (terms) amount to rejection; When you don’t accept
something, it lapses. Changes to terms defeat meeting of the minds
stipulation. Revocation does have to be communicated, but can be done
indirectly.

IV. Acceptance by performance (unilateral K)

• Unilateral contract – when the offeror should offer to exchange a
promise of a future performance only in return for the offeree’s actual
rendering of performance rather than her mere promise of future
performance. The gift of a promise in exchange for the performance of an act.
Performance = assent AND consideration necessary to bind the offeror.
o Maximum protection for the offeror (since offeror is not bound
until/unless performance is received)
o Risky for offeree since offeror can revoke contract before
completion of performance
 Under classical theory, there would be no remedy really for
the offeree in that situation bc K never came into being
(offer revoked beforehand) (p. 178)
- courts now use unilateral contract analysis to enforce liability by
imposing liability on an offeror in cases where no promissory acceptance
was invited or required. ???
- under classical theory, no protection for offeree who relied on a promise
if no option
Petterson v. Pattberg (p. 179)
Issue: Whether a unilateral contract between two parties existed where P was
informed of revocation when he attempted to complete performance and had
relied upon the K?
Fact: Petterson was owner of prop in Brooklyn, Pattberg was owner of bond
executed by Petterson on this prop (mortagage). D made agreement to allow
payment of remaining balance on mortgage at reduced rate. Petterson came
to Pattberg’s house within specified time and tried to pay the balance. D then
said that he had sold the mortgage. D refused to take the money. Petterson
had contracted to sell property free/clear of the mortgage.
Holding: Letter from Pattberg to Petterson was a unilateral K. Offer to enter
into unilateral K must be withdrawn before the act requested has been
completed. D withdrew offer before money was tendered.Court found that no
contract existed which could be breached/no damages for P.
Dissent – fundamental injustive
Rule: Unilateral contract is not created until full performance is tendered and K
can be revoked at any point prior to this time since K isn’t created until that
point.

V. Formalities
Functions that legal formalities serve (acc to Fuller, p. 52):
1. evidentiary – providing evidence of the existence and purport of the K in
case of controversy
2. cautionary – acting as a check against inconsiderate action
3. channeling – mark or signal the enforceable promise – simple, external test
of enforcibility
- despite the end of the seal, consideration sometimes serves these functions
• statute of frauds isn’t enough to make promise enforceable –
also need consideration! (opposite is also true – if consideration but doesn’t
meet SoF, then no K)
• courts have become lenient on the SoF
Statute of Frauds – see Restatement beginning p. 305
If you are going to apply it, ask these questions:
1. is the K one of the types to which the SoFs applies?
2. Is the SoFs satisfied? (written statement, signed by the D, etc)
(3. if no to 2, are there other factors (such as performance or reliance by the P
that might invoke an exception to the statutory bar?)
Crabtree v. Elizabeth Arden Sales Corp (p. 298)
Issue: Whether parol evidence is sufficient to establish an enforceable
employment contract under the statute of frauds?
Fact: Crabtree negotiated an agreement with E. Arden for position as sales
manager. Evidence of this negotiation and agreement consisted of a memo
recorded on a telephone order, welcome telegram, and a payroll change
request signed. D said no increase in pay at appropriate time. P sued for
breach. D claim statute of frauds prevents enforcement.
Holding: Court held that the contract exists and is enforceable against the D.
Rule: Parol evidence may be used in combination with oral testimony to
establish the existence of a K.
Two threshold requirements established:
1. signed writing must itself establish a contractual relationship between the
parties
2. unsigned writing must on its face refer to the same transaction as the
signed writing
Section 5: Alternative Basis for Legal Enforcement

I. Promissory estoppel
• Not traditional – unbargained-for reliance substituted for consideration
• Reliance as a means of proving contract exists
• Relying on a promise that cant become a contract
• Very controversial because it really tears apart
• This is out of place, but Section 90 - comment D thinks that a promise
is a contract (any contract remedy would be fine) – remember that
doctrines of mitigation apply to damages!
• Also, dealings between family members usually don’t have to
conform to bargain theory – legal obligations based on relationship of
parties (promissory estoppel and restitution have been used)
• Equitable estoppel – applies where one party has made misstatement of
fact, not promise – courts seem to believe that estoppel of either variety
can be based on conduct as well as express promise
Four things..
1. Promise
2. Promisor should reasonably expect induces reliance
Of definite and substantial character (Removed from require, but still
considered)
3. Does induce reliance on part of promisee or a third party
4. Must enforce to avoid injustice (detrimental reliance)

Wright v. Newman (p. 80)

Issue: Whether, in the absence of a written contract, promissory estoppel may
be used to enforce a promise on the basis of reliance and justice?
Facts: Bruce Wright acted as father and provided child support for son of
Newman. He is not father. He then stopped paying. Newman seeks to make
him pay. No written K.
Holding: Court thinks that there is a promise, but it is implied
Dissent: he hasn’t paid for 7 years!
Rule: Promissory estoppel prevents promisor from reneging on promise where
the promisor should have expected that the promise to rely. Consideration
may be found in any benefit accruing to the promisor ot any reliance, loss,
trouble, disad, or charge imposed on the promise.

Allegheny College v. National Chautauqua County Bank (p. 85)

Issue:
Facts:Mary Yates Johnston promised $5000 30 days after her death for a
scholarship fund. $1000 was paid in Dec 1923 while she was still alive. Six
months later she took back her promise and then died. Estate didn’t pay,
college seeks payment.
Holding: Court held that the duty of naming scholarship fund after her was
sufficient consideration (resulting in bilateral agreement). Court upheld K,
required estate to pay.
Dissent: Allegheny college was not required to do anythgin…no acceptance
and no K.
Rule:

• Commercial – initially PE was confined to noncommercial sphere x

employee benefit/pension cases, but now it has expanded to include
commercial promises

Katz v. Danny Dare (p. 102)

Issue: Whether PE can be invoked in a commericial context where an
employee claims promise of pension must be enforced?
Facts: Katz filed suit for pension payments from DD. Katz chased a robber and
was struck in the head. When he came back, he had problems working, so
boss offered him a big pension with part time employment. BoDs adopted
resolution. K claims he would have not retired without pension and relied on it.
DD guy (Shopmaker) says that he would have been fired otherwise. K began
working for another company after retiring, then checks from DD decreased.
Holding: All three elements of PE are met here, enforcement of pension
necessary.
Rule: Three elements necessary to invoke doctrine of PE: (1) promise; (2)
detrimental reliance; (3) injust can be avoided only by enforcement

II. Restitution (no promises)

• Grounded in K law, but separate now – implied contracts, founded in
unjust enrichment; classical K law doesn’t recognize
• Basis of liability: a person who has been unjustly enriched at the
expense of another is required to make restitution to the other”
Two types:
1. implied-in-fact – parties actually agreed to this
2. implied-in-law (quasi K) ( restatement rejected this terminolory – called
restitution) – can be used in K situations, but also other ways (like fraud or
conversion of prop) – an obligation imposed by law without regard to either
party’s expressions of assent
Rest on legal fiction arising from considerations of justice and equitable
principles of unjust enrichment – “constructive contracts” - legal fiction -- treat
the case as if this were true in order to get "right" result
• Remedy in modern courts = constructive trust or accounting (equitable
remedies)
Credit Bureau Enterprises v. Pelo (p. 118)
Issue: Whether a party who has received a benefit from another is obligated to
pay where he did not make a promise to the other party?
Facts: Pelo was taken to hospital because he made threats of self harm.
Magistrate had him detained (involun) for 48 hours. He was forced to sign
release form. Judicial hospitalization referee determined that the required
elements for involuntary hospitalization were lacking.
Holding: Pelo is liable for the hospital bill due to restitution – express K isn’t
even needed (hospital release form).
Rule: Where a person performs services for antoher which are known to and
accepted by the latter, the law implies a promise to pay for those services.

