69 Contracts Outline

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Contracts Outline:
I. Enforcement:
1) Definitions:
1) promise: promises enforceable by law are called contracts.
2) Consideration: consideration is a benefit by the promisor or a
detriment incurred by the promise.
3) Beneficiary: consideration is a benefit received by the promisor or
a detriment incurred by the promise.
2) Express Contracts: an express contract may be oral or written and consists of
an offer, acceptance, and bargained for consideration. It may be either
bilateral or unilateral.
3) Efficient Breach: pareto efficient: something will be efficient if it will
make somebody better off with making anyone worse off—allow some
breach if it will allow both parties to be enriched.
4) Bilateral monopoly: when both parties have some interest in the product—
this leads to stalemate in bargaining
5) The UCC governs sales of goods.
1) UCC 2-102: article applies to sale of goods.
2) UCC 2-105: goods means all things which are movable at the time
of identification to the contract for sale other than the money in
which the price is to be paid, investment securities, etc…
3) goods must be existing and identified b/f any interest in them can
pass.
4) Bonebrake-predominate factor test: to determine whether a
transaction is a sale of goods or of services, use the Bonebrake
test….(house is NOT good. Car is. The purchase and installation
of a sprinkler system could go either way.
6) Promises enforceable w/out consideration:
1) promissory estoppel: where one party acts to her detriment in
reliance upon a gratuitous promise, the detrimental reliance of the
promise w/in limits will be deemed sufficient for estopping the
promisor from asserting the defense of a lack of consideration.
2) Promise to pay a barred legal obligation: subsequent promises
to perform contractual obligations which had become
unenforceable b/c the promisor was discharged thru bankruptcy
OR b/c of the running of the statute of limitations are enforceable
w/out new consideration.
3) Promise to perform voidable preexisting duty: subsequent
promises to perform contractual obligations which became
enforceable b/c of the assertion of some privilege or defense w/out
consideration, provided the new promise is not also subject to the
same priv or defense.
4) Promise to pay benefits previously conferred: where no
contractual liability previously existed, a subsequent promise to
pay for benefits previously conferred may nonetheless be
enforceable.
4) Implied in FACT contracts: An implied in fact contract is one inferred as a matter
of reason and justice from the acts, conduct, or circumstances surrounding a transaction
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rather than one formally or explicitly stated in words. As w/ express contracts, the source
of obligation in implied-in-fact contracts is the manifested intent of the parties; however,
whereas in express of contracts, all of the terms are expressed by the parties, implied-in-
facts contracts require one or more of the terms of the contract to be inferred from the
conduct of the parties.
a) e.g. may be found when one person renders services to another at the other’s
request but w/out an express agreement as to the compensation to be paid thereafter.
b) In such a case, if the circumstances warrant, a promise to pay the reasonable
value of the services may be inferred.
c) UCC § 1-201 (3): recognizes implied in fact contracts.
5) Implied-in-Law or Quasi-Contracts: an obligation imposed upon a person, not b/c of
her intent to agree, but b/c one party has conferred a benefit upon the other under such
circumstances that in equity and good conscience there ought to be compensation for the
benefit conferred. This avoids unjust enrichment of one party at the other’s expense.
a) e.g. where one party appropriates for her benefit the inventions of another,
she will be liable in quasi-contract for the benefits resulting from such
appropriation.
6) Difference b/n Express, Implied-in-fact, and Implied-in-law Contracts:
I. Express contract v. Implied-in-fact contract.
A contract is said to be ''express'' when it has been stated

in oral or written words, as distinguished from an ''implied-
in-fact'' contract in which the undertaking is inferred from
conduct other than the speaking or writing of words.
II. Implied-in-law contract (quasi-contract).
An implied-in-law contract (quasi-contract) is not actually

a contract at all. It is a fictitious contract where none
actually exists. Although the attributes of implied-in-law
or quasi-contracts are difficult to quantify, the elements
can generally be considered to be:
1) a benefit conferred upon the defendant by the plaintiff;

2) appreciation by the defendant of the benefit; and
3) acceptance and retention by the defendant of the benefit
under circumstances that would make retention of the benefit
inequitable without payment.
7) Common Law Definition:

a) covenant: today, under the UCC, adopted in all states except LA, the
presence or absence of a seal is immaterial in contracts concerning the sale of
goods. In contracts not involving the sale of goods, the seal raises the
presumption that the contract was validly executed or included consideration, or
acts to extend the statute of limitations.
b) debt: the promisor’s obligation in debt was based upon her receipt of a
benefit from the promise, and the action in debt gave rise to the concept of quid
pro quo on the bargain element.
c) assumpsit: the action of assumpsit generally used by a promisee to recover
damages for physical injury to person or property as a result of the failure of the
promisor to perform in accordance w/ her promise. Assumpsit includes failure to
perform at all.
II. Enforcing Contracts:
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1) Basic principles for enforcing contracts:
a. Contract law is intended to provide relief to the promise to make up for
the breach, not to punish the promisor for breaching
b. Relief should put the promise in the position she would have been in had
the contract been performed, thereby fulfilling the promisee’s
expectations
c. Relief should be substitutional (money) and not specific performance.
2) US Naval Institute v. Charter Communications—Focusing on the Injured
Party’s Damages:
a. D held the paperback option for a book and released it earlier than it
should have. D was seeking all of D’s profits from the pre-set release
date sales.
b. Issue: Must a breaching party pay the profits it received thru its breach
to the promise?
c. No. Damages for breach of contract are generally measured by P’s
actual loss. Awarding D’s profits that far exceed P’s loss would be a
penalty and punitive awards are not part of contract law.
3) Measure of Damages: When mere reliance damages are not enough: Sullivan
v. O’Connor:
a. P, an entertainer, got a nose job which was supposed to only require two
surgeries. It ended up requiring three and causing irreparable damage to
the nose.
b. Is reliance the proper measure of damages for breach of a physician’s
contract to produce certain results?
c. Yes. Mere restitution would be inadequate. Expectation (an amt
intended to put P in the position she would have been in had the contract
been performed as agreed, would be excessive.
d. Ct couldn’t apply expectation damages b/c she didn’t ask for expectation.
e. The ct declined to follow Hawkins v. McGree, where an expectation
mearuse of damages would be applied.
4) Reliance v. Expectation Damages:
a. Assume that you decide to become a tennis promoter. You engage Serence
Williams to play a match against Lyndsay Davenport for 250K. You pay
Ms. Davenport 150 K and spend 75 K promoting the match and 25K renting
W&M hall. Then Ms. Williams backs out and you cannot find an adequate
substitute.
b. If we use reliance, how much does Ms. Williams have to pay you? 250K
c. What would expectation damages be? Don’t know revenue.
d. Can you make an argument that you expected revenues of at least 250K?
What happens if Ms. Williams can prove that I would not have sold any
tickets at all b/c I am not a competent tennis promoter. Should I still be able
to seek my 250 K in reliance damages. NO. If the defendant can prove that
expectation damages are indeed less than reliance damages, the plaintiff is
entitled only to expectation damages.
5) Ways of Measuring Damages: Reliance damages cannot exceed expectation

damages. Award reliance as a proxy for expectation.
a. expectation damages: an amt intended to put P in the position he would
have been in had the contract been performed as agreed. Is the standard
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remedy for contract damages. Not awarded only if too speculative to
calculate or in other special circumstances will courts revert reliance
b. Restitution damages: Not an actual contract remedy. An amt
corresponding to any benefit conferred by P upon D in the performance of
the contract. Can recover restitution on losing contract.
c. Reliance damages: any expenditure made by P and any other detriment
following proximately from D’s failure to carry out his promise—putting P
back in the position he occupied b/f the agreement. Reliance typically used
as an alternative to expectation damages.
d. . Bargain: a bargain promise is not always easily distinguishable from a
conditional donative promise. The distinction is how the parties view the
condition. In Hamer, abstention was the price of the promise, so there was a
bargain.
e. RST § 71:
i) To constitute consideration, a performance or return promise
must be bargained for.
ii) A performance/promise is bargained for if it is sought by the
promisor in exchange for his promise and is given by the
promisee in exchange for that promise.
iii) A performance may consiste of an act other than a promise,
a forbearance, or the creation/modification/destruction of a
legal relation.
iv) The performance or return promise may be given to the
promisor or to some other person. It may be given by the
promisee or by some other person.
II. ENFORCEMENT BASED ON CONSIDERATION:

