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contracts outline

-plaintiff claiming that the defendant made the promise but did not keep it, asking the court to
enforce the promise
• Breach of contract: the plaintiff is claiming that the defendant made the promise but
did not keep it, asking the court to enforce the promise
• Express?
• Implied?
• Testing service implying that will look at evidence that the boy never
cheated through good faith
• Warranty
• It is a promise
• Noncontract actions (when claim is not that breached the contract)
• Restitution
• No contract
• Unjust for you to receive something without having to pay for it
• You were enriched by me and it would be unjust if you do not pay
restitution to me
• Volunteers, intermeddlers, plaintiffs with other remedies available????
• Rescission- asking for money back and have the whole thing undone
• Infant
• Duress
• Either don’t keep the contract or rescind it
• Reformation
• Bollinger- the written contract was not what we both thought it was
• Benefits of reformation
• So that the parol evidence rule cannot be used
Basis to enforce the claim/contract on
-court will not enforce the defendant’s promise unless plaintiff shows there is a basis for
enforcement/ court will enforce the defendant’s promise if plaintiff shows there is a basis for
1. consideration,
2. reliance,
3. or moral obligation
-to prevent enforcement, defendant may argue that plaintiff cannot show one of the bases for
enforcement: consideration, reliance, moral obligation
• Consideration for the defendant’s promise:
• (1) another promise or performance that was
• two arguments for why this might not be shown
• Promise is for an invalid claim
Plaintiff had no good faith and reasonable belief in
possible validity of the claim
• Promise is illusory
• Does not impose an express or implied
• commitment
• Look at intent (I will pay you if I feel like it)
• Promises need to do the above,
• so if a promise does not,
• it is not a promise,
• thus there is no promise given in exchange
• but if the terms are
• implied in law or
• in contracts of warranty, hability, etc
• for everyone involved in the contract
• context does not matter, look at the special
implications with the law
• implied in fact,
• within the context it is made in
• don’t have to spell out everything, that is
hard to do business
• consequence: no express commitment but
wont be illusory because the implications
do impose a commitment
• they may make the promise non-illusory
• because they do imply or impose a commitment,
so promise
• is manifested/committed
(2) Bargained for In exchange for the defendant’s promise
• Four reasons why this might not be shown
• Promise already received, so not given in exchange
• Promise by plaintiff not given until after the promise, so was not
given in exchange
• Defendant’s promise was conditional promise to make a gift,
• defendant did not seek these actions in exchange for the
defendant’s promise
• the bargain was a sham, not a bargain
• promise given by plaintiff did not benefit the defendant and
posed detriment on plaintiff
• policy because detriment is not the court’s business, there
is no accounting to taste, anyways
parties make bargains, courts don’t decide if they
were good or bad
• promise or performance by plaintiff is less valuable than the
defendant’s promise
• how consider what is a bargain and not a conditional promise?
• Consider the benefits/detriments involved
• consideration can include promising to forbear from asserting legal claims if
• the claim is valis (had to have actually happened) traditional rule
• asserted in good faith- even if not valid, could be objective or subjective,
modern rule
-to prevent enforcement, defendant will argue that the two elements, (1) a
promise or performance (2) bargained for in exchange have not been met
• Was there implied terms
• If promise seems illusory
• This would undo the illusory aspect of it
• Act in good faith- implied in contract
• Make reasonable efforts- implied in contexts
• Makes the seemingly illusory promise seem like a promise
because of course one would make reasonable efforts
If not consideration, was there
• Reliance/promissory estoppel
-court enforcing promise by means of promissory estoppel, NOT BY CONSIDERATION
• Plaintiff must show restatement 90
• Reliance and
• Four other elements
• Defendant made promise (does not have to be a bargain)
• Defendant could reasonably expect plaintiff to take
• Plaintiff took the action
• Action was induced by the promise and (taken in reliance on it)
• Enforcement of the promise is necessary to prevent injustice
• Defendant’s response/argument
• Plaintiff cannot show these 5 elements
• Promise did not induce the plaintiff to take action that the
plaintiff would not have taken anyways
• Not unjust because could get another job
• Equitable estoppel?
• Moral obligation- only used by the court in a few instances
• Note courts will not usually enforce promise based on the promise being broken
immorally, but
-there are three types of promises to be enforceable on basis of moral obligation
Court will enforce new promise by defendant that reaffirms old
obligation that was
• Discharged by statute of limitations
• Discharged by bankruptcy proceedings or
• Was voidable based on infancy
• Some courts
• Also say that moral obligation is a basis for enforcing a
• To pay for material benefit received
• If necessary to prevent injustice
• Promise to pay money on a material promise that p gave
to d
Defendant’s argument that the promise was not one of these special
kinds that court enforces based on moral obligation
• Restitution when plaintiff CANNOT prove that the defendant made enforceable
promise, plaintiff can get restitution from defendant if the defendant has been
• Unjustly enriched at the
• Plaintiff’s expense
• Cant recover for
• Breach of contract
 Because no promise
 No tort
• Remedy
• Defendant must pay the reasonable value of any benefit received from
the plaintiff
 Reasonable compensation for benefits/services rendered,
 Take into consideration the skill and time and services
 DO NOT consider the means of the individuals
-defendant’s argument back
• No unjust enrichment at plaintiff’s expense
• Because plaintiff did it as volunteer
• Manifesting no expectation of compensation
• No enrichment because
• Plaintiff conferred the benefit as an officious intermeddler
• No unjust enrichment at plaintiff’s expense because
• Plaintiff has other remedies
Contract formation
-court will not enforce defendant’s promise if plaintiff actually knew (or reasonable person
would have had reason to know) that the defendant had not assented to be bound
• Saying that you were joking rejected by court because reasonable person would have no
reason to know that you were joking
• Offer and acceptance
-if plaintiff alleges that defendant made promise as part of a bargain, a court will not
enforce the promise unless the plaintiff can prove the existence of both an offer and
• Elements of a bargain
• Optional preliminary negotiations
• Questions do not come with intent to assent
• Offer by offeror
• Manifestation on willingness to enter a bargain, difficult to apply
• Acceptance by offeree
Distinguishing offers form preliminary negotiations
 Objective inquiry
 Plaintiff and defendants positions
 Ambiguity is common
 In case of doubt, judges hesitate to find offers
 What courts consider is important- precedent, key words, context,
comparison of language used to alternative languages, etc
Cases that look at language to see if offer or not
Take objective view of language, key words, precedent, comparison
• Offer
• Manifestation of willingness to
• Enter a bargain
• Conditioned on offeree’s acceptance
• Empowers offeree to close the deal
• When someone gives you a form to give back to them, that is not
empowering you to accept anything, so it is not an offer, you will
actually be offering it to them
• Advertisements
• Not an offer unless
• State a limited quantity (because unreasonable to think
there will be one for everyone) or
• Have other attributes indicating that actually intending to
make an offer
• Terms like
• “immediate acceptance”
• “first come first serve”
• Offer terminated when
• Offer lapses because passage of time
• After time specified or
• Reasonable time if no time specified
• Offer revoked by offeror
• Effective only when
• Communicated
• Directly or indirectly to
• Offeree
• Anytime before acceptance unless
• Offeror has made an option contract (enforceable
promise) to keep the offer open
• Needs consideration for this option contract
o Consideration does not have to be
money, can be the promise that I
will only deal with you
• Some courts
• Cant revoke if relied on this offer
• Offer rejected by offeree
• Counter-offer is a rejection
• Proposing to buy more rails, that is counteroffer
and rejection of original offer
• Mirror image rule
• An acceptance with different or additional
terms is
o Rejection and
 Once reject, cannot accept it
o counteroffer
• Offeror has died
• Even if offeree does not know unless
• Offeror entered into option contract to keep the offer
• Note that this does not undo contracts, just unaccepted
• Because it takes away their opportunity to revoke
• Once offer accepted, it is a contract
• and cannot change rules or modify it after that
• if there is a condition on who can accept it, change that
before it is accepted
• how did the offeror invite the offeree to accept?
• by promising to perform? (bilateral)
• was the promise made in manner permitted by
• Needs notice unless waived
• or by completely performing and not making any
promises? (unilateral)
• no notice required unless requested
automatic option contract while the
performance is being rendered restatement 45
• on the basis of reliance, not consideration
• which one did the offeree promise to do?
• Offeree can implicitly promise to perform merely by
starting work note different from completing the work
• People can make promises through conduct
• Was notice of acceptance required?
Mailbox rule
• Acceptance happened upon dispatch of acceptance
• As soon leaves possession and control of offeree
• Not when the other receives
• Unless specified otherwise
Invitation to accept through
• Rendering complete performance or
• Acceptance happens when offeree completely
• Notice of acceptance not required unless
• requested
• Promising to render a complete performance
• notice of acceptance is required unless
• Waived
Accept by
• Making promise to render complete performance
• Expressly/words
• Implicitly/through conduct
• Most common way is to start performing
• Needs to give notice
• Note this is not acceptance by performance
• When suggest one manner of acceptance, other manners
can be accepted
• Silence cannot be acceptance unless
• Course of dealing makes silence a proper method
of acceptance
-arguments defendant might make
• plaintiff cant show offer and acceptance
• offer or
• no manifestation of willingness to be bound by
offeree’s acceptance
• offer lapsed before attempted acceptance
offer revoked indirectly or directly before
attempted acceptance
• no valid option contract
• binding, cant revoke
• separate contract to keep the offer
• needs consideration
 can be money, can be saying
that I will only deal with you
offer expressly rejected by offeree before
implicitly rejected through counter offer by offeree
offer terminated through death
invited acceptance through complete performance
• and didn’t completely perform
promise and
• didn’t make promise
• with words or
• implicitly through conduct
• my manner invited by the offer
offer required notice and
• didn’t provide notice of acceptance
• liability for failed negotiations
• liable for breaching a negotiation, not an agreement
• consideration would be reliance
promises unenforceable if
• indefiniteness
promise too indefinite to enforce if
-court cannot determine existence of breach
-or the appropriate remedy for a breach
-but court may require less definiteness if plaintiff seeks to enforce promise by means
of promissory estoppel
statues of frauds every state has statutes that make types of promises
• unenforceable unless
• promises evidenced by a signed writing
• writing that
• states the essential terms of promise with reasonable certainty and
• signed by defendant (plaintiff usually does not have to)
• 6 common types
• the consideration is marriage
• not marriage to each other
promise that cannot be fully performed in a year
• excludes
• promises that can be terminated in a year
• promise to employ for 5 years
• promise to buy or sell land
• exceptions for land
• does not need writing once conveyed the property
• part performance
• cant use statutes of frauds if
• buyer substantially relied on the promise to sell
• paying price not enough
• enough when plaintiff
• taken possession
• made repairments
• performed substantial other
• promise by executor to pay debts of decedent out of own pocket
• promise to buy or sell goods for 500 or more
• suretyship promise
• promise made by surety to
• creditor
• to pay debt that
• debtor owes to creditor
pattern of argumentation when asserting statute of frauds as a defense
• plaintiff’s claim
• defendant made promise and did not keep it
• defendant’s defenses
• promise not enforceable because
• falls within statute of frauds and
• requisites of writing and signing not met
• no writing
• writing does not state essential terms
• does not need specifics, can be very
simple, actually
• make clear intentions of wanting to sell,
amount, and to whom
• defendant did not sign the writing
• plaintiff’s responses
• promise does not fall in statute of frauds
• could be completely performed in year, the contract
does not say otherwise
defendant equitably estopped from denying existence of
sufficient signed writing because
• defendant asserted sufficient signed writing had been
• and plaintiff relied on the defendant’s assertion
part performance exception for land contracts
• defendant may not assert statute of frauds as defense
• defendant promised to convey land and
• plaintiff substantially relied on the promise
defendant may not assert statute of frauds as defense
• plaintiff relied on defendant’s promise and
• injustice can be avoided only by
• enforcement of the promise
• note not all courts recognize this defense
fine, no contract so cant sue under breach of contracts but still
will use
• restitution and recover under this
even if basis for enforcement, offer and acceptance, and no statute of frauds, can
still not enforce a promise based on following
• infancy, under 18
• voidable until reasonable time after person reaches age of majority
• mental infirmity
• traditional test
• because of mental infirmity cannot understand
• nature and
• consequence of
• transaction
• voidable
• modern test/few states (still accept traditional test)
• because of mental infirmity
• cannot act in reasonable manner in respect to
• transaction
• and promisee has notice of the person’s condition
• voidable
• public policy
• enforcement violate strong public policy
• crime
policies might differ
• induced by improper threat
• threats to commit
• crimes
• torts
• break existing contracts in bad faith
• leaves promisee with no reasonable alternative
• voidable
undue influence/overreaching
• voidable
• undue persuasion
• not duress because no threat, was not forced
modification without consideration
• preexisting duty rule
• duties under existing contract cannot serve as consideration
for new promises
• promise by one party to modify existing contract by
• unilaterally assuming additional tasks
• Does not apply when parties
• Cancel existing contract then form new contract
• If canceled or
• Subsequent new one
• This test is ambiguous
• Some courts
• Enforce promises to modify contracts without
consideration if
• Modification is
• Fair and
• Reasonable
• In light of changed
Fraudulent or material misrepresentation
• Misrepresentation
• Statement of fact that is
• Not true
• Promise induced by
• Fraudulent or
• Material misrepresentation
• Upon which promisee justifiably relied
• Voidable
• Active concealment
• Promise induced by
• Action intended to prevent promisor from
• Learning a fact
• Like putting up wallpaper
• Voidable like fraudulent or material misrepresentation
• Covering up facts is like saying facts don’t exist or not true
• Non disclosure of facts in special circumstances
• Generally, promise is not voidable because the promisee fails to
disclose facts to the promisor
• voidable if
• Induced by half truth
• Promisee misleads promisor by
• Disclosing some of facts but
• Not all of facts
• Promisee justified in relying on it
• Deemed to be misleading if does this
• Induced by non disclosure of facts where special relationship
• Promisor and
• Promisee can
• Expect full disclosure based on their
• Confidential relation
• Lawyer probably should make disclosure thus cannot
rely on
• Bare non disclosure rule
• Mutual mistake voidable
• Mistake
• Incorrect belief about
• What facts currently are- not just prediction about what they
might be
• A poor prediction about what
• The facts might later turn out to be
• Promise induced by mutual mistake to
• Basic assumption that has (fundamental to the characteristics)
• Material effect (having large effect on price, for example)
• Voidable
• Promisor
• Bore the risk of mistake
• If not, court will consider which party should
reasonably bear the risk of mistake
• Unilateral mistake
• Of promisor
• Voidable if
• Enforcement would make
• Contract unconscionable
• Some states don’t agree
• Goes against bare nondisclosure rule
• Unconscionability
• Term or
• Complete contract if
• Court finds that
• term or contract was
• unconscionable at
• time contract was made
• Effect on bare non disclosure rule. Rule said don’t have to disclose,
will be fine. But now, probably have to say something or risk it
voided. 161b
unenforceability as a defense or basis for rescission
-if person who has made a promise that is unenforceable under one of the preceding
rules, they can
-assert the rule as a defense or a basis for rescission
-pattern for argumentation
• plaintiff’s claim
• defendant made promise and didn’t keep it
• defendant’s defense
• promise not enforceable under one of the rules above
-unenforceability as a basis for recission
• plaintiff’s claim
• court should rescind the contract and
• restore the status quo because
• my promise was unenforceable under one of the rules stated above
• restitution upon rescission?
• To get rescission for contract, must first
• Make the restitution of any benefit conferred by the defendant
• Court will not require plaintiff to make restitution where
• Justice does not require it
Infant must make restitution when rescinding based on
• But not if subject matter is no longer available
• EXCEPTIONS to have people sell things to minors
• Emancipated
• For necessaries
• Even if subject matter no longer available
Form contracts
• Pre printed forms
• If party who prepared the form refuses to agree to any changes in the
form’s terms, the form is called a contract of adhesion
• For most part, treated like other promises
• Enforce even if contract of adhesion
• Needs
• Consideration
• Offer
• Acceptance
• Compliance with statute of fraud
• Not unenforceable for none of rules above
• Special rules for litigation of form contracts
• Adequate notice
• No assent to terms on printed form if
• Person did not have reason to know that form
contained contractual terms
• Strict construction
• When figuring out reasonable meanings for terms in a
form contract, court will select meanings that
• Disfavor the person who drafted the form
• Public policy and unconscionability
• Courts more likely to invalidate terms on these grounds in
adhesion contracts than in other types of contracts
• Because can consider the lack of equal bargaining
• Pattern of argumentation
• Plaintiff’s claim
• Defendant breached a contract or committed a tort
• Defendant’s defense
• I am not liable, or my liability is limited because
• Of an exculpation clause in our form contract
• Plaintiff’s replies
form contract not enforceable because I did not have
adequate notice that the form contained contractual
the exculpation clause
• when strictly construed
• should not be interpreted to mean x
• therefor does not apply to this situation
• unenforceable because
• violates strong public policy against x
• unenforceable because
• unconscionable because x
remedies plaintiff has lots of choices, but choices have limitations
• specific performance
• If damages would be adequate
• Adequacy
• Whether damages can be proved with reasonable
• Whether plaintiff might obtain a substitute performance
• Whether plaintiff could collect an award of damages
• Inadequate
• Damages for breach of contract to sell land
• Bargain was unfair at time of contract made
• Terms of contract were unfair
• Or consideration for the defendant’s promise was grossly
• Expectation damages
• Amount of money necessary to put plaintiff in position if defendant had not
breached the contract
• Plaintiff has a right to this
• loss in value PLUS other loss MINUS plaintiff’s costs avoided MINUS other loss
• loss in value
• difference between what the defendant promised and what the
defendant actually delivered
• other loss
• consequential or incidental harm caused by defendant’s breach
• costs avoided
difference between cost plaintiff expected in performing and the
cost plaintiff actually incurred
• other loss avoided
• any losses that would have been incurred consequent to plaintiff’s
performance but
• were not incurred because of the breach
• limitations
• plaintiff cannot recover damages that could be
• avoided without
• undue risk
• burden
• humiliation
• plaintiff may have to make substitute arrangement like
• undertaking comparable employment
• incomplete or defective performance
• plaintiff always may recover the loss in market value
• OR plaintiff can recover the cost to complete or remedy the
defect unless
• That cost is
• Grossly disproportionate to the probable loss in
value to the plaintiff
• Unforeseeability
• Plaintiff may not recover damages for losses that were
• Not foreseeable at the time of the contract
• Losses are foreseeable if
• They arise in the ordinary course of events
• or if the defendant has notice of the special
circumstances giving rise to them
• communicate it to them
• uncertainty
• plaintiff cannot recover damages that the plaintiff cannot prove
without reasonable certainty
• difficulty showing
• fact of loss
• extent of loss
• measurement/dollar value of loss
• can still get nominal damages
• reliance
• specific performance
• liquidated damages
• reliance damages
• alternative to expectation damages
amount of money necessary to
put the plaintiff in same position that
plaintiff would have been in if
contract had not been made
• nominal damages
• alternative
• plaintiff proves that defendant breached contract but
• cannot prove the damages
• liquidated damages
• damages that the parties stipulated in the contract
• limitations
• penalties
• court will not enforce it if it is
• unreasonably large
• in comparison to
• actual or
• anticipated loss
• will be described as penalty
• unconscionably small
• unconscionability
• pattern of argumentation for remedies
• plaintiff’s claim
• defendant made promise and did not keep it
• defendant’s defenses
• no offer/acceptance
• no consideration
• I kept the promise
• Plaintiff’s replies
• Plaintiff’s remedies
• Liquidated damages
• If promise is enforceable,
• Court should order defendant to
• Pay the amount of damages stipulated in the contract
• Defendant’s defense
• The liquidated damage is
• Unreasonably large in
• Relation to both
• Actual and
• Anticipated damages and therefor
• Cannot be enforced as a penalty
Specific performance
• Defendant’s responses
• Damages are adequate, so no specific performance
• Bargain was unfair at time it was made so no specific
• Expectation damages
• Plaintiff says that
• Defendant’s breach has made me worse off because
• Loss in value plus other loss but
• I am better off because
• Costs avoided and other loss avoided
• Expectation damages will equal the difference between
these 2 figures
• Defendant’s responses based on limitations described
• Court should reduce expectation damages based on
• Avoidability
• Plaintiff overstated the other loss because some of
that other loss could have been avoided
• Plaintiff understated cost avoided because plaintiff
could have avoided some of the additional costs
• By stopping performance or
• Making alternative arrangements
• Reduce expectation damages for an incomplete or
defective performance
• For loss in value
• Plaintiff attempted to use the cost to
complete or remedy but
• This amount is grossly
disproportionate to the
• probable loss in value to the plaintiff
• Modern view- get to loss in value to you if substantially prove. If not, get remedy
complete if not grossly dis to value to p, if neither, get loss in market value
choice of market value or cost to
• Can’t get cost to remedy/complete if grossly disproportionate to probable loss of
value to me
 348(2)- if cant prove w reasonable certainty, use loss in market value or cost to remedy
or complete
 But cant get cost of remedy to complete if grossly disproportionate to probable loss in
value to the plaintiff
reduce expectation damages because
• loss in value was not foreseeable at time the
contract was made because damages
• did not arise in ordinary course of events and
• no notice of the special circumstances giving rise to
the damages
• reduce expectation damages because
• plaintiff cannot prove the loss in value or other loss
• reasonable certainty
• if plaintiff can’t get expectation damages, then asks for
• reliance damages
• plaintiff I am worse off than if the contract had never been
made because x
• if no other remedy is available, should at least pay nominal
promises automatically void bc violates public policy
• harm the public
• not about being fair between them
• argue new public policy or
• commit tort, in restraint of marriage
• contracts to pay a brive
contract interpretation
• parol evidence for prior agreements
• integration is the final written expression of an agreement (if not, it is
• integration is complete if it
• is intended to be the exclusive statement of the agreement
• complete integration
• discharges any terms of a prior agreement that are
• within its scope
• would normally and naturally be within the written
• partial integration
• discharges any terms of a prior agreement that
• are inconsistent
• how to determine complete or incomplete?
• Four corners test
• All circumstances of its creation
• Reformation of written contract based on
• mutual mistake or
• fraud as to its content
pattern of argumentation
• plaintiff claim
• defendant made a promise and did not keep it
• defendant defense
• the alleged promise was discharged under the parol evidence rule
• it was not included in out subsequent written agreement
• plaintiff reply 1
• promise not discharged because it is
• outside scope of the written agreement
• plaintiff reply 2
• promise not discharged because
• written agreement was a
• partial integration and the
• promise is
• not inconsistent
• plaintiff reply 3
• written agreement should be reformed to
• include the promise because
• we both mistakenly thought the
• promise was included
• or because defendant
• fraudulently misled me to
• think it was included
• court should
• deem it to be in the writing even when it was not
• parol evidence for meaning of terms
• courts in some jurisdictions will
• not consider extrinsic evidence (other than evidence of trade usage)
• about the meaning of terms in a written agreement
• if the terms appear to have a plain meaning
• other courts will
• consider extrinsic evidence of the meaning of terms
• when parties attached different meanings to a term
• if one party knew or should have known
• the meaning attached by the other party
• the meaning attached by the other party prevails
• if neither party’s meaning of a term prevails under the previous rule, the term
cannot be enforced at all
• pattern of argumentation
• plaintiff’s claim
• defendant promised to do x which means y and did not do it
defendant’s defense
• x means z, and I did z
court will look at contract and see which is most reasonable
plaintiff or defendant will argue that
• x has my meaning on the
• following extrinsic evidence
• other side will respond with own extrinsic evidence
• or other side should not consider the other extrinsic evidence
• x has plain meaning
if evidence shows that parties attached different meanings to the
• either party might argue that
• my meaning should prevail because
• other knew or should have known
• what I thought x meant
• defendant could say that
• if my meaning was not known/my meaning does not
• then the term has no meaning and
• cannot be enforced because
• I did not know and should not have known what
• Plaintiff thought x meant
• filling gaps with implied terms
• contracts may include their
• express terms and
• terms implied
• in law
• based on policy considerations
• some of them like
• good faith
• mandatory and
• cannot be waived or altered
others like
• general assignability of contract rights
• are merely default rules which
• parties may change if want to
• or in fact
• based on particular circumstances of the contract at issue
Patterns of argumentation
Arguing that there was
• Implied promise
• Plaintiff’s claim
• Defendant made implied promise and did not keep
• Defendant’s defense
• I did not make the implied promise
• Was promise made or not?