III. Promissory Restitution (late promises)

• Classical theory would reject – a promise for benefits previously received
was not binding bc the benefits were past consideration (although some
exceptions)

Mills v. Webb (p. 146)

Issue: Whether father was obligated to provide compensation for his son’s
care?
Facts: Levi (son) returned from sea very ill. P took him in (he was poor and in
distress). Father wrote letter promising to pay for expenses.
Holding: Father has no obligation to pay. No consideration for letter promise.
He would have if the child had been a minor.
Dicta: People should choose the moral route, not be coerced into moral
obligation by law.
Rule: This is classical theory.

Webb v. McGowin (p. 151)

Issue: Whether a promise can be enforced where consideration was for past
benefit?
Facts: Webb was working and was going to drop a 75 lbs block of wood. W saw
Mc and was forced to divert the block by holding on to it.. W fell with the
block. M wasn’t injured, W was crippled for life. M then agreed to care for W in
consideration for his actions. W received payments until M’s death. W is
bringing suit against estate to continue the payments. Some assumptions:
o If you could have promised as you were falling, you would
have
o Presumption that if you had been able to bargain, you would
have done it
o Material benefit
Holding: Court loosened the consideration doctrine and ordered the estate to
pay.
Rule: Exceptions can be made to past obligation rule.
• Material benefit rule: if a person receives a material benefit from
another, other than gratuitiously, a subsequent promise to compensate the
person for rendering such a benefit is enforceable.
FULLER AND POSNER – trying to justify the doctrine that certain promises
based on moral obligation are neforceable
 • Fuller –pragmatic rule? add one half and one half = 1--- analogy for
moral consideration + promise = legal enforcement ? (p. 156)
• Posner- has a different explanation for benefit rule
 If you promise to pay that has been discharged, you can still
be held
o Past legal obligation -- reputational
 If you agree to pay a debt that you would not otherwise
have to pay, other people will deal with you -- signal
o Interdependent utility function - depends on another
o Applies to gratuitious promises
Section 6: Evolution/Expansion of Traditional Picture
of K Formation
______________________________________________________________________________

I. Limitations on revocability of offer

Aside: big issues: Power imbalance, info costs, reputations, repeat
players

A. Pre-acceptance reliance
“offeror is the master of the K”
• Courts don’t like to interpret this
• If no option K, classical theory will not protect an offeree who relied on
an offer she had not yet accepted
Two ways to win under classical theory:
1. Earlier acceptance
2. Option contract – separate covenant not to revoke for specified period of
time – when offeree/vendee gives the offeror some consideration to hold
open the offer open for a stated period of time (irrevocable under
classical theory)
o Both parties have to know
o Has to be clear

James Baird v. Gimbel Bros (p. 190)

Issue: Whether a conditional contract was created between a sub and a
contractor?
Facts: D (sub) sent bid to contractors that was underestimated by 50 % for
deliver of linoleum. On 12/28, sub contacted all contractors that its bid was
mistaken. Contractor had already made bid which was accepted 12/30
including the sub.
Holding: Acceptance was not timely. No contract existed because the bid was
not an option and acceptance of offer was too late.
Rule: Sub is not bound to contractor by use by contractor of bid. No contract until
acceptance of bid.
Judge Hand says (and most other courts agree): mere use by a general contractor of
one particular sub’s bid does not constitute acceptance of the bid, forming a bilateral
contract.

Drennan v. Star Paving Co. (p. 193)

Issue: Whether the sub’s bid constitutes an offer? Whether P’s reliance on D’s bid
makes D’s bid irrevocable?
Facts: P is contractor who received D’s (sub) bid + it was lowest. P was awarded the
K. D then told P that he couldn’t do it for bid price (doubled his estimate).
Holding: No enforceable option or bilateral K was created, however PE means that D is
bound. D’s promise was a promise on condition expressly or by implication
Rule: PE can be used to force subs to perform under bid to prev injustice where
revocable wasn’t specified and bid wasn’t unreasonable.
Hand says: Offer is not a promise. Offer doesn’t become a promise until consideration
is given.
• Subsidary promise – promise created to prevent injustice; consideration is furnished
by part performance or tender.
• Contractor is not allowed to delay accept of sub’s bid once awarded the K
Ways this could have been avoided:
1. If D had said expressly in his offer that it was revocable at any time, he probably
would have prevailed (has been exception to this, but…)
2. If P knew error or reasonably should have expected error (i.e. amount so out of
whack), then P couldn’t justifiably rely on the sub’s bid
• Most people think that Baird and Drennan directly contradict – Drennan has
prevailed – subs are usually bound absent some other condition
Radin says Drennan means: sub is bound when bid is submitted (if you know
that the general contractor is relying), but the general contractor is not bound
- subsequent decisions have affirmed that PE is used to protect
general contractors against subs, but not subs against general
contractors.

When will PE not work:

1. Reliance doesn’t make sense (not reaonable -- should have known there
was a mistake)
2. Inequitable behavior or general (n2 p 198)
a. Bid shopping – trying to find another cheaper sub while holding
other sub bound
b. Bid chopping – attempting to renegotiate w/ bidder to decrease K
price after being awarded the K
3. Not even an offer

Best rule (p. 201) was found to be the both-parties-are bound-or-neither-is-

bound approach – so both sub and general contractor would be bound when
the sub’s bid is used on two conditions: (1) sub bid is responsive to the needs
of the K and (2) sub is financially or otherwise capable of performance.

B. Pre-acceptance reliance on promise

Pop’s Cones v. Resorts International (p. 208)
Issue: Whether PE may be invoked where an offer was never specifically
made?
Facts: Taube (owner of Pop’s) started negotiating about opening tcby. She was
told by RI that they were committed to K w/her. She was told to put her stuff
into storage + ended her other lease. She was given a cart to try it out. She
was then not given a K.
Holding: Court reverses summary dismissal (says there might be a claim)
Rule: Four elements of PE (in NJ): (1) clear + definite promise; (2) promise
made w/expectation that promise will rely; (3) promise must actually rely; (4)
detriment of def and substantial nature must be incurred due to reliance.

