-an offer or contract is “started” the day AFTER it is made. Law does not count fractions of a day.
-General rule is fake recital of consideration=not enough..this is Arkansas’ rule
-The restatement permits a fake recital for an option contract only, if it’s in writing and on fair terms
-OPTION CONTRACTS CAN BE ORAL, unless they fall within statute of frauds (doubtful)
-seals are not consideration in AR
-Nominal consideration will also not work in AR, even for an option contract ($10)
-option contract=exception to mailbox rule. The acceptance is not formed until the option is RECEIVED.
-the result of one of the 4 ways to keep an offer open is that a contract remedy happens because a contract is
formed, even if it is PE that works to hold it open..rememedy is not the remedy for PE, it is breach of K. But
reliance must be substantial to hold an offer open in PE.
-if 2 things are so disproportionate for consideration, this does not pass bargained for test.
-if there is no return consideration, both promises fail.
-past consideration does not meet bargained for test.
-if it’s a mixed sale, which one predominates? If it is goods, use UCC.
*Battle of forms, UCC 2-207
-make sure to say the different or additional term form coming back is a counter-offer at CL.
*electronic contracting
-UETA says electornic contract must be voluntary and parties must have agreed to contract electronically—this
agreement can be implied, i.e. if they have done it before
-proving MA electronically—prove just like any other fact
-UETA does not specify whether electronic communication gets mailbox rule..Arkansas has no case law.
-shrink wrap-do terms in the box become part of the deal? Klocek approach: BUYER makes offer by ordering,
so the terms in box are not part of the offer, but when the seller opens box with additional or different terms,
they do not automatically become part of the deal.
-Brower approach-the seller is the offeror and the buyer accepts the goods, when the buyer keeps them for an
amount of time, they become part of the deal.—TRENDING APPROACH
*PE
-remedy is limited as justice requires, this may mean expectation damages but also may be less.
-charitable promises-if charity spends money or makes commitment, we will probably make this promise
binding
-reliance must come after promise, not before.
*Restitution-aka contract implied in law
-if B conferred the benefit as a pure gift, or as a good Samaritan, no restitution. Look at amount of time and
effort spent, if the person is a professional, if they accepted money. Remedy is the value of the benefit
conferred.
*Promissory restitution
-new promise to pay pre-existing debt, etc.
-material benefit rule—look over
*SofF
-functions
-INTEREST in land
-Exception of part performance available in equity only, if A is seeking money damages, part performance does
not make the K enforceable. But if A is seeking equitable remedy like specific damages, part performance may
work.
-PE as a defense, can ask for money damages here, unlike part performance. Controversial because this is an
end around sofF but Arkansas allows it
*UCC statute of frauds
merchant provision satisifies statute of frauds against both parties
For exam, apply modern rule, say well the common law approach was this, but the court is more likely to apply
the modern approach, which is this. Example, offer for unilateral contract restatement 45, common law said you
could revoke offer until act was completed blah blah.
-Use headings, example “consideration”
-Her grading IS score sheet with points and also bonus points.
-if you run out of time, outline
-MAKE SURE YOU ANSWER THE QUESTION.
-what are A’s rights against B?
-The question may say you can leave out some theories—if it says this, DO IT.
-Questions will be a gray area and you need to say “it could come out this way because,” but “if the court finds
it is an offer the blah blah. ARGUE IN THE ALTERNATIVE.
-Also, reach a conclusion, “it is probably not an offer because of this, but it could be because of this but based
on xyz. The court will likely conclude blah blah.”
-Use correct terminology and define terms. Example define offer, say do we have one, then apply it to your
facts.
-DON’T BE TOO CONCLUSORY. Tell me the law first, then apply it. A contract requires an offer and
acceptance blah do we have it? But don’t brain dump and write out rules without applying any facts until the
end. Tell her what an offer is and say whether there was one and where in the hypo.
For UCC, article 2 applies if it’s a sale of goods, if it is a mixed sale, discuss both common law and article 2.
Problems in Contract Law: Cases & Materials
Pg. 1-17
8/20/10
-What is the UCC? Each of the 50 states has adopted the code. It is a statute. The UCC originally had 9
sections, and we’ll mostly be looking at article 1 and 2 in this class. P.131-178 in supplement will be used a lot.
The principles of international commercial contracts will be used a little bit. The UETA will be looked at
regarding electronic contracting. Then after that, there are contract drafting problems and sample exam
questions that may help you.
-
A. Contract Law in the First-Year Law Curriculum
Two elements of a contract:
Contract- an agreement between two or more persons, not a shared belief but common understanding as to
something that is to be done in the future by one or both of them
--Some things are implied in a contract, you assume movie you buy ticket for will be in English.
-A promise or a set of promises for the breach of which the law gives a remedy, or the performance of which
there is some way to recognize as a duty
2 elements:
-mutual assent-something you enter into
-consideration (something given and given back)
Example: lease (promise to rent for promise to rent it to me) marriage (exchange promises) loan, car insurance,
website (I agree button), less formal like going to the movies. Promises can be traded.
-merchantable- must be the industry standard, example, cheeseburger must be edible.
Legal Effect: it creates obligations for which some sort of legal enforcement will be available if performance is
not forthcoming as promised.
Three elements in a transaction:
1. the agreement-in-fact between the parties
2. the agreement-as-written (which may or may not correspond accurately to the agreement-in-fact)
3. the set of rights and duties created by 1 and 2.
Law- the way agreements are made and enforced in our legal system- the role of lawyers and judges in creating
contracts, in deciding disputes that may arise with respect to their performance, and in fashioning appropriate
remedies for their breach.
Anglo-American contract law resides of the concept of “ownership”- a diamond ring, etc. may be the “property”
of one person or more, which means that the state will protect the right of the “owner” to use, enjoy, and even
consume that thing, to the exclusion of all other persons.
Types
“real”- land and the building on it
“personal”- goods, tangible moveable property
Any society that recognizes property rights must address the question of how to respond when someone violates
those rights.
What is “contract law”?
The law of contracts is our society’s legal mechanism for protecting the expectations that arise from the making
of agreements for the future exchange of various types of performance, such as the conveyance of property
(tangible and intangible), the performance of services, and the payment of money ( aka “executory contracts”)
B. The Sources of Contract Law
From what sources do courts derive the rules of law they apply to decide contract disputes?
Primary- viewed as the “law” itself, consists of prior judicidal decisions (common law), statutes, ordinances.
Secondary- anything that might influence a court, commentary, Restatements of the Law
A regime of law based on precedent is justified on two grounds:
1. it offers a high degree of predictability of decisions
2. puts a rein on what might otherwise by the natural proclivity of judges to decide cases on the basis of
prejudice.
Policy- may be regarded as any societal goal that will be furthered by a particular decision
2. Statutory Law
Used to use the “statute of frauds” from the 1677 Parliament, but now use the Uniform Commercial Code
developed in the 1940s
UCC is a statue, first 100 pages of supplement
The legislature has ultimate lawmaking power so long as it acts within the bounds of it constitutional authority.
3. The Restatements- finally adopted in 1979- not the law
4. until the court adopts it (secondary source of law)
summary of what the courts are doing, first project by American law institute was the restatement of contractsalthough there are other ones for torts, etc. Sometimes the drafters of the project took what they thought was the
best rule of law rather than what was the most common rule of law—changed the course of the courts in the
future
4. Legal Commentary
Most weighty: treatises by Professors Samuel Williston and Arthur Corbin- two volume
And one volume by Professor E. Allan Farnsworth
5. International Commercial Law – treaty between nations covering the sales of goods (something that is
moveable)
Twenty first century lawyers must be familiar wit the sources of law for international transactions. Problem has
been lack of uniformity of the rules governing international commercial transactions.
C. The Perspective of Contract Theory
Has more to do with social interest, morals, points of views, etc.
“Legal Realists”
“efficency”- economic analysis to legal issues
D. The Lawyering Perspective
Roles:
Counselor
Negotiator
Drafter
Advocate
Contract law is action is not just a body of rules. It is a complicated process by which attorneys and their clients
make, perform (or sometimes breach), and enforce exchange agreements.
where does the bulk of the contract law come from?
Federal-constitution (3 branches of govt)— there are some statutes such as usury, but not much- we will do very
little federal law in this course
State-constitution (3 branches of govt)—not much constitutional law having to do with contracts, governor
doesn’t do much besides consumer protection agency maybe (not much law), fundamental source is the state
judiciaries and some from legislatures
-Starting with the exec branch of state government, the 2 primary sources of contracts are state courts
(judicial) and the legislative body.
-example, buying stocks and bonds regulated by the security exchange commission (federal override). Some
things coming from federal gov may affect contracts, but not the bulk. We’ll be looking @ the state.
Arkansas government- district -circuit (general trial level courts)-ct of appeals-Ark Supreme Ct
(right of appeals, de novo—new, start over)—You can skip the ct of appeals and appeal straight to the
ark sup ct….all the big stuff goes here. But the littler stuff goes to court of appeals.
-Most contract law is made from case law evolving. In order for law to change over time if it needs to, same
court that decided the precedent can change the law, orrrrr a court of higher jurisdiction can change. The a
higher court hands down a different decision, the lower court in the same jurisdiction must follow this change.
This is the common law, what is created from the courts. Most contract law is court-made from the state courts,
not statutory. Each state court is entitled to say what contract law is in its own state. This is a problem—who
wants 50 different versions of contract law??
-but, if the legislature enacts a statute, the courts have to follow it.
Problems that state ultimately governs the contracts in that state,
-it is remedied by the UCC adopted by the legislatures of the 50 states. This is an effort addressed to
legislatures to get them to adopt same laws.
-also by the Restatements to try to get the courts to adopt the same law from state to state
-Restatement is an authoritative statement of what the law is, The ALI formed in 1923 and its
first project was the first restatement. The problem is there were different rules from state to state, so the
drafters put in what they thought was best. Most of the time, they went with the majority approach. It was
intended to be a summary of what courts were doing, but actually became what the courts should do. 2nd
restatement came in 1979.
-Restatement is NOT the law, It is simply the ALI telling the courts what the law should be. But,
once court adopts the restatement approach, then it becomes the law. Courts give a lot of weight to the
restatement, they cite it many times.
-§1-103, unless dilaced by the UCC, the common law governs
Model & uniform acts- efforts to get the legislatures to adopt uniform laws
UCC-the effort to get the legislatures to adopt a statute.
*is a statute, it is the law, opposed to the Restatement which is not the law. Once legislature adopts this,
court must follow it.
*from the American Bar Association in 1880s
*first promulgated in 1951, Arkansas adopted in 1961. Gets revised over time. Every state adopted this
in 1968.
*not a comprehensive code of contract law-many types of contracts are not covered by UCC. Only
covers contract for sale of goods, however, it is well respected and crafted and people still carry its principles to
other kinds of contracts.
*we’ll look primarily at article 2
*only governs goods- something tangible & moveable, doesn’t cover all contracts
*statute is the law, the official comments are not the law
UCC ARTICLES
1. General introductory stuff, applies throughout (Arkansas has adopted). Says it is here to encourage contracts,
and to make the law the same across state lines.
2. contracts sales of goods- things that are moveable---THIS IS WHAT WE’LL LOOK AT most.
7 parts
2a. leases of personal property (combine, car—not your apartment)
3. negotiable instruments (notes & checks)
4. bank deposits & collections
4a. funds transfers
5. letters of credit
6. bulk sales (been repealed)
7. documents of title- bill of laiding (document of title issued by a carrier while they’re in transit), warehouse
receipt
8. investment securities
9. secured transactions- when Toyota sells you a car they keep a security and if you don’t pay they can take the
car—WE’LL USE THIS TOO.
-One more thing about UCC, there are official comments example p.25. These are not the law, they just explain
what that section means. It isn’t legislative history, but the courts still find it persuasive as to what the UCC
means.
Primary sources of contract law- legislative statutes like the UCC, and state judicial opinions.
8/21
-Contract law is good for showing you the evolution of the law.
-Lawyer files a complaint, which is the legal document that starts a lawsuit, and then that complaint must get
into the hands of the defendant, so you arrange through some sort of service or process. You could do this
through the sheriff’s office, certified mail, a private process server. Now the defendant must answer by 30 days.
This answer is a legal document.
-At this point, we can start filing motions in the proceeding to try and get the thing over with, i.e. motion
to dismiss or a 12 b 6 motion. In this, you are claiming the plaintiff has not stated a legal cause of action (also
called a demurer). If this is the case, court will dismiss it.
-If it is not dismissed, discovery begins. This helps streamline the issues, make it more efficient and fair
at trial. Interrogatories are legal questions you can send to the other side for them to answer. A request for
admission is a document that says, “do you admit you were standing on the corner at so and so date.?”
-After discovery, one of the parties may want to try again to end lawsuit, and would file a motion for
summary judgment. The standard for getting it dismissed at this point is there is no genuine issue of material
fact.
-If this is unsuccessful, we move to trial. First. The plaintiff puts on their case. They must put on enough
evidence that the preponderance of evidence is in favor of the plaintiff. They must put on a little more evidence
than the defense to win. At this point, the defendant puts on their case and may move for a directed verdict
motion which is a decision by the judge that there isn’t enough fact to be decided by the jury in the plaintiffs
favor.
-Now defendant puts on exhibits and witnesses, etc. @ the end of the defendant’s case, they can try to
move for a directed verdict. If the judge doesn’t take it away from the jury at that point, then we move into jury
instructions. Then the jury must decide a verdict (9 out of 12 jurors for a civil case.)
-Judgement not withstanding the verdict (JNOV)-if you believe the jury decided the wrong way.
Civil Procedure overview
1. complaint
2. summons (service on the defendant)
3. answer
Defendant can file motion to dismiss at this point (demurer)—if judge agrees
plaintiff can still
appeal
4. discovery (interrogatories, request for admissions, depositions)
5. can move for summary judgement (no genuine problem of material fact)
6. trial
Plaintiff presents case first, then either can move for directed verdict (not enough evidence to go to the
jury)
7. post-trial motions (new trial, JNOV)
Chapter 2
-Contracts are only promises that are legally binding. Both sides must be required to do something. ExMatthews promising to take us to lunch doesn’t count because we don’t have to do anything back. Also, a will
is not a contract.
-Restatement acknowledges mutual assent and consideration.
Classical contract law:
-clear rules (legal formalism) over general standards
- indifferent to issues of morality or social policy presented by contract cases
Good faith- Honestly and without deception. An agreement might be declared invalid if one of the parties
entered with the intention of defrauded the other.
Unconscionability- A contract which no man in his senses, not under delusion, would make, on the one hand,
and which no fair and honest man would accept, on the other
A. Mutual Assent—offer and acceptance
Formation of a contract requires “a bargain in which there is a manifestation of mutual assent to the exchange
and a consideration” tested objectively as would be interpreted by a reasonable 3rd person
Objective manifestation of assent: signing a contract, saying “yes”
-Mutual assent is voluntary. How do we tell if the parties are manifesting this mutual assent required to
enter into a contract? If A puts forth a contract, and B says yes verbally, but is thinking “no way.” To fix this,
we now adopt the objective meaning of mutual assent. We can’t look into people’s brains. If B has manifested
mutual assent in a way that a reasonable person would think she is assenting, then there is mutual assent. The
fact pattern where this is most likely to occur, is when a contract is in writing. Both parties sign it, but there is
misunderstanding regarding the details.
Restatements requirements for a contract
1. bargain (mutual assent)
2. it is also possible that during a bargaining relationship, one party can incur legal obligations to another even
without entering into a contract
3. even though a contract is entered into, there could be reasons its not final
Meeting of the minds (subjective) vs. mutual assent (objective)
Offeror-making offer, generally also a promisor
Offeree- receiving offer, generally also a promise
2 promisors and 2 promisees in many contracts because there is an exchange of 2 promises—be careful on
exams
-If you offer to sell something for $500, and the other person says they will take it. These are promises that are
exchanged. Offers generally include some kind of a promise of future performance even if they don’t say so in
so many words. The problem with some contracts is that there is only one promise. “I promise ill give you my
ring if you drive my car home.”
Ray v. William G. Eurice & Bros., Inc.
1952
Legal Theory: Breach of written contract to build a house
Defendant: says there is no meeting of the minds (mutual assent)
Procedural Posture: Judge sitting without jury in Baltimore county found for the defendant (Eurice & Bros).
Plaintiff (Ray) appealed. Now we’re in the Maryland court of appeals under Judge Hammond who is writing the
opinion.
Trial judge reasoning: there was no “meeting of the minds”
Remedy: damages-They were going to pay $16,300 for the Eurice bros to build the house. When the company
screwed up, they would have to find another builder.
Facts:
-Plaintiffs (Ray) own a lot, submitted stock plans and asked for an estimate to see if they had the resources to
build. Ray asks for an estimate and the Eurice bros give one.
-architect drew the plans (7 pages) of specifications.
-all changes were noted and agreed upon in green ink
-Mr. Eurice made a 3 page plan and a formal, unsigned bid/proposal. (actual offer)
-Mr. Ray’s lawyer drew up a contract (5 pages aka counter offer) and it was signed including the specific
products he wanted and including language about the builder cannot deviate from the plan without the approval
of the Plaintiff. THIS IS AN ACCEPTANCE.
-Eurice brothers did not see the specifications 1-5 and assumed that they were the same ones that they had
submitted and were redrafted by the attorney of the Rays
-On Feb 22 signed the contract with a witness present after going over the specifications
-Mr. Eurice said he thought the contract he signed was his own specifications and refused to perform on the
other specifications
-Why is there a savings and loan involved (a third party). The Rays don’t have enough money to build a
whole house, so they’re taking out a mortgage. In a promisory note, the Rays promise to pay this money back.
The mortgage means, if a the money is not paid on time, they can take the land away. The FHA is a
governmental organization that ensures of guarantees the note (backs it up). The FHA loan helps you negotiate
a lower interest rate, etc…it’s a good thing to have.
Issue: Is Mr. Eurice bound to the contract that he signed although he hadn’t read it and wasn’t aware of that
which he was signing? Is the contract law going to be subjective or objective?
Reasoning of trial judge:
contract was entered into in “hasty and rather careless fashion.” There was no “meeting of the minds” but he
should have read the contract
Reasoning of appellate judge:
Relies on the first Restatement of contracts
Mr. Eurice is bound to his contract if he has “read it, has the capacity to understand it, and there is no fraud,
duress, or mutual mistake”
Corporation thought they were assenting to their own specifications when in fact they were assenting to the Ray
specifications
Law:
Williston, Contracts sec. 1577 (commentators)- absent fraud, duress, or mutual mistake, that one having the
capacity to understand a written document who reads and signs it, or, without reading it or having it read to him,
signs it, is bound by his signature in the law
Restatement, Contracts, § 70- if someone offers or accepts and reasonably understands it to be a proposed
contract, he is bound by it although he may be ignorant of the terms
The test therefore is objective and not subjective—mutual assent rather than meeting of the minds. By signing
it, this action appears, objectively, to mean they are assenting.
Holding: Yes, Ray wins, Eurice & Bros breached an enforceable contract
Social policy- protects the other party in the contract, also makes it easier to uphold a contract
*duress- unlawful threats or other coercive behavior by one person that causes another to commit acts that he
would not otherwise do
*fraud- a false representation of facts with the intent that another will rely on the misrepresentation to his
detriment
*mutual mistake- a mistake by both parties to a contract, who are in agreement as to what the contract terms
should be, but the agreements as written fails to reflect that common intent; such contracts are voidable or
subject to reformation
*Unilateral mistake- occurs when only one party to an agreement makes a mistake and is generally not a basis
for relief by rescission or reformation
-RESTATEMENT SECTION 21: p. 140 in supplement: Neither real nor apparent intention that a promise be
legally binding is essential to the forming of a contract…all we require is objective manifestation.
Pg 31.
3.- can’t just say “that’s not what I meant, then everyone would do that and contracts wouldn’t mean anything’
Promise: a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a
promise in understanding that a commitment has been made
Assent: An agreement to something
Review Session 8/21:
-Matthews always asks plaintiff, defendant and legal theory (usually breach of contract). She will also ask where
we were procedurally.
-Restatement-restates the law as to what the courts are doing or should be doing.
-Uniform is STATUTORY (UCC).
-2 components to a contract are mutual assent and consideration.
-Mutual assent=Offer and Acceptance. When reading cases, look for when the offer occurred and when the
assent occurred.
**Carlill V. Carbollic Smoke Ball Co.
-Generally, an advertisement is not an offer, but this is an example of an exception. The advertisement here is
taken by the court as an offer.
--------------------------------------------------2. Offer & Acceptance in
bilateral contracts
Bilateral contract- promises made by both sides
Offer- manifestation of willingness to enter into a bargain under certain terms, and if the other party manifests
assent back then the contract will be concluded (from pg 180 of the supplement)
Acceptance
**Doesn’t have to be that way, for example if a 3rd party presents a contract (hey why don’t you sell your comp
to her for 300 dollars… both parties look at each other and say “okay”)… if through a variety of meetings, 2
companies are going to do something but it is not necessarily clear who makes the offer and who makes the
acceptance
What is not an offer:
-opinion or prediction, landlord said it would rain for more cattle but it never did- his opinion on the weather is
not an offer, when I am done operating on you- you should probably be able to raise your arm this high
-statement of future intention to make an offer, thinking about making an offer but not making it (I’m thinking
about selling my bike for $200)
-statement of present intention, stating an intention to make and offer (I’m going to sell my bike for $200)
-estimate, process of negotiation. Your driveway is cracking, I submit you an estimate for $500—NOT an offer.
However, if it is detailed enough, the further along you get in negotiation, the more it could look like
and offer.
-an inquiry, I’ll buy that hat for 50 dollars, if he says I wouldn’t sell it for 200 dollars (simply giving
information)… not an offer OR would you sell me that hat for 200? Yes. Not a contract still, no
commitment
-advertisement, if the paper says suits for 500 and you go in and they’re out of suits you can’t sue for breach of
contract (as objective reasonable people we understand that stores do not have endless supplies of a
certain thing) there are exceptions such as specific language “we will sell this suit to the first 50
people… if you are the 33rd person, you should get the suit)… advertisement is usually an invitation for
an offer (prelim negotiations).
-Can it be done electronically? Yes, by email
-Auctions- some auctions are “with reserve” which gives them the right to take back the item if the bid isn’t
high enough, the bidder is the offeror
-some are without reserve where the person giving it out is the offeror
-Final approval is reserved- I have to get the approval of my husband before I can sell you my ring—not a
contract because the acceptance of the other person will not conclude the deal (husband), i.e. subject to
approval by the home office or supervisor (these are not offers)—pg 181 § 26
-jokes- not reasonably understood to be an offer (jet for pepsi points).
 How can you tell if it is an offer or not?
 You have to communicate to the fact finder, it is a question of fact
 Look at:
 language,
 detailedness of terms,
 relationship of parties
 setting (jokes)
 all surrounding circumstances (emergency situations?)
 usage of trade- how are offers normally made in this business
 prior practice of parties
 how many people is the communication addressed to? Flyer to the world v. individual people
Lonergan v. Scolnick
California District Court of Appeal
Lower court: Judgement for the defendant because the plaintiff did not accept the offer in time
Lonergan- buyer, appellate, plaintiff
Scolnick- seller
Legal Theory: Breach of contract- for specific performance (making them do something) or damages, wants
difference between cost of land and what land was worth
Plaintiff- says defendant repudiated (describes a declaration by the promising party to a contract, that he or she
does not intend to live up to his or her obligations under the contract) the contract and didn’t deliver the deed
Defendant- no contract was ever entered into, no mutual assent to form a valid contract (offer)
Procedural posture: trial judge held that there was no contract as the plaintiff delayed more than a week before
notifying the defendant of his acceptance and the plaintiff was fully aware of the necessity of promptly
communicating the acceptance and judgment was entered for the defendant (Scolnick)… different reasoning
than appellate court. The trial court said the offer had expired.
Facts:
-March 1952- defendant advertised land for sale in the newspaper (LA)
-Plaintiff inquired about the land (NY)
-March 26- defendant wrote form letter to plaintiff describing the land, giving bottom price
-April 7- plaintiff wrote letter asking for specifics
-April 8- defendant wrote answering questions… also says “if you are really interested, you will have to decide
fast, as I expect to have a buyer in the next week or so”
-April 12-sold to third party
-April 14- plaintiff receives letter
-April 15- responds to letter and informs defendant that he would immediately proceed with the escrow
-April 17- escrow set up
Issue: Without a meeting of the minds upon an agreed upon specific thing, was there an offer made that is
legally enforceable?
Holding: NO. An offer was never made, the language is clear that the plaintiff could have made an offer but
needed to do so quickly, which he did not do.
Reasoning: The letters back and forth were merely negotiations and there was never a firm offer made in any of
the letters to constitute a meeting of the minds
Judgement is affirmed- Scolnick wins, because an offer was never made
CISG- modified it to put the risk that the acceptance is never reached on the offeree instead of the offeror (to
finish the bargain, the acceptance must actually reach the offeror in a timely fashion to be enforceable)
Escrow- 3rd party to handle business affairs
Seller sells to buyer #1
Seller sells (same land) to buyer #2
In Arkansas, rule is that Buyer #2 wins unless he had actual knowledge or unless buyer #1 recorded the sell
first, it makes the buyer #1 go and register the sell of the land. Buyer #1 gets money damages from the seller
plus the amount that he had already paid to the seller.
How long did Lonergan have to accept? We start with the premise that you are the master of your offer and can
specify how long it stays open. The problem with some offers is they don’t state a date of expiration, just a time
frame. Normally in contract law, the first day is not counted. You come across a problem when the offer is
mailed, not face to face. It is counted from the day of receipt according to the restatement..the time of
acceptance is extended.
Izadi v. Machado (Gus) Ford, Inc.
Florida District Court of Appeal, 1989
Plaintiff- Izadi
Defendant- Machado Ford
CoA- Breach of contract, and statutory violations involving misleading advertising (at trial court fraud was also
included, but appropriately dismissed)
Procedural history: trial court ruled motion to dismiss with prejudice in favor of Machado Ford and Izadi
appealed to the Florida district court of appeal
Trial court said that contract, misleading advertising, and fraud counts were all insufficient- this court ruled that
the fraud count was appropriately dismissed, but not the other 2
Facts:
 Ford (D) advertised that his car dealership was offering a $3000 “minimal trade-in allowance” in an ad
with other tiny print underneath specifying certain vehicles.
 However, the advertisement was misleading and Izadi tried to purchase a vehicle with cash and a tradein vehicle (understood to be worth substantially less than 3000, but which he thought would get a
minimum of $3000) to buy a Ford Ranger Pick-up (as was in the advertisement)
 When there are discrepancies in the advertisement, it is what a reasonable objective person would read
 D denied the P the trade in because he said that is not the correct interpretation of the advertisement
 Izadi sued Ford
Issue:
If, according to a reasonably objective person, an offer is presented in an advertisement, is it still binding
although the advertiser did not intend to convey the meaning of the offer in the ad?
Law:
Williston: “the test of the true interpretation is not what the person thought it meant or meant for it to mean, but
rather what a reasonable third person would have interpreted the meaning to be.”
Johnson v. Capital city ford- “a contract had been formed even though the dealership “had an erroneous belief
as to what the advertisement, as written, meant, or what it would legally convey”
Reasoning:
-Court finds that the advertisement, objectively considered, did contain the unqualified 3000 offer which was
accepted by the plaintiff, after that decision the question becomes whether or not an enforceable contract arises
from an offer contained in an advertisement
-An enforceable contract arises from an offer contained in an advertisement
-It doesn’t matter that the car dealer may subjectively have not intended for its chosen language to constitute a
binding offer
-Machado’s offer was considered “bait and switch”
-If Mr. Izadi reasonably relied on the misrepresentation, then he can recover… this is a subjective assessment
Holding: YES- it can be a contract. trial judge erroneously held the contract and misleading advertising counts
insufficient, but correctly dismissed the claim for fraud. Reversed and remanded. (also there was a violation of
an advertising statute).
--------------------------------------------------------------8/30
Who is a reasonable person?
 Posses all of the characteristics of the person who has entered into the contract
 Has characteristics of the party within the contract and situation that is presented
-When an oferror makes an offer, when does the offeree’s power of acceptance terminate? All of the
following are options of expiration..they are alternatives, so the first of them to happen terminates the
offer.
§ 36 of Restatement
Whichever occurs first terminates the offer (if there is no acceptance made). It is not the offer that gets
terminated…it’s the power of acceptance that gets terminated! Think of it that way.

An offeree’s power of acceptance may be terminated by
o A rejection or counter-offer by the offeree (you make and offer to me, I say I don’t want it, I
can’t go back later and change my mind… my rejection terminates my power to accept that
offer) because the offeror will rely on that rejection and find another way to sell something…
 also stated in § 38- the offeror can manifest a contrary intention (I’ll keep this offer open
to you even if you reject it 100 times)
 also in 38 (2)- an intention to take it under further advisement
 counter-offer: explained in § 39=This encompasses changing the deal in ANY respectrelates to the same matter as the original offer, but changes details.
 the power of acceptance is terminated unless the offeror or offeree makes a
contrary intention. Your first offer does not stay on the table once you begin
bartering with new amounts/options.
 a “qualified acceptance” is considered a counter offer, and as such will have the same
effect as a rejection, insofar as the original power of acceptance is concerned
(restatements § 59)
o Lapse of time
 Specified time (offeror is the master of the offer and he can make it)
 Reasonable time
 Dependant upon seasonable items, i.e. Christmas goods?
 Perishable items, etc. Does what I’m selling fluctuate in value? Is it expensive?
 At the time specified or, if there is no expressed time, at the end of a reasonable time
o Revocation by the offeror—offeror taking it back
 If you make an offer, you can take it back even if you promise not to UNLESS the
offeree has given consideration to the second offer (the promise to keep the offer open)…
this is called an option contract if there is consideration both ways (second contract). I
promise to sell you this desk for $300, and if you give me $10, I’ll keep the offer open for
3 hours. If she gives you that $10, you can’t revoke.
 Revocation is not effective to terminate acceptance until revocation is communicated,
effective upon receipt (receive: has to come into the possession of the person with whom
it is addressed… so even if you don’t know it in your head, if you have it in your
possession then you have legally received it). You still have the power to accept unless
the revocation is communicated to you.
 How can you revoke?
 By words, immediate
 By conduct inconsistent with the idea that the offer is still open, aka burning the
desk you were originally selling
 If the offer is published, a revocation is acceptable if the revocation is also publish
in the same publication
 In electronic communications, an electronic record is received when it enters an
information processing system that the recipient has designated of use for the
purpose of receiving electronic records or information. It also must be in a form
capable of being processed by the system.