• Court look at all circumstances of the case
• Key
• Look at contract,
• Explain why or why not should be implied
• Implied condition
• Plaintiff’s claim
• Defendant made a promise and did not keep it
• Defendant’s defense
• My performance was
• Excused by the non-occurrence of
• An implied condition
• Was not stated in contract but
• There was a condition that was implied
• Plaintiff’s response
• The implied condition does not exist
• Or in the alternative
• Was satisfied
Performance and breach
• Express conditions
• Non-occurrence of an express condition excuses a performance subject to the
• Regardless of whether it has material effect on the performance
• Party may condition performance on a subjective event- like satisfaction
• But when practicable,
• Courts will interpret condition of satisfaction to mean
• For a reasonable person
• Pattern of argumentation
• Plaintiff claim
• Defendant made promise and did not keep it
• Defendant’s defense
• My performance of the promise was excused
• by the non-occurrence of an express condition
• Constructive condition of prior performance
• Prior performance by one party may be constructive condition to
• The other party’s performance
Substantial performance
• Performance without a material breach
• Will satisfy this constructive condition
Courts determine whether a material breach has occurred
• By considering a variety of circumstances
• Generally hesitant to find a material breach
Pattern of argumentation
• Plaintiff claim
• Defendant made promise and did not keep it
• Defendant’s defense
• My performance of the promise was excused
• Because plaintiff’s prior performance was a
• Constructive condition to my performance and
• Plaintiff did not perform as promised
• Plaintiff response 1
• there was no constructive condition of prior performance
• our performances were meant to be independent of each other
• court allowed that still had to pay for business even if violated
promise because it was independent
• allowed to subtract allowance for damages
• Plaintiff response 2
• Even though I did not perform as promised,
• I substantially performed and
• Therefore satisfied the constructive condition
• Even if strays a lot, will likely find that substantially performed so
that wont suffer a
• forfeiture
• Restitution despite a material breach
• Some jurisdictions, can recover restitution despite
• Committing material breach
• The measure of recovery is the benefit conferred in excess of any loss caused
• Pattern of argumentation
• Plaintiff claim
• I conferred a benefit on Defendant in attempting to perform a
promise and
• although I breached,
• defendant would be unjustly enriched if he did not pay for the
• Divisibility of performances
• Whenever practicable, court may
• Divide single contract into
• Two or more separate contracts
• Even if plaintiff materially breached the undivided contract, the
• Defendant’s performances are
• not excused
• in any of the separate contracts
• which the plaintiff has substantially performed
• Pattern of argumentation
• Plaintiff claim
• Defendant made promise and did not keep it
• Defendant’s defense
• My performance of the promise was excused
• Because plaintiff’s prior performance was a
• Constructive condition to my performance and
• Plaintiff committed a material breach
• Plaintiff’s reply
• Although I committed a material breach,
• I substantially performed one of more
• Divisible parts of the contract
• Defendant’s performance is
• not excused for these parts
• Impracticability and frustration of purpose
• Party’s performance may be excused
• By occurrence of event that renders the
• Performance impracticable
• if both parties assumed that
• The event would not occur
Party’s performance may be excused
• By occurrence of event that
• Frustrates the party’s principal purpose
• If both parties assumed that the event would not occur
• For frustrated
• Can still be practicable to perform,
• Its just that don’t want to
Pattern of argumentation
• Plaintiff claim
• Defendant made promise and did not keep it
• Defendant’s defense 1
• My performance of the promise was excused
• Because an event occurred that
• Rendered my performance impracticable and
• We both assumed that the event would
• Not occur
• Defendant’s defense 2
• my performance was excluded because an event occurred that
frustrated my principle purpose
• and we both assumed that the event would not occur
• plaintiff’s prior performance was a
• Constructive condition to my performance and
• Plaintiff committed a material breach
• Plaintiff’s reply
• Although I committed a material breach,
• I substantially performed one of more
• Divisible parts of the contract
• Defendant’s performance is
• not excused for these parts
who can enforce the promise?
• parties
• representatives
• guardians
• executors
• Intended third party beneficiaries
• If promisee intended to give the person
• The benefit of the promise and
• A right to enforce would
• Effectuate the parties’ intention
• Who else would have enforced the promise?
Plaintiff claim
• Defendant made promise and did not keep it
Defendant’s defense
• Plaintiff is not a person entitled to enforce
Plaintiff’s reply
• I am an intended third party beneficiary
• Assignees
• Party may assign rights under a contract unless
• The assignment would increase the burden on the promisor
• The assignment is forbidden by statute or
• The assignment is precluded by a contract
• To assign, party must
• Manifest an intention to surrender the right permanently to another
• Pattern of argumentation
• Plaintiff claim
• Defendant made promise and did not keep it
• Defendant’s defense
• Plaintiff is not a person entitled to enforce
• Plaintiff’s reply
• the promisee assigned his or her rights to me
Defenses to not keep the promise
• Shouldn’t keep the promise because of public policy
• Parol evidence
• Was not in a year and was not a signed writing
• It would be unconscionable
• It was induced by active concealment
• There was duress, threat, there was no alternative
• Infant
• No consideration
• No reliance
• The offer lapsed before it was accepted
• Didn’t give me notice of acceptance
• Overreaching
• Undue influence
• Purpose was frustrated
• Subject to a condition
• I have mental defect and you have reason to know about it
• Plaintiff can choose
• Specific performance
• Monetary damages
• Defendant’s argument for limiting the damages
• Voidable
• Not foreseeable
• Reasonable certainty
• Damages would be an inadequate remedy
• The bargain wasn’t fair
Scope of UCC article 2
• Provisions apply to the sale of goods
• Consequence
• Will supplement or
• Replace the
• Common law rules that apply to other kinds of contracts
• Examples
• Adds requirement of 500 or more needs signed writing
• Certain sale of goods comes with implied warranty of merchantability
• Term goods
• Movable at identification
• Physical objects
• Not real estate
• Not attached to real estate
• Unborn young of animals
• Growing crops
• Minerals severed by the seller
• Structures severed by the seller
• Other things severable without harm to the real estate
• Timber to be cut
• Future goods
• Will in future meet the definition of goods
• Excluded
• Money
• Securities
• Things in action
Legal rights or claims
• Sale of goods
• Transaction where
• Title to the goods
• Passes from seller to buyer
• For a price
• Excludes
• Leases
• Gifts
• Bailments
• Contract for sale
• Includes to sell in future and
• Present sale
• Even though a present sale, no promises to do anything in future
• Hybrid contract
• Contract for sale of goods and non goods like services
• Will apply ucc if
• The sale of goods is the predominant purpose of the contract
• Some courts will apply ucc if
• Gravamen of the complaint concerns the sale of goods
• If about the goods themselves, not the installation
• Will apply ordinary rules of contracts
• Some courts will apply ucc to transaction that is
• Not a contract for the same of goods but
• Is analogous
• Software, policy that sold similarly
• Pattern of argumentation
• The issue of what governs may determine
• The availability of claims, defenses, exceptions to defenses, and remedies
• Example availability of a claim
• Plaintiff’s claim
• Defendant breached the implied warranty of merchantability
• Defendant’s defense
• does not apply- there is thus no implied warranty of
merchantability because this is not a contract for the sale of
• example availability of a defense
• Plaintiff’s claim
• Defendant made a promise and did not keep it
• Defendant’s defense
• The promise is not enforceable because the requirements of the
statute of frauds were not satisfied
Plaintiff’s reply
• Does not apply because this is not a contract for the sale of goods
Example availability of an exception to a defense
• Plaintiff’s claim
• Defendant made a promise to keep the offer open and did not
keep it
• Defendant’s defense
• The promise is not enforceable because plaintiff gave no
consideration in exchange
• Plaintiff’s reply
• No consideration is needed because of the exception for firm
• Defendant’s response
• Does not apply because this is not a contract for the sale of goods
Ucc basic concepts
• Merchant rules
• Note ucc applies to merchants and non merchants
• but some are only applicable to merchants
• how to be a merchant
• dealing in goods of the kind involved in the transaction
• having knowledge or skill as to the goods involved in the transaction
• only for
• goods previsions
• having knowledge or skill for practices involved in transaction
• only for
• practices provisions
• hiring agent who has knowledge or skill necessary to qualify as a
• person can be merchant for some ucc provisions or transactions for others
• bicycles but not selling other things
• Pattern of argumentation
• Plaintiff’s claim
• Defendant breached a promise to buy or sell goods
• Defendant’s defense
• My promise is not enforceable
• Because not in writing but in statute of frauds
• Plaintiff’s reply
• Statute of frauds satisfied because
• Defendant failed to respond to my confirmation within 10 days to
a confirmation I sent to him
• Defendant’s reply
The confirmation exception does not apply because I am not a
• Unconscionability
• Court may refuse to enforce
• Term or
• Contract that
• It fined unconscionable
• Courts monitor contracts for oppression (substantive unconscionability)
• Remedy meddling or
• Excessive prices
• Courts monitor contracts for oppression (procedural unconscionability)
• Hidden contract terms or
• Contracts offering no meaningful choice
• Courts rarely invalidate contract provisions as unconscionable
• Especially those between merchants
• Pattern of argumentation
• Plaintiff’s claim
• Defendant breached the implied warranty of merchantability
• Defendant’s defense
• The implied warranty of merchantability was disclaimed
• Plaintiff’s reply
• The attempted disclaimer is unconscionable and therefore is
• Not enforceable
• Good faith- only honesty in fact
• Some ucc provisions expressly require good faith
• Specify the quantity of goods
• All ucc contracts have
• Implied duty of good faith in
• Performance
• And enforcement
• Not in their formations
• Merchant definition of good faith
• Honesty in fact and
• Observance of reasonable commercial standards of fair dealing in the
• The existence of commercial standards of fair dealing in the trade must
be proved
• Wont be assumed to exist
• Pattern of argumentation
• Plaintiff’s claim
• Defendant breached the implied duty of good faith when did x
• Defendant’s defense
There was no dishonesty
And (if defendant a merchant)
• Plaintiff has not shown that the standards of fair dealing in
the trade prohibit x
• Supplemental general principles
• Unless displaced by a particular provision of ucc
• Otherwise applicable principles of law and equity supplement them
• Ucc sits upon other laws, others in tact and applicable
• Pattern of argumentation
• Plaintiff’s claim
• Claims not under the ucc
• Defendant’s defense
• Defenses not based under the ucc
Article 2 receipt, inspection, and warranties
• Receipt and inspection
• Buyer’s rights and duties
• Duties
• General duty to accept and pay for any goods
• This duty is conditional (unless agree otherwise)
• Buyer does not have to pay until
• seller
• Goods tendered
• Buyer has right before buying to
• Inspect the goods in a reasonable manner
• Before paying for them
• If goods defective,
• Seller has to pay for the cost of inspection
• Otherwise, it is buyer’s responsibility
• rights
• warranties- representation or assertion about quality or condition or usefulness of
• includes implied promise that the goods will be true to that, will be as warranted
• types
• express
• assertions of fact about the good made by the seller
• buyer does not have to rely on it
• as long as seller makes affirmative statements or
indication of fact about the goods
• cannot disclaim warranties
• implied
• of fitness for a particular purpose
if seller knows that buyer is relying on seller skill and
expertise for selecting it
• memory chip at computer store
• relying on store to pick out the right one
• will come with warranty
• store will be warranting that that chip would work
in your computer
• of merchantability
• only made in contract for sale by
• a merchant who deals with goods in the kind
• requirements
• goods fit for ordinary use
• goods properly packaged and labeled
• of good title
• when sells to you,
• warrants that has a good title
• other ones that arise from facts of cases
• beyond those listed
• when sells goods, probably that new even though not
• even if good for the ordinary purposes, but still
implied that new
• can disclaim warranties
• if disclaimer comports with
• conspicuous
• for merchantability, includes this word
• or says no warranties
• limitation
• court may strike disclaimer terms as being
issues that arise with warranties
• who may enforce them?
• Third party beneficiaries may be able to do so
• Most states
• Warranty extends to anyone who
• Reasonably expected to use
• or be effected by the goods
• damages?
• Buyer is entitled to damages measured by
• Difference in value between the
• Goods as they are and
• Value that they have if they were warranted
Can get
• Incidental and
• Consequential damages
• Economic losses covered
• If seller had reason to know about it
• Personal injury
• No foreseeability as long as
• Proximately caused
Pattern of argumentation
• Plaintiff’s claim
• Defendant made an express or implied warranty that
• The goods would be x
• The goods are not x
• Because x
• Defendant’s defense 1
• i did not make the warranty
• because the elements of the section are not satisfied
• this is not contract for sale of goods
• Defendant’s defense 2
• I didn’t make the warranty to you even if I breached it
• You are not a person who might have been
• Reasonably to be expected to use it
• Consume it
• Or be affected by the goods
• Defendant’s defense 3
• I breached but I
• Disclaimed the warranty in accordance with the requirements of
• In conspicuous terms, I disclaimed no warranty
• Plaintiff response 1
• Disclaimer ineffective because
• You cant disclaim an express
• Plaintiff response 1
• Disclaimer is unconscionable
• Because x
• Assert facts make it unconscionably to make the disclaimer such
Remedy if able to show breached warranty
• Entitled to damages equal to
• Value of goods accepted and
• Value they would have had if they had been as warranted
• Plus incidental and consequential damages
Contract definition: promise or set of promises. Law gives remedy for its breach. Law
recognizes the performance of it as a duty §1
2 questions:
 Under what circumstances is promise enforceable?
o Basis for enforcement law distinguishing this promise from others that should
not be enforced
 Historically- wax seals
 3 functions of the wax seal
o Evidentiary- evidence that contract exists
o Cautionary- significance of their acts
o Channeling- know what transaction it is, is a contract
 Consideration (1) another promise or performance (action or
forbearance) (2) that was bargained for (sought and given) in
exchange for the promise §71(1), (2)
o Policy for recognizing consideration bargaining is how we
do business, encourage bargains in the future
 Reliance there is no consideration, but promise could still be
enforced because person relied on it (planned canoe trip, renting
 Moral obligation
How do courts enforce promises?
o Specific performance when no alternative remedy. Court makes do what
promised to do or will hold in contempt
 Not available when monetary is available or when
 Bargain was unfair
o Money damages plaintiff always has right to this if promise enforceable and
made. Does not matter if land
Claims to bring to court: made promise and didn’t keep it, breach of contract
examples- the other promise or performance sought and given for the og promise
 For student loan
 Agree to pay it back
 Money exchange for canoe- bases for enforcement
o Consideration is the money you receive bc sought and given
 The promise in paying rent
 Promise to let you live in apt
Promise to give bday gift
o No consideration bc no promise/performance bargained for this promise
 Defense is not that did not make promise, it is that there was no
performance/promise bargained for
o Was gratuitous (no enforcement because hard to prove when there is no
Promise/performance can be consideration if there was no benefit/detriment or other special
o Here, the defense of unequal value was not successful
Hamer v Sidway
Facts uncle made promise to nephew that if he didn’t drink, smoke, or gamble, he would
give him 5k
Terms were met and uncle agreed, but died before gave it
Lawsuit against uncle’s executor by louisa who money was promised to
Defense no consideration, that refraining were benefits to the nephew, it was not a
detriment and therefore not consideration, and also uncle did not benefit from these things.
Admitted there was bargain
Court rejects defense. Detriment is not our business, no accounting to taste. Parties make
bargains, courts don’t interpret if good or bad
The nephew did the thing that was bargained in exchange for, so consideration is sufficient
 Shadwell
 "on point", Prior promise, Binding, good consideration, Uncle did not
benefit from nephew married, Nephew did not detriment from marriage,
Consideration was the performance of marrying
 Lakota- newton cbns, british
 Withhold on drinking, ill give you money
 Held to be enforceable
o Ny court bound to follow uk, mass, etc courts?
 No, cited them bc persuasive
 Cant cite precedent from own court bc does not have any
o How did parker find those cases?
 The plaintiff gives it to them
 Hamer's lawyer found them and cited them in the brief that gave to judge
Something of trifling value can be consideration §79b
o Yes, when it is a true bargain
o Not real bargains: both parties/all know its mere pretense, not sought and given, not
bargained for
o Not about if values are equal, but about whether it was bargained for
o If there was a bargain, there’s no additional requirement of equivalence in values
o If mere pretense, it is invalid
 Promise to forbear from asserting legal claim can be consideration
o Exception: promise to forbear from asserting claim cannot be consideration if the
claim is… 2 ways to interpret, one traditional and one modern rule
 Clearly invalid- promise not to take to court for hitting car but never even hit
car… giving up not asserting a valid claim to begin with. So the original claim
actually needed to happen
 Not asserted in good faith, modern rule so could be invalid, but looking at if it
was objectively (what would reasonable person think) or subjectively (what
did the person think) in good faith Dyer
 Policy discourage people from extracting payments
Dyer v national by products
Facts working at factory, lost foot, came back after better, did not employ for life like they
told him, and fired some months later
Claim dyer said that the consideration for the lifetime employment promise was his promise to
stop his court litigation against them. Breach of this contract
Defense never made that promise, and even if did, no consideration to that promise because
dyer could not sue anyways, could only get workers comp, so would not be afraid of him to
file case. So would not even have claim and collected workers comp, so cant sue anymore
Defense of clearly invalid
Procedure appealed sum judge that had no claim. Appeal court said claim had to have been in
good faith vs invalid. Use subjective (if honestly believed it) or objective test. Remanded to
see if promise was made and if it was made in good faith
Past services cannot be consideration
Facts president of company said that because she
worked there a long time, she should have
retirement security
Claim breach of contract, promised to pay her for
life but did not
Plaintiff’s claim of 2 potential pieces of
 Worked for 37 years
 Worked for 18 months even after hearing
about the deal
Defense there was no consideration
-working for 37 years cannot be consideration for
promise because not bargained for, not sought in
exchange for promise because the promise was
not yet made when she worked for 37 years.
-Subsequent working for 18 months not bargain
because the resolution said she could have quit the
day she found out, had no obligation to continue
Final decision no consideration, it was just a
gratuitous promise
What if resolution said “in consideration
of her past years of working” still would
not have worked because was not
sought/bargained for/given
How make it a bargain?
Just say that if work for 3 more months,
we will pay you retirement (could be
argued that would be a pretense)
Facts took care of son, son’s father wrote and said would compensate him and never did
Claim breach of contract, promised to reimburse me and you did not
Defense no consideration for the promise to reimburse, similar to Feinberg: care for the son
was not sought and given in exchange. The promise to pay for the expenses could not be
consideration because it had already been done, not sought and given for in exchange
Rule past services are not consideration because not bargained for. But it was immoral and
should have been kept because of that but court cannot base on morality
Bargains puzzle- if you do x I will do x. but how know if it is conditional to make a gift or if it
is offer to make a bargain?
Williston advice consider the benefits/detriments involved despite hamer
Facts said if you come down and see me, I will give you place to live, land to till because I
have too much, she moved in then he kicked her out
Claim breach of contract of giving place to live after 2 years
Defense no consideration
Finding no consideration, said was gratuitous, was not seeking her visiting him to give her the
place to live, it was not bargained for in exchange
Dissent said that the loss and inconvenience of moving would go to sufficient consideration,
and her tilling his land was benefit to him
Tramp coat to tramp is not benefit to promisor, giving a gift
Tiffany’s detriment for her to see had, benefit for dad to see daughter
Lake land employment
Facts columber signed a noncompetition
agreement, worked there for a while longer.
His promise not to compete after leaving in
exchange for actual forbearance from firing
Left, found similar work elsewhere
Claim breach of contract, violated the
noncompete agreement, said consideration
was keeping him employed
Defense contract lacked consideration
Finding divided the court
Majority said forbearance was consideration,
Regardless, promise was enforced because it
ought to be enforced- don’t get to benefit
from info then give info away to another job,
court frustrated with bargain theory
dissent said was not because was not
bargained for in exchange (did not promise to
employ him or make it a condition, or outline
the specifics)
Similar to Feinberg- the continued
employment does not count
The performance of keeping him employed
happened, but was not bargained for.
What is employment at will either party can
choose to terminate the employment at any
Promised not to compete, but did not get
anything in exchange. Columber did not
require them to employ him, there was no
change in employment because was
employment at will
The exchanges were not bargained for (yes,
he continued working, but he did no ask to)
Illusory promise statement that sounds like a promise but is not because it makes no
commitment §2(1) promise is a commitment, so there is no consideration
Example of promise I will pay you money if you tutor me
Manifesting intent that will pay money, making commitment to pay money
Example of illusory promise tutor me and I will pay you if I feel like it
No intention to pay for sure
Commitment is missing- not committed self to do anything
 Can an illusory promise be consideration? Need another promise for consideration, so the
promise has to be real and not illusory
o Not if the promise is truly illusory
Strong v sheffield
Facts didn’t have money to buy business, said
would pay later. When came time to pay, did not
have enough money so made deal.
Promise that: Wont take property back, but make
promissory note to pay debt later. Wanted wife to
endorse the notes to pay if he could not
Promise- if get wife to endorse I wont collect the
note until I need the money
Claim sued wife for breach of contract when went
to get money but was not given it
Said he forbeared collecting for 2 years, that
should be the consideration
Defense there was no consideration for her
His promise of not collecting until he needed it
does not count because it is illusory.
The promise to forbear was illusory because
could have wanted the money at the right exact
moment, so there was no commitment to follow
through so was not consideration.
Additional defense: And the actual forbearance
that he did do was not consideration because it
was not bargained for (like Feinberg)
If advising strong he should specify time
he would collect in (to indicate
commitment aka promise),
or bargain for it
Conclusion forbearing could be consideration but
it was not because it was illusory. Forbearing
until I want is not really a promise
o But terms “implied in law” or “implied in fact” may make the promise nonillusory §202(1), 205 because imply or impose a commitment, so promise is not
illusory and is manifested/committed
Implied in fact there are express and implied
so no express commitment, might sound
terms within the context within it is made.
illusory, might not be because these
Don’t have to spell out everything because
implications actually impose
that’s not how we do business
 §202(1)
Implied in law implied terms in contract of
warranty and hability. To protect the tenants.
Implied duty of good faith on everyone
involved in the contract, doesn’t matter what
context is
Mattei v hopper
Facts said would buy the only wanted land if could get tenants (promise to buy was subject to
obtaining leases satisfactory to the purchaser). Hopper did not sell the property that promised
to. The contract they entered was not a sale because deed not handed over yet
Claim breach of contract. Mattei said Hopper promised to sell, but did not
Defense no consideration, so I did not breach the contract. Mattei’s return promise to pay if
leases are satisfactory was illusory because: had unlimited discretion, not making a
commitment, similar to “ill pay if I feel like it”
Reply a term implied in law, one that is good faith, is not illusory, so you did break the
promise because it was not void to begin with. Good faith implied in contract §205. If acting
in good faith, cant just randomly say was not satisfactory.
