Bailey v. West
Rhode Island Supreme Court
249 A.2d 414 (1969)- (Paolino, J.)
Parties:
1)
2)
Bailey, Howard E. (Plaintiff) – Farmer
West, Richard E. (Defendant) – Racehorse Purchaser
Procedural History and Outcome:
Case was tried as a Bench Trial. Plaintiff sued Defendant on the basis of a contract implied in fact and a quasi-contract for reasonable
cost of his services. It resulted in a decision for Plaintiff for his costs of boarding the horse for 5 months. Plaintiff appeal and is
denied. Defendant’s cross appeal is sustained. Cause is remanded to Trial Court for entry of judgment for Defendant.
Facts:
 Defendant, with help of his horse trainer purchased a racehorse that was found to be lame. Defendant ordered his trainer


to return it by van to the seller, who subsequently refused to accept delivery. Van driver called Defendant’s trainer for
further instructions. Was told that he would “do whatever he wanted with the horse” and that it “wouldn’t be on any farm
at Defendant’s expense.” Driver delivered the horse to Plaintiff’s farm.
Plaintiff sent maintenance bills to Defendant at regular intervals, who immediately returned the bills with a notation that he
did not own it, and was not placed at Plaintiff’s farm at his request.
Plaintiff was not aware of conversation between trainer and driver, and was entitled to assume that despite the blatant
controversy over the ownership, he was to take care of this horse.
Issue(s):
1)
2)
Where a farmer accepts delivery for a horse whose ownership has been renounced, and was delivered by a third party,
without the renouncer’s knowledge, and not at his request, has a contract been “implied in fact”? (“Implied in fact” –
mutual agreement, intent to promise, but the agreement not made in words, but rather implied from the facts)
Where a farmer accepts delivery for a horse whose ownership has been renounced, and was delivered by a third party,
without the renouncer’s knowledge, and not at his request, has a quasi-contract been established? (Quasi-contract – (1)
benefit conferred, (2) appreciation, acceptance, retention of benefit, (3) Unjust Enrichment – be inequitable to retain
benefit without payment )
Holding:
Where a person who accepts delivery of livestock to care for, from a third party, without the other party’s knowledge and not at his
request, no contract has been “implied in fact” and no quasi-contract has been established.
Reasoning:
1)
2)
Notes:
“There was no mutual agreement and ‘intent to promise’ between Plaintiff and Defendant so as to establish a contract
‘implied in fact’ for Defendant to pay Plaintiff for the maintenance of his horse.” Plaintiff knew that the ownership was
disputed, and his subsequent actions indicate that he did not know with whom, if anyone, he had a contract.
“Restatement of Restitution § 2 (1937) provides: A person who officiously confers a benefit upon another is not entitled to
restitution therefor.” Applying the principals and the facts, it is clear that Plaintiff cannot recover. When he accepted the
horse, he knew of the controversy related to the ownership. He could not reasonably expect remuneration from Defendant,
nor can it be said that Defendant accepted a conferment of a benefit upon him. Thus, Plaintiff was a mere volunteer who
accepted the horse at his own risk, knowing he might not be reimbursed for his incurred expenses.
Bolin Farms v. American Cotton Shippers Association
U.S. District Court, Western District of Louisiana
370 F.Supp. 1353 (1974)- (Hunter, Jr., Edwin F.)
Parties:
3) Bolin Farms (Plaintiff) – Cotton Farmer
4) American Cotton Shippers Association (Defendant) – Cotton Distributors
Procedural History and Outcome:
Trial court entered into a Declaratory Judgment in favor of Defendant.
Facts:



Plaintiff entered into forward contracts to sell and deliver their cotton with Defendant at a specific price set
between January and March of 1973, irrespective of what price at harvest might be.
Price at harvest time unexpectedly skyrocketed to at least double the agreed prices.
Plaintiff wants to annul contract, whereas Defendant wants to the contracts to be adjudged lawful and valid.
Issue(s):
What is the validity and enforceability of a forward contract entered into between a willing buyer and a willing seller,
both adult, on an open and competitive market?
Holding:
Forward contracts made between adult and willing buyers and sellers, on an open and competitive market are valid and
enforceable.
Reasoning:
The contracts speak for themselves. They were negotiated before planting, and are known as “’forward’ sales contract.”
Plaintiff has been a cotton farmer for several years, and was familiar with the “forward” contract procedure. The market
change has no relevance to the validity of the contract. Nor does the record indicate that Defendant had any inside
information at the time of contract. By selling forward, Plaintiff shifted some of his risks to Defendant, as at time of
contract, Plaintiff couldn’t guarantee the quality or quantity of his produce, whereas Defendant obligated himself to
purchase all of Plaintiff’s harvested cotton.
Notes:
Sullivan v. O’Connor
Supreme Judicial Court of Massachusetts
363 Mass. 579 (1973)- (Kaplan, J.)
Parties:
5) Sullivan (Plaintiff / Appellee) – Patient
6) O’Connor (D / Appellant) – Surgeon
Procedural History and Outcome:
Plaintiff is suing for breach of contract and negligence/malpractice. Trial court jury returned a verdict found in favor of Plaintiff for
$13,500 for the breach, and in favor of Defendant for negligence. Defendant contends that judge erred in allowing jury to take
anything into account but Plaintiff’s out-of-pocket expenses. Plaintiff excepted to judge’s refusal to permit him to recover the
difference in value of the promised nose and the post-operation nose. However, Plaintiff waives exception and others if court
overrides D’s exceptions.
Facts:


Plaintiff charges that Defendant entered a contract to perform two plastic surgeries on Plaintiff’s nose by making it shorter
and less prominent, thereby enhancing her beauty and improving her appearance, but failed to achieve promised result.
Rather, he disfigured and deformed her nose. Thus, causing her to undergo an additional surgery in a failed attempt to
correct it, inflicting upon her pain in body and mind, and thus, breaching their contract.
Trial judge instructed jury that Plaintiff was entitled to recover: out-of-pocket expenses related to the operations, damages
due from breach of contract, and compensation for pain and suffering involved in the third operation.
Issue(s):
Where a doctor operates upon a patient, promises to bring about a given result, fails to do so, attempts to perform an additional
surgery to effect the given result, and nonetheless fails to do so, is a patient entitled to receive anything other than the out-of
pocket expenses (pain and suffering from third surgery, emotional distress) as compensation for a breach of contract?
Holding:
In seeking compensation for damages from a breach of contract, a patient is not confined to recovery of her out-of-pocket expenses.
Patient is entitled to recover for the worsening condition, and pain and suffering, and mental distress related to the third operation.
These items are compensable on either an expectancy or reliance view.
Reasoning:
Although damages for pain suffering and emotional distress are not generally available as contract damages, when they flow directly
and naturally from the breach, they are compensable as either expectancy or reliance damages. Patient’s pain and suffering,
disfigurement and emotional distress are compensable as expectancy damages because she expected to have two surgeries and a
more attractive nose. Instead, she was left with a disfigured nose, and had to undergo a third surgery. It is also compensable as
reliance damages because by relying upon Doctor’s promise, her appearance worsened, she suffered emotional distress, and had to
undergo an additional surgery.
Notes:


Expectancy damages seek to put the plaintiff back in the position they would have been in if the contract had been
performed and no breach occurred.
Reliance damages seek to put the plaintiff in the position she would have been in if she had not entered into the contract.
Joseph and Jonah Hadley v. Joseph Baxendale
Court of Exchequer
9 Exch. 341 (1854)- (Alderson, B.)
Parties:
7) Joseph and Jonah Hadley (Plaintiff / Appellee) – Mill Owners
8) Joseph Baxendale (Defendant / Appellant) – Carriers
Procedural History and Outcome:
Trial Court jury ruled in favor of Plaintiff with £25 beyond amount paid to court. Defendant objected that the award was
for damages that were too remote. Court of Exchequer ruled that trial court erred in their criteria used to award
damages. Case to be heard in a new trial.
Facts:




