CONTRACT OUTLINE/KOVACIC (FALL 1999)
LEWIN
ROBERT
CHECKLIST FOR CONTRACT FORMATION
1.
Is a written K necessary?
Statute of Frauds: UCC §2-201
2.
Are there outward manifestations of mutual assent that a reasonable person could conclude than an intent to be bound
was present?
R §17, §18
a.
Embry v. Hargardine, Lucy v. Zehmer; Not existent: Cohen v. Cowles Media
3.
Is there an offer?
R § 24; UCC §2-206
a.
Language: ambiguity or specificity: Southworth v. Oliver, Courteen Seed Case, Jenkins Towel Service v. Fidelity Trust; Not
Existent: Lonergan v. Scolnick
b.
Context of Offer: Lucy v. Zehmer
c.
Relationship between parties, any prior dealings, history: Southworth v. Oliver, Corinthian v. Lederle
d.
Intent of Offeror to be Bound
e.
Is the offer in an advertisement of public solicitation?
i.
No offer exists unless the terms are clear and definite leaving nothing for discussion. Lefkowitz v. Great
Minneapolis Surplus Store; Carlill v. Carbolic Smoke Ball
4.
Is there an acceptance? (Is there consideration?)
UCC §2-206, R §50
a.
Accepted according to the offeror’s terms? R§58; No: LaSalle National Bank v. Vega
b.
Accepted by performance? UCC 2-206; R §25, 32, 53; Exception: R §54(2); Ever-Tite v. Green, Carlill v. Carbolic Smoke
Ball, Corinthian v. Lederle Labs
c.
Accepted by a promise of future performance? (not valid until after offeror is notified “releasing of the acceptance”; R §56.
d.
Was acceptance implicit? B(Behavior consistent with manifestation of intent?) R §69; Russell v. Texaco, Ammons v. Wilson,
Smith-Scharff v. PN Hirsch
5.
Was there proper notification of acceptance while the offer was valid?
R §63; R §69; UCC § 2-204
a.
The mailbox rule: Adams v. Lindsell (acceptance is effective when it is mailed or out of control of offeree)
b.
Implied Assent and Silence: Russel v. Texas Co.; Ammons v. Wilson; Smith-Scharff v. PN Hirsch
6.
Was the offer terminated or changed before acceptance?
a.
Rejection or Counter-Offer (R §36, 40, 59, 61; UCC § 2-207
i.
Mirror Image?
ii.
UCC § 2-207 (Leonard Pevar v. Evans Products)
b.
Lapse of Time (R § 41)
c.
Revocation (Hendricks v. Behee; Dickinson v. Dodds)
d.
Death
e.
Could the offer be revoked?
i.
No, if it was an option K after partial performance or agreement (R § 45, 87); Humble Oil v. Westside
Investment, Marchiondo v. Scheck, Ever-Tite v. Green.
ii.
Check for reasonable and foreseeable reliance (R §90); Drennan v. Star Paving; Electrical Construction v.
Maeda Pacific; NO: James Baird v. Gimble Brothers.
iii.
Negotiated? (R §87)
f.
Firm Offer Rule (UCC § 2-205)
7.
Was the K defective?
a.
Misunderstanding? (R § 20); Raffles v. Wichelhaus “Peerless” case
b.
Open Terms (UCC §2-204; R §33); Incomplete: Varney v. Ditmars, Martin Deli v. Schumacher, Hoffman v. Red Owl Stores;
Complete: MGM v. Scheider, Oglebay Norton v. Armco.
c.
Defect in Bargaining Process
i.
Capacity (R §12)
a.
Infants (R § 14); Bowling v. Sperry
b.
Mental Incompetence (R § 15); Heights Realty v. Phillips
c.
Intoxication (R § 16); Lucy v. Zehmer
ii.
Mistake (R §§ 151-158)
a.
Unilateral Mistake (R § 153); Boise Junior College v. Mattefs Construction
b.
Mutual (R § 152); Lenawee County Board of Health v. Messerly
iii.
Duress (R § 174-176); Alaska Packers v. Domenico
iv.
Unconscionability (UCC § 2-302; R § 208); Williams v. Walker Thomas, Carnival Cruise Lines v. Shute, Jones v.
Star Credit
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CONTRACT OUTLINE/KOVACIC (FALL 1999)
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TESTING A PROMISE’S ENFORCEABILITY
1.
Is there Bargained-For Exchange and Consideration?
a.
Benefit to Promisor or Detriment to Promisee? (R §71(2))
i.
Yes: Hamer v. Sidway, Fiege v. Boheme
ii.
No: Kirksey v. Kirksey; Bogigian v. Bogigian
iii.
For yes, look for: Forbearance, Good Faith, Mutuality
iv. For no, look for: Gratuitous Acts, Lack of Performance or Exchange, Duress, Fraud,
Unconscionability
b.
Sufficient Exchange? Thomas v. Thomas; For No, See: In re Greene
c.
Mutuality? (UCC § 2-204)
i. For yes, See: McMichael v. Price, Wood v. Lucy Lady Duff Gordon, Omni Group v.
Seattle
ii. For no, See Rehm-Zeiher v. FG Walker Co.
d.
No Pre-Existing Duty for Same Promise? (R §§ 73, 89; UCC § 2-209)
i.
For yes, See Angel v. Murray
ii.
For no, See Alaska Packers v. Domenico
2.
Was there a promise for past consideration – a moral obligation? (R § 86)
Yes: See Webb v. McGowin
No: See Mills v. Wyman, Manwill v. Oyler, Harrington v. Taylor
a.
Quasi Contract Elements:
i.
 received a benefit.
ii.
 appreciates that benefit.
iii.
It would be unjust for  to retain benefit without paying for it.
b.
Elements of Contract Implied in Fact
i.
 requests that  perform work (look at conduct of )
ii.
 expected  to compensate her for those services.
iii.
 knew or should have known that the  expected compensation.
3.
Does the K violate the statute of frauds? (R §§ 110-150; UCC §2-201)
a.
1 Year Requirement
i.
Klewin v. Flagship Properties; North Shore Bottling v. Schmidt &
Sons
b.
Writing Requirement
i.
Crabtree v. Elizabeth Arden; DF Activities v. Brown
4.
Was there reliance on the promise? (R § 90)
a.
Rickets v. Scothorn, Feinberg v. Pfeiffer Co.; Grouse v. Group Health Plan; Cohen
v. Cowles Media
b.
Was that reliance reasonable? (Should the promisor have expected reliance?)
c. Is enforcement of the promise necessary to avoid injustice? (Any private remedies, extralegal remedies, rational)
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CHAPTER 2: BASES OF PROMISSORY LIABILITY
Restatement §17 – Requirement of a Bargain
1. The formation of a K requires a bargain with mutual assent to the exchange and valid
consideration.
Restatement §71 – Consideration
1. To constitute consideration, a performance or a return-promise must be bargained for.
2. A performance or return 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.
3. Performance may consist of:
a.
an act other than a promise, or
b.
a forbearance, or
c.
the creation, modification, or destruction of a legal relation
4. 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.
1.
Bargain K: Promise Plus Consideration
a.
Key Points
Consideration helps distinguish between gifts and real bargains. Gifts are generally not enforceable under K law. To
avoid enforcing hollow bargains, courts may ask whether the parties entered into a K in consideration of an
unexpected benefit. Consideration reinforces the solemnity of promises and is a tool to police unjust
agreements.
1.
2.
3.
4.
5.
6.
7.
8.
9.
Conventional doctrine requires benefit to the promisor or detriment to the promisee. Exchange must be
bargained for; not some condition on a gift.
One rough test for if something is sufficient consideration or a condition on a gift is if the “happening of the
condition will benefit the promisor
i.
Langer v. Superior Steel -  received benefit in ensuring  would not work for competitor.
Consideration is present if promisor forgoes or forbears on a legal right that he would otherwise have, or
undertakes a responsibility that limits his freedom in some way. Court will not inquire into whether party
benefited from consideration.
i.
Hamer v. Sidway – Decision to forgo alcohol and pool is a forbearance; sufficient consideration.
Court look to sufficiency of consideration (not nominal), but will not engage in weighing consideration.
Inadequate consideration generally does not bother a court.
Consideration must be actually bargained for.
Courts generally do not inquire into the adequacy of consideration as long as it is present.
Release from an illusory claim is not consideration. In re Greene
Generally, if a pre-existing duty exists, completing the task is not consideration for any new K.
Neither party is bound to a contract unless both are bound. “Mutuality of Obligation”; Rhem-Zieher v. FG
Walker; McMichael v. Price; Wood v. Lucy Lady Duff Gordon
b.
1.
sufficient.
c.
Introduction
In order for a valid K to exist, there must be a mutual agreement (offer and acceptance) and
consideration (or some substitute for consideration). There are two essential factors for consideration:
i.
The bargain element – each party must attempt to secure something from the other side they
were not legally entitled to.
ii.
The value element – the bargained for element must be legally
Remedies
Expectation Damages: for lost income or profit. Put offeree or promisee in same position as if K had
been performed. Appropriate when there has been a material breach.
2.
Reliance Damages: recover whatever detriment offeree or promisee has suffered by reliance.
3.
Restitution Damages: put parties in position as if K had never existed. (remove unjust enrichment, most
commonly grantedm usually witho some reasonable amount of reliance damages. See Sullivan: Restitution
damages awared, but no expectation damages.
1.
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BARGAIN ELEMENT
Restatement §79 – Adequacy of Consideration; Mutuality of Obligation
If the requirement of consideration is met, there is no additional requirement of:
a. a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment
to the promisee; or
b. equivalence in the values exchanged; or
c. “mutuality of obligation”
KIRKSEY V. KIRKSEY {Mere Gratuity}
Brother in law of widow tells widow to come and stay at his house.
Court sees this as a “mere gratuity”; widow’s moving was a condition on a gift.
No benefit to the promisor, therefore no consideration.
It’s often difficult to determine if something is a gift or valid consideration. One test is if the “happening of the condition will
benefit the promisor. Langer v. Superior Steel
LANGER V. SUPERIOR STEEL CORP. {Forbearance from acting}
Man agrees to retire, gets $100 month as long as he does not seek employment with
a competitor.
Test for good consideration asks whether the promisee, at the insistence of the promisor,
has done something, suffered a detriment, or in return for the promise has done
something he was not bound to do or promised to perform or abstain from doing
some act.
K may have also be enforceable on promissory estoppel model.
BOGIGIAN V. BOGIGIAN {Requirement for bargained for consideration}
Husband gets wife to sign release of obligations for husband.
Consideration was not bargained for here, thus the K is not enforceable.
THOMAS V. THOMAS {Amount of Consideration}
Brother’s in law get widow to pay one pound plus upkeep of apartment.
Here, court held one pound plus upkeep was sufficient consideration.
HAMER V. SIDWAY {Sufficiency of exchange; limitation on freedom as sufficient
consider.}
Boy agrees not to drink or smoke in return for $5000.
Valuable consideration may consist of some right, interest, profit, or benefit given to
one party; or some forbearance, detriment, or loss to the other.
Commercial Value – A Court will generally not inquire into the adequacy of consideration in terms of
commercial value since it wants the parties to make their own K, each party determining what is valuable
to him.
APFEL V. PRUDENTIAL-BACHE SECURITIES {Novelty idea not required}
Court says idea is valuable, even if not novel, based on the actions of .
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SITUATIONS OF FRAUD, MISTAKE, DURESS, UNCONSCIONABILITY, AND KS AGAINST PUBLIC POLICY
UCC §2-302 – Unconscionable K or Clause
1. If the court finds a K or clause unconscionable at the time it was made, the
court may refuse enforcement or it may enforce the remainder of the K without the
unconscionable clause, or it may limit the application of the unconscionable clause.
2. When a clause or K is unconscionable, the parties may present evidence as to
commercial setting, purpose, and effect to aid the court’s determination.
(Factors to consider are value disparity, inequality of bargaining power, and knowledge by the seller
of the purchaser’s limited financial resources.)
Unconscionability is “recognized to include an absence of meaningful choice on the part of one of the
parties together with K terms which are unreasonably favorable to the other party. Williams v. WalkerThomas. The court tends to go with its gut in cases on unconscionable Ks. (“Deciding the issue is
substantially easier than explaining it.” Jones v. Start Credit Corp.) Court looks to status of contracting
parties and gross inequality in bargaining power. Court is also more sympathetic to parties who enter these
bargains to acquire necessities as opposed to luxury items.
Courts are not willing to protect contracting parties from “bad bargains” that fall short of
unconscionability. It is the general rule that inadequacy of consideration, exorbitance of price or
improvidence in a K will not, in the absence of fraud, constitute a defense.
In determining unconscionability, courts look for:
1.
extremely on-sided Ks
2.
oppression
3.
unfair surprise (such as in fine print)
4.
absence of meaningful choice
5.
lack of education
6.
disparity in bargaining power
7.
is there a reasonable excuse to explain why the K is as it is?
A difference exists between “procedural” and “substantive” unconscionability:
Procedural – some kind of deception or overreaching that constituts an abuse in the process of
bargaining. The indicators of procedural unconscionability fall under either (a) lack of knowledge; or
(b) lack of voluntariness.
Substantive – some sort of objectionable or oppressive clause that may have been knowingly and
voluntarily assented to.
WILLIAMS V. WALKER-THOMAS {Unconscionable K terms at time of signing,
adhesion K}
Balances from purchases on credit carried over so that full ownership is difficult to
obtain.
Court relies on §2-302 to deem K unconscionable.
JONES V. STAR CREDIT { bargaining power; Seller’s knowledge of buyer’s poverty)
UCC §2-302 allow great flexibility in voiding entirely or limiting the application of an
unconscionable K or clause.
Considers value disparity, inequality of bargaining power, and knowledge by the
seller of the purchase’s limited financial resources.
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CARNIVAL CRUISE LINES, INC. V. SHUTE {Forum selection clause and
unconscionability}
 buys cruise ticket. After they pay for it, they get a ticket that says on the back that
nay suits brought against Carnival must be in the state of Florida. Mrs. Shute falls
and injures herself on the cruise.
She sues Carnival in Washington, where she lives and bought the ticket. Court says
the the forums selection clause is ok, not problem re: notice, no fomration problem,
reduced confusion, and lower prices for tickets. The K was not held to be
unconscionable.
Inadequate Consideration/Illusory Claims v. Good Faith Claims – Another exception to the
enforcement of Ks is where the consideration is totally devoid of value, or nearly so (i.e. nominal). A
majority of courts allow a party to prove that in fact no consideration was ever actually received.
IN RE GREENE {Nominal consideration}
Man lives in adultery, as consideration she pays $1 and “good and valuable
consideration,” he pays $1000/month.
Release from imaginary claims is not consideration, nor is “good and valuable
consideration” where none is given.
FIEGE V. BOHEM {Promise to forgo lawsuit}
It is not sufficient consideration to forbear to bring an action which the party knows
or reasonably should know is not a valid claim.
Public policy is at play here – the policy is to encourage settlement of lawsuits on
amicable basis; promotes agreement between parties and saves the public the time
and expense of lawsuits.
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PRE-EXISTING DUTY RULE: MODIFICATION AND DISCHARGE
UCC §2-209 – Modification, Rescission, and Waiver & Restatement 2nd, §89
§2-209 requires no consideration to modify an existing contract as long as the
modification is bargained for in “good faith.”
§89 requires that a modification should be enforced without new consideration if the
parties voluntarily agree and if:
i. the promise modifying the original K was made before the K was fully performed
by either side
ii. the underlying circumstances which prompted the modification were
unanticipated by the parties; and
iii. the modification is fair and equitable.
The performance or the promise to perform a pre-existing duty does not constitute consideration.
The modern trend is away from rigid application of the preexisting duty rule (reflected by Angel v. Murray)
There are many impulses for renegotiation:
(1)
Bad Faith – awareness after the fact of a better deal.
(2)
Circumstantial – Unforeseen changes as detailed in Murray.
LEVINE V. BLUMENTHAL {Promise to refrain from bankruptcy}
Levine leases store during Depression, price increases not enforced.