II. Relaxation of explicit mutuality of obligation

Mutuality of obligation - both parties or neither party has to be bound;
being bound means that each party had to give up something
Problems generally:
• Problems for distributorship problems and requirements and outputs K
(posner's case)
• Requirement contract - promise to buy an entirety of our need from X
(one source of supply)
o Causes problem under classical rule -- looks like no requirements
for buyer (K is not good then)
A. One-sided business commitments
• Court can find that terms are implied by law – made part of an
agreement by operation of the rules of law (not agreement of parties
themselves)
• Implied in fact is when parties agree to in some meaningful way

Wood v. Lady Duff-Gordon (p. 432)

Issue: Whether a mutuality of obligation existed in an exclusive right to
market contract?
Facts: Lady Duff-Gordon was a creator of fashions. P was supposed to have
exclus right to place her endorsement on designs of others+ exclus rt to place
her designs on sale and license others to market. He claims she breached
when she placed her endorsements w/out his know + withheld profits. She
says no mutuality + no K.
Holding: Mutuality of obligation is implied. K did exist.
Rule: A promise may be lacking, but the whole writing may be instinct with an
obligation imperfectly expressed. Implied obligation to use reasonable
efforts will prevent a somewhat indefinite promise from being
illusory. (courts have continued to hold this)

• Eisenberg says that agreements in which one party makes only a

nonbinding illusory promise ought to be enforceable according to their own
terms
o Party who has made the non-illusory promise has “bargained for a
chance”

Locke v. Warner Bros (p. 444)

Issue: Whether failure to perform a pay or play contract in good faith
constitutes a cause of action for breach or fraud?
Facts: She settled for 450, 000 + some prop. She had pay or play ontract with
WB. She found out that Clint was funding the contract. It appeared that WB
had no intention of playing. She got mad and claims breach and fraud.
Holding: Court held that there were issues of material fact that needed to be
tried on the breach and fraud allegations. Court found an implied covenant of
good faith and fair dealing. Fraud can be inferred.
Rule: Implied covenant of good faith sometimes used by courts to protect the
parties’ rights to receive the fruits of the K.
Restatement 205(1) – subterfuges and evasions violate the obligation of good
faith even though the actor believes his conduct to be justified.

B. Requirements and output contracts

Requirement K – Seller entitled to reliance w/ this K
Output K- (2-306(1)) forbids the seller from selling any of his output to any
other buyer so as to give the buyer a reasonably assured source of supply.
Empire Gas Corp v. American Bakeries (p. 455)
Issue: Is the requirement K in this case a buyer’s option K, entitling the buyer
to purchase all he needs of the good in question on the terms set forth in the
K, but leaving him free to purchase none if he wishes provided that he does
not purchase goods from anyone else and is not acting out of ill will toward the
seller?
Facts: AB entered into a requirement K with EG. AB never actually bought from
EG because it decided not to convert its fleet to propane.
Holding: “More or less” clause of K does not include none (quantity
unreasonably disproportionate to any stated estimate). Demanded implies
only overestimation, need to have valid business reason – AB gave no reason.
Jury misinstruction was also harmless. Court affirmed the jury verdict for the
plaintiff.
Rule: Burden of proof of buyer’s bad faith falls on the seller.
• Usually parties work this out to maintain a business relationship
Has some examples…valid v. invalid reasons
• Valid: factory shut down, boiler replacement
• Invalid: want to buy it somewhere cheaper, harm the seller (competing
in another market)

III. Relational K – Macneil (CS p. 193)

• Classical contract sounds like everyone is the market
• Contracts that are dropped on us are not relational - those where
businesses engage with each other are relational
• Two branches:
o Economic
• If we consider partial integration and long term view of
efficiency change?
o Non-economic branch
• If we factor in business, social, etc?
• Two things become important:
 o Unknowns - market could change
o Risk-sharing
o Conflict resolution built in

IV. Qualified acceptance – battle of the forms

• Qualified acceptance is a counteroffer under the classical rule
• Mirror image rule - cant have an acceptance unless it is exactly the
same
o Otherwise, counteroffer
• Last shot - boilerplate in the last form will be what is in the contract
• Forms = increase eff, decr personalization, increase risk
• Terms can be boilerplate or dickard (important)
Brown Machine v. Hercules (p. 231)
Issue: Whether the indemnity clause was included in the K?
Fact: Seller's form has 16 paragraphs on the machine and 15 boilerplate
paragraphs (#8) is the indemnity clause. Buyer's form - written purchase
order w/ No indemnity clause + Expressly conditional - my terms only. Seller
didn’t return the buyer's form, but sent acknowledgement back - invoice for
deposit
Holding: Hercules PO included express limitation to the terms of its offer.
Indeminification provision did not become part of the K. Hercules isn’t
responsible.
Rule: See UCC 2-207(2) – additional terms become part of the K unless (a)
offer expressly limits acceptance to terms of the offer (b) they materially alter
it or (c) notification of objection to them is given w/in reason time.
• If they had said "our terms only" -
o If they perform, go to 2-207 (3) - acted as if there was a contract,
so the terms are only those that are in common (knock out rule)
o If they don’t perform, no contract
2-207 CHANGES (p. 252)—p. 196-197 of UCC book
OLD 2-207 NEW 2-207 (and 2-206(3))
(2)Three prong test for additional 2-207(1) would become 2-206(3)
terms, they become part of the K, 2-207(2) w/ 3-pring formula for
UNLESS: dealing w/add terms would vanish
a. offer expressly limits accept of
terms of the offer
b. materially alters it
c. notification of objection has/is given
w/in a reason time
• Seems to be more difficult to GOAL: to avoid favoring either the first
get saddled with a K and terms you or the last shot- no preference – uses
don’t want here (mirror image rule) – the same test for each
revision would make it more likely • Gives discretion to courts in
that unapproved clauses would be terms of whether verbal or nonverbal
allowed, but modification is more behavior may be claimed to be an
difficult under old (considered more agreement to another’s record.
c/offer?) • Attempt to deal with changes in
the way contracts are formed (lack of
review by humans, more electronic
transfers)
• Rejects mirror image rule
*** key application in the Klocek case – all terms get knocked out that don’t
agree, so only obligation would be to send the computer

V. Rolling Contract (money now, terms later)

• Shrinkwrap (intended to be effective as soon as the buyer uses or
unwraps the product) or click through terms
Hill v. Gateway 2000 (p. 255)
Issue: Whether terms that are provided after performance (or delivery of
goods) are binding?
Facts: Hills received a computer with K including arbitration clause. They kept
the computer for more than 30 days before complaining.
Holding: When Hills kept computer for more than 30 days, they accepted
Gateway’s offer. Hills had to arbitrate.
Rule:
- ProCD held that K formed at sale – only K terms are known
- Courts says that buyers accept terms all the time w/out disclosure and
the approve or return situation promotes efficiency
- Court says three ways that shoppers can figure out terms: have seller
send a copy of terms before buying; consult public sources; inspect
documents after delivery (return if necess before 30 days are up)
- Arbitration eliminates CALS + ensure there is no public record of any
decision
Relevant Restatement sections:
• 2-204
o Performance + opportunity to see the terms
o Doesn’t reject within reasonable time (i.e. sending it back)
• 2-207
o Performance = K
o Additional terms are proposed mod
o Not effective unless agreed
Klocek v. Gateway (p. 259)
Issue: Whether standard terms included in shipped computer box were part of
K between K and G?
Facts: P claims breach of K and warranty. Gateways says K P has to arbitrate.
Standard Terms contains this clause which was shipped with the computer,
gave P five day period to send computer back.
Holding: Court held that K did not have to arbitrate since the purchaser is
actually the offeror and G = offeree. Offeror, since not a merchant, has to
expressly approve any change in terms. Keeping the computer past five days
was not enough to demonstrate acceptance of the standard terms, so they are
not part of the K.
Rule: Outcome of these cases depends on who is considered the offeror/ee
according to the court.
-modification of UCC 2-209 would result in same outcome

UCITA- criticized for benefiting commericial interests, harms consumers +

smaller businesses
- only two states have enacted
Random Radin: If late formation, then we need to make a law about what is a
reasonable opportunity to see the terms and reasonable opportunity to return
the goods.