Conclusion implied terms made the illusory promise non-illusory
Wood v lucy
Facts brit wanting to sell clothes in usa, hired wood as agent who agreed to sell the clothes in
He would get exclusive rights to market clothes in usa and he would get half of all revenue
Claim breach of contract. Broke promise of exclusive rights to market when she dealt directly
with sears, now he wont get half the profits from that
Defense I did not breach because there was no consideration, the return promise of sharing half
of the revenues is illusory because didn’t make commitment to actually make efforts to make
deals to give her half of the profits
Response it is a term implied in fact- the reasonable effort to generate revenue makes promise
non illusory
Trial court illusory, sounds like- if I feel like doing things to create revenue I will then give
you half
Court not illusory, we are not in age of formalism anymore, requirements would make
contracts difficult, they wouldn’t be enforced
Reasonable effort is supplied here because it is a business agreement and it would not make
sense for 2 business people to enter agreement and one person would not do anything. Their
agreement makes no sense if was never going to make an effort, it was implied in the terms
Consideration/return promise was to make reasonable effort and then give half of the revenue,
not illusory
Looking at strong considering wood
Pro strong must be the case he was agreeing to forbear at least some time, would not say if
was planning on waiting one second, so it was actually term implied in fact. Willing to wait, or
transaction would make no sense, so was ultimately not illusory, was a promise, had
consideration, so could enforce the contract, there would be a breach
If want to show promise, have to show both elements that it is a
promise/performance sought and given in exchange
To show not, have to show one or more not real
How might argue promise to promisee lacks consideration?
Not bargained for, not sought in exchange for/was gift
is illusory- no commitment, manifestation (and not implied in law or fact)
was trifling value and was pretense
was a past service
About promise/performance
 Say it was an invalid claim (made in
bad faith) (good faith- If don’t know
law, so have trial to see the faith)
 Say it was illusory (and not implied in
law or in fact- reasonable
interpretation)(these will imply or
impose a commitment)
Bargained for in exchange
 Say was sham/pretense
 Conditional promise to make gift is
not a bargain, lacks consideration
o Use benefit/detriment test
 Consideration happened before
promise was made
 The consideration or what was done
after the promise was not bargained
for (was just done but not sought and
bargained for)
reliance as alternative basis for enforcement (not using consideration)
before official, would questionably apply equitable estoppel and stretching facts to find a bargain
where there was otherwise no consideration but promises on which were relied on were
otherwise enforced
goal is to remedy injustices, to fix the past
Early ways that used reliance as basis for enforcement:
Equitable estoppel way reliance was enforced before was officially recognized. Pretending that
tree was on his land because you told him it was
 If make statement of fact that someone else relies on, cant go in court and say the facts
are different than what said they were
 Example tell neighbor to cut down tree because on his property, not yours. Then sue him
for cutting down tree on your property.
o he will rightly say that you told me it is on his property, he relied on that
statement, and wouldn’t have done it if didn’t tell me otherwise
 waiver voluntary relinquishment of rights, most rights are waivable. Waived rights to
own tree
 estoppel involuntary bar, stopped from being able to do something
o equitable estoppel if make statement of fact and another relies on it, cant later say
that facts are different- equitably estopped from asserting that tree was on your
property in court
o needs to be a reasonable reliance and has nothing to do with contracts
Facts grandfather wanted her to not have to work. Promise was made
Claim breach of contract
Defense there was no consideration, no bargain, nothing required of her in exchange
Equitable estoppel court said true, no consideration, no bargain, nothing was required of her in
exchange but estopped from raising defense of lack of consideration because she was
reasonably induced to change her position
If someone relies on promise, stopped from saying no consideration
Ought to be held
Situation where stretching facts to find a bargain
Facts promised money to make memorial but then took it back, didn’t donate, bank sued her
Claim breach of contract that she did not donate
Defense lack of consideration
There was consideration the memorial was going to be in the womans name, she would give
money and they would obviously name it after her, so there is a bargain
Controversial said was stretching facts when there was no consideration or bargain, just a gift
because it was called that
Promissory estoppel where reliance was explicitly recognized §90
 promise
 action/forbearance by the promisee
 induced by/taken in reliance on the promise
 reasonably expected by the promisor
 injustice can be prevented only by performance
limitation of remedy §90(1) may be limited as justice requires even if enforce the promise
 ricketts, she ended up getting another job, so justice could just compensate for the
time she lost
reliance under promissory estoppel
No consideration was not bargained for
Has to meet all 5 elements of restatement, if prove that missing one, cant win
Promise to pay her pension
Reliance through retirement
Induced by promise? She ended up working for longer, she would have retired anyways as she
was old. But, show financial documents that she was in good health, she needed money, said
herself that she was relying on it, so she would not have retired
Could action be expected by the promissor? Yes, they intended for her to have a comfortable
living, not unreasonable to think that she would take up the offer when that’s what they
offered her…
Injustice can be prevented only by performance? Telling to get a job is injustice because old
by then, had cancer, so do need to perform
Injustice element if meets standards (vague injustice- flexibility, harder to apply, less certain, but
tailor to facts of case, wont have outliers) or rules (recover if meet rules- uniformity, rigid, but
• Effect of promissory estoppel on consideration
• Gilmore- said then consideration will die out
• Farnsworth- courts hardly ever based on promissory estoppel, and courts first look at
consideration anyways
• Do we need both, or will one swallow up the other?
○ Gilmore said no
• Did the law change in a legitimate manner?
○ Yes, it did
○ Reliance is now basis for enforcing a promise
○ Who changed it?
▪ The courts
▪ Is that legitimate?
□ Contracts are common law subject- all made by courts
□ But arent laws supposed to come from the legislators to be a
□ Legislative supremacy
Facts cohen said keep my identity confidential, paper revealed it anyways, then he was fired
Minn supreme court Said no consideration because when made deal, parties weren’t thinking
in terms of bargain. Maybe promissory estoppel, but wont go there because if did enforce
promise, would violate first amd
Scotus no, press has right to publish truthful info but if waived, have to keep contract
Promissory estoppel dispute about can injustice be prevented only by enforcement? It would
prevent injustice for cohen. It is norm to rely on promise, would have been easy to report same
story without name
5 elements that yes, there was no bargain, but gave information in reliance on the other
person’s promise for not publishing his name
-made promise
-normal to rely on such promises
-plaintiff did take the action
-induced by the promise
-and it would prevent injustice for him
This is how they decide what is unjust, etc, arguing about feinbergs other ways to become rich,
Restitution/unjust enrichment §1
Theory if been unjustly enriched at expense of other, must give restitution/compensate
Example you paid someone by mistake §22
Cant recover for breach of contract (there was no promise), no tort,
But was unjustly enriched
Recovery reasonably value of benefit received §155
other names unjust enrichment, quasi contract, constructive contract, contract implied in law,
quantum meruit, money had and received
Facts thrown from streetcar, hit head, unconscious, wisdom performed operation to save life
but died, didn’t pay operation, sued
Issue did not have real contract with wisdom, never conscious, so no real contract, court still
thought there was basis for recovery
Unjust enrichment can recover on grounds that will be unjustly enriched in receiving med care
without paying for it, enriched at detriment, so has to pay
How decide amount in recovery? Ability to pay because bachelor or rich (net worth) not
relevant to services, whatever is reasonable compensation for benefits/service rendered,
considering the skill and time and services
Important just because cant recover because it was an official contract, can still recover
3 types of plaintiffs who cant prevail in restitution actions
 intermeddlers music players- not unjust to retain enjoyment. Parties could easily
have made contract if wanted to (in cotnam, did not have capacity to contract) §2
 volunteers wisdom was a doctor giving professional service. Helping someone out
is not volunteer §57
 plaintiffs with other remedies then cant really show someone has been unjustly
enriched at your expense § 110
Facts hired callano to plant shrubs,
then couldn’t buy house because died,
did not pay for the shrubbery. Sued
estate, said there was contract to plant
shrubbery for money. Sued Oakland
park homes instead
Claim unjustly enriched because sold
house with shrubbery on it and you
did not pay me for it
Court said have to show that
oakwood was unjustly enriched
Said cant recover because have other
remedy- contract with pendergast, can
sue his estate for breach of contract
Another restitution claim to be
brought? Estate could sue for
unjust enrichment
Why is pendergast not just a
meddler? Was not trying to,
was trying to buy house
Not trying to confer benefit,
was never going to demand
Any other lawsuit? Oakwood
could sue pendergast, broke
promise to buy house (who else
broke a promise?)
Schott where someone had not enriched someone else
Unjust enrichment, not breach of contract gave them an idea on how to
fix problem and they used that, so said was unjustly enriched
Westinghouse said their decision final, need good faith basis implied in
Volunteer? No, expected compensation which volunteers do not
Intermeddler? No, they agreed, asked for these ideas
Argument for why based on independent action, so no unjustified
enrichment, may have been enriched, but not by you, came to it
Moral obligation as third basis for enforcement?
Williston says every promise will be
Fuller said if think moral obligation
enforceable if allow moral obligation
changes with everyone, Can resolve that
by Tame what moral obligation means,
then Courts can set parameters, add new
Not generally, but will enforce gratuitous new promise reaffirming old debt that is unenforceable
because of the moral obligation basis under these (note there was consideration in past, could be
viewed as new promise or as waiving the statute of limitations, bankruptcy, or prior defense of
 statute of limitations §82(1)
o they pass but you feel bad, promise to pay anyways, enforceable if made. Not
enforceable because no exchange for this new promise, but based on moral
promisor’s prior discharge in bankruptcy §83
o promise to pay back debt anyways- no consideration or reliance, but moral
the promisors prior infancy §14
o infants don’t have to keep bc taken advantage of by adults. Made promise at 16
and broke. At 18, say I will pay you from then. This new promise to reinforce is
binding even though no consideration, reliance, but based on moral obligation
few states also say moral obligation is basis for enforcing promise to pay for material
benefit received if necessary to prevent injustice
Webb v mcgowin
Facts webb saved him, said would pay you until you die, paid until self died, executor
refused to make payments so sued estate, said would only pay debts that are
No consideration because nothing bargained for the promise
Unjust enrichment? No, was volunteer, not expecting compensation
Breach of contract
Moral obligation under material benefit think there is a moral obligation to pay, and he
promised to do so too
Concurring opinion does not fit within the 3 exceptions but is promoting justice
Receive material benefit, be unjust not to pay, also have to had made promise to pay
counter examples for moral obligation on incurring a material benefit and promising to
pay for it
Taylor v harrington
Facts promised to pay Harrington for protection from axe, did not keep entire promise
Claim breach of contract
No consideration no bargain
Enforceable on moral or non-consideration? Humanitarian aid not grounds
No difference from mcgowin
Facts promise that will change will to leave money because he took care of him, never
changed will, sued estate
Promise to change will will be enforced if consideration
Wanted to use mcgowin court said moral obligation exception not embraced in Utah,
and even if did, would not prevail
It was promise made in recognition of benefit previously received
No moral obligation anyways if did not pay for taking to post office, would not be
Promise needs assent
Not enforceable if promisor sufficiently manifests that does not assent to be bound §21
Perspectives on whether assenting to be bound- whose perspective determines?
Promisors- subjective
Promisees- subjective
Reasonable persons- objective
Learned hand suggesting objective test,
Frank legal realist, skeptical because
contracts have nothing to do with parties, but objectivity is unrealistic. Contracts are
with reasonable person would think
voluntary, little room for different possible
How objectively consider what someone is
thinking or intending
 Uses objectivity (what would reasonable person think if saw) unless have no intent to be
bound and both parties know of this (will be subjective intent of what one person thinks)
 Theme contractual liability is voluntary
 If don’t want liability, don’t make promise
 Even if make promise, is sufficient to manifest that you don’t want to be bound by it,
wont be bound
o Use words- im not intending to make legally binding promise here
o Also with context
 To avoid liability- either convince party or reasonable person that are joking
Lucy v zehemer
Facts zehemers had drinks with lucy, promised to
sell the farm for 50k, there was negotiation, wrote
contract on back of receipt and signed it
Relied on it, made plans, hired lawyer, gave
deposit, brother helps with payment, zehemers
says wont sell
Claim breach of contract, promised to sell and did
Defense did not assent to be bound, so I am not
bound. Evidence included that was drunk,
whispered to wife that was joke, didn’t accept
money to seal the deal, tried to take the writing
back, was about who could talk the biggest
There was consideration the 50k
Intent of parties did zehemers assent to be bound
by the promise?
Lucy thought zehemers meant it all. Evidence that
thought was legitimate- look at what was in his
head. Relied on it. Didn’t think zehemer was
What would reasonable person have thought they
were assenting to be bound- had long discussion,
changed terms, and 50k reasonable price, not a
joke that would seem unreasonable
Court warranted in believing was serious,
reasonable person test was met
Rule is objective- what a reasonable person would
think looking at it. If what zehemer did only had
one reasonable interpretation, individual intents
do not matter
Exception when unreasonable meaning that party
attaches to manifestation, and that intent is known
to the party, it is not assent. If both parties knew it
was a joke, there is no assent
This is where subjective intent would be
Conclusion was a contract
Change the facts zehemers said no, didn’t
assent, and lucy also knew zehemer
meant it to be a joke and didn’t assent to
be bound, but reasonable person would
think did assent
No contract because exception applies
Advice to give that wants to jokingly sell
farm? Manifest sufficiently so lucy
knows it’s a joke, sell for higher because
reasonable person would know it’s a joke
Make sure convince lucy or reasonable
person that you are joking
Not really voluntary contractual liability if didn’t actually intend, so make sure your intentions
are known to party or reasonable person
Offer and acceptance if plaintiff says promise is enforceable on basis of consideration because
there was bargain, then plaintiff has to prove a bargain was in fact formed
By showing there was an offer and acceptance
Offer test: manifestation? Look at words, comparison drafting
New defenses no offer, no acceptance
Formation of bargain- need all 3 steps, can terminate if don’t reach the last step
Optional preliminary negotiations inquiries, invitations “how much will you pay,” “where will I
have to work”. Can have these alone and not be bound- no legal consequences attached to these
negotiations bc contractual liability is voluntary
Offer by offeror §24, 26
Manifestation on willingness to enter a bargain, difficult to apply
Conditioned on acceptance by the offeree
Acceptance by offeree
Distinguishing offers form preliminary negotiations
 Objective inquiry
 Plaintiff and defendants positions
 Ambiguity is common
 In case of doubt, judges hesitate to find offers
 What courts consider is important- precedent, key words, context, comparison of
language used to alternative languages, etc
Cases that look at language to see if offer or not
Take objective view of language, key words, precedent, comparison language
Owen v tunison
Facts wanted to buy block, writes to see if will sell it. Replied and said would not go lower
than 16k, owen says I accept the offer
Claim breach of contract, promised to sell for 16k and didn’t
Defense did not offer, there was no manifestation of willingness to enter
Was the letter an offer or just preliminary negotiation? Look at objective evidence and
precedent "would not sell for more than half" is not seen as offer or willingness to offer (use
precedent to convince court that what you said is similar to what has been said before)
Conclusion tunison won because of objective test and precedent
If were tunisons lawyer just say I will consider this amount, don’t manifest willingness to enter
into bargain
Bumper hall pen
Sued for specific performance
Said promised to sell but didn’t
Defense no offer
Facts asked 2 questions, never responded to the selling one and never said “to you”
Court no contract concluded, no offer
Advice? Make clear don’t want to enter into contract
General rule price quotes and ads are not offers bc reasonable person would understand that
advertiser would not want to give everyone who sees ad power to conclude a bargain
Exception factors negating this understanding and false advertising rules- just because ads not
offers, cant just advertise anything (only have few items, don’t want to breach it with infinite
amount of people) certain language that could make it (Fairmont- “immediate acceptance”
Lefkowitz- “first come first serve”)
Fairmont glass
Facts wanted to buy glass jars, said cant fulfill because sold out
Claim breach of contract, didn’t keep promise
Defenses (1)said never had bargain/offer because was just a price quote, said it was just
preliminary negotiations, said it was just price quote, quotations in general are not offers (2)
had not accepted the offer as made, was not mirror image, they tried to change the terms, had
to be strictly first quality goods (court said defense not valid because used equivalent
language, was implicit) (3) contract too indefinite to enforce- term carload too indefinite (court
said in the industry, there actually us a definition for carload 1000 gross aka a dozen dozen)
Court they also used words of “immediate acceptance,” sounds like manifestation (this is the
price if accept immediately) sounds like proposing to enter into bargain, what else could it
Ads not offers unless certain language that could make it (Fairmont- “immediate acceptance”
Lefkowitz- “first come first serve”)
Once offer accepted, it is a contract, cant change rules or modify it after that
Facts advertisement said come get scarf for one dollar, first come first serve, went, was not
given, was told that the house rules said the scarves were for women
Claim breach of contract, sued for value
Defenses (1) ad was unilateral offer and could be withdrawn without prejudice, and was true
that withdrew before acceptance, but was it an offer? Ads generally are not offers… unless
where it could be clear, explicit, leave nothing to negotiation (2) said offer was modified by
the house rules. Court said once offer is accepted, cant modify it. If there is a condition on who
can accept, do it before it is accepted.
Court “first come first serve” on ad is directed to one person, so this ad could be an offer
because does not open self to unlimited liability
Acceptance need all of these elements
1. What was the offer?
2. How did the offeror invite the offeree to accept?
 By promising to perform? (bilateral
 Or by completely performing and not making any promises? (unilateral)
o Umbrella example- if look for it and cant find it, cant sue because no contract
because didn’t promise would find it, but contract created once finds and
3. Did offeree promise to perform or actually completely performed?
 Sometimes offeree implicitly promises to perform merely by starting work §4
 People can make promises simply through conduct
4. If offeree promised to perform, was the promise made in manner permitted by the offer?
5. Was notice of acceptance required?
 With promise to perform, yes, unless waived §56
 With complete performance, no, unless requested §54(1)
i. Because notice would not have done any good, what would they have
done differently if gotten notice?
6. Did the offeree provide notice of acceptance?
Facts lawyer responded and said was interested in buying her share of land, wanted exact
dollar amount, made arrangements
Claim breach of contract, said what was needed for acceptance was by promising to perform,
but court said did not promise to perform, just negotiating
Defense he did not accept her og offer, so no bargain, thus no consideration thus no
enforcement for promise
Court “interested” is not promise to buy, “ready to proceed” is not promise to buy, those are
negotiations. If wanted to accept, could have just said so
Offer is manifestation of willingness to enter into bargain and empowers offeree to close the
Intl filter
Filters proposal was preliminary negotiations, not offer (didn’t empower them to close deal
because still needed approval. Was preliminary negotiations because had to be approved in
Chicago first
Conroe’s acceptance was an offer by Conroe, had manifestation of willingness for Conroe to
enter into bargain
Filters approval according to intl filter, this is the okay from Chicago, the acceptance
Filters acknowledgement was notification of the acceptance
Conroe’s countermand don’t want to do this, the repudiation, breach of contract because was
offered and accepted already
Intl sued Conroe for breach of contract said promised to buy water filter and did not do it
Conroe’s defense said did not properly approve, there was no notification to him that accepted
Dispute regarding filers approval the okay- did this make a promise? Court said yes, sufficient
(how is okay on a document a promise to perform? Promise spelled out for them, all need to
do is accept, so made promise in permitted manner by saying okay) and didn’t promise how
they wanted the acceptance, so done in this reasonable way is sufficient
Second defense notification was required. If promise, it is required unless waived, court said
they waived it when they said becomes binding when approved. Even if it were required, the
acknowledgement was notice
Conroe made offer using the form intl filter gave him. Anything can do through words, can do
implicitly through action. Even if intl filter first gave the contact form to them, that was not offer
because did not empower other side to manifest acceptance. Firm does not make the offer,
Conroe does by using the form they gave him
White v corlies and tift
Facts said upon agreement, you can begin work, so did. Sent another letter and said wanted
black walnut, white upset because lost money
Claim white says promised to pay me then broke that promise.
Question was there effective offer and acceptance? What was the offer- the sept 29 note, said
that upon agreement, can begin at once
Offer invited offeree to accept through promise of performance so needs notice of acceptance
Did offeree make the promise to perform? White said that did because bought the materials
that requested and started working. Was implicit. Court does not disagree, says it is plausible
But was notice of acceptance required, yes and was it provided? no
Did offeree provide notice of acceptance? No, didn’t outwardly manifest it. No way for corlies
to know that by working as would work anywhere else would be notice. Just doing work on
stuff cant be interpreted as the notice because how would they know? Maybe if worked in
office itself, that would be notice
Could have just said I have started work to avoid problems
Conclusion commencing work not enough, cutting up things in shop could have been for
Ever tite roofing v green
Facts ever tite gave form to the greens, they signed and gave back. Sales rep took to business,
they needed to check credit. Loaded truck, went to the house, saw there were other contractors
already working. Offer made by greens using form supplied by ever tite. Signing the initial
form is not contract, but offer by green
Claim breach of contract
Question was there a contract?
Gave 2 manners that could be accepted in (1) written acceptance, authorized person at firm or
(2) commencing work. Neither of these are complete performance, so must be through
Ever tites theory of how accepted- commenced work by loading up truck, so was based on
implicit action
Notice was required
Was notice provided? Loading up truck and going? Yes, because greens saw them show up.
Notice does not have to predate anything, just has to be in a timely manner
Commencing work not enough, but here, showed up at premises so did give them notice
How distinguished from white? White focused on notice, not making promise by starting work
Notice and knowledge are different if show up, or send mail, that counts as notice
Carbolic smoke ball
Question did they have a contract?