Agreement to alter the terms of a lease is not enforceable if no additional
consideration is given.
ALASKA PACKER V. DOMENICO {Pre-existing duty and coercion in renegotiation of
K}
Workers threaten to stop working if not paid more $.
The party who refuses to perform, and thereby coerces the other party to promise to
pay more for doing what he was legally bound to do, takes unjustifiable advantage of
the other party.
No consideration for the promise of the other party and it cannot be legally
enforced, even though the firs party his completed his contract in reliance on it.
ANGEL V. MURRAY {Exception to pre-existing duty rule for changed conditions}
Where additional performance unforeseen at the time of the signing of the K means
the cost of performance is higher, compensation may be increased.
Modification of a K is itself a K, which is unenforceable without consideration.
The primary purpose of the “pre-existing duty rule” is to prevent hold-ups at work.
Courts should enforce modification when unanticipated difficulties arise during the
course of performance, even though there is no consideration for the modification,
as long as the parties agree voluntarily.
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1.
ROBERT
Mutuality of Obligation Requirement
Requirement of consideration on each side of the K – For a K to be enforceable, it must appear
that both parties to a K have given legally sufficient consideration (so that both parties are
bound; if both are not bound, neither is bound)
a.
Unilateral Contracts – The act that the offeror bargains for from the offeree must be
sufficient consideration for the promise that the offeror makes. The bargained-for-act
must (in the majority view) impose a legal detriment on the offeree or (in the minority
view) must confer a legal benefit on the offeror.
b.
Bilateral Contracts – (Mutuality of Obligation) – In a bilateral K, A makes a promise (his
offer), which is conditioned on the giving of a return promise by the offeree (B). The
return promise by B is the consideration for A’s promise, and A’s promise is
consideration for B’s promise.
1.
Consideration on Both Sides – Both promises must be binding promises or the K
is void for lack of consideration. This is the doctrine of “mutuality of obligation.”
2.
Theory of Mutuality – In determining whether a promise given by B, the
promisee, is sufficient consideration for a promise given by the offeror (A),
courts look to see whether the performance promised by B is sufficient
consideration. If the performance is sufficient consideration, then a promise
to perform is also sufficient.
c.
Illusory Promises – Promises reserving to the promisor the power to determine
performance. If the promisor can escape performance altogether, he has really not
promised anything – not sufficient consideration for the return promise by the
promisee; therefore, no mutuality. (Rehm-Zeiher Co. v. FG Walker Co.)
d.
Requirements Contract – A promise by A to B to sell all that is required is good
consideration is valid consideration (limitation of action; requirement to purchase all
that is needed)
REHM-ZEIHER CO. V. FG WALKER CO. {Illusory Promise}
 enters K with  where  would supply  with designated quantities of whiskey.
In K,  agreed to “release them from the K from the amount desired by .”
A K which allows one party to act with unbridled discretion lacks mutuality of
obligation.
A requirements K, where A agrees to furnish all of B’s needs for a certain item, is
not lacking in mutuality.
However, if the K allows B to take only so much as B desires, there is no mutuality
of obligation
MCMICHAEL V. PRICE {Application of mutuality of obligation rule to requirements
K}
Where  is entering a business and has no requirements as of yet but  agrees to sell
to  all of ’s requirements, mutuality of obligation exists.
Sufficient consideration to support ’s promise exists, thus valid K.
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e.
ROBERT
Implied Promises – Even where a bilateral K apparently contains no promise at all on one
side, the K may still be upheld if the surrounding facts and the nature of the agreement
fairly imply a promise of performance by that party.
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UCC §2-306(2) – Exclusive Sales Contracts
In an exclusive sales contract, the manufacturer impliedly agrees to use his best
efforts to supply the good and the distributor impliedly agrees to use his best efforts
to promote their sale.
WOOD V. LUCY, LADY DUFF-GORDON {Exclusive K: reasonable efforts implied}
Lucy enters exclusive marketing agreement, then markets on her own.
Court inferred that the agent was supposed to exercise best efforts to get business
for the clothing line, mutual consideration existed.
Restatement 2nd §228 – Satisfaction of the Obligor as a Condition
When it is a condition of an obligor’ duty that he be satisfied with respect to the
obligee’s performance or with respect to something else, and it is easy to see whether
a reasonable person would be satisfied, the condition is said to occur if a reasonable
person would be satisfied.
OMNI GROUP V. SEATTLE-FIRST NATIONAL BANK {“Satisfaction” as condition
precedent}A condition precedent to a promisor’s duty that the promisor be
“satisfied with some aspect of the deal does not render the promise illusory.
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MORAL OBLIGATION: PROMISE PLUS ANTECEDENT BENEFIT
Restatement 2nd §86 – Promise for Benefit Received
1. A promise made in recognition of a benefit previously received by the promisor is binding to the extent
necessary to prevent injustice.
2.
A promise is not binding where:
a.
the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly
enriched; or
b.
to the extent that its value is disproportionate to the benefit.
Avoidance of unjust enrichment over recognition of moral obligation!
a.
Introduction to Quasi-K
In addition to normal remedies that may apply where a party breaches a K with another party, there are situations in which a party
will be given a remedy for performing a benefit for another party although no K ever existed. These situations are based on the
quasi-K theory.
b.
Definition
A quasi K is not a true K, since there is no mutual assent bargained for and received by the parties. The law creates or implies a
K. This is normally done where a benefit has been received by the  from the  under such circumstances that in equity the 
ought to compensate the . The law implies a promise by the  to pay the reasonable value of the benefit which has been
conferred on him by the . The purpose of the implied promise is to avoid unjust enrichment of the  at the ’s expense.
c.
Elements of a Quasi-K Recovery:
1.
 receives a benefit from .
2.
 appreciated or knew of the benefit.
3.
 was not acting as a volunteer.
4.
Allowing the  to retain the benefit without paying the  would result in unjust enrichment by the  at the ’s expense.
d.
Measure of Recovery
1.
Unjust Enrichment – Normally, the recovery is measured by the reasonable value of the benefit conferred on .
2.
Detriment to  - Modern courts have recognized that in some instances the proper recovery is the detriment suffered by
the  (recovery is the value of property expended by ).
e.
Elements of a K Implied-in-Fact: (Bailey v. West – “Bascom’s Foley Case”)
1.
 requested  perform work
2.
 expected the  to compensate him
3.
The  knew or should have known that the  expected compensation.
MILLS V. WYMAN {Moral obligations not sufficient consideration}
Mills takes care of Wyman’s sick son. Wyman promises (in writing) to pay Mills, but later revokes.
A moral obligation does not constitute sufficient consideration to make a promise enforceable.
Consider, however, that express promises founded on preexisting obligations may be enforced (i.e. promise to pay a debt barred by
statute of limitations becomes enforceable.
MANWILL V. OYLER {Majority Rule re: Moral Obligation and Consideration}
Manwill made payments on Oyler’s behalf (for a farm) over four years.
Statute of limitations bars suit for recovery for benefit conferred.
 promised, however, to repay debts.
A moral obligation is not valid consideration to support an oral promise.
It does not constitute valid consideration because in nearly every promise there is a moral aspect. If a K
obligation need be no more than a promise, no consideration is necessary.
WEBB V. MCGOWIN {Minority Rule re: Moral Obligation and Consideration}
Webb falls with 75 lb. block to protect man below him from getting hurt.
McGowin promises to pay $15 for the rest of Webb’s life. When McGowin dies, his estate stops paying.
When the promisor receives a material benefit (here, the avoidance of injury) and the promisee suffers a material
detriment (here, permanent disablement), moral obligation is sufficient consideration to support a promise.
HARRINGTON V. TAYLOR {Humanitarian act is not sufficient consideration}
Harrington intervenes in domestic dispute, is permanently disabled; Taylor, who is saved, promises to pay here.
A humanitarian act, voluntarily performed, is not sufficient consideration to entitle her to redress.
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Promissory Estoppel – Promise plus Unbargained-for Consideration (Reliance)
Restatement 2nd §90 – Promissory Estoppel
1. A promise which the promisor should reasonably expect to cause action or forbearance by the promisee or a
3rd person and which does cause the action is binding if injustice can be avoided only be enforcement of the
promise. Remedy may be granted as justice requires.
2. A charitable subscription or a marriage settlement is binding without proof of inducement to action.
Old view was that PE only existed for gifts. New view is to liberalize the doctrine. No requirement for substantial reliance, where partial
reliance, partial promise enforcement may occur. Doctrine is now applied to bargain and gift situations.
a.
A substitute for bargained-for consideration
i.
Some promises are enforceable without bargained-for consideration. In promissory estoppel, detrimental action or
forbearance by the promisee (A) in reliance on the promise by the promisor (B) will constitute a substitute for consideration
and render the promise by B enforceable. The principle first arose in cases offering compelling reasons for enforcement of
the K.
b.
Equitable v. Promissory Estoppel
i. Equitable Estoppel arises from the conduct of a party to include spoken or written words, positive acts, and silence or
negative omissions to do anything. It is not based on any promise, but rather on the principle that one who by his language
or conduct leads another to do what he would not otherwise have done, should not subject the person to loss or injury by
disappointing the expectations he relied upon.
ii. Promissory Estoppel attempts to dissuade promises relying on promises to their detriment and then suffering a loss of
injury as a result of nonperformance of that promise.
c.
Basic Equitable Principles
i.
Ricketts v. Scothorn
d.
Charitable Contributions
i.
Early cases involving charitable subscriptions supported the doctrine of PE because of the especially compelling policy
considerations involved.
ALLEGHENY COLLEGE V. NATIONAL CHAUTAUGUA {Application of PE to charitable contributions}
Woman left gift to school, paid part, then revoked promise.
A promise to perpetuate a donor’s name is valid consideration for a charitable subscription.
Cardozo didn’t use PE here, simply said consideration existed, but even the older doctrine of PE could have been
applied.
FEINBERG V. PFEIFFER CO. {Gratuitous pension plans}
 worked for  for 37 years; received pension of $200/mo. whenever she retired.
 retired one year later; six years after that the company cut off payments.
 became unemployable due to cancer, she sues to collect.
If an employee, relying on a promise of a pension, does not work during the years when she is employable, she is
entitled to enforcement of the pension promise.
Sufficient reliance by , and  should have reasonably anticipated the reliance.
It would be unjust to  not to enforce the promise.
Consider that if  had been able to work at the time  stopped payments, it would probably have not been unjust not to enforce the
promise.
GROUSE V. GROUP HEALTH PLAN, INC {At-will employment and PE}
Grouse was offered a position with , quit his job and refused two other jobs to take job from .
When  was unable to get a favorable hiring reference for , they hired someone else.
If an employer hires a person to an at-will position, knowing the employee will have to quit his existing job, and
then later changes it minds, the prospective employee may sue for enforcement of the promise based on PE.
PE applies to a promise which the promisor should reasonably expect to induce action on the part of the promisee and does induce
such action.
The court appears to say  was justified in relying on an illusory promise that was insufficient to create a K but sufficient to give rise
to PE claim.
COHEN V. COWLES MEDIA CO. {PE substituted for breach of K}
 gave information re: a competitor for public office.
The information was given in return for a promise to keep ’s identity confidential.
’s editors decided to reveal the name of the informant.
 was fired as a result; SC determined 1st Amendment would not be violated by invoke PE.
PE was appropriate,  relied on ’s promises, which  could reasonably assume would happen, and injustice had
to be avoided.
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STATUTE OF FRAUDS: FORMALITIES IN CONTRACTING
UCC § 2-201: Statute of Frauds
1. A K for the sale of goods for the price of $500 or more is not enforceable unless a writing sufficient to indicate a K
for sale exists between the parties and signed by the party against whom enforcement is sought. A writing is
sufficient even where it omits or incorrectly states a term agreed upon, but the K is not enforceable beyond the
quantity of goods shown in the writing.
2. If an oral K is put in writing by a follow-up confirmation letter, the receiver of the letter has ten days to object to
the terms, or else it becomes binding.
3. A K which does not satisfy (1) but which is valid in other respects is enforceable:
a. if the goods are specially manufactured for the buyer and are not suitable for sale to others, and the seller, before
notice of repudiation is received and under circumstances showing the goods are made for the buyer, has made a
substantial beginning in the manufacture of the products.
b. if the party against whom enforcement is sought admits that a K for sale was made; but not beyond the quantity of
goods admitted.
a.
Introduction
i.
In most instances, oral Ks are valid. However, by statute, a few types of Ks are required to be in writing, or at least evidence by a
signed, written memorandum of the essential terms.
ii.
The purpose of the Statute of Frauds is to prevent fraud and perjury as to the actual terms of the K and to provide better evidence
of the K terms in the event of a dispute.
b.
Contracts for the Sale of Goods
1.
A K for the sale of any goods for the price of $500 or more must be in writing.
i.
“Goods” include all tangible movable property; does not include intangibles, securities, or Ks for labor.
2.
Exceptions – Oral Ks for the sale of goods of more than $500 will be enforced in the following situations:
i.
Where the buyer receives and accepts all or part of the goods.
ii.
The buyer gives something in part payment for the goods.
iii.
The K calls for manufacture of special goods for the buyer and the seller has made a substantial beginning in the
manufacture of the product.
iv.
The K is between merchants, and within a reasonable time, a written confirmation of the oral K is sent by one of the
parties and the party receiving it does not send a written objection within ten days.
c.
Type of Ks that MUST be in Writing:
i.
M
Promise in Consideration of Marriage.
ii.
Y Agreement cannot be performed within one year (no possibility of performance (Klewin, North Shore, Mason)
iii.
iv.
v.
vi.
d.
L Interest in land.
E Administrator/Executor promises to pay estate debts from own funds.
G Goods for sale in excess of $500
S Suretyship – promise to pay the debts of another.
Satisfaction of the Statute – When a K is required to be in writing, it ordinarily must be in a permanent, written form and signed by the party to be
charged. However, this does not mean that the writing must be a fully integrated, formal K.
1.
Memorandum of Essential Terms
a.
Requirements – A memorandum of the essential terms of the agreement will satisfy the statute if the memorandum
contains the following:
i.
Identity of the contracting parties.
ii.
Description of the subject matter of the K.
iii.
Terms and conditions of the agreement.
iv.
Recital of the consideration.
v.
Signature of the party (initials, seal, etc.)
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Restatement 2nd §130 – K not to be performed within one year
1. Where any promise in a K cannot be fully performed within one year of the making of the K, all promises in the K
are within the SOF until one party completes performance.
2. When one party completes performance, the one-year provision does not prevent enforcement of the promises.
e.
One Year Requirement – Ks which are incapable of being performed within one year.
i.
Refers to Ks which, by their terms, cannot by any possibility be performed within one year fro the making of. The one-year period
begins from the date the K is made, not when performance is promised.
CR KLEWIN, INV. V. FLAGSHIP PROPERTIES, INC {Ks of indefinite duration}
 entered into an oral K with  for construction project done in several phases over 3 to ten years.
Takes narrow view of Statute of Frauds.
Ks of uncertain duration are excluded and that SOF only covers Ks whose performance cannot possibly occur in one
year.
Uncertain and indefinite duration contracts are essentially the same thing, both are exceptions to the one year
requirement, therefore enforceable.
The K, “by its terms” must not be able to be performed in one year; the SOF does not apply where there is no provision
that directly or indirectly regulates the time for performance.
NORTH SHORE BOTTLING {Ks for more than one year which include termination provisions}
 is the exclusive distributor for , will distribute as long as  sells in Queens.
Here, performance may occur in one year, even if it appears to be impossible to ensure performance in such time.
Where there is some contingency that could terminate the K within one year (even if it appears performance will go on
for more than one year, the K is outside SOF bar. (enforcement is ok).
MASON V. ANDERSON {Exception to SOF 1 yr req. where 1 party has completed performance of K}
 loaned $5000 to Miner (who dies).
Miner agreed to make monthly payments of $200 until entire amount was paid.
Miner dies, Anderson, administratix, refuses to pay balance of loan: SOF makes K unenforceable.
Exception to 1 yr. requirement exists where one party fully completes their contractual obligations.
