KPOZ Outline -Fall 2015 (1)

Contracts KPOZ Outline
Rest. §1 - Contract
A contract is a promise or set of promises for the breach of which the law gives
remedy, or the performance of which the law in some way recognizes a duty.
§2 – Promise
(1) a promise is the manifestation of intention to act or refrain from acting in a
specified way, so made as to justify a promisee in understanding that a
fucommitment has been made
(2) the person manifesting the intention is the promisor
(3) the person to whom the manifestation is addressed is the promisee
(4) where the performance will benefit a person other than the promisee that
person is a beneficiary
§3 – Agreement
An agreement is a manifestation of mutual assent on the part of 2 or more
persons. A bargain is an agreement to exchange promises or to exchange a
promise for a performance, or to exchange performances.
Three Principles Of Contract Law
o Definition: The theory that an agreement to exchange one thing for
another gives rise to mutual obligations.
o “a deal is a deal” arguably doesn’t apply under conditions of coercion,
duress, or inequality of power and resources
o Commonplace--an idea, story, or other belief that is widely held
o What beliefs make up the commonplace, what reasons might people
give for why deals are obligatory?
-both sides are committed
-the other person, counting on the deal, will spend money or
make commitments b/c he or she believes the deal will be fulfilled
-people make a living from deal making
-our economy depends on commercial exchange
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-a free market system, and our individual freedom, rests on
deals and the fulfillment of deals
o discover possible rationales (differences in “common sense”
and intuition)
o interrogate the rationales
 Bargain Principle is the “big daddy” of enforcement, if it doesn’t apply, go to
reliance and restitution
 BP is fundamental basis for contracts; equal bargaining partners. Hawaiian
case shows that alternative routes of enforcement were needed b/c bargain
principle leaves some w/o remedy.
Kirksey v. Kirksey--the plaintiff’s brother in law wrote a letter to her offering
her a place to stay and land to raise her children. The plaintiff had abandoned
her possessions 60 miles away in order to take him up on his offer.
Court held there was no exchange-- of the things she gave up, none of it went to
him, which would signify “bargain”Result: It was determined a gift, and the rule of gifts is that “as easily as it’s
given, it can be taken away.
Redgrave v. BSO
Vanessa Redgrave says: her speech is the proximate cause of BSO’s decision to
cancel. BSO claims that her speech caused an increased risk of danger, and as a
result, they cancelled her. The court limited damages to the contractual
performance fee (the person is entitled to be in the same position as she would
have been at the end of the terms of the contract), but denied the actress and her
company consequential damages for the actress's loss of future professional
opportunities because the causal connection of a communicative link between the
breach and the alleged harm was not shown.
Market economy--a system in which goods and services are allocated through
a regime of individual property ownership and voluntary exchange
Bargain and the Market
Neo-classical economics: the economic theory most closely associated with the
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bargain principle.
Assumptions of neo-classical economics:
-People act in their own self-interest;
-In the pursuit of self-interest, people act rationally;
-People have access to perfect info. (People have the knowledge necessary to act
-People and resources are freely moveable;
-there are no artificial restrictions on entry to the marketplace (assuming that the
marketplace remains competitive b/c buyers and sellers are free to move in and
out of the market and thereby effectuate the free mobility of people and
-The current distribution of wealth and resources is taken as a given
Values associated with neo-classical economics:
-People are able to act rationally and make decisions in their own self-interest
--People have perfect information implies that there is no economic or
educational bias in the ability to process this info.
--Ability to move freely--people are inanimate objects
-Free entry and exit into the market
-acceptance of the current allocation
*Trust and responsibility related because reliance is based on the premise of
Freeway Poem:
--each time we get into a car, we rely on the premise that other people that get
into their cars are equally governed by the same rules and cautions, and we have
to TRUST the other drivers and their conforming to the rules
--potential injury resulting from the break down in trust (brick wall on one side
and straight drop on the other)
--if we existed as individuals (rather than a society) then we wouldn’t have to be
concerned with respect to how other people act and react
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Andrew Rickets v. Katie Scothorn
The grandfather of the payee made and delivered to the payee a promissory note.
The note was given as a gratuity, to enable the payee to give up her employment.
It held that, although there was no valuable consideration for the note, there was
an equitable estoppel (she detrimentally relied on his promise and quit her job),
which precluded the executor from alleging that the note in controversy was
lacking in one of the essential elements of a valid contract. The payee’s
grandfather intentionally influenced the payee to alter her position for the worse
on the faith of the note being paid when due. Thus, it would be grossly
inequitable to permit the maker, or his executor, to resist payment on the ground
that the promise was given w/o consideration.
Quid Pro Quo? Is the grandfather making the promise on the condition that
she would quit her job? No.
Equitable Estoppel: if a person makes a representation about a fact, in a
situation in which another person is likely to rely on the truth of that fact, then
the first person is barred from denying the truth of the fact as he or she stated it.
*State Bank of Standish v. Robert N. and Kathleen Curry
The jury was entitled to find that the officers' statements were not merely words
of assurance or statements of belief, but of a promise of future action. The
reviewing court concluded that where the parties had left open some matters to
be determined in the future, enforcement of a promise was not precluded if there
existed a method of determining the terms of the contract either by examining
the agreement itself or by other usage or custom.
What makes it a promise?
o Prior dealings, course of conduct
o The parties had an existing relationship (because in cases where the
two parties in the contract are on a personal level (use first names,
know about their families, have been doing business in the past), then
reliance is greater (trust), and more enforceable.)
 Two views of Promise that would allow the promisee to
reasonably rely on the promisor:
--there must be some specific terms laid out by one party
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--must be made as to justify a promisee in understanding that a commitment has
been made.
--strict view: specificity of terms laid out at time of contract
--Like in the note from Katie’s grandfather: although it implied “if you want to”
for the terms, there was enough in the context to infer a promise. Since we’re
dealing w/equity and not with law
1) Have to have a promise that is as definite as you would need for a contract
2) Less definite
3) More definite—constricts limits of equity
-Puts more people in the position to say that I have a promise that is not
enforceable as a matter of law, but is enforceable as a matter of equity. If the
promise is “less definite”, the scope of equity is expanded.
*Promissory estoppel is an equitable remedy. If there aren’t problems w/the
promise, it is an enforceable contract.
 Requirements
o  must show that she conferred a benefit on  and that the  retained
the benefit (i.e. didn’t give it back or pay for it)
o  must show that she did not confer the benefit as a gift (not just to
keep a birthday present)
o  Must prove that she was not acting officiously in conferring the
Executor of the Estate of Enoch F. Sceva v. Fanny True
Fanny spends her last years at an institution (mad house) for the poor, even
though she had property that someone else was reaping the benefits of. Suit
could not be maintained because services were rendered, and support furnished,
with no expectation on the part of Enoch F. Sceva that he was to charge or be
paid therefore. It was regarded substantially in the light of a gift actually
accepted and appropriated by the defendant, without reference to her capacity to
make a contract, or even to signify her acceptance by any mental assent.
o Contract requires two consenting individuals of the same mental capacity.
o Implied in Law: it doesn’t require anything having to do with mental
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capacity on either side.
o At some level, in all of these: bargaining, restitution, reliance: fairness
comes in to play. The law has a way of figuring out the fairest result, while
still using the language of the law.
Howard Bailey v. Richard West, 105 R.I. 61, A.2d 414 (103)
The court rejected the farm owner's argument that there was a quasi-contract,
finding instead that the farm owner was a mere volunteer who boarded the horse
at his own risk and with full knowledge that he might not be reimbursed for his
Lyle Dews v. Halliburton Industries, 288 Ark. 532, 708 S.W.2d 67 (110)
The underlying principle is that one person should not unjustly enrich himself at
the expense of another. To find unjust enrichment, a party must have received
something of value, to which he was not entitled and which he must restore. The
court affirmed in part and held that because the farmout recipient claimed
ownership of the well by virtue of the assignment from the leasehold owner and
accepted the work performed by the claimants, the farmout recipient would have
been unjustly enriched if he were not required to pay for the work
Objective Theory of Interpretation
Charles Embry v. Hargadine, McKittrick Dry Goods Co., 127 Mo. App.
Appellant employee of respondent continued working for respondent after the
expiration of his written contract of employment. Appellant alleged that when he
asked respondent's president if his employment would continue for another year,
he was told that he was all right and need not worry. The court held that the
employer's words were sufficient to constitute the renewal of the employment
A meeting of the minds is not literally needed in order for a contract to form at
the time of contracting. Contract is concerned with if the manifestation of intent
is the same, not if your minds are in the same state at the same time.
Jury’s job is the interpretation of the contract to figure out the intent of the
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*United Steelworkers of Amer. V. United States Steel, 492 F. Supp. 1
The union filed suit against the steel mill, seeking to enforce the mill's alleged
promise to keep its plants open so long as it remained profitable. The union's
complaint alleged breach of contract, promissory estoppel, violation of antitrust
statutes, and property right. The court found for the steel mill in the areas of
breach of contract and promissory estoppel, holding that the union provided
insufficient evidence to prove that corporate officers had authority to make such
*In re Estate of Virgil Steffes v. Terry Stefffes, 290 N.W.2d 697 (126)
The court established that the services were rendered at the instance of the
decedent, and that the nurse expected compensation for these services over and
above room and board and gratuities she received from the decedent. It also
found the illicit relationship was incidental to the performance of the lawful
services and was not a consideration for the implied promise to compensate.
Moreover, it held that a contract could be implied on the ground of unjust
enrichment and the nurse could recover reasonable value of services rendered.
Difference and Meaning in Communication (Meeting of the Minds)
Objectively—(law favors this interpretation)—concept of what a reasonable
person might believe; whether or not there’s been an offer or acceptance is
determined by how a reasonable person in the other party’s shoes would
interpret a party’s intentions. It doesn’t matter what the party’s actual
intention was if it’s contrary to the intent he manifested, and the other party
doesn’t know or have reason to know what his true intentions are.
Restatement of Contracts section 20:
There is no manifestation of mutual assent to an exchange if the parties attach
materially different meanings to their manifestations and (a) neither knows nor
has reason to know the meaning attached by the other.
*Konic International Corporation v. Spokane Comp., 109 Idaho 527
 Made an offer based on his belief that the surge protector was $56.20, when
the offeror meant $5620. The court held that there was no sales contract because
the parties had a material mutual misunderstanding and any agreement that they
thought they had reached was merely an illusion.
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Dr. Werner Oswald v. Jane Allen, 417 F.2d 43 (150)
Plaintiff coin collection purchaser filed a complaint against defendant coin
collection seller, alleging that a contract had been formed for the sale of a Swiss
coin collection. The trial court found that plaintiff thought the offer was for all of
the Swiss coins, while defendant thought she was selling only a specific coin
collection and not the Swiss coins in another collection also. The court below
concluded that a contract did not exist since the minds of the parties had not met.
Herlinda Marie Acedo v. State of Arizona, 20 Ariz. App. 467, 513 P.2d
1350 (151)
 Birth mother thought that she had six months in which she could change her
mind and regain her child. The court noted that the form gave unconditional
consent to the placement of the child, and specifically stated that she
relinquished all rights in the child. The court held that the form clearly indicated
that the consent given was immediately effective. Public policy demanded that
the statutory process be followed.
*S&J Associates v. Jay’s Trucking Co., 26 B.R. 73 (157)
The debtor mistakenly executed the contract, which on its face bound it to
perform sheeting and shoring, as well as excavating work. The mistake was due to
inadvertence. The debtor never intended to perform any sheeting and shoring
work under the contract. Trial testimony established that that the contractor
knew what services the debtor intended to perform under the contract. The court
found that there was no meeting of the minds regarding the contract and that no
valid contract existed between the parties.
Oswald v.
$5,620 v.
Swiss coins v.
Swiss coin
6 mos. To
change one’s
Acedo v.
mind. 0 mos.