A reasonable 3rd person (reliable source) can tell you of the revocation and that
counts—§ 43.
*Death or incapacity of the offeror or the offeree. This is it’s own category. Once the offer is
outstanding, if someone loses the ability to contract, there can be no acceptance. Your estate can not
accept offer on anyone’s behalf.
Acceptance
 Defined: a manifestation (i.e. words or conduct) of assent to the terms made by the offeree in a manner
invited or required by the offer
o Must comply with the requirements of the offer, whatever those requirements are- § 58. Aka
must be an exact match to proposal offeror has made.
o If an offer prescribes a place, time, or manner- the acceptance must comply. If an offer merely
suggests a permitted place, time or manner of acceptance, another method is not precluded.
Example, “must return and sign this enclosed card to my office by so and so time.” You MUST
do this.
 When is the acceptance effective?
o The mailbox rule- The mailbox rule or the postal acceptance rule is a term of common law
contracts which determines when a contract has been formed. The rule is that an acceptance of
an offer is effective upon dispatch. –as soon as she drops it in the mail
 Restatements § 41 (comment e) & § 63:
 Offer is effective upon receipt (and revocations)
 Acceptance is effective upon dispatch
 POLICY:
 in the transit of the acceptance, there has to be someone who doesn’t know, law
chooses offeree (both a pro and con here)
 Contract is formed earlier
 Avoids having to have an additional means of communication (offeree can
depend on acceptance as soon as they send it without having to wait for offeror)
 Offeror is going to stand to benefit from the transaction because they started the
whole thing, put the risk on them. This does mean that offeree could falsely state
that she dropped it in the mail when she did not.
 Certainty, universal rule
 Unless the offeror specifies otherwise as the master of the offer
 Even if the mail never gets to the offeror— (out of interest of certainty and simplicity)
 the offeror is the one who chose the medium by which the offer could be accepted, trier
of fact chooses what is a reasonable medium compared to the medium in which the offer
was made
 even if it is lost, we have a contract
o Electronic Acceptance- No case law in Arkansas to specifically define this
 IT is sent when it is addressed properly, in a form capable of being processed by that
system. It’s essentially the same as mail—when it is out of offerree’s hands it is good.
 Uniform transaction act gives legal definitions to sent and receipt
 statute does not tell legal effect, not intended to change the underlying substantive
laws of contract
Terms for Real Estate involving contracts:
 mortgage- gives bank right to your land
 deed of trust- maybe same thing as the mortgage, new name
 promissory note- promise to pay, corporate note is called a bond

*Normile v. Miller
Supreme Court of North Carolina
Plaintiffs: Normile and Kurniawan, and Segal
Defendant: Miller
CoA: Breach of Contract
-These plaintiffs want the land, not money damages.
Facts:
 Hazel Miller was selling her house
 August 4th- Normile made an offer with an expiration date of 5 pm on August 5th
 August 4th later- Miller made changes to the offer (a counter offer) on the same piece of paper. She puts
it under seal, which validates her signature.
 Later that night- Normile was going to wait awhile and decide what he was going to do about the
changes Miller had made which constituted the counter offer. What did Miller change in her
counteroffer? She increased the earnest money deposited, increased the down payment at closing, and
 12:30 am on August 5th, 3rd party (Segal) signed an offer and was accepted by the defendant, Miller with
no changes
 2:00 pm on August 5th, Byer (real estate broker) told Normile, “you snooze you loose”-this is where the
revocation was communicated to N&K and their power of acceptance is gone.
 Later (prior to 5 pm), Normile decides to accept the offer made by Miller-N & K attempt to accept, but
the revocation had already been communicated and they on longer had the power to accept.
 N&K argue that the promise of the offer being open until aug 5, 5 PM was part of her counteroffer. If
this is an option contract, they would win. BUT they didn’t give Hazel anything back to keep that offer
open.
Procedural Posture
 3rd party Segal and Normile each filed suit against Miller
 Segal filed for summary judgment and won and Miller was ordered to specifically perform—give the
property to Segal
 Consolidation of the suits
 Normile’s motion for summary judgment at this stage was denied and they appealed to the Court of
Appeals
 The court of appeals affirmed the trial court’s action and now it is at the Supreme Court of North
Carolina
Issue: can a purchaser accept a counteroffer after being notified that it was revoked?
Holding: NO, when the first offer wasn’t accepted and a counteroffer was on the table, the first offer was no
longer valid, including the terms of the time limit. When Normile got word of the revocation, he no longer
could accept the counter offer. Judgment entered in favor of Segal.
Reasoning- by ct of appeals
 Start with custom in the industry
 A counter offer (conditional acceptance) amounts to a rejection of the original offer
 The time for acceptance provision contained in plaintiff-appellants original offer did not become part of
the terms of the counter-offer
 No mutual assent
Reasoning- supreme court




No meeting of the minds (assent)
Failed to accept or reject the offer
But rather… The Defendant’s offer was revoked when the Defendant sold the house to the third party
Segal
Plaintiffs received notice of this by the realtor when he said “you snooze, you loose”
Reason by the court of appeals is affirmed, Defendant (Miller) wins
RULE:
 counter offer terminates power to accept original offer
 revoked at time she made contract with Segal
 termination of power of acceptance is effective when the revocation is communicated (you snooze
you loose)
5. In Arkansas, the last guy who makes a binding contract gets the land (for example if “you snooze you
loose” didn’t happen then N&K wouldn’t have lost their power for acceptance.) there would be 2
binding contracts and N&K would have gotten the land
9/4/12
Real Estate Terms:
-Even after the contract is entered into the sell the real estate, there is a lag time to prepare for closing.
-Once you get to the settlement closing, the seller signs the warranty deed and hands it over.
-Buyer gives mortgage in the land (mortgage is a document that says collateral has been put up for a note/ It
says you have a property right in the land). If the buyer defaults and doesn’t pay on the note, there will be a
foreclosure.
-Buyer borrows money from the bank, and then the mortgage goes to the bank.
9/6
4. Offer and Acceptance in Unilateral Contracts***in bilateral there are promises being made and the exchange of these promises form the actual contract, in a
unilateral, it is formed by the exchange of a promise for an act.
-Example-promising to find someone a buyer-- A asks B to find her a buyer (broker’s commissions). The act
coming back from B constitutes assent AND consideration, so when B finished the act, he has objectively
manifested his willingness to accept her offer and is also giving something back to her for her promise. Only
one act in unilateral meets both requirements.
 Unilateral Contract- only one side promises something, promise is exchanged for an act—act will constitute
mutual assent to the promisor AS WELL AS the consideration requirement
 Restatements second don’t even mention “Unilateral Contracts,” instead they try to turn unilateral
contracts into bilateral (§ 32)
 UCC does the same thing in 2-206 (pg 122)
 Examples: reward for dog, be the last survivor on the island, “I will give you 500 if you loose 300
pounds,” many employment situations (if there is not a contract for a specified time)… in none of these
instances a promise would be good enough
 Common law viewed as a completion of the mutual assent and consideration to be when the act is 100%
complete, offer could be revoked at any time before it is 100% complete. At COMMON LAW, if you
have a unitlateral contract, acceptance was not complete and contract was not formed until the act was
100% complete. This is the classical view of unilateral contract formation. The problem is the position
this puts the offerree in. This means offeror can revoke this any time until 100%. Example below:


A says to B, I will pay you 100 dollars if you walk across the Brooklyn Bridge… if B walks across
the bridge, A has to pay him 100 dollars.
 B does not have to walk across the bridge, but if he does, there is a unilateral contract formed
when the act is done.
 If A stops him half-way across and withdraws the offer, A is not bound to the promise because B
had not yet completed the act
 If B crosses half-way and changes his mind because it is too hard to cross, B doesn’t have to
finish and A does not have an action against B for damages
 Modern restatement approach has changed, but there is no Arkansas law on it yet
 Restatement says if you don’t specify how acceptance has to occur, then you invite it by any reasonable
manner, such as doing the act or promising to do the act. Once the offeree starts the act, then we imply a
return promise. If the person begins landscaping, the law requires a return promise of pay or whatever.
Petterson v. Pattberg
Executrix (P) v. Mortgage Holder (D)
New York Court of Appeals, 1928
Cause of action: breach of unilateral contract
P wants: $780 (money damages) plus interest
Procedural Posture:
-Trial: Petterson sued Pattberg for $780 and won-Petterson’s estate wins.
-Appellate Division: Pattberg appealed and Petterson won again
Facts:
 Petterson owned some real estate
 Pattberg held the mortgage-then he sold it to a 3rd person. In order for Petterson to sell the land, they had
to pay off the 3rd person. AND they had to pay $780 more than they paid Pattberg.
 April 4th Pattberg wrote him a letter saying “I hereby agree to accept cash for the mortgage which I hold
against the premises… it is understood and agreed as a consideration I will allow you $780 providing
said mortgage is paid on or before May 31, 1924, and the regular quarterly payment due April 25, 1924,
is paid when due” …ill take less if you’ll pay it off early.
o basically that he would get a 780 dollar discount if he paid before May 31, He then sold it to a 3rd
party, and Petterson is mad because Pattberg breached his offer to take less, basically.
 April 25th- petterson paid the installment of principal that was due
 Latter part of May- Petterson went to pay Pattberg with the cash in hand
o before he could pay him, Pattberg said that he had already sold the mortgage to someone else
and wouldn’t accept the payment
o Never made a tender “here I am ready to perform my legal obligations, here it is, something
formal”
o Pattberg’s defense is that he revoked the offer before it was accepted. The act is both the
acceptance and consideration, so neither of these appeared.
Issue: could the offer to enter into a unilateral contract be withdrawn by the offeror immediately prior to the
offeree’s performance of the requested act?
Holding: YES The offeror can revoke the offer at any time before the act has been performed. Petterson’s estate
does NOT get the money.
Reasoning:
 The plaintiff had not given the money to the defendant had not been made at the time the offeror
revoked the offer and therefore he could legally revoke it with no consequences
 An offer to sell property may be withdrawn before acceptance without any formal notice to the person to
whom the offer is made (actual knowledge is sufficient). The court saw acceptance as the ACTUAL
payment, aka the completed act.
 Revocation (an act inconsistent with the offer, that signals you can’t carry it out anymore) happened
when he sold the property, the termination of acceptance happened when the offeree had actual
knowledge
Dissent: (Lehman)- Pattberg had the right to revoke the offer until the act was performed, however- after
Petterson had offered to make the payment as requested, he could no longer revoke it.
RULE: An offer to enter into a unilateral contract may be withdrawn at any time prior to performance
of the act requested to be done, demonstrates classical approach to the law… has been changed since then
No case law in arkansas
MODERN ANSWER TO THE PROBLEM: This limits the protection of the offeree. Restatement (Second) §
45 now provides that when an offeree tenders or begins the requested performance under a unilateral contract,
the offeror becomes bound and cannot revoke his offer so long as the offeree completes performance in
accordance with the terms of the offer… option contract
Option contract- offeror promises to hold the offer open, § 45 is the same thing because the consideration is the
starting of the act, doesn’t change the common law rule that there is no contract until the act is 100% complete.
Just can’t revoke during the process of doing the act… as long as it was done within a “reasonable time.”
However the offeree can quit at any time and not finish. The offerree must complete the contract, still.
It’s an OPTION…B can finish and form the contract OR start in the middle. It has shifted and now the offerree
has the advantage.
Cook v. Coldwell Banker/ Frank Laiben Realty Company
Missouri Court of Appeals, 1998
Breach of Bonus Agreement Contract
Plaintiff- Mary Ellen Cook worked as a real estate agent for defendant as an independent contractor
Defendant- real estate brokerage firm, Frank Laiben realty company, co-owner is Frank Laiben.
Procedural Posture:
Originally, Laiben had an at will employment contract with Coldwell Banker. This is a unilateral relationship=I
promise to pay you, you accept by doing the work.
Trial Court- jury ruled in favor of Cook, awarding her $24,748.89
D argues: Plaintiff did not accept the bonus offer before it was revoked. He says she did not adduce sufficient
evidence to establish a reasonable inference that
1. she tendered consideration to support defendant’s offer of a bonus or that
2. she accepted defendant’s offer to give a bonus
P argues: she accepted the offer of a bonus by substantial performance
Facts:







March 1991- Defendant announced bonus program in at a sales meeting
April 1991- Plaintiff made $15000 in commissions and was awarded the promised bonus
September 1991- D paid bonus earned in april
September 1991- Plaintiff surpassed $32,000 in commissions
o was told bonuses would be awarded at the meeting in March of the next year (revocation)-offer
has changed. (This offer is revocable under common law.)
o defendant informed her at this time that she must be “here” in March in order to collect the bonus
P stayed til the end of 1991 in reliance on the promise of a bonus
January 1992- Plaintiff left and went to work for another real estate company, at that time Laiben
informed her that she would not receive her bonus, which would have been $17,391.54
March 1992- the plaintiff sent a demand letter to the defendant to get her bonus she had earned
Issue: can a unilateral contract for performance be revoked even if the offeree has done a substantial part of the
performance?
Holding: NO
Under Peterson V Pattberg, she never got to the final acceptance of 100%, she only had part performance.
Reasoning:
 They’re changing the common law rule here and adopting the modern approach from the restatement.
 An offer to make a unilateral contract is accepted when the requested performance is rendered
 A promise to pay a bonus in return for an at-will employee’s continued employment is an offer for a
unilateral contract which becomes enforceable when accepted by the employees performance
 An offeror may not revoke an offer where the offeree has made substantial performance
At will employment- either party can quit/fire, no contract to stay for a particular amount of time
Missouri here tweaks the restatement and adds substantial performance
RULE: in the context of an offer for a unilateral contract, the offer may not be revoked when the offeree
has accepted the offer by substantial performance… from restatement/Missouri law
-Normal restatement rule is that you hold it open and soon as the offerree tenders the act.
-Mutual assent is here because we have a promise for Coldwell Banker to pay, and now she has done the
act which is her manifestation of assent and acceptance and consideration.
p.71 Remedies for breach:
 Normal remedy- expectation damages- put the non-breacher where she would have been if the contract
had been performed, don’t get the entire price, just the damage that you have suffered
o Example of expectation damages=If I sell you a thousand dollar ring for 100 dollars, but it is
actually 1,000 ring then I breach- then the expectation damages that will be awarded is 900
dollars
 Reliance damages- goal is to put the non-breacher in the position that she was in before the contract was
entered into (second best remedy) aka “out of pocket damages”. “At least give me what I’m out”
 Restitutionary damages- restore to the nonbreacher anything that she has given to the breacher. “Giving
me back anything I have to the bad guy.”

Specific performance- not the normal remedy, only in unique instances—you can ask or try but its not
generally going to work. This is the purest form of remedies. BUT this an involuntary servitude which
violates the constitution.

9/11
Postponed Bargaining: The “Agreement to Agree”
 definiteness and certainty
 common law rule says all the material terms must be agreed upon to form a contract—if not, it is void
for indefiniteness
o all you have without the material terms agreed upon is preliminary negotiation
o purpose:
 question of mutual assent notions
 problem for the court to fashion a remedy for breach if there aren’t all the terms, how can
the court determine expectation damages if you don’t really know the expectation
o what are the material terms?—required to be stated with reasonable certainty so that a court can
understand the responsibilities of the parties, the standard for reasonable certainty is up to the
trier of fact. Vagueness is a question of degree.
 Subject matter-what is it that we’re contracting about?
 Payment terms (price, installments, period of time, interest)
 Quantity
 Quality (grade A,B- etc)
 Duration-how long does the contract last?
 Service contract- describe the work that’s to be done
o Contract, not terms, not offer and acceptance standing alone, is required to be definite
 If the offer or acceptance is so indefinite and uncertain, it is probably just an introduction
into negotiations,i.e. “I will paint your house…” Not enough details.
 Even if there is indefiniteness in the offer (I will give you blue or white shirts) the
acceptance can clear up the indefiniteness by choosing one
 Judged objectively

o Indefiniteness as to an immaterial term is not fatal to the contract.
o Even if the contract is definite enough to be a contract, the degree of definiteness might effect the
judgment that a court will award (specific performance would require a greater degree of
specificity, damages would be less) WHY? So you’ll know what to do if you have to do it
o If the contract determines that it is indefinite, the contract is void for indefiniteness- acting like
there is not a contract at all
o Indefiniteness can be fixed by carrying out the contract (court will look at their actions and
conduct)—this is not creating the contract afterwards but the court is saying that at the time they
entered into the contract it was created
o Many times, parties left details about because they’re in a hurry. BUT they could do it on
purpose, maybe they realize they don’t agree on issue #3, but they don’t care..they may think if
they address this, the deal will fall through.
modern contract law changes that rule—if the parties really meant for there to be a contract and there is
some reasonable way to make the contract, then we can uphold it
Restatement
§33 certainty (similar to common law)
 (1) reflects same as common law
 (2) remedy


(3) if it is so uncertain, it may lead the court to believe that the parties didn’t mean to enter into the
contract
Comments: suggest that the rule is lenient/ more liberal, that the courts could resort to the course of
dealing or usage of trade
UCC
§2-204
 (3)
 reflects that in a hurry bargaining is probably the norm for the sell of goods, people are not as thorough
as they might be otherwise
 UCC allows for things to be left out- and we want to save the deal if the parties intend to contract…
also- there isn’t generally as much money on the table
 Only if the parties intend to contract, court must be convinced that they intended this
 Must be a basis for giving a remedy
 If the terms are left out, the UCC will plug them in. If you haven’t filled them in, we have a stature that
will tell us what to plug in (ex. §2-305). There is a string of gap-fillers in the UCC.
o If not, still fall back on usage and custom in the industry
**UCC here seems to sanction open terms in the contract for purchasing goods.
Why do people leave out terms?
 Mistake
 Would cost too much in a routine transaction
 They know they have left out a term, but they are afraid that if they draw attention to it it will cause
problems
 They don’t foresee that the issue will arise
* Let’s say, there are 5 material terms and we agree on all but #6, common law says there’s not contract. Same
would be true if we left out a term. Orrr same would be true if we agree to agree on the term at a later date.
An agreement to agree
 This applies when the bargaining is postponed
 Classical common law says this is a missing essential term and there is no contract
Walker v. Keith
Declaratory judgment proceeding- relief asking the court to declare the rights of the parties
Sought adjudication that he had effectively exercised an option to extend a lease.
*Keith is saying that the contract is too indefinite and uncertain.
Defendant: Walker- lessor/landlord/appellant
Plaintiff: Keith- lessee/tenant/appellee, wants the 10 year renewal option
Issue: whether the option provision in the lease fixed the rent with sufficient certainty to constitute an
enforceable contract between the parties
Ph: upon the verdict of an advisory jury, the chancellor fixed the new rent at $125 a month- keith got renewal
option (because this is in equity court). Lower court said there IS a contract.
Facts:
 July 1951- appellants leased lot to appellee
o 10 year term at $100 per month
o Option to extend the lease for an additional 10 year term under the same conditions except rent
(this was part of the original contract). Walker doesn’t want option to be renewed.
o “rental will be fixed as agreed upon reflective by the business conditions”
 Why didn’t he just revoke it? There was consideration given for the option since the
option was in the first contract. This isn’t a separate, stand alone option, it is part of the
original.*important*


Problem: material term is missing (common law rule is if there is a material term missing there isn’t a
contract) Walker’s argument is that it is too indefinite and uncertain to enforce.
The amount of rent is the ambiguous term. The problem is they tried to agree to agree on it.
Reasoning:
 The provision is “ambiguous and indefinite” and “inherently unworkable”
 However, the law has interpreted it to be a contract, that’s why this court is looking into it
 No degree of certainty, they could have made a specific formula or left the decision up to an arbitrator
 An agreement to agree cannot constitute a binding contract- WHY? The material elements are left
out
 Tobin case is wrong- court fixes rent under a nonagreement, and enforces it as though it was a contract.
Also, the court says that the rent is not a material element of the contract. This is wrong.
 Contract requires mutual assent.
o Court says that they didn’t “comparative conditions” could be different
o If there was something definite then it would have been okay
 Courts should not expend their powers to establish contract rights which the parties failed to define
 The lessee’s option right was illusory
Advisory judgment is reversed, the contract is void for “indefiniteness and uncertainty”
Policy: protect tenants, courts have been careful to support options to renew leases because they are part of the
promises that are “bargained for” between the lessor and lessee
Notes: if you asked for a lesser remedy, the court might try to help you
*This is a rigidly equitable approach, don’t look at sophistication of bargaining power of the 2 parties.
Agreement to agree rules:
 Classical common law approach- court doesn’t consider the relative bargaining positions of the parties,
equity, fairness, whether keith has invested a lot in the property, doesn’t try to figure out why keith
wanted to keep the offer open
 Arkansas- case law, court found that, “based on the past of the parties and the testimonies of the agents
of the lessor of the improvements” the standard to agree to agree on the future rental is to be agreed
upon based on inflation
o Same court stopped the relationship between tenant nursing home when the agreement was
“based on similar facilities in Arkansas”
 UCC- §2-305
o (1)Look at intent, read in a reasonable price if the parties intended for a contract to be formed
o (2)Allows for the seller or the buyer to set the price in good faith
o (4)If the parties don’t intend to contract, there is no contract
*you can set price by some sort of formula
-can also arrange for it to be set by some sort of governmental entity or a designated arbitrator, or some market
outside of a governmental entity.
-But what if you don’t set a price at all? The UCC is willing to tolerate open terms. The UCC will also plug in a
reasonable price.
-Output and requirements contracts
-The court could also say they’re going to plug in the price, but not give you your full blown damages.
*Contract now or contract later issue:
-issue that you have a bunch of different documents and all 5 material terms are hammered out. Later, we intend
to put it in a formal document. If all 5 terms are agreed upon here, but we want to put it in writing later, When is
the contract formed? Basically, it is a question of intent of the parties.
-You can’t have a manifestation of assent if there is some further form of manifestation that is required before
the contract can be entered into (I have to ask my husband first).
-If they’ve made it clear they don’t intend to be bound until formal written document, there is not contract.
-Modern courts let you form a contract now even if term number 5 is left out or not agreed upon. Common law
said NO contract here. But now that we tolerate open terms more readily, it makes the decision more difficult.
-You have to answer 2 questions
1) do they intend to contract now or later?
2) if they intend to contract now, can they? Is it definite and certain enough to be a contract now?
Related Issue that comes up in the Quake Case:
 What if the parties contemplate reducing their contract to a formal writing? When is the contract
formed? Oral communication and correspondence? Or when the formal contract is written?
 Restatement §26?
 Modern approach allows for the contract to be created before the final writing, because even if there are
terms missing it can be filled in with other terms
 Common law approach says no way because there is a term missing
 2 issues:
o When did they intend to contract? Now or later when there is an official contract
o If they intended to contract now… are the terms sufficiently definite to let them do it?
Quake Construction Inc. v. American Airlines
Plaintiff- Quake Construction
Defendant- AA & Jones Bros Construction
CoA- breach of contract
Quake wants damages—they want what they’re out of pocket (reliance damages), and its loss of profits it
would’ve gotten.
AA’s defense is they say they never accepted the offer. They said even if we did enter into some contract, it is
void for indefiniteness.
Facts:
 February 1985 AA hired Jones to do work on the airport
 Quake received invitation to bid on the project (solicitation of an offer). This is not a manifestation of
willingness to enter into a deal.
 April 1985 Quake submitted bid to Jones (offer- specific in construction industry)
 Jones orally notified Quake that they had been awarded the contract (not an acceptance- both parties
must have assumed that there was a further manifestation required)
 Jones wanted licensing numbers from Quake’s subcontractors, they wouldn’t give them without a letter
so Jones sent Quake a letter of intent dated April 18, 1985
o A contract will be available shortly
o Called for work to begin in 6 days
o Gave a price
o Jones has the right to cancel the letter of intent if the parties can’t agree



Handwritten changes were made
No formal contract was ever entered into
April 25- Jones announced that Quake was the general contractor, then American Airlines informed
Quake that they were terminated and Jones confirmed the termination in a letter
Issue: whether the letter of intent from Jones to Quake is an enforceable contract
Ph:



Circuit Court- dismissed Quakes complaint, relying on the last line of the letter (cancellation clause)
Appellate Court- found the letter ambiguous, so that the trial should be remanded and parole evidence
should be admissible to ascertain the parties’ intent
This court agrees with appellate court
Reasoning:
 Factors looked at upon remand by the trier of fact to see if there was a contract
o Whether it is usually in writing
o Many or few details
o Large or small amount of money
o Requires formal writing for the covenants
o Negotiations indicated that a formal written document was contemplated at the completion of the
negotiations
o Other factors could be:
 When the negotiations are abandoned
 Why it is abandoned
 Amount of reliances on the transaction
 Other party’s reliance on the anticipated completed transaction
 Confirm appellate court because
o Detailed terms
o Awarded the contract to the party
o Short period of time
o Cancellation clause is ambiguous-can be interpreted 2 ways-either because you can cancel,
there IS contract, or because you can cancel, there isn’t a contract
 Ambiguity in the cancellation clause enhances the other ambiguities in the letter
Holding: did not make a decision of whether or not a contract exists, rather hold that the parties’ intent based on
the letter alone is ambiguous and on remand the parties should be able to enter evidence based on their intent
Concurrence:
 Cancellation clause refers to cancelling the letter, not the contract- because there wasn’t a contract
 Policy reasons, don’t want to make every letter biding, this will encourage ambiguous words to be used
so that the authors of the letters can avoid making contracts
 Should recognize the letter to be an agreement to keep on negotiating
Parol evidence rule- prevents a party from submitting into evidence things that are different from the written
contract (such as intent)
Analysis:
 Definite and certain?
o At common law, all the material elements must be agreed upon- but the court says that there
probably is potentially enough for the rest to be filled in
 However, look at modern common law and their intent
o Start with the language of the content
 (although there might be a moral obligation, usually aren’t binding) in this case, gives
price, list of services, limited time until it starts, “notice of award authorizes the work,”
cancellation clause (quake says that it makes it legally binding because if it wasn’t why
would they need the clause”)
9/17
Cancellation clauses- if it gives a party a chance to get out on a whim at any time, you do NOT have a contract.
There is not really any consideration because if anyone can get out of promise, there is no consideration to
support this.
-Courts don’t like cancellation clauses and will tend to find they are limited, i.e. by a good faith requirement.
-The aforementioned cancellation clause in quake (top of page 83), why did American want to cancel? We don’t
know but there were probably some fact issues left to debate on the cancellation cause. It was simply remanded
back down, so the parties can continue to fight it out.
*another issue raised by the dissenting judge in Quake, addressing the issue where the parties are at a point
where they have entered into a deal on some essential terms, but there is another essential term where they have
agreed to agree on it.
Ex- mary beth has agreed to train codie’s employees, he will pay her $200 per employee, and she will
come on Monday. What we haven’t figured out is how many employees there are to train. Let’s assume court
thinks this is an essential term. The court can take 3 approaches here:
1) common law=no contract
2) if court decides to be more liberal, we can still say there is a contract. If we do this, how can we figure
out how many employees she was going to train and therefore compensate her for the money she is out
if the contract had gone through? Maybe we can look at old contracts and see that detail, maybe we can
look at old training programs, or at the industry. If this is a UCC contract, we can plug in gap fillers.
3) They also may make a mini K to negotiate the missing term. The parties have agreed to agree on this
one, so they probably intended this. The commentators like this idea and call it a “contract to bargain”
and an “agreement to negotiate.”
-if this option is chosen, parties may negotiate and work out this missing term. OR they could
negotiate in good faith and simply can’t agree—in this case though, the parties have carried out
responsibilities under this mini K and no one is breaching. OR one or more parties can refuse to
keep bargaining in good faith, can’t agree. If this happens, there can be a breach of contract suit
on this mini K. If this happens, court still has to plug something in to fashion a remedy. How can
the court tell if we’re bargaining in good faith here? In this case, American did not keep trying to
bargain in good faith. There is always the possibility the court would fall back on reliance
damages and give them the stuff Mary Beth is out of pocket.
*If you draft something that you want to not be binding, what language do you put in to make sure something is
NOT at the K stage, you must say that we intend for this NOT to be binding and reserve the right to withdraw at
any time, for any reasons, etc. Must be clear and specific.
Problem 2-1 p. 95
 Super Comics has entered into negotiations with JayRan
 They decide:
o Rate of royalty
o Products
o Length of time
o Technical assistance by super
o Sales reports by JayRan
o Circumstances under which a party would be able to terminate
 Agreed that a written agreement would be made by Super and sent to JayRan