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Restatement 2nd §131 – General Requisites of a Memorandum
Unless additional requirements are prescribed by state statute, a K within the SOF is enforceable if a writing exists,
signed by the party against whom enforcement is sought, that:
1.
Reasonably identifies the subject matter of the K
2.
sufficiently indicates that a K has been made between the parties or offered by the signer to the other party
3.
state with reasonable certainty the essential terms of the unperformed promises in the K
UCC §2-202 – Final Written Expression: Parole or Extrinsic Evidence
Terms of a K contained in a confirmatory memoranda of the parties may not be contradicted by evidence of any prior
agreement but may be explained or supplemented.
a.
by course of dealings or course of performance.
b. by evidence of consistent additional terms unless the court finds the writing to have been intended as an exclusive
statement of the terms of the agreement.
f.
Content of Writing Requirement – The requisite writing may be composed of several documents, provided each refers to or incorporates
the others, or they are otherwise integrated (physically attached, for e.g.) R § 208 indicates that it is sufficient if the documents involved simply refer to
the same subject matter.
CRABTREE V. ELIZABETH ARDEN {Application of memorandum writing requirement}
 agrees to become sales manager for .
Payroll cards with starting salary was initialed by ’s general manager.
After one year,  refuses to approve further pay raises.
Several writings may be considered together for purposes of the SOF.
The unsigned office memo, the payroll change card initialed by the GM, and the payroll change card prepared an
designed by the comptroller all refer to the same transaction and constitute sufficient memoranda, when taken together,
to bind .
e.
Effect of Noncompliance with SOF
1.
2.
3.
f.
Majority view – In most states, failure to comply with SOF renders the K voidable (unenforceable at law), but not void. Under
UCC §2-201(3)(b), an oral agreement is binding to the extent admitted.
a.
Rationale – SOF related only to the remedy (enforceability) and not to the substantive validity of K.
Minority view – In a few states, failure to comply with SOF renders the K void. Thus, the statue in these states is a defense to
formation, not merely to enforcement of the K.
Quasi-K Recovery – In both majority and minority states, most courts allow quasi-K recovery for benefits rendered pursuant to
oral promises that are unenforceable under the statute.
Application
DF ACTIVITIES CORP. V. BROWN {Limits on discovery to prove admissions}
 negotiated to buy chair from .
 claimed to have reached an oral agreement to purchase chair, but when a confirmation letter was written,  claimed
to have never entered into such an agreement.
A  in a case may not block discovery intended to elicit an admission simply be moving to dismiss or denying in
pleadings that a K was made. However, when the  swears in an affidavit that there was no K, no further investigation
need occur.
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A.
1.
ROBERT
THE BARGAIN RELATIONSHIP
AGREEMENT AND PERFORMANCE
Mutual Assent – Generally, a K is formed when two parties reach agreement of resources.
a.
The Objective Test – Courts apply an objective test to determine whether there has been
an offer or an acceptance. It does not matter what the parties subjectively intended, but rather
their words and actions are judged by what a reasonable person would believe such words and
actions meant.
EMBRY V. HARGADINE, MCKITTRICK DRY GOODS CO {Subjective test is incorrect}
 worked for one year, stated he would not continue to work without new K.
President said “go ahead, you’re all right.”
Two months later,  was terminated.
A person’s subjective intent is irrelevant. It is what a reasonable person would
believe about the promisor’s conduct or words that count.
LUCY V. ZEHMER {Offers made in jest}
 drew up K and signed it with his wife, agreeing to sell his farm for $50,000.
 offers money as partial payment,  says he was only joking and was drunk.
An offer made by the offeror when he was drunk can be binding if accepted.
P was not too drunk to know what he was doing and understood consequences (his
wife made him redraft the K)
Evidence also shows that , was justified in believing that  were acting in good
faith and intended to be bound.
The objective theory of K led the court to conclude that there was in fact an offer
which was accepted, no matter what ’s subjective intent was.
COHEN V. COWLES MEDIA CO. {Enforceability of agreement}
Agreement not to publish informants name; then published.
The promise made by ’s reporter has an offer, an acceptance, consideration, and a
breach.
However, the law does not enforce every exchange of promises
A reporter and source do not ordinarily believe they are entering a legally binding K.
To impose a legal K theory on this relationship would preclude consideration of
factors behind the ethical relationship.
A K cause of action is inappropriate.
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b.
ROBERT
Creation of the Power of Acceptance – OFFER
Restatement §24 – Offer Defined
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.
1.
i.
ii.
What Constitutes an Offer:
Definition: An offer is a proposal by one party to another, manifesting a willingness to
enter into a bargain and made in such a way (words or conduct) that the other person is
justified in believing that his assent (i.e. acceptance) to that bargain is invited and, if given,
will create a binding K between the parties.
Requirements for a Valid Offer:
1.
Manifestation of present contractual intent.
2.
Certainty and definiteness of terms.
3. Communication to the offeree. The offer must be communicated to the
offeree; otherwise, it doesn’t create the power of acceptance in the offeree.
iii.
Requirement of Manifestation of Present Contractual Intent
1. The words or conduct used in the proposal must be words of offer rather than
mere words of preliminary negotiation.
i.
Words Used – Some words strongly suggest an offer has been made, while
other suggest a mere invitation to make an offer (“I bid” v. “Are you
interested?”)
ii.Surrounding Circumstances – May alter the normal meaning of words.
iii. To Whom Made – Proposals made to the public or a large group of persons
(such as an advertisement) are more likely to be construed as mere
invitations to make an offer.
iv. Definiteness and Certainty of Terms – The more definite the terms, the more
likely an offer has been made.
v. Written Contract Contemplated – Where a proposal contemplates a
subsequent written memorandum of agreement, there is a presumption
that there is no K until written instrument is signed. Other courts,
however, resolve this issued based on the intent of the parties, which is
determined from all of the surrounding circumstances.
LONERGAN V. SCOLNICK {Application}
Inquiry about land advertised in newspaper.
 sends form letter describing the property and stating the asking price.
 wrote asking about an escrow agent.
 writes saying escrow agent is ok but  need act quickly; property would be sold soon.
 receives letter after  has already sold property.
Without knowledge of sale,  sends acceptance letter.
A letter that refers to potential sale to a 3rd party may not be construed as an offer for sale.
 never made an offer, he was entering into a bargaining agreement.
Neither the ad nor the letter by  contained a definite offer.
LEFKOWITZ V. GREAT MINN. SURPLUS STORE {Performance promised by ad}
 advertises sale “first come first served.
 is first person at store and demands sale.
An advertisement to the general public can be a binding obligation requiring the seller to sell the
advertised merchandise.
Ads to the public are binding if the facts show that some specific performance is definitely
promised for something requested.
The ad offered merchandise at a stated price to the 1st person at the store.
No room for negotiation as the offer was clear, explicit, and definite.
Once the offer was published,  had no right to impose further obligations.
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SOUTHWORTH V. OLIVER {Inclusion of the word “offer” unnecessary for valid offer}
 decides to sell some property and discusses with .
 says he was interested, but no price or terms of sale are mentioned.
 was supposed to give  notice of what the price would be.
s were also giving information to other neighbors.
 called to say he had money for the sale.
 sends “information” letter to  describing price, acreage, location, and terms of the sale.
 sends  an acceptance of their offer to sell the land.
 writes return letter saying information letter was just that, informational.
A writing need not contain the word “offer” to be construed as an offer.
A fine line between offers and negotiations preliminary to an offer exists.
In construing a writing, the accompanying circumstances as well as the direct language in the
document must be considered . While a price quote alone is not an offer, when considered
together with other circumstances, such a quote may be an offer which, if accepted, becomes
binding.
Guidelines for judging whether a writing is an offer:
1.
What a reasonable person in the position of the offeree would be led to believe;
2.
The language used, especially words of promise, undertaking, or commitment;
3.
The specificity of the persons to whom the writing is addressed; and
4.
The definiteness of the proposal.
Considering the completeness of the information contained in the letter, a reasonable person in
’s position would have believed  was making on offer to sell.
2.
Indefiniteness
Restatement 2nd § 30 – Form of Acceptance Invited
1. An offer may invite or require acceptance to be made by an affirmative answer in words, or by
performing or refraining from performing specifried act, or may empower the offeree to make a
selection of terms in his acceptance.
2. Unless otherwise indicated by the language or the circumstances, an offer invites acceptance in
any manner and by any medium reasonable in the circumstances.
UCC §2-204(3) – Omission of Essential Terms
In Ks for the 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.
i.
ii.
Requirement of Definiteness and Certainty of Terms:
Essential Terms: A contract must convey (expressly or impliedly) four
essential terms:
iii.
a.
The parties to the K;
b.
the subject matter of the K;
c.
the time for performance; and
d.
the price
Implication of Reasonable Terms: The essential terms must either be expressly states in the K
or be capable of reasonable implication from the agreement. The general trend of the courts
is to adopt a policy of liberal construction so as to uphold the reasonable expectations of the
parties. 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.
a.
e.g. PRICE
1. Where parties make no provision for price but a chare was intended, the
court will normal imply a “reasonable price” (i.e. fair market value)
2. Often, however, where he parties have made some attempt to include
terms on the price but it is stated in such a vague way as to be
unintelligible, the courts will often refuse to imply a reasonable price.
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c. Acceptance of the Offer
In order for a K to exist, there must be an acceptance of the offer. The acceptance (assent to the offer) must be in the same
manner requested or authorized by the offeror.
1.
Requirements for a Valid Acceptance
i.
ii.
iii.
iv.
v.
2.
Who May Accept: The general rule (exceptions exist) is that the offer may be accepted only by the
person to whom it is made.
Acceptance Must Be Unequivocal: The acceptance must be unequivocal and unqualified. If it is
qualified, then it in not an acceptance but a counteroffer, which works as a rejection of the first offer.
Unilateral v. Bilateral Contracts – The rules for acceptance differ depending on whether the offer if or a
unilateral or bilateral K.
Bilateral Ks: The mere giving of the counter-promise to the offeror is all that is required. The objective
theory of K prevails, and whether or not an acceptance has been given depends on how a reasonable
person would interpret the words or conduct of the offeree. But the offeree must have knowledge of the
offer, and notice of acceptance to the offeror is generally required.
a.
If the offeror wants a promise only in return, when the promise is given, the K becomes
binding.
Unilateral Ks: A unilateral K may be accepted only by doing the act requested by the offeror, with
knowledge of the offer and the intent to accept it. Normally, notice to the offeror of acceptance is not
required. There are exceptions, such as where the offeror requires that notice be given or where the
offeror has no reasonable means of knowing that the requested performance has been rendered, in which
case there is a requirement that notice be given within a reasonable time after performance.
a.
When the offeror requests an act as acceptance, then the act itself must be performed or the
offeror can still revoke the offer.
Method of and Communication of Acceptance to Offeror
UCC §2-206 – Offer and Acceptance in Formation of K
1. Unless an offer to buy goods expressly limits acceptance to shipment of the goods ordered, it is to be
construed as inviting acceptance either by shipment or by a prompt promise to ship goods. Shipment of
nonconforming goods does not constitute an acceptance if seller reasonably notifies the buyer that the
shipment is offered only as an accommodation to the buyer.
2. Where the beginning of a requested performance is a reasonably mode of acceptance, an offeror who is not
notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.
LASALLE NATIONAL BANK V. VEGA {Compliance with the terms of the offer to constitute acceptance}
K provided that once  executed the K, it would be in full force once the trust executed it.
 executed the K;  never did.
A contract may not be formed if its language requires execution, but one of the specified parties never signs.
An offer is a person’s act that gives another person legal power to create an obligation called a K. ’s offer
specified that the K would be in full force “upon the trust’s execution.”
No K exists until the trust executes.
Remember: The offeror is the master of the offer; he sets the terms and acceptance cannot exist without completing as the offer states
HENDRICKS V. BEHEE {Revocation of offer prior to communication of acceptance}
 makes written offer to sell some land.
Offeree intend to accept, but before they notify , he revokes.
A contract does not arise if the offeror revokes the offer after the offeree accepts it but before the acceptance is
communicated to the offeror.
Communication of an acceptance of an offer to the offeror is an essential aspect of acceptance where the offer
calls for a promise.
An excommunicated intention to accept is not an acceptance.
a.
An uncommunicated intention to accept an offer is not an acceptance.
b. When an offer calls for a promise, as distinguished from an act, on the part of the offeree, notice of
acceptance is always essential.
c.
A mere private act of the offeree does not constitute an acceptance.
d. Communication of acceptance of a K to an agent of the offeree is not sufficient and does not bind the
offeror.
e. Unless the offer is supported by consideration, an offeror may withdraw his offer at any time before
acceptance and communication of that fact.
f.
To be effective, revocation of an offer must be communicated to the offeree before he has accepted.
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Restatem. 2nd § 54 – Acceptance by Performance; Necessity of Notification to Offeror
1. Where an offer invites an offeree to accept by rendering performance, no notification is necessary to make
such an acceptance effective unless the offer requests such notification. (Carlill)
2. If an offeree who accepts by rendering performance has reason to know that the offeror has no adequate
means of learning of the performance with reasonable promptness and certainty, the contractual duty of the
offeror is discharged unless:
a. the offeree exercises reasonable diligence to notify the offeror of acceptance, or
b. the offeror learns of the performance within a reasonable time, or
c. the offer indicates that notification of acceptance is not required.
EVER-TITE ROOFING CORP. V. GREEN {Time for Acceptance}
Agreement to resurface roof provided that K becomes binding on  upon written acceptance or commencement
of performance by , after the credit check on  was performed.
If no time for acceptance is specified in the offer, an acceptance within a reasonable time is valid.
No unreasonable delay occurred here.
Since no time limit was placed on acceptance, a reasonable time must be allowed therefore in accordance with the
facts and circumstances and the intentions of the parties.
CORINTHIAN PHARMACEUTICALS V. LEDERLE {Partial shipment not an acceptance; accommodation}
Corinthian usually orders small quantities of a drug made by Lederle.
They get an inside tip about a planned price increase,  orders 1000 vials at the lower price.
 sends them 50 vials at low price and includes letter saying shipment is an accommodation.
Partial shipment of customers order does not constitute an acceptance of the order.
Price list was merely an invitation to make an offer.
Generally, shipping goods constitutes an acceptance, but under UCC §2-206(b), a shipment of nonconforming
goods is not an acceptance if the seller notifies the buyer that the shipment is offered only as an accommodation
to the buyer.
Carlill v. Carbolic Smoke Ball Co. {Advertisement of a reward}
 advertised a reward in newspapers of 100 lbs. to anyone who got the flu.
 had deposited 1000 lbs. “good faith” money in a bank to pay for failure of the product.
 got sick,  refused to pay.
Court holds that a commercial advertisement for a reward is an offer.
Unilateral K was offered, ’s buying and using the medicine was the act called for.
Notification is not necessary in this situation, since  could not expect all those using the product to give
notification.
Sufficient inconvenience to  to constitute a legal detriment, providing consideration for ’s offer.
GLOVER V. JEWISH WAR VETS OF US (Knowledge of offer)
Reward for leads to catching murdered.
 gives lead but doesn’t know of reward.
If a person’s act constitutes the performance requested in an offer of which the person was unaware existed, the
act is not an acceptance of the offer.
Private rewards like this one are governed by law of Ks.
No K exists unless the claimant when giving the desired info knew of the offer of reward and acted with the
intention to accept the offer.
No acceptance of a K can exist if offeree does not know of offer.
Note: Government agencies may be an exception to the above rule due to the theory that the government is equally benefited by such
behavior on the part of the claimant, however ignorant said claimant might be.
INDUSTRIAL AMERICA V. FULTON {Acceptance by Performance with Knowledge}
 specializes in M&A.
Sees ’s ad in paper (ad says it will protect brokers rights).
 contacts , recommends a business and arranges a meeting between them.
 cuts out middleman.
Person may accept offer by performing, even without telling the offeror of intent to accept.
Overt manifestation of assent – not subjective intent – controls the formation of a K.