What was the offer? Smoke ball, made with the ad. Court said this one was an offer, was not
just mere puff. Would probably have unlimited liability, but still made offer because confident
in product- negates thought that makes you think it is open to everyone
Did offer invite through performance or promise? Performance
Did she perform? yes, used it and got sick
Issue of notice smoke company said did not give notice
Court said did not need to provide notice. Notice usually required because if don’t hear back,
can go elsewhere. But here, it was common sense, did not need notice because notice would
have not made them do anything different, not like going to make another arrangement
Can the offeree’s silence be acceptance §69
General rule no
Exceptions offeree takes services, offer says silence is acceptance and offeree intends to accept,
previous dealings, offeree uses offered property
Can specify manner of acceptance, cant make silence an acceptance unless
 Offeree takes services
 Violin teacher example- by taking the services, implicitly saying you accept
 Difference between services and goods
 Goods can be returned, services cannot
 Offer says silence is acceptance and offeree intends to accept
 Don’t have to protect offeree if they want silence to be acceptance
 Previous dealings
 Cleaners come to house normally
 Offeree uses offered property
 If eat the cookies offered to you because you normally buy them
 Had sent eelskins before, had been accepted without notice before, so keeping them for
unreasonable time would amount to acceptance- previous dealings. If used, that would
have been inconsistent, but merely holding them without saying anything would be kind
of using them
Termination of offers §36
Does it stay open forever? No, there is lapse of time §41(1), (2)
Revocation by offeror it is voluntary, don’t have to make it, if do, can condition it,
generally assumed that wont stay open forever
Offeror specifies time, is master of bargain, set terms, offeree can ask for more time if
If don’t specify time, goes away after reasonable time because offerors don’t want it to be
open forever
Revocation of the offer by the offeror
Revoke it any time before acceptance
Effective only if offeree receives in/direct communication of revocation before
Cant revoke after accepted
Does not have to be express, can take action to show that does not want to go through
with it
Not possible if offeror made enforceable promise to keep the offer open option contract
Ill pay 10 to keep offer open until next week
It is separate contract to keep the offer open. Make this because without it, would
be free to revoke offer at any time. Does not want to undertake tedious steps
unless knows will be open for x amount of time
Is binding, cant revoke it
Does not have to be money, consideration can be saying that I will only deal with
Dickinson v dodds
Facts wanted to buy house from dodds, dodds told Dickinson that offers to sell house,
finds him at train station and says I accept
Claim breach of contract. Sues dodds for breach of contract for braking promise to sell
property to me
Defense no bargain because implicitly revoked by selling it to someone else before
attempting to accept it
Dicksinson has 2 replies (1) alleged revocation ineffective bc promised to keep offer
open until Friday, so does not matter what did on Thursday
Response was free to revoke offer on Thursday because there was no consideration for
promise to keep it open until Friday
Dickinson reply (2) alleged revocation ineffective because did not notify me until I
Response my revocation was indirectly communicated to Dickinson on Thursday when
he heard about it was sold (communicative of revocation because cant sell something
that already sold)
Revocation was effective
If advising Dickinson if not ready to accept yet, just create option contract. If accept the
10 to keep open until Friday, and its not a sham, will be kept open
Death of offeror §48
Terminates unaccepted offers (but not most contracts)
Can enforce contracts against estate
If offer not yet accepted, then it terminates upon offeror’s death because takes away
opportunity to revoke
No communication to offeree required
Option contract can prevent termination
Earle v angell
Facts if you come to my funeral, will pay you 5k and cover expenses, she tells executor. He
goes to funeral. Executor does not give
Question is this offer terminated?
Offer if attend, I will pay
Had to have accepted when she was alive
Did offeror set it on complete performance? If yes, then offer would have been terminated
before accepted when she died
So had to have been promise to do something/to act that is how could have accepted prior to
death. He partially did this (said if was able to, I will see, etc)
Ethical issue only way promise not been terminated by death is to lie and say was not a
complete performance but was promise to do something
Possible responses to an offer
Inquiry/comment/silence- free to do these to not accept nor reject (is voluntary)
Rejection §38(1) terminates power of acceptance
 Precludes subsequent acceptance (once rejected, cannot later be accepted) whycan make offer to someone without having to be afraid they will come back later
and accept it
Counter offer §39(1), (2)
 Presumed to be rejection and new offer that might change some terms
 General understanding- counter offer implicitly says im not doing that, and will
do something new
Purported acceptance with qualifications §59
 Operates not as an acceptance but as counter offer under the mirror image rule
 Say you are accepting but add additional qualifications
 Mirror image rule unless acceptance is mirror image of offer (all terms in
acceptance are same in offer) does not matter if says accept. If not mirror image,
it is not an acceptance but another counter offer
Columbus rolling mill case
Facts said quote me prices, but gave back an offer- we will sell you x for x.
respond that mark our order per your letter on the 8th. December 16th replyoffer was for 2k-5k, they said we will take 1500. Then respond that cant take,
said okay we will take 2k, no response
Question was there a contract? There was diff communicationsRequest for price was preliminary negotiations
Offer for 2k-5k was offer
Order for 1200 was counter offer (not acceptance because does not follow
mirror image rule- purporting to accept
Response to order was rejection of counter offer
Order for 2k tons was ineffective attempt to accept original offer, was a new
offer because the og was rejected by making the 1200 counter offer
Advice phrase inquiry as will you sell us 1200, would not impact original offer
or reject it, manifest contrary intention that rejecting. “not rejecting but I will
offer for 1200?” not implicitly rejection if explicitly manifest otherwise
Here, it was straight up counter offer which terminated the original offer
Mailbox rule acceptance is effective upon its dispatch §63a. after dispatch, offeror can no longer
revoke, offeree can no longer reject.
Hypo send long, written offer, sign, put in mail, takes a while to get back the them
Effective upon dispatch, not when they receive
Accepted today even though didn’t receive until next week
Consequences- can no longer revoke
Change facts put in mail, changes mind, calls up, rejects. Cant reject because in dispatch, already
been accepted
Us life v wilson
Facts missed policy payment, life insurance contract said offer to revive policy provided that
the payment made in 30 days after missed, will be revived. Took steps to revive, paid using
online banking. Sent on 25th, received after 30th, the deadline. Died on 28th. Insurance company
refuses to pay
Claim broke promise in the revived insurance policy to pay benefits
Defense no acceptance, so offer terminated on his death- this was not challenged
Why wasn’t offer accepted?
Court said was accepted on 25th when was sent- before he died aka offer terminated. Mailbox
Acceptance effective either through promise or performance (sending mail) either way,
effective upon dispatch
Mailbox rule does not apply if
 Offer says acceptance is effective on receipt- common
 Why do they get to say this, Master of bargain, Voluntary
 Why would offeror not like- if they don’t know
 Offer is held open by option contract- §63(b)
 Does not apply if there is an option contract
 Offer to sell car, you say let me think, you say ill pay 5 if promise to keep offer
open until Monday
 Mailbox does not apply here
 Have to receive by Monday
 Offeree is estopped from asserting mailbox rule (offeror relies on overtaking rejection)
 Example
 Estopped from asserting mailbox rule because rejected it before
 Put acceptance in mail
 Call and reject offer
 Receives acceptance, maggs says now that he accepted offer
 He is estopped from claiming this
Implied option contracts
Is there an implied, enforceable promise not to revoke an offer?
o Offer to enter a unilateral contract wormser hypo, restatement 45
 Brooklyn bridge hypo
 Want acceptance by performance- only way is by complete
performance- crossing bridge all way
 2 rules- offer can be rejected any time before acceptance
 If invited acceptance by requiring performance, only way to accept is
through complete performance
 Restatement does not like this
 Restatement 45- does not like, offers solution
 Offeror cannot revoke offer because there is implied option contract
to keep it until 21- drinking case
 Why?
 Always implied option contract to keep offer open while performance
being rendered
o Offer to enter a bilateral contract
Facts school district wants to build school invited contractors to bid for it, who
have to decide how much it costs. Drennan said ill build for x amount (bid is an
offer) star paving told brennan and uses their price in calculation, is chosen, but
star paving tells him never mind, revokes
claim breach of contract
defense no contract because no acceptance because offer was revoked. Revoked
offer before you accepted it. Free to do so unless binding option contract. No
express option contract, but
Court says Cant revoke because made an implied promise (under 45, does not
have to state expressly) to keep its offer open, and this promise was enforceable
on the basis of (what was consideration for star paving?) reliance/promissory
estoppel. There was promise, implied to keep it open. Reliance- used it in his
bid, which was understood. Justice avoided only if enforce it? Yes, so basis of
reliance/promissory estoppel
This case not followed, logic is correct, but don’t think there was implied
promise to keep the promise open- If simple to make it express and didn’t,
probably didn’t want to make it express, make it a contract
Traditional view that people cant rely on offers in absence of option contract
Offer can be revoked at any time- so cant really take actions on reliance of
Liability despite failed negotiations In general, no contractual liability if negotiations fail to
produce a bargain- owen (said would not sell for less than 16k not intention to sell/intention of
offer), white (started working in own workshop without letting know, court said needed to be
manifested with an act, found that did not do so) dickinson (revocation of selling land was
effective because he indirectly heard of it)- if don’t even have a contract!
but in some cases, party might nonetheless be liable for breaching, special cases where might be
liable not because breached agreement but because breached negotiation
promises/assurances made during negotiations or
Hoffman- breaching assurances during negotiations
Suing for promises made during negotiations, breaking intermediate promises
breach of contract, not for breach of franchise agreement because there never was one
Breaking of promise that would get the franchise at one point
Facts sell small store, move to chilton, sell bakery, would get franchise, just with 18k, will get
it, broke all of these promises that were made during the negotiations
Consideration? Why enforceable? Reliance
Another defense? (1) Lack of definiteness- too indefinite to enforce (2) Don’t know what
franchise agreement would have said, so don’t know how much to give you- But court said
not suing for breach of franchise agreement, though
Courts solution what the remedy is don’t know what would have made, but know what lost
because relied on these things by moving and selling. Restore to position would have been in
if not made and broken all of these promises
Advising Hoffman- they are stringing you along
Valid theory that negotiations fail, but does not mean cant sue for breach of other promises
promises to negotiate in particular manner
Facts said was interested but not prepared to sign lease yet, before signed lease, channel
wanted approval from parent company and permits and zoning info. Instead of signing lease,
Grossman said would you sign a letter of intent?
letter of intent might or might not be contract, no definite meaning, have to look at letter itself.
Said would negotiate to completion. Would withdraw store from market and only negotiate
with channel
Claim breach of promises in letter of intent to take property off market, negotiate only with
channel and act in good faith implied in §205
Defense (1) no assent to be bound- said made these promises in letter of intent, did not know
would be binding. Court- there are lots of evidence that assented, but matter of fact for jury
Defense (2) lack of definiteness- court said question is about what they promised, not what
would happen if made good on promise, so not indefinite
Defense (3) no consideration- said we got nothing in return. Court said- there was bargain,
asked for the letter of intent which was valuable (value not required but helps to decide if was
Defense (4) failure to complete in 30 days, did they delay too long in proceeding to negotiate?
Court said might have been implied, but needs trial to figure that out
Was letter of intent in return for promise to proceed with leasing
Would the implied duty of good faith prevent breaking off negotiations in bad faith even
without letter of intent? Don’t have to negotiate in good faith unless have contract, so good
faith cannot be a claim §205
Should not have gone to summary judgement. Seems to be enough
Definiteness §33
Terms must be reasonably certain
What is a breach, what remedy is appropriate?
Reluctance to find indefiniteness
Fairmont, Hoffman, channel, toys
Effect of trade usage, implied terms, etc
Contractual liability is voluntary, should be bound if assent to, technicalities often hurt
Restatement/maj view
 Contract does not need to cover everything
 But only that terms of promise are reasonably certain if
o Court can tell if there has been a breach or not
o If court can figure out appropriate remedy for the breach
o Section 33
Varney- example of indefiniteness
Facts promise to pay “fair share” of profits in addition to salary, and didnt
Defense too indefinite to enforce. Who is to say what fair share is? How would we
say what a breach is, what remedy would be, how would we know?
What might varney have shown? Not that term was too vague, but that there was
not enough evidence to present it. Evidence could have been other architectural
industry customs- show this is what fair share considered to be
Facts lease contained offer to renew it within it. Didn’t specift rent rate because did
not know what it would be in 5 years
Indefiniteness that might raise never accepted offer, negotiated and offer lapsed
Defense indefiniteness, too indefinite to enforce, we are not liable.
Terms used “prevailing rate” court said not difficult, just look at what other tenants
paying, will be sufficient enough to enforce
“renegotiate” shows intent to reach negotiation, actually
Not too indefinite, thus, had intent to be bound
Consideration was to leave lease open for 5 years
Option contract was the promise to keep offer open for 5 years
One consideration for each promise in contracts allowed
Statute of frauds any statute making certain types of promises unenforceable unless they are
evidenced by a writing signed by the promisor. Type of promise unenforceable unless in writing,
signed by person who made the promise. Writing not required unless have statute to say need it
Defense I dont have to keep because yes, made promise, but statute needs writing and you cant
show that I wrote it down and signed it
Goal Plaintiffs falsely alleging promises made when was not
Theme extraordinary promises require extraordinary proof
Importance more than 2500 of these in usa
Lots of unwritten exceptions and special cases
Potential unintended consequences of rule May enable defendants to wiggle out of promise that
was made just on this technicality
6 traditional ones covered in most states
 Marriage
o Can have engagements when promise to marry exchanged for promise to marry
o Cannot have one of them be promise to marry without having it be in writing
(potion for promise to marry him, this needs to be in writing)
o Shadwell v Shadwell promise to pay if marry girl, this needs to be in writing
 Promises that could not be completed in a year
o To do for 6th months
 Not within statutes, does not need signed writing
 Could be completely performed within year
o Promise to do for 4 years
 Could raise statute of frauds as defense
 Need writing
o To do exactly for a year
 No, does not need writing
 Cannot use as defense saying it needed to be in writing to hold it enforceable
and me liable
o To do for life
 Does not need signed writing because could die within a year and thus
o Pay over multi year period
 Could be performed within a year? Possible
 Unless prohibition to pay within a year mentioned in contract,
o Does not need signed writing, not within statute of frauds
o Promise to complete in less than a year that exchanged for more than a year to
complete promise
 Does that promise need signed writing?
 Yes, needs signed writing bc if either promise take more than a year, all need
to be in signed writing to be performed in a year
o Promise to pay 3k, promise to shovel for 3 summers- same grounds
 Pay the 3k, completely performed
 Does her promise need signed writing at this point?
 No, does not need writing because one of them is fully performed- sufficient
o Promise that realistically takes more than a year but contract does not prohibit
completing it within a year
Facts big contract with percentage fee, made deal by shaking hands, verbal, no
writing. Fired klewin and hired someone else
Claim breach of contract, made promise to pay percentage fee in exchange for
promise to serve as manager for project, broke promise by stopping payment
before project completed
Defense year provision of statute of fraud makes the promise to pay percentage
fee unenforceable. So need writing by us and the return promise to serve as
construction manager could not be completely performed in a year
Proper interpretation for what we mean when we say in a year? (realistic or
what the contract says?) the terms that are in the contract, not the realistic
evaluation. Because most other courts do this, and policy reasons of wanting to
read narrowly to prevent unintended consequences and having trial on if can get
done in year is silly. Has nothing to do with case, just look at terms on actual
promise and go from there
If not mentioned in contract but could be done in a year, then does not need to be in
writing, is not in statute of frauds, because does not matter if impossible, but contract
says nothing about if needs to be done in a year
Promise that could be discharged or excused in less than a year but could not be fully
performed in a year- yes, needs to be in writing because being excused within year not
enough, any promise can be excused
 Work for 5 years or rest of life
 Could be within year if die within a year, not in frauds, does not need to be
in writing
 5 years but performance excused on death
 Cant be performed in year because it is being excused, not performed
 Cannot be completed in year, but will be terminated (excused), so needs to
be in writing, it is within statute of frauds
Buying, selling, any other interest in the land including leases, easements,
Land has extraordinary value in england
Performed when the deed is transferred after signed
What if made promise, before performing, refuses to perform? defense is that was
not in writing
Special cases
 Seller has already transferred property §125(3) agreed to sell, gives deed,
refuses to pay. Cant use statute of frauds once performed even if it was not
in writing (gives enough evidence that wanted to do the deal) paying not
enough like in the year provision, needs to be transferred to have enough
evidence and not need it in writing anymore
 If not given the deed yet, can use the statute of frauds
 Short term leases, less than a year §125(4) it is transferring interest in
land, but most states say it doesn’t need to be in writing. If more than a
year, within statute of frauds and needs to be in writing
 Buyer’s part performance- paying some of price, moves onto property,
makes improvements. Does not need to be in writing. Paying price and
doing something more (not officially transferred yet)
 If they use statute of frauds defense, reply with part performance
exception- because of justice of reliance
Reason for statute of frauds- prevent from falsely alleging that sold
 But wouldn’t let move into and make improvements if was
not going to sell, no fraud to protect against
 That extraordinary proof can also include transfer of deed
or allows to come on property, takes money, and makes
Beaver v brumlow
Facts beavers owned property, allowed brumlow to put trailer
and shed on property, paid some of the price to buy. Then states
that no longer wanted to sell
Sued to eject
Counterclaim breach of contract, refusing to sell
Defense (1) statute of frauds needed, there was no writing, so not
promise, cant sue me and win. Said contract made but needs to
be in writing to be enforceable
Response (1) part performance exception. Cant use statute of
frauds because we partly performed- moved on, spent money,
started paying, made improvements (argument that that was not
payment but rent was not bought by court)
Defense (2) indefiniteness, said had not agreed on price, kind of
like varney. Court said it would be market price, general rule
that don’t have to agree on specific price, if did not specify,
defaults to market price, that’s what implicitly agreeing to
Because both parties acted like it was a contract, then statute of
frauds cant be raised
Executors If executor promises to pay out of own pocket
 Example- she would reduce claim and he would pay her out of own pocket if
estate does not pay it
 Needs to be in writing because extraordinary, so that cant be able to take
advantage of executor
Goods more or equal to 500 goods are anything that are moveable
Suretyship always 3 people involved: creditor, principal debtor, and surety
o Promise made by surety to creditor to pay the principal debtors debt. I guarantee
that debt, I promise to pay it
o If getting benefit from it, then paying own debt. If parent gets no benefit and
merely promising to pay the debt, it is surety
Langman v uva
Facts wanted to give a gift to uva. Had commercial property, bought it and had
mortgage, gave this property to uva because profits from business could no longer
pay the mortgage off. Margaretha paid it off then sued the alumni association. Q
claim by accepting the deed, I paid the mortgage but you promised to assume the
mortgage debt as per the clause in the deed, you need to pay me back and be
responsible for the mortgage
Uva’s 2 defenses (1) we didn’t read the deed (court rejected this)
(2) statute of frauds. This was suretyship because it was us taking on mortgage
payments. And for the surety to be effective, it needed to be in writing but wasn’t,
so you cant sue us. Only margaretha signed it in writing, no one at uva did
Court was not suretyship, Because promised margaretha and not the
mortgagee/creditor, it was an original undertaking and not suretyship, so it did not
have to be in writing, so cant use the statute of frauds as a defense
Holding uva liable because statute of frauds defense fell through, did not need to be
in writing. Margaretha won the case, was reimbursed
Statute of frauds as a defense:
-ask if situation is within it (needs writing)
-then as if there is an exception
-then ask if the contract was done well:
Requisites of writing and signing
only essential terms, not entire contract
-Statute of frauds often one way street
-Lucy v zehemers offered to sell land, so needs signed writing for evidence, statute of
frauds was satisfied by one sentence in writing- we hereby agree to sell the farm for 50k
-It was signed by the party to be charged- the defendant who made the promise, the one that
wants to raise the statute of frauds as a defense. The lucy’s didn’t sign it but that doesn’t matter
-Had essential terms identifying subject matter, doesn’t need great specificity
If zehemers sued lucy, could bring up statute of frauds because lucy never signed, and he would
be the party to be charged and such a transaction needs to be under the statute of frauds- for the
writing here to be sufficient would need the party to be charged/defendant to have signed
- reasonably identify subject matter of contract- what is being sold, the farm period, don’t need
exact pinpoints
-sufficient because says we sell, does not indicate that only thinking about it
-131c 2 terms
- title has to be satisfactory, also included who were selling to, and the money
- didn’t include when would sell, but that is not an essential term so courts will just
default to reasonable time
- essential terms are farm, lucy, and 50k
- reason is to prevent lying, have this as proof that not making all of this up
-what if writing got lost can raise statute of frauds? If it was made in writing at one point, doesn’t
have to exist anymore, so its ok that got lost
-how prove: testifying satisfies it
-electronic records all courts have said does not need to be in writing, ink, can be name on email,
congress ratified, okay to be electronic because need signature just to show that you agree to it.
Ucc says telephone also counts
-relationship to other requirements
-consideration, offer, acceptance
Wanted to give house and it was in writing
Defense wont be statute of frauds, but that no consideration
Just because in writing does not make enforceable, doesn’t take out other
requirements needing to be met, other requirements still need to be met
-policy considerations
-purpose to keep from falsely alleging promises that were made
- possible unintended consequences of statute of frauds- beavers admitting that made the
promise, but could still raise and possibly win under statute of frauds
- judicial responses to unintended consequences. Lower requirements for what needs to
be satisfied and create exceptions
Doctrines permitting recovery despite non compliance with writing requirement
Restitution, 375
Mowed lawn, didn’t pay, fired before 3 years.
Cant enforce contract, but can sue for
Not volunteer, not intermeddler, and no other
remedies because there was statute of frauds
as defense, so cant recover under breach of
contract, but do so for restitution even though
was terminated in less than a year
Equitable estoppel- if make statement that
Barring the allegation that there is no signed
you signed it and relies on it, cant say that
facts were different, barring the allegation that
there is no signed writing
Make offer to buy, seller says they accept and
say that they signed it, but did not actually
Refuses to sell, you sue for breach of contract
Defense- no signed writing
Equitable estopped from saying no signed
because even though true, you promised and
said it was signed, relied on it, so cant
contend that facts were different
Promissory estoppel 139. Overcomes lack of
Making promise enforceable despite non
compliance with statute of frauds. There was
compliance with statutes. Not accepted in all
no writing but because relied so promise has
to be enforced. Makes promise enforceable
despite non-compliance with statute (minority
If rely on promise, reliance on promise can
make promise enforceable notwithstanding
statute of frauds
Monarco v Greco- promissory estoppel
Facts carmela and natale had been married, son christie wanted to leave farm. Parents
promised that if stayed and worked farm, would give property when died by changing their
will. Died and left property to own grandson
Claims carmen says entitled to property, christie says cant give because he made binding
promise to me. Said was stopped from using statute of frauds as defense (not equitable
estoppel because did not rely on statement that would put in will)
Question/what was disputed that promise not enforceable because of statute of frauds
Court in truth, we don’t rely on if there is writing but on the promise. Make verbal promises
enforceable even if no written
Grounds for not enforcing promise even if meet all requirements for bargain/promise
-parties themselves lack capacity
- infirmities
-way it was done
-under influence
-mutual mistake
-substance of the promise
-against public policy/harm the public
Infancy- 18 years old
Liability of infants for contracts
When reach maturity, if want to they can
reaffirm the contract they previously made,
then no consideration/reliance necessary,
would thus be based on moral obligation
Contract would be voidable. Not
automatically void, but infant can decide to
not keep the promise and make it such, or can
decide to enforce it. The seller cant use the
defense of the others infancy if the infant
wishes to keep it
it is a defense or basis for recission
Legislation can create exceptions- douglass
Liability of infants for restitution
Liability required if contract voided for
infancy- have to return the car, can also get
money back
Not required if subject matter is now
unavailable- if totals car, does not have to
return, but can get 4k back. Traceable/able to
track, then have to return it
Required for necessaries if infant is
emancipated- food, clothing, shelter, medical
attention. So that these people can pay rent,
buy food, etc. can still rescind because their
contract is voidable but can only get
restitution if give restitution back- food is a
necessary, so restitution required to get first
payment back. Car would not be a necessary,
though, can get 4k back without returning
totaled car
Liability of infants for torts
Can be liable for tort of deceit for lying about
age to enter contract, this is the other way to
hold infants accountable and not be able to
get our of restitution
Facts 17, gets job, signs contract that says have to take to arbitration. It was listed on the 20th
page, and also had a lot of other things in it. Gets injured, sues for sexual assault and injury
Dealership said we agreed to do this through arbitration because it was mentioned in the
employee handbook and that is a contract
Claim does not have to arbitrate because was infant when hired and got handbook, can void
that contract now
Court there are child labor laws in hawaii that make exceptions to this traditional infancy rulecan work as long as not supposed to be in school, because legislation has provided for
employment, cant say infants can void those contracts- they can enter employment contracts
Another defense for plaintiff/court said still not bound, though, because didn’t assent didn’t
assent to contract, so arbitration agreement not enforceable. No assent because so far back in
agreement. Not that didn’t read it but that didn’t understand that written document included
contract terms
Mental infirmity, voiding promise based on this
Test for mental capacity
-traditional still used. 15(1)(a) promisor was unable to understand that what they are doing is
entering into a contract, not that they don’t understand the terms
-additional modern ground used in few states 15(1)(b) promisor was unable to act reasonable and
promisee had notice of that. Used as supplement to the traditional that all courts use
Facts has mental breakdown, had to retire, had to decide how the payouts would be made.