Sent that along with a letter
Octopus, Inc. wants to enter into a contract, but has an exclusivity clause
Is there an offer from Super Comics Not at meeting, but yes when we sent the letter over? The argument
that it isn’t an offer is that it wasn’t signed by Super (us). If we do have an offer, all the essential terms
are worked out, so the court might find that we are bound.
What are your legal responsibilities to JayRan? Might also want to consider ethical possibilities
o Problem: is there a contract now or later?
 Express agreement on all the terms? Yes (like K)
 Usually put in writing? Yes (not looking like there’s a K)
 Need a formal writing for full expression of entire agreement? Yes (not looking like
there’s a K)
 Few or many details? There are lots of details (like K)
 Large or small amount? Large probably (not like K)
 Common or unusual? Common (not like K)
 Standard form widely used? Yes (like K now)
 Action in preparation for performance? Doesn’t say, need to find out
 Reason to abandon transaction? Found better offer (looks like K)
 Extent of assurances? Fair amount... oral, draft, haven’t said that there are more steps
necessary (looks like K now)
o Is there a contract now? Depends, even if there isn’t a contract now it might be unethical and
walking away now would give us a bad reputation and they might sue
o How can we avoid being put in this position next time? Be more specific and say we’re sending
this letter over, but please understand it isn’t a bonding commitment on our part at this time.
UCC or Common Law?
 Common law supplements UCC- article 1-103 (b)
 UCC is the law, unlike the restatement which is a restatement… to the legislatures, Arkansas has
adopted
o No state has adopted revised article 2, must look at unrevised (every state legislature HAS
adopted)
 UCC article 2 does NOT cover contracts for the sale of real estate, contracts to provide services,
contracts to lease goods, problems involving trademarks, patents, or other intellectual property
o Good- defined in 2-105… something moveable, including animals (and unborn young)
 UCC article 2 DOES apply to both consumer and commercial sales of goods
o Merchant consumer, consumer consumer, merchant merchant
o Doesn’t apply to leasing an apartment, making a will, anything else that’s not a good
 If article 2 does not cover an issue, must turn to common law principles to resolve the issue, EVEN if
the contract is one that is subject to article 2
 Also must look to statutes that may apply
Convention on Contracts for the International Sale of Goods (CISG):
Differences between CISG & UCC:
 UCC is in the US but CISG Contracts for the sale of goods for parties that have places of businesses in
different countries
 UCC applies to sales of goods to consumers, CISG Excludes consumer transactions
 UCC lets parties contractually change some parts of the agreement to make parts of UCC not apply, but
parties cannot completely exclude the UCC standards. However, CISG lets parties contractually
completely exclude the provisions
Methods of Reaching Mutual Assent
Restatements § 22, don’t have to be able to recognize a particular offer and acceptance
B. Consideration
Defining Consideration
 Black’s law- consideration is the inducement to a contract- (cause, motive, influence that induces the
party to enter)
 Quid pro quo=what you get in return for what you give
 Idea that in order to make a contract promise binding, you must give something in return (promise, act,
etc)
 Gifts are not legally binding even promises to make gifts aren’t legally binding

Benefit-Detriment test (common law test): To be consideration, the promisee has to give something back that is
either a benefit to the promisor or the detriment to the promisee
 not actual benefit or detriment, but LEGAL benefit or detriment
 a promise that is legally binding even if not enforced constitutes a benefit or detriment even if it isn’t
performed yet
Statue of limitations- legislation that prohibits a plaintiff from bringing a cause of action after a certain period
has expired (protects the defendant and the courts—physical evidence deteriorates, memories fade, defendant
has structured their lives around the idea that the supposed plaintiff has not sued)
 In a suit, would file for the court to dismiss
 Date from which the contract is breached, not the date from with the contract is entered into.
 Arkansas law gives you 3 years on an oral contract from when the K is breached and 5 years on a
written contract. An action on a sale of goods contract is 4 years after the CofA has accrued.
Hamer v. Sidway
Lady who got the nephew’s rights (P) v. Executor for uncle (D)
CoA—breach of contract
Classical common law test for consideration: benefit-detriment test (not the test that most modern courts will
use, there is a subsequent modern test)
 Benefit-detriment test: To be consideration, the promisee has to give something back that is either a
benefit to the promisor or the detriment to the promise (not actual benefit or detriment, but LEGAL
benefit or detriment)
Facts:
 March 20, 1869- Story agreed to pay nephew $5,000 if he didn’t drink liquor, use tobacco, swear, or
play billiards until he was 21 in front of witnesses
 January 31, 1875- Nephew wrote uncle to tell him after he turned 21 that he fulfilled his part
 February 6, 1875- Uncle thought nephew would not use the money wisely, so he was going to keep it
and it would get interest & William agreed (wrote letter)
 January 29, 1887- Story died
 Presented claim for money to executor
Procedural Posture:
 Nephew sued uncles estate
 Trial court- Hamer won
 Sidway appealed to Special Term SC in fourth judicial department ruled for Hamer

Now at NY Supreme Court
D argues:
 no consideration- it was actually good for the nephew because it was healthier for him to live that
lifestyle
 then argued statute of limitations, but court said that the uncle’s letter amounted to a trust/trustee
relationship
Issue: was waiving his legal right to participate in activities sufficient consideration?
Holding: YES, binding contract and Hamer gets her money.
Reasoning:
 valuable consideration could consist of either some right, interest, profit, or benefit accruing to the one
party, for whom forbearance, detriment, loss, or responsibility is given, suffered, or undertaken
 to follow sidway’s contention would be to leave open to controversy whether a consideration was erased
by the degree a detriment is given by a promise also benefitted him
 it was trustee- beneficiary relationship (this eliminates statute of limitations argument)
RULE: a waiver of a legal right at the request of another party is a sufficient consideration for a promise,
not actual detriment but legal benefit or detriment (actual would mean that the nephew was actually not
detrimented, but the court ruled that it was a legal detriment)
*The test for benefit/detriment is NOT actual. It is legal benefit/detriment.
*MODERN APPROACH TEST: Bargained for Test: (used by restatement) no longer weighs the things that
are being traded but rather focus on the process of the trade (things for each other, quid pro quo) court gets its
nose out of it on whether it was fair, etc
 promises are consideration for each other, a promise is good consideration
 does NOT require a process of negotiation (haggling, etc) only that things are traded. Only requires 2
things being traded for one another.
 no case in Arkansas that clearly adopts the bargained for test, must be familiar with both because courts
use both
 2 things must be traded for one another.
 can be act (1,000 dollars if you get a hole in one), promise, forbearance (MBM has hired Godwin to
work for her for 5 years but wants to fire her. She says if I let you go and pay you money, will you
forebear the rest of the contract?), or creation-modification- or destruction of a legal relation (told
Godwin we have a contract and I’ll buy 10 cars from you for $1m and markets change, so I want 15 cars
for a million.2, we modify existing legal relation.)
 if I am going to give you 1000 dollars and I just make you do a pushup to “look like” consideration, then
that isn’t real consideration (sham, token consideration)
Most of the time, the contract will pass both tests… rarely they don’t, but there are some occasions:
 I promise to give you a gold watch hard because you worked hard this past year- but can’t count
consideration that is past. The 10 years of work were a benefit of MBM, and a detriment to worker. BUT
the promise was made after the 10 years of work, so they weren’t traded for one another. This doesn’t
pass the bargained for test, but does pass the benefit/detriment test. This promise would need to be in
place before the work is done.
 You have a reward out for your lost ring, I don’t know about the reward but I find the ring and bring it
back to you. No bargained for exchange. There IS a benefit because MBM gets her ring back. But this
act of giving the ring back was not in response to her reward because he didn’t know about it, so this
promise is not binding.
*BEFORE APPLYING EITHER TEST, YOU MUST FIRST IDENTIFY WHICH PROMISE YOU ARE
ARGUING ABOUT*
In a modern court, you will probably have to prove the bargained for test, but the benefit-detriment test is useful
even in modern courts to show that it was bargained for
Comment: History of the Consideration Doctrine
 Hamer test measures by legal detriment or benefit- problem is that sometimes what I bargained for isn’t
a legal detriment or benefit
Pennsy Supply, Inc. v. American Ash Recycling Corp of Pennsylvania
CoA: 5 counts of Breach of Contract (pg 79)
Facts:
 Pennsy Supply was subcontracted pave some a driveway and parking lot for a school district
 Project specifications called for AggRite as an aggregate and said that American Ash would provide it
for free, as well as a letter from American Ash confirming.
 Pennsy used it in December 2001 (mutual assent is finished here after letter of offer and Pennsy
accepting it by going to get it)
 the paving cracked in February 2002,
 Pennsy fixed the work during the summer of 2003 and had to dispose of the AggRite, which is classed
as toxic waste.
 Pennsy asked American Ash to pay for the removal and disposal but they didn’t
 Pennsy sued American Ash for the disposal costs, which it only happened because the product was
defective,
 American Ash saved money by giving the AggRite to them for free
Procedural History: trial court granted demurrer in favor of the defendant, plaintiff appeals
Issue: Was there consideration or conditional gift?
Holding: Consideration, remanded back to trial level to persuade trier of fact
Reasoning:
 Plaintiff has burden of proof on all elements of a contract claim
o Contract (MA, consideration)
o Breach
o The breach proximately caused the damage
o Damages
*Court uses benefit detriment test AND bargained for test
-Under common law test, Pennsy needs to prove it gave something back to American ash that was either a
benefit to them or a detriment to Pennsy. They say they gave back to American ash the cost of disposing of the
stuff.

Consideration was the fact that American Ash received the benefit of saving thousands of dollars by not
having to dispose of it themselves
 It wasn't a gift because American Ash received a benefit from the arrangement, which was the reason
they were offering it free in the first place.
 Promise induced a detriment and the detriment induced a promise. Relief of the disposal costs was the
inducement. Did the two parties every explicitly state that they were trading the 2 things? No.
 Count I: breach of contract
o Trial court said no consideration because of no bargaining and that American Ash didn’t offer it
with an intent to avoid disposal costs (conditional gift)=WRONG
Example=MBM giving someone her ring IF they walk up and get it. Does this pass a benefit detriment
consideration test? NO. That is just a gift with a string attached of walking up to the desk.
Bargained theory of consideration does not actually require the parties to bargain over the terms of the
agreement, must instead have the promise and consideration “be in the relation of reciprocal conventional
inducement, each for the other”
Quid pro quo- equal exchange
RULE: Difference in conditional gift and a contract. Might could convince the trier of fact that it was bargained
for
NOTES:
2. conditional gift example of the tramp (didn’t trade the coat for your walking around the corner)—must
look as a reasonable person. Walking around is not consideration for the coat. The walking around is
simply the string attached. The problem is a lot of contracts are worded like conditional gifts. It helps
here to use the benefit detriment test. Example=send in this card and you’ll get $100 free couponconditional gift. Example come visit me and I’ll give you the family farm=conditional gift.
7. Legal formalities- why do they exist? Sometimes it is important
Example=2 witnesses needed for a will to be valid.
Another example= a seal (wax or imprint dropped on paper)-in old times the courts said this was a substitute for
consideration. This became so informal and didn’t really serve the function of making people stop and think
anymore.
 Evidentiary- putting things in tangible proof (will example)
 Cautionary- formalities/ceremony make people stop and think about what they’re doing
 Helps courts- easy way to separate things out that are/are not enforceable
Doughtery v. Salt
Plaintiff: Charley, 8 year old boy—guardian is bringing suit on his behalf
Defendant: executor of aunt tilley’s estate- calls aunt “testatrix”
CoA: breach of contract
Facts:
 Witness was the boy’s guardian
 She said that the aunt gave him the promissory note with the words “value received” for 3,000
 She said to the nephew, “you have always done for me, and I have signed this note for you. Now, do not
lose it. Someday it will be valuable”
*State’s defense=no consideration
*testatrix must legally protect assets of the state
Ph:



Trial: jury ruled verdict in favor of Plaintiff, but judge set aside the verdict and dismissed the complaint
Appellate Division: reinstated verdict in favor of plaintiff- said note was sufficient for consideration
This court: reverses (Salt wins)
Holding: The note was the voluntary and unenforceable promise of an executory gift (Defendant wins)
Reasoning:
 Only witness is plaintiff’s witness
 No consideration
 Because he had “been a good boy” in the past, that is not enough for consideration, not enforceable
RULE:
 past consideration is no consideration,
 it was only an executory gift= promise to make gift in the future
Notes:
 Charley has to prove beyond 50/50 all of the elements
o K
 MA- yes
 Consideration?
 1st thing to do- define promise… aunts promise to charley
 Benefit-detriment test? FLUNKS on benefit and detriment. The promise in issue
is aunt promising to pay charley $3,000. Whatever charley gives back has to be a
detriment to him OR a benefit to aunt.
 Bargained for test? NO. Charley did not trade anything for the note/the money.
o Breach
o Prox cause
o Damages
 How did Charley ever win in the lower court? – on grounds that the note with the recital “value
received” created an inference that consideration was given, and Charley could reach his burden of proof
 Why do we not make those gifts binding in the law?
o Proof problems: person is often dead
o Promises often made informally-- Language is going to be pretty fuzzy, not exactly clear
o Often not thoughtful and deliberative, made under the influence of emotion or excitement of the
moment
o Donor might change his mind, is it fair to enforce if nothing is given back and the donor changes
his mind?
-Note 2 p. 114-why don’t we say that if you make a moral promise, you should be stuck with it? The law wants
to give you another step to change your mind if circumstances change. Pure promises should have a safety valve
in them, and most people think promises are allowed to be taken back.
-Also, gifts like that are often made under emotion.
-There are also proof problems with gifts because they are made orally, informally, or the person who made
them might be deceased.
Comment: The Lawyer’s Role in Counseling for Legal Effect
-Best way to get him the money would be to just hand him the money as an inter vivos gift.
Promissory note: a mere written promise that will probably not create an obligation enforceable against the
promisor’s estate (Restatement [second] § 71 rejects “nominal consideration” as a device for making a
promise enforceable)—even if you write in the note that there was consideration (even a specific type).
Lack of consideration is still a valid defense to a promissory note. This is a fake recital if there is really
no consideration. Law will look at the substance over the form of the fake recital.
Promise under seal: today, nearly every state has passed legislation affecting the legal significance of the seal.
Some have simply abolished the device altogether; others have reduced its effect to a mere presumption
of consideration, § 2.203
Executed gift: easiest way to get Charley the money-- once a gift has been “executed”- delivered by the donor
with the intent to make a gift, and accepted by the donee- it is irrevocable and may not be recovered
Testamentary gift: put it in the will, disadvantage is: he doesn’t get it until she dies AND promissory notes and
debts would take priority over things in the will AND she can revoke will
Gift in Trust: best thing that you can do is create a trust. Aunt Tillie puts money into trust right now and
Charley is the beneficiary. Title in a trust is split into a legal title and a beneficial title. Legal title goes to
trustee and beneficial title goes to the beneficiaries.
Sham/token consideration- won’t work
Motivations/emotions are not consideration
* What if aunt tilley said I will give you a promissory note for $3,000 and charley gave her $100 in return?
There is mutual assent and it passes the benefit/detriment test, but is it really bargained for?? Not really.
But in testing this, you’re weighing consideration. You would probably, as reasonable people, not be
convinced the 2 things were being traded for one another.
Batsakis (plaintiff) v. Demotsis (defendant)
Facts:
 Batsakis gives a loan of 500,000 drachmae ($25) and Demotsis promises to pay $2000 in return
 April 2, 1942- D writes letter to plaintiff promising to pay back the loan of 2000 dollars with 8% interest
at the end of the war or before
 The plaintiff sued for the money and the defendant argued that the contract was unenforceable due to
want of consideration because, in reality, the plaintiff only lent the defendant $25 (the value of 500,000
drachmae at the time).
Ph:


Trial court: summary judgment in favor of P for principal of 750 dollars plus interest and future interest
of 8% until paid/
Plaintiff appealed because he wanted the full 2000
Issue: were the drachmas enough consideration to make the promise enforceable?
Holding: yes
Reasoning:
 In essence, the court finds that 500,000 drachmae was sold for $2,000 and that this exchange was
appropriately bargained for.
 It also seems that the lie exacted from the defendant by the plaintiff that is contained in the written
instrument does not void the promise.
 The court won’t interfere because it feels that the defendant got exactly what she contracted for.
 The court upheld the judgment for the plaintiff, but increased the award to the full $2,000 plus interest
Rule: A complete lack of consideration will make a promise unenforceable, but “mere inadequacy of
consideration will not void a contract.” We’re going to let the parties duke this out.
What could she try instead?
Fraud- probably not
Duress- forced to enter into a contract, with guns etc or economic duress
Arkansas says economic restraints have to be made by the “bad guy”
Unconscionability- foreign to the conscious of the court, one sided—probably best bet
*now thinking about consideration in terms of the offer.
Adequacy of consideration- Restatements (second) 79-- courts will not weigh consideration to make sure that it
is “fair or even.” But it will apply it to the bargained for test. However, “gross inadequacy of consideration may
be relevant’ to the application of other issues, such as fraud, mistake, lack of capacity, duress or undue
influence”
9/25
*Should the mailbox rule apply to an option? Section 63 of the restatement says it should not. Acceptance under
an option contract is not operative until received by the offeror. The mailbox rule is to protect the offeree, but
with an option, offeree knows how long he has under the option already.
Plowman v. Indian Refining Co.
Plaintiffs: 13 P’s and 5 administrators of estates- didn’t have wills because they are called administrators
Defendant’s: corporations
Facts:




Employees for a long time got laid off, said promise was half of their wages for life
Facts about the promise were disputed- refinery said that wasn’t true
No dispute about the consideration, only relied on their past performances
Change in management here
Ph: district federal court level, lowest court
Why are we in federal court? Diversity of citizenship
Issue: Is the past performance of the employees consideration?
Holding: NO
Indian Refining Company’s arguments:
 No promise, Vice President never said that
o Court never decided on this, punted
 No authority of Anglin (vice pres) (agency)
o Actual? Nothing in minutes, etc that actually authorized Anglin to act
o Implied authority? Court says no, this is a big promise for someone in his position
o Manifestations to 3rd party? Maybe- but court says no
o Ratification? That’s what P’s say, because they continued to get their money… but the high ups
in the corporation couldn’t have known just from the checks being written. They had to have
known all the material facts for there to be ratification authority.
 No consideration
Company says payments were gratutitous
o Look at both promises
o b/d test? Yes
o Bargained for? No- past consideration is no consideration
Reasoning:
 Question in the facts of whether or not the employees were promised that the payments would continue
throughout their lifetimes, never makes a decision
 No ratification by anyone who has the authority to make the arrangement binding
 Can’t rely on past performance as legal consideration
 Moral consideration? Moral obligation does not form a valid consideration unless the moral duty were
once a legal one
 Act of going to get the check was simply a condition
 Has to be a statue creating a pension plan
 However, the court views the facts most favorably toward the plaintiffs, which would mean that he
didn’t promise to give them the checks for life and that there was no consideration
Rule: Past consideration is no consideration
Corporation: split between shareholders, officers, and directors—to find out if there is agency, first, look at the
articles of incorporation, then the corporate bylaws. Then, must look through the minutes of directors and
shareholders (annual shareholders meeting) and the bylaws of the directors meeting. There might also be a
resolution adopted at either of the meetings between the shareholders or the directors.
Past consideration: something already done cannot constitute consideration for a later promise. Nor can any
“moral obligation” arising out of past faithful service constitute consideration unless the “moral” duty was also
a “legal” one
Agency: In Plowman, the justice doesn’t clearly define, but makes reference to the fact that maybe those who
sent the letters and distributed the checks didn’t have the validity to do that because of agency issues
Illusory promises- makes performance entirely optional with the promisor… a prediction of future willingness
is not an expression of present willingness and is not a promise, even though phrased in promissory language
 Neither party is bound
 B’s reply to A is “I promise to do as you ask if I please to do so when the time arrives”
 I promise to spend as much time in the business as I choose
 “at will”—the promisor reserves the right to terminate the agreement with the promise at any time
without any period of notice to the promise
o I promise to deliver 299 shirts per month, but this contract can be cancelled at any time that I
choose
 2 qualifications:
o Concept does not apply to the promise under a unilateral contract because the promisee does not
make any promises
o Even when the principal aspects of a contract do not impose obligations on either or both of the
parties, a court may find consideration present in the “secondary” commitments that the parties
make
*Marshall Durbin case
-Durbin kicked his daughters off the board of directors and is now president.
-Baker is suing Durbin.
-No agency issues here because Durbin is authorized to make promises like he did to Baker.
-Legal theory=breach of contract
-Contract was a promise of compensation for 5 years but it is only triggered IF some things happen.
-Baker is asking for specific performance of the contract
-They promised to pay Baker money, BUT it is “at will” meaning they can change their mind at any point. This
is an illusory promise!! It has nothing to enforce for a future contract.
-What’s coming back from Baker? Another illusory promise to work. This is also at will—he can quit at any
time.
-At-will employment is really a unilateral contract.
-One of the conditions was that IF marshall durbin becomes incapacitated, this will come into effect. We do
have an offer on the table, even if it is conditional.
-If we can make this a binding promise, the condition was met, so this should hold up.
-It looks like we have mutual assent—there was a deal proposed.
-Argument is that here was no consideration from the company.
-They use benefit/detriment test to measure here.
-Baker’s first argument is that there is a recital in the contract that consideration was given ($10). The plaintiff
has the burden of proof, so for every element of your cause of action, you have to shove it across the 50/50
mark. This recital gives a presumption of consideration, unless the defendant puts on something to rebut. But
they don’t, so the plaintiff wins here.
-So, Baker argues that he gave a promise back. But the company says that Baker’s promises are illusory, i.e.
when baker promises not to work somewhere else. The company argues he isn’t giving anything up here
because he is an “at-will” employee. The court finds that Baker’s promise is illusory.
-Next issue=the court says his act of continuing to work was a benefit to the company and a detriment to him.
Did Baker suffer a detriment in forebearing to look for another job? No..he was an at-will employee so he did
not give up a right to which he was legally entitled. The court says he cannot establish a legal detriment.
-We have established mutual assent AND consideration (his continuing act of working was a benefit to
Durbin) therefore this is a binding legal contract and Baker gets his 5 year salary!!
Mutuality of obligation- “both parties must be bound or neither is bound”
 POLICY: unfair for one party to be stuck and not the other one
 Example: I promise to pay you 100 if you promise to pay a computer. You say I promise to deliver the
computer, but I can change my mind if I want to. Lacks mutuality of obligation- Your promise is
illusory, no consideration because your promise has no content
o Lack of mutuality of obligation is actually no consideration- it is the same thing
o Because of this, Restatements doesn’t have this test—DON’T USE MUTUALITY OF
OBLIGATION, although courts do use it
*Arkansas retains this concept and you need to be ready to address it, but acknowledge it is
controversial.
Doesn’t always require matching, corresponding promises- one side can give 10 promises and the other side can
give 1 promise—the Tyson case adopted this reasoning and Matthews doesn’t agree with it. Tyson case is
taking 1 promise (arbitration promise) and trying to match a promise from the other side about it.
Arkansas gives 5 elements of a binding contract
 Competent parties (someone has a defense of this, MBM says not an element)
 Subject matter (has to be definite and certain enough to enforce)
 Legal consideration (“legal” is inherent in the word consideration)
 Mutual agreement (yes, mutual assent)
 Mutual obligations (inherent in concept of consideration)
Comment: The Power of Agents to Bind their Principals
Agency- a consensual relationship in which one person, the agent, agrees to act on behalf of, and subject to the
control of, another person, the principal—and the principle agrees that the agent shall so act. (person can
include corporations as well as individuals) any time a nonhuman person enters into a contract they do it
through agents
 Fiduciary relationship (defined by restatements of agents)



Does NOT require consideration, only assent- it can be gratuitous
How can I legally give an agent authority?
o Actual authority
 Measured by an objective 3rd person in a similar situation
 Can be implied or explicit. In terms of what is implied, you would look at what is normal
for such a position.
 Actual authority to take actions “designated in the principal’s manifestations”—ie send
out company letters
 Agent has actual authority to take actions “implied in the principal’s manifestations”—ie
some action by the principle implying to the agent that he has some responsibility to act,
giving him a title “VP in charge of purchasing” can purchase
 Agent has actual authority to perform “acts necessary or incidental to achieving the
principal’s objectives”
 Any contract that the agent enters into in these ways, the principal is bound
 HOWEVER, authorization of an agent to make a gift of the principal’s property must be
specific
o Apparent authority- Even if the agent doesn’t have actual authority, the principal may be
bound if the agent does something to a third party to make him reasonably believe that he does
have actual authority. This is just as real as “actual” but it is created by manifestations to the 3rd
person.
 Measured by manifestations to a reasonable 3rd party
 This one usually only matters if someone appears to have the power but you actually took
it away from her.
o Ratification authority- a principal that gives no authority to agents but later learns of its agent’s
action and approves of it will be liable on that contract by virtue of such “ratification”
 Requirement is a knowing and intelligent ratification. Must know all the material facts.
 This was at issue in Plowman because the plaintiff’s claimed that because they continued
to get paid for a year, the board approved it—however the judge said this isn’t true
because the board did not have all of the facts of what was really going on
Estoppel- under agency law: principal may be estopped to deny (not allowed to) that its agent’s actions
were unauthorized, where the principal (explicit or implicit) caused a 3rd party to rely on the agent’s
authority to act AND it caused the 3rd party a detriment. Estoppel requires a change in position to X’s
detriment.
o Often manifested by an inaction by the principal?
o Difference from apparent authority: estoppel requires a change in possession to your detriment
Tyson Foods & The Pork Group v. Michael Archer (farmers)
Promissory Estoppel- the doctrine that provides that if a party changes his or her position substantially either by
acting or forbearing from acting in reliance upon a gratuitous promise, then that party can enforce the promise
although the essential elements of a contract are not present, alternative way to make a promise binding
CoA: fraud, deceit, Promissory Estoppel
Facts:
 Tyson and Pork group entered into an agreement with farmers
 1988-1991- Tyson recruited hog farmers and they entered into contracts
 august 2002-- Appellants decided to cease their operations and cancel their contacts with farmers and
informed farmers
 September 2002-- farmers filed suit in circuit court

October 2002- Tyson filed motion to stay litigation and compel arbitration based on the mandatory
arbitration clauses


September 2002-- farmers filed suit in circuit court
October 2002- Tyson filed motion to stay litigation and compel arbitration based on the mandatory
arbitration clauses
Hearing on Tyson’s motion was held in Jan 2003
Trial court denied Tyson’s motion in February 2003 because no mutuality of obligation
Tyson appealed to ark supreme court
Ph:



Issue: whether the arbitration agreement found in the “swine” contracts is a valid and enforceable arbitration
agreement
Tyson argues:
 There is mutuality of obligation because both parties agreed to submit to it
 That the contract says that they are free to pursue any remedy within the context of arbitration- court
says this is garbage
 Says the phrase is just to protect them from a default
 Ruling is inconsistent with other arbitration cases—Tyson didn’t bring this up til appeal, court not
hearing it. They disagree because “Arkansas contract law requires identical promises.”—They require
this for arbitration requirements.
Farmers argue:
 There is not because the contract gives Tyson the ability to “pursue any remedy at law”
Holding: no mutuality of obligation, farmers win
Reasoning:
 Must be decided under Arkansas contract law
 Only element of contract at issue is mutuality of obligation
o neither party is bound unless both are bound
 Arkansas precedent on mutuality requires that the terms of the agreement must fix a real liability upon
both parties
Concur:
 There is an ambiguity and therefore it is construed strictly against the drafter of the contract (Tyson)
Dissent:
 Not looking at the big picture of the agreement between Tyson and pork
 Paragraph 11 and 16 need to be looked at differently, they protect different things
Rule: neither party is bound unless both are bound
Remember that there were 5 elements to a binding contract that Arkansas applies
MBM says this is a binding contract to arbitrate, because both parties gave some consideration in response
bargained for. Headnotes 17 & 18
MBM says this court is twisting contract law
Maybe should try something else such as unconscionability (Tyson v. Hog farmers, not fair)
As a result: Arkansas legislature passed a statute that you can’t put one of these arbitration clauses in production
contracts
UCC=
This is laid on top of the common law.
2.202=parole evidence rule
2.204=
Issues in applying the concept of mutual assent
 Limiting the offeror’s power to revoke: the effect of pre-acceptance reliance
 Irrevocability by statue: the “firm offer”
 Qualified acceptance: the “battle of forms”
 Postponed bargaining: the “agreement to agree”
 Electronic contracting
Limiting the offeror’s power to revoke: the effect of pre-acceptance reliance
Option contracts: contract to keep a first contract open. Serve a useful purpose in commercial relations, by
permitting one who is considering a contractual transaction to delay committing herself to the contemplated
exchange without fearing that such delay will cost her the ability to enter into that contract, should she
eventually decide to accept it, in restatements- not in common law
 I promise I’ll hold this offer open for x amount of time
 I promise not to revoke this offer
 I promise on my mother’s grave not to revoke, I put a seal on it
 All of these can be revoked because there is no consideration given by promise
Offer for a unilateral contract:
 I promise I’ll pay you 2000 to build something in my backyard
 You come with the lumber
o This is an option contract because I am stuck, I have to keep the contract open but you don’t
o Not binding til you finish building it
o I can’t revoke because you’ve started
o You can stop at any time because there isn’t a contract formed yet
o Remember this is different in common law before the restatements came along: in the common
law you can revoke at anytime until the act is fully completed
This section explores the idea that the offeree relies on a contract to be open, but the offeror revokes it
*Jannusch= breach of an oral contract
Plaintiffs, Gene and his wife and defendants are Lindsey and her mother
-this case is following a bench trial
-plaintiffs operated a festival foods business from late april to late October in Illinois and Indiana
gene testified that on august 13, 2005 , plaintiffs had oral agreement for defendants to sell to plaintiffs for
$150,000
-defendants put $10,000 down immediately but the title to trailer remained in Gene’s name, even though
defendants were operating the truck for the rest of the 2005 season
-Louann testified she could no longer confirm making an oral agreement on aforementioned date
-Gene suggested the parties sign something but Lindsay said no because they didn’t have an attorney or any
loan money from the bank
-eventually bank did give her loan money and she admitted to, “taking possession of festival foods, receiving
income from the business, replacing equipment, paying taxes on the business, and paying employees.
-D’s returned festival foods because the income was lower than expected
-D’s said Gene asked for the trailer back
trial court said UCC governed this sale
trial court said there was a contract, but no meeting of the minds
D’s say the UCC should not apply because this is the sale of a business, not a good
-UCC 2-201
-D’s said there were essential terms missing from the above UCC
-This court says essential terms were agreed upon
-“rejection of goods must be within a reasonable time of their tender”
-remanded for plaintiffs
-Good will means above and beyond the business, such as a good reputation, etc. That was being sold here
along with the business.
-The court adopts the predominant purpose test here—THIS IS ARKANSAS LAW.
-first, to apply this test under 2-201 we need to see if this is actually a contract. The predominant part is for the
goods, but according to UCC article 2, a written contract is needed for the sale of a good over $150,000
-contract now or contract later?—just because you’re contemplating writing something down later doesn’t mean
you don’t already have a contract now.
QUAKE FACTORS to see K now or K later=
-is this usually put in writing? Yes, it’s a sale of business.
-are there few or many details? Many
-large or small amount of money? Large
-does it require writing for its form of expression? No
-did the negotiations contemplate a formal document? Yes
-when in the process was it abandoned? LATE.
-what was the reason it was abandoned? They just changed their mind.
-reliance on transaction—yes, jannusch’s really relied on it
*Court found there was a contract now and there enough to enforce.
*There was mutual assent according to UCC
(consideration was promise to sell a business and promise to pay.
Irrevocability by Statute: The “Firm Offer”
 Offers can be held open by statute
o R,2 §87
o UCC firm offer rule §2-205
o Bidding in construction
o Offer to buy stock in a corporation that isn’t formed yet
o Auction with reserve- person putting things up for auction is not allowed to take the goods back
down, he is the one making the offer UCC §2-328
 UCC has some regulations where offers have to be held open
o Seller’s freedom to withdraw from sale goods being offered in an auction in which the right to
withdraw is not reversed
o UCC “firm offer” provision §2-205
 Must be an offer
 Firm offer must be made by a merchant (UCC definition in §2-104 includes someone
who sells goods OR has knowledge of sales of goods, comments say they include anyone
who is involved in business practices- electricians, plumbers, lawyers, etc or if they
employee agents who are familiar with business practices which includes banks and
universities—would only cover the person if they are acting in that capacity, otherwise
they are considered a consumer)
 Does not have to be accepted by a merchant, the other end of the offer (offeree can be a
consumer)
 Can be to buy or to sell


must be goods
must be in a signed writing (includes any mark or signal with the attempt to validate,
thumbprint, initials, happy face, etc)
 must give assurance that it is held open (does not have to explicitly state a time frame,
does not have to use language “firm offer”). Can even be something as simple as “you
have my word that this prices will not change!”
 Three months or less, whatever is “reasonable”—after three months, the offeror is not
held under the contract anymore
 Any term of assurance supplied by the offeree must be separately signed by the offeror
o CISG gives legal effect to the apparent intention to make an offer binding
Notes:
 “I will sell you these widgets and I will not revoke it” stays open for a reasonable time if it is in writing
 “I will sell you these widgets and it will stay open for 2 months” can revoke, it must be in writing
-Code suggests that at the end of 3 months, you could renew and make another 3 month one. BUT, if supported
by consideration, it may continue so long as the parties specify.
-The firm offer option only lasts 3 months.
Problem 2-2
 Gale v. Brance
 Horses for sale, UCC §2-205
 Option contract, for “valuable consideration,” a recital of consideration is enough in an option contract
 Offeror signs it but doesn’t initial the clause for the firm offer
 Branch revokes
 Mutual assent?
o Offer? Yes
o Acceptance? Not yet
 Option contract?
o Consideration? Fake recital, enough in an option contract (in the restatements) but most states
will take the approach that its not enough
 She went around and got investors… was that bargained for? Not expressly stated- would
be hard to prove. BUT this would pass the old benefit/detriment test.
o R45? Not a unilateral contract, He wants a promise from Gale to give money, and she wantsa
promise to sell the horse from him.
o Promissory Estoppel? By §87 (2)
 Offer? Yes
 Reliance? Yes
 Substantial reliance? Yes, time and effort, to her detriment? Probably not, no one lost
money to the detriment
o Statue? UCC 2-205
 Offer? Yes
 By a merchant? Yes
 Goods? Yes
 Signed? Yes
 Assurance it will be held open? Yes, 120 days
 Available for her to accept? The problem is that it is open for 4 months, but the statute
only holds it open for 3 months so she needs to immediately tell him that she wants to
accept the offer
o Internationally, if you say you’re going to hold the offer open then you’re stuck with it
-If you’re her lawyer, tell her to accept NOW, but this is an option and at common law, the mailbox rule
doesn’t apply. You must get the acceptance to him. We’re using firm offer, though, so there might be an
argument that there is an offer.
*we’re only offering this to sale of goods
Qualified Acceptance: The “Battle of Forms”
 Forms are often used by lawyers
 Boilerplate language- stuff that gets repeated in every form
 Reduces cost to the clients and cuts down on work
 Problem is that the clerks are exchanging forms and when the two parties complete the forms, they will
probably match as to all of the important stuff, but there will also be other stuff in there (minor) that
don’t agree. If the deal goes forward it isn’t a problem
 However, if there is a problem the two sides have two different forms and they aren’t “mirrored” so it is
difficult to determine what the actual terms of the contract are
 Common law- buyer offers, seller counter offers, buyer uses the goods (implied acceptance), the terms
are on the seller’s terms
o Last shot approach, whoever sent the last form gets their terms-the contract gets formed on the
last form, and that is usually the seller’s.
o What is the problem? Doesn’t seem fair to the buyer
Princess Cruises, Inc. v. General Electric Corp.
Plaintiff: Princess Cruises
Defendant: General Electric
CoA: breach of contract (express warranty, implied maritime warranty are breach of contract theories) and
negligence (tort)
US court of appeals
D argues: the district court applied the UCC and should have used the common law and this contact was for
services rather than goods
P argues:
Facts:
 October 1994- princess issued a purchase order with terms & conditions, princess intended it to be an
offer
 GE faxed back a fixed price quotation offering a price
 GE notified princess of GE’s error
 October 28- GE faxed a final price quotation with erms & conditions
 October 31, 1994- GE sent confirmatory letter to princess acknowledging receipt of princess’ purchase
order and GE’s intent to perform the services
 GE saw surface rust on the rotor and it got cleaned and it messed up the rotor to make it unbalanced
Ph:






In federal court because it is a federal question (maritime law)
Princess filed a four-count complaint against GE
District court granted GE’s motion for summary judgment on the negligence claim
District court denied second motion for summary judgment as a matter of law
Jury returned a verdict of 4 million dollars in favor of princess
GE renewed motion for judgment as a matter of law (JNOV) arguing that there wasn’t enough evidence
to go to the jury in the first place

District court denied the renewed motion for judgment as a matter of law
Issue: whether the evidence presented was sufficient to allow a reasonable jury to render a verdict
Reasoning:
 Law of the seas doesn’t automatically adopt the UCC
 District court says UCC applies to maritime law, but admiralty law needs to be uniform. So a court mist
first determine whether or not the transactions primary purchase is the sale of goods
 Determined that the contract was primarily for services
 GE’s final price quotation was a counter offer and it was accepted by princess through their actions,
which had the limit on the amount that they could be sued for so princess gets the limited amount on the
suit and not the rest of the money that the jury used
 The verdict demonstrates that the jury impermissibly relied on a contract other than the one that
governed.
Rule:
 This is under the common law, GE got the last form there and Princess agreed to it by accepting the
services so their form was the terms of the contract
 States will sometimes separate common law and UCC
 Some will look at the main part of the contract
 Some will look at the specific part that was breached to determine if the breach was under the UCC or
the common law
 Arkansas doesn’t have a clear rule of law on which part we adopt—we look at the most substantial part
of the contract and apply that
Notes:
1. mixed sale, Arkansas seems to be following the majority—applying one body of law to whichever (service or
product) is predominant
2. comment on Restatement (second) §59 seems to suggest that a court could use the UCC approach outside of
the sale of goods by alanogy, but a pretty gutsy court would have to do this, it would be a radical change
4. international law seems to adopt the common law
*2-207
1) If A makes some sort of offer on and they’re intending to have a deal, there should be a contract.
2) If both of these parties are merchants. The general rule should be that the stuff in this form becomes part of
the deal. Unless there is some indication that the other guy has made clear that he objects to that stuff.
3) The extra stuff in the contract is just a proposal to change the deal that is already formed.
-in the situation where it is just a proposal you have to see if the other party really agreed to that stuff and only
if they agree to that should it become part of the deal. If both parties are not merchants, the extra stuff does not
become part of the deal.
*this is structured in 3 parts, and the first part is what overturns the mirror image rule. Paragraph 3 covers the
situation where the documents are insufficient to create the contract, BUT the parties go ahead and act like they
have a contract.
Common law (mirror image approach) problems
 Last shot approach- not fair
 Buyer sends a purchase order to seller, seller never sends the goods even though buyer relied on them,
seller sends a form that is not a “mirror image” there was never a contract and the buyer doesn’t have an
action against the seller
UCC §2-207
 Adapted in Arkansas
 Make sure you’re looking at unrevised article 2, no state has accepted revised article 2
 Only applies to sale of goods
 Basically says that if A makes an offer and B’s form is meant to be an acceptance, even if there are
minor changes in the forms, there should still be a contract
 If both parties are merchants, they should understand that they should read the forms and thus all the
extra stuff becomes part of the deal
 If they aren’t both merchants, those people are less sophisticated and in that case, all the new stuff in
the acceptance does not automatically become part of the deal but only serves as a proposal for new
stuff and must look and see if A agreed to it (more than just using the goods)
 Deals with 2 fact patterns, confusingly in the same sentences
o A makes an offer and B accepts with minor changes
o A and B make an oral contract but then there are written confirmations that don’t agree with the
original oral deal
 Note: offer is assumed, fall back on common law to determine if there is an offer made first—this
provision only applies to the acceptance
 Paragraph (1)- overturns mirror image rule
o Even though the offeree sends back an acceptance that has different or additional terms, there is
a contract
o Must be intended to be an acceptance
o If the acceptance differs significantly (price, etc) it is not a definite and seasonal acceptance, but
rather a counter offer
o Minor stuff: late charges, inspection rights, etc.
o UNLESS THE OFFEREE SAYS THAT THERE CAN ONLY BE A CONTRACT ON MY
TERMS! Then it is not an acceptance but a counter-offer.
 Question of fact
 B must have to very clear and explicit to alert A that there is only a contract on his term
 If he uses the phrase “only on the condition that we use my terms” it is enough… I accept
“subject to these conditions” might not be enough
 Further, if B does expressly say that it’s only his terms (thus made a counter-offer), then
A has to also explicitly agree to the terms in the counter offer- can’t accept just by the
using the product… in this case it is probably a case under paragraph 3 where the terms
cancel each other out
 Paragraph (2)- what happens to new terms of acceptance
o Additional terms- acceptance adds (minor) terms that aren’t in the original proposal
 If a nonmerchant is involved
 the acceptance agrees to the original terms of the offer and the additional terms is
treated as a proposal for addition to the contract
o must look and see if offeror agreed to it, must be explicit to be part of the
contract
 If they are both merchants
 The additional term becomes part of the deal unless:
o Limitation- The offeror is expressly limiting the contract to her terms,
saying “this is it, you can’t add anything to it”
o Material alteration- The additional term in the acceptance is a material
alteration (material alteration- comment 4- test: if the term is “surprise
and hardship” if incorporated)
o Objection- Notice of objection to the additional terms happens in advance
or within a reasonable time within notice of the terms

o Different terms- a term in the acceptance changes or contradicts a term rather than adding
(applies to merchants and nonmerchants)
 Paragraph (1) says the contract is formed still if there are different terms
 Paragraph (2) doesn’t mention different terms, but comment 3 implies that “different
terms” should have been part of paragraph 2
 So what do you do about different terms? (no Arkansas case law) Court splits 3 ways:
 Different terms don’t get coveredo different terms are a proposal to change the contract that is already entered
into, true whether the parties are merchants or nonmerchants
o courts would look for an affirmative, explicit statement by the offeror to
see if that proposal was agreed to
 Different terms do get covered because of comments and are treated same way as
additional terms
o Nonmerchant involved- the different term is a proposal for a change in the
contract and you have to see if the offeror explicitly agreed to it
o Merchant- the different term becomes part of the contract unless:
 Limitation
 Material alteration (court usually finds that a contradiction in terms
is a material alteration, but it is arguable)
 Objection by offeror (strong possibility court finds that a
contradiction by the offeree has already been objected by the
offeror with her contradictory term)
 Majority approach- knock out rule, knock out both of the terms
o Comment 6 applies to merchants, so it is probably only to merchants, but
since the comment is used poorly anyway and only by analogy—the
courts could probably also apply it to nonmerchants
o Found in comment 6
 Problem: MBM says this comment only applies to written
confirmations based on an oral contract
 Second problem: K may end with a term that neither party wanted
o Use UCC terms
o Use custom in the industry as terms
Paragraph (3)- in a situation where the forms have killed each other off but the parties go on and act like
there is a contract
o Says that conduct acting as though there is a contract is sufficient, the problem is just figuring
out what the terms are
o Use the terms on which the forms do agree, and fill in the gaps with supplementary terms in the
UCC
Practically- don’t rely on contract law or boilerplate language, negotiate an overall contract in advance—in the
future, this section will probably be reworked
Machine, Inc. v. Hercules
Plaintiff: Brown Brown - manufactures machines (Jim Ryan, Mr. Fassett- product manager)
Defendant: Hercules- bought machine (Tim Wilson- purchasing agent)
CoA- breach of contract
Facts







1975- negotiations begin for Brown Machine to sell Hercules a T-100 press
November 7, 1975 Brown submitted original proposal to Herculese with 16 paragraphs including an
indemnification clause
Jan 7, 1976- Hercules called Brown and said that Hercules had prepared a purchase order and
rejected the deposit, brown said they wouldn’t waive the deposit
Jan 19, 1976- Brown received Hercules written purchase order had language limiting terms and
conditions with no indemnity provision
Jan 20- Brown sent Hercules an invoice requesting the deposit
February 5- Brown sent Hercules an order acknowledgement with same 16 specifications of the
original proposal (including indemnity clause)
February 9- Hercules sent letter that a provision was wrong
February 16- Brown confirmed the problem and requested the change
April 14- Brown sent invoice to Hercules for final price, Hercules eventually paid
James Miller, Hercules employee, was injured and sued Brown
Brown though Hercules should indemnify and they didn’t so they’re suing





James Miller suit- settled
Brown sued Hercules for indemnification
Trial court: jury awarded Brown 157,000
Hercules appeals
Hercules wins




Ph
Reasoning:
 Brown says Nov 7 “original proposal” with the indemnification clause was an offer
o Generally a quote is not an offer
o Hercules could not have reasonably believed it to be an offer
o Language was “discuss the quote”
o Expressly stated that it was not binding unless accepted by Brown on the standard “order
Acknowlegment” form
o Even if it was an offer, the time limit expired for when Hercules responded
 Rather, Hercules’ purchase order with no indemnity provision is the offer (Jan 19)
 SO… was the order acknowledgment (Feb 5) an acceptance or a counter offer?
o Use UCC 2-207
o Most states accept that the acceptance must have the conditions clearly expressed to notify the
offeror that the oferee will not proceed with the contract unless the specific provisions are
included
o So it was an acceptance
 February 5 order acknowledgment by Brown was an acceptance
o Under UCC 2-207(2), Hercules’ purchase order specifically said that it was limited to the terms
stated, therefore the indemnity provision in the acceptance (acknowledgment) was not part of the
terms
Rule: UCC§2-207: valid contract may exist where the acceptance contains additional terms not present in the
offer, unless the offer specifically limits acceptance from including additional terms- in that case, it can still be
an acceptance but the additional terms do not become part of the contract
Just because one part of the contract is agreed to, it doesn’t mean that all of the terms are agreed to
1. is it article 2? Yes- sale of goods
2. is it a contract?- UCC doesn’t define an offer, must use common law—define an offer
a. go through each possible offer, why its not (generally a quote is not an offer, terms, requirement
of a further manifestation of intent)
b. define the offer, why it is
3. is there an acceptance?
a. Go through the acceptances, look at boilerplate language, etc
b. Must be very clear to be a counter offer
4. consideration? Yes-promise for a promise
5. now address the specific terms- if they became part of the contract
a. is the term additional or different- define
b. merchants or nonmerchants (merchants)- define merchant
i. becomes part of the deal unless 1,2,3
ii. address 1,2,3
1. limited- yes
2. material difference- surprise or hardship? yes
3. objection- yes
iii. the offeror limited the terms, material difference, AND objection- so what? It is a
proposal, look at Hercules agreed… essential because without the clear and explicit rule,
we’re back to the last shot principle (has to be more than silence, using it, etc.)
Promissory Estoppel- if I make a promise to you and you do something to your detriment relying on the
promise, we will continue with this in chapter 5—it is an alternative way to make a contract binding other than
consideration, a totally separate legal theory. Here, we are using promissory estoppel as a tool to help get the
contract formed
 Included in the first restatements, first time it was created as separate and distinct doctrine
 Drew from cases where courts were doing it already- where courts were enforcing promises with no
consideration
 Restatement designed to summarize existing case law but also to persuade the courts to start doing
something new and different, after it was in restatement, law changed because courts started using it to
make their rulings
 Restatement § 90
 Elements:
o Must be a promise, same as defined promise in contract law
o Promisor must reasonably forsee that it would induce an action or forbearance on the part of a
promise of 3rd person
o Must actually induce the action
o Only binding if injustice can be avoided only by enforcement of the promise
o Remedy may be granted for breach as justice requires (this might be just §90, I’m not sure)
 If I promise to give you 10000 and you quit your job based on that promise then that is
promissory estoppel. However if you can get another job in a week then you can’t get the
full amount of the money- but only enough for what will be fair
Promise to hold the offer open:
 Statute
 consideration
 Restatement § 45
 Promissory estoppel
o 4 elements of promissory estoppel
 Must be a promise, same as defined promise in contract law



Promisor must reasonably forsee that it would induce an action or forbearance on the part
of a promise of 3rd person
Must actually induce the action
Only binding if injustice can be avoided only by enforcement of the promise
Berryman v. Kmoch
Plaintiff: Berryman, landowner
Kmoch: real estate broker
3rd party: goertz: agricultural consultant
CoA: to declare and option contract null and void
Ph:





P filed declaratory judgment action to have an option contract declared null and void
D answered and counter-claimed seeking damages (breach of contract)
Both filed for summary judgment
Trial court entered SJ for P b/c option was granted without consideration
Kmoch has appealed to this court
Facts:
 Berryman was selling land
 Goertz talked to him about getting an option contract for kmoch
 June 19,1973- option agreement dated, consideration for the option “$10 and other valuable
consideration” to keep offer open for 120 days sent from P to D (Kmoch wrote the option contract)
 Goertz and kmoch flew to kansas and met with berryman and option agreement was signed by berryman
 $10 not paid
 July: Berryman called Kmoch and asked to be released from agreement, no definite answer
 Berryman sold land to another person
 August: Kmoch tried to buy land and found out from bank it was sold
 October: Kmoch sent him letter and Berryman responded by bringing the present action to have the
option declared null and void
 All of this happened within the 120 days
Is there a contract?
 MA?
o Offer? Yes- berryman offered
o Acceptance? Yes- kmoch tried to exercise it by going to the bank
 Consideration?
o Yes, promise to sell promise to buy
 What’s the problem? It was revoked when berryman sold the land, and it was communicated to kmoch
when the bank told it so the power to terminate acceptance was terminated
 Option contract
o MA? Yes
o Consideration?
 $10 recital- can be rebutted (aunt tillie)
 Benefit/detriment- yes (if it was paid)
 Small amounts for options can be considered “bargained for”
 However, it was simply a recital
 Time & money- no, not “bargained for”
o Statutes? No
o R45? No
o Promissory estoppel?
 Should P assume that Kmoch would have reasonably relied on it? NO
 Did he act in reasonable reliance? No, it wasn’t reasonable
 Can justice only be avoided by enforcing the judgment? No
D argues:
 even though 10 wasn’t paid, there was other consideration that he should be allowed to present at a trial
(time spent and expenses incurred)
 promissory estoppel should be consideration in an option contract
o court finds that Kmoch did not show that he reasonably relied on the promise to his detriment,
because Kmoch had no obligations
Reasoning:
 promissory estoppel?
o No because it doesn’t meet the requirements
o Kmoch didn’t change his position in reliance on the promise
 Kmoch did not promise to buy the land, thus they weren’t bargained for each other
o Motive and consideration are two different things
o Kmoch didn’t have to do anything- no consideration
 Kmoch argues that he spend time and money to try to sell the land for which he held the option, court
says that is not consideration, berryman did not promise to hold the option open for kmoch to run around
and get people to buy the land- it wasn’t bargained for
 The court goes on to explain an option contract:
o An option can be made irrevocable by action in reliance on it even though it wasn’t asked for.
o -An option may see consideration as performance, but this can’t be if neither the land nor the
optionor benefits.
 The defendant argues two cases that the court later says do not support his view.
o Tallbott: -Court explains in this case, the option was duly accepted—in Kmoch, the option-offer
was withdrawn before acceptance.
o Steel: -Court explains that there was consideration in this case, but in Kmoch the $10 dollars was
never paid during the time period
 D was notified that Berryman didn’t want to be obligated by the option and that he had sold the land—
terminated the D’s power of acceptance
 No consideration for the option contract, so the P could revoke the offer
 Judgment affirmed- P wins
Notes:
 Promissory estoppel can work outside the construction industry, but those cases are rare
o §87 (2), there isn’t a limitation to one fact pattern
 Nominal consideration- can work, must convince a trier of fact that the two things are really traded for
 Fake recitals- majority rules that a fake recital can be proven to be fake and can also be sure to show
o Arkansas takes the minority approach, might have trouble introducing evidence to show that a
recital is fake
o Restatement §87 (1)- sanctions a fake recital for an option, NOT FOR THE MAIN
CONTRACT—
 Has to be in writing
 Signed by offeror
 Must be fair terms
Here we are looking at promissory estoppel as a stand alone legal theory, rather than letting the contract stay
open, this is using promissory estoppel for the P to get relief
Uses R2, §90 (stand alone)
 Promise
 Reasonably expect to induce action or forbearance
 Promisee relies on
 Injustice can only be avoided by enforcement of the promise
o Remedy limited as injustice requires, could be to enforce the contract, could be reliance
damages—it just depends on the specific case
o In arkansas, you can argue that any of the remedies are appropriate for promissory estoppel
Pop’s Cones, Inc. v. Resorts International Hotel, Inc
Plaintiff: Pop’s cones t/a TCBY yogurt (franchisee of TCBY) operating in NJ
Defendant: Resorts International, casino hotel that leases retail spaces
Legal theory: Promissory Estoppel
Ph:



Lower court granted Resorts summary judgment and dismissed P’s complaint seeking reliance damages
(pops argued Promissory Estoppel)
Plaintiff appealed to appellate court
THIS court reversed and remanded
Facts:
 May or June 1994: president of Pops had discussions with Executive director of business development
and sales for resorts about a relocation of Pop’s to Resorts
 Resorts showed them 3 locations
 Summer 1994- As a trial, Resorts let Pops operate a vending cart free of charge
 July 6, 1994- Taube gave initial approval for the change of site
 Taube (President of Pops) and Phoenix visited site with TCBY representatives
 August 18- Taube drafted proposed addressing the leasing of the location and hand delivered to
Phoenix
 Mid September- Taube asked about status of lease proposal and told Phoenix they had the option to
renew lease at current location (Margate) no later than Oct. 1
 Later in September- Phoenix told Taube they were 95% there, Phoenix advised her not to renew the
current lease (Margate location) and begin to pack up
o Even though the chief operating officer still had to sign it
o He assured her that the COO would sign
 Late September- Taube told landlord they wouldn’t renew the lease
 October: Taube packed up old location & moved to storage, sent out designs for the new store & got an
attorney to finalize lease
 November 1: Letter from resorts to Pops about lease, saying contact later
 December 1: another letter with terms of lease and a provision that said “this letter is not intended
to be binding upon Resorts” (boilerplate lease agreement provision)





Early December: Taube met with Resorts counsel, they informed her they needed to postpone but
assured her that the rent for the space was not an issue
January- Taube tried to contact the attorneys for the resort
January 30: letter to Taube saying Resorts withdrew offer
July 5: Pops found another suitable location and opened
July 17: pops filed against resorts seeking damages based on promissory estoppel
K?:

MA?
o Offer?
 August 18 by pops
 december 1 NOT an offer by resorts, but it was not intended to be binding so there has to
be a further manifestation of assent
o so there was no offer or acceptance
o this is why Pops is not suing for breach of K but rather Promissory Estoppel




clear and definite? Not required
expecting reliance? Yes- told them to
reasonable reliance? Yes
Detriment substantial? Yes
PE
Reasoning:
 4 elements of promissory estoppel from Malaker:
o Clear and definite promise by promisor
o Promise made expecting promisee with rely on it
o Promisee must reasonably rely on it
o Detriment of a definite and substantial nature must be incurred in reliance
 Definite and substantial nature is not in R2,§90
 Talks about a clear and definite promise as described in an earlier case,
o used to expect that all of the legal elements of a promise must be met before it is clear and
definite, but that standard is considered high
o Restatements confirm this
 Pops clearly relied on the promise
 Doesn’t need to be an express promise to be binding
o This case is different than malaker because the plaintiff isn’t trying to enforce the contract that
isn’t fully negotiated, but rather just seeking reliance damages
Holding: a jury could conclude that phoenix should reasonably have expected to induce action or forbearance
on the part of the plaintiff because he told her not to renew the lease and to pack up the margate store
Complaint should not have been dismissed, remanded back for a jury trial
See the use of promissory estoppel where they tried to contract, but it is used as an alternative way to make the
promise binding—not being used to hold the contract open (that would be a suit for breach of contract)
Notes:
 Arkansas is like this, doesn’t require a clear and definite promise
 3- might see sympathy to a less sophisticated business person
 4- although pops is asking for reliance damages, the party is not limited to the remedy of reliance, can
ask for other things such as enforcement of the full promise, unless the state limits to reliance damages
Problem 2-1
 Mutual assent?
o Offer? Yes
o Acceptance? The church was silent, use §69—would have a hard time to convince the trier of
fact that that counted as an acceptance
 Consideration? yes
 Is that promise to hold the offer open binding?
o Consideration? NO
o Restatement 45 (was the first contract unilateral?)
 No it is a bilateral contract, the raising the million dollars is a condition attached to the
city’s obligation to perform
 If there is a condition, there can still be valid contract promises
o Statute? NO
o Promissory estoppel? No
 Clear and definite promise-- yes
 Promise must be made with the expectation that the promise will rely on it-- yes
 The promise must in fact rely on it-- yes
 Detriment of a definite and substantial nature must be incurred in reliance on the
promise—probably not, there is not a detriment because they haven’t even started
pledging
 Church doesn’t have much of a chanceNotes:
 §69 acceptance by silence or exercise of dominion
 Rare that silence and inaction shows that there is an intent to accept, but the restatements allows for it
Problem 2-3
 Boyston (limited partnership) v. National Bank
 MA?
o Offer? Yes
o Acceptance? Problem: is the specific way of acceptance the only way or is there another way that
she can accept? Probably not a real acceptance- if she would have called and said that she
changed her mind the bank probably wouldn’t have been able to sue for Breach of K
 Problem with a loan the bank sent a letter and promised
o Statute—
 Bank a merchant? not selling goods, but they understand the selling of goods so they are
included in the broader definition
 Signed writing? Yes
 Is it an offer to sell goods? No, money is not a good
o R 45?—not a unilateral contract
o Consideration No commitment fee
 Going to get the investors together? B/D? no
 Bargained for? No discussion of that, not convinced “keeping the offer open” was traded
for “going around getting investors”
o Promissory estoppel
 Offer? Yes
 Reliance? Yes



Substantial reliance? Maybe time and effort? To her detriment? Probably not (she could
have given the money back)… she could probably also argue that there were other
damages such as additional stress, reputation etc- but court probably won’t accept this
 What about the 25,000 that she put down? She put it down before the bank’s
promise so she wasn’t relying on it
 Could include reasonable reliance by 3rd persons possibly
Boyston accepted the loan via the phone call before Mrs. Wilson called and revoked the offer, but it
wasn’t in writing?
Contract offers a specific way to accept the offer, Boyston doesn’t do it in that specific way but rather
only makes a telephone call
Princess Cruises, Inc. v. General Electric Corp.
Plaintiff: Princess Cruises
Defendant: General Electric
CoA: breach of contract (express warranty, implied maritime warranty are breach of contract theories) and
negligence (tort)
US court of appeals
D argues: the district court applied the UCC and should have used the common law and this contact was for
services rather than goods
P argues:
Facts:
 October 1994- princess issued a purchase order with terms & conditions, princess intended it to be an
offer
 GE faxed back a fixed price quotation offering a price
 GE notified princess of GE’s error
 October 28- GE faxed a final price quotation with erms & conditions
 October 31, 1994- GE sent confirmatory letter to princess acknowledging receipt of princess’ purchase
order and GE’s intent to perform the services
 GE saw surface rust on the rotor and it got cleaned and it messed up the rotor to make it unbalanced
Ph:



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
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
In federal court because it is a federal question (maritime law)
Princess filed a four-count complaint against GE
District court granted GE’s motion for summary judgment on the negligence claim
District court denied second motion for summary judgment as a matter of law
Jury returned a verdict of 4 million dollars in favor of princess
GE renewed motion for judgment as a matter of law (JNOV) arguing that there wasn’t enough evidence
to go to the jury in the first place
District court denied the renewed motion for judgment as a matter of law
Issue: whether the evidence presented was sufficient to allow a reasonable jury to render a verdict
Reasoning:
 Law of the seas doesn’t automatically adopt the UCC
 District court says UCC applies to maritime law, but admiralty law needs to be uniform. So a court mist
first determine whether or not the transactions primary purchase is the sale of goods



Determined that the contract was primarily for services
GE’s final price quotation was a counter offer and it was accepted by princess through their actions,
which had the limit on the amount that they could be sued for so princess gets the limited amount on the
suit and not the rest of the money that the jury used
The verdict demonstrates that the jury impermissibly relied on a contract other than the one that
governed.
Rule:
 This is under the common law, GE got the last form there and Princess agreed to it by accepting the
services so their form was the terms of the contract
 States will sometimes separate common law and UCC
 Some will look at the main part of the contract
 Some will look at the specific part that was breached to determine if the breach was under the UCC or
the common law
 Arkansas doesn’t have a clear rule of law on which part we adopt—we look at the most substantial part
of the contract and apply that
Notes:
1. mixed sale, Arkansas seems to be following the majority—applying one body of law to whichever (service or
product) is predominant
2. comment on Restatement (second) §59 seems to suggest that a court could use the UCC approach outside of
the sale of goods by alanogy, but a pretty gutsy court would have to do this, it would be a radical change
4. international law seems to adopt the common law
Common law (mirror image approach) problems
 Last shot approach- not fair
 Buyer sends a purchase order to seller, seller never sends the goods even though buyer relied on them,
seller sends a form that is not a “mirror image” there was never a contract and the buyer doesn’t have an
action against the seller
UCC §2-207
 Adapted in Arkansas
 Make sure you’re looking at unrevised article 2, no state has accepted revised article 2
 Only applies to sale of goods
 Basically says that if A makes an offer and B’s form is meant to be an acceptance, even if there are
minor changes in the forms, there should still be a contract
 If both parties are merchants, they should understand that they should read the forms and thus all the
extra stuff becomes part of the deal
 If they aren’t both merchants, those people are less sophisticated and in that case, all the new stuff in
the acceptance does not automatically become part of the deal but only serves as a proposal for new
stuff and must look and see if A agreed to it (more than just using the goods)
 Deals with 2 fact patterns, confusingly in the same sentences
o A makes an offer and B accepts with minor changes
o A and B make an oral contract but then there are written confirmations that don’t agree with the
original oral deal
 Note: offer is assumed, fall back on common law to determine if there is an offer made first—this
provision only applies to the acceptance
 Paragraph (1)- overturns mirror image rule
o Even though the offeree sends back an acceptance that has different or additional terms, there is
a contract

o Must be intended to be an acceptance
o If the acceptance differs significantly (price, etc) it is not a definite and seasonal acceptance, but
rather a counter offer
o Minor stuff: late charges, inspection rights, etc.
o UNLESS THE OFFEREE SAYS THAT THERE CAN ONLY BE A CONTRACT ON MY
TERMS! Then it is not an acceptance but a counter-offer.
 Question of fact
 B must have to very clear and explicit to alert A that there is only a contract on his term
 If he uses the phrase “only on the condition that we use my terms” it is enough… I accept
“subject to these conditions” might not be enough
 Further, if B does expressly say that it’s only his terms (thus made a counter-offer), then
A has to also explicitly agree to the terms in the counter offer- can’t accept just by the
using the product… in this case it is probably a case under paragraph 3 where the terms
cancel each other out
Paragraph (2)- what happens to new terms of acceptance
o Additional terms- acceptance adds (minor) terms that aren’t in the original proposal
 If a nonmerchant is involved
 the acceptance agrees to the original terms of the offer and the additional terms is
treated as a proposal for addition to the contract
o must look and see if offeror agreed to it, must be explicit to be part of the
contract
 If they are both merchants
 The additional term becomes part of the deal unless:
o Limitation- The offeror is expressly limiting the contract to her terms,
saying “this is it, you can’t add anything to it”
o Material alteration- The additional term in the acceptance is a material
alteration (material alteration- comment 4- test: if the term is “surprise
and hardship” if incorporated)
o Objection- Notice of objection to the additional terms happens in advance
or within a reasonable time within notice of the terms
o Different terms- a term in the acceptance changes or contradicts a term rather than adding
(applies to merchants and nonmerchants)
 Paragraph (1) says the contract is formed still if there are different terms
 Paragraph (2) doesn’t mention different terms, but comment 3 implies that “different
terms” should have been part of paragraph 2
 So what do you do about different terms? (no Arkansas case law) Court splits 3 ways:
 Different terms don’t get coveredo different terms are a proposal to change the contract that is already entered
into, true whether the parties are merchants or nonmerchants
o courts would look for an affirmative, explicit statement by the offeror to
see if that proposal was agreed to
 Different terms do get covered because of comments and are treated same way as
additional terms
o Nonmerchant involved- the different term is a proposal for a change in the
contract and you have to see if the offeror explicitly agreed to it
o Merchant- the different term becomes part of the contract unless:
 Limitation
 Material alteration (court usually finds that a contradiction in terms
is a material alteration, but it is arguable)


Objection by offeror (strong possibility court finds that a
contradiction by the offeree has already been objected by the
offeror with her contradictory term)
 Majority approach- knock out rule, knock out both of the terms
o Comment 6 applies to merchants, so it is probably only to merchants, but
since the comment is used poorly anyway and only by analogy—the
courts could probably also apply it to nonmerchants
o Found in comment 6
 Problem: MBM says this comment only applies to written
confirmations based on an oral contract
 Second problem: K may end with a term that neither party wanted
o Use UCC terms
o Use custom in the industry as terms
Paragraph (3)- in a situation where the forms have killed each other off but the parties go on and act like
there is a contract
o Says that conduct acting as though there is a contract is sufficient, the problem is just figuring
out what the terms are
o Use the terms on which the forms do agree, and fill in the gaps with supplementary terms in the
UCC
Practically- don’t rely on contract law or boilerplate language, negotiate an overall contract in advance—in the
future, this section will probably be reworked
Machine, Inc. v. Hercules
Plaintiff: Brown Brown - manufactures machines (Jim Ryan, Mr. Fassett- product manager)
Defendant: Hercules- bought machine (Tim Wilson- purchasing agent)
CoA- breach of contract
Facts
 1975- negotiations begin for Brown Machine to sell Hercules a T-100 press
 November 7, 1975 Brown submitted original proposal to Herculese with 16 paragraphs including an
indemnification clause
 Jan 7, 1976- Hercules called Brown and said that Hercules had prepared a purchase order and
rejected the deposit, brown said they wouldn’t waive the deposit
 Jan 19, 1976- Brown received Hercules written purchase order had language limiting terms and
conditions with no indemnity provision
 Jan 20- Brown sent Hercules an invoice requesting the deposit
 February 5- Brown sent Hercules an order acknowledgement with same 16 specifications of the
original proposal (including indemnity clause)
 February 9- Hercules sent letter that a provision was wrong
 February 16- Brown confirmed the problem and requested the change
 April 14- Brown sent invoice to Hercules for final price, Hercules eventually paid
 James Miller, Hercules employee, was injured and sued Brown
 Brown though Hercules should indemnify and they didn’t so they’re suing
Ph




James Miller suit- settled
Brown sued Hercules for indemnification
Trial court: jury awarded Brown 157,000
Hercules appeals

Hercules wins
Reasoning:
 Brown says Nov 7 “original proposal” with the indemnification clause was an offer
o Generally a quote is not an offer
o Hercules could not have reasonably believed it to be an offer
o Language was “discuss the quote”
o Expressly stated that it was not binding unless accepted by Brown on the standard “order
Acknowlegment” form
o Even if it was an offer, the time limit expired for when Hercules responded
 Rather, Hercules’ purchase order with no indemnity provision is the offer (Jan 19)
 SO… was the order acknowledgment (Feb 5) an acceptance or a counter offer?
o Use UCC 2-207
o Most states accept that the acceptance must have the conditions clearly expressed to notify the
offeror that the oferee will not proceed with the contract unless the specific provisions are
included
o So it was an acceptance
 February 5 order acknowledgment by Brown was an acceptance
o Under UCC 2-207(2), Hercules’ purchase order specifically said that it was limited to the terms
stated, therefore the indemnity provision in the acceptance (acknowledgment) was not part of the
terms
Rule: UCC§2-207: valid contract may exist where the acceptance contains additional terms not present in the
offer, unless the offer specifically limits acceptance from including additional terms- in that case, it can still be
an acceptance but the additional terms do not become part of the contract
Just because one part of the contract is agreed to, it doesn’t mean that all of the terms are agreed to
6. is it article 2? Yes- sale of goods
7. is it a contract?- UCC doesn’t define an offer, must use common law—define an offer
a. go through each possible offer, why its not (generally a quote is not an offer, terms, requirement
of a further manifestation of intent)
b. define the offer, why it is
8. is there an acceptance?
a. Go through the acceptances, look at boilerplate language, etc
b. Must be very clear to be a counter offer
9. consideration? Yes
10. now address the specific terms- if they became part of the contract
a. is the term additional or different- define
b. merchants or nonmerchants (merchants)- define merchant
i. becomes part of the deal unless 1,2,3
ii. address 1,2,3
1. limited- yes
2. material difference- surprise or hardship? yes
3. objection- yes
iii. the offeror limited the terms, material difference, AND objection- so what? It is a
proposal, look at Hercules agreed… essential because without the clear and explicit rule,
we’re back to the last shot principle (has to be more than silence, using it, etc.
10/18/12
Problem 2-6
Mendoza- agent, Navell (supervisor)
G&P- agent, Park
Facts
 Sept. 15- Navell called park for prices, availability, and delivery schedule
 Oct. 1- Navell faxed Park order form, said delivery was to be made November 15 *offer*
 Oct. 1- Park sent fax back confirming receipt and additional terms *acceptance* (the terms aren’t clear
and explicit enough to let the offeror know that it’s their terms or no contract)
 Oct. 7- Mendoza sent G&P a check for the 10% payment
 Nov. 4- Park informed Navell of delayed delivery, it would cause Navell damages, Park replied that
G&P was not responsible for the delays and if Mendoza refused to honor the contract G&P would seek
damages
(a) Contract? Yes- because the final term is probably a material alteration, and therefore it was a breach of
contract
(b)
(c)how would it change?
 This is not a notice of objection, also probably isn’t a material change so probably the analysis would be
the same
 This is a counter offer by G&P and the acceptance by Mendoza would have to also be expressly stated,
so since Mendoza didn’t expressly agree to the counter offer, we would go to paragraph 3 and fill in the
contract with gap fillers
2-207 in oral contracts
 Included in 2-207, so if that is the fact pattern must run through 2-207 the same way
 Contract is formed orally, the question is whether the things coming (additional paperwork) later add to
or change the oral contract
 Won’t be tested over this
Comment: Battle of the Forms under Revised Article 2
 no state has adopted this-*you can set price by some sort of formula
-can also arrange for it to be set by some sort of governmental entity or a designated arbitrator, or some market
outside of a governmental entity.
-But what if you don’t set a price at all? The UCC is willing to tolerate open terms. The UCC will also plug in a
reasonable price.
-Output and requirements contracts
-The court could also say they’re going to plug in the price, but not give you your full blown damages.
*Contract now or contract later issue:
-assue that you have a bunch of different documents and all 5 material terms are hammered out. Later, we
intend to put it in a formal document. If all 5 terms are agreed upon here, but we want to put it in writing later,
When is the contract formed? Basically, it is a question of intent of the parties.
-You can’t have a manifestation of assent if there is some further form of manifestation that is required before
the contract can be entered into (I have to ask my husband first).
-If they’ve made it clear they don’t intend to be bound until formal written document, there is not contract.
-Modern courts let you form a contract now even if term number 5 is left out or not agreed upon. Common law
said NO contract here. But now that we tolerate open terms more readily, it makes the decision more difficult.
-You have to answer 2 questions
1) do they intend to contract now or later?
2) if they intend to contract now, can they? Is it definite and certain enough to be a contract now?
Related Issue that comes up in the Quake Case:
 What if the parties contemplate reducing their contract to a formal writing? When is the contract
formed? Oral communication and correspondence? Or when the formal contract is written?
 Restatement §26?
 Modern approach allows for the contract to be created before the final writing, because even if there are
terms missing it can be filled in with other terms
 Common law approach says no way because there is a term missing
 2 issues:
o When did they intend to contract? Now or later when there is an official contract
o If they intended to contract now… are the terms sufficiently definite to let them do it?
Comment: The Pennzoil/Texaco Case
 Getty Oil voted to merge with Pennzoil
 Getty issued press release declaring there to be an “agreement in principle”
 A few days later announced they were selling to Texaco
 Pennzoil tried unsuccessfully to sue in Delaware
 Sued Texaco in Texas for tortuous interference
 Texas civil jury found for Pennzoil
 Texas court of appeals affirmed
 Went through federal courts, case finally closed by Texaco paying Pennzoil 3 million
Electronic Contracting
Common law- never addressed anything like this
Question- whether the objective manifestation of assent can be done electronically
*Website? A display of goods on the website is no more an offer than a catalog, you have to make the offer and
they would have to accept it because they don’t have an unlimited amount of goods
*ebay auction without reserve- construed to be an offer
*type up an email and hit send, click the mouse on the “I accept” button—considered usually a manifestation of
assent to accept the contract
*make sure that there are no problems with the terms, etc
History- states wanted to encourage commerce but early on they were worried about electronic contracting.
Early on began to pass legislation with an encrypted message to make sure that the offer only came from a
specific person, etc. Uniform commissioners got together to find something uniform, started making UETA.
At first it was controversial, but then they decided not to mess with the substantive law of contracts but wanted
to remove the barriers involved with electronic contracting
Arkansas has adopted UETA in 2001, preempts the federal statute
 One party cannot force the other to contract electronically
 Purpose is to remove the barriers and allow for people to use electronic contracts if they choose to do so
 Only applies to parties “each of which has agreed to contract electronically”
o How do you know? Words, actions, conduct, outward manifestations can be implied that you
have agreed to contract electronically
 Just because they have agreed to contract electronically, they are not stuck forever
 Mailbox rule? UETA doesn’t specify, no case in Arkansas- argue both ways
 How do you prove the signature §25-32-109
o If he says it’s his, have a video, a key or code or pin number required—have to prove like any
other fact
Electronic terms- what are they?
 Shrinkwrap- order something and there are terms, do they become part of the deal?
o Court split
 Klocek- purchaser made the offer, contract is made when the purchaser buys the product,
run it through the battle of the forms (2-207). He promise to ship is usually viewed as the
acceptance.
 Usually the terms are not part of the deal because even if the person uses the
product, that is not enough to be an express acceptance on the part of the offeror
(purchaser)
 Brower- treats merchant made the offer, box terms are part of the offer and the contract is
not made until the purchaser keeps them for long
o No Arkansas case law, argue both- look at: was it intended to be an offer, was the reply intended
to be an acceptance—if they don’t match there is a common law problem- but if it is the sale of
goods then falls under UCC 2-207, look at what the court intended
Under 2-207
 First- is it a sale of goods
 2nd- is a contract formed?
 3rd- merchants or nonmerchants?
 4th- Different or additional?
 Then analyze
Traditional approach- Klocek approach
 Seller makes a solicitation for an offer
 Buyer makes the offer
 Seller makes the acceptance
 Terms are sent afterward as proposals to the contract
 Under 2-207 run through battle of the forms, see if buyer agreed to them (usually just using them is not
an express acceptance to the terms)
-DeFontes=
-May 16, 2003 Mary DeFontes brought suit-class action
-Dell collected taxes from them on optional service contracts, which violated the deceptive trade practices
act
-DeFontes says this contract is not taxable within the state of Rhode Island
-Dell ships throughout all 50 states but warehouses are locates in TX and TN
-DeFontes paid total of $950.51 of which $13.51 was characterized as tax
-no allegation of dell improperly retaining tax
-they say arbitration provision was part of terms and conditions agreement and they say plaintiffs accepted it
upon delivery fo the goods
-plaintiffs could review it by selecting a hyperlink on website, on invoice, or by looking at terms and
conditions in the packaging
-trial court says these were not sufficient to create a contract
-trial judge said hyperlink=inconspicuously placed at bottom of web page
-transactions involved interstate commerce
-they are placing power of acceptance on buyer when she receives the goods
-this court says it is unreasonable to expect a seller to apprise a consumer of every term and condition the
minute she makes a purchase
-they say a contract is fully formed when the consumer accepts the full terms after receiving a reasonable
opportunity to refuse them,
-“layered contracting theory”—they say the burden falls on the seller to show buyer has accepted.
Other electronic contracting issues:
Terms on the website:
 only arises on electronic contracting
 courts divide it into 2 categories:
o clickwrap: somewhere in the process of purchasing the goods or the software, you click on the
terms and you can’t purchase the item or proceed further unless you agree to the terms (clicking
on the box, may say that doing a search on the website you’re agreeing to the terms) court
usually finds that the terms are a part of the contract. You manifested objectively a willingness
to agree to them. However, t here are arguments both ways- it isn’t fair, you don’t read, but on
the other side—what else can the seller do
o browsewrap: contemplates that the terms are on the site but you aren’t forced to agree to them.
You can continue to purchase something or continue on the site without looking at them.
Problem is that there are a bunch of different names that it can be called. Format, color, etc is
not uniform. Here the courts are less willing to find mutual assent. You had the opportunity to
read them but you didn’t, so it is less likely that you manifested an objective assent. However,
there are problems both ways and arguments on both sides
Chapter 3: Liability in the Absence of Bargained-for Exchange: Promissory Estoppel and Restitution
A. Protection of Promisee reliance: The doctrine of promissory estoppel
Restatements §90- A promise which the promisor should reasonably expect to induce action or forbearance of a
definite and substantial character on the part of the promise and which does induce such action or forbearance is
binding if injustice can be avoided only by enforcement of the promise
Remedy is limited as justice requires- can be expectation damages, reliance damages
Theories:
-BoK
-PE
-Restitution
-Promissory Restitution- A convers a benefit on B then B makes a promise to pay for it and A is trying to,
through promissory restitution enforce the promise on B
Plaintiff is going to have the burden of proving preponderance of the evidence of each element for each of the
theories that she is trying to establish to win
Promissory Estoppel History- born as a separate theory in 1932 when it was included in the restatements. When
they pull it into the restatement though, they didn’t make it up the drafters were simply summarizing what the
courts were already doing. However, when they put it in the restatement it then encouraged other courts to
adopt it as a separate legal theory. In the restatements, it is called “Promise reasonably inducing action or
Forbearnce” and it is under the topic of “Contracts without Consideration” recognizing that the courts were
binding contracts that didn’t have consideration
Requires:
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Promise, as viewed as a promise under traditional contract law (can’t be an estimate, statement of future
intent, etc)
Promisor should reasonably foresee to induce action or forbearance on the part of the promisee or a third
person
Must actually induce the action or forbearance, the promisor or 3rd party must actually change their
position
o Most courts will require that the change in position must be detrimental, although that is not in
the restatements
Binding only if injustice can be avoided by enforcing the promise
o Remedy is limited as justice requires (added in the second restatement, under the first it was
expectation damages, now it is less than that) reliance does not have to be substantial anymore as
was required in the first restatements
Paragraph (2)
o Not all courts will probably adopt this part of the restatement, it is more controversial
If there is a detrimental reliance, why is that (at common law) good enough to be consideration and binding in
contract law? Difference is that the detriment is not bargained for, it results from the promise but is not what
persuaded the promisor to make the promisor
Promissory Estoppel Defined: I’m estopped from raising the defense of lack of consideration
 Arkansas case law speaks of estoppel to deny the promise
 Estoppel basically means that I’m stuck with my promise and it is binding
1. Promises within the family
Kirksey v. Kirksey
CoA: Assumpsit- old school breach of contract (duty assumed)
Plaintiff: widow of the defendant’s brother
Defendant: brother in law
Facts:
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1840- plaintiff lived on public land and defendant lived 60 or 70 miles away
October 10th 1840- D wrote P a letter saying she can sell the land and he had a place that she could live
Plaintiff moved there and she lived in a comfortable house for 2 years
D then moved here to another house in the woods
D then made her leave
Ph: Trial court found for plaintiff for 200 dollars, D appealed
Supreme court- reversed judgment
Reasoning:
 Judge says that he thinks consideration of moving there and dropping everything was enough, however
the other judges think that it was a gratuitous gift and therefore it was not a contract that was breached
1845 in Alabama- promissory estoppel wasn’t recognized
Greiner v. Greiner
Plaintiff: Maggie Greiner, mother
Defendant: Frank Greiner, son
CoA: P brought an action for forcible detention to recover the land and remove D. D filed a countersuit and
sought specific performance for P to execute a deed and convey the property to him. At trial the court entered
judgment in favor of D and ordered P to execute a deed and convey the land. P appealed.
Ph: Son sued mom to get a deed. District court ordered mom to execute a deed conveying the land to the son
and the mom appealed
Facts:
 The father died and the children were disinherited and got only 5 dollars each
 Henry (Frank’s brother) died and left considerable property to his mother (plaintiff)
 P wanted to give something to children disinherited
o Intended to give Frank and Nicholas 90 acres each
o Written contract to give Nicholas 2000 dollars
 July 1926- P had Nicholas write Frank and tell him to come because she was going to make a settlement
for him
 He came & she said she was going to pay but Frank said he wanted land not money he said okay
 September 20, 1926- Frank moved back
 Spring 1927- frank moved onto 80 acre tract
 Deed is never executed
Did she express a promise to Frank to give him the land?
Holding: She promised it, but it was unenforceable because of indefiniteness. Later, when it was segregated for
Frank and she gave him possession of it then it was definite
Reasoning:
 P argues: future act of intention, not a promise when she wrote the letter and said that she was going to
deed him the land
o Every promise is one of future intention, but she made a present promise to deed him the land in
the future—a current promise doesn’t have to say “I promise right now” look at the expression,
objective 3rd party, etc
 P argues: indefiniteness, “I’ll give you some land”
o Look at the future acts of the parties to see what they did and make the terms more definite,
sectioned off the 80 acres and moved his house there, etc
 P argues: no consideration Maggie’s promise to Frank
o Court says him moving there and fixing it up and relying on the mom is enough
Result: Mom should execute a deed to frank, judgment by district court is affirmed
The promise she made was not bargained for. It was a gift, look at her intent. Moving down to the land is the
condition to the land when you look at her actual intent- she just wanted to even out the disinherited children
When you measure the detriment for promissory estoppel, you don’t calculate in the promise—so although the
mom was giving him a 1000 dollar piece of land and he spent 500 on improving it, he is still out 500 dollars.
You look at what happens before the promise BECAUSE the other party is trying to get out of the promise
Here the court’s remedy is to enforce the entire promise, the same remedy he would have gotten for breach of
contract. Under the original restatement, it allowed for the same remedy as under a contract—today under the
new draft of the restatments, the court might give less (reliance damages) instead.
Hypo: she made him the promise, he moves there and spends $500, while he is there he builds a windmill and
he subsequently sells the windmill for 50,000 dollars. Can he still win on promissory estoppel? Under the
current restatments, most courts will require for him to change his position to his detriment—which in this case
he didn’t because he made so much money
Contracts between family members
 Analyzed differently by the courts because of policy
o Encouraging marriage
o Supporting the family
 Marriage is considered a civil contract
 Because of policy, the state can make statutes about marriage
o K that retrains marriage is void as against public policy
 Used to be against the law to make a contract with your spouse, but now you can
 Courts will scrutinize a contract more closely between spouses than between others because they think
an unfair contract will interfere with spousal harmony
 Can’t enter into a contract that prevents or restrains marriage, but the modern approach is that it is
enforceable if it is reasonable (will uphold a contract that an alimony stops when they get remarried)
 Promises to marry? Yes- there is a cause of action during an engagement
 Prenuptial agreement- idea to settle what rights will be in the event of divorce, courts first struck them
down as against public policy (statutes about dividing property in divorce)
 Property settlement/ child custody agreement- at divorce, court can alter it
 At divorce, some are adopted as part of the decree, some are not
 Cohabitation agreement- unmarried people try to set rights if they split, at first courts didn’t uphold
these
Wright v. Newman
Plaintiff: Kim Newman (mom)
Defendant: Bruce Wright (dad)
CoA: recover child support
Facts:
 DNA showed he was not the father of her son
 Trial court said that he had to pay for both children because he signed the birth certificate, gave him his
last name, and established a relationship, thereby denying the mom the opportunity to find the real dad
Reasoning:
 D argues: trial court erred in legal conclusion that facts authorized obligation for him to provide child
support for the son, he was not the biological father and did not adopt the son
 Jurisdictions have required child support in situations “based upon parentage or contract”
 There is no contract, so they use promissory estoppel
 Held himself out as the father for 10 years
Concurrence:
 Responding to the dissent which said that Newman didn’t rely upon the promise to her detriment
 Clear that Wright should have known that Newman would rely on his promise
 It is reasonable for her to have relied on that promise
 Also he is morally obligated
Dissent:
 The issue of promissory estoppel was not brought by either of the parties
 Plaintiff must show that she relied on the promise to her detriment
 Says she should get child support from the natural father, newman hasn’t shown that she doesn’t know
who he is or that she couldn’t get child support from him
 Wright says he didn’t support the child the last 7 years, he is only morally not legally obligated to
support him
K- mutual assent?
 Offer- yes, acted like, gave last name, established relationship
 Acceptance- yes
 Consideration- she gave up the right to find the biological father
o Benefit detriment- benefit to him? yes- detriment to her? Yes (trying to find the real father, going
out to get a job)
o Bargained for? No indication that there was discussion, although that isn’t required- the two
promises aren’t made for each other… no contract
Promissory Estoppel
 Comes from statute in Georgia- this is odd, Arkansas doesn’t do this
 Promise? Yes
 Reasonable for father to expect reliance? Yes- he should be aware of how she would respond if he did
this
 Did it induce the action? Yes
 Was it detrimental? Although §90 doesn’t say this, we read it in because of justice and fairness in
requiring it to be enforced, it will be harder to bring it now than it would have been if she would have
tried to find the father then
 Can injustice be avoided only by enforcement? This is debatable, the court made the promise completely
enforceable—but there are possible other remedies
o If there are benefits AND detriments, this part is where it can be made just
Notes:
6. citing morality and your own version of what conscious requires, it weakens the courts opinion, makes it look
like it is based on their own opinions rather than the law
What theories could work for child support?
 If he was the biological father
 If he adopted the child
 Virtual adoption (act like the child is yours, the child can inherit when you adopt)
Charitable Subscriptions (gifts)
 R,2 § 90(2)- makes a charitable subscription binding without proof that the promise induced action of
forbearance
o MBM doesn’t think courts will accept this approach
 Undercuts contract law, undercuts promissory estoppel law
 I promise to make you a gift and you accept it and I change my mind. Can I do that?
o Yes no consideration
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Different than a completed gift (intent, delivery, acceptance)
Promises to make gifts aren’t enforceable under traditional contract analysis
Can we change that?
o Charity- you give the charity 1000 dollars and they give you a mug
o Doesn’t pass the bargained for test
o You give 1000 dollars and they name the gift after you, could be argued as something that is
bargained for or simply as a conditional gift
o A court may be able to stretch the rule for policy reasons to support chartities
o Another way to make a charitable promise binding:
 Matching deal, Ms Oakley gives 1000 to the red cross and promises that to MBM and
MBM promises to her that she will also give 1000 to the red cross
 3rd party can probably enforce that
What about promissory estoppel?
o You promised us 1000 and we go build something in reliance on that
 Promise? Yes
 Reasonable foreseeable we will rely on it? Yes
 Relied on it? Yes
 Binding justice avoided by enforcing it? Yes
o Is it a good idea to sue? No it damages your reputation
Should we make a statute to make people pay their promises?
o Might discourage people from making the promises
Promises in a Commercial Context
Enforcing commercial promises in the absence of consideration
Katz v. Danny Dare, Inc.
P: Katz
D: Danny Dare, Inc., agent- Harry Shopmaker
Facts:
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Katz worked for Dare from 1950-1975
Katz was injured while working and when he came back, he wasn’t as effective and cost Dare money
Shopmaker began discussions about retirement but Katz didn’t want to
Shopmaker offered a pension of $10,500 and katz refused
Shopmaker sent him a letter saying that retiring would be more beneficial to him, including $13,000
annual pension plus SS and some money for part time employment (not by Dare)
Katz retired and got a letter about the pension
Started working for another company then started working for Dare a half-day a week
Dare reduced payment to 250 a week then stopped completely
Ph:
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Katz filed 3 suits against Danny Dare seeking pension payments
Two resulted in favor of Katz, but a request for trial de novo was filed and they were assigned to a
circuit judge for trial
The other was transferred to same judge and they were all consolidated
Heard before the judge without a jury
Judgment entered in favor of Dare
o No consideration by Katz (promise or forbearance)
o Did not suffer a significant change in position when he retired
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o Distinguishes from Feinberg
Katz contends promissory estoppel
Katz wins
Reasoning:
 Doesn’t matter that he was given the option to be fired, he retired
 Says that Feinberg is not distinguishable
 His detriment was the amount he was receiving by working compared to the pension amount
 This is the only was injustice can be avoided because he is too old to begin working
 Dare argues that it isn’t promissory estoppel because of the threat of being fired
o But court compares it to General texel, where there were similar facts and the court used
promissory estoppel
 Court distinguishes from Pitts
o Distinction is that pitts did not elect to retire based on a promise, but the company told him that
he was retired and gave him some money
 Katz wins
K?
Agency problems? no
Offer- yes by DD
Acceptance- yes not argued
Consideration- work he did for 20 years (no-past consideration), thankfulness (no-motivation)…
Forbore working (b/d test? No- because it was an employment at will so he didn’t have the legal right to work)
(bargained for? Looks like it is- there is a negotiation process) however, he doesn’t argue contract, probably
wouldn’t have won because it wasn’t the legal right
PE?
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Promise? Yes
Does DD reasonably expect reliance or forbearance? Yes that’s why they did it
Did it induce action or forbearance on part of Katz? Yes, he retired
What is the injustice? Court says it’s the net of the promises, however MBM says it is only the detriment
measured by the one promise, if he would have kept working for $23,000
Injustice can only be avoided by enforcement of the promise—“thus the element that injustice can be
avoided only by enforcement of the promise is present, because Katz cannot now engage in a full-time
job in return to the earnings which he gave up in reliance on the pension”
o We don’t have to enforce the promise, there could be other ways to enforce justice—the remedy
is flexible
***all promissory estoppel requires is that you give up something to your harm—YOU DO NOT HAVE TO
BE LEGALLY ENTITLED TO IT, it is a different test than what it is for consideration
***employment at will- there isn’t a legally entitlement to work- you can quit or be fired at will
Aceves (plaintiff and married woman) V. U.S. Bank N.A.
-california court of appeals 2011
CofA= quiet title, slander of title, fraud, promissory estoppel, ad declaratory relief
-aceves got loan from option one mortgage corporation on april 20, 2006
-borrowed $845,000 on a 30 year loan, monthly payment was $4,857.09
-March 25, 2008 option one transferred entire interest under the deed of trust to U.S. bank, national association
-then U/S bank designated quality loan service corporation as trustee under the deed of trust
-Jan 2008, Aceves could no longer afford the same monthly payment
-March 26,2008 quality loan service recorded a “notice of default”
-then Aceves filed for chapter 7 bankruptcy
-U.S. bank told her they “would work with her on a mortgage reinstatement and loan modification”
-she then submitted documents to them for its consideration
-wanted to then convert her chapter 7 bankruptcy to chapter 13 and rely on her husband’s finances to save their
home
-U.S. bank filed a motion to proceed with the foreclosure
--november 12, 2008-A’s attorney was contact by American Home who wanted to talk to A directly to “explore
loss mitigation possibilities”
-she relied on us bank’s promise to work with her to reinstate and modify the loan—and therefore did not
oppose the motion to lift the bankruptcy stay and decided not to seek relief under chapter 13.
-stay was lifted
-December 9, 2008 Aceves’ home was schedule for public auction by US bank for jan 9, 2009
-Aceves contacted bank about negotiations and they told her a negotiator would contact her on jan 13,2009
which was after her house was scheduled to be auctioned
-woman called and told her American home had made a mistake
-US BANK FILED DEMURRER attacking each CofA separately-aceves opposed this
-aceves argued she and her husband could have saved their house through bankruptcy
-2009, trial court sustained the demurrer
-DID THEY SAY THERE WAS A CLEAR, UNAMBIGUOUS PROMISE?
-aceves definitely relied on the promise
-aceves reasonably relied on the promise
-the courts says PE survives at this stage of the proceeding.
Note 2:
 You can net all of the detriments to come to a detrimental reliance- however you can not net the benefits
with the detriments without enforcement of the promise
 Detriments don’t have to be money damages (can be conditions of employment, further distance to
travel to a job, having to move)
 Promise has to be made before the detriment chronologically because the promise must induce the
detriment
Mailbox rule? Doesn’t apply in promissory estoppel- limited to acceptance in contracts
Note 4: what does promissory estoppel do to formalities? If you allow for it to be an alternative to enforce
contracts, you are allowing people to get an end around contract formalities—it’s a bad thing if you think those
formalities are important and it makes people stop and think about what they’re doing, creates evidence for the
court. However, if you see promissory estoppel as a safety valve when its more fair to enforce the contract, we
think its okay to do an end around the formalities
§90(4)- hard cause of action to establish, materials on 250-253 show its often not successful
*Now we are moving to talk about PE as a way to hold an offer open.
-you can use promissoru estoppel to create and prove a breach of contract CofA
James Baird Co. v. Gimbel Bros, Inc.
Offer (& revocations): effective upon receipt
Acceptance: effective upon dispatch
Plaintiff: James Baird Co, contractor in Washington (general contractor)
Defendant: Gimbel Bros, Inc., NY merchant of linoleum (subcontractor)
CoA: breach of contract of sale
Ph: parties tried the case to the judge under a written stipulation (because nothing is disputed in the facts) and he
directed judgment for the defendant, this court affirmed
Facts:
 D sent employee to Pennsylvania to compute the amount of linoleum needed- messed up and only
reported half of it
 12-24: D sent letter to prospective contractors offering to pay for the linoleum at 2 lump sums depending
upon the quality
 Letter said it was offering the prices for reasonable, prompt acceptance after the general contract has
been awarded
 12-28: P received letter
 12-28: P put in a bid for the linoleum based on prices quoted by D
 12-28: D learned of mistake and withdrew his offer by telegraph (would normally revoke the offer
because the P had learned of it)
 12-30: P’s bid accepted by the state
 12-31: written revocation by D
 Jan 2: P formally accepted the offer
 P sued for breach of contract
D argued: he revoked the offer before it was accepted—therefore no mutual assent, no contract
P said: he relied on it, promissory estoppel
Issue: was there a contract?
 Promise by Gimble brothers? YES
 Promise to hold it open? YES
o Consideration to hold it open? NO
o Restatement 45? Doesn’t apply- only if the main contract that the option contract is trying to
hold open, has to be unilateral
o Statute? NO
o Promissory estoppel (Restatement §90)— argued before the court
 Reasonably expected to use it
 Must be a promise, same as defined promise in contract law
 Promisor must reasonably foresee that it would induce an action or forbearance on the
part of a promise of 3rd person
 Must actually induce the action
 Only binding if injustice can be avoided only by enforcement of the promise
 Remedy is limited as justice requires
 This looks like promissory estoppel, but court says promissory estoppel can’t be used in
this case
Holding: NO
Reasoning:
 Bilateral contract?
o Not good because acceptance wasn’t manifest by making a bid based on the offer
 P tries to sue for promissory estoppel
o Says we can’t use promissory estoppel here, doesn’t apply—can’t extend it to substitute for
consideration where the parties contemplated consideration