Where an offeror requests an act in return for a promise (unilateral K) and the act is performed, the performance
becomes the requisite over manifestation of acceptance if the performance is done intentionally and with
knowledge of the offer, even though the performance was primarily motivated by a reason other than the offer.
An offer that invites acceptance by performance will be deemed accepted by such performance unless there is a
manifestation of intention to the contrary.
No notification to the offeror of acceptance is necessary when acceptance is by performance and when the
offeror sees that the performance has been made on the faith of the offer.
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Restatement 2nd § 63 – Time When Acceptance Takes Place
Unless the offer provides otherwise,
a.
an acceptance made in the manner invited by the offer completes the manifestation of mutual
assent as soon as put out of the offeree’s possession, without regard to whether it ever reaches the
offer; but
b. an acceptance under an option contract is not operative until received by the offeror.
ADAMS V. LINDSELL {Ks concluded by correspondence}
Letter sent offering to sell to  some wool contingent on receiving acceptance by mail.
 misaddressed letter, which reached  late.  send immediate acceptance.
 receives ’s acceptance after selling the wool.
An acceptance sent by mail is effective as of the date sent.
Acceptance occurs the moment the letter of acceptance is posted, even if it is never received.
Mailbox Rule: General rule – Acceptance is deemed effective from the time the offeree places
acceptance in the mailbox, as long as it is correctly addressed to the offeror.
Intention to Accept Offer
i.
Under the objective theory of Ks, the subjective intent of the offeree is immaterial. If a reasonable offeror would be
justified in relying upon the apparent intent of the offeree as manifested by his conduct, then acceptance will be
deemed to have occurred irrespective of the actual intent of the offeree. Furthermore, if the offeree intends to
accept the offer but fails to communicate such intent in a manner which a reasonable offeror would understand as an
acceptance, no K is formed.
RUSSEL V. TEXAS CO {Application of intention to accept offer rule}
 owned land;  was conduction oil and gas operation on adjacent land.
 offered a “revocable license” to ; “Your continued use of the roadway will constitute your
acceptance of this revocable permit.
 used the roadway for one month, then notified  that the offer was rejected.
An offeree may not vitiate a K by a claim of lack of intention to accept an offer when he accepts and
retains the benefits offered to him by the offeror, and the offer expressly states that retention of such
benefit constitutes acceptance.
When the offeree exercises dominion over things which are offered to him, such exercise of dominion
in the absence of other circumstances showing a contrary intention is an acceptance.
If circumstances indicate that the exercise of dominion is tortious, then the offeror may at his option
treat it as an acceptance, even though the offeree manifests an intention not to accept.
Even in the absence of tortious use, the true test is whether or not the offeror was reasonably led to
believe that the act of the offeree was an acceptance.
Silence as Acceptance
i.
General rule: the offeror cannot force the offeree to reply by wording his offer: “Your silence will be an acceptance
of my offer. R § 72. However, there are exceptions to the rule, primarily where the offeree’s silence does not
involuntarily make an acceptance.
AMMONS V. WILSON {Patter of Conduct and Silence as Acceptance}
 was a wholesale grocer and regular customer of , supplier shortening.
Salesman has no power to create a K.
Ammons placed order, Wilson waits 12 days before declining order.
 says that previous orders were filled after a week of silence, so he expected the same.
Here silence may constitute an acceptance if the parties have established a pattern of accepting by
silence.
Silence and inaction are an acceptance only where because of previous dealings, the offeree has given
the offeror reason to understand the silence or inaction is intended by the offeree as a manifestation
of assent, and the offeror does so understand.
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SMITH-SCHARFF PAPER CO. V. PN HIRSCH {Course of Dealings}
 sold bags to  for 36 years.
 normally kept a supply of bags with ’s logo to assure timely filling of orders.
 was liquidates and its retail outlets sold.  assures  that it will buy all bags in inventory.
A course of dealings between two parties may create a contract even when there is no written
contract.
Because the goods are specially made and no suitable for sale to others, they fall within an exception
to the Statue of Frauds and no written K is necessary.
An implied K may arise based on the course of dealings between two parties.
HARRIS V. TIME {Junk mail advertising as an offer}
Junk mail offers free watch for opening letter.
 opens letter, finds more terms before receipt of watch.
A court may choose not to grant relief when the only damage to the  resulting from the breach of K
was being enticed to open an envelope he may not have otherwise opened.
Ads are usually treats as invitations to bargain, not as offers, but an ad may be deemed an offer it if
calls for performance of a specific act without further communication and leaves nothing for further
negotiation.
’s ad was in fact an offer which was accepted by .
However, “de minimis no curat lex” or, the law disregards trifles, bars recovery.
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The Nature and Effect of a Counteroffer – Termination of Offer
An offer may be terminated by act of the parties or by a rejection by the offeree. A rejection by the offeree terminates the
offeree’s power of acceptance. If the offeree later attempts to accept the offer notwithstanding the prior rejection, his
“acceptance” is a mere counteroffer.
Restatement 2nd §59 – Purported Acceptance Which Adds Qualifications
A reply to an offer which purports to accept it but is conditional on the offeror’s assent to terms additional to
or different from those offered is not an acceptance but is a counter-offer.
Restatement 2nd §60 – Acceptance of Offer Which States Place, Time, or Manner of Acceptance
If an offer prescribes a manner, time, or place of acceptance, it must be complied with. But if it only offers
suggestions, other methods are not precluded.
Restatement 2nd §61 – Acceptance Which Requests Change of Terms
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.
UCC § 2-207 – Additional Terms in Acceptance or Confirmation
1. A definite expression of oral acceptance or a written confirmation which is sent in a reasonable time
operates as an acceptance even though it states terms additional to or different from those offered or
agreed upon, unless acceptance is expressly made conditional on assent to the additional terms.
2. The additional terms are to be construed as proposals for addition to the K. Between merchants, such
terms become part of the K unless:
a.
the offer expressly limits acceptance to the terms of the offer.
b.
they materially alter it; OR
c.
notification of objection to them is given within a reasonable time after notice of them is received.
3. Conduct by both parties which recognizes the existence of a K is sufficient to establish a K for sale
although the writing of the parties don’t establish a K. In such case, the terms of the K consist of those
terms on which the writing of the parties agree plus thus read into it by the court.
a.
b.
c.
d.
How effected. A rejection may occur by either words or conduct, or by a qualified acceptance (which amounts to
a counteroffer and therefore a rejection of the offer.)
Equivocation. An acceptance by the offeree must be unequivocal and unqualified. If a purported acceptance is
qualified, it is legally insufficient as an acceptance. Instead, a qualified acceptance is a counteroffer – an implied
rejection of the original offer. The line between “qualified” and “unqualified” acceptance is not always clear.
(R § 39)
Mirror-Image Rule: If an acceptance states terms of K, it must repeat them without departing from them or
adding to them. If offeree offers new terms in restating the terms, he makes a counter-offer, which serves as a
rejection of the offer. Differentiate between “mere requests” and a change of terms. Terms like “offer” and
“acceptance” are not dispositive.
Acceptance under the UCC: Attempts to relax the common law requirement of “mirror-image.”
Tries to avoid the problem that the last person sending a form determines the nature of the relationship
between the parties – the battle of the forms.
LEONARD PEVAR CO. V. EVANS PRODUCT CO. {Application}
 gets bid on plywood from .  says they reach oral agreement,  denies.
 subsequently sent a written purchase order.
 written acknowledgment states that it was expressly contingent on ’s acceptance of the terms it
contained, which limited warranties on the wood.
 sues when the wood turns out to be bad.
A K may exist even when parties who exchange writings do not agree in those writings to important terms.
If the parties did make an oral K, the K is governed by 2-207(1), which means the additional terms
contained in ’s acknowledgment would be treated as proposals and would become part of the K unless
they materially alter it.
Under UCC §2-207(3), the parties may have an agreement based on their conduct, even when there is no
oral or written K. In this case, the parties continued dealing, which means they recognized the existence of
a K. The K would consist of terms on which the writings agree, plus those terms supplied by the “gap
filler” provision of Article 2 of the UCC. (In this case, UCC §2-314 Warranty fills the gaps)
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Termination of Offers
An offer may no longer be effectively accepted if the offeree’s power of acceptance has been
terminated by an act of the parties or by operation of law.
Restatement 2nd § 36 – Methods of Termination of the Power of Acceptance
1. An offeree’s power of acceptance may be terminated by:
a.
rejection or counter-offer by the offeree, or
b.
lapse of time
c.
revocation by the offeror, or
d.
death or incapacity of the offeror or offeree
2. In addition, an offeree’s power of acceptance is terminated by the non-occurrence
of any condition of acceptance under the terms of the offer.
Restatement 2nd § 41 – Lapse of Time
1. An offeree’s power of acceptance is terminated at the time specified in the offer
or if no time is specified, at the end of a reasonable time.
2. A reasonable time is a question of fact, depending on all the circumstances
existing when the offer and attempted acceptance are made.
3. An offer sent by mail is seasonably accepted if an acceptance is mailed at any time
before midnight on the day on which the offer is received.
Restatement 2nd § 42 – Revocation by Communication from Offeror to Offeree
An offeree’s power of acceptance is terminated when the offeree receives from the
offeror a manifestation of an intention not to enter into the proposed K.
Restatement 2nd § 43 – Indirect Communication of Revocation
An offeree’s power of acceptance is terminated when the offeror takes definite
action inconsistent with an intention to enter into the proposed K and the offeree
acquires reliable information to that effect.
1.
revocation:
Termination By Act of the Parties
a.
Termination by act of the parties
See above, R § 35.
b.
Revocation of the offer by the offeror (Hendricks v. Behee)
i. Where the offeror communicates a revocation before an acceptance by
the offeree, the offer is terminated.
a.
Requirements of effective
1.
c.
Words or conduct: The offeror’s words or conduct must
be sufficient for a reasonable person to interpret them
as a revocation.
2. Communicated to the offeree: The revocation must be
communicated to the offeree (the offeror must at least
make a reasonable effort to communicate the
revocation)
3. Effective when received: The revocation is generally held to
be effective when received. R § 41.
Communication from a Third Party (Dickinson v. Dodds)
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Termination By Operation of Law
a.
By Lapse of Times
i. The offer lapses by operation of law after expiration (and before
acceptance) of whatever period of time was specified in the offer.
a. The period begins to run from the date of actual receipt by the
offeree (R § 51)
b. Where no specific time period is specified, the offer lapses after
a reasonable period of time. Consideration is given to the
subject matter involved and all other relevant circumstances in
determining what is a reasonable time.
c. Just because an offer says it will remain open until some date
does not mean that the offeror cannot validly revoke the offer
before acceptance.
HENDRICKS V. BEHEE {Revocation of offer prior to communication of acceptance}
 makes written offer to sell some land.
Offeree intend to accept, but before they notify , he revokes.
A contract does not arise if the offeror revokes the offer after the offeree accepts it
but before the acceptance is communicated to the offeror.
Communication of an acceptance of an offer to the offeror is an essential aspect of
acceptance where the offer calls for a promise.
a. An uncommunicated intention to accept an offer is not an acceptance.
b. When an offer calls for a promise, as distinguished from an act, on the part of the
offeree, notice of acceptance is always essential.
c. A mere private act of the offeree does not constitute an acceptance.
d. Communication of acceptance of a K to an agent of the offeree is not sufficient
and does not bind the offeror.
e. Unless the offer is supported by consideration, an offeror may withdraw his offer
at any time before acceptance and communication of that fact.
f. To be effective, revocation of an offer must be communicated to the offeree
before he has accepted.
DICKINSON V. DODDS {Communication from a 3rd Party}
 offered to sell property to , offer was to remain open for three days.
On the 2nd day,  decided to buy property.
On the same day,  decided to sell to another person.
 delivered acceptance to ’s mother-in-law on the 2nd evening, she told  next
morning.
 refused acceptance,  had received revocation news from third party before
acceptance was received by .
If  learns from a 3rd person that the offer has been given to (or accepted by another
person), he cannot still accept that offer.
 can revoke the offer prior to acceptance.  learned that  was going to sell to
another person. This was sufficient communication of retraction of the offer by ,
even though communication occurred through a third party.
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Irrevocable Offer: Nondestructible Power of Acceptance
UCC §2-205 – Firm Offers
An offer to buy or sell goods in a signed writing which by its terms gives assurance that it will be held
open is not revocable, for lack of consideration, during the time stated or if no time is stated for a
reasonable time, but in no event is that time to exceed 3 months. Any such term of assurance on a
form supplied by the offeree must be separately signed by the offeror.
Restatement 2nd §24(A) – Offers for Consideration
If the offeree has given any consideration (even nominal consideration) for the offer, the offer then
becomes an option K and is not revocable for the period stated therein.
Restatement 2nd §25 – Option Contract
An option K is a promise which meets the requirements for the formation of a K and limits the
promisor’s power to revoke an offer.
Restatement 2nd §87 – Option Contract
1. An offer is binding as an option K if it:
a.
is in writing and signed by the offeror, recited a purported consideration for the making of the
offer, and proposes an exchange on fair terms within a reasonable time; or
b. is made irrevocable by statute.
2. An offer which the offer should reasonably expect to induce action or forbearance of a
substantial character on the part of the offeree before acceptance and which does include such action
of forbearance is binding as an option K to the extent necessary to avoid injustice.
Restatement 2nd §37 – Termination of Power of Acceptance under Option Contract
The power of acceptance under an option K is not terminated by rejection or counter-offer, by
revocation, or by death or incapacity of the offeror, unless the requirements are met for the discharge
of a contractual duty.
a.
The General Rule: An offer is revocable even if the offeror expressly promises not to revoke or gives a definite
period during which the offer is to remain open. There are a number of exceptions to this rule, however.
b.
Exceptions to the General Rule: (Humble v. Westside)
i.
Firm offers under the UCC: (See above – UCC §2-205)
ii.
Offers for Consideration: (See above – Restatement 2nd §24A
a.
Recitals of consideration: Where there is a recital that consideration has been received
for the option, the general rule has been that this recital is not conclusive. But R § 89
provides that an offer is binding as an option if it is in writing, signed by the offeror, and
recites a purported consideration.
iii. Revocation of Offer for a Unilateral Contract after Part-Performance: Ordinarily, a unilateral offer may be
revoked at any time prior to the offeree’s completing the act of acceptance called for in the offer.
But a difficult problem is presented where the act requested will take some time to complete and
thee offeror attempts to revoke after the offeree has started performance. Under modern rule,
where the offeree has rendered substantial part performance, courts will not permit revocation of
the unilateral offer by the offeror.
a.
The Old Rule: Offer of a unilateral K may be revoked at any time prior to performance,
even if the offeror knows of the offeree’s intent to perform. (Petterson v. Pattberg)
b. The Modern Rule: Partial performance creates on binding, nonrevocable option K.
(Marchiondo v. Scheck)
i.
R § 45, 90: where an act will take some time to complete, there is a promise
implied in the offer that the offeror will not revoke once the offeree has made
a substantial beginning of performance, provided that performance is actually
completed within the time required by the offer.
ii.
Where it was reasonably foreseeable to the offeror that the offeree would rely
on the offer, such reliance constitutes a substitute for consideration and is
sufficient to imply the offeror’s subsidiary promise not to revoke the offer for
a reasonable length of time. (R § 90) (Drennan v. Star Paving Co.; Electrical
Construction v. Maeda Pacific)
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Restatement 2nd §45 – Option K Created by Part Performance of Tender
1. Where an offer invites an offeree to accept by rendering a performance and does not invite a
promissory acceptance, an option K is created when the offeree tenders or begins the invited
performance or tenders a beginning of it.
2. The offeror’s duty of performance under any option K so created is conditional on completion of
the invited performance in accordance with the terms of the offer.
Restatement 2nd §90 – Promise Reasonably Inducing Action or Forbearance
1. A promise which the promisor should reasonably expect to induce action or forbearance on the
part of the promisee or a 3rd person and which does induce such action or forbearance is binding
if injustice can be avoided only by enforcement of the promise. The remedy granted for breach
may be limited as justice requires.
2. A charitable subscription or a marriage settlement is binding under (1) without proof that the
promise induced action or forbearance.