Arizona (Dept. To
of Public
change one’s
Excavation v.
S&J Assoc. v.
excravation +
Jay’s Trucking sheeting &
Reasonable misunderstanding
on both parts.
The buyer and seller were
misinterpreting what the other
was trying to say.
Understandable discrepancy.
Transfer of rights from birth
mother to adoptive mother.
Birth mother made agreement,
then revoked. Challenged state
of mind of birth mothers.
both parties
walk away
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Void contract: no contract has been formed so there’s no duty to perform under
Voidable contract: one or more parties have the power to either ratify or avoid
the contract. I.e. if it is formed under duress.
Unenforceable contract: contracts that have some legal consequences, but they
aren’t enforceable in an action for damages or specific performance, due to a
defense (i.e. Statute of Frauds or the Statute of Limitations).
EXAMPLE: Butcher tells Jack Beanstalk, “If you promise to give me your cow, I
promise to give you a handful of magic beans…they grow giant beans that reach
up to the clouds.” Jack agrees and signs a written contract. However, before the
exchange takes place, Jack finds out the beans aren’t magic at all-they’re just
ordinary kidney beans. Is the contract void, or voidable?
A: it’s voidable by Jack. A void contract is one that produces no duty to perform
(i.e. it lacks consideration), such that it wasn’t really a contract in the first place.
No party is bound by a void contract.
o Meeting of the minds: previously defined as legal rhetoric, dicta.
o There doesn’t have to be a meeting of the minds because we are
interested in subjective interpretation. In this case we see a mixed
analysis b/c we have to start w/the terms, and move onto what each
party meant when agreeing to the terms.
UCC: Sec. 2-204, 2-206, and 2-207
CISG: Art. 19
Rest (2d): Sec. 22, 24, 26, 29, 35, 36, 39, 40, 41, 42, 43, 48, 50, 53, 54, 56, 58, 59,
60, and 61.
Note: prior relationships, past practices, and industry customs are all relevant
in determining whether there has been a valid offer and acceptance.
1. a communication by the offeror;
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creating a reasonable expectation in the offeree;
that offeror is willing to enter into a contract;
on specified terms;
Such that offeree need only accept in order to form a contract.
§24, Restat.
An offer is the manifestation of a 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.
Factors: look to see if the communication is a promise. Consider
language, circumstances, prior practices and relations of parties, method of
communication, and industry custom (“I offer,” “I promise”)
Seven Essential Terms of an Offer at Common Law:
1. subject matter
2. price
3. payment terms
4. quantity
5. quality
6. duration
7. work to be done
(Ducks Say Quack Quack When People Pass)
Note: a missing “quantity” term can invalidate a contract. Without the term
there is no reasonably certain basis on which to give an appropriate remedy. A
quantity term need not be an express quantity in the contract itself, as long as it
can be definitely ascertained.
EXAMPLE: This is a valid offer:
The Camelot Army Store puts the following ad in a local newspaper: “SaleSaturday only-singing sword, Excalibur. Was $500, now only $24. First come,
first served. Will open at 10 a.m.” Arthur King sees the ad, caps out in front of
Camelot Friday night, and is the first one in on Saturday morning. He says, “I
accept your offer for Excalibur. Here’s my $24.”
EXAMPLE 2: Dee Fecht visits the Mendel Greenhouse. She is looking over the
pea plants, and George Mendel, the owner tells her, “I have pea plants with red
flowers and some with white flowers. I’ll sell you any one of them for $5.” This is
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a valid offer because giving the offeree a reasonable range of choices does not
destroy the offer. As soon as Dee chooses a plant, the contract is formed.
*Michael Normile v. Hazel Elizabeth Miller, 313 N.C. 98, 326 S.E.2d 11
The counter-offer by defendant, which stated that plaintiff-appellants had until
5:00 p.m. of the next day to accept, did not constitute a binding and enforceable
option contract. Defendant's counter-offer on plaintiff-appellants' original offer
was a rejection of that offer, which meant that the time for acceptance provision
in plaintiff-appellants' original offer was also rejected and did not become part of
defendant's counter-offer. Defendant then properly revoked the counter-offer by
selling the property to plaintiff-appellee and thus gave plaintiff-appellants notice
of that revocation.
§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 of a counteroffer, unless the offeror has manifested a contrary intention or unless the
counter-offer manifests a contrary intention of the offeree.
Norman &
Offer History 1 Offer History
N&K offer to Miller
Attempt to take offer,
too late
Hawkins Counter-offer, N&K Byer: offer rejected
Byer (2) Offer to Miller
Offer accepted--Contract
deposit) the 24-hr. time period b/w the offer and mandatory acceptance is
considered a reasonable amount of time for the acceptor to accept, and for the
offeror to hold the offer. Moving into a 48-hr. time period would transfer it to the
category of “unreasonable”.
§25 Option Contracts: an offer made irrevocable by consideration – i.e.
offeree pays offeror to keep the offer open for some period of time. It creates a
property right in offeree, which
Means, without a provision to the contrary, that the offeree can sell or transfer
this power of acceptance to someone else, enabling the transferee to accept the
original offer.
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Was there an offer?
*Southworth v. Oliver, 587 P.2d 994 (165)
The court explained modern law construes both acts and words as having the
meaning a reasonable person would attach to them in view of surrounding
circumstances and a contract includes not only what parties said, but what is
necessarily implied from what they said. The court found landowners' letter
quoting a price, when considered together with the facts and circumstances,
constituted an offer and purchaser's acceptance resulted in a binding contract.
It is the duty of the offeror to be sure that the terms are clearly laid out, including
if it was an actual offer or not.
§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
*Ahmad Izadi v. Machado Ford, 550 So. 2d 1135 (172)
Complaint alleging that a car dealer placed an ad representing a minimum tradein allowance, but limiting this statement in infinitesimally small print stated a
cause of action for breach of contract, misleading advertising, and unfair
*Leonard v. PepsiCo, 39 UCC Rep.Serv.2d 1 (176)
The court stated that advertisements were not contracts or offers to sell, but
rather invitations to negotiate. The court noted that offers made in jest were not
contracts where a reasonable person could see that no serious offer was intended.
Six Ways to Terminate an Offer (besides acceptance):
death or insanity (of either party) (Rest. 2d § 48)
intervening illegality (Rest. 2d §§ 35, 36)
Rejection/counter r offer (Rest. § 36)
lapse of time
destruction of subject matter (Rest. 2d §§ 35, 36)
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--any act which is inconsistent with the offer is sufficient to revoke, as long (and
as soon) as offeree knows about it (i.e. selling a house to another buyer).
EXAMPLE: Christopher Columbus offers to sell his powerboat, the Santa
Maria, to Leif Ericson. He turns around and sells it to Isabella instead. If Leif
overhears of the sale from two strangers at the local tavern, Newe Worlde, the
offer is revoked because if the offeree knows of an act by offeror which is
inconsistent with the offer.
Assent Invited: Acceptance
§22 Mode of Assent: Offer and Acceptance
(1) The manifestation of mutual assent to an exchange ordinarily takes the form
of an offer or proposal by one party followed by an acceptance by the other
party or parties.
(2)A manifestation of mutual assent may be made even though neither offer nor
acceptance can be identified and even though the moment of formation cannot be
*Panhandle Eastern Pipe Line v. Nowlin Smith
General Rule: When a person writes on a contract, and the changes are material,
the offer becomes a counter-offer. If the changes are immaterial, it is still
considered an acceptance of the offer.
--The things that Smith added to the contract were things that were already a
privilege to him, before the contract formation. His request to review his file was
not a condition of the contract, or an addition, because he would have access to
his file as an employee anyway.
§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 of different from those offered is not an acceptance
but is a counter-offer.
Mirror Image Rule: the acceptance has to be exactly what the offeror offered.
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Any material changes are considered to be a “counter-offer”
Acceptance v. Counteroffer (UCC 2-206)
o Don’t worry about accommodation; consider materials of offer and
material of acceptance.
§61 Acceptance Which Request 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.
Mode of Acceptance:
--the only person who may accept an offer is the person(s) to whom
the offer is addressed, even if the offer does not call for personal
performance on offeree’s part.
--acceptance is valid as soon as it is posted (including in the mailbox,
“mailbox rule”), but only if the offeror authorizes the mailbox as a
valid means of acceptance. It doesn’t have to reach the offeror in
order to be a valid acceptance.
§29 To Whom the Offer is Addressed
1. The manifest intention of the offeror determines the person or persons in
whom is created a power of acceptance.
2. An offer may create a power of acceptance to a specified person or in one or
more of a specified group or class of persons, acting separately or together, or
in anyone or everyone who makes a specified promise or renders a specified
§35 The 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 in one of the ways listed in §36
§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, or
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(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 nonoccurrence of any condition of acceptance under the terms of the offer
§40 Time When Rejection or Counter-offer Terminates the Power of
Rejection or counter-offer by mail or telegram does not terminate the power of
acceptance until received by the offeror, but limits the power so that a letter or
telegram of acceptance started after the sending of an otherwise effective
rejection or counter-offer is only a counter-offer unless the acceptance is received
by the offeror before he receives the rejection or counter-offer.
Restatement §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) What is a reasonable time is a question of fact, depending on all the
circumstances existing when the offer and attempted acceptance are made.
(3) Unless otherwise indicated by the language or the circumstances, and subject
to the rule stated in §49, 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
§48 Death or Incapacity of Offeror or Offeree
An offeree’s power of acceptance is terminated when the offeree or offeror dies or
is deprived of legal capacity to enter into the proposed k.
Note: the mailbox rule does not apply to option contracts, according to Rest.
Rejections, however, are valid when received.
Note: this is within the offeror’s control; the offer can be made to as many or as
few people as offeror desires.
*Beard Imlement Co. v. Krusa, 208 Ill. App. 3d 953, 567 N.E.2d 345 (192)
The court agreed with the buyer's argument that the seller never accepted the
buyer's offer to purchase the combine. The court found that the purchase order
form signed by the buyer constituted an offer made by the buyer to the seller. The
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court concluded that the purchase order "unambiguously" required the signature
by the seller's "dealer" in order to be a proper acceptance of the buyer's offer. The
court therefore found that because the seller's "dealer" never signed the purchase
order, no contract ever existed.
*Krusa is the master of the offer b/c the company had to accept the trade-in and
the money for the combine.
Russell v. Texas Co.
General Rule: Silence does not operate as acceptance.
**If the offeror is willing to accept a silent acceptance, he/she is responsible for
putting that in the offer. Otherwise, the other party does not have to assume that
their silence operates as acceptance. i.e. The use of my land will cost you
$150/day. If you continue to use my land, I will assume that that is an
acceptance of this offer.
*Multicare Med. Center v. State of Washington, 114 Wash. 2d 572
The court found that the plain language of Wash. Rev. Code § 74.09.120
permitted the state to make MI-GUA payments based upon a unilateral contract,
and that such a contract existed between the parties. The court reasoned that the
hospitals had to perform additional obligations under the MI-GAU unilateral
contract than those required by federal law for Medicaid or Medicare certified
hospitals, and that these additional obligations sufficed as consideration for the
unilateral contract.
Three Means of Acceptance Under UCC 2-606:
1. after a reasonable opportunity to inspect, manifest to seller
that goods conform or are acceptable in spite of nonconformance;
2. fail to reject within a reasonable time after a reasonable
opportunity to inspect;
3. Act inconsistently with seller’s ownership.
Restatement §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 parties in a manner invited or required by the offer.
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(2) Acceptance by performance requires that at least part of what the offer
requests must be performed or tendered 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.
Rest. §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. Except as stated in §69, the rendering of a performance does not constitute an
acceptance if w/in 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.
Rest. §54 Acceptance by Performance; Necessity of Notification to
1. Where the offer invites an offeree to accept by rendering a performance, no
notification is necessary to make such an acceptance effective unless the offer
requests such a notification.