o No because the D offered to deliver the linoleum in exchange for the P’s acceptance, not for his
bid
o When the plaintiff promised to take and pay for it
It seems entirely clear that the contractors did not suppose that they accepted the offer merely by putting
in their bids
Gimbel Brothers offered to deliver the linoleum in exchange for James Baird’s acceptance, not in
exchange for James Baird’s bid on the general contract.
If James Baird promised to take and pay for the linoleum, then promissory estoppel would be applicable.
Much of this is policy, industry standard
This decision was by a respected judge so it took a long time for a court to say that promissory estoppel can be
used to hold an option contract open
When the general contractor uses the subcontractors bid in the general bid, this does NOT constitute acceptance
(this is still good law)
Drennan v. Star paving Co.
Plaintiff: Drennan, general contractor
Defendant: Star Paving Co., subcontractor
CoA: breach of contract
Arkansas adopts this, modern approach
Facts:







July 28: P preparing bid
Secretary received a big by D
P made his own bid accordingly
P awarded contract
July 29: P visited D and D informed P that they had made a mistake and refused to do the job
P says sorry I can’t let you out
P found another company to do it for 3,000 more than D’s bid
Ph:



TC found that D made a definite offer and plaintiff relied on it. Entered judgement for the plaintiff in
the amount of 3,817
D appealed
This court affirmed
D argues: no enforceable contract b/c he made revocable offer and revoked it before P communicated
acceptance
Issue: did P’s reliance on the bid make D’s offer irrevocable? (ie can we use promissory estoppel to hold the
offer open?)
Holding: YES
Contract?:
 Offer: yes, by star paving on the 28
 Revocation? Yes, on 29th, looks like it
 Acceptance?
o Not when the general contractor used the subcontractor’s bid in his general bid (still good law
from James Baird v. Gimbel Bros)


Promise to hold the offer open? Yes, it is implied
o Star pavement didn’t say that it was revocable
o Use restatement 45, unilateral contract a promise to keep it open is implied—so it can also be
implied here, only use by analogy through another fact pattern
Is that promise to hold the offer open binding?
o Consideration? NO
o Restatement 45 (was the first contract unilateral?) NO
o Statute? NO
o Promissory estoppel? YES
 Must be a promise, same as defined promise in contract law—promise in this case is
reasonably inferable from the facts
 Promisor must reasonably foresee that it would induce an action or forbearance on the
part of a promisee of 3rd person--yes
 Must actually induce the action
 Only binding if injustice can be avoided only by enforcement of the promise
Reasoning:
 D presented bid with knowledge that it could be used by the plaintiff and probably would
 D could forsee the harm that would ensue from an erroneous underestimate of the cost
 Motivated by his own business interest (good for him if P chose his bid)
 Distinguishes from cases where the mistake was known or should have been known by the offeree
In most cases it is not reasonable to rely on the promise, in this fact pattern with the contractor and
subcontractor it is reasonable, in next case they try to use the same thing and it doesn’t work between 2 private
parties
Mistake:
 If both parties are mistaken about some fundamental material fact the law will let you out
 If only one party is mistaken the court won’t let you out generally UNLESS the other party knew of the
mistake and wasn’t saying anything to the mistaken party because they were trying deceitfully to get a
better deal----IF MISTAKE IS PALPABLE (other side is aware of it), you can get out.
Rule: promissory estoppel because general contractor will obviously rely on subcontractor—there are
exceptions:
 Defendant’s bid had “expressly stated or clearly implied that it was revocable at any time before
acceptance
 Inequitable conduct by the general contractor may preclude the use of promissory estoppel “bid
shopping”
 If the general contractor knew or should have known the bid to be in mistake
Promissory Estoppel: explained in R 2 § 90
Drennan vs. Baird- contradictory?
 Most cases now accept drennan’s approach
 Absent a staute, it seems generally true that under Drennan, the subcontractor will be bound to its bid
while the general will incur no liability if instead it chooses to “shop arround”
Comment: Contract law and business practice:
 Tried to change when the contract was actually formed, when the general used the bid-etc

However, the courts still seem to accept that the contract isn’t formed until after the general contract has
been accepted
Restitution
A confers a benefit on B and tries to recover from B on ground of restitution
If you conferred a benefit on B in circumstances where it is fair and just for them to have to pay, that B should
be required to give compensation
Elements- (1) A has recovered a benefit (2) it is just and fair for A to recover
 Where did it come from? A separate theory from contract
 Based on the theory of unjust enrichment- that when someone enriches a person that person should pay
for it
 How can it happen?
o Mistake- your foundation is messed up and I have been hired to fix the foundation on the house
next door but I accidently come to your house and fix your foundation- in certain circumstances
this may require for you to pay for my services
o May happen if we attempted to contract and it fell through- if I had a contract but it was void as
to public policy (I wasn’t allowed to do that work in your neighborhood) but you still got the
benefit and I still did the work
 Allows for breadth and flexibility
 Can you plead K, PE, and Restitution- if the facts fit all three then yes and you should
 Goes by a variety of language:
o Quasi contract- label the common law courts began to affix to the doctrine when it started to
arise, because it is like a contract but isn’t one
o K implied in law- described by early courts to express that there were no express words or
anything that can be implied in their contract, but in law it can be implied
o Quantum meruit- “as much as he is entitled to” label for the common count at common law,
(Arkansas uses this)
o Unjust enrichment- principle/policy behind all of this
o Restitution- act of restoring to A the benefit that she has conferred on B
 Which term should be used? Probably Restitution—it was designed to do away with the problems that
were created by “quasi-contract” and “K implied in law” because those make it seem as though there is a
contract
 Arkansas uses the term “quantum meruit”
 Restatement of Restitution states the basis of liability- “a person who has been unjustly enriched at the
expense of another is required to make restitution to the other”—this requires 2 elements:
o (1) benefit conferred on B
 Comments to the restatement are very broad as to what can be a benefit—“a person
confers a benefit if he gives to the other possession of some interest in money, land,
chattels, or chose in action (legal right)” also includes “performing services beneficial to
or at request of the other” or “relieving of some duty or obligation” or “in any way adds
to the others security or advantage” “not only where he adds to the property of another
but also where he saves the other from loss”
 “any advantage to where a person must ordinarily may pay is a pecuniary advantage, but
is not so necessarily so limited such as when a physician saves your life”
o (2) circumstances render it unjust for him to keep that without compensation
 Decision by the trier of fact- look at what factors a court should consider, what the
benefitting party was going to do, etc.
 If it’s a pure gift- can’t recover for it in restitution
 Good hearted good Samaritan- can’t recover
 A can only recover from B if she expected to be paid (even if it was for someone
else)
 One factor that may indicate that there is an expectation to be paid is whether or
not the person is a professional- a professional would expect to be compensated
 How hard/long it took to convey the benefit- look at the risks, amount of time, etc


Where are situations where this happens?
o Mistake- even then its not automatic
o Aid rendered in emergencies- no time to contract, only way to render service is without a
contract
o Supplying necessities of life
o Work performed under an unenforceable contract
o Discharge someone else’s duty-i.e. supporting their child, or paying their taxes
What is the remedy?
o The value of the benefit conferred- fact question (is it what it cost me to do it, or is it what I
would have charged someone if I was doing it for business)
 Based on reasonableness
 What other people in the industry/geographical area would charge for the same thing
 Whether the person rejected the services to begin with and you did it anyway (policy of
sticking your nose into other people’s affairs)
o May be the same price as if there were a contract, but the trier of fact will look to see what is
just, fair, and reasonable
Credit Bureau Enterprises, Inc. v. Pelo
P: Credit Bureau
D: Pelo, Cerro Gordo county (dismissed as a defendant at the district court level, liable for mental health
services provided to Pelo under the Iowa code if it is a public hospital)
Theory: Restitution
Facts:
 Pelo had an argument with his wife and then called and threatened to hurt himself
 Taken to Ellsworth Municipal Hospital
 Magistrate found probable cause that Pelo was seriously and mentally impaired and entered a
hospitalization order on January 8 requiring him to be detained in the psychiatric unit
 Pelo refused to sign a hospital release form to make him or his insurance company responsible for the
bill
 Later he says that he was forced to sign the form by a nurse
 Pelo’s wife filed an application for involuntary hospitalization, but the referee found that he didn’t have
the elements to be requires involuntary hospitalization
 Hospital sought compensation
 Pelo refused to pay or authorize his insurance to pay
Ph:



Hospital assigned claim to credit bureau enterprises for collection
Credit bureau sued Pelo in district court and won
Pelo appealed
Reasoning:
 Pelo claims:
o Didn’t agree for the services
o Signed the paper under duress
 District court associate judge concluded:
o No statute to make the county pay bc it was a private hospital
o Policy reasons- if he gets the services he should pay for them
o Judgment in favor of credit bureau




District court judge affirmed
o Also entered in the alternative that Pelo was liable for payment of the bill under a theory of
contract implied in law or quasi-contract because he benefitted from the hospitalization
Supreme Court of Iowa:
o Who pays? Not the county under statutory law
o Examines implied contract theory:
 Contract, restitution, unjust enrichment
 “where one renders services of value to another with his knowledge and consent, the
presumption is that the one rendering the services expects to be compensated an the other
implies a promise to pay
 Restatement of restitution- “a person who officiously confers a benefit upon another is
not entitled to restitution therefore”
Due Process violated? Court says no because he went through all the necessary steps
Iowa constitutional protections about contract rights? Not applicable because this is restitution not
contract.
Affirmed
Rule: requiring a patient who is involuntarily committed to a private hospital to pay for medical services which
the patient receives does not violate the patient’s right to due pros or constitutional right to contract
Note 2: aid in an emergency- you can get restitution for that even if the guy never wakes up, there is case law in
Arkansas where the guy had emergency surgery even though he died- the estate argued that there was no benefit
because he died but the court said that trying to save you is a benefit
What is an implied in fact contract- an actual contract based on your words or actions
Implied in law is different- there is no basis for a contract (restitution)
What is the difference? Who cares? Changes the remedy, statute of limitations is different, constitutional rights
are different,
Note 4: restitution can also lie when the plaintiff preserves your things (I jump in the river and get your things
out so they aren’t damaged)
Restatement §117- one of the requirements is that “he intended to charge”—this is built into the current
restatement version of what you have to show to recover.
Note 5: there is an economic advantage, reason—we are trying to create the same situation where a contract
would have been entered into in a special situation where the parties didn’t have the opportunity to enter into a
contract where the parties didn’t have the chance to contract
Commerce partnership 8098 Limited Partnership v. Equity Contracting Company
P: Equity- stucco and surfacing subcontractor (president-agent)
D: Commerce- owner of a building, worked with a general contractor (World Properties)
CoA: “Quantum Meruit” unjust enrichment, Commerce didn’t pay the general contractor who in turn didn’t pay
equity
Ph:

Non jury trial
Equity argues:
 Is owed $17,000
 General contractor & commerce inspected equity’s work
 Commerce gave a punch list for remedial work when it was completed
 Equity asked for partial payment and Commerce wouldn’t do it
 Equity didn’t complete the punch list
 General contractor went bankrupt
Commerce argues: it paid the general contractor in full
 Not enough evidence to be “quantum meruit” which the attorney said meant contract applied in fact, the
trial court denied this argument
 Commerce testified they negotiated 256,000 and paid $223,000 to the general (World)
Reasoning;
 Contract Implied in fact and Quasi Contract
o Implied in fact- looks at factual circumstances, can be enforced even when a defendant has
received nothing of value
o Quasi contract- looks at obligation created by law no matter the parties’ assent, requires:
 Plaintiff has conferred benefit on defendant
 Defendant has knowledge of the benefit
 Defendant has accepted or retained the benefit
 Circumstances are such that it would be inequitable for the defendant to not pay
o Confusion is over the definition of “quantum meruit”
o Conclusion: equity was asserting a quasi contract claim, not implied in fact
 A subcontractor’s quasi contract action against an owner
o Maloney v. Therm Alum Industries Corp.
 No dealings between owner and subcontractor
 Court held subcontractor could maintain quasi contract against the owner if it proved that
the subcontractor had exhausted all remedies against the general contractor and still
remained unpaid and that the owner had not given consideration to any person for the
improvements furnished by the subcontractor
 Court didn’t uphold claim
o Gene B. Glick Co
 Overruled a section in Maloney
 Reversal is required under the facts of this case
o Because Commerce paid the full amount already, the court should have heard the evidence of the
64,000 that they paid
Judgment is reversed and remanded with instructions to the court
K?
Problem because there wasn’t a direct contract between Equity and Commerce
PE?
Not a promise made by Commerce to Equity that was made before Equity did anything to make equity rely on
Equity asserts restitution
Lien statutes- includes material & mechanics liens, Arkansas lien laws aren’t clear
Idea is to give advance notice to the owner and protect the worker from not getting paid for his work or the
owner from having to pay price
Note 1: some courts don’t let the subcontractor get paid in restitution regardless because if you allow a direct
suit, you’re depriving the owner the right to work out the problems with the general contractor. The owner does
not have a direct contract with the subs so it’s not fair
How can equity prove whether commerce paid or not? Court order, process of discovery
Does the landlord have to pay when the door is messed up in my apartment?
-is there a benefit conferred? Yes
-is it fair for them to have to pay for the door to get fixed? Yes, it is the landlord’s duty to provide the door, it is
just and fair to make them come and pay
Watts v. Watts
Plaintiff: Sue Ann Watts
Defendant: James Watts
1987
Rule: unmarried cohabitants may raise claims based upon unjust enrichment following the termination of their
relationship where one of the parties attempts to retain an unreasonable amount of the property acquired through
the efforts of both
Facts:
 Lived together for 12 years and had 2 children
 She was 19 when they met, lived with her parents, and worked full time as a nurse’s aide in prep for a
nursing career
 He persuaded her to quit her job and move into an apt with him
 Acted like husband and wife, held out to others that they were
 She contributed child-care and homemaking services and personal property- she worked as his office
receptionist, typist, and assistant bookkeeper and started a business
Ph:




Plaintiff filed in trial court but it was dismissed for lack to state a claim
o Said the legislature, not the court- should provide relief for cohabitated parties who weren’t
married in seeking property
She appealed
Now it is at supreme court as case of first impression at the pleadings stage— no trial
Plaintiff argues:
o Entitled to equitable division of property under 767.255 (NO)
 Claims they should be treated as a family because legislature changed the title of the act from
“marriage” to “family”
 Uses Warden with similar facts, but court points to many other cases where there was the
opposite holding
 Court looks at legislative intent, say that legislature intended it to apply to couples who were
married
o Defendant is estopped to assert as a defense that they are not married (NO)
 Court uses same reasoning from the previous cause of action
o Entitled to damages for defendants breach of contract (YES)- expectation damages
 Court won’t enforce a contract that violates public policy
 D argues that the contract couldn’t have been recognized:
 Contract claim contravenes the family code
o Uses Hewitt
o Court distinguishes Hewitt as Illinois case and this as Wisconsin
 Legislature should determine the property and contract rights, not courts
o Legislature gives guidance to courts, but courts can make decisions and have
traditionally determined contract law by common law
 Relationship was immoral and illegal and against public policy
o An illicit relationship does not make their bargaining illegal as long as the
relationship and bargain are separate
 Court finds that she should be able to argue this claim in a court
o Unjust enrichment, implied in law contract (YES)- value of benefit conferred (can be measured
differently—add everything up and get specific money for each task OR add everything up and
divide equally)
 3 elements:
 A benefit conferred on the defendant by the plaintiff
 Appreciation or knowledge by the defendant of the benefit
 Inequitable for D to keep benefit without paying P
 Court uses Steffes- even if there is an illicit relationship, one party shouldn’t benefit more
than the other
o Partition (YES)
 Property/partnership argument
 Court says the plaintiff has made a sufficient allegation to be able to present this argument to
the court
Holding: Facts are sufficient to state a claim based on breach of express or implied in fact promise, unjust
enrichment, & partition reversed and remanded
Note 3: should someone step in and decide how unmarrieds should divide property?
Common law marriage recognized- doesn’t matter because treated the same as a marriage
Arkansas doesn’t accept common law marriage but will accept one from another state
Arkansas has no case law on this
Some states have anitipalomony statutes
Note 5: one family member provides services to mother and mother promises to take care of family member but
mother doesn’t include that in the will
K?
Mutual assent? Yes
Consideration? No
 Must be a benefit to the promisor or a detriment to the promisee, passes the benefit detriment test
 Not bargained for, past consideration of the sister helping the mom then at the end of her life the mom
promises
 What if mom makes promise before she helped her? Problem there is the bargained for- it is hard to
convince a court that you only took care of your mother for money
PE?
If mom made the promise before the care
 Promise made? Yes
 Reasonably foresee that she would rely on it? Yes
 Must have actually relied on it. Yes
 Must be fair and just to enforce the promise. Maybe?
If mom made the promise after the care- mom would not have reasonably forseen that she would rely on it
R?

Benefit conferred? Yes


Knowledge? Yes
Fair and just to make the mother pay? Probably not
So- there is a problem in enforcing these kinds of promises
ARKANSAS- in order to prove an oral contract to include someone in a will, the evidence has to be “clear,
cogent, and convincing” and at Ark. Code. Ann. §28-24-101 a contract to make a will can only be made by a
writing
Promissory restitutionfalls somewhere between contract and restitution, a 4th potential theory that can be used… includes a material
benefit
A confers a benefit on B
THEN B promises to pay for it
Injustice says that it is fair and just for B to enforce the promise
Never a legally binding contract
Promise is too late for contract law because it is past consideration and the things aren’t traded for
Restatement §86 Promise made
 Must be in recognition of the benefit previously received
 Must be fair and just to enforce
Recovery- the promise itself, not the value of the benefit
Maybe more flexible than restitution, instead of the benefit conferred it is just the promise that is made by the
person who received the benefit, looks more fair and just because that person is the one who came up with the
amount to begin with
May allow stretching of gift promises to be enforced
History
 Early common law recognized some exceptions to k law for policy reasons
 Thought maybe k law was too harsh
 Most of the promises enforced were the kind that there was already a contractual obligation but for some
reason that contract couldn’t be enforced
 At common law-- Categories of exception… K without consideration enforced included:
o K under seal
o Negotiable instruments
o Moral obligation,
 when the restatement was drafted, it merely accepted these as an exception to the normal rule (Topic 2,
Contracts without consideration)
o promise to pay a preexisting debt
 A promises to pay B for goods and never pays it
 A 3 months later makes a new promise to pay B for the same goods
 Law says this is binding, new promise is supported by the moral obligation to pay the
debt incurred (common law)
 Modern law says it is giving up the right to claim a defense that there is no consideration
o new promise to pay a contract that has been discharged (statute of limitations or bankruptcy)
 statute of limitations-

written contract entered into in January, goods delivered, breached (didn’t pay) in
2004
 statute of limitations has run because it’s 5 years and it is 2010
 B makes a new promise to pay
 Common law says it is binding even without new consideration because there is a
“moral obligation”
 Modern- “promises revives the debt” “new promise waives debtor’s defense of
statute of lmitations”
o Waiver- must be a knowing and intelligent decision to give up a legal right
 Addressed in restatements §82 (important-doesn’t have to be an express new
promise)
o Recognized the old debt
o Start paying the debt
o Statement that the statute of limitations won’t be pleaded as a defense
 Bankruptcy If the debtor promises to pay after bankruptcy, promise is binding
 §83- must be express promise to be binding
 Bankruptcy code has hedged this with all kinds of requirements- requires they are
fully informed, advised by an attorney, etc—can’t read this restatement without
the bankruptcy code requirements
o Voidable
 Voidable by one or both of the parties due to fraud, duress, minority (too young), lack of
mental capacity
 §85
 Common law- even though it is voidable, a new promise to pay it is binding even without
new considerations- based on moral obligation
 Modern- you have affirmed the contract, and waived your right to make the defense that
it is voidable
o unenforceable
 statute of frauds- says certain contracts must be in writing
 A makes oral K to buy land then later puts it in writing with no new consideration
 common law- moral obligation
 modern- waiving defense of statute of frauds
o promissory restitution
 roots in “moral obligation” contracts because they were based on a moral obligation and
not a contract
 modern- “waiver”
 §86- a promise made in recognition of a benefit previously received by the promisor from
the promisee is binding to the extent necessary to prevent injustice
 Must be promise
 Must be recognition
 Must be binding to prevent injustice (look at surrounding circumstances, convince
the trier of fact)
 promise to pay for benefits received A confers a benefit on B
 B promises to pay for it later
 Common law- moral obligation, when B received the benefit he had the obligation to pay
 Modern- makes it binding on fairness and justice, theories of restitution- not “moral
obligation” anymore
 Will the states adopt this? Not sure what will happen
 No case law in Arkansas




Minority approach when restatement adopted it- sometimes the restatement
drafters adopted the minority approach sometimes when they thought it was the
better rule of law even though it wasn’t what “most of the courts” were doing
 Traditional majority said no way, doesn’t meet consideration test
 Probably is still a minority approach
(a) Not binding if the promisor conferred it as a gift because it is pure good samartian,
however because B promised to pay for it they might be more willing to stretch
(b)- not be enforced disproportionate to the benefit, if I have a pet skunk and save it and
you promise to pay me a million dollars, that promise will probably not be enforced but a
lesser promise that would be more just and fair
Trend is in favor of recognizing the theory, but it doesn’t have a lot of impact- doesn’t
happen a lot
Mills v. Wyman
Plaintiff: Mills, Caretaker
Defendant: Wyman, father
CoA: assumpsit
Ph:

Facts:






Court of Common pleas directed a nonsuit, that it was not sufficient to support an action
Son was not part of the fathers family, was sick when he returned from sea
Mills nursed and cared for son before the son died
Wyman wrote a letter promising to repay him after learning of his care for the son
Wyman refused to pay the expenses
Mills filed action in court of common pleas and Wyman won in nonsuit against Mills because of no
consideration for the promise
Mills appealed
Reasoning:
 Court said that moral obligation is not sufficient consideration if there was not at sometime some kind of
legal duty of valuable consideration.
 There must be other preexisting obligation to suffice for consideration:
o Considers cases with debts barred by the statute of limitations
o Debts incurred by infants
o Debts of bankrupcy
o These all at one time passed the benefit detriment test
 The son is an adult and the father has no legal obligation to provide for him since he is an adult
 Merchantile law doesn’t contradict this, it is distinct to encourage commerce
 Statute that requires family members to support each other if they are about to have to be supported by
the town they live in, not applicable here
o Limited to the statute
o The one who is paying has to be proven to have the means to support
 This is simply a gift promise, a moral obligation but no legal obligation
Upheld the decision by the court of common pleas- the promise was not enforceable, awarded the defendant
costs?
K?