HUMBLE OIL V. WESTSIDE INVESTMENT {Application of exception to general rule re: option Ks}
 entered into valid option K with  for the purchase of real estate.
Within the option period,  wrote letter to  exercising the option and proposing an amendment to
the K.
In a second letter, they withdrew the amendment and again exercised the option.
 says ’s first letter was repudiation of offer.
Court says that a conditional exercise of an option does not preclude a later unconditional exercise of
the option within the option period.
General law of Ks is that a conditional or qualified acceptance is a rejection of the offer and a
counter-offer.
But an option K is a completed K, the negotiations for the making of which are concluded by the
execution and delivery of the option. Meeting of the minds exists.
The optionor, for consideration, binds himself to keep the option open for election by the optionee,
for and during the time stipulated or implied by law.
Under an option, the act necessary to raise a binding promise to sell is not, therefore, an acceptance of
the offer, but rather the performance of the conditions in the option K.
Therefore, the general rule regarding conditional acceptances of Ks being a counter-offer and destruction of power of
acceptance does not apply to options contracts; options K are supported by consideration and fixes a time limit for election
to accept.
PETTERSON V. PATTBERG {Old rule re: partial performance and revocation of offer}
Mrs. Petterson () executed a promissory note to .
 wrote  that  would discount the amount of the mortgage if paid before a certain date.
 went to ’s home to pay, but  refused the payment, indicating the note had been sold.
 wanted to pay off the mortgage because he had sold the property.
Court finds that an offer of a unilateral K may be revoked at any time prior to performance, even if
the offeror knows that the offeree intends to perform.
The offer of a unilateral K may be revoked at any time prior to full performance of the act.
Here,  revoked the offer prior to performance (payment of $) by .
Note: Modern ruled do not permit revocation where there has been substantial part performance rendered by the offeree,
but even under these rules, the result in this case would be the same since the act required for acceptance was payment,
and revocation can be before payment.
MARCHIONDO V. SCHECK {Part performance creates and option K}
 in writing, unilaterally offered to sell certain real estate to specified prospective buyers and agreed to
pay a commission to , a broker.
Six day time limit for acceptance was set;  revoked the offer in writing, which was received by 
within the time period.
Part performance by offeree makes an offer an option, subject to complete performance by offeree.
Where an offer invites an offeree to accept by rendering a performance (unilateral) and not a
promissory acceptance (bilateral), an option K or K with a condition is created when the offeree
begins the invited performance or tenders part of it. The condition is full performance by the offeree.
Until there is action by the offeree, the offeror may revoke, even if his offer is an exclusive agency or
an exclusive right to sell.
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DRENNAN V. STAR PAVING CO. {Subsidiary promise constituting an option}
 incorporates bid from  (subcontractor) into its bid for a construction project.
 wins K,  says it made a mistake in its bid, requires more money to complete the job.
A subcontractor is bound to perform under the terms of its bid when it notifies a general contractor
who has incorporated its bid into that for larger project.
 did not offer to make its bid irrevocable, nor was ’s use of ’s bid an acceptance which bound 
to award the K to . Thus, there is neither an option supported by consideration nor a bilateral K
binding on both parties.
However,  relies on the principle of detrimental reliance.
 expected  would use its bid if lowest and by bidding  induced such action on ’s part.
’s bid was not specifically revocable. Because  reasonably relied on ’s offer, a subsidiary promise
not to revoke the offer may be implied.
ELECTRICAL CONSTRUCTION CO. V. MAEDA PACIFIC CORP. {Prime contractor’s inducement to
subcontractor to submit bid}
 agreed to bid in response to solicitation from , only on the condition that  agree to award  the
subcontract if ’s bid was the lowest and  got the job.
 won suit but did not hire ;  sues.
A prime contractor may be required to hire a subcontractor if the prime induced the sub to submit a
bid by promising to hire the sub if its bid was lowest.
A subcontractor is bound not to revoke a bid once relied upon by a general contractor.
 was not required to submit bid, and only did so in return for ’s promise to award  the K if ’s
bid was lowest.
The consideration for ’s promise was ’s submission of the bid itself.
This case focuses on the submission of the bid an PE relating to that promise.
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THE BARGAIN RELATIONSHIP
INSUFFICIENT AGREEMENT: INCOMPLETE, INDEFINITE, AND DEFERRED TERMS
a.
b.
a.
c.
d.
e.
f.
g.
h.
Introduction
In order for an offer to exist, there must be a manifestation of present intention to K by the offeror, the terms of the
proposed K must be definite and certain, and the offer must be communicated to the offeree. This section discusses
the certainty requirement.
Ambiguity
Introduction
i.
Terms in the proposed K may be ambiguous, preventing a meetings of the minds by the parties on essential terms.
This subject is related t that of definiteness of terms and mistake, and the rules are similar to mistake with respect to
unilateral misunderstanding or mutual misunderstanding.
ii.
Latent Ambiguity (Raffles v. Wichelhaus)
a.
No K exists because material terms is ambiguous and both parties have different yet reasonable
interpretations of the material term, without knowledge of the other party’s interpretation.
iii.
Different understandings of the same price term (Konic Int’l Corp. v. Spokane Computer)
a.
A K does not arise when the parties each have a reasonable but different understanding of a material
term of the agreement.
Requirement of Definiteness and Certainty of Terms
i.
The terms of the offer must be sufficiently clear and complete so that the court can determine what the parties
intended and can fix damages in cases of nonperformance. R § 32.
The Essential Terms: A K must cover (expressly or impliedly) the following four essential terms:
i.
Parties to the K.
ii.
Subject matter of the K.
iii.
Time for performance.
iv.
Price
Traditional Approach (Varney v. Ditmars)
For a K to be valid, the agreement of the parties must be certain and explicit; their full intention must be
ascertained to a reasonable degree of certainty. Their agreement must be neither vague nor indefinite, and if
thus defective, parol proof cannot be resorted to.
Newspaper Advertisements (Lefkowitz v. Great Minneapolis Surplus Store)
Ads to the public are binding if the facts show that some specific performance is definitely promised for
something requested.
Implication of Reasonable Terms
i.
The essential terms must either be expressly stated in the K or capable of reasonable implication from the agreement.
The general trend of the courts is no 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 stated by the parties.
Agreements to Agree and Preliminary Negotiations
i.
Introduction: For a valid K to exist, there must be an expression of present contractual intent which is accepted by the offeree (i.e.
mutual assent). If the parties have simply negotiated but have failed to agree in sufficient certainty about essential terms, there
is no K. Of if the parties have agreed to agree on some essential terms in the future, there is as yet no K.
ii.
Omission of Essential Terms (MGM v. Scheider)
A K may be enforced if it omits an essential term, as long as the term can be provided by
objective custom and practice in the industry.
iii.
Limitation on Courts’ Supplying Terms (Joseph Martin Deli v. Schumacher)
A court may not supply a term (here, price) to a K if there is no indication within the K as to the parties’ intent
as to that term.
iv.
Omission of Specific Price Term in Long Term K (Oglebay Norton Co. v. Armco)
A party may enforce a long-term service K when the price is not specified and the parties must
periodically resort to the court to determine a reasonable price. Court looks to 30 year
relationship between parties, inter-ownership, and other aspects to find an intent in the K to be
bound. Court imposes 3rd party mediator to set price.
v.
Letter of Intent (Empro Manufacturing Co. v. Ball-Co Manufacturing, Inc.)
A party to a letter of intent may not enforce the sale contemplated by the letter when the language of the letter
makes the deal “subject to” a formal, definitive agreement not yet completed.
vi.
Remedies under incomplete or indefinite agreements
1.
Introduction: Traditionally, no K is enforceable in damages unless the parties have reached an agreement
covering all the essential terms; mere agreement to agree is not a K and therefore is one of the parties
refuses to go forward, no damages are available to the other party because no K existed.
Increasingly, however, the courts are recognizing in these situations that if one of the parties does not act
in “good faith,” the other party may suffer substantial detriment y relying on the fact that a K was to be
formed. Therefore, some courts are recognizing a cause of action where only negotiations had been
carried on but one of the parties failed to act in “good faith” in concluding a K.
2.
Foreseeable Detrimental Reliance (Hoffman v. Red Owl Stores, Inc.)
Where  relies to his detriment on a promise made by , and such detrimental reliance is
foreseeable to ,  may recover.
i.
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Restatement 2nd §20 – Effect of Misunderstanding
1. There is no manifestation of mutual assent to an exchange if the parties attach materially different
meanings to their manifestations and
a.
neither party know or has reason to know the meaning attached by the other; or
b. each party knows or each party has reason to know the meaning attached by the other.
2. The manifestations of the parties are operative in accordance with the meaning attached to them
by one of the parties if:
a. that party does not know of any different meaning attached by the other, and the other knows the
meaning attached by the 1st party; or
b. that party has no reason to know of any different meaning attached by the other, and the other
has reason to know the meaning attached by the 1st party.
Restatement 2nd §32 – Option K Created by Part Performance of Tender
The terms of the offer must be sufficiently clear and complete so that the court can determine what
the parties intended and can fix damages in cases of nonperformance.
Restatement 2nd §33 – Certainty
If the parties intend to conclude a K but the price is not settled, the price is a reasonable price at the
time of delivery if the K requires the price to be set by some standard and it is not so set.
UCC §2-204 – Formation in General
1. A K for the sale of goods may be made in any manner sufficient to show agreement, including
conduct by both parties which recognizes the existence of such K.
2. An agreement sufficient to constitute a K for sale may be found even though the moment of its
making is undetermined.
3. Even though one or more terms are left open, a K for sale does not fail for indefiniteness if the
parties have intended to make a K and there is a reasonably certain basis for giving appropriate
remedy.
UCC §204 – Supplying an Omitted Essential Term
1. When the parties to a bargain sufficiently defined to be a K have not agreed with respect to a
term which is essential to a determination of their rights and duties, a term which is reasonable in the
circumstances is supplied by the court.
UCC §2-205 – Open Price Term
1. The parties if they so intend can conclude a K for sale even though the price is not settled. In
such a case the price is a reasonable price at the time of delivery if:
a.
nothing is said as to price; or
b. the price is left to be agreed by the parties and they fail to agree; or
c. the price is to be fixed in terms of some agreed market or other standard as set or recorded by a
3rd person
2. A price to be fixed by the seller or by the buyer means a price for him to fix in good faith.
3. When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through
fault of one party, the other may at his option treat the K as cancelled or himself fix a reasonable
price.
4. Where, however, the parties intended not to be bound unless the price be fixed or agreed and it is
not fixed or agreed, there is no K. in such a case the buyer must return any goods already received
or if unable to do so must pay their reasonable value at the time of delivery and the seller must
return any portion of the price paid on account.
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ROBERT
RAFFLES V. WICHELHAUS {Latent Ambiguity}
 agreed to buy cotton shipped by  to England aboard the “Peerless.”
another ship named the “Peerless” was leaving later than the first.
Both parties thought the shipment was on a different “Peerless.”
Where the K is subject to two equally possible interpretations and the parties contracted with different
interpretations in mind (neither knowing of the other’s interpretation, nor having reason to know of the different
intention), there is no mutual assent and thus no enforceable K.
Latent ambiguity in the K makes it unenforceable.
No K because no meeting of the minds.
Here, both parties gave a different meaning to a material term of the K.
Had both parties given the same meaning to an ambiguous term, there would have been a K; or had either party
known of the ambiguity or should reasonably have known of it, the K would have been construed against that
party.
Konic Int’l Corp. v. Spokane Computer
 sent employee to buy surge protector.
Buys one for “fifty-six twenty”; thought $56.20, really $5,620.00.
 sends unit, which  installed.
After some time, ’s president calls  and states  should pick up surge protector.
 refuses to pay,  sues.
A K does not arise when the parties each have a reasonable but different understanding of a material term of the
agreement.
Varney v. Ditmars
 is an architect employed by . When  gets a better offer,  promises him a raise and “a fair share of the
profits” at the end of the year.  gets hurt and doesn’t come in to work,  fires him.  sues for his “fair share”
Court says a “fair share” is vague, indefinite, and uncertain, and there is no formula within the K for computing
what a fair share is.
For a K to be valid, the agreement of the parties must be certain and explicit; their full intention must be
ascertained to a reasonable degree of certainty. Their agreement must be neither vague nor indefinite, and if thus
defective, parol proof cannot be resorted to.
“Fair share of the profits” is too vague to support the courts injection of terms.
Whether “fair” and “reasonable” have a definite and enforceable meaning depends on the intention of the parties
in the use of such words and the subject matter to which they refer. Where the use of such words is definite
under the circumstances (i.e. tying “fair share” in with market value, for e.g.), parol evidence regarding them may
be admitted.
The above rule does not prevent recovery upon quantum meruit by a party for the reasonable value of services
rendered in reliance on the terms of the agreement.
Majority takes the traditional approach: Terms such as price must not be too indefinite for the court to determine
the intent of the parties. The dissent argues that the court (once it determines that contractual intent is present)
should be willing to imply the exact terms from all the circumstances.
LEFKOWITZ V. GREAT MINN. SURPLUS STORE {Performance promised by ad}
 advertises sale “first come first served.  is first person at store and demands sale. An advertisement to
the general public can be a binding obligation requiring the seller to sell the advertised merchandise.
Ads to the public are binding if the facts show that some specific performance is definitely promised for
something requested.
The ad offered merchandise at a stated price to the 1st person at the store.
No room for negotiation as the offer was clear, explicit, and definite.
Once the offer was published,  had no right to impose further obligations.
MGM V. SCHEIDER {Omission of essential terms}
Studio and actor agree that he should appear in a pilot and then the spin-off series. The only term not addressed
was when filming for the series was to begin. In the interim, the actor’s career takes off, and he doesn’t want to
do the series anymore. He claims that a material term was not agreed on so there should be no K
A K may be enforced if it omits an essential term, as long as the term can be provided by objective custom and
practice in the industry.
The parties had begun performance on the good faith understanding that the unsettled matter would be resolved
by agreement.
Because the parties were both familiar with the established custom and practice in the industry, the court could
properly supply the time for beginning the television series.
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CONTRACT OUTLINE/KOVACIC (FALL 1999)
LEWIN
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JOSEPH MARTIN DELI V. SCHUMACHER {Limitation on courts’ supplying terms of K}
The K omitted the future rent to be agreed upon later. Should have put some default mechanism, current keyed
to inflation, or interest rate, or fair market price, but didn’t.  asked for $900 when fair market rental value was
$545.  sued for specific performance.
A court may not supply a term to a K if there is no indication within the K as to the parties’ intent as to that
term.
To be enforceable, K provisions must be sufficiently certain and specific that the court can ascertain what was
promised. Otherwise, the courts would be involved in writing Ks.
An agreement to agree is unenforceable. The K does nothing more than commit the parties to agree to the rent
during renewal periods, without disclosing how such amounts are to be determined. The K does not bind the
parties to accept fair market rental value. This is not a UCC case where the price of goods may be determined.
The K cannot be enforced because it is too uncertain.
OGLEBAY NORTON CO. V. ARMCO {Omission of specific price term in long-term K}
Sale for the shipping of iron ore on one of the Great Lakes. Price mechanism was tied to the published goingrate for such shipping. K had two back-ups in case of inability to negotiate c K price for shipping.
A party may enforce a long-term service K when the price is not specified and the parties must periodically resort
to the court to determine a reasonable price.
Evidence of a long-standing and close business relationship including ’s participation on ’s board and
ownership of ’s stock, supports the court’s finding that the parties intended to be bound, even in the event the
pricing mechanisms failed.
A court has the authority to fill an open price term when the parties intend to be bound by the K. A term which
appears to be indefinite may be supplied by factual implications.
Normally, specific performance is not granted unless the terms of the K are sufficiently certain to provide a basis
for the order. Certainty may be provided by the addition of a term otherwise lacking or may be provided by the
addition of a term otherwise lacking or incomplete, however. In this case, the court properly determined that
specific performance was necessary due to the speculative nature of any award of damages based on the length of
the K and the economic uncertainties of this type of shipping.