Could get less now and then husband gets more after dies, or get more now and none when
die. Chose the second one. Husband had to quit job.
Sued to rescind transaction on ground that she lacked mental capacity
Trial court applied traditional test said she was able to understand nature and consequences of
transaction because she was asking detailed questions about the options
Court of appeals said should use the modern test in supplement remanded to use this testunable to act reasonable, and board had notice that she was suffering from condition because
had to retire at one point
Cundick v broadbent
Facts wife brought lawsuit for husband, wants to rescind contract, price to sell was extremely
Traditional test for mental incapacity courts said that did have capacity to make the
But had testimony that didn’t have capacity. Didn’t believe because no family or friends
thought he was deficient.
Way contract was formed
If 2 parties form bargain and 1 party subsequently promises to do more than originally agreed, is
the subsequent promise enforceable? (modification without consideration)
-no, if induced by duress (improper threat (to commit crime/tort or threat to breach existing
contract in bad faith) with no reasonable alternative) 175, 176(1)(d)
-no, if there is no new consideration- pre existing duty rule, Alaska packers, 73
-yes, if original statement canceled and new bargain is formed schwartzreich
-yes, if changed circumstances- modern modification rule Watkins, 90, about 12 states
Duress 175 improper threat (to commit crime or tort 176(1)(a) or threat to breach existing
contract in bad faith 176(1)(d)) with no reasonable alternative other than to accept it
-duressed party can rescind and get restitution even if made the promise
Example- gw law
promises to pay salary,
maggs promise to teach
for a semester
Gw law makes
subsequent promise to
pay additional 2k
2 reasons might not be
enforceable, depends on
If induced by duressimproper threat and no
other alternative than to
accept it
-no reasonable alternative
includes not having
anyone else to teach in the
-bad faith can include
making up lie to get
If no new consideration
Say im doing good job, give me more
money, they say yes but do not give. Sue for
breach for extra 2k. defense that no
consideration. Teaching was consideration
for the original promise, cant use that here
and there. No additional consideration for the
new promise. Pre existing duty rule
Alaska packers
Facts hired workmen with deal. Asked for extra 50 or will not work. Promised to pay because
would be impossible to find anyone else. Ended up not paying even though worked. Sued for
breach for promising to pay the extra 50
2 defenses didn’t have authority to make that promise- court said ignore this because no
consideration anyways
No consideration didn’t promise anything more beyond the first contract that made. There was
pre existing duty to do that work
Another defense that could be raised duress- left them no reasonable alternative and had to
have breached in bad faith, which they did. They argued was not in bad faith, that had faulty
fishing nets. Bad faith is lying and dishonest. Threatening to break contract just to get more
money is bad faith
Enforceable if original contract cancelled and new one if formed. Always free to mutually
cancel contracts and they did
Facts had duty to work for 90 hrs because signed to work for 90. Compromised to work for
100 but didn’t pay the extra 10. Tore up the first contract. Significant because intention not to
be held by the first one, shows no more pre-existing duty to work
Question is promise to pay the additional money enforceable? Not enforceable if duress and
not if there was no consideration. Yes if cancelled first contract and made subsequent at the
same time
Used the same work as consideration here again but because tore it apart, there was no more
existing duty, so there was consideration for the new agreement
What if cancelled old one after making new contract? What would be the consideration for the
new agreement?
Is this just a formality because it is still the same consideration in the end? Is this a proper way to
do business?
Some courts say if form bargain and make modification of it, then no new consideration is
needed. About 12 states use this
Facts hired to excavate, agreed on price. Started working and discovered problem, wanted to
get that into the agreement. Agreed but did not pay. Sued,
Claim breach of contract, agreed to pay extra but did not.
Is the subsequent promise to pay 9 times more enforceable?
One side- oral contract superseded original one, similar to rescinding and making new one like
schwartzreich, no preexisting duty, so had consideration
Other side- not enforceable because no new consideration, like Alaska packers. the work for
additional money was work that would have been done under original contract and no
evidence that canceleld the old one, didn’t rip anything up
Court this is different, it is an existing contract with a modification. New law- there is still one
transaction, but in effect, rescinding old one and making new one, about 12 states use this
What if said no, court not
Section 89 about anticipation when contract was made. Excavators should have anticipated big
rocks, carrig/defendant would have still won, but didn’t make this argument. Because
modification only allowed when fair but not anticipated. Should have anticipated
\Was this promise induced by duress? Improper threat with no reasonable alternative
-Was not in bad faith, not just said to get more money, something new did come up
-Also had other alternative to seek new contractor
Undue influence/overreaching these are voidable
Undue persuasion gay teacher being fired at house on weekend, not at work on Monday to
intimidate- contractual liability is voluntary
Howe v palmer
Facts has farm, palmers move into his house and sell his house, want commission for it, want
half of property, got the church involved. They put him in an unnatural disposition, he was
susceptible and slow, they had the opportunity to exercise undie influence and used it
2 claims rescind transaction because induced by undue influence and tort for intentional
infliction of emotional distress
Distinguishable from duress- was not forced, no threat made that will hurt or break contract in
bad faith, just pressured him
Also had competence because knew was getting into a contract, understood the nature of what
was doing
Rules on misrepresentation and non disclosures
Made in 2 ways
Promise voidable if induced by
-promise is voidable if induced by material or fraudulent misrepresentation of fact
-misrepresentation- untrue, statement is false, 159
- material misrepresentation- if it matters to the parties. Graduated from yale vs hometown.
Doesn’t really matter that not true
- fraudulent- one that is done intentionally, knows it is false 162
- not mere opinion or puffing- you will look good in this necklace. Not statement of fact, just
opinion. Allowed because no one believes it anyways
- an active concealment of facts
- act of preventing someone from learning the facts, covering up part of transcript. If never
asked for it, it would be fine, but did and you misrepresented it. Treated same way as
- half truth where promisee was justified in relying is misleading 164(1)
-a bare non-disclosure does not make promise voidable unless
- statute requires disclosure or
- promisee has a relation of trust and confidence with promisor requiring disclosurenegotiations not being at arm’s length but closer- family, doctor, lawyer, guardian 161(d)
- then everyone would be in trouble for not disclosing things, too idealistic/extreme. Info has
value, if want it, pay for it
Statute requires disclosure
Facts house infested with termites, damage caused by them, buyer didn’t know about that.
Wanted to rescind because sold me house but didn’t tell even though knew
Can he rescind? Did bank induce him by making fraudulent/material misrep? No, bank didn’t
say anything
Actively conceal damage? No, didn’t put up wallpaper
Any half truths that were misleading? No
So, defendant not liable
Swinton could have asked. If they responded I don’t know, it would have been fraudulent
Kannavos v annino
Facts made house into 8 apts then sold it. This violated law, could not sell as apts
Can he rescind?
Misrepresentation? Was not technically false, didn’t say it was in accordance with zoning
Active concealment? No, could have asked
Half truth? Yes. Advertised as being able to be rented and relied on that to rent them out
Court- no duty to speak, but if does, has duty to reveal all facts. Fragmentary truths not good
Half truths treated as misrepresentation because can be misleading in the same way
Did more than non disclosure, here, said half truth that can rent, but should have said it was
Promises that are induced by a mutual mistake are also voidable 152
mistake of fact 151
has to be mutual/made by both parties.
Contractual liability is voluntary and didn’t want to volunteer into this, but another one
If baragin is not one that parties made, don’t enforce it
Has to be basic assumption,
have material effect and
affected party does not bear risk of mistake 154
Stees v leonard- not voidable
Building kept falling because of quicksand. Sued because gave up
Said we were mistaken, we thought land was good, because mistaken, didn’t have to keep
Arguably no mistake here- no belief one way or another, just predicted it would hold the soil.
Did not make assumption that was not in accordance with the facts
Sherwood/cow voidable
At time that sold cow, both thought it was sterile. But was pregnant and worth way more, so
didn’t sell. Sued
Defense don’t have to keep contract because thought it was sterile
Voidable under modern rule?
Mistake of fact- belief that is not in accordance with facts. Thought cow was sterile, but both
parties wrong
What if buyer said it was pregnant and one thought sterile and proceeded. Could rescind?
Can not, that’s just bare non disclosure if mistake of one party
Wood/promise to sell diamond not voidable
Arguably no mistake here- court said didn’t know what selling, but no mistake about what
selling, knew the fact- knew were selling that stone.
Has to be about a basic assumption- something so fundamental about the contract that it is just
cant make someone carry it out
-Not about name, color of cow, not material
-Basic/fundamental assumption about buying cow- if it can reproduce, court said it was a
different creature
Basic assumption and large enough mistake that has material effect
Land 99.8 and not 100
Basic assumption, yes, .2 acres does not have
material effect on price
affected party does not bear risk of mistake 154- not in the contract that will still have to sell at
the low price even if wrong. That mistake is on walker and has to sell anyways. People agreeing
what will happen if a mistake was made.
Bearing risk of mistake means cant raise mistake of fact as a defense
- If affected party bears risk, then cant use this as a defense
- If no express agreement, court puts it on party because reasonable to do so
Diamond case
Affected party does not bear risk of
mistake, was not expressly stated,
but used the reasonable
circumstances. The jeweler bears
risk because they were more
Lets assume it was a mistake, does
affected party bear risk of mistake?
Put it on builder because he has
expertise- his problem, promised to
build, if cant, that’s on them
Promises induced by a unilateral mistake one party is mistaken and doesn’t meet second part
of test for mutual mistake
Traditional rule of swinton- it was too bad for swinton, one party knew truth and one was
mistaken, one wanted to enter, too bad for other party
Modern rule 153/25 states. Voids contract when results
- Effect on bare non disclosure rule. Rule said don’t have to disclose, will
be fine. But now, probably have to say something or risk it voided. 161b
Limited ways courts can police on even though courts don’t get into consideration being
sufficient because voluntariness
limitations on equitable remedies for breach of contract
public policy restrictions on enforcement
special doctrines relating to form contracts
unenforceability of unconscionable contract terms
Court of law
Court of equity
Specific performance, injunction, rescission
Denying specific performance/injunction even if contract is enforceable
-Cant get specific performance if can get adequate monetary damages. 359(1), 360
-exchange was inadequate/unfair 364(1)(c)- this also allows courts to police substance of some
-courts normally don’t look to see if bargain was fair, just to see if there was a bargain when
determining if there was a promise. If not fair, only way to enforce is through money damages
-but for enforcing specific performance, has to see if was fair because that’s what courts of
equity used to do. Leftover practice. Yes, no additional requirement for equivalence, but if want
specific performance as remedy, has to be fair
What makes monetary adequate? 360
-Cant remedy because cant figure out how much money to give/how much it
was worth (something unique- cant use money to get again) and (landtraditional rule- land always considered unique even if homes look alike,
-When likelihood that award of damages could not be collected- they don’t
have 20k, injunction will do him good because defendant is judgement
Mckinnon- exchange was inadequate/unfair
Facts camp bought by benedict. Needed non-interest loan and advice,
mckinnon said would give if promised not to make improvements. And had
paid back the loan and tenant was not good. Comes back to find them
Claim sue for breach of contract, said would not bulldoze but did, broke
that promise. Says damages not adequate remedy here because hard to
determine what the value would be
Question about remedy that mckinnon wanted- injunction to stop cutting
down trees and construction
Court the exchange was unfair and inadequate anyways, Gave up
something extremely valuable/profitable like using land and didn’t have
much choice because needy of the loan. The interest saved inadequate in
Holding grossly unfair that wont enforce it through specific performance,
but can still get damages if want to
Problem with money damages here? Hard to quantify, real estate agent was
not able to with reasonable certainty, and they didn’t have a lot of money to
There was no defense, contract was enforceable, but only asking for
specific performance, would consider monetary damages if asked for it
Did not follow rule looked at bargain after it was made vs at the time
Tuckerwiller v tuckerwiller
Facts Morrison lived in house, needed care, entered into bargain with niece,
quitting job to become caretaker for as long as she needed. Promised ot
change will so niece gets farm when dies. Same day, before able to change
will, hospitalized and died, didn’t get to take care. Will not changed, would
go to davidson college
Sued executor to enforce her promise
No dispute about whether contract was formed, no argument that breached
contract and excused Morrison from performing. She did give all the help
that she could
Executor didn’t say invalid contract, said cant get specific performance of
this contract because gave so little care that was not enough consideration,
getting whole house for taking care only a few hours should be reason to
deny specific performance
Court fair because quit job, had good intention at time to complete promise.
When looked at time of contract, the terms/contract is fair, consideration is
Rule to figure out if bargain was fair- have to look at fairness at time
contract was made- neither of them knew she would die extremely soon,
could have lived for 10 more years, etc
What if fair? Monetary not adequate for land anyways
Didn’t get into but probably also that she relied on this. But it was fair
Promises that are automatically void because violate public policy
Can have offer, acceptance, consideration, some still wont be enforced because will harm the
public. Not about being fair between them, but about harming the public if were to enforce it
Another way to police bargains- refuse it if there is a public policy against it
Determined by precedent/traditional customs
Always free to cite precedent or free to ask court to recognize new public policy
Promises to commit tort 192
Promises unreasonably in restraint of
Don’t want people to make deals on when
marriage 189
others will get married because don’t want
kids out of wedlock
Additional in black industries v bushcontracts to pay a bribe, etc
Black industries asking court to recognize new policy protections 178
Facts gov entered contract to buy munition from hoover, asked black, black bought
from bush
Claim bush broke promise to sell us components
Defense by bush we did make contract, it was not induced by mistake, not
overreaching, there was consideration. Said it violates public policy of excessive
profits on a war contract, people shouldn’t make excessive profits on need of public
Court it does not fall in a recognized public policy. Not a bribe, illegal act, no bidding
Holding that sounds good in theory but if court stepped in, would have to say
middlemen not allowed to make profit or court would have to assume price regulatory
function, police fairness of prices of government contracts
Avoiding exculpation clauses and other terms in form contracts how can get out of contract
terms that don’t like? Normally people want to keep contract, just get out of one of the terms
Exculpation clauses relieve one party of liability if happens
Arguments that don’t work
It’s a form contract
Car renting, lease, insurance, have to Good because lessons of
fill out what they hand you. Parties
litigation, judicial interpretation,
can negotiate but many are standard admin will know when things
with these businesses
due, lawyers have perfected
what to say. Bad because one
side can put bad terms in it
Its an adhesion
Contract offered as take or leave, no
changing the terms. Saying that you
had no choice as a defense does not
work to make it unenforceable
I didn’t read the
Then everyone would not read it
Strict construction 206
Arguments that will work
If ambiguity in contract, will be interpreted
against person who drafted (looking back) it
because fair and they had time to perfect it,
incentivize them to write more clearly
(forward)- if can be interpreted more than one
way reasonable
Facts injury on lawn, sued landlord,
There was contract, lease enforceable, she is
bound by clause, but will strictly construe the
clause- what does it mean when it says
Defense look at lease, excludes liability for
injuries in certain places
Court obviously intent was to not be liable at
all but we are not dealing with what intended,
will still construe it against you.
Llewelyn- just include every place that can
Doesn’t get to heart of problem about what
should rules be between landlords and tenants
as substantive matter because instead talking
about how should interpret the words of a
particular lease. Not leading to determining
reasonable meaning but how can construe to
help party that didn’t write it. Makes
precedent on misconstruing instead of
construing on reasonable interpretation. Fixes
problem once then makes it a problem for
everyone else
Adequate notice 211. If accept document or
other item that contains contract terms but do
not have reason to think they are there, not
bound by them. Objective, reasonable to
believe on there or not?
I am not bound by written contract terms
unless I had notice that there were contract
terms there. Lease contracts versus coffee
cups? There is still a contract, but it doesn’t
include those terms because wouldn’t have
notice/reason to know its there. Still need a
contract to sue them over
Facts checked in parcel at store, given receipt,
gave parcel to someone else. Sues for 1000
because that was what worth inside.
Defense will only pay 25 because that was
what was on the receipt ticket
Klar wants to get out of that, says didn’t have
adequate notice, didn’t expect to find terms
on that ticket… so not bound by them because
didn’t expect it. Did not know was supposed
to read it
Still can limit liability, just has to provide
adequate notice to be able to. Just tell
them/warn them there is a contract on the
Public policy 178
Claim of negligence
Defense exculpation clause precludes liability
Reply the clause unenforceable because
violates public policies of (1) discouraging
negligence; and (2) preventing those
w/economic power from overreaching.
Public policy hard to argue, unconscionability
would have worked better
Could just say this is unfair to me, denying
liability for own negligence pretty bad
Court split on this
Majority said didn’t violate public policy for
8 reasons- policy of freedom of contract
(could have gone elsewhere and fairness
between parties not our problem) -- leases
concern only private, not public, interests -clauses may benefit tenant as well as landlord
(could lower rent) -- lessening the sanction for
negligence by contract is permissible (e.g. car
insurance makes you drive worse) -- no proof
of overreaching in this case (she hadn’t
objected to the clause) -- legislature has
addressed the housing shortage through rent
control (reason leg didn’t address it) -landlords do not have monopoly power, there
are so many of them -- housing shortage is
temporary, but such rules would be forever,
like swinton termite rules cant be made for
this reason
Dissent it is public concern, these terms are in
a bunch of contracts and violates the two
policies brought up in claim
Unconscionability contracts and contract
terms 208, 2-302 alternative to indirect
policing of terms
Substantive/oppression and
Procedural/unfair surprise- buried term in
there and make it a take it or leave it
Just say that it shocks, does not have to harm
the public
Will not enforce because will shock, so
unfair, not necessarily that will harm the
Facts furniture store still owns until paid off,
if default on it, can repossess it. Pro rata- even
if pay 1200, don’t owe anything because
distributed amongst everything. Defaulted on
stereo so did on all
Claim store sued to get items unlawfully in
possession of others, wanted sheriff to give
Defense clause unconscionable therefor
Unconscionable for both substantive
(oppressive if take something that 3 cents
back and not allowing it) and procedural (hard
to understand what's going on, unfair
Misc. statutes regulating the substance of
Courts enforce them through remedies
Unconscionability was controversial when came out
 Kind of vague, how know shock conscious
 Paternalistic?
 Shouldn’t be in the business, we don’t know why people conducting business
 Redistribution- using law to redistribute wealth among people with/out money
 Lleyellyn- legal realist- look at how law works in practice- this rule does not
change anything, courts would come up with excuses not to enforce, so lets just
have them rule directly
 And actually not used often
 Typical ones are exculpation of injuries caused by own negligence, but
atms, tall lattes tuition are still allowed and protected
 Public policy had been used to cover things that are shocking, but now will challenge it
on unconscionability
Enforcement of a promise by order of specific promise
346 Plaintiff always has right to damages, unlike spec performance, when there were
limitations. If promise enforceable, then right to damages. Can still get damages
for land. If prove promise was made and it was enforceable
How to measure the general availability damages? Normally asks for whichever is the highest
Expectation damages 344a, 347(1) where would be if contract had not been breached/had
been performed. hypo
Look at 2 things
 How worse off plaintiff is because defendant broke promise,
 How better off plaintiff is (if plaintiff didn’t have to perform/pay yet)
Loss in value PLUS other loss MINUS cost avoided MINUS other loss avoided
(what d promised - what d delivered) + other loss - (costs p expected - costs plaintiff incurred)other loss avoided
What d delivers changes amount in damages can get
Figure out the what d promised/expansion of the café worth? What would another company
offer/what is it generally worth/substitute performance?
Other loss avoided can include not having to shut down, being told that wont work so don’t
shut down
So have to consider if any of the contract was already completed to see how to make it whole
the extra bit (loss in value- what d delivered) and also see if you benefitted, then defendant
does not have to pay you that amount back that is not fair
Restitution 344(c), 370 restored any benefit conferred on defendant. I want my money back
Easiest, most common one
Reliance 344(b), 349 restore plaintiff to position if contract never been made- benefits
conferred on defendant and whatever spent in relation/reliance on it
position if contract had never been made- would have never given the down payment or shut
down. hypo
 Cannot recover anything that cant prove with reasonable certainty
 Prove what would have made with reasonable certainty. Hypothetical, will never know
Plane ticket and hotel room because would not have booked one without other
Limitations on
Avoidability- have to mitigate- find another company so only get
400 a week for 2 more weeks. Get damages for period until find
someone else
Facts County paid part of price then repudiated contract, said would
not pay anymore
County said don’t build bridge, it was a breach of contract
But they continued to build until completion
Once finished, sued county
 Wants expectation damages County promised the contract price minus what they
delivered, they paid something
 County said you are better off, avoided costs. Bridge
expected the cost of building the bridge
Costs incurred
 2 diff views
 Wanted costs at completion, so does not want anything
subtracted for costs avoided
 County said costs incurred should only be costs when
notice of breach was received
Court said can only include cost incurred when contract breach was
received because the costs could have been avoided, but you kept
going, these additional costs were avoidable. Duty to mitigate not
anything wrong, just cant recover the cost
 Why not let plaintiff rack up costs
 Why inflicting damage on defendant and no benefit to the
If no Avoidability, luten bridge would have to incur
more cost to be awarded to extra money. So it’s a
zero sum, but defendant has to pay that extra dollar,
so that is damage on him because has to pay more
So this is not efficient anymore
o Foreseeable if arise in ordinary circumstances- direct and
incidental damages or
o From special circumstances of which damages had reason to
know- consequential damages
o Hypo- 2 losses- airplane late fee of 100, lose out on business
meeting and lose 10k business deal
 Sue, need expectation damages to make whole
 Were the 2 losses foreseeable?
 Arise in ordinary circumstances? Paying to
take a later flight
 How about loss in profit? Not ordinary, but
special circumstances. Unless defendant knew
about them, cant recover because not
 Why shouldn’t be able to recover for
things that are not foreseeable- anyone
could be liable for things that don’t
know about
 Might say wont drive, might be more
careful, or might address it- all goes
back to contractual liability is
 How might you know about these
special circumstances- if tell her. If
she knows, cant get out of it
Facts mill shaft broke, had to close until get new shaft, send back.
Pick delivery, said could get there next day on train
Instead, put it on a mule, had to be shut down for that long. Took 5
extra days instead of 1 day
1 day delivery minus 6 day delivery
Wanted loss profits for 5 days of 300 pounds
 Recover damages reasonably foreseeable 352(1) and is
reasonably foreseeable when both parties aware, if
communicated and known at the time or if ordinary would
arise, should know
 Contract was breached
Special circumstance here- wouldn’t be able to operate mill
without shaft. Court said pickford might have thought they
had a spare. Need trial to discover if knew
Lawyer for hadley- tell pickford that they are shutting down
until this is fixed, we need it, and losing profits of 60 pounds
a day
 If told them this, could have recovered the 300
 Could have said wont be liable, taken more care, not
entered, charged more money, etc
 Add clause that only liable for delivery fee, and also
say what not liable for- any other loss, foreseeable or
Uncertainty 352
fact of loss Collatz
-- probability of loss? § 348(3)
extent of loss Fera
value of loss
o Might not know breach caused damages
o There was breach, loss, don’t know extent of loss
o Know what was lost but cant put value on it
Facts Trivia game, last person eliminated would get car worth 750
Only 2 parties able to answer correctly, they were left
Then, both of them got wrong, gave to not collatz because he was
eliminated after you
Breach of contract- probably have term implied in fact.