Mutual assent? Yes, letter

Consideration? B/D- conferred on son, might have to stretch to include it, bargained for? NO, care
performed before the promise was made- must be chronological to work, induce each other (past
consideration is no consideration)
PE?
 Promise? Yes
 Foresee they would rely on it?
 Rely on it to the detriment? No- care took place before the promise
Restitution?
 Benefit conferred? It was conferred on the son, not the father- must stretch to meet the requirement
 Unjust enrichment? Problem: was Mills conferring as a good Samaritan? If so, you can’t recover in pure
restitution- he didn’t have dollar signs in his eyes
 Can mills argue that he was fulfilling the fathers duty? No the child was 25 and the father had no
obligation
Promissory Restitution?
 Must be promise- problem here because the promise is not on the person making the promise
 Must be recognition
 Must be binding to prevent injustice (look at surrounding circumstances, convince the trier of fact)
 can’t enforce a promise that is disproportionate to the benefit conferred
If promise was made before- he could probably recover in K and in PE
If he was 16?- then it would be a legal duty for the father to take care of him
What is the problem with making promises binding under a “moral obligation”? because morals for one person
might be different
Note 5: even though all of these might be enforceable at common law, there still might be statutory law (statute
of frauds) or other additional requirements that would bar them still
*the restatements are strict about the promise being conferred directly on the promisor rather than a roundabout
promise, as it would have had to be in this case because the promise was made on the son and not directly on
the father- the comments
*most scholars are supportive of the doctrine of restitution, gives needed flexibility, doesn’t come up in most
cases, will be rare
Webb v. McGowin
Plaintiff: webb
Defendant: executor of estate of McGowin
CoA: assumpsit (restitution)
Ph:
Trial court- Demurrers (motions to dismiss) to the complaint as amended were sustained (McGowin wins)
 No K- no cause of action, No consideration, Before services rendered McGowin didn’t agree to pay
 Void under statute of frauds
Facts:




Appellate was cleaning the floor of a mill
When he was about to drop a pine block he saw McGowin right below
The only way to stop it was to fall with it so he did so it wouldn’t fall on him
Crippled for life


McGowin agreed to help him with care for $15 every two weeks for his life
Continued to pay until McGowin died, now webb is suing his estate
Reasoning:
 1. It was a material benefit for McGowin, compares it to a doctor saving him
o Case about saving a bull
o Life is worth more- is it priceless?
o Not really, doctors charge for their services to save lives- insurance based on health
 2. It is settled that when there is a moral obligation is sufficient consideration to support a subsequent
promise to pay where there is a material benefit
o Distinguishes from cases where the consideration is a mere moral obligation, here it is actually a
material benefit
 3. Some authorities say a moral obligation is not enough without a prior legal obligation
o McGowin’s express promise to pay for the services was a ratification of the agreement after the
fact
 4. Goes through benefit detriment test, passes
 5. Not gratuitous, McGowin promised to pay and followed through
 6. Statute of frauds? No
Holding: reversed and remanded, Webb gets to present his case below
Concurring:
 He should be paid for his services by the estate simply because that is what is just
Why didn’t they pay? Executor doesn’t think he owes it to Webb and he has a fiduciary duty to the heirs
This court doesn’t call it “promissory restitution” but finds it legally binding nonetheless
K?
Mutual assent- offer by McGowin to pay 15/2wks, webb accepted it when he took the money
Consideration- to enforce the promise by McGowin to pay, Webb must give something back- saved his life,
passes B/D test but not bargained for
PE?
Promise- yes
Can it reasonably foresee that he would rely on it? Wasn’t incurred in reliance on the promise- must be
chronological
Restitution?
 Benefit conferred? Doesn’t have to be pecuniary, but we could reduce this to dollars and cents (doctors,
insurance company)
 Unjust enrichment? He wasn’t a professional, wasn’t doing it with dollar signs in his eyes
Promissory Restitution? §86 restatements
 Must be promise- yes
 Must be recognition- yes
 Must be binding to prevent injustice- look at paragraph 2, was it a gift? Were there dollar signs in his
eyes? How does the court find differently under this case—he took the money- there was a promise and
he took it—so it seems not gratuitous because he accepted the money—so you can look at conduct
afterward in this case to determine if it was gratuitous or not
 Can’t enforce the promise to the extent that it disproportionate to the benefit conferred
Problem 3-3
Can the company legally terminate the pension that was promised for the pilot who crashed the plane and was
seriously injured then subsequently wrote a book criticizing the company?
Benefit/D test- benefit to the promisor or the detriment to the promise
Bargained for? No
What about him avoiding the risk of harm to civilians? The company was already entitled to it because it was in
his contract- however it could be argued that he went above and beyond? Language of the contract could be
argued
Promissory Estoppel Promise? Yes- look at agency still
 Foresee they would rely on it? yes
 Rely on it to the detriment? Depends on if there is anything that was a change of position to his
detriment on reliance, they must foresee that he would have taken that change in his poisition
 Binding only if injustice can be avoided- problem here, he wrote the book- maybe he isn’t justified in
relying on them continuing to pay him if he is stabbing them in the back, made a lot of money with the
book- doesn’t need the pension anymore, however he has freedom of speech
 Remedy is limited as justice requires
Restitution A conferred a benefit- depending on how the contract is read
 Justice and fair to recover- hard to find dollar signs in his eyes, what about him being a professional? Do
they usually require money for protecting people
Promissory restitution Benefit conferred? Depends
 Promise made? Yes- agency
 Recognition- yes
 Binding to prevent injustice- same argument earlier, is it unjust for them to keep the benefit without
paying for it? Same problem as before
 Remedy must not be disproportionate to the benefit
Problem 3-3
K?
 Mutual assent?
o Offer- lacks definiteness and certainty maybe, “I want to do this” statement of future intent not a
present commitment
o Acceptance- she’s trying to get it from the bank
 Consideration?
o Which promise are we trying to enforce? Ronalds promise to her to give money, so Ronald is
promisor and she is promisee
o B/D?
 Benefitted him? Not conferred on him, but unlike promissory restitution consideration for
a contract can flow to a third person
 Detriment to her? Yes, spending her time, put career on hold
o Bargained for?


Before the letter- past consideration
After the letter- nothing to say that she wouldn’t continue without the money, looks like a
gift, not bargained for
Promissory Estoppel?
 Promise? Statement of future intent, maybe not definite and certain
 Reasonably foresee that she will rely? Yes probably
 Reasonably rely?
o Care of mother before? No
o Care of mother afterward? Maybe there could be some if she could show additional reliance
(giving mother more/better services)
 Injustice can only be avoided by enforcement- maybe- depends on what she did, might give her reliance
damages and not the entire contract remedy of enforcing the promise
Restitution?
 Benefit conferred on him?
 Justice and fairness- looks like she is just giving it as a good Samaritan
Promissory restitution?
 Benefit? Problem here is it must be directly on him
 Promise made in recognition? Yes
 Fair and just to make him carry out the promise? She would have done it anyway, §86- it won’t be
binding as a gift
 Disproportionate? Depends on how long she’s been doing it, etc
 The promise is the most that she can get, but the court can give less
*remember, she is a sympathetic plaintiff- family situation
Statute of Frauds
 Formality for some kinds of contracts to be enforceable- signed writing
 Even if everything else is right
 Adopted into every American jurisdiction
 Different, though very similar in each state
 §110 in Restatements, but we won’t use it, just the Arkansas one
 Promise to make a will, sell securities, UCC statute of frauds (over $500 for the sale of goods)
 Although it is a statute, there has been a judicial gloss over it- you can’t just look at the statute alone
without the judicial opinions
 The purpose is to prevent fraud, certain contracts must be in writing
 Problem is that suddenly honest oral agreements suddenly become unenforceable— that is why the
judiciary has generally been lenient about it
 Failure to comply with the statute of frauds, even if it is a promise supported by consideration, will make
an agreement unenforceable
 Not just one statute, many states have several places where agreements are required to be in writing
 Policy problem: courts have been continuously faced with the necessity of choosing between the
injustice of enforcing a possibly fraudulent claim and the injustice of refusing to enforce a possibly
honest one based upon the statute of frauds
 When statute of frauds is asserted as a defense, court will ask a series of questions:
o Is the contract at issue one of the types to which the statute of frauds applies, so that a signed
memorandum will be required?
o Is the statute of frauds “satisfied”? (is there something written?)
o If second answer is “no”… Are there other factors in the case, such as performance or reliance
by the plaintiff, which might envoke an exception to the statutory bar?
Arkansas Statute of Frauds
 Looking at the exception to “oral contracts are binding” not the general rule
 Plaintiff can have made the oral promise, but the defendant’s promise must be in a signed writing
o Miss Torres promises orally to sell some land to Mr. Terrell who makes it in a signed writinggoing to court and suing on his promise, Miss Torres is admitting that she made the promise,
although she made it orally
 Both parties DO NOT need to sign in order for it to be binding under the statute of frauds, only the one
who is to be charged, but each of the parties to protect themselves should get the other one’s signature in
the writing
 If it falls within the statute of frauds, the person to be charged must have their promise in a signed
writing
 PURPOSE/POLICY of the statute of frauds
o Evidentiary- proof of the promise, helps the court
o Cautionary- you’re bound if you signed it, people are careful about what they sign
o Channeling function- helps the court to say that these contracts are enforceable and these are not
 List of topics has been criticized, statute generates a lot of litigation
o some are dated- many times a very complex modern contract may not have to be in writing
o penalty is too harsh (can’t enforce it)
 (a) signed writing, person to be charged
o Executor or administrator, upon any special promise, to answer for any debt or damage out of his
or her own estate Executor is if there is a will, administrator is if there is not a will
 Debt of the deceased is owed to some creditor
 An executor or administrator makes a promise to the creditor to pay out of their own
pocket for the debt of the deceased must be in a signed writing. Oral is not binding.
o Suretyship provision- person, upon any special promise, to answer for the debt, default, or
miscarriage of another
 Same idea as executor or administrator,
 Difference: the debtor is alive and someone else makes a promise to pay the debt of the
debtor
 Promise must be directly to the creditor, if the promise is made from the surety to the
debtor then that is allowed to be oral and it is enforceable
 If the purpose of the promise is not to benefit the debtor, but the surety do something to
benefit themselves, then it doesn’t fall within the statute of frauds
 Main purpose for agreeing to pay the debt of another is to benefit yourself
 Agree to pay for neighbor to get siding to increase the value of your own house
 Agree to pay for the debt to a corporation because then you get a job
o Consideration of marriage- person upon an agreement made in consideration of marriage
 Dated, I’ll give you this if you marry my daughter
 Mutual promises to marry do not have to be in writing, they are binding and enforceable
even if they aren’t in writing
 Antenuptual- statute of frauds in Arkansas (§9-11-402) built right into the antinuptual
statute
o Sale of land- person upon any contract for the sale of lands, tenements, or hereditaments, or any
interest in or concerning them
 Land is an important purchase, want to fulfill cautionary & evidentiary functions
 What is included?
 Easements
 Mortgage
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
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Any kind of lien (mechanic, materialmen)
Sale of fixtures- something that is attached to realty
Option to buy land- gives you the right to buy it somewhere in the future
Boundary lines & partition suit- deals with the actual land & parameters
Future interests
Mineral rights- depends, UCC has a discussion on it, depends on who is going to
do the severing… if you’re selling them with the land or taking the minerals from
the land and selling them
 Does not include leases less than a year
 What is not included?
 Real estate listing contract
 Contract to do work on the land- build a house, farm it (service contracts)
 Judicial interpretation- both parties have to sign the writing, the entire contract falls
within the statute of frauds not JUST the one who is promising to sell the land like the
others just require one promise to be in writing
o Lease of lands- person upon any lease of lands, tenements, or hereditaments for a longer term
than one (1) year
 Evidentiary, cautionary
 Exactly a year probably falls outside of the statute of frauds, short term leases exempt
o 1 year provision- person upon any contract, promise, or agreement that is not to be performed
within one year from the making of the contract, promise, or agreement
 Time period is from the making of the contract to when full performance is complete
 Worried about evidence, memories fading after a year
 Time frame is not how long the performance is actually going to take I contract with you today to make a speech next Christmas that will take 30
minutes, it has to be in writing because the performance won’t be over until after
a year
 If performance can, in any scenario, occur within a year then it is not within the statute of
frauds (even if it is not performed within a year)
Miscellaneous provisions within the Arkansas Statute of Frauds
o New promise to pay an old debt
o New promise to pay a debt that was made during infancy
o Promises to borrow money over ten thousand dollars
What is the effect of violating the statute of frauds?
 Some states say it is totally void- like it was never entered into
 Arkansas (some other states)- unenforceable, a legal impediment to enforcing it, but no holdover legal
effects
HOW TO ADDRESS SofF questions:
How can you have a sufficient writing to satisfy the statue of frauds?
 1st question- is it within the statute of frauds
 Next- is there a sufficient writing to satisfy the statute of frauds, if the answer is no, go to the third ditch
effort and try to find a way around the statute of frauds. If the answer is weak here, look for an exception
to get around the SofF.
 If you find that the parties have agreed on all of the essential terms, there is mutual assent and
consideration, no agreement to agree on a final contract
 So what does it have to include? In Arkansas:
o Identify the parties
o
o
o
o
o
Identify the subject matter
Have all of the essential terms of the contract
That means that none of these can be supplied by parole evidence, they must all be in the writing
Signed writing saying “I will be responsible” is not enough
What about real property?
 Case law described as “burt barn homeplace on tontitown road” in Arkansas is not
enough because it didn’t say the town, county, state, in order to be specific about what
real property it is talking about
Form of the writing?
 Can be anything- diary, note, will, class notes, as long as it amounts to a showing by the party to be
charged that they agree to the terms
 Doesn’t have to be addressed to one of the parties
 Doesn’t have to be prepared with the purpose to satisfy the statute of frauds
 Doesn’t have to be prepared at the same time as the contract- just enough to convince the trier of fact
that you aren’t committing fraud, can be before or after the contract is entered into
 Doesn’t have to be delivered to anyone, if it is in your notes and still in your possession that is fine
 Doesn’t have to exist anymore, as long as at one time there was a writing and there is sufficient evidence
to show that there was, then that is enough to satisfy the statute
Signature?
 Anything- photograph, stamp, signature, initials, X- as long as you can prove that it was yours
 Doesn’t have to be in any particular place on the writing
 Does not require the signature of both parties- just the one you’re trying to hold to the contract
 Can be signed by an agent
Multiple pieces of paper?
 Trying to connect them
 If they’re all signed, great
 If only one is signed- there are 2 issues:
o if there is physical connection, then they can all be part of the one document that is signed (in
the same envelope, stapled together)
o if there is an express incorporation by reference to the other documents, might probably also
work even if the language is less than express “in connection with other documents, etc”—
signed one must refer to the unsigned one, unsigned ones referring to signed ones is not enough
o if there is not an express incorporation of the unsigned some courts say the unsigned ones cannot be used
 Majority approach- (MBM says this is better) other courts say that it is enough for all of
them to refer to the same subject matter and you can convince court that the one who
signed assented to the other ones by their words, conduct, etc, If the signed one, refers to
the unsigned one/ones.
 Arkansas has not adopted this view yet, but you are free to argue that they should
based on what others are doing, fraud and perjury is smaller here
Crabtree v. Elizabeth Arden Sales Corporation
Plaintiff: Nate Crabtree
Defendant: Elizabeth Arden Sales Corp.
(Robert Johns, VP & Elizabeth Arden, president & Carstens, comptroller, secretary)
CoA: BoK
Facts:
 Nate Crabtree entered into negotiations with Elizabeth Arden Sales Corp.






September 26- interviewed, requested a 3 year contract because he would be giving up a good job
Elizabeth Arden prepared to offer him a 2 year contract based on an annual salary of 29k for 6 months,
then 25k for 6 months, then 30k for the second year plus expenses of 5k a year for each year
Arden had her secretary write first agreement which included “2 years to make good” on a telephone
blank- not signed
Crabtree later accepted
There was a card made up for him by the payroll department- signed by Mr. Johns
Received the first increase but not the second, he complained, nothing happened, he quit & sued
Ph:


Trial court awarded plaintiff $14,000
o Have to mitigate your damages… so he must have done something else instead of just sit aroundso he must have made 16,000 at his other job that he got to replace hers (expectation damages)
Appellate court affirmed
Reasoning:
 No question that there were 2 written agreements, problem is that they didn’t state a duration of
employment in the second document
 Statue of frauds doesn’t require everything to be in one document
 To connect the signed and unsigned, jurisdictions apply this 2 ways
o There must be a reference from the unsigned to the signed writing- can’t use parol evidence
o There must be a sufficient connection between the papers- and oral testimony is allowed to show
this, must establish that the other party assented to the writings
 This court chooses the second view, permitting the signed and unsigned writings to be read together,
provided that they clearly refer to the same subject matter or transaction
 Parol evidence allows the oral testimony- in this case fraud or perjury is at a minimum because none of
the terms are left out, they are simply trying to connect the two documents and find the terms between
the two
 Clear that the defendant assented to the terms because it was prepared by her personal secretary
 Problem about the essential terms
o “2 years to make good” couldn’t possibly mean anything else
Judgment affirmed- Crabtree wins
K?
Offer- arden offered him the job
Acceptance- they called him, he agreed after saying that it was “interesting”
Consideration- not at will
Is there a defense?
 Statute of frauds- yes, falls in the one year provision (can’t be performed within a year)
 Is there a sufficient writing to satisfy?
o Initial writing by secretary- includes the duration
o Payroll change card- has all of the amounts, initialed by Johns
o Other payroll change card- doesn’t have the 2 year duration
 Does it matter that there are multiple memorandums? no
 Does it matter that the payroll cards happened afterwards? No—doesn’t matter that they weren’t signed
with the intent to satisfy the statute of frauds. They’re allowed to come later.
 Although it isn’t raised: there is an argument that it is signed because the agent wrote mrs. Arden’s name
on it

After court decides that they can all be read together, the court basically says that 2 years to make good
can’t mean anything besides if it is a 2 year contract
Notes:
1. if there is the possibility of performance within a year, the agreement does not have to be in a signed
writing, even if it was not performed within a year.. further possibility of performance in a year and
possibility of termination within a year are different, the courts only measure the performance
a. purpose is to make sure that the memories are fresh at trial- maybe that doesn’t make as much
sense
b. courts are lenient, construe it very narrowly, and allow more oral contracts to be binding
c. courts find that an oral contract is binding if it is POSSIBLE that it could have been performed
within the one year period, even if it is unlikely or remote
d. promise to do this “within 15 months” can happen in a year
e. promise to do something after the dam is built, even if the dam takes 2 years to build, the dam
could have been built within a year so an oral agreement is binding
f. Installment payments over a period of years are within the statute of frauds.
g. if ANY of the promises cannot be performed within a year, then the contract falls within the
statute of frauds and oral contracts are not binding
2. lifetime contracts- one year clause is inapplicable because a lifetime could end before a year is up, so all
oral contracts are binding that are based upon a life
3. another issue that may arise is that the unsigned writing must have had mutual assent
a. restatements §132 take liberal crabtree approach- the memorandum may consist of several
wirtings if one of the writings is signed and the writings in the circumstances clearly indicate that
they relate to the same transactions, comments
b. §133
c. §134- liberal signature requirement
d. §136- indicates the memo can be before or after the K is entered into
4. a memorandum sufficient to satisfy the statute of frauds need not have been made as a memorandum of
a contract
a. even a note attempting to renounce the contract can be enough to satisfy the statute of frauds
5. “signed writing” is not strict
a. Electronic contracting & statute of frauds- does an electronic “image” and “signature” satisfy the
statute of frauds requirements
b. Telegram- yes
c. Tape recording- if it was signed in someway
d. Computer disk
e. Fax- once it gets printed out then it becomes a signed writing
f. The real problem is email, text- problem is that it may be altered in someway, forged, accessed in
someway, can’t tell authenticity on the face (does it depend on the format- nonmodifiable)
i. Should we require that there are passwords, firewalls, etc? security procedures? Same
problem with a signature- how can you verify that it was actually put on by the person
ii. Another problem: people treat them not as cautiously—not as serious about them
iii. Federal Esign act- permitted states to override it with UETA, Arkansas adopted UETA,
says that if you agree to contract electronically, that it will satisfy the statute of frauds
and the signature is good enough for the statute of frauds §25-32-105
If I’m going to hire mr. price to do a tv program next December, that is within the statute of frauds because
performance cannot be completed within a year
What if a contract takes exactly one year to perform, but the performance doesn’t start for a few days?
 1/1-12/31 is one year
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

Even if something takes exactly one year to perform, you start measuring from the day the contract is
entered into rather than the date on which the performance starts—statute of frauds NOT based on how
long it takes to perform
K entered into 1/1, performance starts 1/2 and the performance takes exactly one year it will be over 1/1,
this contract will fall outside of the statute of frauds because we are going to disregard the day of
contracting
Theory is that we disregard fractions of a day
Consistent with normal offer rules that you don’t count the day on which the offer is made
How do you get around the SoF requirement? (pull the contract “out of the statute of frauds” box and the oral
contract is now binding
 Recognize part performance--*WILL GET SPECIFIC PERFORMANCE DAMAGES HERE. If you’re
asking for money damages, can’t raise this as a defense to the defense of SofF.
o Oral contract to sell land, part performance on payment
o Demonstrates that there isn’t fraud, carrying of it out is an alternative for convincing us that there
really was a contract
o Only fair if the performance is clearly attributable to the contract
o What degree of performance is going to be enough?
 Full performance on both sides is clearly enough
 Full performance on one side- must look at the law of that state
 in a land contract in Arkansas it is settled that there is full performance on the part of the
person conveying the land that there is enough. Full performance by the seller takes it out
of the SofF, but full performance by the buyer does not.
 Arkansas and majority: if only the person paying for the land has given full performance
(paid the money) then that is not binding because he can just get the money back
 Contract for more than one year? It is enough if one of the parties has fully performed
completely
 R2 §130 (2)- when one party to a contract has completed his performance, the one
year provision of the statute does not prevent enforcement of the promises of
other parties
 Part performance- each have done just a little bit? It depends, less likely when there is
just part performance than full performance on either side. Came out of courts of equity
so the courts will only use it when it is fair and just to make the contract binding
 Look at the cases on the state and figure it out
 Arkansas land contract- if A has orally promised to convey the land, it is enough
if B has taken possession pursuant to the current contract (not including a
holdover tenant of a prior contract) of the land AND has either done
improvements (substantial and valuable enough to make it fair to enforce the
current contract) OR made part payments
 Is the defense available in equity only?
 Restatement §139 says yes- Arkansas agrees, latest case is from 1969
 Why? We don’t want to extend the doctrine of part performance because it
undercuts the statute of frauds. If plaintiff is seeking money damages, part
performance does not work.
 What does that mean?
o England- King set up rigid law courts with jury trial and money damages
for a remedy & equity courts for people who couldn’t fall within a writ or
wanted something besides money damages
o What are equitable remedies? You can only get it if money damages aren’t
adequate- include specific performance, injunction, recession (undoing the

contract and putting the parties back where they were before), constructive
trust (treat the property as if there was a trust even though there isn’t), an
accounting, partition suit, shareholder derivative suit
o Equity has jurisdiction over particular kinds of cases- domestic relations,
land matters
o Amendment 80 in Arkansas combined the law and equity courts
 Standard to prove
 Clear satisfactory & convincing, rather than preponderance
 Arkansas defines it as evidence of a credible witness
 What is the result for the defense of part performance?
 If the part performance is sufficient- Contract becomes enforceable & binding- so
the remedy he will get becomes the contract remedy, but can only get an equitable
remedy
 If he can’t show part performance- he gets nothing, but if he has paid something
already then he can get that money back in restitution because he has conferred a
benefit and it is unjust for them to keep that benefit
Do an end around using promissory estoppel
o Restatement §139 allows for you to sue on promissory estoppel even if the contract is not in
writing
o Controversial because it is the same evidence that the court is not allowed to hear for contract
under the statute of frauds can’t hear, also it goes against the idea that the legislature said that it
can’t be enforced except when it is in writing and the courts shouldn’t go against it
o Because the courts want to protect the policy reason of protecting from fraud
o A made me a promise to convey the land and I relied on it to my detriment- even though the
contract isn’t enforceable bc of SoF, I should assert promissory estoppel
o Courts are split:
 Some say no way
 Some courts say that you can assert PE, Restatement approach (ARKANSAS)
 Some courts say that they will only be enforced when one of the parties is lying and tells
the other party “don’t worry about the statute of frauds” or, “this isn’t under the statute of
frauds” when in reality it is
o Take into account (a)-(e) of restatements §139—just saying consider the justice factors and only
enforce promissory estoppel in the right circumstances-availability of other remedies—if it is fair
to put B back in position he was before and can do this with another remedy, not fair to do. If
this is a tiny reliance, maybe this isn’t best option. Extent
So- we have talked about PE 3 times- what does that mean? Nothing, the restatement is just trying to show what
the courts are doing- they are just doing it in all 3 of these fact patterns- doesn’t matter if the court relies on the
wrong section to decide- §87(2) and §139 are the same as §90, they just give a more tailored approach for
specific fact patterns (ex. factors in §139)
How do they differ?
 Result- if part performance is shown, it comes out of SoF and entire contract remedy is enforced, but if
PE is found, the remedy is limited as justice requires
 Availability- part performance only available when there is an equitable remedy..not money damages
 Standard of proof- higher for part performance than probably a court would assert for promissory
estoppel
BEAVER B. BRUMLOW-
Winternitz v. Summit Hills Joint Venture
Plaintiff: Winternitz- operated a pharmacy & convenience store in Summit Hills
Defendant: Summit Hills Joint Venture, landlord (Ronald Frank- partner & Bonita Harris- property manager)
CoA: breach of lease, breach of an assignment agreement, malicious interference (intentional tort) with his
contract to sell the business
Facts:
 6 year lease agreement expired Jan 31, 1983
 October 1982- Winternitz met with Frank to discuss renewing and transferring the lease, frank agreed
 Mid-January 1983- Harris delivered a proposed 2 year lease with conditioned option to renew,
Winternitz accepted, had a different rent and Winternitz paid the new rent for February
 Neither harris nor winternitz signed it at that time, and it said “sample” across the front
 Feb 2, 1983- Winternitz sold the business to the Suh family
 Feb 5- Winternitz, Suhs, and accountant met with Harris and she said she saw no problem with
transferring the lease, several days later Mr. Frank agreed, “as far as I know everything is okay”
 Feb 21- Frank told Winternitz he changed his mind and wanted to negotiate his own lease, then 2 days
later said the lease was neither transferred or renewed
 Harris delivered an eviction notice
 Winternitz was forced to renegotiate the contract at (15 thousand instead of 70 thousand)
Ph:
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Jury awarded him 45 thousand in damages for all three counts
Court nullified the award by grating a judgment NOV on the basis that the Statue of Frauds made it
unenforceable
This court- combined breach of lease and breach of assignment agreement and upheld those, then the
judgment NOV was reversed on the malicious interference count and plaintiff awarded original verdict
Reasoning:
 Breach of Contract
o Court combines first 2 counts because they both turn on whether the landlord effectively and
enforceably renewed the lease
o Statute of frauds is used because it is a lease of land for over one year
o Plaintiff argues: his payment of the $1,700 is sufficient “part performance” and the statute of
frauds isn’t used
o Court says- part performance is only available where the relief sought is equity, has no
application where the plaintiff is seeking only money damages (remedy at law)
o SO- uphold trial courts judgment on counts I & II
 Malicious interference with contractual relationship
o Plaintiff says the defendants deliberately and wrongfully interfered with the contract with the
Suhs
o Evidence that the agreement was breached comes from the real estate broker and his
conversations with Mr. Frank- saying he doesn’t want Witernitz to leave with a dime
o Look at factors from Restatement of Torts to determine if the interference is improper
o Summit Hills argues that the breach of an unenforceable contract is not enough to show
malicious interference, assuming that there was a month-to-month tenancy
o Court says- trial jury had enough evidence to find that there was an original contract, although
Winternitz cannot collect on that contract because of the statute of frauds, Frank does not have
the ability to breach the contract, especially not with the intent of messing up the other contract
o Mr. Frank didn’t breach the contract for his own sake, but for the harm of winternitz
o SO- Count III reversed and judgment entered on original verdict
K? offer & acceptance, consideration
SoF?
 Does it fall within the statute of frauds? Yes
 Is it a sufficient writing including all of the terms? Yes
 Is it signed? No- that’s the problem
 P argues the doctrine of part performance as a “defense”
o It is really a defense to an defense- an argument to defeat the defense of the defendant
o He paid some money already
o Why do we recognize part performance as a defense to statute of frauds? Because it, in justice
and fairness, makes sense that when the parties start to carry out the performance that is evidence
that the oral contract really did exist… Restatements recognizes that part performance can take a
land contract out of the statute of frauds
 Winternitz ends up getting the same verdict that the jury originally awarded him
Notes:
1. why do we require the sell of land to be in writing? Large amounts of money, important
Alaska Democratic Party v. Rice
Plaintiff: Kathleen Rice
Defendant: ADP (Greg Wakefield, chair-elect
CoA: breach of oral contract
Ph:
jury trial, cross motions for summary judgment and all counts were dismissed except promissory estoppel and
misrepresentation
Rice was awarded damages
This court affirms
Facts:
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Rice worked for ADP, then got fired and worked for Maryland Democratic Party
While in Maryland, Wakefield contacted her about possibility of her being his executive director
May 1992- wakefield elected chair
Sometime during that summer- they discussed terms
o 36,000 a year for at least 2 years and an additional 2 years if he was reelcted and 4000 in fringe
benefits
August 1992- she accepted offer to work as co-finance chair on Gore campaign
September or October- she accepted Wakefields offer
November- resigned her position with Landau (Gore) and moved to Alaska
February 5, 1993- Wakefield was informed he couldn’t hire rice as executive director
February 15, 1993- he informed her she couldn’t have the job
Discussion:
 Lower court denying the party’s motion for summary judgment on PE claim was okay
o Can an oral contract in the SoF be enforced by PE
o Policy reason for SoF is to prevent fraud but not let people avoid obligations
o Uses Restatement that says “notwithstanding statute of Frauds”
 Plaintiff’s burden is to show the promise existed by clear & convincing evidence