EMPRO MANUFACTURING CO. V. BALL-CO MANUFACTURING, INC. {Letter of intent}
 put its assets up for sale.  entered preliminary negotiations with  which resulted in a letter of intent whereby
 would purchase ’s assets for a price of $2.4 million. The letter of intent was subject to a formal, definitive
agreement, and ’s purchase was subject to the approval of its shareholders and board of directors. After the
letter was signed, negotiations continued by  refused to accept ’s demand for a security interest in the real
estate.  began negotiating with other prospective buyers, and  sued to compel  to sell only to .
A party to a letter of intent may not enforce the sale contemplated by the letter when the language of the letter
makes the deal “subject to” a formal, definitive agreement not yet completed.
HOFFMAN V. RED OWL STORES, INC. {Foreseeable detrimental reliance}
Agents of Red Owl promised  that if he took certain actions, he’d become a franchisee of .  purchased a
small store to gain experience; sold it before profitable months,  was required to put $1,000 for an option on
land to build the new store; then  was told he’d get the franchise after he sold a bakery he had started. Soon
thereafter,  raised the price for buying the rights to the franchise.  sued for damages based on his reliance and
’s nonperformance.
Where  relies to his detriment on a promise made by , and such detrimental reliance is foreseeable to , 
may recover.
PE applies here. It applies even though the promise which is relied on by  does not contain all of the necessary
essential elements to for a K.
The required elements are a promise, substantial reliance, detriment, injustice unless damages are granted, and
foreseeability of reliance by .
The decision varies from the normal PE case in that it does not rationalize the decision in terms of reliance as a
substitute for consideration, but rather the parties must bargain in good faith; where they do not, and where the
one party relies to its detriment, promissory estoppel will apply and damages will be awarded to prevent injustice
from the detrimental reliance.
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CONTRACT OUTLINE/KOVACIC (FALL 1999)
LEWIN
ROBERT
AVOIDANCE OF CONTRACT
Restatement 2nd §12 – Capacity to Contract
1. No one can be bound by K who doesn’t have the legal capacity to incur at least voidable
contractual duties. Capacity to K may be partial and its existence in respect of a particular
transaction may depend upon the nature of the transaction or upon other circumstances.
2. A natural person who manifests assent to a transaction has full legal capacity to incur contractual
duties thereby unless he is:
a. under guardianship, or
b.
an infant, or
c. mentally ill or defective, or
d.intoxicated.
Restatement 2nd §14 – Infants and Capacity to Contract
Unless a statute provides otherwise, a natural person has the capacity to incur only voidable
contractual duties until the beginning of the day before the person’s eighteenth birthday.
Restatement 2nd §15 – Mental Illness or Defect
If a person has some understanding of the transaction but is affected by a mental illness or defect, the
controlling factor is whether the transaction’s result is one which a reasonably competent person
might have made. Inadequacy of consideration by itself is insufficient; there must be something else,
such as fraud, violation of a duty, undue influence, or taking unfair advantage for the K to become
voidable or void.
Restatement 2nd §294
Where a mistake of both parties at the time a K was made as to a basic assumption on which the K
was made has a material effect on the agreed exchange of performances, the K is voidable by the
adversely affected party unless he bears the risk of the mistake under the rule stated in §296..
Restatement 2nd §296
A party bears the risk of a mistake when:
a.
It is allocated to him by agreement of the parties.
b. He is aware, at the time of K, that he has only limited knowledge with respect to the facts to
which the mistake relates, but treats his limited knowledge as sufficient; or
c. It is allocated to him by a term supplied by the court on the ground that it is reasonable under the
circumstances to do so.
A.
Lack of Contractual Capacity
Legal capacity of both the offeror and offeree is essential to formation of a K. Parties lacking legal capacity cannot
give legally binding mutual assent. Legal capacity should be distinguished from physical capacity. While a person
may be physically able to perform the acts necessary to otherwise create a binding K, if that person possesses a legal
disability, the proposed K will either be void or voidable. Typically, Ks entered into by the following persons will be
void or voidable: minors, insane person, convicts deprived of their civil rights, and intoxicated persons.
B.
Conditions Affecting Capacity
1. Contracts of Minors – The contracts of a minor are voidable at the option of the minor, although the minor may
nevertheless enforce the K against the adult. In some states, there are contracts that are not merely voidable,
but void. (i.e. contracts for the sale of real estate).
a.
Quasi-Contractual Liability for “Necessaries”: Minors are always liable for the reasonable value of
necessaries of life (e.g. food, clothing, shelter). This is based on quasi-K rather than contract
liability.
b. Determination of “necessary”: (Bowling v. Sperry)
i.
A minor may rescind a K for the purchase of a car which is not vital to
his existence.
PAGE 33 OF 47
CONTRACT OUTLINE/KOVACIC (FALL 1999)
LEWIN
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2.
Mental Incapacity
Introduction: A person lacks the mental capacity to K only if his mental processes are so deficient that
he lacks understanding of the nature, purpose, and effect of the transaction.
b. Effect: A K entered into by a person lacking mental capacity is voidable by him or his guardian (but
not by the other party). In some states, contracts of those judged insane are entirely void.
c.
Quasi-K for Necessities: Incompetent’s estate is liable for the reasonable value of any necessaries
furnished to him.
d. Application: (Heights Realty, Ltd. v. Phillips)
A person may be deemed incompetent when there is no evidence that the result of the
transaction is not one which a reasonably competent person might make.
Relevant evidence in a competency case includes (i) the person’s prior or
subsequent condition, (ii) the person’s physical condition, (iii) the adequacy of
consideration, (iv) whether or not the transaction was improvident, (v) relation of
trust and confidence between the parties to the transaction.
3. Mistake – Occurs where one or both parties state clearly what they mean in the K, but they make a mistake
concerning one of the essential terms of the K. (i.e. incorrectly adding up a contractor’s bid)
a.
Unilateral Mistake: One party may use words which are clear but make some unilateral mistake of
fact, so that, had he known this mistake, he would not have expressed himself in the same way.
i.
Errors in computation.
ii.
Mistake in use of words or symbols.
iii.
Application: (Boise Junior College District v. Mattefs Construction Co.)
A bidder is entitled to equitable rescission of a K because it submitted a bid
containing a material clerical mistake if he can establish:
1.
the mistake is material;
2.
enforcement of a K pursuant to the terms of the erroneous bid would
be unconscionable
3.
the mistake did not result from violation of a positive legal duty or from
culpable negligence;
4.
the party to whom the bid is submitted will not be prejudiced except by
the loss of his bargain with the party that made the mistake; and
5.
prompt notice of the error is given.
iv.
General Rules:
a.
If the other party neither knew or should have known of the mistake, there is
a binding K (based on objective theory of Ks). There is some authority for
the proposition, however, that if A has not changed its position in reliance
before B informs A of B’s mistake, rescission will still be allowed.
b. However, if A is aware (or should have been aware) of B’s mistake there is no
K. This conforms also to the objective theory of Ks – A knew what B really
meant or did not mean.
b.
Mutual Mistake
i.
General Rule:
a.
Where both parties make a mistake concerning a material fact which is the
subject of the K, the K may be rescinded if neither party knew (or should
have known) of the mistake. (See R § 294, 296)
ii.
Rescission possible unless bargained away: (Lenawee County
Bd. of Health v. Messerly)
A K may be rescinded when there is a mistaken belief relating to a basic
assumption of he parties upon which the K is made, which materially affects the
agreed performances of the parties.
The right to rescind, however, may be bargained away by accepting property “as
is,” which is what occurred in this case.
a.
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CONTRACT OUTLINE/KOVACIC (FALL 1999)
LEWIN
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BOWLING V. SPERRY{Determination of “necessary” for exception to general rule}
, 16 years old, and his aunt went to ’s car lot and bought a used car for $140. After a week, it required
repairs costing $95. P disaffirmed the purchase K and demanded that  return his money.
A minor may rescind a K for the purchase of a car which is not vital to his existence.
Ks of minors are voidable and may be disaffirmed at any time during the minor’s minority, regardless of
whether the disaffirmance puts the other party in a position of status quo ante.  was fully aware of ’s
age when he sold the car and the receipt was in ’s name alone, the fact that the aunt actually paid for the
car doesn’t matter.
’s claim that  himself damaged the car is no defense to ’s suit; a minor is not required to tender back
the money or property he has received, or to put  in the same position he was in before entering the K.
An exception to this general rule is for sales of things that are necessary to the support, use, or comfort of
the person of the minor, such as food, clothing, lodging, medical care, and education. Whether goods are
necessaries is a question of law.
HEIGHT REALTY, LTD. V. PHILLIPS {Application of mental incapacity rule}
 entered an exclusive listing agreement with Gholston ( is conservator of her estate). When  received
an offer,  refused to sell.  sues. Gholston was determined incompetent.
A person may be deemed incompetent when there is no evidence that the result of the transaction is one
which a reasonably competent person might make.
A person is mentally competent if she is capable of understanding in a reasonable manner the nature and
effect of the act in which the person is engaged. There is a presumption of competency that must be
overcome by clear and convincing evidence. A showing of previous incompetency is presumed to continue
unless overcome by evidence that proves the existence of a lucid interval at the time an instrument was
executed.
Relevant evidence in a competency case includes (i) the person’s prior or subsequent condition, (ii) the
person’s physical condition, (iii) the adequacy of consideration, (iv) whether or not the transaction was
improvident, (v) relation of trust and confidence between the parties to the transaction.
BOISE JUNIOR COLLEGE DIST. V. MATTEFS CONSTRUCTION {Application of unilateral mistake rule}
 submitted a bid on a construction K to be let by , along with a “bid bond” which promised to pay the
difference between ’s bid and that which was used if  refused to do work.
 refuses to do work because of clerical mistake in bid.
A bidder may be entitled to equitable rescission of a K because it submitted a bid containing a material
clerical mistake.
One who errs in preparing a bid for a public works K is entitled to the equitable relief of rescission if he
can establish the following conditions: (i) the mistake is material; (ii) enforcement of a K pursuant to the
terms of the erroneous bid would be unconscionable; (iii) the mistake did not result from violation of a
position legal duty or from culpable negligence; (iv) the party to whom the bid is submitted will not be
prejudiced except by the loss of his bargain with the party that made the mistake; and (v) prompt notice of
the error is given.
Here, the mistake constituted 14% of the total value of the project, enforcement would be unconscionable,
 was not grossly negligent nor did he violate a positive legal duty, and  was not prejudiced as it, in the
end, paid less than it thought it would, and finally,  received prompt notice of the mistake.
LENAWEE COUNTY BD. OF HEALTH V. MESSERLY {Rescission possible unless bargained away}
 bought a three-unit apartment from Bloom. Bloom had installed an illegal septic tank which made the
apartment unlivable.
The land K form included a clause by which the buyer agreed to accept the property “as is”, with no
additional written or oral understandings.  condemned the property and obtained a permanent injunction
against human habitation on the premises.
A K may be rescinded when there is a mistaken belief relating to a basic assumption of he parties upon
which the K is made, which also materially affects the agreed performances of the parties.
The parties entered the land K under a mutual mistake of fact; they both thought the property was
habitable, while in fact it was not.
Rescission is permitted when a mistaken belief relates to a basic assumption of the parties upon which the
K was made, and which materially affects the agreed performances of the parties. A party, as in this case,
may voluntarily assume the risk of the loss in connection with the case, when signing a K with an “as is”
clause.
Here, rescission would normally have been the proper remedy, however, in the K, the Pickles assumed the
risk of loss by accepting the “as is” clause.
PAGE 35 OF 47
CONTRACT OUTLINE/KOVACIC (FALL 1999)
LEWIN
ROBERT
TABLE OF CASES
BY ISSUE
NAME OF CASE
Adams v. Lindsell
Ammons v. Wilson
Carlill v. Carbolic
Industrial v. Fulton
LaSalle v. Vega
Smtih-Scharff v. PN Hirsch
Corinthian v. Lederle
Glover v. Jewish War Vets
Russell v. Texas
Ever-Tite v. Green
Harris v. Time
Bowling v. Sperry
Heights Realty v. Phillips
Bogigian v. Bogigian
Fiege v. Bohem
Hamer v. Sidway
In re Green
Kirksey v. Kirksey
Thomas v. Thomas
Apfel v. Prudential Bache
Deli v. Schumacher
Empro v. Ball Co.
MGM v. Scheider
Oglebay v. Armco
Varney v. Ditmars
Cohen v. Cowles
Pevar v. Evans
Boise v. Mattefs
Konic v. Spokane
Lenawee v. Messerly
Raffles v. Wichelhaus
Harrington v. Taylor
Manwill v. Oyler
Mills v. Wyman
Webb v. McGowin
McMichael v. price
Rhem-Zeiher v. FG Walker
Wood v. Lady Duff
Embry v. Hargadine
Lucy v. Zehmer
Lonergan v. Scolnick
Southworth v. Oliver
Lefkowitz v. Great Minneapolis
Humble Oil v. Westside
Marchiondo v. Scheck
Alleghany College v. National Chaut.
Feinberg v. Pfeiffer
Grouse v. Group Health
Hoffman v. Red Owl
Langer v. Superior Steel
Electrical v. Maeda
Drennan v. Star Paving
Angel v. Murray
Levine v. Blumenthal
Alaska Packers v. Domenico
Hendricks v. Behee
Omni v. Seattle 1st National
Crabtree v. Elizabeth Arden
DF Activities v. Brown
Klewin v. Flagship
Mason v. Anderson
North Shore v. Schmidt
Dickinson v. Dodds
Carnival v. Shute
Jones v. Star Credit
Williams v. Walker-Thomas
Petterson v. Pattberg
CLUE
mailbox rule
shortening sale
smoke ball
merger broker
trustee signature
bags with names
drug sales
reward
oil land
roofing
junk mail
car/minor
insane lady/real est.
husband tricks wife
bastardy proceeding
uncle/nepher
live-in adultery
move in w/ family
£1/upkeep
bookkeeping progr.
agree to agree
letter of intent
Jaws
or shipment
“fair share of profits”
media informant
plywood/warranty
mistake in bid
surge protector
septic tank
Peerless
axe to hand
farm payments
treatment of son/sea
rooftop/falling block
sale of sand
whiskey
exclusive agent
“it’s all good”
high as a pine
land advertisement
farm sale
expensive shole
option K
partial performance
charity contributions
pension plan
pharmacist
franchise
retirement/noncompetit.
sub-contractor
sub-contractor
garbage collection
depression/can’t pay rent
hold-up
real estate deal
satisfaction/study
pay raise/memo
domino’s/chair
contractor/UCONN
loan/Vermont
NY beer distributor
sale of land
cruise/forum select.
expensive freezer
repo/unfair K
sale of mortgage
ISSUES
acceptance
acceptance
acceptance
acceptance
acceptance
acceptance
acceptance/accommo.
acceptance/knowledge
acceptance/option K
acceptance/performance
acceptance/performance
capacity to contract
capacity to contract
consideration
consideration
consideration
consideration
consideration
consideration
consideration/novelty
incomplete K
incomplete K
incomplete K
incomplete K
indefinite terms
intent to contract
mirror image
mistake
mistake
mistake
mistake
moral obligation
moral obligation
moral obligation
moral obligation
mutuality of obligation
mutuality of obligation
mutuality of obligation
objective test
objective test/intoxic.
offer
offer
offer/unilateral
option K
option K/part perform.