2. If an offeree who accepts by rendering a performance has reason to know that
the offeror has no adequate means of learning of the performance w/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 w/in a reasonable time; or
(c) The offer indicates that notification of acceptance is not required.
§56 Acceptance by Promise; necessity of Notification to Offeror
Except as stated in §69 or where the offer manifests a contrary intention, it is
essential to an acceptance by promise either that the offeree exercise reasonable
diligence to notify the offeror of acceptance or that the offeror receive the
acceptance seasonably.
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Content of Acceptance
§58 Necessity of Acceptance Complying with Terms of Offer
An acceptance must comply w/the requirements of the offer as to the promise to
be made or the performance to be rendered.
§60 Acceptance of Offer Which States Place, Time or Manner of
If an offer prescribes the place, time or manner of acceptance its terms in this
respect must be complied with in order to create a contract. If an offer merely
suggests a permitted place, time or manner of acceptance, another method of
acceptance is not precluded.
*Jom, Inc. v. Adell Plastics, 193 F.3d 47 (204)
Plaintiff had to replace over one million chips due to defects attributable to their
chemical composition. Defendant was unable to correct its defective resin.
Plaintiff resorted to another supplier, sued for breach of contract and other
claims, and was awarded significant compensatory damages.
Step-saver Data Systems v. Wyse Technology, 939 F.2d 91 (213)
The court observed, appellee’s software producer demonstrated a willingness to
supply additional orders. Consequently, the disclaimer of warranty in the license
did not constitute a conditional acceptance by appellant of its terms, irrespective
of the repeated mailings of the license. The court held that it was error for
appellant’s warranty claims to be dismissed, and that no evidence demonstrated
any intentional misrepresentation by appellees on issues of software or hardware
Rich Hill and Enza Hill v. Gateway 2000, 105 F.3d 1147 (223)
The court stated that a contract did not have to be read in order for it to become
effective and that the terms inside a box of software were binding on a consumer
who subsequently used it.
Revocation of Offer Prior to Acceptance
§42 Revocation by Communication by the Offeror Received by the
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.
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§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 info to that effect.
Dickinson v. Dodds, 2 Ch. D. 463 (227)
Court held that  was not entitled to specific performance and likewise not
entitled to restrain conveyance of the property or to impress a trust upon the
property if it had already been conveyed. Despite assuring  that the offer to sell
would be open until Friday at 9:00,  was free to revoke at any time prior to the
s acceptance. A promise to hold an offer open is not binding and can always be
withdrawn on notice to the offeree.
State of Washington v. Wheeler, 95 Wash. 2d 799, 631 P.2d 376 (231)
The court held that where defendant failed to detrimentally rely on the plea in
any manner except psychologically. The prosecution could revoke the plea
proposal. The court also held that although the admission of the hearsay
statements by a police officer was an error, it was a harmless error because the
testimony involved prior intent or motive which were not elements of the assault
Holland v. Earl Graves Publishing, 46 F.Supp.2d 681 (235)
The court granted the employee's renewed motion for summary judgment on the
breach of contract claim and held that the compensation agreement was a
unilateral offer that the employee would receive a bonus if her net revenue
exceeded her revenue goal. Therefore, once the employee began substantially
performing, the employer's offer could not be modified without the employee's
consent. The evidence showed that the goal was changed without the employee's
assent. Thus, as a matter of law, the employer breached the compensation
Drennan v. Star Paving Co., 51 Cal. 2d 409, 333 P.2d 757 (241)
The court affirmed the award of damages to plaintiff, since the loss resulting from
any mistake fell upon the party who caused it. Plaintiff had no reason to believe
that defendant's bid was in error and plaintiff was entitled to rely upon it.
Complicating Assent: Indefinite Agreements
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George Varney v. Isaac Ditmars, 217 N.Y. 223, 111 N.E. 822 (254)
The court held that the contract, so far as it related to a share of the employer's
profits, was not only uncertain but it was necessarily affected by so many other
facts that were in themselves indefinite and uncertain that the intention of the
parties was pure conjecture. The court held that the employee was entitled to
recover only the difference between the amount he was paid and the actual value
of his work, if the value was above the amount paid, for work actually performed.
As a general proposition:
*If somebody drafts something and puts it on paper, and there is an
ambiguity/misunderstanding, you have to determine who gets the benefit of the
doubt draftee/offeree of the document.
Rest. § 30
Unilateral Contract: Promise for performance. “I promise to sell you my book
if you pay me $100.” If response is: “I will pay you $100” is not acceptance of the
money. Payment of the money is establishing of the contract.
Bilateral Contract: Promise for a promise. “I promise to sell you my book if
you promise to pay me $100 dollars.” If you promise also, then I sell my book to
someone else, I am in breach. Contract is established at the agreement of
Uniform Commercial Code
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 a 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 the sale of goods does
not fail for indefiniteness if the parties have intended to make a k and there is
a reasonably certain basis for giving an appropriate remedy
§ 2-205
An offer can be irrevocable in the absence of consideration – it is called a “firm
offer” – as long as the offeror is a merchant, the transaction concerns the sale of
goods, and the assurance not to revoke is embodied in a “signed writing.”
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Note: the maximum length of a “firm offer” is three months. When the
option expires, the offer isn’t automatically revoked, but the offeror gets the
right to revoke the offer.
UCC §2-206 Offer and Acceptance in Formation of Contract
(1) Unless otherwise unambiguously indicated by the language or circumstances
(a)an offer to make a contract shall be construed as inviting acceptance in any
Manner and by any medium reasonable in the circumstances;
(b) an order or other offer to buy goods for prompt or current shipment shall
be construed as inviting acceptance either by prompt promise to ship or by
the prompt or current shipment of conforming or non-conforming goods, but
such a shipment of non-conforming goods does not constitute an acceptance if
the seller seasonably 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 reasonable mode of
acceptance an offeror who is not notified of acceptance within a reasonable time
may treat the offer as having lapsed before the acceptance.
§2-207: Additional Terms in Acceptance or Confirmation
 Title should make clear why it is the first case for today is assigned,
and why assigned w/in the context of acceptance
 Purpose: additional terms to offer/acceptance; rejects the mirror
image rule.
o Mirror-Image Rule (common law rule): In an offer, it
calls for X, Y, Z and 1, 2, 3. In order for the offeree to accept
this offer, according to the mirror image rule, X,Y,Z,1,2,3 must
be included in the acceptance.
o If the acceptance included X, Z, A, 2, 4, 7, this is a counter-offer,
which rejects the original offer, and have extended an offer to be
accepted by offeror/counter-offeree. If we are not bound by
common law mirror-image rule, we need to ask whether the
changes are material (and if so, purported acceptance is
counter-offer; if they are immaterial, it is acceptance)
o If offeror is master/mistress of offer, the acceptance should
comport w/what the offeror had in mind.
2-207 §1:
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 If an offeree accepts an offer w/in a reasonable amount of time, and it
includes additional or different terms, the parties have a contract if
terms are expressly conditional
2-206 §2 (default rule that kicks in where you are dealing
 Additional terms are proposals for contractual additions, where the
terms between merchants become part of the contract unless
o The offer expressly limits acceptance to the terms of the offer
(offeror remains master of the offer and does not allow changes
to the offer)—if what is written on the offer is not subject to
change/modification, it must be stated that way.
o They materially alter it
o Notification of objection to them has already been given or is
given within a reasonable time after notice of them is received.
 Note: if the offeror specifically limits the acceptance to certain
means, the acceptance is not valid if transmitted any other way.
2-206 §3
 If both parties act like there’s a contract, there’s a contract. In that
case, the original terms of the agreement, X,Z,2 would definitely
become part of the contract, and the rest must be determined under
the entire UCC (which rules would we use to determine if Y,A,1,3,4,7
would fit)
o Are they merchants?
o Are the terms material?
o Do the material terms alter the contract, etc.?
o Every statement of relevance must be followed by a “because”
statement. I.e.: this statement (Y, A) is irrelevant because…
UCC Gap-fillers: there is no real good way for a court to figure out which to
choose (you pay to get it on the boat v. I pay to get it on the boat), so the UCC
The Consideration Doctrine
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--Is characterized as a “bargained for exchange” with three elements: the
promisee must suffer a legal detriment; the detriment must induce
the promise; the promise must induce the detriment.
Application of the Consideration Doctrine and Corollary Rules
*Langer v. Superior Steel Corporation, 161 A.571 (277)
Defendant company promised to pay plaintiff employee $ 100 per month for the
rest of his life after his retirement if he agreed to not work in any competitive
occupation. Court held that there was good consideration to form a contract
between the parties in that plaintiff employee refrained from seeking other
employment with any competitive company. By accepting the monthly payment,
plaintiff employee accepted the conditions imposed by defendant company and
thus was restrained from doing something he had a right to do. This was
sufficient consideration to support the contract.
Corollary Rules:
Rule 1: Courts Will Not Look Into the Adequacy of Consideration
-But will consider where:
1. one party is unusually vulnerable
2. where the inequality of bargaining power is unusually great
3. where the contract includes a term that the court views as
conflicting with some public policy or as unusually one-sided
*Hamer v. Sidway, 124 N.Y. 538, 27 N.E. 256 (281)
The court held that a promise to forbear or abandon a legal right in return for
another's promise was sufficient consideration to support the contract. Here,
plaintiff abandoned his legal right to use tobacco in exchange for his uncle's
promise to pay him a sum of money; therefore, there was sufficient consideration
to enforce the contract.
Rule 2: Nominal Consideration Is Not Sufficient
Nominal Consideration—the mere naming of something as “consideration” will
not make it consideration (a big disparity b/w the things being exchanged, you
can’t exchange a dollar for $100,000. The parties merely recited the dollar to
satisfy consideration)
In re Greene, 45 F.2d 428 (292)
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The debtor, who was married, had intimate relations with the mistress for several
years. The mistress claimed that under a written agreement, the debtor promised
to pay her $ 1,000 a month during their joint lives, to assign her a life insurance
policy on his life, and to pay her rent on an apartment she leased. The court
found that the agreement was invalid for lack of consideration because past illicit
intercourse was not sufficient consideration. There was no consideration for the
debtor's promises beyond past cohabitation. The $ 1 paid by the mistress was
nominal and could not support an executory promise to pay hundreds of
thousands of dollars.
o 5 points of consideration (she claims):
1.) $1 consideration recited in the paper is nominal. It cannot seriously be
urged that $1, recited but not even shown to have been paid, will support
an executory promise to pay hundreds of thousands of dollars.
2.) “Other good and valuable consideration” are generalities that
sound plausible, but the words cannot serve as consideration where the
facts show that nothing good or valuable was actually given at the time
the contract was made.
3.) The release of claims furnishes the necessary consideration. No
vestige of any lawful claim that the claimant had any claims to release.
Release from imaginary claims is not valuable consideration for a
promise. Although he might have promised to marry her, it cannot be
considered lawful consideration, since he was still married. There is no
merit to the release of claims, because she didn’t give up anything she
had a legal right to pursue. In an overall context, where the policy is to
encourage marriage (if this particular couple is on the verge of divorce,
we would rather them reconcile than divorce). We would not work
against the institution of marriage.
4.) The claimant also urges that by the agreement the bankrupt obtained
immunity from liability for taxes and other charges on the Long
Island home. The fact is that he was never chargeable for these expenses
because the payments he had already made were either gratuitous or
were the contemporaneous price of the continuance of his illicit
intercourse w/the claimant.
5.) It is said that the parties intended to make a valid agreement. It is a
non sequitur to say that therefore the agreement is valid. A promise like
this, even with a formal document writing it out, is not a legally
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enforceable contract. The intent of the parties is not dispositive under
these circumstances.
6.) The seal—provides presumptive evidence of the contract that is
rebuttable. The seal is not supposed to be interpreted as evidence of an
enforceable agreement. The seal would have been decisive in the
claimant’s favor a hundred years ago.