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o She meets the requirements for PE, court lays out circumstances to see if injustice can only be
avoided by enforcement of the promise
Lower court not including “definite and substantial” into jury instruction was okay
o Restatements say that a definite and substantial are circumstances which the court should take
into consideration, but not a requirement
o Also, definite and substantial was in the next instruction so the instructions as a whole were clear
Evidentiary record supports the jury verdict (agency & misrepresentation)
o Party says wakefield wasn’t their agent
 Court says that his election as chair gives him apparent authority, Also he had implied
general authority
o Party says even with authority, he didn’t have authority to hire Rice for a term of years
 The court already found he had authority, and the employment at will issue wasn’t raised
at trial
o MISREPRESENTATION: Party says that at the time he made the representations, Wakefield
was only a volunteer and the restatements requires a prerequisite that it is someone who has a
financial interest
 Court says: the representation was made during the course of business, and he did have
an interest
Damage amount was not excessive
o Parties don’t dispute the amount off the contract, but Party argues that the full amount of the
bargain is not necessary to avoid injustice
 Court says: it was properly given to the jury and decided by the jury
o Party claims that Rice was awarded double damages for moving expenses
 Court says jury was properly instructed to make adjustments to the award, and that the PE
judgment was lessened to accommodate for this
PE
Promise by ADP? Yes, wakefield by agency
Could he expect action or forbearance? Yes
Reasonable? Yes
Can we only enforce justice by enforcing the promise? Yes
What is the remedy? What is just and fair- here the jury has given her the exact same remedy she would have
gotten in contract, enforce the promise
§139 Builds in other factors where the court says it is fair to make PE work here, because you are overriding
the statute of frauds- it is hedged with more requirement to make sure that it is fair and just to enforce it
o Availability of other remedies, particularly cancellation & restitution
o The definite and substantial character of the action or forbearance in relation to the remedy
sought—if the forbearance is minor, maybe we shouldn’t let PE work
o The extent to which the action or forbearance corroborates evidence of the making and terms of
the promise, or the making and terms are otherwise established by clear and convincing evidence
 The act or forbearance indicates that there really was a contract, a higher standard of
“clear and convincing”
o The reasonableness of the action or forbearance
o The extent to which the action or forbearance was foreseeable by the promisor
Arkansas allows §139- it is clear that you can do that here
Note 3: even if you win in promissory estoppel, that doesn’t mean you get the same remedy as in contract, it is
limited as justice requires
Problem 4-1
 Agency
 K?
o Mutual assent? Offer- letter from school, acceptance- letter from Elizabeth
o Consideration? B/D, bargained for- yes, actual negotiation process
o Then go to statute of frauds
 SoF?
o Yes, can’t be performed within a year (contract made in January 2005 for the 2005-2006 school
year, can’t be over until May 2006)
o Possibility of termination and possibility of performance within a year are different- the courts
will only look at possibility of performance within a year, in this case it is impossible to perform
a job from when the contract was formed in January 2005 through the end of the school year in
May 2006 within a year
 Sufficient writing?
o Yes, signed by the party to be charged (law school)
o Must have all the material terms
o However does not include anything beyond a mention of the 2005-2006 school year, doesn’t say
anything about the term of the employment…
o There are multiple writings, a second letter signed by Elizabeth (not the party to be charged) but
they relate to the same subject and she sent that as her acceptance, the signed letter by the party
to be charged must have an incorporation of the other document
 If that isn’t enough: courts look at it 2 ways: (1) can’t be used, or (2) can be used if you
can convince the trier of fact using parole evidence that the other one assented to the
terms by words or conduct
 Crabtree analysis
o Internal referral to the same subject matter
o Convince a trier of fact that the Dean assented to the terms by words or
conduct
 In this case, she continued to work, the law school paid her, etc- must convince the trier
of fact, but it looks as though in the second jurisdiction that the two can be connected
 What if we show the trier of fact? She gets her remedy- expectation damages
 If there is not a sufficient writing—
o Can you argue part performance?
 Some part performance, they paid for a year and she worked for a year
 Might have a problem with the amount
 No because that defense is available in equity only, in this case she is trying to get
expectation damages
o Can you argue promissory estoppel?
 Probably, she gave up where she lived, etc
 Depends on which state you live in, look at the jurisdictions
 Promissory Estoppel- summary judgment not appropriate because there are still issues of fact open
o Promise, as viewed as a promise under traditional contract law
o Promisor should reasonably foresee to induce action or forbearance on the part of the promisee
or a third person
o Must actually induce the action or forbearance, the promisor or 3rd party—they must actually
change their position
o Binding only if injustice can be avoided by enforcing the promise
 Restitution- doesn’t work
(1) benefit conferred

(2) it is just and fair for the benefitor to recover
Remedy: value of benefit conferred
Promissory Restitution
o Benefit conferred
o Subsequent promise to pay for the benefit conferred
o Remedy: the promise
UCC statute of frauds
 Drafters of the UCC had a chance to incorporate the statute of frauds into the sale of goods
 It is not enforceable- same thing at common law, where it is not enforceable between the parties, it can
be used for other things (if you go and get the goods and take them you aren’t a trespasser)
 What has to be in writing is reduced, “sufficient to indicate that a contract for sale has been made”—you
can leave a lot of stuff out, not like the common law where you have to have the material terms (price,
etc may be omitted) however it does require a quantitiy… so what are the requirements?
o Evidence a contract
o Must be signed-any sort of authentication counts
o Must state a quanitity
 Article 2 keeps a statute of frauds, it is still important to have a signed writing §2-201
o Sale of goods for $500 or more is not enforceable if it is not in a signed writing
o Content of the writing is much reduced- only must indicate that a contract for sale has been
made, requirement for the signature “some mark or symbol with the intent to _ the writing”
o Must state a quantity
o Consequence same as at common law- unenforceable
o Exceptions
 Merchant exception
 both have to be merchants
 one sends a writing in confirmation of an oral contract
o must be sent within a reasonable time
o must be a writing in confirmation of the contract
o make sure the writing has a sufficient content so that when the recipient
gets it, she knows that the confirmation means that the sender is
confirming an oral contract that he has
o must be sent in a way that she can receive and understand it
o must be a failure to reject in writing within 10 days
 party receiving it has reason to know its contents
o must be in a form the recipient can read and get to her
 in confirmation sufficient against the sender, means that it must make B
responsible under the statute of frauds
o evidence of a contract
o signed by the sender
o state a quantity
 If there is an oral agreement and one merchant sends the confirmation, it makes
the recipient responsible
 Unless the recipient of the confirmation gives a written notice of objection is
given (sent) within 10 days
 3(a)- Specially manufactured
 Not suitable for the sale to others in the ordinary course of business
 Still enforceable even though it was oral
 It is a sufficient subject for a writing, because no reasonable person would
monogram towels with your name on it
 3(b)-Admission
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In his pleading, testimony, or otherwise in courts admits that there was a contract
Person is only stuck with whatever it is that they admitted, doesn’t prove the
entire contract
 At common law, this wasn’t allowed, but now it is under the UCC
 3(c) Part performance exception
 Goods for which payment (part payment okay) has been made and accepted
 Or for which have been received (part performance okay) and accepted
 Only responsible for the extent to which it has been performed
 Available in law AND equity (different than from common law)
 Also only enforces the contract partially, does not “take the contract out of the
statute of frauds” and thus make the entire contract enforceable
 Additional arguments to supplement the UCC with the common law (promissory
estoppel)—you can still argue PE in Arkansas as a supplement to the UCC.
This just gets you over the statute of frauds objection if the defendant raises that… doesn’t mean the
plaintiff wins, still has to show preponderance of the evidence for all of the elements of a contract
How does written confirmations fit in with the battle of the forms?
 Battle of the forms ucc 2-207 includes the written confirmations of oral contracts
 In the battle of the forms, the confirmation has different or additional terms and is trying to decide which
terms are part of the contract
 Difference: in the battle of the forms there is a “reasonable time” to object, here there is the requirement
of 10 days
What if you have a mixed sale?
 Recurring issue and not a clear answer, what if there is a sale of goods and something that can’t be
performed within a year
 Majority- will look at which element predominates (Arkansas)
 Minority- tries to divide it
In Buffalo, what if they were both merchants? Would it have worked under the merchant exception?
 Debatable question if farmers are merchants
 Arkansas has old case law that says farmers aren’t merchants, probably ripe for reexamination
 Many other states have held that farmers are merchants
Even if you don’t sign it, you can be stuck with it
You can only object if there was not an oral contract in the first place, can’t go through and say I’m denying the
existence of the contract
Buffaloe v. Hart
P: Homer Buffaloe, tobacco farmer
D: Patricia Hart and Lowell Thomas Hart
CoA: BoK
Ph:
Jury trial- P won, damages of 21,000
trial court denied motions from defendant for directed verdict (at close of plaintiff’s evidence and at close of all
evidence) and judgment notwithstanding the verdict
Facts:
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P filed complaint for Bok
o D denied the existence of contract and
o said it was unenforceable anyway because of SoF
P rented 5 tobacco barns from Ds in oral agreement, said in prior business they always had oral agreeme
Ds agreed to provide insurance coverage on the barns in 1988
October 20, 1988- P paid the 2000 rent owed for the barns and the 992 dollars for the tobacco rent
Several days later began negotiating to buy the barns
o P offered to pay 20k in annual installments of 5k for 4 years
o Already had possession of the barns because of the rental agreement
Jan 3, 1989- P applied for loan to pay for the barns, loan denied
Then reconfirmed agreement
D agreed to provide insurance for 1989, P reimbursed them
Plaintiff put ad in paper to sell the barns, 3 people interested
Oct 22- P delivered check to D for the first 5,000
The next night- P called D and said she didn’t want to sell him the barns, sent him back the check, sold
them to same people
D’s version:
o P made first arrangement
o Then made a second arrangement to pay for them all at one time
o Loan not approved and P wanted continue rental agreement from previous year
o Brought money over as “enticement to buy the barns”
o Mr. Hart says that wasn’t sufficient and mailed back check
D argues:
 check is not enough for a signed writing under the SoF because defendant didn’t sign it—court agrees
o court agrees because D’s name is no where on the check and they are the party to be charged
 part performance does not apply because the D’s never made an action to give up the barns and the
check doesn’t constitute part payment because the defendants never accepted it legally— court disagrees
o requires that the seller deliver goods to the buyer and the buyer accept—that is a question for the
jury
o in this case he does- told several people, reimbursed D for insurance, paid for improvements,
took possession, contacted an auctioneer, listed ad in the paper, took deposits from prospective
buyers
o not enough to overturn, a “reasonable jury” could have concluded the same verdict
Court did not err in denying defendants motions to deny directed verdict or JNOV, P wins
K?
 offer? Buffalo made the offer to purchase the barns- acceptance? Yes
 consideration? Promise to sell, promise to pay 5k over 4 years
in SoF?
 yes, goods over 500$
 signed writing? Check… not enough because it wasn’t signed by the party to be charged
o must be sufficient to indicate a contract- yes
o signed by the person to be charged- no, if they would have endorsed it, then it might have been
different
o state a quantity- 5 barns
 does it matter that it was destroyed? No it can still be testified to even if it doesn’t exist anymore, this
does exist and is just pieced back together
2-201
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
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specially manufactured? No
admission? No
part performance
o possession of the barns- he already had possession through the rental agreement
 must be an act by both parties
o payment- delivered the check
 wrote it the 22, gave it to Mrs. Hart, she kept it and didn’t rip it up and send it back until
the 26th (postmark)
 found that they accepted the payment
o could not have established one way or the other—requires payment and acceptance or delivery
and acceptance—lets him enforce it as to all 5 barns since the amount is only 5000 and not the
full amount- if it was just 50000 then he couldn’t have gotten all 5 of the barns, only the amount
of the part performance that he made
Can he argue PE?
 Court is split on this, as they do for the general SoF
 Minority say that’s not in here, legislature said that it doesn’t work because that’s not what legislature
said
 Introduction to UCC says it is supplemented by the common law, and that Promissory Estoppel is a
common law doctrine and it should work (majority)
Is the delivery of a check enough to show part performance? Yes- even if you stop payment or even if the check
bounces
Notes:
1. Flip side- would have been a sufficient writing
2. when the goods can’t be broken down into components, if you’ve only paid partially for the unit you can
enforce the entire unit
5. what is a specially manufactured good? Containers- if they are not standard in the industry, Carpet- not
just standard carpet
Problem 4-2
 Agents of Machine Tools
 Approached by Tobacco, Inc
 Agree to sale the assets
 Is there a K? oral agreement in late Feb 2006- is it a contract?
o Problem: agreement to agree, is the contract formed now or later
o Question of intent- as objective 3rd parties can we look at what they did and determine if they
intended to contract now or later
o Restatement §27- gives factors if they intended to contract with the oral contract or later
 Express agreement on the terms? Yes
 Is it the type usually put in writing? Yes- indicates preliminary
 Do we need a writing for the full expression? Yes- indicates later
 Few or many details? Many- no contract yet?
 Large or small? Large- later
 Unusual agreement? Yes- later
 Has either party taken action? Don’t know
 After all this, it looks like there is not a contract until it is in the final writing, but maybe
we do… they can argue either way
 March 2- Tobacco’s attorney wrote a letter as a confirmation
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Advise client- statute of frauds because it is the sale of goods for over 500 dollars and it is the sale of
land
How would it separate? Look to the jurisdiction, what is the gist of the contract, what is the party really
intending to buy- Coakley factor
Arkansas applies which is a predominate part of the contract(1) the language of the contract,
(2) the nature of the business of the supplier, and
(3) the intrinsic worth of the materials
UCC statute of frauds?
o Over 500$ for the sale of goods- is it the sale of goods? machinery
o Is there a writing that is made in confirmation of a contract? No
 Must include a quantity
 Must be signed
 Must evidence an oral contract has been entered into
o Exceptions to the UCC rule
 Specially manufactured? No
 Admit in court? No
 Part performance? No, want to check it out though
 Merchant exception?
 Merchants? Yes, experts in the goods- in the industry
o 3 shareholders? Hold themselves out by employment to have a peculiar
knowledge
 Within a reasonable time? Yes
 Is it a writing in confirmation? (paragraph 4) yes
 Is it received by us? Yes
 Do we have reason to know its contents? Yes
 Enough to satisfy UNLESS we give written notice within 10 days
o What should the letter say?
 Can’t word it to say that we know we had an oral deal but we’re trying to get out of itbecause that is admitting to the fact that there was a contract
 Say that we are still negotiating and there is no deal yet, we did not understand that we
had entered into a binding agreement yet- and there is still stuff to work out (if you can
ethically word it that way)
 If there is an oral deal, then you can’t say that there isn’t a deal
 Can it be a telephone call? No, it must be a written notice of objection
o Can still argue that it is too indefinite and uncertain to enforce
They can try promissory estoppel
o Is there a promise- yes
o Could they reasonably foresee that it would induce action- no
o Did it induce action- no
o Is injustice only avoided by enforcement of the promise- no
Also regular statute of frauds- there is land
o Does it fall within the statute of frauds? Yes
o Is there a sufficient writing to satisfy the sof? There is a letter from the tobacco company signed
by them (binds them)—but there is not a sufficient writing to bind us
o Part performance? There is no information, want to check it out and see if they have started to
perform or not
Restitution?
o Benefit conferred
o It is not just for them to keep the benefit
o Value of benefit conferred

Promisory restitution?
o Benefit conferred
o Subsequent promise to (we would have had to have promised them that we are going to pay
them)
o Usually enforcemenet of the promise unless it is disproportinate
Statute of frauds
Not enforceable unless signed by the party to be charged
List the kinds
First question: is it within the statute of frauds
Then: is there a sufficient signed writing to satisfy the statute of frauds
If not: is there a way around it (part performance to take it out of the statute in equity… must prove by clear and
convincing evidence) or use promissory estoppel as a separate legal theory
If it is for the sale of goods over 500$ it must be in writing and signed by the party to be charged
Even if it is less than $500 it still falls within article 2, but if it is over $500 then it must be in writing
Content is much less than for the general statute of frauds (doesn’t require all of the essential elements, only to
evidence a contract, state a quantity, and be signed)
4 exceptions where it is still binding:
 If there are specially manufactured goods
*WILL PROBABLY HAVE TO STOP HERE
Chapter 5
Principles of Interpretation
 How to interpret the contract
 We’re saying that there is a contract according to the formalities
 How do we interpret the words that they used (either in an oral or a written agreement)
 3 approaches:
o Original subjective approach- if they mean 2 different things, there is no mutual assent and
therefore there is no contract (Pearless-boats)
 May uphold freedom to contract- but leads to inefficiency, hard to see what people
thought, more litigation
o Pure objective approach- should be interpreted according to the meaning a reasonable 3rd person
would interpret those words
 Less time and resources, seems fair that people would contract based on real meanings
 problem is there may be a contract on terms that neither party wanted—bad results.
 In the first restatements, not the second
o Modified objective approach Arkansas approach
 if the 2 parties have subjectively agreed on some weird meaning of their own, they should
get it—
 however if the parties don’t agree on the meaning, then this approach tips the scales
against the party that is more at fault in the sense that they knew or should have known
that there was more than one meaning to the term and should have made clear what
meaning was being adopted
 if they have equal mental states- there is no agreement on that term, if the court can’t
supply a term to fill in the gap and the term is material to the contract, then the contract
fails
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chance to save the contract
Restatement §201
o (1) Where the parties have attached the same meaning, it is interpreted in accordance with that
meaning
o (2) where the parties have attached different meanings, it is interpreted in accordance with the
meaning attached by one of them if at the time the agreement was made
 That party did not know of any different meaning and the other knew the meaning
 That party had no reason to know of any different meaning
o (3) except as stated, neither party is bound by the maning attached by the other, even though the
result may be a failure of mutual assent
 ***only is to the one term that isn’t agreed upon, not the entire contract
 If it is an essential term then the contract may fail
 Maybe ask them to agree
 However if it is nonessential it can be filled in
3 mental statesKnow-light bulb going off in brain
Should have known (it is on your desk, you should have understood it, from what everyone has told you, etc.
Look at language, prior relationship between parties, etc.) *a person in your position would have the actual
knowledge
Ignorant- person who is maybe innocent but ignorant (duhhhh)
6 potential fact patterns
 A is ignorant, B knows- A is innocent, result is you fall under (2)(a)- A gets her meaning
 A is ignorant, B should have known- A is more innocent than B- falls under (2)(b)- A gets her meaning
 A is ignorant, B is ignorant- mental states are equal, fall under paragraph (3)- neither party is bound—
may mean the K fails, have to see what the result is based on the materialness of the terms, see if the
court can plug something in, etc
 A knows, B knows- same as above
 A should have known, B should have known- same as above
 A should have known, B knows- A is more innocent than B, result falls under (2)(a)- a gets her meaning
Parole evidence rule
 K has been put in writing (whether they had to or not)—parole evidence rule says this is the best
evidence to what the K meant
 Parole evidence is any evidence outside the writing (includes oral, other evidence, will exclude any
evidence that will contradict the writing)
 If you’re trying to supplement the writing then maybe it will be let in
Joyner v. Adams
P: margarite Joyner- property owner
D: Adams- substituted lessee
BoK
Facts:
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Joyner owned property called Water Edge Office Park
Contracted with Brown investment company to lease and develop the property in 1972
1975- lease was amended to substitute adams as the lessee
Lease amendment (written by adams) also suspended the annual rent increases provided for in the lease
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Adams agreed to pay Joyner a fixed rate until 1980, contingent on Adams developing the property
Adams developed most of the property except one lot where the sewer and water lines were constructed
but no building
Joyner asserted that his failure to property develop the property made him liable for the suspended rent
increases
Adams said that the contract did not require that buildings be constructed
Ph:
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Summary judgment for defendant
Court of appeals reversed
trial court without a jury found for plaintiff and awarded 93,000 in damages because there was no
mutual assent, so it should be constructed against the D since he constructed the lease
Adams appealed
Reasoning:
 Plaintiff introduced 3 memoranda showing that she intended for D to construct the buildings on the lots
 D argues that his interpretation is the only reasonable one
o “development” in the market is when there are water and sewer lines installed ready for a
building
 Trial court weighs the evidence, so there is no need to look at it again
 Trial court didn’t err in finding no meeting of the minds
 It is important to interpret disputed language that both parties knew the other’s interpretation
 The contract should be enforced pursuant to the meaning of the innocent party (the one who
didn’t know the other’s interpretation)
 Trail court didn’t determine whether either or both parties knew or had reason to know of a different
meaning attributed by the other, which is crucial to determining this question
 Trial court mistakenly based it decision on the fact that adams had drafted the agreement
 Case remanded
K?- no argument
Consideration?- promise to pay & development, promise to lease him the land
SoF? Yes- we have a contract formed, it has mutual assent & consideration & the requisite writing, in this casewe’re asking what the meaning of the term is
Interpretation
 Did they both agree on one wacko meaning?—they try to argue that, but each one is saying that the
meaning is their meaning—court finds that each party agreed to their own meaning
 So the court finds that there is no meeting of the minds- does that mean that there is no contract? NO,
you apply the modified objective approach and look at the parties mental states
 Court remands because the trial court didn’t determine mental states
Construing against the drafting party is just for adhesion contracts, and in this case the court isn’t even
convinced that Adams drafted the contract
Possible outcomes on remand:
 Assume Joyner is at the duh stage & Adams knew that there might be more than one meaning- Joyner
wins because she is the more innocent party
 Assume Joyner is at the duh stage & Adams should have known- same outcome, because joyner is more
innocent
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If they’re both at the duh stage, then the term doesn’t get incorporated and unless the court is willing to
plug something in, there is no meeting of that term & you can’t sue him for breach on the term—so he
wins anyway
Adams wins on remand, because Joyner can’t show that he knew or should have known her meaning
-Question is what do you mean by “know”
 No case law in Arkansas
 He should be held to know or have reason to know if he is aware that there are multiple meanings out
there, whether he knows which meaning she is attaching doesn’t matter- he just needs to make it clear if
he knows that there just ARE multiple meaning
 If we say that it is only that he knows that she has a different meaning, then it is like rising to the level of
fraud because then he is deliberately misrepresenting to her
Who has the burden? Plaintiff has the burden, preponderance of the evidence
Arkansas adopts the modified objective approach
 Arkansas case law cites the restatement verbatim in a jury instruction
Aides to a court in interpreting a contract, to help the court determine what the parties really meant, they reflect
the “normal habits in the use of language”
 Noscitur a sociis- construe in context
 Ejusdem generis- If there is a list of specific stuff then a general catchall term, only include stuff in the
general term that is like the stuff in the list
 Expressio unius exclusion alterius- if the specific stuff is listed without a catchall term, then other stuff
is excluded
 Ut magis valeat quam pereat- try to use an interpretation to make a contract valid, obviously the parties
intended to make a contract
 Omnia praesummuntur contra proferentem- construe it against the drafter
 Interpret contract as a whole- take all the bits and pieces and put them together, if some contradict each
other you try to figure out which the parties intended
 Construe in light of the purpose of the parties- what were they trying to do when they used this language
 Specific provision is exception to a general one- more specific is pulled out of the general intent, thought
about more specifically- considered separately and it was addressed by us
 Handwritten or typed control over the printed ones- because they are more recent, more thought about,
not boilerplate, intent of the parties is probably the handwriting
 Public interest preferred
A lot of these are adopted by the restatement in §202- “Rules in Aid of Interpretation”
Common law concepts also included in the restatement: course of performance, course of dealing, or usage of
trade
§203- Standards of preference in interpretation
reasonable, lawful, and effective
§206, §207- interpretation against the draftsman, interpretation that would be in the public interest
What are all of those things? How do they fit in with modified objective approach?
 Modified objective approach seems to be what one party meant
 It would help a court that would apply a pure objective approach (no court today would do that)
 Would help understand what one party meant by their language
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Mostly used in cases where there is not a lot of evidence as to what the parties meant- if it would violate
the parol evidence rule or if the parties didn’t care to introduce evidence
Use in judicial opinions is often more ceremonial than persuasive- they don’t actually use these to interpret, but
rather to bolster what they already decided in their opinion
If they help you, use them- but it is questionable as to how persuasive they will be
Tools that help courts determine what the parties meant:
§1-303 in article 1 of UCC, Arkansas has adopted the revisions to article 1
 Course of performanceo a sequence of conduct between parties to a particular transaction that exists if: (1) performance
over a period of time, and (2) the other party, with knowledge of the nature of the performance
and opportunity for objection, accepts the performance or acquiesces in it without objection
o aka- you’ve been carrying it out this way and I have accepted or not objected to what you have
been doing—that is very good indication that what you’re doing is the contract
 Course of dealing
o A sequence of conduct concerning previous transactions between parties to a particular
transaction that is fairly to be regarded as establishing a common basis of understanding for
interpreting their expressions and other conduct.
o Aka- the course of dealing is whatever we did in the prior contracts
o Can give particular meaning to terms, may supplement or qualify the terms
 Usage of trade
o Any practice or method of dealing having such regularity of observance in a place, vocation, or
trade as to justify an expectation that it will be observed with respect to the transaction in
question
o Usually done by expert testimony
o All of these are relevant in ascertaining the meaning of the agreement
Frigaliment Importing Co. v. B.N.S. International Sales Corp.
P: Frigaliment (chicken purchaser)
D: BNS (seller)
CoA: breach of warranty of a contract for the sale of goods
Facts:
 P&D made 2 almost identical contracts for the sale of chiken
 Difference was the second was the same except 25,000 libs less of the heavier chicken and a different
price for the lighter ones
 BNS, new to poultry business, believed any kind of chicken, including stewing chickens could be used
to fill the order
 Most of the heavier birds was filled with stewing chicken because that was the only way D could make a
profit
Holding: frigailment failed to meet its burden of persuasion that the word chicken has a narrow meaning,
defendant wins
Reasoning:
 Negotiations in german
 BNS asked if any kind of chickens wewre wanted to which an affirmative answer meanging “huhn was
given
 Frigaliment must show bns’s acceptance of the trade use of the term
 Frigaliment could not say that the price would be reasonable since they knew the business
 Bns is expected not to sell at loss
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BNS believed it could complpy by supplying stewing chickent
Conformed with a dictionary meaning, the department of animal regulations to which at least there was
a contractual reference, and with some trade usage
First look at contract language itself
Look at preliminary negotiations
Standard for proving usage of trade- very high under the common law (violent) but today it is not that difficult
to prove the usage of trade
Rank:
Express
Course of performance- for this contract
Course of dealings- this is another contract
Usage of trade
D argues: The contract was for 33cents a bird and it is impossible to obtain the kind of chicken P wanted at that
price. The market price was between 35&37cents. The plaintiff knew or should have known that.
 P says that 33cents is closer to 35cents (market value) than 30cents (cost of the fowl)
 Court says: unreasonable for plaintiff to expect D to incur a loss
D argues: conduct by the plaintiff after first shipment (course of performance)
 Plaintiff complained that he had received “fowl”
 D replied that they have the chicken ready- asked whether they are to ship it and whether they will
accept it
 P asked to confirm that the merchandise to be shipped is pursuant to the contract
 P says this is clear he wants the young chickens, D says that if P wanted that he would not have allowed
the second shipment
 Court says: that has no weight in the issue of interpretation, but would on a measure of damages
Notes:
1. doesn’t say that it chooses D’s meaning, only says that P can’t prove that it was his meaning
 If P knew or should have known, then D wins anyway and it means that D gets his term as the more
innocent party
 If they’re both at the duh stage - there is no agreement on that term, if the court can’t supply a term to
fill in the gap and the term is material to the contract, then the contract fails
 If BNS had brought suit- they win if the court finds that P knew or should have known about the
different meanings
SoF?
UCC-applying NY law- fits within
“patent ambiguity”- obvious on the face
“latent ambiguity”- not obvious on the face
Modern court would be consistent with how it would be allowed
Standard under the UCC for trade usage- comment 5 to 1-205
 Must have the regularity of observance specified
 Acient English tests for custom are abandoned- it doesn’t have to be ancient, immemorial, etc. just that it
is greately observed by dealers today
C&J Fertilizer, Inc. v. Allied Mutual Insurance Co.
 Doctrine that developed in the insurance industry- pretty much restricted to insurance agency, don’t
want court to apply rigid rules
 Question is whether the courts will adopt this radical motion- asking a court to be interventionist to
adopt this type of approach
 Giving an illustration of a different way for a court to police the contract, common law notion is that
courts didn’t do that- laize faire… however more modern doctrines may let for policy matters us affect a
contract
 The court is using interpretation to police the parties, but is not departing from contract interpretation
asking, “what did the parties really mean, intend” but they are letting it be overridden by what is actually
said
 Arguing about the definition of burglary
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Doctrine of reasonable expectations- restatement had already adopted this, it appears to only apply to
adhesion contracts which means that you’re stuck with it and you can’t negotiate the terms—This is a
pretty radical idea.
o Interpret the contract according the reasonable expectations of the insured
o Worried about provisions that undermine what you were contracting for
o Not going to stick you with terms that bizarre or oppressive, non-standard terms explicitly agreed
to, or from the fact that it eliminates the dominant purpose of the transaction
o Radical, comes from the courts
o Doctrine to intervene and protect the little guy
o Has been adopted by half the states
o NOT Arkansas
o Some people see it as a beefed up construe the contract against the drafter
o Most commentators support it
o §211(3)- doesn’t take the prospective of the insured, but views it in terms of what the insurance
company thinks and has reason to know (more protective of the insurance company)
o Nothing in the restatements section that LIMITS it to insurance contracts, can use it for a
noninsurance contract—but the courts seem to be limiting it to the insurance situations
 SO- C&J gets his policy
o He thought it was, normal reasonable person would have though that it was, the agent for the
insurance also thought that it was a burglary
Factors of adhesion contracts
 Document in a printed form
 Drafted by only one party
 Drafting party participates in a number of transactions as a matter of routine
 Form is presented to the adhering party with the representation that, except for a few terms, the drafting
pary will enter only on the terms contained- may be implicit or explicit
 After the parties have dickered over what terms are open, the document is signed by the adherent
 The adhering party enters into few transactions of the type prespresented by the form The principal obligation of the adhering party in the transaction considered as a whole is the payment of
money