1) in order to have a legally enforceable promise, there must be consideration
given. Consideration is a benefit received by the promisor or a detriment
incurred by the promise. The cts will infer a legal detriment whenever a party
obliges himself through a bargain to perform in a certain manner, even if the
performance is not exactly detrimental as we understand it. The fact that a
promise is bargained for is generally sufficient to make it enforceable.
2) Hamer v. Sidway:
1) Uncle promised P that if he would refrain from several vices when he
until he turned 21 and was capable of taking care of 5K.
2) Issue: Does a promisee’s abstention from legal but harmful conduct
constitute legal consideration for a promise to pay money?
3) Yes. A waiver of any legal right is sufficient consideration for a
promise.
4) Certain Promises must be in Writing to be Enforced….
3) Contract Not to Sue:
1) FORBEARANCE: The maj rule is that forbearance to sue is legally
valid consideration whether or not the claim is doubtful, so long as the
claim is reasonable and honestly asserted. Under the minority rule,
where the parties bargain in good faith and the claimant honestly
believes that the claim is valid, the disputed claim need not be
reasonable
2) . Fiege v. Boehm—Forbearance as Sufficient Consideration
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3) P promised to forbear prosecuting a bastardy suit if D paid for child
support, though D later turned out not to be the father.
4) Is a forbearance to sue, although based on an invalid cliaam, sufficient
consideration to make a promise to pay binding?
5) Yes. P’s forbearance was sufficient consideration as long as P acted in
good faith under a reasonable belief.
6) What if she sued two fathers? Objective—claim is legitimately in
doubt. Subjective—honestly believes 50% of being believed.
7) Doesn’t have to tell fathers about each other—nondisclosure right now
isn’t fraud/only when she lies is it fraud.
8)
4) 1st RST § 76: forbearance to assert an invalid claim…by one who has not an
honest (subjective test) AND reasonable (objective test) belief in its possible
validity is not consideration.
5) 2nd RST § 74 (1) : forbearance to assert ot surrdender of a cliam or defense
which proves to be invalid is not consideration unless the cliam/ defense is in
fact in doubt b/c of uncertainty to facts/law (objective test) OR the forbearing
party believes may be fairly determined to be valid (subjective test) ---only have
to pass one of the tests!!!!!
III. QUASI-CONTRACT
1) quasi-contract: when d receives a benefit from P under such circumstances that
D ought to compensate P for the benefit received, the law implies a promise by D
to pay the reasonable value of the benefits conferred.
2) Reason why not rewarding volunteering/officious intermeddling: policy in order
to prevent unsolicited services and concomitant prices w/out consent.
3) NOT a true contract—no mutual assent bargained for by both parties. The law
instead creates the contract.
4) Purpose is to avoid the unjust enrichment of D at P’s expense.
5) Elements:
1) P has rendered services or expended property which confers a benefit
on B.
2) P rendered such performance w/ the expectation of being paid.
3) P was not acting as a “VOLUNTEER”
4) To allow D to retain the benefits w/out paying P would result in unjust
enrichment of D.
6) Can be an alternative to contract remedy: can be used for enforcement even if
there was an express contract.
7) Measure of Recovery:
1) unjust enrichment: generally, the recovery is measured by the
reasonable value of the benefit conferred ont eh D.
2) detriment to the P: modern cts have also recognized that in some
instances the proper recovery is the detriment suffered by the P. This
may be critical in situations where D has really received no benefit,
although P has expended.
3) Cotnam v. Wisdom—Emergency Services
a) P treated a man after an accident while man was
unconscious.
b) May cts find an implied contract to pay for medical services
provided to a person who is incapable of contracting?
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c) The theory of recovery is implied in law (quasi contract) b/c
implied in fact would mean conscious assent.
d) This was competent professional service during emergency
circumstances.
8) Callano v. Oakwood Park Homes—Indirect Benefit
1) Shrubbery case.
2) Issue: Is D, w/ no privity of contract w/ P, obligated to pay for the
benefit received on the theory of quasi-contract?
3) No. Here, while D clearly received a benefit, the retention of such a
benefit does not appear unjust. P had no dealings w/ D—there was no
mistake involved.
4) COMMENT: cannot use the fiction of quasi-contract to substitute one
promisor or debtor for another.
8) subcontractor’s liens: under callano if a contractor doesn’t pay workers, the
subcontractor can’t get remedy from owner, even tho the subcontractors have
benefited the owner. However, this has been statutorily remedied by giving
subcontractors a security interest in the property that can be liquidated for debts.
9) Claims b/n Spouses—Peyatte v. Peyatte:
1) ct held that although restitution is not normally a proper remedy for
services provided during a marital relationship, it may be appropriate
when one spouse took advantage of antoher by not performing his part
of an agreement b/n the parties. BUT THIS IS NOT NORMALLY
THE RULE—generally the cts consider benefits conferred b/n spouses
as gifts.
2) HOWEVER, later on in Peyatte v. Peyatte, restitution is allowed. The
court had refused to enforce the husband’s promise to put his wife
through a master’s degree program, finding the agreement too
indefinite as to “the time when she would attend” and “cost of her
program”. But although the agreement “failed to meet the
requirements of an enforceable contract, [it] still has importance in
considering the wife’s claim for unjust enrichment b/c it both
evidences her expectation of compensation and the unjust enrichment
problem.
10) Gratuitous Services Not Consideration
a) Dementas v. Estate of Tallas: D’s promise to P for assisting him was held
not to be legal consideration. Noting that some cts may recognize past
consideration as sufficient under a “moral obligation” theory, in this case, P’s
services were gratuitous. P had not provided services with the expectation of
being compensated.—differs from the Webb case how? I guess b/c no material
benefit (such as life) at stake.
IV. BENEFIT CONFERRED BY PAST ACTION:

1) the exchange requirement
2) the modern tendency to a hold a promise to pay a moral obligation
enforceable, at least up to the value of the benefit conferred.
3) MORAL OBLIGATION: a promise is said to be given for moral
consideration when the promisor is motivated by some past event.
Usually the past event is a transaction of some sort b/n the promisor
and the promise which benefited the promisor and placed him under a
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moral obligation to the promise. Webb and the NY statute are really
the only two that support this.
4) Moral Obligation: ct’s conviction that the promisor ought to do the
thing, plus the promisor’s own admission of his obligation, may tilt the
scales in favor of enforcement where neither standing alone would be
sufficient.
5) Fienburg v. Pfeiffer Co—Gratuitous Pension Plan:
a) P was offered a pension, which was a major factor in her
later decision to retire. D’s new president stopped payments
after several years.
b) Is a gratuitous pension plan enforceable if the promise retires
in reliance on continued payments?
c) Yes. Promissory estoppel is now recognized as
consideration. P’s retirement was a change in position made
in reliance on the pension plan.
6) PROMISSORY ESTOPPEL: permit enforcement of contracts
lacking consideration w/out abandoning the doctrine of consideration.
Other theories include treating the act of reliance itself as consideration
and finding a bilateral contract.
7) RST § 90: Promise reasonably inducing action or forbearance:
i) a promise which the promisor should reasonably expect ot
induce action/forbearance on the part of the promisee/3rd party
and which does induce such action is binding if injustice can be
avoided only by enforcement of the promise. THE REMEDY
GRANTED FOR BREACH MAY BE LIMITED AS JUSTICE
REQUIRES.
8) EQUITABLE ESTOPPEL: requires that the party being estopped
know facts that the other party does not know. Usually induces
performance of a party by deceit or knowledge of their ignorance.
Usually involves a fact.
9) Mills v. Wyman:
a) P took in D’s son and nursed him. D promised to pay him
for his trouble and then didn’t.
b) Does a moral obligation constitute sufficient consideration to
make a promise enforceable?
c) No. A MORAL OBLIGATION IS NOT SUFFICIENT
CONSIDERATION FOR AN EXPRESS PROMISE. THE
LAW WILL GIVE A PROMISE VALIDITY IF THE
PROMISOR GAINS SOMETHING, OR THE PROMISEE
LOSES SOMETHING AS RESULT OF THE PROMISE.
d) Benefit was not directly conferred on the promisor….
e) Mills is the traditional view re: moral obligation
10) exceptions to moral obligation: promise to pay a debt that is no
longer legally enforceable b/c of statutory limitations has run, and a
promise by an adult to perform a duty imposed by a promise that the
adult made as a minor and could have avoided on that ground. Same is
said of a promise to pay a debt that has been discharged in bankruptcy.
11) Modern Approach—Webb v. McGowin
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a) P injured himself preventing a log from falling on his boss.
D offered to pay him, and then his estate stopped after D
died.
b) Is moral consideration sufficient to support a promise given
in recognition of a past economic benefit received by the
promisor?
c) Yes. Life and health are material benefits, and D retained
his while P was injured.
12) § 86: Promise for Benefit Received: a promise made in
recognition of a benefit previously received by the promisor from the
promisee is binding to the extent necessary to prevent injustice…
a) a promise is not binding if the promisee conferred the benefit
as a gift or for other reasons the promisor has not been
unjustly enriched.
b) To the extent that its value is disproportionate to the benefit.
13) New York statute: if consideration is expressed in writing and
would have been valid contract if not for time of promise
14) Webb: significant material benefit
Cases Mills NY Webb--Alabama RST § 86
Mills No Yes X—tho mat ben No
conferred on son
Feinberg No Yes (?) X (?) X
Harrington No No Yes Yes
Webb No No-- Yes Yes
14) MORAL OBLIGATION: the mere fact of promise has been thought
to create a moral obligation, but it is clear that not all promises are
enforced. Nor are moral obligations based solely on gratitude or sentiment
sufficient of themselves to support a subsequent promise.
V. Bargain Requirement
1) Even when a promise is unenforceable when made b/c the promisee is not bound,
it may become binding when the promisee subsequently furnishes the
consideration contemplated by doing what he was expected to do.
2) Conditional Gratuitous Benefit: eg walk w/ me to Wawa and I’ll buy you a
sandwich—not enforceable…something done to make it easier to give a gift is
not consideration….
3) Early case of no estoppel—Kirksey v. Kirksey
1) P moved onto bro-in-law’s farm at his invitation. D later req them to
leave.
2) Is a gratuitous promise legally enforceable after P has suffered loss and
inconvenience in reliance on the promise?
3) No. There was no consideration.
4) Probably the main reason that the court did not invoke promissory
estoppel was the year in which Kirksey was decided, 1845.
4) Mixed motives: if any part of the consideration is bargained for, the rest can
still be a gift. Conditional gift. Depends on whether you actually wanted
the condition or the condition was just part of completing the transfer of
the gift.
5) WAWA Hypo: “walk with me to WaWa and I’ll buy you a sandwich.”
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a) not enforceable if it is something to give a gift is not
consideration BUT
b) “giving” a gift in exchange for anything, even just
someone’s company, makes this enforceable
6) Covenant Not to Compete—Central Adjustment Bureau v. Ingram
1) Is a covenant not to compet enforceable if it is signed after the
employee has accepted employment and begun working?
2) Yes. Most states have found continued employment alone to be
sufficient consideration for a covenant not to compete.
7) CAB court did not say that any amt of work will do to enforce a non-competition
clause. “The rule of reasonableness applies to consideration as well as to other
matters such as territorial or time limitations.” Whether there is adequate
consideration to support a non-compete covenant signed during an on-going
employment relationship depends on the fact of each case.
8) Change in employee handbooks:
1) an employer w/ a written policy requiring discharge for cause may
unilaterally change its policy to one of termination at will, so long as it
provides affected employees reasonable notice of change.
9) Pine River Test:
a) problems along the lines of CAB on whether to
enforceability of employer’s promises, often in connection
with employee handbooks. Typically some time after they
have been hired, employees receive handbooks setting out
company policies. Is the employer bound b/c most
employees did not bargain for these.
b) P in this case was fired by the bank president D for serious
deficienciese in processing over 600K in loans. D failed to
follow the procedure set out in relating to disciplinary policy
in the employee handbook he distributed when he fired P.
c) Ct held that “an employer’s offer of a unilateral contract may
very well appear in a personnel handbook as the employer’s
response to the practical problem of transactional costs. P’s
continued duties as an employee despite his freedom to quit
constitutes an acceptance of the bank’s offer and affords the
necessary consideration for that offer, with the bank gaining
the advantages of a more stable work force.
d) An employee can provide consideration for a promise in
a handbook by just showing up to work. This is
consideration b/c the employee is not obligated to do so;
employment at will!!!!
10) Interplay b/n Pine River and Bankey:
a) Pine River followed a standard contract analysis. The
employee handbook is an offer which the employee accepts
by showing up to work. Showing up to work also supplies
the consideration.
b) Bankey rejects the Pine River approach to employee
handbooks and holds that there is no contract. B/c there is
no contract, the employer can change the terms unilaterally.
The only limit is that the employer must enforce its rules
uniformly.
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11) Employer’s Change of Policy:
1) Bankey v. Storer Broadcasting Co—whether an employer may
unilaterally change its written policy statements by adopting a
generally applicable policy and alter the employment relationship w/
existing employees to one at will of the employer did not reserve the
right to make a change in the original policy.
2) The employee may legitimately expect that the employer will apply
whatever personnel policies are in force at a given time, not that
policies will never change.
VI. Promise as Consideration
1) a contract may be formed by the exchange of promises
2) for a bilateral contract to be legally enforceable, each party’s bargained for
promise must be legally sufficient consideration for its counter promise.
3) THE TEST: whether the performance promised would be sufficient
consideration.
4) ILLUSORY PROMISES: if a promisor reserves expressly or by implication an
alternative by which she can escape performance altogether, she has really not
promised anything at all.
1) Strong v. Sheffield—lack of specificity renders promise illusory
2) Does an agreement not to collect a debt for as long as the creditor shall
elect constitute consideration?
3) No. While P did not foreclose on the note for two years, the test is
what was in the agreement, not what was actually done.
4) The problem was not that P waited two years, but rather that there was
no consideration for the wife’s promise in the first place.
5) COMMENT: THE RULE OF THIS CASE WAS CHANGED by
UCC §3-408—no consideration is required to create an enforceable
obligation which guarantees an antecedent debt of any kind.
5) RST § 77 : a promise is not consideration if by its terms the promisor or
purported promisor reserves a choice of alternative performances unless:
1) each side of the alternative performances would have been
consideration if it alone had been bargained for OR
2) one of the alternative performances would have been consideration and
there is or appears to the parties to be a substantial possibility that b/f
the promisor exercises his choice events may eliminate the alternatives
which not have been consideration.
6) ALTERNATIVE PROMISES: under § 87 (2): buyer orders goods from seller
subject to a right of cancellation before shipment. Is buyer’s promise illusory?
The promise might not be illusory b/c the seller is likely to ship b/f the buyer
exercises right to cancel. The promise makes the consideration binding, so even
if the seller does not ship b/f cancellation, we would still have consideration
under the clause.
7) Alternative Promises Hypo: the method behind breaking up one
promise into two promises. "If you will pay me $20, I
promise paint your house if I'm in town." I promise to
paint your house or I promise to leave town. I see how the
promises in the end reflect the original promise. I just
don't see the method behind it.
I promise to paint your house or I promise to BE OUT OF