2 Kinds of Presumption:
i. If it’s an irrebuttable presumption, there is no way
to disprove the presumption after it is established,
there’s no amount of evidence you can submit to
refute the conclusion that it could be an enforceable
ii. If it’s rebuttable—the seal acts as presumptive
evidence that the presumption is enforceable. Can
be knocked down by evidence proffered by the other
Rule 3: Illusory Promises and Mutuality of Obligation (§77 Rest.)
(“Provided that the requirements of consideration are met there is no
further obligation to meet mutuality of obligation.” )
Agnes Masewski v. John Piskadlo, 318 So.2d 226 (300)
Appellee deeded his fee simple title to appellant reserving a life estate. When
appellant attempted to leave the premises, the parties reunited and made an
agreement in writing that neither had the right to dispossess the other from the
premises, but either of the parties could leave if desired. Appellant brought an
action to enforce written agreement. The court held that the written agreement
was unenforceable for lack of mutuality of obligation. There was no
consideration to support the exchange of promises not to dispossess one another
because while appellee gave up the right to dispossess appellant, appellant could
not have dispossessed appellee b/c he was a life tenant. Also, appellant could not
use parole evidence of consideration, her promise not to leave when she could
have left, when such parole evidence was in conflict with the written contract
where she had expressly reserved the right to leave at any time.
Illusory: If you didn’t have the right before it all started, writing it down is not
going to give you this right.
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Parol evidence rule – whenever contractual intent is sought to be ascertained
from among several expressions of agreement by the parties, and earlier tentative
agreement will be rejected in favor of a later expression that is final.
Lawrence v. Ingham County Health Dept., 160 Mich. App. 420, 408
N.W.2d 461 (304)
The parents' assertion of an implied in fact contract failed for lack of
consideration. A promise by the parents to follow the instructions given by the
clinic along with the clinics promise to provide prenatal care was insufficient to
establish an implied in fact contract. The lack of mutuality of obligation
translated into a lack of consideration. The promise to follow the advice of the
clinic was not a legally enforceable promise and could not provide consideration
for an implied contract.
Rule 4: Pre-existing Duty Rule
--if you have a legal duty to do something, that legal duty cannot serve as
consideration to render an enforceable contract.
Angela White v. Village of Homewood, 256 Ill. App. 3d 354, 628 N.E.2d
616 (318)
 Took a physical agility test to become a firefighter/paramedic with  village’s
fire dept. She injured herself when she fell and sustained injuries. She brought a
negligence action, which was dismissed b/c it had been barred by an exculpatory
agreement signed by. The court reversed upon appeal b/c  had a pre-existing
duty to administer the agility test, and  had a legal right to participate. The
agreement also violated public policy b/c the disparity in bargaining power was
such that  that the agreement had not represented s free choice. Finally, b/c
the relationship b/w employer and employee, public policy would not permit  to
contract w/ to relieve  from liability for injuries caused by s negligence.
Promissory estoppel: a promise which the promisor should reasonably expect
to induce action or forbearance of a definite and substantial character on the part
of the promisee and which does induce such action or forbearance is binding if
injustice can be avoided only by enforcement of the promise. Rests upon a
promise to do something in the future.
Equitable estoppel: rests upon a statement of a present fact.
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Mutuality of Obligation v. Consideration
o Problem arises with inexact use of language. Don’t talk of meeting of
minds or mutuality of consideration has been met. Example: Hamer
v. Sidwell (older consideration cases talk about mutuality. Is there a
bargain for Exchange if there is no need to talk about mutuality?
Romack v. Public Service Co. of Indiana, 499 N.E.2d 768 (324)
The employee accepted a job from the employer after he received oral assurances
that he would have permanent employment. Upon his termination,  sued, and
court held that the employee was at will because oral assurances of permanent
employment were insufficient to establish a contract for permanent employment
where the period was not for a definite or fixed duration, and he could have quit
at any time, (3) relocation was not valuable consideration in exchange for the
promise of permanent employment, (4) the employee failed to present evidence
that he was fired for exercising a statutorily conferred right, (5) claims of fraud
and negligent misrepresentation did not apply to future promises, and (6) the
employee was not entitled to due process protection in the absence of a protected
property interest.
At-Will Employment
Rule: At-will employees can be terminated for any reason at any time, regardless
of good or bad cause, or no cause at all, unless a contract is present.
Rebuttals for this rule:
--If there is existence of consideration; if the individual is leaving permanent
employment for another “permanent” position, but has special skills to offer,
accepts the position based on his reliance on the job security (Romack);
--Unions: if you’re subject to the jurisdiction of the labor union board, you
cannot be fired for your union activity. These employees are not fully “at-will”,
since there is something to prevent the employer from firing w/o cause.
--Handbook policies, though employers do not have to give handbooks
Romack Rule (a person is considered an “at-will” employee unless):
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The employee is uniquely qualified for the position by virtue of his training and
the highly specialized nature of the employment; the employee left lifetime
employment to take his present employment; the employee was recruited by the
employer to fill a position uniquely requiring a person who possessed the
employee’s skills and abilities; the employee advised the employer that he would
leave his existing job only if the new job offered the same permanency of
Advancement and benefits
Upon that basis, the employee was told by the employer that he would have
permanent employment if he accepted the offer.
Covenants Not to Compete
*Richard Freeman v. Duluth Clinic, 334 N.W.2d 626 (337)
There was no adequate consideration for the covenant not to compete as the
second employment agreement was not merely a modification of the existing
contract, and there was no distinction between those who signed the second
agreement and those, like the doctor, who did not. They each received the same
benefits regardless of whether they had signed.
§ 186 Promise in Restraint of Trade
1. A promise is unenforceable on grounds of public policy if it is unreasonably in
restraint of trade.
2. A promise is I restraint of trade if its performance would limit competition in
any business or restrict the promisor in the exercise of a gainful occupation.
Promises Made in Recognition of Past Benefits
Mills v. Wyman, 20 Mass. 207 (341)
Plaintiff provided board, nursing, and care to defendant's adult son for a two
week period after he returned from a voyage at sea poor, in distress, and sick.
After plaintiff had finished caring for defendant's son, defendant wrote a letter
promising to pay plaintiff for his expenses. When defendant did not pay as he
promised, plaintiff sued. Plaintiff's complaint was dismissed for lack of
consideration. The kindness and services provided for defendant's son were not
bestowed at defendant's request, and defendant was not legally obligated to
support his son in any way.
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Joe Webb v. Floyd McGowin, 168 So. 196 (344)
The plaintiff was permanently injured while saving the promisor's life. The
promisor agreed to pay plaintiff a monetary amount every two weeks during the
remainder of plaintiff's life. The promisor complied with this agreement up to the
time of his death. Court held that the contract was enforceable because the injury
to the plaintiff was sufficient legal consideration for the promisor's agreement to
Promissory estoppel as a consideration substitute (for contract): substituting
[reasonable & foreseeable reliance] with [consideration] from first situation.
3 Requirements for Promissory Estoppel:
1. Promise must be as definite as what’s required by a contract
2. Promise must be less definite…
3. Promise must be more definite…
--in order to be considered for promissory
For (B) REMEDY, do not substitute because the reliance was induced by the
promisor. Remedy would be equal to that which the relying party would have
received had the promise not been broken.
Conditions where PE emerged:
 promises in the family
 promises to make a gift of land
 gratuitous agencies and bailments
 charitable subscription and marriage settlements
 Cases where the obligor promises not to plead the statute of limitation or
gratuitous licenses for use of real property.
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Allegheny College v. Nat’l Chautaugqua County. Bank, 246 N.Y. 369
The decedent promised to give plaintiff college a charitable subscription 30 days
after her death and with the condition that the scholarship established with the
subscription be named in her honor. She donated $ 1,000 prior to her death. The
court concluded that the duty assumed by plaintiff to perpetuate the name of
decedent by naming the scholarship in her honor when it accepted part of the
donation was sufficient consideration to make the charitable subscription
promise legally enforceable.
Q: What is the significance of § 17 of Restatement?
A: Subsection 1 discusses “classical contract”; subsection 2 discusses “nontraditional theory of contract”
§ 17 another way to get end result of attaching liability to a promise. May take the
form of paying somebody for relying on a promise made in a way that the
promissory intended to induce upon the promisee.
Contemporary Applications of Promissory Estoppel/ Reasonable
§ 90 of Restatement:
Sub-section 1:
1. a promise which the promisor should reasonably expect to induce action
or forbearance on the part of the promisee or a third person
2. and which does induce such action or forbearance
…is binding if injustice can be avoided only by
enforcement of the promise.
In breach of contract: the prevailing party may recover compensatory damages,
and punitive damages, but punitive damages may only be recovered if the
manner in which they chose to breach the conduct could stand alone as its own
claim (tort of fraud).
Sub-section 2:
1. A charitable subscription or a marriage settlement is binding under
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Subsection 1 w/o proof that the promise induced action or forbearance.
-had this subsection been in effect, Justice Cardozo would not have had to
go through his entire rationalization process in Allegheny College.
--there are certain aspects of charitable subscriptions that could be enforceable
(law is trying to make people abide by the terms of their pledge).—that’s the way
they do business and run successful pledge drives.
Why should you be able to not show reliance but still have that contract be
--in marriage contract: the law would provide an “exception to the exception”
because the contract is based on emotions, and one can’t be expected to operate
in a clear-headed way. There is something different w/marriage where the law is
considerate of people's feelings.
A promises B $5000 (to buy land). The buying of the land (or the beginning of
the performance) is when the contract becomes binding.
Promissory Estoppel: legal term of art for the “doctrine”; talks about how
reliance is operated (the whole statement found in subsection 1 of § 90)
Reliance: part of promissory estoppel; always an issue
 Remedy: if reliance is used as a consideration substitute you want the
remedy to be to enforce the promise.
 Promissory estoppel is freestanding alone as a remedy
Example: If A says “I’ll sell you my book for $5”, and B gets another book—B
doesn’t need 2 books (consideration would only get the book); A would be
entitled to amount of money she would have saved had she not relied on the
promise. Say the book had to be sent via FedEx to B, and it cost $25; promissory
estoppel standing alone would give A the $25 plus the money for the book.
If A says: I promise to give you $5000 if you promise to buy the house: contract
is formed when B promises to buy the house. “Promise for a promise” (no
reliance needed because the return promise constitutes the contract). (Bilateral
If A says: I promise to give you $5000 if you buy a house: contract is forced
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when B buys the house. (Unilateral contract).
*Joseph Hoffman v. Red Owl Stores, 26 Wis.2d 683, 133 N.W.2d 267 (388)
The court concluded that injustice would result if plaintiffs were not granted
some relief where defendants failed to keep their promises, which had induced
plaintiffs to act to their detriment.
Expends: signals “reliance”
*If no intent to communicate false or misleading information: may only recover
the amount of losses. (This was a mistake)
*If intent to communicate: may recover for more because the “erroneous
behavior” was deliberate. Then, punitive damages may result. (This was a lie)
Violet Neiss v. Kenneth Ehlers, 899 P.2d 700, 135 Or. App. 218 (405)
Pursuant to an agreement between the optician and the doctor and his wife, the
optician left her employment to work in the optical business opened by the doctor
and his wife. Among other things, the agreement conferred one-third interest on
the optician after a year in consideration of her skills. The optician left after
working for two years when the parties unsuccessfully attempted to negotiate a
new agreement. The optician claimed that she was entitled under the doctrine of
promissory estoppel, to some relief in connection with the ownership provisions
of the initial agreement.
Abbington v. Dayton Malleable, 561 F. Supp. 1290 (414)
In this case, plaintiffs' contractual claim of promissory estoppel is based upon
oral statements made during the tent meeting concerning efforts to modernize
and keep the Foundry open and the employee responses to these representations.