VI. UCC Statute of frauds

• represents a relaxation of classical rules (2-201) – no meeting of the
minds
Bazak International v. Mast (p. 333)
Issue: Whether oral agreement is enforceably under the merchant’s exception
to the SoFs?
Facts: Textile merchants are arguing about oral agreement to sell fabric under
the “merchant’s exception” (2-201(2))
Holding: PO forms signed by buyer, not seller, and sent to seller and retained
without objection fall under exception – are enforceable.
Dissent says that PS are not enough to indicate complete agreement (or
satisfy SoFs); writings were ambiguous, Pos = offers; hurts SoFs.
Rule:
• Court also rejects parol evidence in the threshold issue of whether
documents on face satisfy SoF
• SoFs requires confirmation – not clear what the explicit confirmation has
to be..p. 342
•
VII. Incomplete bargaining
Quake Construction v. American Airlines (p. 278)
Issue: Whether of a letter of intent to award a K to Quake is an enforceable K?
Facts: Jones told Quake that it would get the K for expansion of some facilities
at O’Hare. Jones sent letter of intent.
Holding: Letters of intent may be enforceable if the parties intend them to be
binding. This letter is ambiguous, especially as to the intent of the parties.
Remanded to the trial court.
Rule: Factors to consider in whether parties intended to reduce their
agreement to writing: whether type of agreement is usually put to writing,
whether agreement includes few or many details, whether the agreement
involves are small or large sum of money, whther the agreement requires
formal writing for full expression of the covenants, and whether negotiations
indicated that a formal written document was contemplated. Other factors
can also include: where the negotiating process was abandoned, the reasons it
was abandoned, and the extend of the assurances, and the other party’s
reliance
• Both UCC and Restate allow for parties to be bound contractually when
they have reached agreement in principle.

Two types of incomplete bargaining:

1. the agreement to agree – when the parties have reached agreement on a
no of matters, but have left for future agreements one or more terms.
2, formal contract contemplated – when the parties have reached agreement
in principle on at least the major provisions of they agreement, but they
contemplate a formal written agreement.
Section 7- Breach (How should the K be
interpreted?)
___________________________________________________________
I. Form v. substance, subjective vs. objective
Form: the expression of an agreement in a particular medium and with a
particular indicium of assent; doctrines that are supposed to limit us and
shape outcome
Substance: is there actually a deal?
Example of blur: definiteness, requirement of consideration
Subjective – if the parties attributed materially different meanings to K
language, no K was formed
Raffles v. Wichelhaus (p. 350) – “Peerless Case”
Issue: Whether an enforceable contract exists where each of the parties has a
different interpretation of the terms?
Facts: Two merchants entered into a K for the sale of cotton to arrice ex
Peerless from Bombay. Two ships named Peerless were sailing from Bombay –
one in Oct and one in Dec. The seller thought Dec, buyer thought Oct.
Holding: No consensus, no binding K between them. (subjectivist interp)
Old Objective – Holmes based his argument for obj on two grounds: (1) sub
made enforcement of Ks too difficult (2) external method was fair bc one
should expect his/her words to be interpreted acc. To normal usage --- words
and conduct should be interpreted in accordance with the standard of a
reasonable person familiar with the circumstances.
Modern Objective approach (response to argument that Old Obj could
result in a meaning that neither of the parties intended): court should answer
two questions: (1) whose meaning controls the interpretation of the K? (2)
What was that party’s meaning?;
• Restatement §201 adopts this approach – mutual understanding of
parties controls
• If the parties don’t agree, K should be interpreted according to the
meaning of one party if the other party either knew or had reason to know of
the meaning attached by the former
• If neither party knew, then Raffles applies – no K exists bc of the
absence of mutual assent

II. RULES OF INTERPRETATION (p. 358)

1. nosciture a sociis – a word in a series is affected by the other words in the
series or a word may be affected by its context.
2. ejusdem generic – a general term, when added to a specific one, will include
only things that are like the specific one (i.e. restrictive interpretation)
3. expression unius exclusion alterius – if one or more specific terms are listed,
other items, although similar in kind, are excluded
4. ut magis valeat quam pareat – an interpretation that makes the contract
valid is preferred to one that makes it invald
5. omnia praesumuntur contra proferentem- if a written K contains a word or
phrase that is capable of two reasonable meanings, the interpretation which is
less favorable to the party who drafted the K will be preferred.
6. interpret contract as a whole – a writing or writings that form part of the
same transaction should be interpreted together as a whole.
7. “Purpose of the parties” – the principal purpose of the parties is given great
weight when determining meanings. Used with caution. If the purposes of the
parties are obscure, court may rely on plain meaning.
8. specific provision is exception to general one – if two provisions are
inconsistent with each other, the specific provision will be deemed to qualify
the more general one (to provide exception to).
9. Handwritten or typed provisions control printed provisions – based on the
idea that language written or typed into K is more recent and reliable.
10. public interest preferred – if PI is affected, interpretation which favors PI
will be preferred.
11. (Restatement § 203(a)) court should prefer an interpretation that makes
an agreement reasonable, lawful, and effective to one that produces an
unreasonable or illegal or ineffective result.
• Also possible that a court will conclude that failure to agree on a
material term means that there is no K

III. Varieties of evidence of meaning

Frigaliment Importing Co v. BNS Int Sales Corp (p. 360)
Issue: Whether a K which calls for “chicken” should be interpreted as per the D
or the P? Does K exist if parties have different meaning?
Facts: P and D differ on what “chicken” means.
Holding:D prevails since P could not meet its burden of showing that “chicken”
was used in a narrower rather than borader sense.
Rule: Party with the more specific interpretation has burden of proving that
the term was used in the more narrow sense.
Plain meaning rule – when courts say that the plain meaning should govern
unless term is ambiguous – only look within the four corners
(classical/formalistic approach)
o Been rejected on the argument that words have more than one
meaning, but courts still use
o Relevant trade usage can overcome plain meaning, but
statutes/admin regs generally aren’t enough