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TOWN. The method behind it is to demonstrate that this
promise can serve as consideration if each of the
alternative promises could serve as consideration: i) paint
your house - yes, ii) be out of town - maybe, but less
likely.
8) Illusory Promises—SATISFACTION—promise conditional on promisor’s
satisfaction; objective test is reasonable person standard; subjective test is good
faith.
9) Using which standard depends on whether the clause is amendable to an
objective interpretation. A satisfaction clause applied to the painting of my
house is. A satisfaction clause applied to the painting of my portraits is not.
10) Good faith standard for SATISFACTION contracts: an expression of
dissatisfaction is not conclusive; the promisor must actually be dissatisfied with
the performance, not with the contract itself.
1) mattei v. hopper: real estate deal
a) Is a promise that is conditional on the promisor’s satisfaction
w/ a related matter enforceable?
b) Yes. Satisfaction can be either objective or subjective. A
subjective satisfaction promise is still enforceable b/c the
promisor is expected to IN GOOD FAITH be dissatisfied w/
the performance, not w/ the contract itself.
11) Conditioned Promises:
1) that a promise is conditional does NOT make it insufficient
consideration. As long as the promisor has undertaken something of
legal detriment to him, such as becoming bound if the contingency
occurs, the promise is sufficient consideration.
2) REQUIREMENT CONTRACTS: a promisor promises to “buy all I
require” is actually good consideration b/c it imposes a detrimaent
upon the promisor—limits his choice to buy from anyone but the
promisee.
a) Eastern Airlines v. Gulf Oil Corp
b) May a contract be a valid requirements contract even if it
does not specificially approximate the amts involved, as long
as the amts are reasonably foreseeable?
c) Yes. Good faith makes it valid.
d) UCC 2-306: a term which measures the quantity by the
OUTPUT OF THE SELLER or THE REQS OF THE
BUYER means such actual output or requirements as may
occur in good faith…except no quantity unreasonably
disproportionate to any stated estimate or in the absence of
a stated estimate to any comparable prior output or req may
be tendered or demand.
e) Use GOOD FAITH: e.g. a shut down by a requirements
buyer for lack of orders might be permissible when shut
down merely to curtail losses would not.
f) Got specific performance as their relief. Jet fuel is common,
but the court would be unable to assess money damages b/c
unable to guess the quantity that Eastern Airlines would
require.
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3) IMPLIED PROMISES: even where a bilateral contract apparently
contains no promise at all on one side, the contract may still be upheld
if the surrounding facts fairly imply a promise of performance by that
party.
a) UCC 2-306 (2): indicates that in exclusive sales contract the
manufacturer impliedly agrees to use his best efforts to
supply the goods and the distributor impliedly agrees to use
his best efforts to promote their sales.
b) Woods v. Lady Duff—Exclusive Contract
a) Where P did not specifically promise to use reasonable
efforts to promote D’s goods, and all compensation to D
under the contract is to come from such efforts, is there a
valid promise by P?
b) Yes. The circumstances make such an implication
reasonable. It was an exclusive dealing contract D gave
to P; any return to D was to come from P’s profits. This
meant if D was to get anything at all, P had to perform.
c) Implied duty of best efforts or good faith….but beware
there is some 20th C contra authority.
c) Lady Duff claimed he didn’t give her reciprocal exclusivity
or any guarantee to try to sell her products.
d) However, Cardozo said “unless he gives efforts, she gets
nothing.” So the P had duties and therefore there is a
promise.
VII. RELIANCE AS AN ALTERNATIVE BASIS FOR ENFORCEMENT
1) detrimental action or forebearance by the promisee in reliance on a promise by
the promisor will constitute a substitute for consideration.
2) RST § 90:
1) a promise which the promisor should REASONABLY expect to
induction action or forbearance on the part of the promisee and which
DOES induce action or forbearance is binding if injustice can be
avoided only by enforcement of such a promise.
2) A CHARITABLE SUBSCRIPTION OR MARRIAGE SETTLEMENT
IS BINDING W/OUT PROOF THAT THE PROMISE INDUCED
ACTION OR FORBEARANCE.
3) More liberal than first restatement: where reliance is less than
substantial, partial enforcement of the contract may still be granted.
ALSO, the doctrine can be applied to bargain as well as gift situations.
3) Promissory estoppel enforced in 4 categories prior RST §90 in 1932
a) family promises:
b) promises to convey land: cases involving promises to
convey land on which the promisee had relied upon moving
onto the land and making improvements.
c) promises coupled with gratuitous bailments: although a
gratuitous bailment imposes no duty on one to insure, etc the
goods, such a duty arises from a promise to do so.
d) Charitable subscriptions—Allegheny College: wrote an
estate pledge which was not payable until 30 days after her
death. She later repudiated her promise. Cardozo found
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consideration for her promise in the return promise of the
college to set up a memorial fund in her honeor.
4) Ricketts v. Scothorn—Gratuitous Promissory Note
1) P’s grandfather offered her gift of money. Granfather’s executor
refused to pay the note b/c no consideration.
2) Is a gift promise enforceable if it induces the promisee to take
detrimental action in reasonable reliance on the promise?
3) Yes. B/c P suffered reasonably foreseeable detrimental b/c of the
promise of the note, the promise is enforceable.
5) Promissory Estoppel as Consideration: In Feinbureg v. Pfeiffer used
promissory estoppel to enforce promise. Is this compatible with RST §90? “At
the time the plaintiff retired she was 57 years of age. At the time the payments
were discontinued she was over 63 years of age. It is a matter of common
knowledge that it is virtually impossible for a woman of that age to find
satisfactory employment…”
6) Quantum meruit: damages awarded in an amt considered reasonable to
compensate a person who has rendered services in a quasi-contractual
relationship.
7) Vastoler: sued his employer for breach of a promise of greater pension benefits
when he claimed he had relied in taking a promotion from an hourly lithographer
to a salaried supervisor. Ct of appeals found that the trial ct erred in failing to
recognize that absorption of the stress and anxiety inherent in supervisory
positions could be one of the factors that constitutes detrimental reliance.
8) ENFORCEMENT TO PREVENT INJUSTICE
1) the test under RST §90 (1) is NOT whether the promise should be
enforced to do justice, but rather to PREVENT injustice.
2) Cohen v. Cowles: Reporters promised to keep Coehn’s identity
confidential and then didn’t. Cohen was fired from job. The ct noted
it would be unjust to allow the newspapers to break their promises, esp
since the newspapers themselves believed that they generally must
keep promises of confidentiality.
3) Schott v. Westinghouse: suggestion card from employee used by
corporation. Ct found that it resulted in savings to Westinghouse
approximating unjust enrichment since it did not appear that he
expected no payment nor intended to confer a gratuity.
9) D &G Stout v. Bacardi Imports—RELIANCE INTEREST ON PROMISE
1) Liquor distributor relied on Bacardi’s promise to stay w/ them and
didn’t sell. When Barcardi left, P had to sell at a much lower price.
2) May a party who promises to maintain a business relationship become
liable for damages when the promisee relies to its detriment on the
promise?
3) Yes. The relationship b/n P and D was always terminable at will.
BUT, a prospective employee cannot sue for lost wages b/c can have
no reasonable expectation of any determinable period of pay. BUT can
recover for expenses incurred in moving for a job.
4) Distinction is b/n expectation and reliance damages. P is not seeking
lost future profits. P seeks lost value of its sale opportunity.
VIII. OFFERS
1) The usual test applied is the objective theory of contracts—what a reasonable
person in the position of each of the respective parties would be led to believe by
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the words or the conduct of the other party. WHAT A REASONABLE
PERSON, STANDING IN THE PLACE OF THE RESPECTIVE PARTIES,
WOULD UNDERSTAND THEM TO MEAN.
1) modern cts reject the req that there be any actual, subjective meeting of
the minds. Each contracting party must be able to rely on the other
party’s apparent intentions w/out regard to his secret thoughts or
mental reservations.
2) Lucy v. Zehmer—Contract made in Subjective Jest:
1) sale of farm on a napkin
2) Issue: is a contract enforceable if one of the parties mentally agreed to
it only in jest?
3) Yes. The mental assent of the parties is not required for the formation
of a contract; a person’s undisclosed intention is immaterial if his
words and acts have but one reasonable meaning.
3) RST § 71: OBJECTIVE THEORY OF ASSENT “mental assent of the parties
is not requisite for the formation of a contract. If the words 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 is known to the
other party.
3) Factors that influence enforcement:
1) equal bargaining position of both parties
2) absence of fraud or misrepresentation
3) admitted fairness of price
4) The offer:
1) an offer is a proposal by one party to the other manifesting a
willingness to enter into a bargain and made in such a way that the
other person is justified in believing that her acceptance to that bargain
is invited, and if given, will create a binding contract b/n
2) RST § 24: OFFER: an offer is the manifestation of willingness to
enter into a bargain, so made as to justify another person in
understanding that his assent to that bargain is invited and will
conclude it.
3) Requirements for a valid offer:
v) manifestation of present contractual intent.
vi) Certainty and definiteness of terms.
vii) Communication to the offeree. The offer must be
communicated to the offeree; in no other way will it create a
power of acceptance in him.
4) Requirement of manifestation of present contractual intent:
a) the words or conduct used in the proposal must be words of
an offer rather than of preliminary negotiation.
b) The test: Would a reasonable person in the shoes of the
offeree feel that if he accepted the proposal, a contract would
be complete?
c) To whom made: a proposal made to the public or a large
group of persons (such as in advertisements) is more likely
to be construed as a mere invitation to make an offer.
d) Certainty/Definiteness of Terms
5) Gentleman’s Agreement:
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1) arises in “firm-commitment” underwriting of corporate stock, a
transaction in which the corporate issuer sells an entire issue of stock
outright to a group of underwriters, who in turn sell to a larger group of
dealers, who then sell to the public.
2) Since they have to turn in a registration statement to SEC, the issuer
wants some assurance of the availability of underwriters.
3) The solution has been in having the underwriters write to the issuer a
“letter of intent” which is then signed by the issuer, and which sets out
terms of underwriting but reserves liability.
4) Investment banks worried about risk—so why not just make the
promise conditional (I’ll buy these securities if the market is not bad)?
B/c they don’t know exact paraments. Enforced rather by reputation
and social sanctions.
5) Gentlemen’s agreements typically are not contracts b/c the reasonable
person doesn’t believe that the other side intends to bind themselves;
the other side has told them that they do not intend to be bound (note
that somethmes a different rule in the big business/consumer sitch b/c
consumer may not pay close attention and may mis the disclaimer).
6) A letter of intent can be a contract (Type I contract) if a reasonable
person would believe the parties intended to bind themselves (assent)
and there are enough terms to satisfy terms of definiteness.
6) Winston v. Mediafare Entertainment Corp: factors to determine whether the
parties meant to be bound absence by a document on both sides
1) whether there has been an express reservation of the right not be bound
in the absence of a writing
2) whether there has been partial performance of the contract
3) whether all of the terms of the alleged contract have been agreed upon
4) whether the agreement at issue is the type of contract is usually
committed to writing
7) Price Quotations: a simple quotation of price is usually construed merely as an
invitation to the buyer to make an offer.
1) Owen v. Tunison
a) P offered to purchase D’s property for 6 K. D responded to
P by letter saying that he could not sell for less than 16K. P
then replied he accepted D’s offer whereupon D decided not
to sell.
b) A STATEMENT SPECIFYING A MINIMUM FOR
THE SALE OF PROPERTY DOES NOT
CONSTITUTE AN OFFER.
2) Harvey v. Facey: Ct held that acceptance of a price term that has not
been specified as an offer to sell was in fact an offer itself. In this
case, the court held that a communication regarding only a price term
is inadequate to constitute an offer. Facey was negotiating to sell
certain property to the town of Kingstone for 900 pounds. Harvey, a
soliciter in Kingsston, sent Facey a telegraph, asking if Facey would
sell to Harvey and what he lowest price was. Facey answered the
lowest price was 900 pounds. Harvey answered that he agreed to buy
the property for 900 pounds. Harvey then sued for specific
performance. The trial ct held that there was no contract. The
appellate ct reversed. Facey appealed to Privy Council, which held
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that there was no contract b/c Facey had provided only a price term.
Facey never stated whether he would sell to Harvey, and Harvey’s last
telegram was actually an offer of sale that Facey never accepted.
3) Fairmont Glass v. Grunden-Martin Woodenware Co.
a) P asked for the lowest price at which D (Fairmount) would
sell to P 10 carloads of jars. D replied w/ a quote and terms
for immediate acceptance and shipment. P replied by
telegraph w/ an order and included an additional clause req
the jars be top quality. Same day, D said could not filled
order. P then sued.
b) DOES A QUOTATION OF PRICES FOR IMMEDIATE
ACCEPTANCE CONSTITUTE AN OFFER TO SELL?
c) Yes.
8) Moulton v. Kershaw—the salt trade case: Kershaw wrote to Moulton: in
consequence of a rupture in the salt trade we are authorized to offer Michigan fine
salt in full car load lots of 80-85 barrels, delivered at 85 cents per barrel. Kershaw
sent noted letter requesting shipment of two thousand barrels. Moulton didn’t ship
b/c ct held that the language is not such that a businessman would use in making an
offer to sell.. a definite amount of property.
IX. ADVERTISEMENTS
1) advertisements are generally deemed invitations to deal, rather than offers.
1) advertisements are usually indefinite as to quantity and other terms
2) sellers ought to be able to choose w/ whom they deal
3) adverts are typically addressed to the general public, so that if they
were considered to be offers, a seller might find her offer
overaccepted….
2) Lefkowitz v. Great Minneapolis Surplus Store—Exception to the general
rule
1) ad advert in a paper that it would sell fur stoles for one dollar.
2) Issue: CAN AN ADVERT TO THE GENERAL PUBLIC BE A
BINDING OBLIGATION REQ THE SELLER TO SELL THE
ADVERTISED MERCHANDISE?
3) The advertisement offered specific merchandise at a stated price to the
first person to present himself. There was no room to negotiate as the
offer was clear, explicit, and definite.
3) Leftkowitz: explicit first-come, first served, so exception to advertisement rule.
4) Fairmont Glass: language more specific “immediate
acceptance”/circumstances: response to inquiry from specific customer.
5) Moulton v. Kershaw: Kershaw wrote to Moulton re: selling 80-95 barrels a
carload (but w/ no specified carload number) at a certain price. Moulton wrote
back and requested shipment of 2K barrels. Ct held that no contract created b/c
“the language was not such a businessman would use in making an offer to sell…
a definite amt of property.” Harder to imply offer if no quantity specified AND
can’t reasonably assume that offeror gave the offeree the right to choose quality.
6) BAIT AND SWITCH ADVERTISEMENTS: sellers try to attact customers by
advertising a product at a exceptionally low price (the bait) which the seller has
no intention of selling, in order to sell the cusotomer another product that will
bring the seller a higher profit—Uniform Deceptive Practices Act makes this
prohibited.
7) RST § 153: UNILATERAL MISTAKE:
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1) where a mistake of one party at the time a contract was made as to a
basic assumption on which he made the contract has a material effect
on the agreed exchange of performances that is adverse to him, the
contract is voidable by him if he does not bear the risk of the mistake
under §154 AND
2) the effect of the mistake is such that enforcement of the contract
would be unconscionable, OR
3) the other party had reason to know of the mistake or his fault
caused the mistake
4) the other party can be returned to status quo
8) RST § 154: When a Party bears the risk of a mistake:
1) the risk is allocated to him by agreement of the parties
2) he is aware, at the time the contract is made, that he has only limited
knowledge w/ respect to the facts to which the mistake relates but
treats his limited knowledge as sufficient
3) the risk is allocated to him by the ct.
4) judgment rather than clerical mistake
5) neglected a legal duty
9) MISTAKEN BIDDER—Elsinore Elementary v. Kastorff:
1) Where P had an irrevocable option to accept D’s bid but learned of D’s
mistake of computation b/f accepting, is D entitled to rescission?
2) Reasons:
a) P knew that there had been a unilateral mistake by D.
b) D was not guilty in negligence in preparing the bid
c) D informed P promptly.
d) Would be unconscionable to enforce b/c mistake was