At the outset, there are a number of difficulties with plaintiffs' promissory
estoppel argument. It is by no means clear that a claim of promissory estoppel
based on oral [**20] representations is cognizable when the parties have
executed a formal contract which addresses the precise matters which are the
subject of those oral representations.
The doctrine of promissory estoppel recognizes the possibility of the
formation of a contract by action or forbearance on the part of a second
party, based upon a promise made by the first party under circumstances
where the actions or forbearance of the second party should reasonably
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have been expected to produce the detrimental results to the second
party which they did produce. Restatement (Second) of Contracts § 90
(1932) states:
A promise which the promisor should reasonably expect to induce action
or forbearance of a definite and substantial character on the part of the
promisee and which does not induce such action or forbearance is
binding if injustice can be avoided only by enforcement of the promise.
This case differs from Dickenson v. Dodd because we didn’t have reliance or
evidence of reliance in Dickenson. When B began making the improvements,
that was enough to prove reliance, and render a promise irrevocable at least for
the amount of time stated.
Hopkins Case: example of promise being less definite
Hoffman/Neiss (as definite) Case: somewhat of an example of as definite and
less definite (dependent on the jurisdiction)
Addington Case: example of more definite
Section 90, Comment B: Character of reliance protected
P. 1177: Illustration 2: why wouldn’t as promise to B be consideration?
No quid pro quo—as promise to B is a gratuitous promise. A can revoke the
promise at any time and not be legally liable.
The improvements on the land are evidence of reliance (foreseeable and
reasonable), under these facts, B’s conduct is not so out of the ordinary to catch A
by surprise.
You don’t have to suffer great losses in order for a person to prove that they
--A person is always entitled to one of two things for breach:
1. enforcement of the original promise (consideration substitute)
2. the amount that you are out of pocket (independent cause of action;
reliance cost)
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Reliance: Action or Forbearance on the Part of the Promisee
Alden v. Presley, 637 S.W.2d 862(427)
Court ruled that plaintiff had failed to prove the detrimental reliance and
resultant loss, which were necessary to promissory estoppel. Plaintiff showed that
decedent's promise had induced her to incur a $ 39,587 mortgage as part of a
divorce settlement agreement, but the agreement was not binding on her or her
husband until approved by the divorce court. Defendant denied liability for
decedent's gratuitous promise to pay the mortgage before the agreement received
court approval. This removed the element of detrimental reliance from the case.
General Aviation v. Cessna Aircraft, 915 f.2d 1038 (432)
Summary judgment in favor of manufacturer for breach of contract was proper
because an obligation of good faith could not be employed, in interpreting a
contract, to override express contract terms.
Note: A gift that is executed is not effected by the death of the person giving the
gift. But, if someone promises to give a gift and then they die, the estate is not
liable for the remainder of the gift. Serves as an offer that is unaccepted.
--more equitable uses of promissory estoppel.
--the facts of these cases don’t fall within general framework for promissory
RESTITUTION: put in same position they would have occupied if the contract
had not been broken.
-the fact that there wasn’t a contract does not enable the person to look to the
PROMISE→to enforce:
1. Put it in writing (though oral promises can be contracts)/Statute of
Frauds (absolute defense)
Farash v. Sykes Datatronics, 59 N.Y.2d 500, 452 N.E.2d 1245 (437)
Plaintiff's cause of action to enforce an oral lease for a term longer than one year
was barred by the statute of frauds. The cause of action was premised on the
theory that the parties contracted by exchanging promises that plaintiff would
have performed certain work in his building and defendant would have entered
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into a lease for a term longer than one year was also subject to the statute of
A person may not sue for enforcement for 6 categories of promises unless the
agreement upon which such action shall be brought, r some memorandum or
note thereof, shall be in writing, and signed by the party to be charged therewith.
These categories are:
1. a promise of an executor or administrator to answer for the debt of his
2. a promise to answer for the debt of another;
3. an agreement made in consideration of marriage;
4. a contract for the sale of an interest in land;
5. any agreement that is not to be performed w/in one year from the making
thereof; and
6. An agreement for the sale of goods for a price of more than ten pounds
Kinoshita v. Canadian Pacific Airlines, 68 Hav. 594, 724 P.2d 110 (447)
A question was certified by the court of appeals regarding whether the employer's
employee rules constituted a contract enforceable by the employees. The court
held that inasmuch as the employer circulated the rules w/an intention to create
expectations and induce reliance by the employees as a group, it should not be
able to escape liability on the ground that a particular employee was unaware of
the rules and thus did not receive a promise.
Review of Bases of Liability in Contract and Restitution
Van Brunt v. Rauschenburg
-Pay Van Brunt’s living expenses
-reimburse business expenses incurred by Van Brunt on behalf of Raushenberg
-annually supply Van Brunt w/two drawings and two paintings destined for
exhibition from each of the series of works that Rauschenberg and Van Brunt
worked on
-provide Van Brunt w/one of each edition and two of each multiple or poster that
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Raushenberg and Van Brunt worked on together
-pay Van Brunt’s income taxes
-transfer to Van Brunt the property on Captiva Island known as the “Fish House”
1. Consideration for these promises was evident since the relationship
between Van Brunt and Rauschenberg did not involve an illicit sexual
relationship, and the services provided were they type that are considered
gratuitous, as stated in the law of New York.]
In consideration for the six promises that R made to V, V promised to
devote his life, personally and professionally, to R, and to perform duties
including coordinating exhibitions and providing administrative services.
However, since some of the promises were made on past consideration,
they cannot be valid. The promise to give V the “Fish House” could not be
considered since the conveyance of real property must be in writing to be
2. Yes, the unjust enrichment claim will give V some relief. In order to
maintain a COA for this, they  must show that a) the  has been enriched;
b) the enrichment was at the s expense; and c) s retention of the benefit
would be unjust. R used Vs photographs, audiotapes, and videotapes for
his art work, and made a lot of money from them. V was never
compensated for the use of this property, but continued to provide R with
them because he thought that he would be, based on the promise.
Therefore, R was seriously enriched by V holding up his end of the bargain
by providing R with the materials to make a lot of money, and by V not
getting anything in return, it would be considered to be “at his expense.”
Additionally, by R never compensating V for the use of his materials, nor
holding up his end of the bargain, Rs retention of the benefit would be
3. In order to satisfy a claim for promissory estoppel, there must be a) a clear
and unambiguous promise; b) reasonable and foreseeable reliance by the
party to whom the promise is made; and c) an injury sustained by the party
asserting the estoppel by reason of his reliance. V performed in this case by
continuing to provide R with sculptures, photographs, drawings, paintings,
etc. in return for the promises that R had made to him, such as paying his
living and business expenses and paying his income taxes. Therefore, there
was a clear and unambiguous promise made, and it was reasonable for V to
rely on the promises made by R. Because R did not uphold his end of the
bargain, there was injury sustained by V because of his reliance.
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--in identifying the consideration, V promised to give his professional and
personal dedication to the employer
-who is bringing a defense. All defenses deal with illegality and public policy.
Cannot enforce solely on the contract being against public policy.
In re Baby M, 217 N.J. Super. 313, 525 A.2d 1128 (465)
The surrogate-parenting agreement was a valid and enforceable contract
pursuant to the laws of New Jersey. The rights of the parties to contract were
constitutionally protected under U.S. Const. amend. XIV. The court further found
that defendant mother had breached her contract in two ways: (1) by failing to
surrender the child to plaintiffs, (2) by failing to renounce her parental rights to
the child. The court found the child was a third-party beneficiary of the contract
and specific performance was in her best interests.
In re Baby M, 109 N.J. 396, 537 A.2d 1227 (482)
The court reversed the order that terminated defendant surrogate mother's
parental rights, restored her as the mother of the child, and invalidated the
surrogacy contract entered into between plaintiff father and defendant. The court
ruled that the contract was invalid as a matter of law, because it violated statute
and was against public policy. The court ruled that no one can contractually
abandon one's parental rights.
Consideration: her womb
A.C. v. C.B., 113 N.M. 581, 829 P.2d 660 (500)
The court found that petitioner, who alleged a co-parenting agreement and an
agreement settling claims of timesharing and custody, stated a prima facie case
for relief. If proved, it would justify setting aside the dismissal and authorize
consideration of her right to continue her relationship with the child. Evidence of
petitioner's sexual orientation, standing alone, was not a permissible basis for the
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denial of shared custody or visitation of a minor child.
DeMuth v. Miller, 652 A.2d 891 (505)
The court held that the continued relationship b/w the parties created the
inference that the parties assented to another contract for a term of the same
length and same conditions. Thus, appellant breached the contract by soliciting
clients The court held that discrimination based on sexual orientation was not
actionable under any PA statue or its constitution nor did it violate U.S. Const.
amend. XIV.
Rest. Chap. 2 (p. 1096) §§12, 14, 15, 15
§12: Capacity to Contract; ability to enter into voidable contracts
--a natural person who manifests assent to a transaction has full legal
capacity to incur contractual duties thereby unless he is under guardianship, an
infant, or mentally ill or defective, or intoxicated.
James Halbman, Jr. v. Michael Lemke
Issue: whether a minor who disaffirms a contract for the purchase of a vehicle
which is not a necessity must take restitution to the vendor for damage sustained
by the vehicle prior to the time the contract was disaffirmed.
The other party that entered into the contract knew exactly how old the person
was and that he was a minor. Therefore the minor lacked capacity to contract
based on the infant doctrine.
If the vendor of the car had wanted the contract to be binding, he would have had
to contract with the guardians.
Brooke Shields v. Garry Gross
Attempted disaffirmance based on Shield’s age, was not successful because the
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parent consented. Her mother was then responsible, and could not hide behind
Shield’s status as a minor.
Mental Incapacity
Shoals Ford v. Maxine Clardy
Rest. §§174-177 [173]
§174: When Duress by Physical Compulsion Prevents Formation of a Contract;
when the person under duress didn’t intend to sign the contract prior to the
actions of duress.
§175: When Duress by Threat Makes a Contract Voidable;
Difference between 174 and 175: 174 involves physical compulsion
Trane Co. v. Lorna Bond: creates temptation to allow all battered women
The Life of Nate Shaw: a lot of times it’s not necessary to have co-signer, but
sometimes it was used as a means to control people. Sharecropping came after
slavery, emancipation, reconstruction. Before that, ability to control family was
restricted. Post-emancipation one of the ways slaves asserted their new freedom
was to redirect their family (reasserting control over wife and children).
Sosnoff v. Carter: shows aspect of economic duress. A fundamental
requirement for the individual seeking economic duress was for the other person
to cause the economic stress.
a contract entered as a consequence of “undue” persuasion of one party by the
other is voidable by the victim.
 Often applied in situations where the person exerting influence was in one
of several recognized categories of authority or control.
 In situations of presumptive undue influence
o A person promises to bestow an inheritance on his or her lover.
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Nancy Ferguson v. John F. Jeanes: Ferguson and Jeanes had a
partnership. Ferguson was Jeanes spiritual advisor, and lover. The partnership
followed Ferguson’s search for an apartment, and Jeanes convincing her that she
should let him in as partner, which she did based on her affection for him and
because he was her spiritual guide. The court held that a partnership agreement
is a proper remedy where the partnership is created through undue influence.
 Fact
§159: Misrepresentation, Duress and Undue Influence, a
misrepresentation is an assertion that is not in accord with the facts.
§160: When Action is Equivalent to an Assertion (Concealment),
action intended or known to be likely to prevent another from learning a fact is
equivalent to an assertion that the fact does not exist.
§161: (see below)
§162: Fraudulent and Material Misrepresentation
§163: When a Misrepresentation Prevents Formation Of A Contract
(VOID), when dealing w/an essential term or material fact
§164: When a Misrepresentation Makes a Contract VOIDABLE (see
Speaks also to the effect of misrepresentation b/w two people; or by one person
to another concerning a third party.