IV. Parol evidence rule

Parol evidence rule – involves the admissibility of evidence of oral
agreements, but also may apply to some written – it operates to exclude
evidence, it has the effect of preventing one party from introducing into court
extrinsic/collateral evidence of matters not contained within the written
agreement of the parties
o Any admitted evidence has to be relevant
Thompson v. Libby (p. 384)
Issue: Whether parol evidence is admissible to show a warranty within a
contract for sale where the contract contains no evidence of this warranty?
Facts: D sold P logs. D offered a warranty of the quality of the logs.
Holding: Court erred in admitting parol evidence since warranty is not
collateral to K, it is part of it. New trial was order.
Rule: It is presumed that the whole engagement of the parties is reduced to
writing of K, where this is not the case, parol evidence may be offered to fill in
the gaps.Parol evidence cannot speak where writing is silent.
• Integration – entire agreement embodied in the document (this is
presumption – buyer in this case argued it wasn’t, and lost)
o Complete – writing that is intended to be a final and exclusive
expression of the agreement of the parties (ct said in Thompson
that K= complete)
o Partial – a writing that is intended to be final, but not complete bc
it deals with some bu not all aspects of a transaction between
parties
o Four corners – use only the written, formal K to determine if
integrated
o Merger clause – states that the writing is intended to be final and
complete (ensures complete integration)
Ambiguity: latent or patent
Exceptions to the rule….(p. 388)
1. the parol evidence doesn’t apply to evidence offered to explain the
meaning of the agreement
o Classical – generally admitted parol evidence for explanatory
purposes only if the writing appeared on face to be ambiguous
o Modern – more likely to admit parole v to show that the language
used in the agreement has special meaning
2. doesn’t apply to agreement, whether oral or written, made after the
execution of the writing
3. doesn’t apply to evidence offered to show that effectiveness of the
agreement was subject to an oral condition precedent
4. doesn’t apply to evidence offered to show that the agreement is invalid for
any reason such as fraud duress, undue influence, incapacity, mistake, or
illegality
5. doesn’t apply to evidence that is offered to establish a right to an equitable
remedy, such as reformation of the K
6. doesn’t apply to evidence introduced to establish a collateral agreement
between the parties.
→ adopting idea that words are not enough only hurts individuals (helps
businesses who are able to litigate more readily)
→ rule is perpetuated by distrust of juries
UCC + Restatement allow for usage of trade, course of dealing, and course of
performance evidence – some courts allow some do not.
V. Implied warranties
Three types:
1. Express - says I promise that this boat can go 25 miles an hour…written
or oral concerning the quality or nature of goods (2-313)
o Can prove through words, description, sample, or model
o Sales talk or mere puffery does not give rise to express warranty
2. Implied warranty of merchantibility - the buyer (if the seller is a
merchant) is the quality that is to be expected in the trade for a good of
that kind (2-314)
o Pass without objection in the trade
o Fit for ordinary purposes for which such goods are used
3. Implied warranty for a particular purpose - relying on skill,
judgement etc for sale of goods
(2-315) – doesn’t have to be defective, just not good for purpose

Bayliner Marine Corp v. Crow (p. 485)

Issue: whether there was sufficient evidence to support the trial court’s ruleing
that the manufacturer of a sport fishing boat breached an express warranty
and implied warranty of merchantability and fiteness for a particular purpose?
Facts: Crow bought a boat to go fishing. It need to go a certain speed. The
boat he received did not go the speed he wanted it to. He tried to get money
back, but he had put lots of hours of use in.
Holding: Crow says express warranty in brochure. Court says it is just an
opinion, not warranty. Court rejects implied warranties.
Rule:
o UCC 2-316 governs disclaimers, modification, exclusion of warranties –
three important proposed changes:
1. disclaimer of the merchantability warranty must be made by a writing or
other “record” – →“remedial promises” made by sellers = express warran
2. disclaimer of fitness also requires an explicit statement that the seller
assumes no responsibility
3. “as is” disclaimers have to be conspicuous and in a writing or other
record in Ks w/consumers
Section 8: Breach (what constitutes actionable non-
performance?)
_______________________________________________________________________________
I. Concept of breach
Three situations in which non-performance is not breach:
1. bilateral K – one party fails, the other doesn’t have to perform
2. time hasn’t arrived, but likelihood of other party nonperformance is
substantial
3. performance is conditional + condition doesn’t happen
• Economistic law professor at yale
• Theory- should be analyzed in terms of insurance (like insurance) --
assumes people will have to pay for it
• These articles are supplementary - ways of looking at things that
enhances understanding
• Makes argument that consumers will demand to have warranties excluded/disclaimers
Why analogous to insurance?
• Insurance= you buy in case of a risk
• Warranty = purchase in case of risk - if risk happens you collect
• Ought to regulate like insurance (acc to priest)
• Manufacture is going to had off cost to consumer
• High risk people are bound to break it -- they benefit; low-risk are
paying money for high risk behavior/people

II. Material Breach

Jacob & Youngs v. Kent (p. 745)
Issue: Whether there was a breach?
Facts: P built a residence for the Ds. K included provision that plumbing work
use standard pipe of reading manufacture. P did not use all Reading pipe, but
instead used pipe of comparable quality. Omission of Reading pipe was not
fraudulent or willful.
Holding: Must balance consitency/certainty vs. fairness/justice. Measure would
be difference in value of pipes, not cost of replacement. P wins.
Dissent – P didn’t perform the K. P is liable for the breach. (classical view)
Rule:
• Economist would say that substantial performance (of the same value
and use) doesn’t matter in terms of efficiency
• Function is key to the economist -- good/bad faith DOESN’T matter to
him/her
o Increase transaction costs to figure this stuff out for no real reason
(of importance)
o Remedy tends to be the difference in market value unless there is
subjective value that is stated beforehand (possibly?)
• Will theory (classical position)- whatever details were bargained for
in the contract are to come to him/her regardless of how trivial
• Independent convenant theory - separate suits
 • Put together, the breach would result in two suits
• Two conditions (types of):
o Express
o Implied/constructed - makes covenants dependent
• A doesn’t perform, B doesn’t have to pay then
• If the thing they were supposed to do is collateral, then they remain
independent, have to perform
• If material, then the convenants become dependent
• Collateral - you have to sue independently
• Cardozo says if the defect is insubstantial -- forfeiture against the
breaching party
o Doesn’t like forfeiture result
• Restatement thinks (p. 759)
o Total breach = discharges other party from its duties
o Material = other party can suspend and wait for a cure
Also other tests (p. 760)
REMEDIES
1. Dimmuntion in fair market value
2. Suspension of your own performance (await cure),
then #1
3. Complete discharge - don’t have to perform

III. Anticipatory Repudiation

• Will theory-- you can plan to break a promise, but change your mind and
perform before the obligation is due
Flatt & Sons v. Schupf (p. 763)
Issue: Whether K was repudiated by P which justified non-performance by D?
Facts: Flatt seeks specific performance of real estate K made with schupf.
Holding: Trial court erred in granting summary judgement. P did not repudiate K.
Rule:
o Common law provides a right to retract a repudiation
o Must tell other party that it is treating the K as rescinded
Section 9: Avoiding Agreement (bad bargaining,
circumstances, policy)
Ways to get out of contracts: Purported Contracts