substantial portion of D’s bid.
3) the reason why court let the mistake go b/c the school would incur no
detriment while the contractor would incur detriment. However, if the
school had relied to its detriment on the contractor’s bid, the case could
have gone the other way.
X. ACCEPTANCE
1) Requirements for a valid acceptance:
1) who may accept: generally, the offer may be accepted only by the
person to whom it is made.
2) Acceptance must be unequivocal: If the acceptance is qualified, then
it is not an acceptance but rather a counter offer, which works as a
rejection of the offer.
2) Unilateral versus Bilateral contracts:
1) bilateral contracts: the mere giving of the counter promise to the
offeror is all that is required. The obj theory of contract prevails.
a) BUT the offeree must have knowledge of the offer, and
notice of acceptance to the offeror is generally required—
exception: when the offeror specifies no notice.
2) unilateral contracts: unilateral contract may be accepted only by doing
the act requested by the offeror, w/ knowledge of the offer and w/ the
intent to accept it.
a) normally notice to offeror is not required.
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b) Exception: when offeror requires that notice be given or
where the offeror has no reasonable means oof knowing that
the requested performance has been rendered.
3) Methods of Acceptance: Whether a contract is unilateral or bilateral makes a
big difference in acceptance and revocation.
1) If all the offeror wants is a return promise, then if such a promise is
given, revocation becomes impossible
2) But if the promisor requests act of acceptance, then the act itself must
be perfomed or the offeror can still revoke the offer.
3) RST § 31: where the offer is unclear as to whether a bilateral or
unilateral contract is contemplated, it is the policy of the law to
construe it as an offer for a bilateral contract.
4) Rationale: a bilateral contract affords immediate rights and complete
protection to both parties, since a contract arises as son as the offeree
promises to perform, whereas an offer for a unilateral contract does not
ripen into a binding contract until performance is actually rendered.
5) UCC 2-206: the UCC states that unless an offer to buy goods
expressly limits acceptance to shipment of the goods, it is to be
construed as inviting acceptance either by shipment or by prompt
promise to ship the goods.
4) International Filter v. Conroe Gin—No notice requested
1) Must notice of acceptance be given if the offeror does not require it?
2) No. Here D, although using a form provided by P’s salesman, was the
offeror and made no stipulation as to notice of acceptance. On the
contrary, the agreement specifically provided that it would become a
binding contract when approved by an executive officer by P.
3) The real offeror was Conroe—“Accepted 2/10/1920….” Once
approved by International Filter, it became a binding contract.
4) The notice did not specify that the executive officer had approved it,
but it did say “We acknowledge and thank you for your order.” Would
a reasonable person construe this as acceptance?
5)
5) RST § 54: ACCEPTANCE BY PERFORMANCE Necessity of Notification
of to Offeror:
1) where an offer invites an offeree to accept by rendering a performance,
no notification is necessary to make such an acceptance effective
unless the offer requests such an notification.
2) If an offeree who accepts knows that the offeror has no means of
learning of performance no contract unless:
a) the offeree exercises reasonable diligence to notify the
offeror of acceptance.
b) The offeror learns of the performance w/in a reasonable time
c) Offer indicates no notice was required
6) RST § 56: ACCEPTANCE BY PROMISE—NOTICE:
1) except as stated in § 69 where the offer manifests a contrary intention,
it is essential to an acceptance by promise either that the offeree
exercise reasonable diligence to notify the offeror of acceptance or that
the offeror receive the acceptance seasonably.
7) RST § 69: ACCEPTANCE BY SILENCE:
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1) silence as acceptance only works when:
a) where an offeree takes the benefit of offered services w/
reasonable opportunity to reject them and reason to know
that they were offered w/ expectation of compensation.
b) Where the offeror has stated/given offeree reason to believe
that assent may be manifested by silence, and the offeree in
remaining silent intends to accept the offer
c) Where b/c of previous dealings…it is reasonable for offeror
to assume he would be notified if no acceptance.
b) Hobbs v. Massasoit: eelskins sent w/out order but accepted/paid
several times. Last time no payment but no notice of rejection. Past
dealings created duty to notice rejection.
8) Magazine example: if one were reading the magazines, cutting them up, etc, this
would be inconsistent w/ her claiming that they really were still the offeror’s
magazines, not hers. She would effectively claiming ownership of the magazines
and thereby accepting the offer.
9) RST § 56 says that a bilateral contract demands that the offeree communicate or
attempt to communicate the acceptance.
10) White v. Corlies &Tift:
1) D sent note to P indicating that he could begin work immediately if he
would agree to finish w/in two weeks…P never answered but
immediately purchased lumber and began work.
2) Issue: If an offer requests a promise, will P’s beginning performance
be sufficient to create a binding contract?
3) NO. No effective notice given or was tried to be given on this
“acceptance” of a bilateral contract.
4) The notice wasn’t effective b/c done in his shop.
5) Couldn’t claim reliance b/c materials used were customarily used in his
business.
6) All the offeree did was buy wood and work in his office, which were
all normal aspects of his job.
11) RST § 32 INVITATION OF PROMISE OR PERFORMANCE:
1) In case of doubt an offer is interpreted as inviting the offeree to accept
either by promising to perform what the offer requests, or by rendering
the performance, as the offeree chooses.
12) COMPARE TO RST § 62: Effect of Performance by Offeree where offer
invites performance or promise.
1) where an offer invites an offeree to choose b/n acceptance by promise
and acceptance by performance, the tender or beginning of the invited
performance or a tender of beginning of it is an acceptance of
performance.
2) SUCH AN ACCEPTANCE OPERATES A PROMISE TO RENDER
COMPLETE PERFORMANCE.
3) Ambiguous whether promise or performance is wanted.
13) INTENTION TO ACCEPT:
1) obj theory: if a reasonable offeror would be justified in relying upon
the apprarent intent of the offeree as manifested by his conduct, then
“acceptance” will be deemed to have occurred, irrespective of an actual
intent of the offeree.
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2) FURTHER, if the offeree intends to accept the offer but fails to
communicate such intent in a manner which a reasonable offeror
would understand as acceptance: NO CONTRACT
14) Ever Tite Roofing Corp v. Green: offeror was the customer, offeree was the
roofing company.
1) ct held that the offeror must allow a reasonable time for the offeree to
accept by commencing performance.
15) SUGGESTED METHOD OF ACCEPTANCE: Allied Steel v. Ford
1) When an offeree fails to comply the suggested method of acceptance,
but instead begins performance, a contract is still formed.
2) THE KEY HERE IS THE WORD ‘should’: indicates that this is not
the only means of acceptance.
3) the performance was commenced w/ notice, so not irreconcilable w/
White
4) ct held that the K was good b/c under Louisiana civil law, this would
be a binding offer: “This agreement shall become binding only upon
written acceptance or upon commencing performance of work.”
16) Carbolic Acid Smoke Ball:
a) arose out of advertisement: “100 pound reward will be paid
by the Carbolic Smoke Ball company to any person who
contracts the flu after using the C.S.B.
b) CSB tried to say b/c the P had not notified the company her
acceptance, it wasn’t okay.
c) Ct said b/c it was mass marketed, it “seems to me to follow
as an inference to be drawn from the transaction itself that a
person is not notify his acceptance of the offer b/f he
performs the conditions.”
d) What is the acceptance here? Not getting sick b/c it isn’t
voluntary. Not buying the ball. The acceptance is three uses
a day for two weeks.
17) Master of the Offer:
1) offeror may determine method of acceptance: court may find method
is merely suggested rather than required! Allied Steel
2) if unspecified whether want unilateral or bilateral promise then use
RST §32 and RST §62
18) RST § 32: INVITATION OF PROMISE/PERFORMANCE:
1) in case of doubt an offer is interpreted as inviting the offeree to accept
either by promising to perform what he offer requests or by rendering
the performance, as the offeree chooses.
19) RST § 62: EFFECT OF PERFORMANCE BY OFFEREE WHERE
OFFER INVITES EITHER PERFORMANCE OR PROMISE
a) an acceptance which requests a change or addition to the terms of the offer is
not thereby invalidated unless the acceptance is made to depend on an assent to
the changed or added terms.
20) Non-Conforming shipment: Corinthian Pharmaceutical systems:
1) The first step is determining when the first offer was made. D’s price
lists and its internal price memo were merely quotations, which are
invitations to make an offer. Therefore, P’s May 19th order for 1K of
vials is merely the first offer b/n the parties.
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2) does a seller’s shipment of nonconforming goods constitute an
acceptance of the buyer’s offer to purchase?
3) NO. Price lists are mere quotations, esp D reserved right to change
prices.
21) UCC 2-206 Shipment of Goods—Acceptance v. ACCOMODATION:
1) Unless other specified:
2) an offer to make a contract shall be construed as inviting acceptance in
any manner…
3) An order to buy goods for prompt shipment shall be construed as
inviting acceptance either by a prompt promise to ship or by the
prompt shipment of conforming OR nonconforming goods, BUT THE
SHIPMENT OF NONCONFORMING GOODS IS NOT AN
ACCEPTANCE IF THE SELLER SEASONABLY NOTIFIES THE
BUYER THAT THE SHIPMENT IS OFFERED ONLY AS AN
ACCOMODATION TO THE BUYER.
XI. REVOCATION/REJECTION
1) Revocation of the Offer by the Offeror: when the offeror communicates a
revocation b/f an acceptance by the offeree, the offer is terminated.
2) Requirements of effective revocation:
1) words or conduct must be sufficient for a reasonable person to interpret
as a revocation.
2) The revocation must be communicated to the offeree
3) The revocation is generally held to be effective UPON RECEIPT
3) RST § 42: an offere’s power of acceptance is terminated when the offeree
receives from the offeror a manifestation of an intention not to enter into the
proposed contract.
4) Revocation of Offer to the Public: may be revocked by publicity equivalent to
that given the offer.
5) OPTION CONTRACTS: UCC §2-205: FIRM OFFERS: an offer by a
MERCHANT to buy or sell goods in a signed record which by its terms gives
assurance that it will be revocable, for lack of consideration, during the time
stated, OR if no time stated, for a reasonable time (no longer than three mos.)
ANY SUCH TERM OF ASSURANCE MUST BE SEPARATELY SIGNED BY
THE OFFEROR.
6) A firm offer is a promise not to revoke. Like any promise, it can be enforced if
we have consideration. Similarly reliance may do if we can satisfy promissory
estoppel (RST 90). In contrast w/ promises generally, the law may enforce b/c of
mere formality (RST 87 (1), UCC 2-205). Finally the law may even be willing to
imply the promise (RST 87 (2)).
1) IN order to protect consumers, § 2-205 only applies if both are
merchants to protect consumers.
2) Offers for Consideration: RST § 87: binding IF
a) in writing and signed by offeror, recites a purported
consideration for making the offer, and proposes an
exchange on fair terms w/in reasonable time
b) is made irrevocable by statute.
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3) recitals: general rule has been that this recital is not conclusive—cts
reserve the right to see if consideration was actually paid. But
generally accepted.
4) Often small consideration accepted.
5) 87 (1) does not actually require consideration. If there is actually
consideration (e.g. something bargained for) the period can be
arbitrarily long. Remember, as long as there is a bargain.
6) RST § 63: an acceptance under an option contract is not operative
until received by the offeror.
7) § 45: partial performance by an offeree makes the offeror’s offer an
option contract, but the offeree hasn’t accepted until the end of
performance. (this is for unilateral promises only).
7) RST § 87 and 87 (2) : an offer which the offeror should reasonably expect to
induce action or forbearance of a substantial character on the part of the offeree
before acceptance and which does induce such action or forbearance is binding as
an option contract to the extent necessary to avoid injustice.
a) so under 87 (2) one can get reimbursed preparation costs.
8) When hedging a bet against price, the recital is probably not enough. The court
will probably say the purported option is not for a “reasonable time.” A
reasonable time depends on how volatile the market.
9) TERMINATION BY LAW:
1) by lapse of time
2) Offers revocable where specified to remain open: offeror might still be
able to revoke
3) By death or destruction of the subject matter of the offer
4) By death or insanity of the offeror or the offeree.
5) By intervening illegality of the proposed contract.
10) RST § 37: TERMINATION OF POWER OF ACCEPTANCE:
1) the power of acceptance under an option contract is not terminated by
rejection or counter-offer, by revocation, or BY DEATH OF THE
OFFEROR, unless the requirements are met for the discharge of a
contractual duty.
11) RST § 48: an offeree’s power of acceptance is terminated when the offeree or
offeror dies or is deprived of legal capcity to enter into the contract.
12) Dickinson v. Dodds—Revocation of Offer Prior to Specified Term:
1) Even if an offeror says he will hold his offer to sell open for a given
time period, may he sell the property to a third party prior to the
expiration of the specified time?
2) Yes. D can revoke the offer at any time prior to acceptance by P.
3) D had offered to sell property to P indicating tha thte offer was to
remain open until 9 on June 12. On June 11, P made up his mind to
buy the property. In the afternoon P was informed by a third party that
D had offered or agreed to sell the property to another person. IN the
even, P delivered his acceptance to D’s mother in law and D finally
received it at 7 am on June12.
4) B/f accepting D’s offer, P learned that D was going to sell to antoehr
person. This is sufficient constructive notice of D’s revocation of the
offer.
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5) The ct held that D was not bound by the option b/c there was no
consideration for it. The common law requirement for consideration
has been modified by UCC 2-205 which allows a merchant offero to
make an irrevocable offer by using a signed writing.
13) Ragosta v. Wilder—Revocation Prior to Acceptance by Performance
1) An offeror may revoke an offer at any time b/f the other party accepts
by performing (in this case—by paying), as long as there is no
consideration for the option?
2) In this case, Ps secured financing and said that this was detrimental and
should constitute consideration for D’s promise to keep offer open.
However, while detriment may be considered consideration in some
circumstances, it can only be consideration if it is bargained for.
14) Rejection by the Offeree: if an offeree later attempts to accept the offer after
her previous rejection, her acceptance is a mere counteroffer.
1) qualified acceptance: generally acts as a counteroffer, and is
therefore a rejection of the original offer.
2) the line b/n qualified and unqualified acceptance is not always clear.
a) conditional acceptance: usually acts as a counteroffer.
HOWEVER, if the condition was implicit in the offer or if
the offeree had a legal right to insist upon the condition
under the terms of the offer, the acceptance will be
considered “unqualified” acceptance.
b) Eg X accepts Y’s offer to sell land but includes a condition
that Y give X good title.
3) Mother-in-law problem: Sara Hodgkin, a wido who lived alone her farm,
wrote her daughter and son-inla in Missouri offering the use and income of the
famr if they would move to Maine and take care of Hodgkin during her life.
They moved, and later problems developed. The mother tried to force them out,
and court said her promise was unilateral promise, so the offerees held an option
contract. So the daughter could move out or stay, and the old lady had to pay if
she stayed until her death.
3) Minneapolis RR co v. Columbus Rolling Mill Co—Order specifying
quantity
a) Is an order that specifies a quantity not covered by the offer
a conditional acceptance and thus a rejection?
b) Yes. D had quoted prices for 2-5K tons of iron rails. P had
placed order for 1.2K tons. D then informed that wouldn’t
work. The P tried to reorder 2K tons, and D said no.
15) UCC § 2-207: Additional Terms in Acceptance or Confirmation:
a) a definite and seasonable expression of acceptance operates
as an acceptance EVEN THOUGH it states terms additional
to or different from those offered, unless acceptance is
expressly made conditional on assent to the additional or
conditional terms.
b) ADDITIONAL TERMS ARE UNDERSTOOD AS
PROPOSALS FOR ADDITIONS TO CONTRACT.
c) BETWEEN MERCHANTS, the proposals become part of
contract unless:
i) the offer expressly limits acceptance to terms
of offer
24
ii) they materially alter the offer
iii) notification of objection has already been given
or is given w/in a reasonable time after notice of
them is received.
16) Grumbling Acceptances: acceptances which express dissatisfaction but place
no condition on the acceptance generally are considered “unqualified.” When a
change is listed as a demand, it goes beyond mere grumbling acceptance and
operates as an implied rejection of the offer.
17) Inquiries/Requests: acceptances which include inquiries or requests by the
offeree for a better deal generally do not impair the original offer.
XII. MAILBOX RULE