Court agreed that broke the contract, should have asked
another question, but gave him no remedy because didn’t
prove he would have won with reasonable certainty
Prove that broke contract, but not that answered correctly
If had 50/50 chance, then could give value of chance because
lost chance 348(3)
 If rule had been if both get wrong and flip coin and
that person wins, then it is 50. if rule was about who
is smarter, don’t know who is, so cant give anything
 Sounds like harsh result that cant recover, but it is
about putting in position that would be in if contract
would not be breached
Alternative in this case is nominal damages 346(2)
Collatz cant prove w reasonable certainty if won, so
can only get nominal damages, just something as
symbol that broke contract
 Benefit of getting nominal damages- moral victory
One way is that cant prove with reasonable certainty, so cant
recover anything, only nominal damages
 Specific performance is sometimes a remedy
Know been a loss, but cant prove loss with reasonable
Facts He was new tenant at the shopping center. Book and bottle
shop. In midst of bankruptcy of shopping center, overlooked lease,
gave it to someone else. No doubt about lease being broken
Question can he recover for loss of profits if business could have
opened up in the lease that made
 Scan show breach of contract, wanted to recover for loss of
profits that would have earned if business could have opened
up in lease that made
 Problem of showing loss of profits
 How will show lost profits when it is a new business
with reasonable certainty
 Naval institute- how many sales in september? look
at before?
 Court said with new business, can still recover, just harder to
prove the reasonable certainty. It may often be the case, but
able to prove
 How tried to prove the lost profits in this case?
 Talked to similar types of businesses as experts about
what type of profit might be able to make.
 Defendant's experts gave lower,
 But court said that is enough evidence
 But experts are always biased
 Even if have lots of experts, if it is baseless, then
doesn’t matter if so big
 Court said easier to look at prior profits, but can still recover
 Could have been avoided, could
Rule- cant recover damages that cant prove with reasonable
 Uncertainty
o Fact of loss, probability of loss, extent of loss,
value of loss
o Value of loss
 Not being able to go to prom
Fact of loss, extent of loss all
Difficulty of value of losscould pay for prom tickets,
how prove reasonable certainty
benefit of going to prom
If uncertain,
o Nominal damages
o Reliance damages- cant prove with reasonable
certainty 349
 Paid to prepare. Can prove these with
reasonable certainty
o Specific performance
o Liquidated damages
Hypo- promise to expand in
exchange for promise to pay.
Shuts down for a week.
Doesn’t do the expansion
Additional profit lost subject
to limitations
Opportunity to make money
for expectation but not
reliance because if contract
had not been made, would
not have made the more
Restitution- down payment
Reliance- down payment and shut down loss
Expectation: (expansion-nothing) + additional profit lost –
(contract price-down payment) - none
Hypo- homeowner wants to
fix house, gets contractor to
build and pay. Contract is
100, builders expected cost is
90 and makes 10 profits.
Owner paid 0, builder spent
0, market value of work is 0.
Calls up and says wont do
work anymore
Restitution for builder. no benefit conferred on owner because
market value 0. Done nothing, paid nothing, will get nothing
Reliance even if contract never made, nothing owed because
have not paid them anything
Expectation if contract were performed
 How much worse
 Loss in value
 Promised minus
 100
 Delivered
 0
 How much better
 Cost avoided
 Cost expected minus
 90
 Cost incurred
 0
 Other loss avoided- 0
 Equals 10
 What would get if kept promise- would have made
their 10 profit
Change terms of hypo
Restitution- benefit of builder to defendant- 40. improved
Contract price 100
house by 40 dollars
Builders expected cost- 90
Owner has paid already- 0
Builder has spent- 60- maybe
spent more that havent done
yet, spent that does not
benefit homeowner, hired
someone else, etc
Market value so far- 40
Other losses could be that
turned down contract with
another store, and lost it
because we made it with you
Restitution- benefit of builder to defendant- 40. improved
house by 40 dollars
Reliance- if never been made. 60. how much they spent
 Expectation Worse off
 Loss in value
 What promised 100
 What delivered 0
 Other loss
 Better off
 Costs avoided
 Costs expected 90
 Costs incurred 60
 70
Worse off bc didn’t get 100, but better off bc didn’t
spend the 30, only paid 60, so saved 30 so doesn’t get
the 30 because saved it
Sullivan v oconnor
Facts didn’t do nose job well
Claims negligence (said did ordinary care, result does not mean malpractice) and promised to
improve nose, that would look like hedy lamarr’s nose
Question what damages can she get? Can she get for disfigurement and pain and suffering?
Restitution Just doctors fee. Just what paid doctor. Disfigurement, pain and suffering would
not be because benefit not conferred to the defendant
Reliance Restore her to if contract had never been made, where would parties be
Give her doctors fees, hospital fee, pain and suffering of all 3 operations,
disfigurement/worsening. Give to put her back if contract would never have been made
o Worse off minus better off
o Worse off because didn’t get what promised, was disfigured, and went through 3rd
o Loss in value
 Promised- enhanced appearance
 Delivered- did not improve and also made disfigurement
o Other loss- pain and suffering of 3rd operation because she only expected to go
through the first 2 ones when made and thought contract would go through
o As sullivan's lawyers- how give number to those?:
 Disfigurement- would you feel whole if someone did that and only paid 10?
Nothing to do with lost profits, but about what jury thinks should be owed for
that type of injury.
o Better off?
 Cost expected to incur- doctors fees, and incurred them, paid doctors fee, so
didn’t avoid any costs, was not better off here
 Other loss avoided- pain and suffering of first 2 operations, did not avoid that.
If doc said I wont perform, would avoid those. Other loss that incurred that was
not avoided- hospital fee. So other loss avoided is nothing
Court says can expectation Appeal- entitled to get ps for 3rd and compensation for
Court says- was entitled to those because restitution would be too little and not limited to that.
And could recover both under either reliance or expectation. (what went through when relied
on contract, and also those are losses that experienced for expectation)
If issue was to get pain and suffering for all 3, that would be under reliance
 Law says can get any of 3 remedies
 Court said entitled to any type, and those go under either. All we have to decide in this
 Instruct jury what to compensate and that is what they have to decide, don’t go to them
to get a value
o As sullivan's lawyers- how give number to those?:
Disfigurement- would you feel whole if someone did that and only paid 10?
Nothing to do with lost profits, but about what jury thinks should be owed for
that type of injury.
Why would a defendant ever breach a contract if the plaintiff is entitled to expectation damages
putting the plaintiff in the same position as if the defendant had not breached the contract?
1. The defendant cannot help breaching. Sullivan v. O'Conner
2. The defendant thinks the plaintiff will not sue.
Efficient breach 3. The defendant calculates that paying expectation damages is cheaper than
 Change in status quo that increases efficiency
 No one is worse off and at least one person is better off
 Expectation puts in same position, not worse off, but I am better off because I save
The hunt for red October/naval institute press
Facts gave licensing to publish, but cant sell books until October. Wanted to sell earlier to
make more money
2 options
 don’t breach
 No sales in october but
 No damages
 Breach
 Make lots of profit but
 Have to pay damages of 35k expectation
More likely to prefer this one. In theory, choice shouldn’t matter if can restore them by
The damage measurement can encourage people to breach the contract
 3 important points about this
o In theory, the choice shouldn’t matter
 Naval institute would rather just have them perform, and if anything,
worse off because of the court costs
 Can never know actually how much it would be, so is actually in the
same situation?
 No one will want to do business with them, anymore
o Efficient breach is still a breach, always has to pay damages
 Critics- this is not morally good, though
Employment hypothetical
 What are damages for breach of contract
 Broke after 2 years of 4 years
 Promised 4 years of salary, got 2 years of salary
Costs expected vs costs incurred. Cost of your labor 4 years of labor minus 2
years of labor
 Would be no damages because the cost of labor is salary
 Under ellenborough's theory, can put under cost incurred of 2 actual years and 2
years constructive. Can be considered to have served the last 2 years because
willing and able to do it
o Would get the full salary for not doing anything
 Modern law says can recover damages for constructive service to extent that cant
get reasonably comparable substitute of employment for yourself
 Employment cases- can include constructive labor for cost incurred if unable
during period to get reasonably comparable, if could have, don’t get
compensation for that time
Parker v twenthieth
Facts she didn’t accept the other employment opportunity for the western. Yes, had breached
the contract. Promised her 750k, paid her nothing
 Dispute about what should be put into costs incurred
o 20th century said nothing, so don’t owe you anything
o Shirley said deserved 14 weeks constructive service, so could get the full
amount of 750k
o Because could not get other remedies
 Rule of getting the constructive service, cant find reasonable comparable job
 If only employment available was different and inferior, can get the full amount
 Undue, embarrassing, etc
 Dissent- it’s a movie
 20th century fox could have said to go to another studio
Promise to pay for 10 years, don’t
1 semester of labor minus no cost incurred
Could argue that labor worth less than what defendant promised, not different and
inferior, just your labor is not valuable
If take another good job, there is no constructive service, but can still get
something by showing labor is worth less than what was going to get paid
Limitations in cases of incomplete or defective performance 348(2)
-- loss in value to B?
-- loss in market value?
-- cost to remedy/complete?
Pay for swimming pool and diving board, pay him that amount, and build pool but not
diving board
Promise pool w board, deliver pool wo board
What can recover in damages?
Loss in value is the board
If put in same place would be in, ask subjectively how much pool with/without
board is valued
o Problem with subjective view, hard to prove with reasonable certainty, which has
to be done
o Market value? Good for your property or not?
o Cost to remedy/complete the problem?
 Rule in 348(2)
o If can’t prove loss in value to you, then have choice of market value or cost to
o Can’t get cost to remedy/complete if grossly disproportionate to probable loss of
value to me
 Value to plaintiff, market value, cost to complete is 20k.
 If could prove with reasonable certainty what the value is to you
 348(2)- if cant prove w reasonable certainty, use loss in market value or cost to remedy
or complete
 But cant get cost of remedy to complete if grossly disproportionate to probable loss in
value to the plaintiff
Jacob and youngs v kent
Facts Kent paid almost all the money but refused to pay balance because said defect of the
construction. Said would use reading pipe, used cohoes instead, but no real difference. Kent
said would not pay for rest of house unless replace the pipe that was encased in the walls and
had to tear down to replace. Sued kent for the balance pay, wanted rest of the money
2 issues What damages is kent allowed to subtract out? How measure difference between the
Kent wanted damages calculated through remedy/completion
 Loss in value to plaintiff? We don’t know
 Loss in market value? Nominal or nothing
 Cost to remedy/complete? Great expense- unfairly out of proportion to the good to be
court said only diff in market value which was none. True that breached contract by not
providing reading. Allowed damages he suffered to be taken off from price, but market value
Value to him? If were president or something
Dissent follow the contract. Argument of efficient breach- will make builder worse off and
kent doesn’t need the damages to be better off, or could just keep and not fix house
Groves v john wunder
Facts Entered into lease allowed wunder to remove sand from property, would pay rent for
this, compensate. Also made another promise that after lease was done, would use the dirt that
took off to get sand and gravel and make the land level again. Wunder did not do that
Promise- land with level grade, and got land without level grade. How measure this?
No proof to subjective loss to plaintiff, don’t know why wanted it level, etc
Loss in market value figures because it wasn’t leveled? 12k. Property couldn’t be sold
if not leveled, but if leveled, could be sold for 12k
How much would it cost to level it? Over 60k
Court jacob and youngs was distinguishable because here, the breach was willful, in jacob and
youngs, was mistake. This was willful because just chose not to level
Was said by peevyhouse to not follow general rule
Modern view- get to loss in value to you if substantially prove. If not, get remedy complete if not
grossly dis to value to p, if neither, get loss in market value
Peeveyhouse 348(2)
Facts owned house, promise to do restorative work after the lease, didn’t do that
No proof for loss in market value to plaintiff
Court follow Jacob, only get market value
Question is if grossly disproportionate to loss in value to plaintiffs. This is not industrial land
that has nothing on it, it is their family farm, and 29k could be proportionate even if market
value does not care about it
If not grossly disproportionate, can recover remedy/complete. Evidence from negotiation of
contract- peevyhouses said wouldn’t even sign if it was not in there, shows that did value the
property being leveled. Doesn’t take into consideration that valued it higher
FIVE POINTS ABOUT LIQUIDATED DAMAGES AND PENALTIES 1. The rules for determining contract damages that we have been studying are "default" rules.
They only apply if the parties do not stipulate in their contracts what the remedies for breach will
2. Examples of stipulated remedies include late fees, forfeitures of deposits, rights to cancel the
contract, etc.
3. Some benefits of stipulated remedies are that they may
(a) reduce litigation;
(b) facilitate calculation of risk; and
(c) permit compensation when loss cannot be calculated with reasonable certainty.
4. Two key limitations on stipulated remedies are:
a. The def may argue that a stipulated amount of damages ("liquidated damages") is an
unenforceable "penalty" if the amount is unreasonably large in the light of
(1) the actual or anticipated loss and
(2) the difficulty of proof. §356, Dave Gustafson.
b. Disguised penalties are still penalties. E.g., Prob. (2), p. 997
Policy arguments for prohibiting
 Courts give it
 Goal of contract damages? Red
october- to put in position if
hadnt been breached. Goal
because not to ensure does
promise, but position to be in
if kept. Because breach could
be efficient
 Don’t want to encourage to
keep promises when more
efficient to breach contracts.
Puts in same position but
would be better off
 Penalties not necessarily
efficient, sometimes not a
good thing and
 Don’t let parties figure out
Policy arguments against prohibiting
penalties. Against 356
 Why have freedom of
 Allow parties to
stipulate prices?
 Why freedom of
contract- more likely to
be mutually beneficial
 If both parties agreed to
it. Both parties think
mutually beneficial, so
how could it be
inefficient result?
 If penalty is so high,
price also probably
high, so mutually
 Why do people stipulate
 Reduces litigation
 Put clause so don’t
have to go to court, but
then went to court, so
not litigating the
penalty, but about if
should be enforced
 Leads to litigation
which is what did not
want when stipulated
Rule is that free to stipulate damages, but cant be unreasonably large because then would violate
 Penalties in contract violate public policy
o Hired to pave road, said would be paid for work
o State didn’t pay entire amount, withheld 14k
o Why withheld? Because were 67 days later than promised
o So why 14k good for 67 days? In contract, stipulated that for every day late,
damages will be 210
o Sued to challenge the award of liquidated damages
Difficulties of proof- state wants highway to be paved in certain amount of dayswhy need stipulated remedies? Difficulties of proof? No market for highway, how
determine damages for the state? Inconvenience to the public- hard to prove this
with reasonable certainty
If didn’t stipulate damages, hard to prove with reasonable certainty
 Like fera- if cant prove, then cant recover
There was fact of loss, extent of loss (couldn’t use for 67 days) but what was
Unreasonably large in light of actual or anticipated loss?
What if don’t return car but no one showed up to rent, so there was no actual
But what about anticipated loss- at time made it, what did they think it will be
Here, couldn’t put figure on it, but took steps to show trying to make reasonable
in light of possible damages that might occurr
What if had unreasonably low amount of damages?
 Would be unconscionable- another way to challenge remedy- galligan v
Example- say contract did not stipulate remedies
o Broke contract but can readily buy something immediately for 1k more. What are
the damages?
 Loss in value and other loss minus costs avoided minus other loss avoided
 What d promised (the machine, did not deliver it)
 Cost plaintiff expected (20-0)
 Need to put value on machine. Contract was for 20k, broke
contract so have to buy substitute, can buy anywhere for 21k. So
value of machine is 21k
 Actual damages 1k because diff between loss in value and costs
 Not much difficulty of proof
 Now, look at the provisions
 Said penalty of 10k
 Can logan enforce that clause against and make pay?
Probably not because the difference is unreasonably large
 Liable for 10k for liquidated damages- not calling it a penalty
(term does not matter in determining the provision)
 Either deliver machine or pay 10k
 These terms ultimately amount to having to pay 10k, just a
disguise of penalty
o Determine first what actual damages are, which were 1k, then look at difference,
terms, etc
Parol evidence
A completely integrated agreement discharges any terms of a prior agreement that are within its
scope. [§ 213(2)]
A partially integrated agreement discharges any terms of a prior agreement that are inconsistent.
[§§ 213(1), 216(1)]
Integrated agreement 209(1) writing or writings constituting final expression of one or
more terms (final meaning last thing wrote, ended up with written agreement, nothing
came after. If something came after, would not be integrated)
o 210(1) final but also
meant it to be complete
and exclusive, but also
intended it to have
nothing else added to it
o 210(2) discharges any
terms of prior agreement
that are inconsistent
o Didn’t contain all terms
intended it to
o How determine if
completely integrated or
Tests for completeness
Willistons 4 corners
o Appear on its
face to be
incomplete to
permit parol
evidence of
o Don’t ask
parties, but
just look at
Corbins all
o Instead of just
looking, ask
parties, did
intend it to be
complete and
Other way to figure
o Most contain a
merger clausethis says if
expression of
o Most big
contracts havecomplete and
o If not, use one
of the tests
o Willistons is
Lease hypo- ask landlord things before sign lease.
o Utilities paid, furnished, rides to grocery store
o But contract said utilities not paid, nothing about furniture or groceries
o Sue for breach of contract
o Landlord can argue that some of those terms discharged, unenforceable
 Depends on if completely integrated or partially
2 tests or merger clause
Say it has merger- is complete
 If so, will discharge any terms
of prior agreement that are
within its scope
 Scope- would that term
normally and naturally be
included in a contract of this
 Would provision
saying landlord would
pay utilities be in
lease? Yes, so that
prior agreement is
 Nothing about furnished
 Is within scope of
lease, normal and
 So can be discharged
 Rides to grocery store- assume
its not normal and natural aka
collateral. Diff subject matter.
Not about lease, but grocery
store. Not in scope,
 Not discharged
Mitchell v lath
Owned farm, agreed to sell to mitchell, but didn’t want
to buy because didn’t like the ice house. Said orally
promised that if buy farm, will remove. Written
contract didn’t say anything about ice house. Bought
but icehouse stayed. Mitchell sued for breach of
Say is partial, and not completely
integrated, no merger clause
 Not meant to supersede other
 Partially integrated
 Discharges any prior terms that
are inconsistent. Means that 2
things mean opposite things
 Utilities paid
 In contract, says not
 Doesn’t discharge all
terms in scope, just
ones that are
 Inconsistent, so prior
agreement discharges
 Nothing about if furnished
 Not discharged because
not inconsistent.
Saying nothing does
not make it inconsistent
 Same for rides to grocery
Mithcell- final one said
would sell. But there was
prior argreement, not
disputed, that would take out
ice house, not in final
expression. Sued, defense
was that was discharged
under parol evidence rule
Find out that there was final
agreement, looking at it,
looks complete (4 corners,
Claim: Breach of contract. The Laths promised to sell
their farm and to remove an icehouse, and they did not
remove the icehouse.
Defense: The promise to remove the icehouse was
discharged by the parol evidence rule because . . .
(a) that promise was not included in the parties'
final written agreement;
(b) the final written agreement was "complete"
because ______ (see 1st half of last ¶ of
majority opinion); and
(c) that promise was within the scope of the
written agreement (i.e., not "collateral" to the
agreement) because ______ (see 2d half of last
¶ of majority opinion).
majority rule). Even if looked
at all circumstances, would
still be complete. Ask party,
look at circumstances, etc
Complete. Then
Would agreement to take
down ice house be within
scope? Yes, would normally
and naturally be included.
Because not in contract, was
Court says complete integration
o Uses four corners test first- read it and
looks complete
o All circumstances- would make it
complete too
Ice house discharged because within scope because
was normal and naturally agreed (clause of wanting
icehouse removed normal and natural)
Court says it is closely related, would be included.
True that about different things, but natural to be
included, so may not be enforced
Conclusion- promise was discharged because within
scope and was completely integrated
could get for mutual mistake? Could, if prove that both
mistakenly believed included it. But hard to show.
Didn’t have prior performance
Hypo- say it was partially integrated
 Can be enforced because is not opposite/inconsistent. Can both exist together.
 Practical and policy
 Implications for advising clients?
 Is everything agreed upon in there or are things that discussed not in there?
 Or if making contract, put in clause to say that some that are not included
 Policy for the rule?
 Why do we have written contracts
 No dispute later on about what agreed to
 Universal goal that people have, valid and beneficial
 How does parol evidence rule promote this?
 Says if not in contract, discharged. So furthers goals of eliminating
dispute, write it better
 Don’t have to prove what previously discussed because it is discharged
 About what parties intending
 Possible unintended consequences?
 Lets people break things that did agree to
Didn’t want the term to be discharged but it was
What will people argue about
 If complete or partial
 And
 Within scope or inconsistent?
Masterson v sine
Facts sold farm to sister so could start air taxi
service, went broke, declared bankruptcy,
bankruptcy trustee took charge of all assets and tries
to liquidate to get money, wanted to take farm.
Thought it was still asset because there was option
clause that could repurchase the land clause said
could buy it for the same consideration of 50k, so
valuable for trustee to buy back and sell for more.
Tried, sister said that the clause was only for the
family to purchase it for the same. Option clause for
only family to use this clause
Trustee that it has to be only used by family not
within written doc, because of this, doesn’t matter,
Under parol evidence rule, is discharged
Was it partial or complete? 4 reasons why not
intended to be complete integration
 Deed does not provide that is complete
agreement (doesn’t have merger clause)
 Deeds are hard to include terms like that.
Dissent says should have just written it in there
 Who are the third parties? If sister sold to
someone else, have to be put on notice that the
brother can buy back. But does third party need
notice as to who can? No, just that someone
might buy it
 So might have but this option just so
third parties know that it is subject, but
don’t need to know that it is for family
members, so didn’t have to be in
 How were they to know that should have
included it in there- didn’t know about the parol
evidence rule and discharge
 So decided that these indicate that evidence
should have come in about this prior agreement.
There was deed, deed said masterson
could repurchase property. Trustee
wanted to rebuy to sell. Siblings said
only family members could. Did written
deed discharge that alleged prior
agreement? trial court said yes. Court
said no, not completely, partial, because
of that, doesn’t discharge unless
inconsistent, and not inconsistent to say
can have option, and only family can do
this option
Was partial. So was it inconsistent? When terms
conflict. Option to repurchase, and family member
can. Not inconsistent
Dissent When someone gets option, assignable
unless say its not. So that only family members can
do this option, is inconsistent. term implied in law,
and if contradict it, it is inconsistent. Majority
replies that not contradiction just because rebutting
term that otherwise would be presumed
Parol evidence rule that applies to prior evidence. When sit and write down, important to have it
include everything because if completely integrated, terms in scope prior will be discharged
"Reformation" of the writing by the court
-- for mutual mistake as to its content § 155, Bollinger
-- for fraud as to its content § 166
 Reformation option to get around parol if mistake or fraud in content. If neither, then
parol will apply
Facts Contracts with locals- take debris and put
it on property, will pay you. Agreed to that,
subject to when dispose of it, put the top soil
back on top when done, didn’t
Sued for reform contract to include the term.
Wanted court to say that written agreement
includes this provision.
What have to show to get it reformed?
Why important to reform? So wont be
barred by parol evidence rule. If not in
writing, parol evidence will discharge it
because it is within the scope because
would normally and naturally be included.