Bad Bargaining – something is wrong with the procedure of the parties’

interactions, this should not be treated as a contract because there is
something wrong with the procedure

Bad Bargains – something is wrong with the bargain itself, one side is taking
advantage of the other

Bad Circumstances – there have been underlying assumptions of the world as

a back-drop when the contract is formed but sitations have changed that
make the situations different
Bad Policy – the sovereign just doesn’t want to contract to let the parties do
something even if they parties want to enter into these, prostitution, killing

[There are other ways, claim there was no offer, no acceptance, it violates the
statute of frauds… but these are all additional concepts to end the contract.]
These can be used defensively or offensively – if the other party tries to
bring suit against you, then defensively you can bring these issues up, or you
can let them ride. Offensively you can sue someone else about the duress of a
contract and try to get restitution or damages for fraud.
Freedom of Contract is about the freedom of will:
a. anything that doesn’t come from freedom of the will has to
be part of the system too, you have to disallow things that
overcome a person’s freedom of the will by using coercion.
a. You cannot allow unfree transfers from coercion if you
want freedom of will
b. Clear cases of Unfreedom that fall out of the will theory in
the classical system
a. Duress
i. Torture
ii. Threats of death or GBH
b. Incapacity
i. Infancy
ii. Mental disability
iii. Delusion
c. Fraud
i. Lies
ii. Trickery
iii. Deliberate misinformation and manipulation
Less Clear cases for the Classical System (do not clearly fall into one category)
a. Grossly unfair terms
 a. Traditional theory is that you are not supposed to
inquire into the subsistence of the agreement (peppercorn
theory)
b. Subject matter that is off-limits (Public Policy)
a. Might be paternalistic and economically inefficient
c. Mistake or changed circumstances
a. Classical theory could think that the mistake is a clear
case where there is no meeting of the minds (Peerless), but
it is more difficult when it looks like one person is at fault, or
one person could have more easily found out if there was a
mistake
b. Changed circumstances could be easy, but it is more
difficult when it looks like one party did not plan ahead
enough for the circumstances to occur, what kind of risks
you should have taken into account, risk management

Duress MIGHT be able to be extended to the duress under economic coercion:

-but this tred lightly on the overlap between economic and philosophical
standings, this is a background moral commitment that we don’t have a
moral right to keep our jewelery collection, so we won’t think there is
duress involved if we have to let it go.
-so, duress is often defined by what we assume that we have a moral
right to, and then we must let this go because of force or circumstances

Expansion of Duress:
“Economic Duress”
“Undue Influence” – I was so in love that I had to do this because I was
crazily in love, this was his influence

Expansion of Incapacity: - what about being drunk, or under the influence of

drugs, or a severe lack of sleep, should the contract be valid when you signed
it but were incoherent?

Expansion of Deception: - there is a problem of actually lying to someone, or

knowing that they are basing their judgment on an inaccurate information
(Caveat emptor – the buyer beware and take the proper information that
is necessary for the information to be good)

I. Duress and undue influence

o Began as only between family members or those in a fiduciary
relationship – has expanded
o Classical doctrine - had to be threat of great bodily harm, death
o No definition of coercion -- economists think that it isnt
Totem v. Alyeska
Issue: Whether economic duress rendered the settlement contract between
two parties unenforceable?
Facts: Totem contracted w/Alyska – Totem was to transport pipeline materials
from Houston to Alaska. K was terminated bc of problems due to bad weather,
miscommunication of materials to be transported, additional cost, etc. Totem
need money or go bankrupt, so had to accept undercompensation via
settlement. Totem wants to rescind settlement since it was made under
duress.
Holding: Totem’s allegations, if proven as a matter of fact, could show duress.
(Remanded)
Rule:Duress exists where (1) one party involun accepts terms of another (2)
circumstances permitted no other alternative (3) circumstances were a result
of coercive acts of another party
- requires that wrongful acts or threats, intentionally cause party to enter
into particular transaction
- threat to breach K or withhold payment can be considered wrongful act
- economic duress means that the contract is voidable, not void—will be
binding unless disaffirmed + may be expressly or implicitly ratified by
the victim
- POSNER case: Selmer - if a party agrees to a settlement bc of a
desparate need for cash is not duress unless financial hardship is caused
by the other party (Selmer p. 534)
- This case could be distinguished from the posner case -- bad faith, etc
- Modern theory place less emphasis on free will – no agreement reflects
true free will

Three elements (REstatment § 175) for ec duress:

1. a wrongful or improper threat
2. lack of reasonable alt
3. inducement to K by the threat (threat doesn’t have to be illegal)
-atty threat = misconduct (p. 533)

Odorizzi v. Bloomfield School District (p. 535)

Issue: Whether undue influence was used to obtain resignation from K?
Facts: Odorizzi was a teacher at elementary school under K. He was arrested
on charges of homosexual activity. He was then visited by immed
superintendent and principal at his apt while in severe emotion
distress/exhaustion – they told him to resign. Charges were dropped. He wants
to rescind. He claims duress.
Holding: No duress or menace. No cause of action for fraud. No mistake of fact
or law. Court did find cause of action for use of undue influence.
Rule:Undue influence is persuasion which tends to be coercive in nature,
persuasion which overcomes the will without convincing the judgment –
overpersuasion – taking adv of another’s weakness of mind – taking a grossly
oppressive and unfair adv of another’s necessities or distress
Characteristics of overpersuaion:
1.discussion of trans at unusual, inappropriate time
2.consummation of the transaction in an unusual place
3.insistent demand that the business be finished at once
4.extreme emphasis on untoward consequences for the victim
5.use of multiple persuaders on dominant side against a single victim
6.absence of third party advisers to the victim
7.statements that there is not time to consult atty, etc
- Willing to call it fraud if there is a fiduciary relationship (relationship of
trust)
- Many cases of undue influence are due to the relationship
Domination to:
• Undue susceptibility
• Excessive pressure
• Results in weakness of will (domination)
What could have been done differently?
• No time
• Locale
• No of people
• No attorney

II. Lying and concealment

- Fraud = equitable recission, courts also recognized legal right of
recission – difference is pretty unimportant though…
- Two possible remedies now:
a. tort action for damages
b. recission – defrauded party would have to return any money or prop
received, so if that party doesn’t want to return, then wont seek
recission ALSO, if recission is not possible, then not an option
Syester v. Banta (p. 544)
Issue: Whether D is liable for fraud (and damages)?
Facts: P is widow. She was sold unbelievable amount of dance lessons. Jury
found fraud and awarded huge damages, including exemplary.
Holding: Court affirms jury verdict and damages.
Rule: see Restatement § 164
What was the fraudulent or material mispresentation?
• You can be a professional dancer
• You don’t need an attorney
• Implied promise (I am a qualified instructor) – gold
level?
- Classical rule- opinions are not actionable – modern law qualifies this
- Restatment says that opinion amounts to misrepresentation if the persosn
giving the opinion misrepresented his/her state of mind -- § 169 option is
actionable if…
o Person giving opinion is in a fiduciary relationship
o Person giving is an expert
 o Person renders an opinion to one who is peculiarly susceptible (age,
etc)
Damages – two rules in tort actions for misrepresentations:
1. out-of-pocket – P can recover the difference b/t what she parted with and
what she received plus consequential damages she suffered prior to discovery
of fraud
2. benefit of the bargain – P is to be put in the position she would have been if
the D had spoken truthfully
III. Unconscionability
• Substantive – more like paternalism; terms are too one-side-
fairness of the terms of the resulting bargain
• Procedural – like the transgression against will theory; bad
process – lack of choice by one party or some defect in the bargaining process
-You either have both or substantive only
-Unconscionability rarely when there is any bargaining-- Usually standard
adhesion forms
- courts have shown a lot of restraint when applying this