1) Acceptance effective on dispatch. § 63.
2) Everything else effective on receipt § 40, 42.
3) Exceptions:
i) RST § 63 (b) acceptance of option
contracts effective on receipt.
ii) RST § 40: non-overtaking acceptance
4) general rule is that an acceptance is effective on dispatch, but all other
communications are effective on receipt. The reason is that at the moment of
dispatch the offeree has done all that he can reasonably can to manifest assent.
5) Acceptance: to be effective, dispatch must be timely and made in a proper
manner. Generally, dispatch should be in manner that the offer was sent.
6) Revocation: a revocation by the offer is effective only on receipt.
7) Rejection: a rej of the offeree by the offeree is effective only upon receipt. If an
offeree sends a rejection and then an acceptance, there is no contact even though
the rej arrives after the acceptance was dispatched.
8) W/drawing acceptance: the general rule is that the power to w/draw a letter of
acceptance from the mail does not affect the formation of a contract when the
letter is deposited in the mail.
9) LAST SHOT RULE: A sends an offer to B. B sends back an “acceptance” that
proposes an additional term. This additional term converts B “acceptance” into a
rejection and counter-offer. If A and B conduct their business as if they had
reached an agreement, a court may find that A accepted B’s counter-offer by
performance. B/c B sent the last form (fired the last shot) the terms in B’s form
will govern.
10) RST § 40: rejection or counteroffer by mail/telegram does not terminate offer
until received by oferror, but limits the power so that a letter/acceptance started
after the sending of an otherwise effective rej is only a counteroffer unless the
acceptance is received b/f he receives the rej/counteroffer.
11) RST § 42: REVOCATION BY COMMUNICATION FROM OFFEROR
RECEIVED BY OFFEREE: an offeree’s power of acceptance is terminated
when the offeree receives the offeror a manifestation of an intention not to enter
into a proposed contract.
12) RST § 63:
1) unless an offer provides otherwise, an acceptance made in a manner
and by a medium invited by an offer is operative and completes the
manifestation of mutual assent as soon as put out of the offeree’s
possession, w/out regard to whether it ever reaches the offeror
25
2) BUT an acceptance under an option contract is not operative until
received by the offeror.
13) Overtaking acceptance:
1) e.g.: Day 1: Oliver sends offer.
2) Day 2: Anne sends rejection.
3) Day 3: Annie sends acceptance.
4) Day 4: Oliver receives acceptance.
5) Day 5: Oliver receives rejection.
14) Overtaking rejection: if acceptance doesn’t arrive first and was sent alter, then
NO CONTRACT, mere counter offer.
1) Day 1: Oliver sends offer.
2) Day 2: Anne sends rejection.
3) Day 3: Anne sends acceptance.
4) Day 4: Oliver receives rejection
5) Day 5: Oliver receives acceptance.
15) ACCEPTANCE THAT DIFFERS FROM THE OFFER