PE
PE
PE
PE
PE/Bargain
PE/consideration
PE/revoking offer
pre-existing duty
pre-existing duty
pre-existing/duress
revocation/acceptance
satisfaction
statute of frauds
statute of frauds
statute of frauds
statute of frauds
statute of frauds
time issues
unconscionability
unconscionability
unconscionability
withdrawal/unilateral K
PAGE 36 OF 47
BOOK PG. #
301
309
285
294
271
314
279
291
305
276
316
430
439
61
98
18
95
57
67
84
393
412
392
398
384
238
325
446
381
457
377
148
142
139
145
121
118
124
228
230
243
259
247
348
357
XX
421
58
370
364
110
104
107
273
125
218
218
195
204
202
339
XXX
90
29
354
OUTLINE PG #
20
20
19
19
18
21
19
19
20
19
21
32, 34
33, 34
4
6
3, 4
3, 6
4
4
4
28, 31
28, 31
28, 30
28, 31
28, 30
15
22
33, 34
28, 30
33, 34
28, 30
10
10
10
10
3, 8
3, 8
3, 9
15
15
16
17
16, 28, 30
25, 26
25, 26
11
11
XX
28, 31
3, 4
25, 27
25, 27
7
7
7
18, 23, 24
9
14
14
13
13
13
23, 24
5
5
5
25, 26
CONTRACT OUTLINE/KOVACIC (FALL 1999)
LEWIN
ROBERT
TABLE OF CASES
ALPHABETICALLY
NAME OF CASE
Adams v. Lindsell
Alaska Packers v. Domenico
Alleghany College v. National Chaut.
Ammons v. Wilson
Angel v. Murray
Apfel v. Prudential Bache
Bogigian v. Bogigian
Boise v. Mattefs
Bowling v. Sperry
Carlill v. Carbolic
Carnival v. Shute
Cohen v. Cowles
Corinthian v. Lederle
Crabtree v. Elizabeth Arden
Deli v. Schumacher
DF Activities v. Brown
Dickinson v. Dodds
Drennan v. Star Paving
Electrical v. Maeda
Embry v. Hargadine
Empro v. Ball Co.
Ever-Tite v. Green
Feinberg v. Pfeiffer
Fiege v. Bohem
Glover v. Jewish War Vets
Grouse v. Group Health
Hamer v. Sidway
Harrington v. Taylor
Harris v. Time
Heights Realty v. Phillips
Hendricks v. Behee
Hoffman v. Red Owl
Humble Oil v. Westside
In re Green
Industrial v. Fulton
Jones v. Star Credit
Kirksey v. Kirksey
Klewin v. Flagship
Konic v. Spokane
Langer v. Superior Steel
LaSalle v. Vega
Lefkowitz v. Great Minneapolis
Lenawee v. Messerly
Levine v. Blumenthal
Lonergan v. Scolnick
Lucy v. Zehmer
Manwill v. Oyler
Marchiondo v. Scheck
Mason v. Anderson
McMichael v. price
MGM v. Scheider
Mills v. Wyman
North Shore v. Schmidt
Oglebay v. Armco
Omni v. Seattle 1st National
Petterson v. Pattberg
Pevar v. Evans
Raffles v. Wichelhaus
Rhem-Zeiher v. FG Walker
Russell v. Texas
Smtih-Scharff v. PN Hirsch
Southworth v. Oliver
Thomas v. Thomas
Varney v. Ditmars
Webb v. McGowin
Williams v. Walker-Thomas
Wood v. Lady Duff
CLUE
mailbox rule
hold-up
charity contributions
shortening sale
garbage collection
bookkeeping progr.
husband tricks wife
mistake in bid
car/minor
smoke ball
cruise/forum select.
media informant
drug sales
pay raise/memo
agree to agree
domino’s/chair
sale of land
sub-contractor
sub-contractor
“it’s all good”
letter of intent
roofing
pension plan
bastardy proceeding
reward
pharmacist
uncle/nepher
axe to hand
junk mail
insane lady/real est.
real estate deal
franchise
option K
live-in adultery
merger broker
expensive freezer
move in w/ family
contractor/UCONN
surge protector
retirement/noncompetit.
trustee signature
expensive shole
septic tank
depression/can’t pay rent
land advertisement
high as a pine
farm payments
partial performance
loan/Vermont
sale of sand
Jaws
treatment of son/sea
NY beer distributor
or shipment
satisfaction/study
sale of mortgage
plywood/warranty
Peerless
whiskey
oil land
bags with names
farm sale
£1/upkeep
“fair share of profits”
rooftop/falling block
repo/unfair K
exclusive agent
ISSUES
acceptance
pre-existing/duress
PE
acceptance
pre-existing duty
consideration/novelty
consideration
mistake
capacity to contract
acceptance
unconscionability
intent to contract
acceptance/accommo.
statute of frauds
incomplete K
statute of frauds
time issues
PE/revoking offer
PE/consideration
objective test
incomplete K
acceptance/performance
PE
consideration
acceptance/knowledge
PE
consideration
moral obligation
acceptance/performance
capacity to contract
revocation/acceptance
PE
option K
consideration
acceptance
unconscionability
consideration
statute of frauds
mistake
PE/Bargain
acceptance
offer/unilateral
mistake
pre-existing duty
offer
objective test/intoxic.
moral obligation
option K/part perform.
statute of frauds
mutuality of obligation
incomplete K
moral obligation
statute of frauds
incomplete K
satisfaction
withdrawal/unilateral K
mirror image
mistake
mutuality of obligation
acceptance/option K
acceptance
offer
consideration
indefinite terms
moral obligation
unconscionability
mutuality of obligation
PAGE 37 OF 47
BOOK PG. #
301
107
309
110
84
61
446
430
285
XXX
238
279
218
393
218
339
364
370
228
412
276
98
291
XX
18
148
316
439
273
421
348
95
294
90
57
195
381
58
271
247
457
104
243
230
142
357
204
121
392
139
202
398
125
354
325
377
118
305
314
259
67
384
145
29
124
OUTLINE PG #
20
7
11
20
7
4
4
33, 34
32, 34
19
5
15
19
14
28, 31
14
23, 24
25, 27
25, 27
15
28, 31
19
11
6
19
XX
3, 4
10
21
33, 34
18, 23, 24
28, 31
25, 26
3, 6
19
5
4
13
28, 30
3, 4
18
16, 28, 30
33, 34
7
16
15
10
25, 26
13
3, 8
28, 30
10
13
28, 31
9
25, 26
22
28, 30
3, 8
20
21
17
4
28, 30
10
5
3, 9
CONTRACT OUTLINE/KOVACIC (FALL 1999)
LEWIN
Issue
Contract Enforcement
Pro
Damage is done if people break promises
Moral obligation to keep promises.
Avoid the unjust enrichment of a party.
Gives and respects autonomy to contract especially bargain
where a benefit and detriment to both parties exists.
5. Protects the promisor/ensures performance.
5.
6.
7.
1.
Moral Obligation
2.
3.
4.
1.
Promissory Estoppel
2.
3.
4.
5.
1.
Capacity to Contract
Unconscionability
2.
3.
1.
2.
3.
4.
5.
Default Rules
1.
2.
3.
4.
1.
2.
3.
Statute of Frauds
POSSIBLE POLICY ISSUES
1.
2.
3.
4.
1.
2.
3.
4.
Consideration
ROBERT
4.
5.
6.
7.
Evidence of a K.
Deters use of “promises” – ensures accuracy in contracting.
Encourages caution in contracting; ensures deliberation.
Reluctance to intervene.
a. family situation
b. respect for autonomy.
c. other social restraints.
No increase to societal wealth (through the formation of the
K) if not mutually beneficial.
Without it, courts would be flooded with claims for
enforcement of promises.
Gives courts a basis for allowing or providing a remedy.
Material and substantial benefit to the promisor, usually, plus a
subsequent promise.
Courts believe that promisor, if given the chance, would have
entered into a binding agreement before the fact.
Such benefits are the types of promises worth enforcing
(encourages assisting others)
Consideration model may be too restrictive.
Control promisor who promises recklessly and/or negligently
without regard for the reliance of others.
Prevent unjust resulting from the situation in #1.
Some level of reliance damages should exist. Reasonable
reliance can be beneficial; people should have a reason rely
on promises.
It is the morally right thing to do.
Safety net to catch Ks that fall through the rigid cracks of the
bargain model.
Want a mutually beneficial exchange – parties must know what
is mutually beneficial.
Limit opportunism.
Prevent exploitation.
Protect people that cannot protect themselves.
Some people do not read Ks for personal or practical reasons.
No notice = no mutual assent.
Unequal bargaining power. Non-negotiable contracts. No
bargaining terms favorable to one side.
Encourages both a pristine process and substance in
contracting arrangement.
Reduce transaction costs.
If parties had to specify all terms, the negotiation process
would be more lengthy and costly.
Approximate what parties would have bargained for.
Consistency, predictability, and administerability.
Prevent fraud.
POSNER: prevents people from lying to extract an agreement
to behave in a certain way.
Screen out frivolous commitments/appreciation of
seriousness.
Cautionary device: If one signs something, it must be a serious
commitment.
Better organizes parties’ affairs (memory is not always perfect).
Avoid misunderstandings.
Better evidence in court.
PAGE 38 OF 47
Con
1. Not all Ks are worth enforcing.
2. People can protect themselves, the do not need the
intervention of the law.
3. Market may be most efficient corrector (i.e. reputation, trust,
long-term business relationships.)
4. Sometimes people break promises for good reasons, not
always bad ones.
5. Enforcement might discourage promise making.
6. Enforcement may cause implementation of an obligation
regarding a transfer that was intended only as a gift.
1. Moral obligation to fulfill promises is better.
2. Detrimental reliance encompasses a larger grouping of
agreements that should be enforced through the use of the
courts.
1. Person who received the benefit is the best person to judge
the value of the benefit conferred.
2. There may be good reason for breaking the promise.
3. Hard to encourage charitable acts, if possible change may
lead to court enforcement.
1. Abuse of “escape’ clause (Escape hatch for opportunism.)
2. Costs to contracting will increase, encourages reneging. (law
& econ. argument.)
3. Encourages deceit, rule exploitation by taking advantage of
the rule outside of its purpose.
1. False claims of incapacity.
2. Those without capacity have no ability to contract.
3. Other parties may be deceived into thinking there is capacity.
1. Prevent contracting with a “high risk” person.
2. May hurt those you are trying to protect by removing the
enforceability of a K.
1. Abuse of “escape hatch” clause – evil opportunism.
2. Costs to contracting will increase, encouraging reneging.
3. Encourages deceit, rule exploitation by taking advantage of
the rule outside of its purpose.
CONTRACT OUTLINE/KOVACIC (FALL 1999)
LEWIN
ROBERT
Relevant UCC Code Sections
1-102:
effect of provisions in agreement may be varied by agreement, except as otherwise provided, and except obligations
of good faith, diligence, reasonableness, and care, which may not be disclaimed.
1-201:
definitions
1-203:
Every K or duty within the UCC imposes an obligation of good faith in its performance or enforcement.
2-103:
definitions
2-104:
definitions
2-105:
definitions
2-202:
Formal Requirements: Statute of Frauds
1. K for sale of goods of $500 or more must be in writing sufficient to indicate that a K for sale has been
made between parties and signed by party to be charged with enforcement. A writing is not insufficient
because it omits or incorrectly states a term agreed upon but the K is not enforceable under this
paragraph beyond the quantity of goods show in the writing.
2.
Between merchants, in a reasonable time, a writing in confirmation of a conversation forming a K is
sufficient if received by the other party who has reason to know of its contents, except:
a.
where that party objects to the contents within ten days.
Exceptions:
a.
specially manufactured, not suitable for sale to others in ordinary course of seller’s business
and seller, before notice of repudiation of K, has made either a substantial beginning of their
manufacture or commitments for their procurement.
b. if party admits in leading, testimony, or otherwise in court that a K for sale has been made, but
still not enforceable if beyond quantity of goods admitted.
c.
if payment has been made and acceptaed or goods have been received and accepted.
2-203:
Seals Inoperative
Affixing a seal to a writing for K for sale or offer to buy or sell goods does not constitute the a valid written K.
2-204:
Formation in General:
1.
A K for sale of goods may be made in any manner sufficient to show agreement, including conduct by
both parties which recognzies the existence of such a K.
2.
An agreement sufficient to constitute a K for sale may be found even though the moment of its inception
is unclear.
3.
Even though one ore more terms are left open, a K for sale does not fail ofr indefiniteness if the parties
have intended to make a K and there is a reasonably certain basis for giving an appropriate remedy.
2-205:
Firm Offers
An offer by a merchant to buy or sell goods in a signed writing which states it will be held open is not
revocable, for lack of consideration, during the tiem stated or if no time is stated, for a reasonable time, but in
no event may such period of irrevocability exceed three months; such an offer must be signed by the offeror is
on a form supplied by the offeree.
2-206:
Offer and Acceptance in Formation of Contract
Unless otherwise unambiguously indicated by the language or circumstances:
1. an offer to make a K is construed as inviting acceptance in any manner and by any medium
reasonable in the circumstances.
2. an order or other offer to buy goods for prompt or current shipment is construed as inviting
acceptance either by a prompt promise to ship or by the prompt or current shipment of conforming
or non-conforming goods, but a shipment of non-conforming goods does not constitute an
acceptance if the seller notifies the buyer that the shipment is offered only as an accommodation to
the buyer.
Where the beginning of a requested performance is a reasoable mode of acceptance, an offeror who is not
notified of acceptance within a reasonable time may treat the offer as having lapsed before acceptance.
PAGE 39 OF 47
CONTRACT OUTLINE/KOVACIC (FALL 1999)
LEWIN
ROBERT
2-207:
Additional Terms in Acceptance or Confirmation:
1.
A definite and seasonable expression of acceptance or a written confirmation which is sent within a
reasonable time operates as an acceptance even though it states terms additional to or different from
those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional
or different terms. (See #3 of this §)
2.
The additional terms are proposals for addition to the K. Between merchatns, such terms become part of
the K unless:
a.
the offer expressly limits acceptance to the terms of the offer;
b.
they materially alter it; or
c.
notification of objection to them has already been given or is given within a reasonable time
after notice of them is received.
3.
Conduct by both parties which recognizes the existence of a K is sufficient to establish a K for sale
although the writings of the parties do not otherwise establish a K. In such case, the terms of the
particular K consist of those terms on which the writings of the parties agree, together with any
supplementary terms incorporated under any other provision of the UCC.
2-209:
Modification, Rescission and Waiver
1.
An agreement modifying a K within the UCC needs no consideration to be binding.
2. A signed agreement which excludes modification or rescission except by a signed writing cannot be
otherwise modified or rescinded, but except as between merchants such a requirement on a form supplied
by the merchant must be separately signed by the other party.
3. The requirements of the Staute of Frauds (§2-201) must be satisfied if the K as modified is within it
provisions.
4. Although an attempt at modification or rescission does not satisfy the requirements of (2) or (3), it can
operate as a waiver.
5. A party who has made a waiver affecting an executory portion of ht eK may retract the waiver by
reasonable notification received by the other party that strict performance will be required of any term
wiaved, unless the retractioin would be unjust in view of a material change of position in reliance on the
waiver.
2-302:
Unconscionable Contract or Clause
1.
If the court as a matter of law finds the K or any clause of the K to have been unconscionable at the time
it was made the court may refuse to enforce the K, or itmay enforce the remained of the K without the
unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any
unconscionable result.
2.
When it is claimed or appears to the court that the K or any clause thereof may be unconscionable, the
parties shall be afforded a reasonable opportunity to present evidence as to its commerical setting,
purpose, and effect to aid the court in making the determination.
2-305:
Open Price Terms:
1.
The parties if they so intend can conclude a contract for sale even though the price is not settled. In such
a case the price is a reasonable price at the time for delivery if:
a.
nothing is said as to price; or
b.
the price is left to be agreed by the parties and they fail to agree; or
c.
the price is to be fixed in terms of some agreed market or other standard as set or recorded by
a third person or agency and it is not so set or recorded.
2.
A price to be fixed by the seller or by the buyer means a price for him to fix in good faith.
3. When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of
one party the other may at his option treat the K as cancelled or himself fix a reasonable price.
4. Where, however, the parties intend not to be bound unless the price be fixed or agreed and it is not fixed
or agreed there is no K. In such a case the buyer must return any goods already received or if unable so
to do must pay their reasonable value at the time of delivery and the seeler must return any portion of the
pirce paid on account.
PAGE 40 OF 47
CONTRACT OUTLINE/KOVACIC (FALL 1999)
LEWIN
ROBERT
RELEVANT RESTATEMENT SECTIONS
FORMATION OF CONTRACTS – PARTIES AND CAPACITY
Restatement 2nd §12 – Capacity to Contract
1. No one can be bound by K who doesn’t have the legal capacity to incur at least voidable contractual
duties. Capacity to K may be partial and its existence in respect of a particular transaction may
depend upon the nature of the transaction or upon other circumstances.