Once in, if don’t abide by it, will be sued
for breaching, and cant bring up parol
evidence rule and win
o Rule is that can be reformed when
mutual mistake as to the content of
the writing, not about fact, but if
writing contains particular term. If
both mistaken, then can be
reformed to include
o Easy for bollingers to say were
mistaken- testimony
o Hard to show other side was also
mistaken- showed that initially did
it and also did it for neighbors
property who had same contract.
Only later, when someone read
contract, stopped doing it
Court said both mutually mistaken
The Parol Evidence Rule concerning the exclusion of extrinsic evidence to show the
meaning of written terms
o Can court consider extrinsic evidence- evidence outside of contract, like testimony,
circumstances in which made to determine meaning of terms, or only things in contract?
o Ask their intent- would we ask them that? Parol evidence rule. Why do people write
down? So later on, so no dispute about meaning of contract later on
o Problem 525
o Does phrase above modify both rain
o What if just said all, why cant bring in
water and domestic piping?- is
evidence? Because has plain meaning,
ambiguous, extrinsic evidence should
cant contradict plain meaning with
be allowed
extrinsic evidence
Masterson had both parol evidence rules.
Said same consideration and depreciation
Depreciation value-
Hypo- contract said could buy back for 50k.
Could intro evidence that meant it with
Can intro extrinsic evidence for meaning of
words? Same consideration- intro evidence to
allow that consideration was the 50k? Yes,
term in isolation doesn’t mean anything.
Would ask what was the consideration
because no other way to know by looking at
contract. Court cant just look at see it was 50k
meant as calculated under fed income statutes.
Because depreciation can be calculated in diff
ways. Someone needs to tell court what that
Parol evidence preclude intro of evidence that
meant with inflation. Yes, 50k plainly means
1.Traditional "plain meaning rule" in most jurisdictions plus "usage of trade"/"custom" exception
Hurst- most courts use
o If plain meaning, cant introduce extrinsic evidence to say had diff meaning
o But if has ambiguity, then free to bring in extrinsic evidence
o Rule exception exists because
o If people can come in, write down, there is plain meaning but then say didn’t mean it,
then no point in writing it down
o Unless have usage/custom
Can always bring in evidence of usage of trade or custom to show particular
meaning other than regular meaning in their custom
Even though 50 has plain meaning, can still be introduced because industry custom
Facts Said there was discount if was less than 50 percent protein, was so, so could
get discount
Sued, said didn’t pay full price, said entitled to discount
Question. If 50 has plain meaning, are parties still allowed to introduce evidence
that has industry custom
 Yes. always allowed to bring in evidence of trade
Why allowed? Like mutual mistake- if both parties know, that is what they
are meaning within their trade. Trying to get at what the party wanted
They did put it in writing. Did it in the language they spoke, furthering what
they intended by recognizing that.
If did not, no one could use jargon, or people would misinterpret what was
actually met
2. Modern "intent" rule § 214(c), Pacific Gas, Trident (minority rule)
Pacific gas
Facts Took cover off drayage, fell and
damaged the machinery. Cost 25k to fix.
Sued gw, negligence and breach of contract
Breach of contract Said have to pay us the
25k because you promised to indemnify us
against loss/damage. Because you dropped it
on our turbine, you have to pay us for the 25k
Drayage said indeminity was to third parties
only, but not to your own property. Only for
liability you would have to other parties
On appeal, traynor says im changing law and
overruling everything - Modern intent rulealways allowed to consider extrinsic evidence
There are no one meaning of words
Also, always extrinsic evidence because of
judge's experience of hearing words, so why
Pacific gas- what mean by indemnify?
Defendant said only meant liability to
third parties, not to own party, wanted to
intro evidence to show that. Trial court
said no, has plain meaning. Traynor said
the rule is always can bring in this
not have parties come in and say what it
meant to them instead
Cali has the modern rule- always allowed to
bring in evidence of the meaning of the terms
Trident center
Facts interest rate was 12.25, then fell. Wanted to refinance at another lower price.
Contractually excluded possibility of refinancing, said loan cannot be prepaid
 Trident center brought declaratory judgement. Yes, even though we said, we meant that
could pay the 10 percent. Sanctioned the law firm about meaning of "shall not" has
plain meaning
 Court of appeals says that we don’t follow plain meaning rule here, have to follow
pacific gas- can introduce extrinsic whenever
 Here, says can always bring it in, thus cant have summ judgement
 Not happy- Makes commentary about modern intent rule- can never rely on written
word, now bc of pacific gas
 Chips away at our legal system, undermines that language constraint on conduct
2. If a court considers extrinsic evidence, whose meaning prevails what do with evidence
when has 2 diff meanings? The answer depends on whether there was . . .
-- no misunderstanding, Rest § 201(1);
 no diff meanings assigned. Masterson v sine- option to repurchase. Knew it was "same
consideration," would not know how much it was. Case where does not have plain
meaning, ask parties. Both said 50k. Whose meaning prevails? When same meaning,
interpreted with that meaning.
-- a misunderstanding in which one party knew and should have known and the other party did
not know and should not have known, Rest. § 201(2); or
 If want it interpreted in your favor, plaintiffs burden, has to show it did not know, no
reason to know meaning of term
 Seller suing the buyer
 Saying had agreement. Wanted to ship cotton on peerless, arrived, didn’t take it
and buy it. Breach because didn’t do so.
 Plea- said we agreed to buy but we meant the ship that sailed in october. Probably
bought cotton from someone else because late, now don’t want the extra cotton
 Demurrer- failure to state a defense
 Said we didn’t agree to the diff kinds of ship. Court said that is not a defense, it is
immaterial which ship was used
 What does this have to do with parol evidence- milward said cant bring in
evidence to show the difference because irrelevant, and contract was (rule for
when parol evidence may or may not be admitted- when its unambiguous, plain
meaning rule) it has a plain meaning, cant bring in extrinsic evidence
 Mellish says- there is ambiguity, so no plain meaning. With proper names, cant
look up in dictionary
Then says no meeting of the minds, agreement about what being litigated,
so no binding contract
Evidence comes in, one thought one way than the other, mellish thinks it is the
third rule
Did one party know or have reason to know what one party meant. Just said
because we attached diff meanings, there is not agreement
Mellish won
First step- can intro? Second, if so, what do with that evidence? In this case, was
misunderstanding, neither party was at fault, therefor, contract fails, no contract to
Plain meaning rule has nothing to do with integrated. Don’t have to determine the
integration aspect of it
Frigaliment importing
o 2 companies, one sold chicken, another was selling. 2 contracts
 75k pounds of chicken
 25k for another type of chicken
o Shipped them, then was unhappy about the larger chickens, wouldn’t pay for the
larger ones
o Said sent the wrong types of chickens, bns said we agreed, we will send ones want for
another price if you want
o Breach- promised to send broiler chickens but sent stewing ones
o Disagreement about the term chicken
 Said we meant broiler
 Said we meant any kind
o Claim- breach
o To figure this out, look at meaning of word chicken in contract- can intro extrinsic
 Yes, it was ambiguous
 Looks at contract itself first, one argument was that had to be contract for
broiler chicken because the smaller ones had to be broiler anyways. Friendly
says not persuaded.
 Extrinsic evidence- testimony- from negotiations that led to the contract
 Said word in english to clear up ambiguity- court said had tried to clear it up
and actually used the german word
 Then brought in usage of trade- when say chicken, mean broiler
 Tried to use expert, but said should specify anyways
 Usage of trade was not so clear
 Defense brought in evidence and said would have no reason to know- fedthere were diff classes of chicken, thought it meant fowl. Helped them
because chicken could be both of those
 Other evidence was the price- market price was higher. Court said that means
not selling broilers if would be losing money
 Law says- has to show that when parties said chicken, they meant broiler
 Second question
Has to show that knew or should have known meant broiler chicken,
and we have to show
 Didn’t show that was that bns knew, and couldn’t show that bns had
reason to know.
Court said frigaliment has not proved that one point, that only meant broiler,
and no reason to know and didn’t know that meant any chicken, and
regulation alone suggests that could mean anything
Frigaliment can only win if show only means broiler. Had lots to know that
was not the only meaning. Has to show bns at fault for misunderstanding. Did
not come close to showing that
Frig can only win when
 Showed both understood the term to meet broiler or
 Didn’t know and no reason to know meant chicken, and frigaliment
knew and should have known. We had a disagreement and its your
Dispute between them and union
New contract that was made and colfax brought declaratory to have the term
Brought coutnerclaim- promised to arbitrate, broke that by going to court
Defense- no agreement because failure of mutual assent caused by our disagreement
about the term x
Argues contract fails for lack of mutual assent
What has to be shown that no contract because attached diff meanings, neither party
knew or should have known that attached another meaning, didn’t show that. Judge
says will send to arbitration. Then find out meaning of contract there
Has to show that neither side knew what other was thinking
-- any other misunderstanding, Rest. § 201(3).
 What if neither party is at fault, each attached diff meanings to the terms. Thought meant
any, and no reason to know gw meant something else, and vice versa
 In that case, that cannot be a term of the contract because didn’t agree on it, struck
out of contract. Consequence is that if material term of contract, then don’t even
have a contract
Implied terms
 Wood v lucy, implied that will use reasonable efforts
 Mattei v hopper- being satisfied has meaning because had to have been done in good faith,
implied in contract
 Parol evidence rule does not prevent court from finding implied terms in a written contract,
even if the contract is completely integrated
 Because do not need to list everything for it to prevail, we are past that primitive
 How impacts litigation? Cant these be argued to be implied terms? In mitchell, could
get around parol evidence rule by saying you are talking about implied terms, not
effected by parol evidence
 Reviewed because did so well, said handwriting was different, cancelling his score
 But 5 options- showed had mono, witnesses including the proctor, and counter expert
 Ets disregarded these
 Court says need to give it in good faith, don’t have to count the score, but has to look at it in
good faith
 Hypo- what if tried to say it was not implied term, but something we previously agreed on
 Strategically, don’t say we previously agreed on it, but it is implied in the contract
Conditions to Performance
definition of a condition § 224
 When make promise subject to condition, don’t have to perform until that condition is
defense of non-occurrence of a condition § 225(1)
 didn’t perform but didn’t have to because non occurrence of a condition, never had a duty
to perform
express vs. implied conditions
 express- listed in contract and implied- implied by the circumstances conditions
purpose of conditions = allocating risk of uncertain events
Express Conditions
When express, condition has to be strictly met
 Luten bridge- implied that if broke contract, would have to stop working
-- disproportionate forfeiture exception § 229
"satisfaction" of a party as a condition
-- subjective conditions are allowed Gibson (but see § 228)
 Luttinger
 Said would buy house for 85k, subject to condition that will get mortgage from
institution with specific terms
 Didn’t buy house because contract said would only get if got certain lending, but
best deal we got was not that. Didn’t give back deposit. Sued to get back. Said
forfeited because didn’t go through with purchase of house, because condition
wasn’t satisfied
 2 arguments
 Due diligence
 Should have looked more, so cant say condition wasn’t satisfied
 Court said there was only one bank to do that, law does not require
performance of a futile act. Only went to one bank
 Said we can fund the difference, lower price of house to make same
monthly payments anyways
 Court said about the offer to fund it- irrelevant
 Because of the strict compliance rule- if has express condition, needs to be
expressly met. If not strictly met, does not have to be performed
 Exception, when too ridiculous
 Didn’t matter that could have been put in same condition, because of strict
compliance rule
If material condition, cant be excused
Can have satisfaction as a condition?
 Yes
 Subjective conditions are permitted, but need to be good faith
 While permitted, when ambiguous, will say not subjective but objective
 If not satisfactory, don’t have to pay
 Said was not satisfactory, does not pay
 Defense- condition. Am not satisfied. Is that legitimate condition?
 Said they both agreed to this, thus nothing wrong with this
 What if had not looked at the first one, could not raise that defense of satisfaction,
has to look at for implied term of good faith
 Way that gibson can still win even if not satisfied? If told someone else he was
satisfied, that would not be good faith
 So we mean satisfied in good faith
 Not illusory because bound by good faith, like mattei. Because can actually say
that and prove that was satisfied
If states satisfaction is condition, probably mean subjection, but if possible to
interpret means objective, that is the preferred
 What if painting the barn- can make subjective. But when ambiguous, we prefer
reasonable person to be interpretation. A barn is not so specific as portrait
 Purpose of conditions- often because there is a risk
 Luttingers risk- wouldn’t get suitable financing
 That would not like the picture
 Conditions allow parties to address these risks
 Did the express terms eliminate the risk?
 Risk burden shifts to someone else. If don’t like pic, not his problem, but
other party's
 Allocates to other party
 797
 Constructive condition of prior performance by the other party [§§ 226, 237, 241
existence of the condition
 satisfaction of the condition
-- strict compliance not required
-- substantial performance suffices (i.e., even if there was a breach, the breach was not
-- p recovers but defendant my subtract from p's recovery an allowance for damages
caused by p
Pattern of Argumentation in Constructive Conditions Cases
-B's claim: Breach of contract in that ) failed to perform )'s promise.
-)'s defense: Non-occurrence of the constructive condition that B perform its promise without a
material breach. § 237 [AKA "failure of the consideration"]
-B's 1st reply: There was no constructive condition because )'s duty to perform )'s promise was
not dependent on B's performance of B's promise. E.g. Kingston (reply raised unsuccessfully)
-B's 2nd reply: The constructive condition was satisfied because any breach by B was not a
material breach (i.e., B substantially performed). § 241. E.g. Walker, J&Y, Plante
Note: If B prevails, B may enforce the contract but ) may subtract from B's recovery an
"allowance" for any damages caused by B's breach. Walker, J&Y
Constructive conditions- not explicit, but typical that don’t have to perform unless other
party performs
Strict compliance is only express conditions
 When not, satisfied by substantial
If you teach torts, I will pay you 100. not able to, does
not teach class.
o Response that promise to pay 100 was
conditional on you teaching the class. Promise
made but don’t have to pay because teaching
class was condition of me paying you
o Probably not stated expressly, normally not
o Because condition can be made expressly or
found implicitly by court, here, was found
o Based on the existence of the conditionevident sense and meaning of the bargain
(obvious that need one before other)
First hypo- doesn't pay, sue
for not paying.
Defense is that non
occurrence of constructive
condition 237. called failure
of a consideration
-I don’t have to perform
because you didn’t perform
Exchange teaching classes. Not about 100 dollars,
about teaching each others classes. Not able to teach
on Wednesday. As result, does not teach Friday. Sue
for breach of contract. Defense- non occurrence of the
condition. There was constructive condition to teach
class on Wednesday
Reply that that was not the evident sense and meaning
of the bargain, this situation, don’t think failure to
teach on Wednesday should excuse teaching on Friday
o Students will be disadvantaged. Don’t think
that way to fix this is to not not teach other
class. Remedy is to sue for damages, still has
to perform even if you breached
 No express condition
 No constructive condition
 All about evident sense and
meaning of the bargain
 It would just create bigger
problem, double the
Second hypo- exchange of
teaching. Doesn’t teach on
Friday, sue for breach of
Defense of non occurrence,
you didn’t teach mind on
-Response that no
constructive condition
because the promises were
not dependent on each other.
Result should not be that
don’t teach because hurt
people. Not unfair because
when sued, can subtract from
your damages
inconvenience when intended to
make things better for students
Third hypo- important that we cover the assignment
on Wednesday. Says pay me hundred if I teach the 20
pages. Shows up, teaches, but only teaches 18 pages
o Breach of contract because only taught 18
o Says wont pay because constructive condition.
Reply that this is different, breached contract
but substantially performed, that should be
good enough
o Question is, when talking about constructive,
strict compliance not required. Instead,
substantial performance suffices
o Breach not material because performance was
o Argument that was not material
o Allowed to subtract from recovery an
allowance for damages caused by them.
 There is constructive condition, but
based on substantial. Still has to
perform even though you breached, but
allowed to subtract from it
Third hypo- agree will teach
20 pages on Wednesday, only
teaches 18 pages. Doesn’t
pay. Sue for breach of
Response is that yes, was
constructive condition and it
was satisfied even if paid 18
pages because the breach was
not a material breach.
Admitting was a breach. But
substantially performed, and
that is enough to satisfy the
Strict compliance is only
express conditions
When not, satisfied by
=And does not have to pay
full price, can subtract from
recovery his own damages,
can sue but only gets 90
instead of 100
How make it explicit condition?
 Any of these can be express- if and only if teach all 20 pages, if don’t, will not
pay you anything
 Rare to find express. Usually, condition says these are each of our duties.
Most typical of what happens- list what duties are and don’t say what would happen if
other party does not perform
How decide is material breach?
 Section 241 list of significant factors
 Courts reluctant to say was material because leads to large forfeiture
Kingston v preston
 Exchange of performances
 Would sell, but pay in installments
 Worried that might not be able to pay, didn’t want to turn over the
business, said not just pay installments but pay securities
 Preston did not provide security
 What kind of security- a person promise to pay, lien on house
 Didn’t convey business, sued
 Said breach of contract, you didn’t deliver the business to me
Preston's defense- you didn’t perform part of promise and constructive
condition of you providing security. Because you didn’t give security, I
don’t have to perform
 Buller's response- these are 2 independent promises, no constructive
conditions. Not about only if, so you have to perform even if I didn’t
 Isnt that unfair?
 Argument is that no, can sue in different suit for damages, but still
have to give me the business
 Claim- breach
 Defense- non occurrence
 Reply- no constructive condition because your duty was not dependent on my
 Court- 3 kinds of covenants
 I teach profs class to teach mine on Friday. Exchange pf promises but not
dependent on each other that failure to perform will excuse. Performances
not excused because on side breaches
 I will teach if you pay 100. don’t teach, sue for 100, says was conditional
because if teach, I will pay
 Agree to buy house, meet on Friday, give check to seller, get deed from
seller. If willing to give check but other side not willing to give deed,
don’t have to render the check. Both parties have to be ready to perform at
 How can tell the difference?
 Standard to see if constructive, depends on evident sense and meaning of contract
 Does it make sense that preston would have to convey business if didn’t
give security. No, because the whole point about don’t want to sell unless
prove have money. So argument that give me business then sue me for
money makes no sense because does not have money
What if bargain but promises not conditional?
 Says b is in breach, promised not to compete and competed
 Defense that you wrongfully discharged me, broke promise first
 Conditional
 Reply- no constructive condition, even if we breached, can sue for damages, but
cant break promise to not compete
 Why? Why does b still have to adhere to not compete? Because still have the
trade secret
 Yes, this was their bargain, but if break promise, still has to keep this promise, not
wholly excused
 Farajzadeh- why failure to make repair does not excuse paying the condo fee- if don’t
pay fee, wont be able to fix anything, wont have money to do it
 Kobayashi- can sue for damages, but not excused from other obligations
 Fischer- there is a bargain, but just that no condition that breach by one party excuses the
Walker and company
Hired to put a sign up and arrangement was that there would be monthly
payments for 3 months. Was called a lease but at the end, deed would go to them.
Lease to own
 Called in maintanence, did not answer or clean, though
 Came by later to clean, but still refused to sell
 What did contract say- listed duties. Was missing express statement of
relationship between b and d, that paying was contingent on maintainence
 Here, just said will pay rent, will maintain sign, nothing about the relationship
 Didn’t maintain the sign.
 Didn’t pay, walker and company sued for entire balance due plus interest, there
was acceleration clause in contract that said if fail to pay balance, entire is due at
 Claim breach of contract, didn’t pay rent
 Defense was non occurrence of constructive condition. When didn’t maintain
sign, that excused me from performing
 Both parties assumed true even though not in contract
 Argued that may be in breach, but was not material, so not entirely excused from
 Court said yes, only repudiate contract if materially breached
 Said yes, conditional, but no strict compliance, instead substantial. Breach, but not
material breach to get entire sign for free.
 But if harrison entitled to no remedy? No, could get some damages for plaintiffs
non performance, was able to subtract the cost of service over the term of the
lease because did not service it
 But when make payment for the sign, can subtract the cost to maintain
What might be situation in which court would conclude that was a material breach?
 Completely lost confidence in them
 Seemed wilful
 No good faith
 Cleanliness issue
 What if said was material breach?
o Then would not have to pay
Other side- why would that seem inappropriate remedy- did not get the maintenance, but
got the sign
Say he was distrustful at time that made the sign
 Make an express statement that if wont maintain sign, wont pay- strict compliance
would be required. Didn’t say that, though, about what would happen if didn’t
maintain it
Advice to harrison? Approach other than saying wont pay
 Just wait longer, complained some more
 Just ask them if they will fix. How might that change the situation? If said no,
wont fix it, would have repudiated the contract. Admitting wont clean up different
from not cleaning up
Everyone agreed that at some point, it was condition. Then, was there a material breach?
One tomato does not excuse from breaching
Jacob and youngs v kent
 348(2) allowed to recover subjective loss in value, but without certainty, can get
loss in market price or to complete/remedy, only get if not grossly diff from
probable value
 Defense- non occurrence. Don’t have to do promise of paying full because you
breached your contract of using reading pipe
 Argument was that no, substantially performed, you have to pay us, but can
subtract from damages
 Why is substantial rather than strict compliance?
 Breach always breach, not a defense that was not material, etc.
o But, sometimes, breach is to be atoned for by allowance for damages and
not by breach of condition followed by forfeiture
o Wont give you house, will give you damages
 Did breach the contract, but it was not material breach. Can enforce contract, but
you can recover from our damages
 Why is that the rule?
o Cant just give the house back, all affects materiality
o Why is constructive condition satisfied by substantial performance rather
than strict performance
o Injustice for strictly performing- rip our from house, super expensive
o From the conclusion that it will be unjust, will not be stretch to think that
was the intention of the parties if it was unjust to begin with
 There was substantial performance because of
o Pipes were identical
o Super expensive to fix situation and was
o Not intentional for breach/accident to happen
 Go through the restatement factors to see if it was material
 If had to fix this, would suffer forfeiture
 If intentionally, not always material, one factor among many
true, breached with pipe, just subtract amount for damages, but didn’t even have damages
Judicial responses to avoid a forfeiture by the B when ) asserts the defense of nonoccurrence of the constructive condition of prior performance by the B
1. Reluctance to find the B's breach material Plante
o Court said that we never say promisor completes through partial
 Breach is always a breach, no such thing as its not a material breach as a defense
 Admit it’s a breach, but
 Plaintiff can say true, breached, but not material, and can recover damages for it.
You are not excused from performing
o Consequence for this defense- plaintiff may be forfeiture
 Say court said breach is material, that promised to sell sign and maintain it, and
when didn’t maintain, did a material breach. Consequence that there is a
 Forfeiture would have been that done all that work and don’t get paid anything
for it.
If it were material, would get house for free, forfeiture because spend all time
and money building house
Agreed to build house, and mostly did, but there were some problems. As result,
jacobs stopped paying, paid 20k. When wanted additional money, said no, didn’t build
way we want it, defense of failure of consideration
Also misplaced a wall, living room was smaller
sued, wanted purchase price, breach of contract
 Defense- non occurrence of constructive condition
Court said substantial performance, none of that is material breach
 How different from jacobs v young
 Why might court say its not a material breach? What if court said it was
material? Jacobs' would get house for free
Did not mean didn’t have a remedy, still did
 Because substantially performed, you don’t get house for free, still have to pay,
but can subtract amount for damages. Can get complete cost to remedy or
replace the things, but for the wall, can only get diminution of the market value
 Rule for cost to complete or market value?