a) Battle of the Forms: typically a buyer send a purchase order to the seller.
The purchase order typically contains printed terms favorable to the buyer.
After receiving the order, the seller sends a written acceptance or
confirmation to the buyer. The acceptance contains the basic terms of sale
but also contains terms favorable to seller. The seller’s terms may conflict
w/ buyer’s tersm.
i. Common Law: standard contract requires “mirror
image”—any variance therefrom material or not constitutes a
rejection of the original offer. It becomes a counteroffer.
ii. UCC §2-207: on the premise that both parties recognize a
contract despite their clashing forms, the UCC establishes a
general rule that a contract can be formed under such circs,
unless the responding offeree (the seller) specifically states
that there shall be no contract unless his set of terms is
accepted by the original offeror, in which case the offeree’s
response is treated merely as a counteroffer.
b) Proposed additional terms: if the offeree’s response contains terms
additional to those contained in the original offer, a contract exists consisting
of the terms on which the offer and acceptance agree. The additional terms
are deemed a proposal for additions to the contract. Where the parties are
merchants the proposals become part of the contract unless:
i. the offeror’s original offer expressly limits acceptance to the
offered terms (take it or leave it)
ii. the additional terms are a material alteration of the contract
c) Proposed inconsistent terms: If the offeree’s response contains terms
which are actually inconsistent w/ those contained in the original offer, the
parties’ conduct to determine whether they acted as tho a contract had been
formed. The conflicting terms cancel each other out.
26
XIII. Pre-Contractual Liability
1) Exceptions to no liability before contract: one party, in reliance on the
expectation of a contract, confers a benefit on the other party and can seek
restitution to prevent unjust enrichment. In some circumstances, however, a
party who relies on an offer but does not confer a benefit on the other party
may still have a claim.
2) Promissory Estoppel: w/in limits, detrimental action or forbearance by the
promisee, in reliance on a promise, constitute a substitute for consideration and
renders the promise enforceable to some extent. The promisee’s detrimental
reliance is deemed sufficient reason to estop the promisor for asserting the lack
of consideration. For similar reasons, a growing number of courts hold that an
offeree’s foreseeable, detrimental reliance on an offer will serve as a substitute
for consideration, so as to create an option and prevent the offeror from thereafter
revoking the offer for at least a reasonable time.
3) § 45: provides that an option contract is created when the offer invites
acceptance by performance and the offeree tenders or begins the invited
performance.
4) Drennan v. Star Paving Co—Liability of a Subcontractor
a) When a general subcontractor relies on a subcontractor’s bid
but the subcontractor later declines to perform, does that
refusal constitute a breach of contract?
b) Yes. P received a clear and definite offer. P’s reliance was
reasonable and foreseeable by D. P relied to his detriment,
so this is sufficient to imply a subsidiary promise by D not to
revoke its offer.
c) Modern cases hold that if the reliance was reasonable and
foreseeable, and if the reliance produced detriment, then the
subcontractor will be bound to this bid. This is a distinct
change from the old rule which required the general to
formally accept the sub’s bid b/f a binding contract existed.
5) Why is not § 90 to enforce this case as if a promisor’s promise induces
forbearance then it is binding…There is NO promise—the bid is not a promise.
In order to invoke promissory estoppel, we need a promise.
6) Rule of Drennan: logic is that the sub makes an offer, the general relies on that
offer, relies on that implicit promise w/in that offer not to revoke the offer, and it
would be unjust for the sub to pull the offer.
7) In order to prevent bid shopping: general contractor cannot reopen bargaining
with another sub after learning of and claiming a continuing right to accept the
original offer.
8) The main difference b/n Drennan and Elsinore—the Elsinore ct placed great
emphasis on its belief that the school board could roughly be no worse off if the
general contractor were released.
9) Holman Erection Co. v. Orville Madsen—Liability of General Contractor
a) D used P’s bid and listed P as a sub. D won the contract but
used another sub, a minority-owned business, instead of P.
b) Does a general contractor accept a subcontractor’s bid
merely by listing the subcontractor in its bid?
c) No. The generally accepted rule is that the listing of a
subcontractor bid in a gen. contractor’s bid does not
constitute acceptance of the sub’s bid. This is true even
27
though the sub is bound to his bid as submitted on the theory
of promissory estoppel.
d) The reason is that the general subcontractor relies on the
subcontractor’s bid. The subcontractor does not reliy on a
particular general contractor.
e) The nature of the bidding process requires that the general
contractor have flexibility in selecting the sub it hires.
Subcontractors ordinarily submit their bids only house b/f
the general bid must be submitted. This does not leave the
general contractor with time to work out the specifics;
specific details must be negotiated after the award is made.
This prevents bid shopping and allows general contractors
time after award to evaluate subcontractors on factors other
than just the price of the bid.
f) THE GOVERNMENT is required by 1963 statute to use the
use subs listed unless they had a) lost license, or b) declared
bankruptcy. The government could chuck one off of the list
but only after a hearing for shoddy work.
10) Failed Negotiation:
a) Sometimes negotiations involve considerable time and
expense by the parties. Where one party confers a benefit on
the other while working toward a formal contract, the
beneficiary may be required to make restitution if
negotiations fail.
b) Estoppel: During negotiations, one party may make
representations that induce the other party to incur expenses.
In such cases the party making the representations may be
estopped from disclaiming liability for natural consequences
of his conduct.
c) Ragosta v. Wilder: the ct noted that the trial ct had relied on
a part performance theory to allow the plaintiffs to recover
the cost of obtaining financing. While this theory was
inapplicable to the case, promissory estoppel might have
justified recovery. Plaintiffs entitled to enforcement of D’s
conduct if:
i) the promise induced them to take action of
a definite and substantial character
ii) injustice can be avoided only enforcement
of the promise.
11) Hoffman v. Red Owl Stores: Promise Incomplete as an Offer
a) If P relies to his detriment on a promise made by D, and
such detrimental reliance is foreseeable to D, P can recover
damages even though all details of the proposed transaction
are not included in the promise.
b) Promissory Estoppel applies here even though the promise
which was relied upon by P does not contain all the
necessary elements to form contract (here the plans for
construction, etc had not been decided upon).
c) Important!!!!: extends the promissory estoppel doctrine
since it does not rationalize it in terms of reliance as a
28
substitute for consideration. Here, there wasn’t even an
offer. There is simply negotiation. The implication is that
parties must bargain in good faith.
d) Ct claimed Red Owl committed fraud because don’t know if
they knew about the higher price before. B/c this a
promissory estoppel case, they think, they should only give
reliance, which puts one back in the positon you were in b/f
the K happened.
12) Cyberchron Corp v. Calldata Systems: Estoppel to Avoid Injustice:
a) If the parties never agreed to a material term of a contract,
but the buyer induces the seller to incur development costs in
the hopes that an agreement would be reached, the seller is
entitled to damages under promissory estoppel.
b) NY has three elements for promissory estoppel:
i) a reasonable and foreseeable reliance by
the party to whom the promise is made
ii) a clear and unambiguous promise
iii) an injury sustained by the party asserting
the estoppel by reason of the reliance.
c) Trial ct found that D’s behavior, especially its abrupt
termination of P’s purchase order to purchase heavier,
inferior equipment from another party, was unconscionable.
d) D had directed P to proceed with production as if there had
been agreement on the weight issue, on the understanding
that they would resolve the purchase order terms in the
future.
e) Denied recovery for overhead, etc b/c couldn’t prove they
were the result of relying on D.
13) Channel Home Centers v. Grossman—Obligation to Negotiate in Good Faith
a) A property owner’s agreement to negotiate in good faith and
to w/draw the premises from the market during the
negotiation binds the owner for a reasonable period of time.
b) Parties may agree to negotiate in good faith, and this
agreement may constitute a binding contract.
i) both parties manifested an intention to be
bound by agreement
ii) the terms of the agreement are sufficiently
definite to be enforced
iii) there was consideration
c) In this case the letter of intent and the activities of both
parties, including planning by P and D’s efforts to obtain
zoning variances, show that both parties intended to be
bound by an agreement to negotiate in good faith.
d) D claims there was no consideration given but in reality the
letter of intent P gave D was valuable to D b/c D needed it to
secure financing. When P showed intered, D requested a
letter of intent that D would use to help secure financing. P
provided the letter of intent, which provided that D agree to
w/draw the space from the mkt and that P otain necessary
zonig permits. D later told P that neogtioations were
29
terminated b/c P did provide a mutually acceptable lease
w/in thirty days of the letter of intent. The next day, D
signed a lease w/ A RIVAL OF Ps for a higher rent than P
had negotiated.
XIV. Definiteness
1) RST § 33 Requirements of Definiteness and Certainty of Terms: terms must be
sufficiently cler and complete so that the court can determine what the parties
intended and can fix damages in case of non performance.
2) Essential Terms: express or implied
a) parties to the contract
b) subject matter of contract
c) time for performance
d) price
3) TRIBUNE I Contracts: a fully binding preliminary agreement which is created
when the parties agree on all the points that require negotiation (including whether to
be bound) but agree to memorialize their agreement in a more formal document.
Such an agreement is fully binding; it is “preliminary only in form on ly in the the
sense that the parties desire a more elaborate formalization of the agreeemtn. It binds
both sides to their ultimate contractual objective in recognition that, despite the
anticipation of further formalities, a contract has been reached.
4) TRIBUNE 2 Contracts: “dubbed a binding preliminary commitment,” buy Judge
Leval, is created when the parties agree on certain major terms but leave other terms
open for further negotiation. The parties accept a mutual commitment to negotiate
together in good faith in an effort to reach a final agreement. In contrast to tribune I,
a type II agreement does not comit the parties to their ultimate contractual obligations
but rather to the obligation to negotiate the open issues in good faith in an attempt to
reach the objective w/in the agreed framework. Indeed, if a final contract is not
agreed upon, the parties may abandon the transaction as long as they have made a
good faith effort to close the deal and have not insisted on conditions that do not
conform to the preliminary writing.
5) Implication of reasonable terms: the general trend of the courts is to adopt a policy
of liberal construction so as to uphold the reasonable expectation of the parties; thus,
the court will usually imply reasonable terms (i.e. implied-in-fact terms from the
dealings and relationship of the parties) where none are expressly covered by the
parties. (e.g. failure to specify price may not invalidate the contract.)
a) Where price is completely omitted: where the parties have made no
provision for price but a charge was intended, the court will normally imply
“a reasonable price.” (e.g. fair mkt value for goods).
b) Where the price stated is indefinite: Often, however, where the parties
have made some attempt to include terms on the price but it is stated in such
a vague way as to unintelligible, the courts will refuse to imply a reasonable
price, and the contract will be unenforceable due to lack of certainty on an
essential term (e.g A agrees to employ B at a rate not exceeding 300 dollars
per week).
6) UCC 2-204: in contracts for sale of goods, the omission of one or more essential
terms does not render an offer invalid, as long as it appears that the parties intended
to make a contract and there is a reasonably certain basis for giving an appropriate
remedy.
7) RST § 33: restatement takes the same approach in effect.
8) Toys v. F.M Burlington—Conditional Exercise of Option:
30
a) If an optionee gives notice of exercising the option but later disputes the
terms of the agreement, may the optionee enforce the option agreement.
b) An acceptance that varies from the offer does not create a contract. A reply
must exceed the terms of the proposal without qualifying the acceptance,
however where the addition is merely a request but NOT a condition.
c) In this case, P clearly had notified D of its intention to exercise the option.
The subsequent dispute about the rental rate could be construed as an
agreement by the parties to a withdrawal of P’s notice of intention to
exercise.
d) The consideration Toys gave was the previous 5 year lease—this was
consideration for the option to renew.
9) Oglebay Norton Co. v. Armco—Omission of Specific Price Term in Long-Term
Contract
a) Iron ore case. A party can enforce a long-term service contract where the
price is not specified and the parties must periodically resort to the court to
determine a reasonable price.
b) D claims here it never consented to be bound by a contract once the specified
pricing mechanisms had failed, and that the contract was therefore
unenforceable. However the evidence of a long-standing and close business
relationship; supports the court’s findings that the parties intended to be
bound, even in the event the pricing mechanisms failed.
c) RST §33 and UCC 2-305 (1): If the parties intend to conclude a contract
but the price is not settled, the price is a reasonable price at the time of
delivery if the contract requires the price to be set by some standard and it is
not so set.
d) UCC much more willing to fill terms in than is common law—including
price. The only thing it won’t fill in is quantity.
e) Cts willing to fill in terms for Oglebay b/c there were 2 methods for
price. The contract, as well as the long term business relationship, led the ct
to believe that parties intended to be bound. The intent to bind that matters is
during the formation of the first agreement which was made in 1957.
f) BUT SHIPPING not a good, so RST §33 rather than 2-305 was used to
fill in.
10) STATUTE OF FRAUDS
a) Statute of frauds is a necessary but not sufficient condition of contract
law. Even if you satisfy the s.o.l. this does not make the contract
enforceable BUT failure to have a writing is enough to make the contract
Unenforceable.
b) § 6, §8: Unless a promise, contract, etc, is in writing and signed by the party
to be charged no action shall be brought in any of the following cases
i) upon any contract for the sale of real
estate or for the lease thereof for
MORE THAN A YEAR
ii) upon any agreement that is not be
performed WITHIN a year
c) Courts usually only enforce the “within a year” requirement if the agreement
is not THEORETICALLY possible, even if it is not PRACTICALLY
possible.
d) What if I agree to work for the law school for the rest of my life?
Theoretically could die w/in a year, so doesn’t have to be in writing.
31
e) What if I agree to work here for 2 years? Has to be in writing b/c could die
within a year.
32
Unilateral v. Bilateral: an interpretation of the FIRST RST 31 states “When it is unclear
whether the offer contemplates a bilateral or unilateral contract, a bilateral contract will be found
as a matter of public policy b/c a bilateral contract affords immediate rights and complete
protection to both parties.
1) The first restatement approach was to prefer bilateral contracts and interpret offers as
inviting a return promise whenever possible.
2) Note that this is not possible if the offeror explicitly states that they want performance;
not a promise of performance, or if the context makes it clear that he offeree should
accept by performance (e.g. rewards.)
Differences b/n Promissory Estoppel and 87 (2).