§167: When a Misrepresentation is an Inducing Cause:
 Opinion
§168: Reliance on Assertions of Opinion: distinguished from preceding
sections because it is facts v. opinion. Only in circumstances where assertion
of opinion makes reliance on that opinion reasonable; fiduciary responsibilities
§169: when reliance on assertion of opinion is not acceptable
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 Intent
§171: When Reliance on an Assertion of Intention is Not Justified, at
the time you made the representation, your intent was consistent with what you
Note: mutual assent (offer and acceptance) + consideration = enforceable k
If misrepresentation happens in the offer, and the contract is determined to be
void, it’s as if there were no acceptance (void); if there was some conflict as to
mode of acceptance, but there is remedy available, or it’s not as serious of a
problem, it’s voidable by the adverse person that was affected by the missing
element. The party it affects has the discretion to elect to abide by the contract or
not. Void means neither party may enforce the k.
 Makes a contract voidable (or void) if it was entered as a consequence of
 May also be the basis for an action in breach of contract, fraud, etc.
 Emphasizes the effect of the misrepresentation on the victim as well as the
blameworthiness of the speaker.
 Important aspect that victim did not consent to the exchange w/full and
accurate information.
 Applies “reasonable person standard” where speaker did not know that he
was offering a misrepresentation, if the reasonable person would have
consented to the exchange.
 The person cannot rely on mere statements of opinion
Audrey Vokes v. Arthur Murray, Inc.: Dance studio owner talked  into
buying $30,000+ hours of dance instruction based on the falsity that she would
be a professional dancer, lifetime member of the dance studio, and be able to
practice her dance in various countries. The court held that, while opinions
(telling her she was a beautiful/poised/graceful/successful dancer) were
generally not considered misrepresentations and therefore be actionable, except
 There is a fiduciary relationship b/w the parties
 Where there has been some artifice or trick employed by the representor,
 Where the parties do not in general deal at “arm’s length”
 Where the representee does not have equal opportunity to become apprised of
the truth or falsity of the fact represented
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Also, where a party has superior knowledge, it may be regarded as a statement of
fact although it would be considered as opinion if the parties were dealing on
equal terms.
--In a contract, a party to a transaction owes no duty to disclose facts w/in his
knowledge or to answer inquiries respecting such facts, but if he undertakes to do
so, he must disclose the whole truth.
Skyfox Corporation v. Boeing Company: parties entered into a contract
providing that Boeing would sell the aircraft manufactured by Skyfox
Corporation with a royalty of $150,000/aircraft. Boeing sold none in two years
and terminated the agreement. Skyfox alleged misrepresentation in Boeings
stated ability to sell 450 aircraft, and their agreeing to invest millions of dollars
into the project. Boeing also had a patent licensing agreement, under which
Boeing would pay all taxes and fees associated w/any patent application. The
agreement alleviated Boeing of the obligation to sell, as well as the ability to
terminate the contract. Court dismissed the action for lack of fiduciary
relationship or joint venture between the parties. Contradictions in the licensing
agreement voided the contract. The general rule is that a misrepresentation
must relate to a preexisting or present fact; statements or promises about future
occurrences are not actionable except where evidence establishes that at the
time the promise as to future events was made, the promisor did not intend to
perform the promised action.
Lawrence Kang v. Dewey Harrington: Harrington moved into property
owned by Kang with the agreement that rent would be $400 monthly, and that
Harrington would make specific changes to the property. Harrington, however,
attempted to fraud Kang and his agent by writing the incorrect information on
the lease agreement and “tricking” Kang into signing it, although it was under
terms different than previously agreed upon. The court held that: where it
appears that one party has been guilty of an intentional and deliberate fraud,
by which, to his knowledge, the other party has been misled, or influenced in his
action, he cannot escape the legal consequences of his fraudulent conduct by
saying that the fraud might have been discovered had the party whom he
deceived exercised reasonable diligence and care.
Warren G. Hill and Gloria Hill v. Ora and Barbara Jones: regards the
question of whether a seller of a residence must disclose facts to a buyer
pertaining to past termite infestation. Court applied Rest. § 161 that a vendor
has an affirmative duty to disclose material facts where:
1. disclosure is necessary to prevent a previous assertion from being a
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misrepresentation or from being fraudulent or material;
2. disclosure would correct a mistake of the other party as to a basic assumption
on which that party is making the contract and if nondisclosure amounts to a
failure to act in good faith and in accordance w/reasonable standards of fair
3. disclosure would correct a mistake of the other party as to the contents of
effect of a writing, evidencing or embodying an agreement in whole or in part;
4. The other person is entitled to know the fact because of a relationship of trust
and confidence b/w them.
Rest. § 153: even a unilateral mistake of one party to a transaction may justify
§ 164(1): where a misrepresentation is fraudulent or where a negligent
misrepresentation is one of material fact, the policy of finality rightly gives way to
the policy of promoting honest dealings between the parties.
Caveat emptor: let the buyer beware. This maxim summarizes the rule that a
purchaser must examine, judge, and test for himself.
Courts have previously held that the existence of termite damage and past termite
infestation has been considered by other courts to be sufficiently material to
warrant disclosure. While buyers should have made the connection between the
damages they witnessed and termites, “a matter is material if it is one to which a
reasonable person would attach importance in determining his choice of action in
the transaction in question.”
Jefrey Stambovsy v. Helen Ackley and Ellis Realty: Stambovsy
purchased a house from s without being warned that the house had a reputation
for being haunted. While the court agreed that the real estate broker is under no
duty to disclose to a potential buyer the phantasmal reputation of the premises
and that, in his pursuit of a legal remedy for fraudulent misrepresentation against
the seller,  hasn’t a ghost of a chance, and the court was nevertheless moved by
the spirit of equity to allow the buyer to seek rescission of the contract of sale and
recovery of his down payment. Caveat emptor requires a buyer to act prudently
to assess the premises prior to purchase. Because this buyer did just that, and
that no amount of inspecting would reveal poltergeists, he would be entitled to
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Tends to divide up between two aspects
o Procedural
 The way the contract was made; the language about the absence
of meaningful choice
o Substantive
 Speaks about the terms; whether it shocks the conscience
§2-302 (UCC): If the court as a matter of law finds the contract 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 it may enforce the remainder of the k w/o the unconscionable
clause, or it may so limit the application of any unconscionable clause as to avoid
any unconscionable result.
 §208 (Rest. 2d)
Williams v. Walker-Thomas Furniture: has had relationship with WT for
5 years. She has 7 kids, is a single mother, and is on welfare. If the contract
lacked mutual assent, the contract would be “void” (one of the chief elements of k
formation is missing).
Brooklyn Union Gas. V. Jimeniz
In re Marriage of Gene Gudmundson and Geng Hui
Nez Percé Tribe of Indians v United States: courts may not inquire into
the adequacy of consideration, but may require courts to look at the difference
between what is the market value of something with the value assigned to that
thing in a particular transaction. In this case, says the Indian Claims Court was
wrong in deciding that the amount was wrong.
Ryan v. Weiner: W is a “slum-lord” who took advantage of widowed, elderly,
drunk Ryan by tricking him into signing over his deed when he thought W was
merely giving him a loan to save his house from repossession. W’s actions so
severely “shocked the consciousness” that the court allowed recovery for
unconscionability for substantive only, without procedural.
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 Course of dealing (prior relationships b/w parties)
 General Norms (customs) of Reasonableness or Good Faith
 Trade usage
Trade Practices, Community Norms
Nanakuli Paving and Rock Co. v. Shell Oil Co.: court’s presented with
two plausible interpretations of the contract, and must determine which of the
two makes more sense to enforce.
Fisher v. Congregation Bnai Yitzhok
Best Efforts, Good Faith, and Similar Communal Norms:
 Parties cannot get around good faith and fair dealings, even by attempting
to put terms in the contract to negate the standard.
at all other times.
Wood v. Lucy, Lady Duff Gordon: application of good faith standard;
contract was so one-sided the court determined it would be ridiculous to enforce
it, without looking at the element of good faith on Wood’s part.
Outputs and Requirements Contracts
 Outputs: a seller agrees to sell all he produces of a stated item, for a
stated period of time, to the buyer.
 Requirements: a buyer agrees to buy all he needs of a stated item for a
stated period of time, from the seller.
 As part of a contract are sufficiently vague, so you run the risk of having a
dispute b/w arties if one of the parties requests or provides too much or too
 Fixed price, but amount buyer pays out would be different than
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requested, or seller might get more or less than he expected
 Concreteness
 Comfort level
Duty of good faith: implied term instilled in virtually all contracts.
Atlantic Track v. Perini: output contract dispute; departure in the evidence
of bad faith. Can’t turn an “estimate” into a minimum or maximum. Deviating
from the estimate within a reasonable way means you are still acting in good faith
and are not crossing the line.
Larese v. Creamland Dairies:
Dalton v. ETS: wants the good SAT score, as if there were no comment on his
marked improvement on the tests. Contractual relationship b/w the test taker
and test administrator. Terms of that contract provide remedies: submit
documentation, arbitration; score thrown out and take over; take over and they’ll
pay for it;
Reid v. Key Bank of So Me: honesty in fact under UCC; question whether
judge improperly instructed the jury. Exemplary damages: even if  should have
prevailed, exemplary damages are unavailable because it’s not warranted b/c
there are insufficient facts to support an independent tort.
Interpretive Presumptions and Implied Terms
Rowe v. Montgomery Ward
Was she right to believe that she would have a job for life w/Ward as long as she
met her quota? If there had been a clear employee contract, it would have been a
different story (being an at-will employee); but this was not the case. She was a
commissioned employee who began well before the company instilled “at-will”
employment and handbooks. She did not sign the new policies. If two parties
enter a contract, one party cannot just change the terms of the contract by
Interpretive Presumption: (implied term); we assume that employment is
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at-will. This is the specific presumption used to determine the suit. We then
need to look at oral representations to find terms sufficient to override the terms
of at-will employment. Court said there was not enough for Mary to state that the
at-will employment did not operate under her circumstances.
Frigaliment v. International Sales: what’s chicken? Two options: fresh
young chicken, or chickens including old, tough stewing chickens. If you use the
word “chicken” and you want specifically young fresh chicken, you need to put
qualifiers (adjectives) to specify that, unless it could only be a certain type of
Regional Bank of Colorado v. St. Paul: What is pollution? A number of
provisions in a k, some of them speak to pollution. Carbon monoxide was
leaking from a pier, and company tried to say that it was not included in the k,
therefore should not have to pay up. Court said they’re wrong. Trainer Rule,
not plain meaning (in terms of reasonable policy holder)
Start w/ a contract:
 Under the terms of the contract, is extrinsic evidence always relevant?
o No, words standing alone don’t have meaning
Trainer Rule (California): advanced a contextual analysis of written words that
require you to look outside of the document to determine what the parties
Pacific Gas and Electric Co. v. G.W. Thomas: party wants to indemnify. 
Agreed to perform the work “at its own risk and expense” and to “indemnify” 
“against all loss, damage, expense ad liability resulting from…injury to property,
arising out of or in any way connected w/the performance of this k.” Have to look
at how parties look at “indemnify” according to this k. The use of extrinsic
evidence need not be limited by how you characterize a certain
agreement. You don’t have to say it’s ambiguous to say it’s unenforceable. The
four corners of the document can and should stand on its own should be a
Parol Evidence Rule
Definition: Extrinsic evidence, or evidence outside of the contract
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1. Parties give special authority or significance to a written statement of some
or all of their agreement
2. If people do want to give special significance to a writing, they want the
significance to be either:
a. The writing to be a final statement of the terms stated in the writing,
but not a complete statement of all the terms
b. Or the writing was meant to be both final and complete statement of
all the terms
1. look for writing –if no, then no Parol Evidence Rule issues; if yes, then:
2. integrated, i.e. parties intend to attach special significance to the writing; if
not integrated, then no Parol Evidence Rule issues; if yes, then:
a. partial integration: evidence of prior or contemporaneous
agreements that contradict the writing are inadmissible
b. complete integration: evidence of prior or contemporaneous
agreements are inadmissible
General Exceptions:
1. evidence is admissible to explain a term, even if integrated (when term is
ambiguous); in order to explain a term, first determine that term is
ambiguous (compare PG&E)
2. trade usages or prior dealings (or course of performance b/w parties)is
3. Defenses to the formation and enforcement of the contract
(unconsciounability, duress, fraud, etc.)