 Cost to complete unless grossly disproportionate to value to you
Damages was market difference which was nothing, so only got the cost to repair
2. Restitution to B despite B's material breach Britton, § 374(1)
Restitution = stipulated price - (cost of completion + other loss)
i.e. contract price
Say there is a material breach, therefor defendant doesn’t have to pay, but plaintiff might
still get restitution for benefit over and above amount of damages caused
Get money for contracts that you breached
Tries to mitigate that don’t have forfeiture
Farm laborer, agreed to work for turner for a year
 Pay would be 120 at the end of the year, and only worked for 9 and a half
months, then left
 Turner paid him nothing
 Britton sues turner
Can he get for breach of contract? no
If it was breach, defense would be non occurrence because I don’t have to pay you
because you didn’t do your promise
Response can be that these things are independent, this doesn’t work
2nd response that it was not a material breach, wouldn’t have worked, that’s why we
have case. If would have worked, would have sued for breach of contract
Court said these arent fair. Should be rule that can recover in restitution if the benefit is
bigger than the damages. If turner received benefit over and above any damages that
breach caused, then should be able to recover that surplus benefit
In this case, there were no damages,
 Entitled to get 95
 In dicta, explained how to calculate damages if it showed that other party
actually suffered damages
 Restitution is stipulated price (contract price) minus (cost of completion
plus other loss)
 Stipulated was 120 minus (2 and a half months 25 plus no other loss)
comes to 95
Say there was additional loss, finding other laborers hard. Instead of paying 10 other
workers, have to pay 20
 120 minus (50 + 0) is 70
 Turner only wanted to pay 120, so if has to pay someone else extra, should pay
britton the amount that would lead to 120
Hypo. Say theres an other loss that crops not harvested, takes while to hire someone
else, etc
 120 minus 50 plus 10, only gets 60
3. Finding B's performance divisible into completed parts and breached parts Kirkland, § 240
 240 builder builds only one structure out of agreed 3, says I wont pay. Sues for breach of
contract, defense is that didn’t substantially perform whole contract, you only built one
 240 says is that where situation where have one contract, where it is possible to divide
into part performances for equivalents, should do that. If didn’t divide it up, would be
material breach, but if did,
 Substantial performance for the first part, can get 100k, but none for the rest, but doesn’t
forfeit the entire
 Could split where each is 100k, 3 separate parts where each is 100k
 Renovations, would pay 6k over time
 Started doing work, paid some money, then said in breach because not doing it right.
Problem that was using wood material instead of rock for plastering
 Trial court said should be able to recover something because you paid first 10, agreed
that beginning was done.
 Her defense would be that didn’t substantially perform. but if did first part, why got
paid for that? Trial court said substantially performed first part and that could be split
 appeals disagreed, don’t think contract was divisible as it was divided
So why did structure the payments that way, then?
 If did it at end, what risks- other party could fail and would be out of all money
or work, mitigate that other would not perform. just because split up, doesn’t
mean first 10 days is equivalent of the amount of money
 No material breach, and don’t think that it can be split up, but what could be
available to kirkland could be
 Recovering under theory of restitution, cited britton v turner
 Reversed, remanded under britton
Other kinds of constructive
Performance not impracticable
 Defense- something happened after
contract that renders my performance
impracticable, it was something that
was basic assumption of us that
wouldn’t happen but did. My
performance was contingent on
nothing happening that would make
impracticable. Death or destruction of
subject matter
Hypo- died during teaching, sues his
 Defense- impossible for
 So duty discharged
 Illness also counts, both
assume wont become ill or diebasis assumption. So even if
didn’t teach, have defense of
Impracticability (also called impossibility) § 261 -------------------------------------------Common examples: death, illness, destruction Note (2), p. 1054
Limitations: promisor's fault, contrary indications
Policy ideas:
-- arguably contrary to usual strict liability for breach of contract (e.g. Sullivan v. O'Connor)
-- but presumed intention of the parties? Taylor
-- or simply what justice requires? ("tiger days excepted") Note (1), pp. 1053-1054
Doesn’t always mean death excuses something. Hamer v sidway- sued to get the money.
Why didn’t have defense of impractibility because some things can be performed after
death, like money, but performance cannot be
 Say will sell for 50, someone else buys for 60, sell, gets sued, cant use impracticability
and say book doesn’t exist anymore because did that with own fault.
 Contrary implications- can put in contract that if you die, still liable for x, is still a breach
of contract
Taylor v caldwell
 Taylor would rent hall to sell tickets and have concerts, caldwell didn’t give the music
hall because impossible because it burned down
 Said breached, now I am suffering damages
 Court has to decide if in breach because didn’t perform
General rule that have to perform whenever promise to
Promised to
Expressly stated or otherwise don’t have it
Court says general rule- do or pay damages, but can condition it expressly- luttingers
or implicitly
Court thinks there is implicit condition that need not perform if impossible to perform
and was that both parties assumed there would be factor of existence
Here, cant recover because there is the defense of impracticability
Hypo- what if put in contract that if unable to provide, duty is absolute, have to pay for
substitute. Could have recovered then
What if said we cant bc we rented out to someone else, is impracticable, but still have
to pay because his fault.
Taylor saying that this was their intention anyways
Said was just what justice requires
Defenses to constructive conditions
Prior performance
Performance not impracticable
Purpose not frustrated 265 has to be a basic assumption of both parties
 Nothing happened,
 Say joined a gym but
 Say business meeting
no supervening event
injured, hospitalized.
canceled so cant go to
that frustrates the
Nothing in contract
purpose of the parties
that says if
Is this a valid defense in this
in keeping the
hospitalized, don’t
case?- The business meeting was
have to pay. But can
not central to contract
say my purpose has
been frustrated and
Need basic assumption for both
now I cannot do it
 Has to be without his
use gym at time that signed up for it
If no clause in contract that said that even if cant use gym, still have to pay
If there is a clause in contract that is not unconscionable, then the defense might be
Krell v henry
Facts plaintiff wanted to rent room for 2 days to see coronation. King got sick, had to cancel
the coronation parade. Had already paid 25 pounds, didn’t want to pay extra 50 because didn’t
want to go
Tried to rely on taylor v Caldwell- to say that impossible, but court said doesn’t have to be
literally impossible to perform. it was not impossible for him to pay the extra 50 pounds but
his purpose was frustrated
And the frustrated purpose has to be known by both parties and central, which it was. Both
knew got this room to see the coronation
 Example 1- cant teach in person
because of covid
 Impracticability, so not in
breach of contract
 Example 2- wanted to buy hotel, hotel
was shut down for covid, and getting
an operating hotel was very
foundation of the contract
 Frustration- I can buy the
hotel, true, but I don’t want to
buy a hotel that is shut down.
Nothing it preventing me from
transferring money, but city
wont let me operate it
Who may enforce a promise/take steps to sue to get the promise? Anyone else "lacks privity"
and is therefore not a person entitled to enforce.
o The promisee- lucy v zehemer, owen v tunison
o Representative of the promise, executor of the estate can enforce it against the promisor, or a
guardian. Representative steps into shoes and acts as the party, handles the case
o Intended third party beneficiary of the promise 304, 302
To be intended, has to be 2 requirements that
-- allowing beneficiary to enforce "is appropriate to effectuate the intention of the parties"
-- circumstances indicate the promisee intended to give beneficiary the benefit of promised
 Example
o Life insurance promises to pay your wife upon your death. Don’t put self as
beneficiary. Contract between you and insurance, wife is not party, does not sign,
but wife is beneficiary. So it is paid to the wife
o If life insurance doesn’t pay, who can sue? Estate/maggs can, but has no incentive
because they don’t get the money, the wife does. But wife would have incentive.
o What if they say lack of privity? It was between us and husband, she would say
she was intended beneficiary
 Why appropriate for her to enforce the contract? Because no one else will
enforce the contract. Im dead and estates resources would be wasted if
they bring it up
Bain v gillespie
 Iowa team lost, gillespie was owner of iowa sports store. Mad that referee made call
against iowa that made iowa lose
Sued gillespie and he counterclaimed with claim that had breached contract with big
ten by being incompetent. Breached contract of serving competently, that breach
caused us loss.
Lawsuit- promised to serve, they promised to pay you
Bains defense was that you are not privity to this contract, whether I breached it is
between me and big ten, cant enforce the contract of having to serve competently in
return for being paid
Said I was third party beneficiary, I stood to benefit by your performance
Is gillespie intended third party beneficiary?
 Would it be appropriate to effectuate the intention of the parties?
 No, because big 10 has incentive to bring the case itself, incompetent
referees would be something that big 10 would want to fix
 Not like there is no one with incentive to bring lawsuit like when life
insurance person dies
 Did intend?
 No
Fails both requirements
Seaver v ransom
Facts Wife about to die, said will would give to husband the home and then after he died, to
society for animals. While on deathbed, change of mind to give house to niece instead of
 There was not enough time to change the will but husband said if youll sign will, I will
take care of niece by making up the difference because she wont ultimately get the
house, so I will change my will to give her the amount difference when I die
 Then he left nothing to the niece
Niece sued his estate
 Claim- promised wife to leave me money
 Estates defense- lack of privity, you are not party
Court said contract made expressly for her benefit, and even if not wife or child, that
distinction does not make that much of a difference
Moved away from catagorical approach from who could bring into more general
Whatever intended, does not have to fit within the categories
2 factors
 Appropriate to recognize in the niece to enforce the contract
 Ms beman dead, estate has no incentive
 Did promisee, ms beaman, intend for niece to get it? Yes
 So she would be able to enforce
The assignee of the promisee’s rights with respect to the promise 317
Assignment of contract rights
Consequence if give something as gift- you lose ownership and another person gains it
Contract rights can be assigned like property rights can be
Assignment is not a contract anymore than gift is giving a gift. Is just assigning property,
not promise to make a gift, just a gift
How do you assign? Just manifest your intention to assign. Don’t need consideration,
writing, just manifestation of intention. Assignor loses right to assign, assignee gains
 Consequence of assignment
 Y has right and b gives up the right
 What does it take to manifest an intention
Shiro v drew
 Question- did correctly assign the right to gordon drew?
 Manifestation of intent to transfer
 Because still getting money first and paying it out. Not the case that give right
to drew and didn’t have that right anymore. This is possible but is not an
assignment because when they put that manifestation in there, didn’t say give
you our rights, just said that when we get money, we will also pay you back
 If actual assignment, money would go to drew and would not be subject to being
apportioned out in the bankruptcy
Assignment is manifestation. Not manifestation here because still assumed had right to
be paid
Rewrite to make it an assignment- we assign our rights to get money to you. Once
make it sound like we will get money and give it to you, that’s not a manifestation
anymore, not an assignment
They would no longer have right and someone else would have it
If assigned, then if payment didn’t come, gordon drew could sue obligor and not
gordon drew
Restrictions on assignments 317a-c
 If says cant in contract
o What might our lease say about that- no subletting, no assigning without
permission, this is how contract could prohibit assignment. If doesn’t say, can
assign it to someone else
 If illegal
o can you assign plane ticket to fly to california? No, because illegal
 if change obligation
o give admittance to law school to someone else
 It would change the obligation, they have to instruct someone you chose
vs someone they chose. Would alter risk because don’t know if that person
will succeed in law school, etc. unless would change the obligation, cant
educate you but someone else
 Masterson v sine- always assignable unless precluded by contract
Defense against the assignee 336(1) and (2)
 Idea is that can only give away whatever rights that you have.
 Right to receive payment is subject to defense because you failed to perform, so that
defense would apply to that person, too, cant wipe away the right to receive
 if obligor has defense against promisee, can also assert it to assignee.
336(2) a has obligation to pay money to b. say make contract, then b assigns that
right to y without telling a about it. Effect of the assignment? A, not knowing, pays b
even though right has been assigned. Y sues a saying wheres money, a says I paid, y sayd
paid to wrong person because b assigned the money to me. A says I didn’t know
 Question- is that argument valid? Yes
 Defense of I already paid will not be stripped if didn’t know
 Corollary for the assignee? What should y do upon receiving assignment from b? should
notify obligor/a of the transfer or else a will continue to pay
 Assignment isnt ineffective, but the defense can be used
Assignment of Contracts Rights Pattern of Argumentation
B's claim ) breached promise to ______.
)'s defense: B lacks privity of contract.
B's reply: I am the assignee of the promisee's rights.
)'s typical responses:
1. The promisee did not actually assign any rights § 317(1) drew
2. Assignment of the rights was prohibited § 317(2)
3. The assigned rights are subject to a defense § 336(1)
4. I performed before receiving notice of the assignment § 336(2)
Herzog v irace
o Jones had accident on motorcycle, needed operation, not enough money to pay dr.
herzog. But had something valuable- tort claim, lawyers irace and lowry would enforce
that and give him money. Told herzog that if you perform surgery, I can pay you out of
money I get from the lawsuit as soon as it is settled
o But no money left to give to herzog, so herzog sued the lawyers
o Jones has signed letter telling lawyers to make direct patment to herzog
Let the doctors know so that don’t pay to jones but to him because cant raise defense of
saying already paid. If no notice, they can say they already paid before was notified
and that would be valid defense
Herzog sued lawyers
 Lawyers had 2 defenses
 Jones didn’t actually assign it, cited drew, said that this language from
the assignment- is equivalent to drew
 Court said no, he had assigned the amount of the damages that,
manifestation to assign whereby assignor right extinguished and
asignee gets the rights
 This letter gives no indication that intended to retain control of
funds, not like drew, it was a manifestation of intent, was not
retaining any interest
Advice to give to herzog/assignee- to give warning to obligor- rewrite by using word
assign. I assign my right to get the proceeds from lawyers to dr herzog.
Second defense- were not allowed to take settlement proceeds to give to dr. ethical
obligations require paying directly to jones. Saying assignment of rights prohibited.
Court said lawyers have duty to follow instructions of their clients
Change facts- dr never called lawyers, paid it directly to jones. Response of lawyers?
Performed before receiving notice. Maybe you did assign but we didn’t know. Thus,
would not be able to recover from lawyers, but maybe could have claim of restitution
from jones
Contracts for the sale of goods
o Subject to special rules
o Before, body of special rules that applied to sale of goods
 Substantial performance generally not enough in the law of
o Lots of interstate transactions in good. If left law to common law,
would have conflicts because interstate
o Model law that every state adopt to unify law of sales
o Made every state adopt the same law
o Its not really uniform across states, each state did some tinkering
o Interpreted by state courts, sometimes disagree on ambiguities in
o Are there more exceptions to statute of frauds? (estoppel)
o Scope of ucc, what does it govern? 2-102
o The official comments are extremely persuasive
o Sale of goods, not things that are secure transactions, things that are
not actually sales of goods
o What are transactions, what are goods
 Transaction means sales of goods- title to goods passes from
buyer to seller for a price
 What are goods- 8 categories that are and 2 categories that
are not
 Things moveable at time at identification excluding
money, securities, things in action
 Moveable- 2 things not moveable, real estate, and
things that are attached to real estate/land. Building.
Components of building not moveable, sidewalk not
moveable. Now the white board attached to real estate,
not moveable
Could be that something moveable when buy but not movable
later. Buying concrete from home depot, patch driveway not
moveable anymore. Was it moveable at time contract made
 Non moveable marble fireplace to moveable when cut out and
sold. That is not a sale of good
o 2-201- statute of frauds
 For more than 500 contracts need signed writing. Services
more than 500 don’t need it. Not a contract for the sale of
goods. Every lawsuit that involves good will be more than 500
because lawyers are more than 500, so every case will have
statute of frauds
o 2-314(1) merchantability
 Goods fit for ordinary purposes for which such goods are used.
If bike falls apart, merchant who sold it is liable. Whatever
goods you buy, if from merchant, comes with implied
merchantability. Not true with services
o 2-725(1) statute of limitations in contracts for sales
Unborn young of animals
o Before born, contract for the sale of goods
o Puppy after its been born- yes, a thing that is moveable. Animals are
things. Unborn are also
Growing crops
o After been harvested is a good
o Wheat that is growing is also a good. But its attached to real estate?
o Contract same if sell before or after harvested
o Minerals severed by the seller
o Contract to sell coal. Sale of goods if you are one who severs it. If
buyer severs it, sounds more like an easement to come on and sever
the coal
o Structures severed by seller
 Shed on property, needs to be taken off foundation. If buyer
does it, not contract for sale of goods
o Other things severable without harm thereto
 White board not good because attached. If sell, can be severed
without material harm thereto, then it would be contract of
sale of goods regardless of who severed it
Ambiguity- what does thereto refer to- building or the item
being sold. Its still an ambiguity. Most courts say to the thing
its attached to
o Timber to be cut is sale of goods. Whether been cut down or not yet,
sold the same way
o 2-105- future and specially modified goods
 Can have contract to sell even if don’t exist yet, and they can
be specially manufactured goods
 Hire someone to make custom couch cushions is still a sale of
What are not goods
o House, acre, haircut, whatever doesn’t fit within these categories and
also expressly excluded things
 Money. But if not price, then sale of goods. Like antique penny
 Securities. Stocks and bonds
 Things in action. Causes of action, legal rights. Copyright,
patent, someone's salary. Can be bought and sold, but not
contract for sale of goods
Need to know what is a good and what isnt to know which law to apply
Hybrids of goods and services
 Paying for oil and service of having it changed
 Are those hybrid contracts governed by article 2 or common law?
 Courts have had to come up with tests about what to do when have
o Most courts do predominant purpose test
 Mostly about the goods or mostly about the service?
 Hire someone who paints house vs fridge installation
 Can look at what are you paying for most
 What if its split, though?
 Look at predominant purpose to sell goods, then apply
o Few courts use the gravamen of the complaint test
 Use what complaining about
 Are you suing because complaining about goods or the
Difficulty- what if complaining about both things and the
defense is that never formed contract under statute of
frauds? Gets really complicated
 Example- sally
 Nexxus promised best to distribute nexxus
products in texas. Sally beauty took over best,
then wanted exclusive right to distribute nexxus.
Nexxus said want best to do it. Because sally
beauty had competing products
 Nexxus Defense- right to cancel because best
breached by delegating to sally. Contract was for
personal services. Restatement that cant delegate
contract for personal services
 Sally Reply- that common law rule doesn’t apply,
instad, ucc 2-210 applies because purpose for the
contracts was mostly about selling goods
 Court agreed that ucc applies, predominant
purpose was for sale of goods
 Majority- bests duties were not delegable
to sally under 2-210(1) because there is
substantial interest for best instead of sally
do it because they are direct competitors
 Dissent- if nexxus feels insecure, don’t have
right to just cancel, but can use 2-609suspend until get assurance from sally that
sally will perform
 Point- dispute can arise about if goverend
by ucc or not. Might be same as common
law or diff.
Other problems
 Hybrids
 Applying non ucc law to sales ucc ucc1-103(b)
 Ucc never intended to be exclusive, just to sit on
top of law. Can still use duress, infancy, etc
 So never get 100 percent ucc case, always mixture
of ucc and common law
 Common laws made over time,
Restatement 208- adopted ucc into the common
 So in common law case, can argue that it should
be adapted to adopt ucc rule
 Even if no goods involved, can argue that should
still apply ucc by adopting it as common law and
applying it
Merchant rules
 Ucc applies to all contracts regardless of if business or
ordinary person/consumer
 Ucc has 14 rules that impose additional duties on
merchants that don’t apply to people who are not
 Merchant- deals in good of the kind. Buys and sells.
Knowledge and expertise as to either goods or business
aspects of the transactions
 14 rules that just apply to merchants
 Implied warranty of merchantability 2-314(1)
 If buy from maggs, everything else applies except
the warranty of merchantability. Not saying not
sale of goods, etc, just that doesn’t come with
warranty of merchantability
 Firm offers 2-205
 Dickinson v dobbs, no consideration for promise
to hold promise open
 If merchant promises to keep offer open, no
consideration required for that
 Just holding merchants to a higher standard
 Both are contracts for sale of goods, but this
 Merchant exception to statute of frauds 2-201(2)
 Example
 M1 promises to buy 600 from m2 over
phone- subjected staute of frauds
 M2 gives m1 written and signed in
If other party does not object in matter of
time, then loses statute of frauds
St ansgar
 Promised to buy, price of corn fell
and refused to pay
 Sued breach
 Defense- statute of fraud
 Reply- merchant exception. We sent
you writing and you didn’t reply
 Response- that doesn’t apply because
I didn’t get the confirmation in
reasonable time
 Court- remanded because didn’t
decide what a reasonable time was
 2 factors thought that the trial court
had overlooked
 Always filled it out but didn’t
really mail it because usually
picked up. This was just their
 Long amicable business
relationship, not adversaries,
was it really unreasonable to
just hold for him until he came
 Disputing if elements of exceptions
o Promise by seller to answer for damages if certain facts are not as
seller expressly or implicitly represented them
o Express warranty 2-313
o Jeweler says its 2 karats, turns out its not, can rescind on grounds of
misrepresentation. Or accept ring, pay for it, but sue for breach of
 Damages would be difference between what was warranted
and what was given- that would be the loss of value
o Claim- you warranted it was 2 karats, any affirmation of fact made by
seller to buyer creates a promise
Implied warranty- when there is not discussion about, so there ought
to be implied
 Merchantability and
 Provided it is not disclaimed
 Fit for ordinary purposes- missing button, diamond falls
out of setting
 Labeled Fitness for a particular purpose
 Even if for ordinary purpose, might not be for buyer's
particular purpose
 Seller has reason to know the particular purpose and
 Seller knew buyer is relying on the sellers judgement to
select the good
 I told seller it has to fit me, and seller knew I relied
because he measured my finger
 Might be good for other peoples fingers, but not yours
 Not about representation but about representation for
your purpose
 Title of the goods- seller owns goods and can transfer to you.
What if stolen, proper owner can get back even if you bought
it, but can sue the seller for breach of warranty of title
 Miscellaneous- in trade, there might be other terms
 Fire caused 9 million
 Sued manufacture and distributor of a fire blanket
 Blanket melted
 Sued for breach of implied warranty of merchantability
 What would have to show to prove this breach?
o It would not be merchantable when they are not fit for
ordinary purposes
o Claim was that this is not fit for ordinary purpose because
 Melted, fire was caused
o To show not fit for ordinary purpose, has to show
 Using it for ordinary purpose, not clear that you did that
 But the defendants waived this
 Did it perform reasonable expectations of ordinary user?
Conflicting evidence of someone surprised to see
it melt, not uncommon to have holes in it, it
would contain small fires but this was not going to
put out any fire, but smaller ones and sparks
Court said was not shown to perform its ordinary purpose
o Could get there through more testimony
Facts different
o Any other warranty that could have been made even if no
implied warranty
o Could be particular purpose
 If went and said we need a fire blanket to prevent fire
for these acts, and they said use this blanket, and was
not fit for that purpose, there would be breach
Had hydraulic system installed, needed oil to function
 Told him he needed ambrex, machinery broke, had to be replaced,
 The oil ultimately did not work, needed additives
 This was not right oil to use
 Breach of implied warranty for particular purpose
 Needed to show
o Seller had reason to know of purpose and
 Common knowledge that had the system
o Relied
 Reponse- you didn’t give us enough info, just said it was a general
system, nothing else. You didn’t say you wanted oil with additive
o Court said incumbent on them to ask more questions to see
what kind of oil
o Whole point is that don’t know what need, they need to ask
you to get there
 Doesn’t mean that not good for ordinary purposes
Scope- things that are moveable,
 Special rules for merchants, implied for fitness, etc, made my