Williams v. Walker-Thomas Furniture (p. 566)

Issue: Whether K including cross-collateral clause was unconscionable?
Facts: Williams was a poor woman on gov assistance with lots of kids. She had
successfully bought and paid off several items from WT. They sold her a stereo
system using a K with a cross-collateral clause. She eventually defaulted and
they took all of the items she had purchased, even though she has paid in full
for them.
Holding: Yes, as a matter of fact, could be unconscionable – remanded.
Dissent – she knew what she was doing.
Rule:
- have to consider the circumstances when the K was made
What is unconscionable here?
- Add-on clause – cross-collateral clause
- Knew that she was poor
• Collateral- something that the company gets to
repossess if you don’t pay
• Court of appeals thinks that it is significant that the
company knew of her poor financial position – despite this
they sold it to her
• Absence of meaningful choice
• K terms that are unreason/unfavorable to the other party
On to economic analysis…why might not be fair for poor
• information asymmetry
• lack of alternatives
• delivery costs
• transportation cost (shopping cost)
Epstein says that these things that we see as oppressive K terms actually
allow poor people to enter in to Ks for things that would otherwise be priced
too high
• thinks he knows bc of the graph
• may not have perfect competition
- consumer protection legislation (p. 576)
Remedy for unconscionability
1. could say K is invalid
2. rewrite the bad part – make it reasonable

• if the court rewrites, there are monitoring costs (have

to make sure that it is changed/enforced correctly)
• problematic for courts to write Ks (wills)
• courts may not be better writer – not easy for the
court to do this accurately
• more risk has to be factored in with the possibility of
no K (knowing that the court can figure out what was going
on)
• could force people to live with unconscionable Ks bc
only alternative is to have it thrown up
• tolerate affront to will theory?
Can price be unconscionable?
• Ahern case (p. 573-574) – is unconscionable?
• Could be economic duress
• Fraud
Reynoso case (top of p. 573)
No just price theory – rarely cases with only overpriced as issue
• Our system doesn’t like just price restraint
• Difficult to figure out what markets look like

IV. Standard forms + “adhesion”

7 Characterisitcs of an adhesion K (p. 381)
Slawson argues that boilerplate not part of K (only purported Ks)
• Disconnect between the ideal and the reality of the K
situation
• Kornhauser – in this model paragraph – commodity model (K
as product) – p. 335
• Different from ordinary language
• Economic meaning is more specific…part of the
commodity/product
• Standard forms are a good thing once you understand
what you are actually buying in the form
• Against traditional understanding bc not bargaining
and not consent (only take it or leave it)
 • Information has a role in traditional K – minds didn’t
meet here too – traditional K has a lot of stuff about info and
know (who develops, who is resp – Hadley v. Baxendale)
• Most economists have this model
• Standard terms are norm – without cant customize
• Information in quireies would lead you to look at
market structure and wealth distribution
• Although you could custom more without this
(radin view)
V. Public Policy
- Restatement § 178- 179 speaks to this – says legis not judges – weigh a lot
of factors including:
o Nature of public policy involved
o The degree of resulting forfeiture
o Whether denial of relief would futher that policy
o In pari delicto – if both parties are engaging in wrongful conduct, the
court will not hel either party
Class example:
Murder for hire
Usury
Restraint of trade
Restraint of marriage
K to violate law
Interference with family

Questionable:
Exculpation of tort liability
Transfer of child custody
Donahue v. Federal Express (p. 466)
Issue:
Facts: Donahue was employee. Appellant employee called defendant
employer's attention to various improprieties. Thereafter defendant
supervisor, appellant's immediate supervisor, accused appellant of gross
misconduct. Appellant after failing to have his termination overturned by
defendant employer's Guaranteed Fair Treatment Procedure (GFTP), sued.
Holding: appellant could not sue for breach of the implied duty of good faith
and fair dealing, where the underlying claim was for termination of an at-will
employment relationship; defendant employer's grievance procedure imposed
no separate contractual duties on it; superior work performance could not
overcome at-will employment presumption.
Rule:
- some jurisdictions recognize public policy exception to at will doctrine
Remedy if K is against public policy
Let losses lie
Restitution – Restatement 2d 197, 198, 199
BABYSELLING
Posner says..
1. people should market what they like (why should state be
moralistic)
2. practical (blackmarket)

• all states say that you cannot purchase an adoption

Three categories:
1. commissioned adoption
2. paid adoption of “unwanted” children
3. “surrogacy” – commissioned adoption with specified genetic
material

VI. Mistake
Unilateral mistake
1. mistaken about the nature of the thing (one party only) –
other parties non-disclosure might be another doctrine --- 1-54 © -
determines who bears the risk of the mistake
2. One party makes mistake (not fault of other) – IL doctrine is
that the mistake has to be material, notwithstanding the exercise
of reasonable care, so bad enforcement would be unconscionable,
have to get them back to where they were
• 153 Rest 2d
• Contract was rescinded even though there was a
unilateral mistake (rare)- think reasonable care (relied on
specs)
• Balancing test
Will-Fred’s v. Metropolitan Sanitary District (p. 643)
Issue: Whether mistake renders K voidable?
Facts: Will-Fred’s submitted bid for rehab of water reclamation plant w/
deposit. Wil-Fred’s attempted to withdraw after bids opened – w/draw was
rejected – told they would be awarded the K.
Holding: Wil-Fred’s was granted recission + return of security deposit.
Rule: Restatement § 153 – requires that (a) enforce would be unconscionable
or (b) other party had reason to know of the mistake

VII. Changed Circumstances

Changed Circumstances – who has the risk?
3. Impossibility – Taylor v. Caldwell – music hall fire
4. Frustration – Krell-coronation of King
5. Impractibility – Mineral Park – excavation much more
expensive due to water