Note: parole evidence rule doesn’t apply to agreements made after the writing;
only prior or contemporaneous agreements
Two Problems That Lead to its Complexity:
1. an inherent necessity for certain distinctions
2. The prevalence of a terminology in which the subject cannot possibly be
discussed w/entire accuracy and lucidity.
Betaco, Inc. v. Cessna Aircraft Co.: Parties have a writing; integration
clause. Seems Betaco seems to believe that Cessna by way of a prior rep. has
made a particular warranty as it relates to the airplanes, to the extent that they
read the agreement they signed, but believing the disclaimer of warranty didn’t
apply to them based on a letter they received.
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--we have a writing
--we have a prior writing (letter)
--letter precedes the writing and contradicts the writing
--is a motion for summary judgment appropriate? NO. Genuine issues of
material fact to be solved.
1. writing—yes
2. integrated (had an integration clause)—yes
3. Would operate as a complete integration, but it contradicts a term explicitly
laid out in the writing. So, we could satisfy the rule w/either partial or
complete integration.
Possible Exception: k defenses: misrepresentation, fraud; BUT have to be able to
establish a present intent to misrepresent.
Whether the contract signed by Betaco and Cessna was a fully integrated contract
containing a complete and exclusive statement of the parties’ agreement.
The clause is strong evidence that the parties in dispute intended and agreed for
the signed contract to be the complete embodiment of their agreement.
Court Held: the district court erred in granting summary judgment because the
record was reasonably subject to contrary assessments of whether the parties
intended their signed contract to be the complete embodiment of their
Look at the weight of integration clauses, and how they can tip which way a
contract would go.
Merk v. Jewel Food Stores et al.:
Extrinsic Evidence: outside of the contract
Collective bargaining agreement, shady negotiations by representatives of
employer and their own union reps that inserted a secret clause into collective
bargaining agreement, then sprung the new info on the rest of the union.
Concerns about National Labor Policy; unrest
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to do or not do
An event that
must occur,
unless excused,
performance due
No liability
Both a
promise and
Mere suggestion, request
or notation w/o legal
No liability
adhered to
adhered to
(except ucc)
excuse possible
if courts allow
Modify by
Doesn’t matter
Internation: December delivery is at the essence of the contract. Delivery instructions
before the date in December was a condition, if the condition doesn’t happen, no liability for
failure to ship the rice that was supposed to be shipped.
Incomm, Inc. and Muzzy: subjective in Muzzy because a statute was passed by legislature;
objective in Incomm because lack of “lemon law” that was in Muzzy.
Beachcomber Coins v. Boskett
First Baptist Church of Moultrie v. Barber Contracting
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Changed Circumstances
Difference b/w possibility and practicability on one hand and frustration of
purpose on the other:
Frus.: can still perform, but objective for getting into the contract is so messed
up it’s not even practical to do so; don’t need to be absolutely incapable of doing
Parties enter into a contract. In between the time of formation and the time for
performance, an intervening thing happens that changes either the value of the
thing originally agreed to exchange, or ability to perform according to the terms
of the contract you agreed to perform.
p. 1133: Impracticability of Performance and Frustration of Purpose
§ 261 Discharge by Supervening Impracticability: where, after a contract
is made, a party’s performance is made impracticable w/o his fault by the
occurrence of an event the non-occurrence of which was a basic assumption on
which the contract was made, his duty to render that performance is discharged,
unless the language or the circumstances indicate the contrary. [Discharged
from obligation to perform unless there is something to indicate that you should
not be discharged]
§ 262 Death or Incapacity of Person Necessary for Performance:
obvious. Dead persons are not obligated to perform under the terms of the
contract, or their estates. This is unless circumstances were added into the
contract to say that someone could fill in in the event the original person could
not perform.
§263 Destruction, Deterioration or Failure to come into Existence of
Thing Necessary for Performance: If the existence of a specific thing is
necessary for the performance of a duty, its failure to come into existence,
destruction, or such deterioration as makes performance impracticable is an
event the non-occurrence of which wasa basic assumption on which the contract
was made.
§ 264 Prevention by Governmental Regulation or Order: if the
performance of a duty is made impracticable by having to comply w/a domestic
or foreign governmental regulation or order, that regulation or order is an event
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the non-occurrence of which was a basic assumption on which the contract was
§ 269 Temporary Impracticability or Frustration: impracticability of
performance or frustration or purpose that is only temporary suspends the
obligor’s duty to perform while the impracticability or frustration exists but does
not discharge his duty or prevent it from arising unless his performance after the
cessation of the impracticability or frustration would be materially more
burdensome than had there been no impracticability or frustration.
Specialty Tires: excused
Portland Section: not excused; different from Specialty Tires and Cazares
(why is there no discharge or excused here) b/c each party could have
contemplated inflation when entering into the contract, where inflation is
generally foreseeable; failed to take into account possibility of inflation of cost,
court says you assume the risk and after the fact cannot decide it is impracticable
to perform according to the terms of the agreement
Cazaras: in terms of contract it appears to be excused, but there seems to be an
allowance for restitution
Howard: frustration of purpose operating to excuse
Brenner: didn’t apply; frustration of purpose was not applicable under the
Rest. § 89—Modification of Executory Contract: A promise modifying a
duty under a contract not fully performed on either side is binding
(a) if the modification is fair and equitable in view of circumstances not
anticipated by the parties when the contract was made; or
(b) to the extent provided by statute; or
(c) To the extent that justice require enforcement in view of material change of
position in reliance on the promise.
UCC 2-209
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CISG ART 29(1): dispenses w/form of requirement that an attempted
modification be supported by additional consideration in order for it to be
Alaska Packers:
1. He had no authority
2. There’s no additional consideration
3. They had a preexisting duty to perform
Quigley v. Wilson:
Original contract was entered into in 1980; renegotiate terms of contract in 86.
Appeared to commit themselves to something other than the original intent
(amount of money); committed themselves to less.
Q: why doesn’t pre-existing duty rule operate in the same way to raise questions
about the enforcement of modification?
A: consideration, bargaining power;
Caveat: anything we talk about in this class today doesn’t carry over to property
Landlord/tenant: presumption in contracts is that they are dependent on one
another, which means it’s not an irrebuttable presumption. To rebut, you need
evidence that there is evidence of parties intended to have promises or covenants
treated independent.
Dependent covenants: performance is expected to be concurrent; i.e. the
computer and the payment are expected to be exchanged on the same day.
Independent: we would like to have performance on the 7th, but I understand
that you may not have your money by that day, so it would be independent. You
give me your money on the 10th, but I still have to give you my computer on the
Landlord/tenants relationship: independent. Landlord is expected to make
repairs. But, even if he doesn’t make repairs by rent due date, you still have to
pay rent for that month.
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Shaw v Mobile Oil Corp.:
Promises: mobile to deliver at least 200,000 gallons (max. 500,000); indiv.
Dealer is required to order at least 200,000 but not more than 500,000 over a
Shaw is to pay 1.4 cents/gallon delivered, but no less than $33,572 (or
$470/month). Mobile is entitled to amount stated. Shaw has obligation to not
purchase gas from another seller.
Mobile—Federal Energy Policy: you’ve got to distribute what you have to your
dealers. Shaw ordered 34000 gallons, Mobile delivered 26,000. Even though
mobile only delivered 26,000 even though shaw ordered 34000, mobile still
wants the minimum amount of rent ($470); independent covenants.
Court held: dependent covenants; Shaw wouldn’t have to pay rent if they did not
receive their total amount of order.
Spivey v. Highview:
Contract for a golf course w/ written modification regarding enforceability of
written mod. Allowing  to w/hold part of the scheduled payment so you can
compare what you got w/what you expected to get. (Easier to recover your
money this way).
Question remains to be decided on remand: whether the  has as of June 5th
substantially performed. If yes,  has obligation to continue to pay. If not, there
would be a breach, for which there would be a different remedy if substantial
performance had taken place.
Jacob and Youngs: (877)
Construction of house; promises:
1. pay for the construction of the house
2. contractor would use reading pipe (industry custom, trade usage)
 The person getting the house built doesn’t understand that reading pipe may
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be substituted, and that reading pipe does not mean cohoc pipe.
 Was not done fraudulently
4 Part Test:
1. purpose being served
2. desire to be gratified
3. the excuse for deviation from the letter
4. the cruelty of enforced adherence
O.W. Grun…Construction Co. v. Cope:
--material breach.
Difference b/w this case and the previous case: the deviation was much more
egregious because in the house, you can see the roof. The roof was supposed to
be russet glow all of the roof, uniform. Contractor f-ed it up. She’s entitled to
whatever it would cost her to get the roof she expected to get.
Perfect Tender Rule: contemplates that what is tendered will comply what’s
called for in the terms of the contract.
Acceptance Time Line
--can reject it anytime b/f acceptance; in the event of nonconformity, it’s not
--after acceptance, the nonconformity has to substantially impair the value of the
contract in order to be able to reject; the degree of nonconformity must trigger
the buyer’s options under those circumstances.
Ramirez v. Autosport:
Ramirezes and Autosport entered into a contract for a trade-in of the R van for
another. They tried to pick up their new van several times before asking for their
original van back. B/w the time they asked for the return of their van and their
getting it, AS sold it. R wanted blue book value of the van and the van. Autosport
decided not to give them what they wanted (upon bad legal advice), went to court.
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Issue: can the s under these circumstances reject the s tender of a camper
w/minor defects. Yes.
Q: why wasn’t this a situation involving substantial impairment?
A: they never accepted the van. Then, the minor defects may not have allowed
the R to seek some sort of remedy b/c of the degree of nonconformity. They had
an absolute right to reject the goods b/c they hadn’t accepted it.
Anticipatory Breach and Related Doctrines
Time for Performance
Demanding assurance: seek adequate assurance of their intention on the date of
the contract. Once you have demanded this, and they do fail to provide adequate
assurance, then you have the right to treat is as an immediate breach and seek
Anticipatory Breach and Related Doctrines
H.B. Taylor v. Elizabeth and Ellwood Johnston
AMF Inc. v McDonald’s Corp.
Expectation: giving the benefit of the bargain; see what would be the appropriate
Reliance: seeks to give out of pocket costs to show that what you spent was
reasonably and justifiably correlative.
Restitution: the measure of damages awarded to avoid unjustly enriching one
party at the expense of the other party. The value of the thing transferred to one
party, rather than how the person receiving the good might value that thing.
[fill in w/randal’s notes “remedies notes”]
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Alice Sullivan v. James O’Connor: the additional surgery would be
evidence of the breach, but not the first two. She couldn’t have recovered for pain
and suffering for the first two operations b/c there is expected to be pain
associated with cosmetic surgery.
Specific Performance
Exceptional Remedy: courts like money damages first
Clark v. Pennsylvania State Police: matter of equity? Impact of common
wealth court act which creates equitable courts and defines jurisdiction.
Clark had an agreement w/the van commission of the state police. According to
the agreement, he would be promoted to corporal captain if he went to law
school. He went to law school, new commission took over, didn’t give him
corporal captain. He sued for the promotion, not for monetary damages. He
does not prevail, balanced on jurisdictional grounds (as a court of equity, it does
not have jurisdiction over the matter)
In the commonwealth of PA, in order for someone to be entitled to specific
performance, one has to show that:
1. no other remedy at law,
2. the amount of damages cannot be accurately ascertained or
3. And you have exhausted all your remedies at law.
Clark had not exhausted all his remedies at law b/c he did not go to the board of
arbitration of claims, where he may have been entitled to monetary relief equal to
the difference in pay of the two positions.