Promissory estoppel requires a promise and 87 (2) an offer where you can have reliance before
acceptance. And note the “substantial character” required in 87 (2) that no longer applies to § 90.
RST 90 requires a promise and therefore does not apply directly to the Drennan context. There
was no explicit promise to keep the offer open. Still, 87 (2) would make the offer irrevocable.
Effectively, 87 (2) implies a promise not invoke.
At first we saw promissory estoppel as a mere substitution for consideration. In other words, we
had no problems w/ assent or definiteness, but the defendant argued that the promise should not
be enforced b/c lack of consideration. The plaintiff argued that the court should “estop” the
defendant from making this argument b/c the plaintiff detrimentally relied on the defendant’s
promise.
Red Owl and similar cases involve situations in which there really is no assent in the form of ofer
and acceptance and may involve a promise that is too indefinite to enforce. Here the court uses
promissory estoppel as an independent cause of action. B/c the ct is enforcing reliance damages,
it need not worry as much about definiteness.

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A contract is said to be ''express'' when it has been stated

II. Implied-in-law contract (quasi-contract).

An implied-in-law contract (quasi-contract) is not actually

1) a benefit conferred upon the defendant by the plaintiff;

7) Common Law Definition:

5) Ways of Measuring Damages: Reliance damages cannot exceed expectation

II. ENFORCEMENT BASED ON CONSIDERATION:

IV. BENEFIT CONFERRED BY PAST ACTION:

I promise to paint your house or I promise to BE OUT OF

XII. MAILBOX RULE

15) ACCEPTANCE THAT DIFFERS FROM THE OFFER

Differences b/n Promissory Estoppel and 87 (2).

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