So three separate doctrines – but all about the same thing in a sense
• If we viewed all of this from risk allocation, we would ask two questions:
1. Who assumed risk?
 2. Who should bear risk?
• If we knew who assumed the risk, then we can assume that the risk was
included in the price…
• If no one took on the risk, move to the normative question - who should
o Economic analysis - person who can best protect the risk -- want to
give incentives for future assumption of risk
o Best cost avoider example -- want to price the risks into the K -
systemic rule(util)
o From non-economic view, a little more difficult to figure out
o If person dies, probably should be not be held? Although you can
insure anything…
Karl Wendt v. Int Harvester (p. 655)
Issue:
Facts: Wendt + IH signed agreement where Wendt was IH dealer. Economic
downturn drove IH out of farm equip business. Defendant corporations sold
their farm equipment division but did not terminate plaintiff dealer's contract
under the contract's terms. The court reversed the judgment for defendants
and remanded for a new trial on the issue of plaintiff's damages because the
district court erred when it instructed the jury on the defense of
impracticability of performance
Holding: Remanded.
Issue:
VIII. Modification of existing K
- Court has become lenient on this – see Restatement § 89 – promise
modifying is binding if:
a. mod is fair + equitable in view of changed circumstances
b. extent provided by statute
c. extent to which justice requires in view of material change in position

Kelsey-Hayes v. Galtaco (p. 688)

Issue: Whether breach occurred when D attempted to modify price after K
agreed to?
Facts: D + P contracted for castings. P says that price increases were agreed
to under duress, unconscionable, in bad faith, constitute unjust enrichment,
Holding:Court denied summary judgement for D.
Rule:
-one-sided modifications are presumptively improper- special circumstances
required
 RESTATEMENT SECTIONS
Restatement §21- can be legally boun to promise without expressing intention to be bound (w/out actual
intent)
Restatement § 32- unless lang otherwise, an offer may be accepted either by a promise of performance in
return or by an actual rendering of that performance.
Restatement § 35- unless there are circumstances to take it out of ordinary doctrine, if offer withdrawn
before acceptance, the acceptance was too late.
Restatement § 45 – option K created by part performance or tender (p. 281) – unilateral K?
Restatement § 69 – silence can be acceptance where (1) offeree takes the benefit of the services w/reason
opportunity to reject+ reason expect that compensation was expected (2) offeror has state/given reason for
offeree to understand silence is consent (3) reason that offeree should notify of non-acceptance (p. 288)
Restatement § 70- written offer which is accepted = K
Restatement § 76 – Conditional Promise
Restatement § 79 – Adequacy of consideration – mutuality of obligation
Restatement § 86- promissory restitution – material benefit rule
Restatement § 87- option K defined
Restatement § 89 – modification of an executory K
Restatement § 90 – promissory estoppel
Restatement § 130 – K performed within one year otherwise has to be in writing
Restatement § 131 – Statute of Frauds – requires signature by/on behalf of party to be charged; identifies
subject matter of K, sufficient to indicate K has been made; states the esstential terms (p. 309)
Restatement § 132- parol evidence - several writings are ok if one is signed and clearly demonstrate they
relate to same transaction
Restatement § 153- when a mistake makes K voidable (wil-fred’s)
Restatement § 159 – misrepresentation defined
Restatement § 164- fraudulent or material mispresentation
Restatement § 168- reliance on assertions of opinion
Restatement § 169- when reliance on opinion is not justified
Restatement § 175 – economic duress
Restatement § 177- undue influence
Restatement § 178 – when a term is unenforceable on public policy grounds
Restatement § 179 – public policy against enforcement
Restatement § 202- course of performance
Restatement § 208 – unconscionability
Restatement § 209 – integrated agreement (invokes parol evidence rule)
Restatement § 210 – also integrated (partially v. completely) agreements
Restatement § 211- standardized agreement terms
Restatement § 213- parol evidence rule
Restatement § 222- trade usage
Restatement § 223 – course of dealing
Restatement § 250 – manifestation of intent to not perform must be def and unequivocal – anticipatory
breach, but can happen if party doesn’t intend
Restatement § 256- retraction of repudiation
Restatement § 349 – if a party cannot prove expectation damages, they can recover reliance damages
Restatement § 356(1) – liquidated damages must be reasonable. Unreason = unenforce on pub policy grds
Restatement § 367 – negative injunction ok, positive injunction is not (p. 381)
Restatement § 373 – non-breaching party can recover restitution instead of expectation
Restatement § 374 – restitution damages can be conferred based on the benefit conferred to the other party
Restatement § 375 – if K performance has ended due to impracibility or incapability, then both sides can seek
restitution (due to statute of frauds)
Restatement § 376 – restitution when contract voidable due t omistake, duress, undue influence, misrep, etc)
Restatement § 377 – restitution when K is discharged due to impracticability, frustration of purpose, etc)

UCC – remember, sale of goods

1-205- trade usage + course of dealing
2-201- Statute of Frauds (p. 35)
2-202 – parol evidence rule – tilted to admissibility
2-204 – allows parties to be bound when they have only agreed in principle (see Quake)
2-205 – firm offers
2-206- offer/acceptance
2-206 – two means of acceptance – promise of performance in return or by actually rendering perform
2-207- additional terms in accept/confirmation – spec as relates to output K- additional terms in
acceptance or confirmation – prevents companies from tacking on other terms (see Klocek)
2-208- course of performance
2-209 – modification, recission, waiver of K (p. 43) – mod has to meet statute
2-302 - unconscionability
2-306 – Outputs, exclus dealings…
2-313 – express warranties
2-314 -- implied warranty of merchantability
2-315- implied warranty of fitness for a particular purpose – only when buyer relies on seller’s judge; doesn’t require
showing that goods are defective (just not good for purpose)
2-316 – disclaimers, exclusion, modification of warranties
2-610- anticipatory breach
2-611- retraction of repudiation
CISG
Article 8 – modified objective approach to interp (rejection of parol evidence rule) any relevant evidence about what
parties knew or had reason to know about each other’s intent is ok
Article 16(1) – adopts the mailbox rule BUT …an offer cannot be revoked if it indicates that for a fixed period of
time it is not revocable or it was reasonable for the offeree to rely…
Article 18(2) – modifies the rule – places the risk on the offeree
Contracts Glossary

Bailment - delivery of personal property -- possession without title -- obligation

to take care of it
Bilateral contract – an exchange of promises, reciprocal commitments;
classically require offer and acceptance
Consideration- the inducement to a contract. The cause, motive, price, or
impelling influence which induces a contracting party into a contract. The
reason or material cause of a K. (Restatement §17, 71)
CISG- UN Convention on the International Sale of Goods effective 1988;
applies to sale of goods, has force of law (treaty); like the UCC although a few
limitations (has to be between parties in countries that recognize, not
consumer transactions, etc)
Efficiency – transaction costs low or reduced, resources allocated in their most
highly valued uses
Ex rel- rising out of the relationship of (government has interest) -
congressional statute that they have interest in having resolved
In quantum meruit – as much as he deserved – in relation to restitution
damages
Restatement 2d – written by ALI; persuasive authority
Statute of frauds – originated in 1677 in English Parliament – enacted in
virtually every US state; certain types of contracts must be evidenced by a
signed writing to be enforceable in court; has been overlaid by common law in
20th certury
Sub judice – under adjudication
UCC- every state has enacted some form of this; does not govern all Ks; but
has become very important in K law; Llewllyn was primary drafter; created by
NCCUSL
UCITA – Uniform Computer Information Transactions Act; ALI sponsored
addition to the UCC; hit heavy opposition – only a couple of state have
adopted