2. A natural person who manifests assent to a transaction has full legal capacity to incur contractual
duties thereby unless he is:
a.
under guardianship, or
b.
an infant, or
c.
mentally ill or defective, or
d.
intoxicated.
Restatement 2nd §14 – Infants and Capacity to Contract
Unless a statute provides otherwise, a natural person has the capacity to incur only voidable contractual
duties until the beginning of the day before the person’s eighteenth birthday.
Restatement 2nd §15 – Mental Illness or Defect
1. A person incurs only voidable contractual duties by entering into a transaction if by reason of mental
illness or defect:
a.
he is unable to understand in a reasonable manner the nature and consequences of
the transaction, or
b. he is unable to act in a reasonable manner in relation to the transaction and the other party
has reason to know of his condition.
2. Where the K is made on fair terms and the other party is without knowledge of the mental illness or
defect, the power of avoidance under (1) terminates to the extent that the K has been so performed in
whole or in part or the circumstances have so changed that avoidance would be unjust. In such a case
a court may grant relief as justice requires.
Restatement §16 – Intoxicated Persons
A person incurs only voidable contractual duties by entering into a transaction if the other party has reason
to know that by reason of intoxication:
a.
he is unable to understand in a reasonable manner the nature and consequences of the
transaction, or
b.
he is unable to act in a reasonable manner in relation to the transaction.
PAGE 41 OF 47
CONTRACT OUTLINE/KOVACIC (FALL 1999)
LEWIN
ROBERT
FORMATION OF CONTRACTS – MUTUAL ASSENT
Restatement §17 – Requirement of a Bargain
1.
The formation of a K requires a bargain with mutual assent to the exchange and valid consideration.
Restatement 2nd §20 – Effect of Misunderstanding
1. There is no manifestation of mutual assent to an exchange if the parties attach materially different meanings to their
manifestations and
a.
neither party know or has reason to know the meaning attached by the other; or
b.
each party knows or each party has reason to know the meaning attached by the other.
2. The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if:
a. that party does not know of any different meaning attached by the other, and the other knows the meaning
attached by the 1st party; or
b. that party has no reason to know of any different meaning attached by the other, and the other has reason to
know the meaning attached by the 1st party.
Restatement §24 – Offer Defined
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.
Restatement 2nd §25 – Option Contract
An option K is a promise which meets the requirements for the formation of a K and limits the promisor’s power to revoke an
offer.
Restatement 2nd §26 – Preliminary Negotiations
A manifestation of willingness to enter into a bargain is not an offer if the person to whom it is addressed knows or has reason
to know that the person making it does not intend to conclude a bargain until he has made a further manifestation of assent.
Restatement 2nd §30 – Form of Acceptance Invited
1. An offer may invite or require acceptance to be made by an affirmative answer in words, or by performing or refraining
from performing specified act, or may empower the offeree to make a selection of terms in his acceptance.
2. Unless otherwise indicated by the language or the circumstances, an offer invites acceptance in any manner and by any
medium reasonable in the circumstances.
Restatement 2nd §33 – Certainty
1. Even though a manifestation of intention is intended to be understood as an offer, it cannot be accepted so as to form a K
unless the terms of the K are reasonably certain.
2. The terms of a K are reasonably certain if they provide a basis for determining the existence of breach and for giving an
appropriate remedy.
3. The fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of
intention is not intended to be understood as an offer or as an acceptance.
Restatement 2nd §35 – Offeree’s Power of Acceptance
1. An offer gives to the offeree a continuing power to complete the manifestation of mutual assent by acceptance of the
offer.
2. A K cannot be created by acceptance of an offer after the power of acceptance has been terminated by one of the four
ways listed in §36.
Restatement 2nd § 36 – Methods of Termination of the Power of Acceptance
1.
An offeree’s power of acceptance may be terminated by:
a.
rejection or counter-offer by the offeree, or
b.
lapse of time
c.
revocation by the offeror, or
d.
death or incapacity of the offeror or offeree
2. In addition, an offeree’s power of acceptance is terminated by the non-occurrence of any condition of acceptance under
the terms of the offer.
Restatement 2nd §37 – Termination of Power of Acceptance under Option Contract
The power of acceptance under an option K is not terminated by rejection or counter-offer, by revocation, or by death or
incapacity of the offeror, unless the requirements are met for the discharge of a contractual duty.
PAGE 42 OF 47
CONTRACT OUTLINE/KOVACIC (FALL 1999)
LEWIN
ROBERT
Restatement 2nd §38 – Rejection (Designed to give effect to party’s intentions)
1. An offeree’s power of acceptance is terminated by his rejection of the offer, unless the offeror has manifested a contrary
intention.
2. A manifestation of intention not to accept an offer is a rejection unless the offeree manifests an intention to take it under
further advisement.
Restatement 2nd §39 – Counter-Offers
1. A counter-offer is an offer made by an offeree to his offeror relating to the same matter as the original offer and
proposing a substituted bargain differing from that proposed by the original offer.
2. An offeree’s power of acceptance is terminated by his making a counter-offer, unless the offeror has manifested a contrary
intention or unless the counter-offer manifests a contrary intention of the offeree.
Restatement 2nd § 41 – Lapse of Time
1. An offeree’s power of acceptance is terminated at the time specified in the offer or if no time is specified, at the end of a
reasonable time.
2. A reasonable time is a question of fact, depending on all the circumstances existing when the offer and attempted
acceptance are made.
3. An offer sent by mail is seasonably accepted if an acceptance is mailed at any time before midnight on the day on which
the offer is received.
Restatement 2nd § 42 – Revocation by Communication from Offeror to Offeree
An offeree’s power of acceptance is terminated when the offeree receives from the offeror a manifestation of an intention not
to enter into the proposed K.
Restatement 2nd § 43 – Indirect Communication of Revocation
An offeree’s power of acceptance is terminated when the offeror takes definite action inconsistent with an intention to enter
into the proposed K and the offeree acquires reliable information to that effect.
Restatement 2nd §45 – Option K Created by Part Performance of Tender
1. Where an offer invites an offeree to accept by rendering a performance and does not invite a promissory acceptance, an
option K is created when the offeree tenders or begins the invited performance or tenders a beginning of it.
2. The offeror’s duty of performance under any option K so created is conditional on completion of the invited performance
in accordance with the terms of the offer.
Restatement 2nd §50 – Acceptance of Offer Defined; Acceptance by Performance; Acceptance by Promise
1. Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a manner invited or
required by the offer.
2. Acceptance by performance requires that at least part of what the offer requests be performed and includes acceptance by
a performance which operates as a return promise.
3. Acceptance by a promise requires that the offeree complete every act essential to the making of the promise.
Restatement 2nd §51 – Effect of Part Performance without Knowledge of Offer
Unless the offeror manifests a contrary intention, an offeree who learns of an offer after he has rendered part of the
performance requested by the offer may accept by completing the requested performance.
Restatement 2nd §53 – Acceptance by Performance; Manifestation of Intention Not to Accept
1. An offer can be accepted by the rendering of a performance only if the offer invites such an acceptance.
2. The rendering of a performance does not constitute an acceptance if within a reasonable time the offeree exercises
reasonable diligence to notify the offeror of non-acceptance.
3. Where an offer of a promise invites acceptance by performance and does not invite a promissory acceptance, the
rendering of the invited performance does not constitute an acceptance if before the offeror performs his promise the
offeree manifests an intention not to accept.
PAGE 43 OF 47
CONTRACT OUTLINE/KOVACIC (FALL 1999)
LEWIN
ROBERT
Restatement 2nd § 54 – Acceptance by Performance; Necessity of Notification to Offeror
1. Where an offer invites an offeree to accept by rendering performance, no notification is necessary to make such an
acceptance effective unless the offer requests such notification. (Carlill)
2. If an offeree who accepts by rendering performance has reason to know that the offeror has no adequate means of
learning of the performance with reasonable promptness and certainty, the contractual duty of the offeror is discharged
unless:
a.
the offeree exercises reasonable diligence to notify the offeror of acceptance, or
b.
the offeror learns of the performance within a reasonable time, or
c.
the offer indicates that notification of acceptance is not required.
Restatement 2nd §59 – Purported Acceptance Which Adds Qualifications (see UCC § 2-207)
A reply to an offer which purports to accept it but is conditional on the offeror’s assent to terms additional to or different from
those offered is not an acceptance but is a counter-offer.
Restatement 2nd §60 – Acceptance of Offer Which States Place, Time or Manner of Acceptance
If an offer prescribes a manner, time, or place of acceptance, it must be complied with to create a K. But if it only offers
suggestions, other methods are not precluded.
Restatement 2nd §61 – Acceptance Which Requests Change of Terms
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.
Restatement 2nd § 63 – Time When Acceptance Takes Place
Unless the offer provides otherwise:
a.
an acceptance made in the manner invited by the offer completes the manifestation of mutual assent as soon as put
out of the offeree’s possession, without regard to whether it ever reaches the offer; but
b. an acceptance under an option contract is not operative until received by the offeror.
Restatement 2nd § 69 – Acceptance by Silence of Exercise of Dominion
1. Where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance in the following cases only:
a.
Where an offeree takes the benefit of offered services with reasonable opportunity to reject them and reason to
know that they were offered with the expectation of compensation.
b. Where the offeror has stated or given the offeree reason to understand that assent may be manifested by
silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer.
c. Where because of previous dealings or otherwise, it is reasonable that the offeree should notify the offeror if he
does not intend to accept.
2. An offeree who does any act inconsistent with the offeror’s ownership of offered property is bound in accordance with
the offered terms unless they are manifestly unreasonable But if the act is wrongful as against the offeror, it is an
acceptance only if ratified by him.
PAGE 44 OF 47
CONTRACT OUTLINE/KOVACIC (FALL 1999)
LEWIN
ROBERT
FORMATION OF CONTRACTS – CONSIDERATION
Restatement §71 – Requirement of Exchange; Types of Exchange
1.
To constitute consideration, a performance or a return-promise must be bargained for.
2.
To constitute performance or return 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.
3.
Performance may consist of:
a.
an act other than a promise, or
b.
a forbearance, or
c.
the creation, modification, or destruction of a legal relation
4. 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.
Restatement §77 – Illusory and Alternative Promises
A promise is not consideration if by its terms the promisor reserves a choice of alternative performances.
Restatement §79 – Adequacy of Consideration; Mutuality of Obligation
If the requirement of consideration is met, there is no additional requirement of:
a.
a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promisee; or
b.
equivalence in the values exchanged; or
c.
“mutuality of obligation”
Restatement 2nd §86 – Moral Obligation
1. A promise made in recognition of a benefit previously received by the promisor is binding to the extent necessary to
prevent injustice.
2.
A promise is not binding where:
a. the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched;
or
b.
to the extent that its value is disproportionate to the benefit.
Restatement 2nd §87 – Option Contract
1.
An offer is binding as an option K if it:
a. is in writing and signed by the offeror, recited a purported consideration for the making of the offer, and
proposes an exchange on fair terms within a reasonable time; or
b.
is made irrevocable by statute.
2. An offer which the offer should reasonably expect to induce action or forbearance of a substantial character on the part of
the offeree before acceptance and which does include such action of forbearance is binding as an option K to the extent
necessary to avoid injustice.
Restatement 2nd §90 – Promise Reasonably Inducing Action or Forbearance
1. A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a
3rd person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of
the promise. The remedy granted for breach may be limited as justice requires.
2. A charitable subscription or a marriage settlement is binding under (1) without proof that the promise induced action or
forbearance.
PAGE 45 OF 47
CONTRACT OUTLINE/KOVACIC (FALL 1999)
LEWIN
ROBERT
THE STATUTE OF FRAUDS
Restatement 2nd §110 – Class of Contracts Covered by Statute of Frauds
1. The following classes of Ks are subject to the Statute of Frauds, forbidding enforcement unless there is a written
memorandum or an applicable exception:
a.
K of an executor or administrator to answer for a duty of his decedent.
b.
K to answer for the duty of another.
c.
K made upon consideration of marriage.
d.
K for the sale of land.
e.
K that is not to be performed within one year from the making thereof.
Restatement 2nd §130 – Contract Not to be Performed Within One Year
1. Where any promise in a K cannot be fully performed within one year of the making of the K, all promises in the K are
within the SOF until one party completes performance.
2.
When one party completes performance, the one-year provision does not prevent enforcement of the promises.
Restatement 2nd §131 – General Requirements of a Memorandum
Unless additional requirements are prescribed by state statute, a K within the SOF is enforceable if a writing exists, signed by
the party against whom enforcement is sought, that:
a. Reasonably identifies the subject matter of the K
b. sufficiently indicates that a K has been made between the parties or offered by the signer to the other party
c. state with reasonable certainty the essential terms of the unperformed promises in the K
MISTAKE
Restatement 2nd §152 – When Mistake of Both Parties Makes a K Voidable
1. Where a mistake of both parties at the time a K was made as to a basic assumption on which the K was made has a
material effect on the agreed exchange of performances, the K is voidable by the adversely affected party unless he bears
the risk of the mistake under the rule stated in §154
2. In determining whether the mistake has a material effect on the agreed exchange of performances, account is taken of any
relief by way of reformation, restitution, or otherwise.
Restatement 2nd §153 – When Mistake of One Party Makes a K Voidable
Where a mistake of one party at the time a K was made as to a basic assumption on which he made the K has a material effect
on the agreed exchange of performances that is adverse to him, the K is voidable by him if he does not bear the risk of the
mistake under §154 and:
a.
the effect of the mistake is such that enforcement of the K would be unconscionable, or
b.
the other party had reason to know of the mistake or his fault caused the mistake.
Restatement 2nd §154 – When a Party Bears the Risk of a Mistake
A party bears the risk of a mistake when:
a. it is allocated to him by agreement of the parties.
b. he is aware, at the time of K, that he has only limited knowledge with respect to the facts to which the mistake
relates, but treats his limited knowledge as sufficient; or
c.
it is allocated to him by a term supplied by the court on the ground that it is reasonable under the circumstances to
do so.
UNENFORCEABILITY ON GROUNDS OF PUBLIC POLICY
Restatement 2nd §§ 178-191
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CONTRACT OUTLINE/KOVACIC (FALL 1999)
LEWIN
ROBERT
SCOPE OF CONTRACTUAL OBLIGATIONS
Restatement 2nd §205 – Duty of Good Faith and Fair Dealing
Every K imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.
Restatement 2nd §206 – Interpretation Against the Draftsman
In choosing among the reasonable meanings of a promise or agreement or a term thereof, that meaning is generally preferred
which operates against the party who supplies the words or from whom a writing otherwise proceeds.
Restatement 2nd §207 – Interpretation Favoring the Public
In choosing among the reasonable meanings of a promise or agreement or a term thereof, a meaning that serves the public
interest is generally preferred.
Restatement 2nd §208 – Unconscionable K or Term
If a K or term thereof is unconscionable at the time the K is made a court may refuse to enforce the K, or may enforce the
remained of the K without the unconscionable term, or may so limit the application of any unconscionable term as to avoid any
unconscionable result.
Restatement 2nd §228 – Satisfaction of the Obligor as a Condition
When it is a condition of an obligor’ duty that he be satisfied with respect to the obligee’s performance or with respect to
something else, and it is easy to see whether a reasonable person would be satisfied, the condition is said to occur if a reasonable
person would be satisfied.
REMEDIES
Restatement 2nd §344 – Purposes of Remedies
Judicial remedies under the rules stated in the Restatement (2 nd) serve to protect one of more of the following interests of a
promisee:
a.
his “expectation interest,” which is his interest in having the benefit of his bargain by being put in as good a position
as he would have been in had the K been performed,
b. his “reliance interest,” which is his interest in being reimbursed for loss caused by reliance on the K by being put in
as good a position as he would have been in had the K not been made, or
c.
his “restitution interest,” which is his interest in having restored to him any benefit that he has conferred on the
other party.
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