Would have had to show unjust enrichment on behalf of the police force in order
to get restitution. THIS IS NOT AN ISSUE.
If he were alleging he came out of pocket for some expenses, if he alleged:
Reliance in interest damages, he would be entitled to money he paid.
Madison Square Gardens v. Earnie Shavers:
Shavers has an agreement to fight Ali, and doesn’t honor it. Court issues a
preliminary injunction (negative injunction: what you must do instead of what
you can’t do). 13th amendment says you cannot be compelled to perform
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according to this contract because it would be involuntary servitude. Injunction
prohibited Shavers from boxing w/anyone else until he performed according to
the contract or pay the money in damages. Anticipatory Repudiation on behalf of
Madison Square Gardens.
Even though a normal injunction might not be available, under certain
circumstances in certain jurisdictions, a negative injunction will be issued. Not
compelling you to perform, just saying you CANNOT do something else until you
perform according to the contract you were supposed to perform.
Beverly Glen Music v. Warner and Anita Baker:
Baker had a deal with BGM, Warner Bros offered a better deal. Had she been in
NY, she would have been prevented from taking that deal until her contract
w/BGM was complete. However, in CA, must show the services were unique and
the contract was less than $6000 in order for a negative injunction to be
Could make the case for unique services. BUT—the contract was not for $6000
or less. Therefore, no negative injunction could be issued by the court.
*specific performance is an extraordinary remedy
*there are specific requirements you have to prove above monetary damages in order to prove
*remedy at law must be inadequate, and there must be some type of injustice
*specific performance is the presumptive remedy when dealing w/land or real property
§ 302: distinction b/w incidental and intended beneficiaries. Unless otherwise
agreed between promisor and promisee, a beneficiary of a promise is an
intended beneficiary if recognition of a right to performance in the beneficiary
is appropriate ot effectuate the intention of the parties and either (a) the
performance of the promise will satisfy an obligation of the promisee to pay
money to the beneficiary; or (b) the circumstances indicate that the promisee
intends to give the beneficiary the benefit of the promised performance.
A and B are parties to the contract; C is outside of it. Law should provide C with
some sort of remedy.
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Difference between Devine and Scarpitti:
Devine indicates that the intent must be clear and definite and must be expressed
in the k. in Scarpitti, the court is not limited to the four corners of the k, but can
look at the surrounding circumstances to determine if the parties of the k
intended for party C to be a beneficiary of the k.
Henry Horner Mother’s Guild v. Chicago Housing Authority:
3 different ways that C can be deemed to be beneficiaries under this type of k.
Where you can contend there is a public benefit clearly intended by the nature of
the public k. This would not apply to indiv. Seeking to be 3rd party beneficiaries
to k where there is not a direct public benefit.
3 Ways to allow C to be able to contend that they are in fact 3d party beneficiaries
to a k such as the one between HUD and Chicago Housing Authority:
1. Public housing tenants can be considered third party beneficiaries for
certain types of contracts between HUD and public housing authorities.
2. third party beneficiary status on public housing tenants by the ACC
3. If the k were made for the third party’s direct benefit.
Divided line is not bright between intended and incidental beneficiaries.
Alvin Stangland v. Brock et al.:
Transaction 1:
Will (k)
Decedent-atty law firm ()-beneficiary ()
Beneficiaries were supposed to take all of decedent’s real property, which
included the farm at the time of contract.
--real property included farm
Transaction 2: (predates Trans. 1)
Decedent-atty law firm-purchasers
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Land k for a farm
-personal property
Second k changed a big portion of what the beneficiaries expected to inherit by
changing the real property to personal
Torts (malpractice)—breach and duty
--punitive damages b/c there was an independent tort; compensatory
’s don’t prevail because:
--new matter memo: check through weekly to make sure that there was no
new matter addressing your client, and if so that it wasn’t inconsistent w/the info.
you believed to be true.
Judges are lawyers; lawyers self-police. Judges are hesitant to impose rules on
lawyers that they feel are unreasonable. Here, there was no “extraordinary or
deviant conduct”
Duty owed by Brock (attorney for trans. 1) to decedent: draft will, make sure it
was in compliance w/the laws of the jurisdiction; signing. Did not require Brock
to pay attention to the new matter memo.
Duty of Carpenter (atty trans. 2): no obligation to go somewhere else (files,
central files) to see what Brock had done, and to be sure decedent’s will would not
be negated. Only required to use requisite care. However, someone should be
made to pay for the problem.
Finding a duty in the absence of privity:
1. multi-factor balancing test: extent to which the transaction was
intended to affect the ; the foreseeability of harm to the ; the degree
of certainty that the  suffered injury; the degree of certainty that the 
suffered injury; the closeness of the connection b/w the s conduct and
the injury; the policy of preventing future harm; and the extend to which
the profession would be unduly burdened by a finding of liability.
2. Based on the concept of a third party beneficiary contract.  must prove
that he or she was intended to benefit from the established attorneyclient relationship.
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If you hold the rights to a contract, you can transform those rights to a party.
Evening News Assoc. v. Peterson: k for personal services easily assigned
Issue: whether a k for employment b/w an employee and the owner and licensee
of a television station, providing for the employee’s services as a newscasteranchorman, was assigned when the station was sold and acquired by a new owner
and licensee.
 Peterson had been employed by Post-Newsweek Stations when it was bought
out b  Evening News Assoc. He resigned after one year of work w/ in order to
work at a competitor tv station.
Court held: k was assignable and that evening News is entitled to appropriate
permanent injunctive relief against  Peterson. The s duties did not change in
any significant way; and Evening News met all of its required k obligations.
Bill of Sale and Assignment and Instrument of Assumption and Indemnity b/w
the two: PNS has granted…to ENA…all the property of PNS…including…all and commitments listed in Schedule A. This included
Peterson’s contract.
Although there was no express provision concerning its assignability, it contained
an integration clause stating that the parties were in understanding of the
agreement, and it could only be changed through the written consent of both
s contention that he only agreed to the k because he was friends with the News
Director and Exec. Producer, who since had left, was w/o merit since he did not
contract with them, but with the company. Had he intended to condition his
performance on his continued ability to work w/Snyder and Baker, the k should
have reflected that.
Summary: the performance required of Mr. Peterson under the 1977 k was (1)
not based upon a personal relationship or one of special confidence b/w him and
Post-Newsweek or its employees, and (2) was not changed in any material way by
the assignment to the Evening News.
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Rest. § 151-152: Contract rights as a general rule are assignable, but subject to
exception where the assignment would vary materially the duty to the obligor,
increase materially the burden of risk imposed by the k, or impair materially the
obligor’s chance of obtaining return performance.
Silence on the issue of assignability does not create ambiguity.
Revisiting Parol Evidence Rule: when two parties have made a k and have
expressed it in a writing to which they have both assented as the complete and
accurate integration of that k, evidence, whether parole or otherwise, of
antecedent understandings and negotiations will not be admitted for the purpose
of varying or contradicting the writing.
Equico Lessors v. A. Moneim Ramadan:
Ramadan signed a lease w/Hastings Capital Corporation for an energy
management system that would reduce the building’s electricity consumption.
Hastings assigned the lease to Equico, who conducted a credit check on
Ramadan. The assignment granted Ramadan’s personal guaranty of the lease.
The lease contained a waiver of defenses clause as to any assignee of the lease.
The assignee would be free of all defenses or claims Ramadan may have against
Hastings Capital.
Equipment failed to perform, used greater amounts of energy. As a result,
Ramadan had the equipment removed and stopped making payments. Hastings
went out of business, Equico sued R for balance. R raised defenses of
misrepresentation and failure of consideration and counterclaimed on a breach of
Florida UCC: validates waiver of defenses clauses in ks or leases; only valid when
the assignment is taken for value, in good faith and w/o knowledge of a defense
or claim.
Close Connection Doctrine: if a close connection appears, then the assignee
will be denied the benefit of a waiver of defenses clause. In a commercial setting,
more than just a close connection must be shown before an assignee will be
denied the status of a holder in due course. In Equico Lessors v. Rockville
Reminder, Equico was found to be closely tied to the transaction and denied
judgment due to its prior knowledge of the seller’s guarantee, and therefore of
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potential claims that might arise.
Court held: evidence offered by Ramadan was insufficient to justify setting aside
the waiver of defenses clause, as there was no evidence of a standing agreement
that Hastings Capital would assign to Equico all the leases it executed or that
Equico agreed to make all assignments from Hastings Capital.
An arrangement in which someone who owes a contractual obligation arranges to
have another person do the work. K b/w the delegator and the delegate.
Rest. 2d § 318: a delegation is not valid if it will change the quality or character
of the performance.
Much more restrictive than doctrine of assignment of rights.
UCC § 2-210(4): an assignment of “the k” or of “all my rights under the k” or an
assignment in similar general terms is an assignment of rights and unless the
language or the circumstances indicate the contrary, it is a delegation of
performance of the duties of the assignor and its acceptance by the assignee
constitutes a promise by him to perform those duties. This promise is
enforceable by either the assignor or the other party to the original contract.
Sally Beauty Co. v. Nexxus Products Co.: Nexxus contracted w/Best
Barber & Beauty Supply, who merged into Sally Beauty Co. Nexxus cancelled the
agreement b/c Sally is owned by a competitive manufacturer of hair care
Court held: the k could not be assigned to the wholly-owned subsidiary of a
direct competitor under s 2-210 of the UCC. Thus, delegation of duties under
the distribution k is invalid if the proposed delegate is a competitor of
the oblige.
Explain RICO? Racketeer Influenced and Corrupt Organizations Act: makes it
a federal crime instead of state
Texas Dominant Factor Test: was the essence of or dominant factor in the
formation of the k the provision of goods or services?
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UCC 2-210(1): a party may perform his duty through a delegate unless
otherwise agreed to or unless the other party has a substantial interest in having
his original promisor perform or control the acts required by the k.
UCC § 2-306: a lawful agreement by either buyer or seller for exclusive dealing
in the kind of goods concerned imposes unless otherwise agreed an obligation by
the seller to use best efforts to supply the goods and by the buyer to use best
efforts to promote their sale.
Unlike Best, Sally is a subsidiary of one of Nexxus’ direct competitors, and serious
questions are raised regarding Sally’s ability to perform the distribution
agreement in the same manner as Best.
Hunter Tract Improvement Co. v. SH. Stone: original land contract
purchased by a Caucasian for two African-American. It was conceived of as a
front from the beginning. (B/c he was only purchasing it to assign the k to
stone.). The Hunter Tract Improv. Figured it out, and tried to stop the sale. Says
assignment has to be approved by HT b/c of language on the back of the k.
Court held: language was invalid b/c it was on the back, and not technically part
of the k. Parol evidence: could divide the front of the k from the back of it.
Assignment is legal and enforceable.
Geyen v. Time Oil Co.: leasing of a gas station residential situation by a party
of one race, and sublet (k is assigned) to: Mrs. Geyen (white); and Mr. Geyen is
black. The fact that they were an interracial couple is undesirable to the parties
that made the k. They try to kick them out. Refused to deliver gas. They brought
a breach of lease claim, but there was no breach. They paid, the oil was delivered.
Awarded $7100, it was reduced (remittur: reduction of damages). Amount
wasn’t supported by the evidence.
Assignment of k vis-á-vie assignment of rights: generally assignment of k is
disfavored, and assignment of rights is generally favored. May be linked to
property rights being favored over everything else (con law).
Assignment of k disfavored b/c: delegation of duties. Duties (in k) are
obligations placed upon individuals that speak to who you’ll work for under what
circumstances. This relates to labor. Forces you to work for someone you would
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not otherwise have worked for: works against liberty of individual owing duty.
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