Plaintiff operated a milling business. On May 11, operations were halted due to a breakage of a crank shaft, by
which the mill operations relied upon. Fracture was discovered on May 12. Shaft needed to be sent be sent as a
pattern to Greenwich. On the 13th, Plaintiff sent a servant to Defendant to have the shaft carried by Defendant
to Greenwich.
Plaintiff’s servant told Defendant’s clerk that the mill was stopped, and the shaft must be sent immediately and
was told that if it was sent up by 12PM any day, it would be delivered to Greenwich on the following day.
Shaft was taken before noon. However, delivery was delayed by some neglect. Resulting in shaft being received
by Plaintiff several days after it would have otherwise.
Plaintiff lost profits due to delay.
Issue(s):
Can a mill owner recover the loss of profits due to a currier not delivering the shaft in a timely manner?
Holding:
When one party fails to deliver what was promised to be delivered in a timely manner, the other cannot recover for
damages that were not foreseeable at the time of contract
Reasoning:
Where two parties have made a contract which one of them has broken, the damages which the other party ought to
receive in respect of such breach should arise naturally from breach itself, or may reasonably be supposed to have been
in contemplation of both parties at the time of contact. If specific circumstances were communicated by the millers to
the currier, and thus was known, the millers would have a right to claim for damages resulting from the specific injury.
However, the only circumstances communicated here were that the article to be carried was the broken shaft of a mill,
and that the Hadleys were the millers of that mill. It was not clear that these specific circumstances reasonably
demonstrate that the work of the mill had to stop, and thus result in a loss of profits.
Notes:
It sounds like the Hadleys told the wrong people that the mill was stopped. They only told the clerk, but not the actual
currier.
Louisa Hamer v. Franklin Sidway
Court of Appeals of New York
124 N.Y. 538 (1891) - (Parker, J.)
Parties:
9)
10)
11)
12)
William E. Story, Sr. – Promisor/Deceased
William E. Story, 2d – Promisee/Assignor
Louisa Hamer (Plaintiff / Appellant) – Assignee
Franklin Sidway (Defendant / Appellee) – Executor of Estate
Procedural History and Outcome:
Plaintiff is suing for $5,000 + interest, and trial court ruled in his favor. Defendant appealed and the Appellate Court
reversed. Plaintiff appeals and the Court of Appeals of New York reverses the Appellate Court’s reversal.
Facts:



W. Story, Sr. promised W. Story, 2d $5,000 contingent upon his refrain from drinking, using tobacco, swearing,
and playing cards or billiards for money until he reached 21 years of age. When he reached that age, having
fulfilled his promise, Sr. wrote a letter stating that the money was his. However, he would hold it for him until he
believes that he is capable of taking care of this money, guaranteeing the $5,000 plus interest.
Sr. is now deceased, and Franklin Sidway is the executor of the estate.
Through a series of assignments, the claim is currently owned by Louisa Hamer.
Issue(s):
Do a set of promises that one agrees to refrain from drinking, using tobacco, swearing, and playing cards or billiards for
money until one reaches the age of 21, in exchange for a financial reward, contain adequate consideration?
Holding:
Promises made based upon a contingency whose fulfillment or lack thereof are not necessarily beneficial to one party
and/or detrimental to the other, are made upon good consideration and are binding.
Reasoning:
Valuable consideration can manifest itself in either a benefit accruing to one party, or some forbearance, detriment,
loss, or responsibility given, suffered, or undertaken by the other. A waiver of a legal right at the request of another
party is sufficient consideration for a promise. Promisee had the legal right to drink, use tobacco, etc., a right he
surrendered for a period of years. This surrender of right caused the promise, and is indeed sufficient consideration.
Notes:
William F. Langer v. Superior Steel Corp.
Superior Court of Pennsylvania
105 Pa. Super. 579 (1932)- (Baldridge, J.)
Parties:
13) William F. Langer. – (Plaintiff) Promisee/Retired Employee
14) Superior Steel Corp. – (Defendant) Promisor/Employer
Procedural History and Outcome:
Trial court entered a judgment in favor of Defendant. Appellate Court reverses, and permits Defendant to file an
affidavit of defense.
Facts:


Plaintiff was sent a letter by Defendant, upon his retirement from Defendant’s company stating that he would
receive a monthly pension of $100 for the remainder of his life, considering that he remain loyal to the company
and not gain employment by a competitor.
Plaintiff adhered to the contingencies, and received monthly pension for four years, and was thereafter notified
by Defendant that the monthly payments would cease to be sent.
Issue(s):
Does a promise made by a former employer, to a retired employee that he will receive a monthly pension for the
remainder of his life, contingent upon his remaining a loyal to the company and not gaining employment at a
competitor, contain sufficient consideration for an enforceable contract?
Holding:
Where one impliedly accepts specific conditions imposed, and thus refrains from doing what one has a right to do, is
sufficient consideration to support an enforceable contract.
Reasoning:
It is reasonable to conclude that Plaintiff’s refrain from gaining employment at a competitor, was to Defendant’s
advantage. Plaintiff served as its superintendent for a longer period of time, and knew of Defendant’s operational
methods. This must have been the inducing reason as to why this stipulation was included. By receiving the monthly
payments, Plaintiff impliedly accepted the conditions imposed and thus restrained from doing what he had a right to do.
The contract is also enforceable on theory of promissory estoppel – a promise for which the promisor should reasonable
expect to induce action or forbearance from promisee, and which is binding if injustice can be avoided only by
enforcement of the promise. Here, Plaintiff was induced by promises made to refrain from seeking employment.
Notes:



Langer was retiring. So the promise was made at a time when he wasn’t working. This is called past
consideration.
Loyalty is subjective, that is why we focus more on the not gaining employment at a competitor condition
Not working at a competitor might be consideration
Pennsy Supply, Inc. v. American Ash Recycling Corp.
Superior Court of Pennsylvania
895 A.2d 595 (2006) - (Melvin, J.)
Parties:
15) Pennsy Supply, Inc. – (Plaintiff) Paving Subcontractor
16) American Ash Recycling Corp. – (Defendant) AggRite Provider
Procedural History and Outcome:
Plaintiff sues for breach of contract and breach of express and implied warranties. Trial court entered a judgment in
favor of Defendant. Appellate Court reverses.
Facts:




Plaintiff acquired 11,000 tons of AggRite from Defendant to be used for paving work on a construction project.
Defendant (a non-party to the construction project) made AggRite available to project bidders at no cost, on a
“first come, first served” basis.
When the paving developed extensive cracking, Plaintiff remedied the defects at a cost of $251,940 and spent
$133,777 to dispose of the AggRite, which was classified as a hazardous waste.
Plaintiff alleges that Defendant made AggRite available at no cost to induce someone to take it off their hands so
as to avoid the hefty disposal costs.
Based on facts, the Trial Court concluded that disposal costs were not included in the bargaining process, and
the Defendant did not make AggRite available with the intention to avoid disposal costs.
Issue(s):
Does a promise made by a Corporation to provide a product at no cost, whose fulfillment of the promise would save the
Promisor thousands of dollars, despite this fact not being included in the bargaining process, contain consideration?
Holding:
Where one has promised to provide a product at no cost to another, and whose fulfillment of the promise ultimately
saves the Promisor from a detriment, contains consideration, even where the aforementioned detriment was not
discussed or understood by all parties, at the time of bargaining.
Reasoning:
Plaintiff alleged that Defendant promoted the product to be used as a base course for paved structures, and provides
the material free of charge in an effort to have others dispose of the material and thereby avoid incurring the disposal
costs itself. It is fair to interpret the Complaint that Defendant’s promise induced Plaintiff to assume the determent of
collecting and taking title to the material, and it is this detriment that induced Defendant to promise to make AggRite
available at no cost. This agreement was clearly not a conditional gift for which Defendant desired and expected nothing
in return. Although the Complaint does not allege that the detriment was discussed or even understood by Plaintiff at
the time of contract, this discussion and understanding was not necessary to constitute consideration. “What is required
[for consideration to exist] us that a promise and consideration be in ‘the relation of reciprocal conventional
inducement, fore each other’” (Bargain Theory of Consideration, Holmes).
Notes:
In re Edwin Farnham Greene
United States District Court, Southern District of New York
45 F.2d 428 (1930) - (Woolsey, District Judge.)
Parties:
17) Woman – (Claimant)
18) Man – (Bankrupt)
Procedural History and Outcome:
Hearing held before a referee in bankruptcy, claim was deemed by referee to be valid. Petition for review, reverses, and claim is
decided as invalid.
Facts:




Bankrupt, lived in adultery with Claimant, knowing he was a married man, giving her money and paying for a house in Long
Island acquired by her, and promising to marry her as soon as his wife should get a divorce.
Intimacy relations were discontinued and they executed a written instrument, which is alleged to be a binding contract. It
stated that the Bankrupt would: provide Claimant with $1,000 per month for their remainder of their lives; assign a life
insurance policy $100,000 upon Bankrupt, naming Claimant as the beneficiary, should the policy lapse, Claimant would be
entitled to $100,000; and pay Claimant’s rent for four years.
Declared within, the Bankrupt renounced his interest in the Long Island house, and he would not be liable for mortgage
interest, taxes, etc. and Claimant released Bankrupt from all claims which she had against him.
The preamble to the contract notes $1 payment from Claimant to Bankrupt as consideration, as well as “and all other good
and valuable consideration.
Issue(s):
Where a man and woman executed an instrument obligating the man to provide certain financial benefits to the woman, and in
exchange, the woman releases the man from all claims she has upon him, pays $1 “and all other good and valuable [as]
consideration, do any of the foregoing act as sufficient consideration to support a contract?
Holding:
An instrument made by a man and woman obligating the man to provide certain financial benefits to the woman, in exchange for a
release of claims, a citation of $1, and other good and valuable as consideration, without any actual proof, do not constitute
consideration to support a contract.
Reasoning:
What Bankrupt intended was an agreement to make financial contribution to Claimant because of his past cohabitation with her,
such an agreement lacks consideration.
 Citing $1 as consideration, a nominal amount in relation to the thousands of dollars promised, without even proving that it
was given, cannot serve as consideration to uphold a contract.
 “Other good and valuable consideration” are generalities that cannot serve as consideration where facts don’t even
indicate that anything good or valuable were actually given at the time of contract.
 A release of claims, where they actually exist, can serve as consideration. However, none exist. A release from a promise
made by a married man to marry another woman after acquiring a divorce does not constitute a claim, and it could not
possibly be lawful consideration.
 Obtaining immunity from tax liability from a house of which one does not in fact own, and derive a liability from, cannot
serve as consideration.
 Stating within an instrument that the parties intend to make a valid agreement, does not in fact prove that the agreement is
valid.
 The presence of a seal upon the instrument does not in fact prove that any consideration was made.
Notes:
Dan Cohen v. Cowles Media Co.
Supreme Court of Minnesota
457 N.W.2d 199, reversed, 501 U.S. 663 (1991) opinion on remand, 479 N.W.2d 387 (1992) - (Simonett, J.)
Parties:
19) Dan Cohen – (Plaintiff) - Interviewee
20) Cowels Media Co. – (Defendant) – Publisher of Minneapolis Star and Tribune
21) Northwest Publications, Inc. – (Defendant) – Publisher of St. Paul Pioneer Press Dispatch
Procedural History and Outcome:
Trial Court jury returned a $200,000 compensatory award, as well as $250,000 punitive damages against each
Defendant, in favor of Plaintiff in claims breach of contract and misrepresentation. Defendants appeal on
misrepresentation count is reversed by Appellate Court, and appeal on breach of contract is sustained. Supreme Court
affirms Appellate Court’s reversal on misrepresentation count and, and reverses the breach of contract charge.
Facts:







Plaintiff separately approached reporters for the two Defendants and informed them that he had information
relating to a candidate of the upcoming election, that he would share on the condition of anonymity.
Plaintiff was known by Defendants as an active Republican associated to the Wheelock Whitney campaign.
Although neither reporter informed Plaintiff that their promise was subject to approval or revocation by their
editors, they intended to keep their promise.
Plaintiff testified that he insisted on anonymity because he feared retaliation from news media and politicians.
Plaintiff turned over to the reporters copies of to public court records concerning Marlene Johnson, the DFL
candidate for lieutenant governor.
The newspapers interviewed Johnson that day for an explanation and reaction, and decided to name the
Plaintiff as their source.
Plaintiff was fired by his employer that day, and was subsequently attacked in the media.
Issue(s):
Is a promise between a news source and a reporter legally enforceable where the source promises to furnish
information to the reporter on the condition of anonymity?
Holding:
Promises between a source and a reporter are not legally binding contracts.
Reasoning:
Seemingly, this case appears to have the elements of a contract – offer, acceptance, consideration, and in this case a
breach. The keeping of promises is professionally important for two reasons. First to beak a promise of confidentially
which has induced a source to give information is dishonorable. Secondly, if it is known that promises will not be kept,
sources may dry up. The question is not whether keeping a confidential promise is ethically required, but whether it is
legally enforceable. The law however does not create a contract where the parties intended none, and does not
consider every exchange of promises to be binding. Reporters and news sources are not thinking in terms of offers and
acceptances in any commercial or business sense. Thus, promises between a source and a reporter are not legally
binding.
Notes:
First Hawaiian Bank v. Jack Zukerkorn
Intermediate Court of Appeals of Hawaii
2 Haw.App. 383 (1981) - (Burns, J.)
Parties:
22) First Hawaiian Bank – (Plaintiff / Appellee) Lender/Bank
23) Jack Zukerkorn – (Defendant / Appellant) Borrower
Procedural History and Outcome:
Trial Court entered into Summary Judgment in favor of Plaintiff on three counts. Defendant appeals, Appellate Court
affirms summary judgment on one count, and reverses on the other two, decides it is a matter of fact, and remands to
Trial Court for further proceedings.
Facts:





Defendant executed a demand note in favor of Plaintiff in the amount of $6,394.21 on November 22, 1965 and a
$2,500.00 two year note dated September 23, 1966, and made no payments on either.
On August 6, 1973, Defendant obtained an automobile purchase loan from Plaintiff, which he paid off on April
6m 1976.
In December 1975, Defendant applied for a credit card from Plaintiff. The bank told him that he owed “a small
amount of money on an old account” and that issuance was conditioned on his agreement to pay $100 per
month on the old account, which he agreed to. Defendant denies that Plaintiff’s assertion that the 1965 and
1966 notes were specifically identified and that his agreement specifically related to them. He also denies
Plaintiff’s assertion that he paid $200 in cash at that time.
It is agreed that Defendant made payments on the automobile loan, the credit card, and four payments
pursuant to that agreement.
Plaintiff suing Defendant on the two notes and on the credit card balance.
Issue(s):
Is a borrower liable to repay his lender on debts that were borrowed 13, 12, and 3 years old respectively?
Holding:
Collection on notes dated more than six years previously are time barred by the applicable six year statute of limitations,
unless something occurred which started running it anew. A new promise by the debtor to pay his debt, whether then
barred by the applicable statute of limitations or not, binds the debtor for a new limitations period.
Reasoning:
In order to start anew a limitations period, borrower would have had to promise either (1) by an express promise to pay
the two stale debts, or (2) by an express acknowledgment of the two stale debts, or (3) by part payment of the two stale
debts. Borrower however denies doing either of the three. His evidence is that he agreed to pay and in fact paid “a small
amount on an old account.” He denies that he acknowledged the existence of the two stale debts or that he agreed to
pay them or that he paid on them. This case raises questions of material fact in regard to the 1965 and 1966 notes. The
lower court erred in entering a summary judgment with respect to them.
Notes:
Daniel Mills v. Seth Wyman
Supreme Judicial Court of Massachusetts
20 Mass. (3 Pick.) 207 (1825) - (Parker, C.J.)
Parties:
24) Daniel Mills – (Plaintiff / Appellant) – Good Samaritan / took care of Defendant’s Ill Son
25) Seth Wyman – (Defendant Appellee) – Father of Ill Adult Son
Procedural History and Outcome:
Trial Court judge ruled in favor of the Defendant’s motion for dismissal. Plaintiff appeals. Appellate Court affirms.
Facts:


Levi Wyman, 25 year old son of Defendant, and not under his father’s care, arrived in Hartford after a voyage at
sea, where he suddenly took ill. Being poor and in distress, the Plaintiff offered him board, nursing, and care.
After Levi died, Plaintiff sent a letter to Defendant apprising him of his son’s death. Defendant then sent a letter
to the Plaintiff, promising to pay for the expenses incurreds.
Issue(s):
Is a promise made by one to reimburse another for the boarding, nursing and care of their adult son, after being made
aware that said son was provided with such care enforceable?
Holding:
A promise that is made without any consideration cannot be enforced by law, even where failure to perform a particular
promise may be deemed disgraceful.
Reasoning:
The promise declared in this case appears to have been made without any legal consideration. Kindness and services
towards the sick son of Defendant were not bestowed at this request. The son was 25 years old, independent, and in no
respect under the care of the Defendant. Defendant in his gratitude to Plaintiff on being a Good Samaritan, made his
promise after the expenses were incurred to Plaintiff. However, he has decided to break this promise. It is said that
“moral obligation” is a sufficient consideration to support an express promise, and some authorities lay down the rule
broadly. However, an examination of those cases, indicate that the universality of the rule cannot be supported, and
that there needs to be some preexisting obligation to make it an effective promise. Those cases are of promises to pay
where the debt was time barred by statute of limitations, or incurred by infants, or of bankrupts. They all contain quid
pro quid – something for something. They also contain a moral obligation founded upon antecedent valuable
consideration. They are, however, not naked pacts.
Notes:
Joe Webb v. N. Floyd and Joseph F. McGowin
Court of Appeals of Alabama
27 Ala.App 82 (1935) - (Bricken, Presiding Judge)
Parties:
26) Joe Webb – (Plaintiff / Appellant) - Saved the life of J. Greeley McGowin / Promisee
27) N. Floyd and Joseph F. McGowin – (Defendant / Appellee) – Children of J. Greeley McGowin who is Promisor
Procedural History and Outcome:
Complaint of Breach of Contract was originally filed and amended. Trail Court sustained Defendant’s demurrers. Plaintiff
appeals motion for dismissal. Appellate Court reverses and remands.
Facts:


August 3, 1925: While working at W.T Smith Lumber, and acting within the scope of his employment, Plaintiff
was engaged in clearing the upper floor. He was in the act of dropping a 75 pound pine block from the upper
floor of the mill to the ground – the ordinary way of clearing a floor. It was his duty to drop it. As he turned the
block loose, to drop it, he saw J. Greeley McGowin, testator of the defendants, below, directly under where the
block would have fallen. Had it hit him, it would have caused him serious bodily harm or death. The only
reasonable way to prevent this was for Plaintiff to hold the block and divert its direction in falling, by falling with
it. McGowin was not injured. Plaintiff was left with serious bodily injuries, and was rendered unable to do
physical or mental labor.
September 1, 1925: In consideration of preventing him from sustaining death or serious bodily harm and in
consideration of the injuries Plaintiff received, McGowin agreed to care for and maintain him for the remainder
of Plaintiff’s life at the rate of $15 every two weeks. It was paid until McGowin’s death in 1934, at which time it
was discontinued.
Issue(s):
Is a promise made by a “A” to “B,” where “A” would pay “B” $15 every two months for the remainder of “B”’s life,
because of a moral obligation for taking an action to save “A”’s life, that rendered “B” unfit for physical or mental labor,
enforceable?
Holding:
Where a Promisee cares for, improves, and preserves the property of the Promisor, though done without his request, it
is sufficient consideration for the promisor’s subsequent agreement to pay for the service, because of the material
benefit received.
Reasoning:
Plaintiff’s saving of McGowin from death or grievous bodily harm was material benefit to him of infinitely more value
than any financial aid he could have received. By receiving this benefit, McGown became morally bound to compensate
Plaintiff for the services rendered. Recognizing this, he expressly agreed to pay Plaintiff this sum and complied until his
death, a period of eight years. Any assertion that saving a man from death or grievous bodily harm is not a material
benefit sufficient to uphold a subsequent promise to pay for the service, rests on the assumption that saving a life and
preserving of the body from harm only have sentimental value. In fact, the contrary is true – life and preservation of the
body have material, and measurable financial value (doctors, life insurance). Thus, this promise is an enforceable
contract.
Concurring (Samford, J):
This is a gray area, and strictly applying the letter of the law might result in the Plaintiff being denied recovery. However,
the law should not be “separated from justice, where it is at most doubtful.” The court reached the correct result.
Notes:
Peter Kossian v. American National Insurance Co.
Court of Appeals, Fifth District, California
254 Cal.App.2d 647 (1967) - (Stone, Associate Judge)
Parties:
28) Reichert – Inn Owner
29) Peter Kossian – (Plaintiff / Appellant) – Cleaned up Inn
30) American National Insurance Co (Defendant / Appellee) – Beneficiary to Deed of Trust (mortgage)
Procedural History and Outcome:
Trial Court returned a summary judgment in favor of Defendant. Plaintiff appeals to Appellate Court. Appellate Court reverses
judgment.
Facts:





On February 19, 1964 a fire destroyed a portion of the Bakersville Inn, owned by Reichert, and subject to a deed of trust
with Defendant as beneficiary. Property had fire insurance.
On March 16, 1964, Reichert entered into a written contract where Plaintiff agreed to clean up and remove debris from the
fire damaged portion of the Inn for the sum of $18,900, and commenced work, which he completed in early April.
Defendant had no knowledge of this agreement.
During the entire work progress, Reichert was in possession of the premises as the owner. However, Defendant sent him
notice of default under the deed of trust four days after the contract was executed. Plaintiff had no knowledge of this.
After Plaintiff performed his obligations, Reichert filed for bankruptcy. Trustee abandoned the premises together with any
interest in the fire insurance policies, up to $424,000. Reichert then assigned their interest in them to Defendant, as per
terms of deed of trust.
Defendant submitted proofs of loss, total of $160,000, including $18,000 for cost of removing and cleaning up debris. After
negotiations with fire insurance company, they compromised on $135,620, which included an amount to cover at least part
of the cost of debris removal.
Issue(s):
Where “A,” the owner a building that was damaged by a fire, contracts “B” to remove the debris, “B” commences work, “A” then
defaults on the mortgage of the building, files for bankruptcy, and assigns the building and fire insurance policies to the beneficiary
of the deed of trust, and “B” then completes the work, with B not knowing of the default notice, and the beneficiary not knowing of
the contact to remove debris, is the beneficiary required to compensate “B”?
Holding:
One party should not be indemnified twice for the same loss – once in labor and materials and again in money, to the detriment
(forfeiture) of the party who furnished the labor and materials.
Reasoning:
Plaintiff’s argument rests upon the basic premise that Defendant should not be able to have the fruits of Plaintiff’s labor and also the
money value of that labor. This is simplified pronouncement of the doctrine of unjust enrichment. Usually, unjust enrichment is
predicated upon a relationship between the parties, from which the court infers intent. However, the doctrine also recognizes an
obligation imposed by law regardless of the intent of the parties. In these instances, no relationship is needed to give substance to
intent, rather the obligation is imposed because good conscience dictates that under the circumstances the person benefited should
make reimbursement. There is no precedent in this particular case, thus we are guided by the ‘Underlying Principles’ delineated in
the Restatement of Restitution. The governing principle states that “The restatement of this Subject deals with siuations in which
one person is accountable to another on the ground that otherwise he would unjustly benefit or the other would unjustly suffer
loss.”
Notes:
Samuel Thomas v. Eleanor Thomas
Queen’s Bench
2 Q.B. 851 (1842) – (Lord Denman, C.J.; Concurring: Patterson, J. and Coleridge, J.)
Parties:
31) Eleanor Thomas – (Plaintiff /) – John Thomas’ wife
32) Samuel Thomas – (Defendant) – John Thomas’ brother
Procedural History and Outcome:
Trial Court judge ruled in favor of the Plaintiff. Defendant appeals.
Facts:




John Thomas owned seven houses, one of which being the home in question, he personally lived in with his
wife, Eleanor. He appointed his brother, Samuel, to be his executor and to take possession of the houses,
subject to certain payments mentioned in the will. On the evening before his death, he expressed orally a wish
to make some further provision for his wife, and declared orally before two witnesses, that he wanted his wife
to either have the house in which he lived and all that it contained, or an additional sum of £100.
Samuel consented to the intentions, and came to an agreement with Eleanor that she can live in the house so
long as she remain a widow and unmarried, provided that she shall pay Samuel the annual sum of £1 for ground
rent, maintain the premises in good order, and other provisions not applicable here.
Eleanor was left in possession of the house for some time, until Samuel’s death. His executors refused to
continue the agreement and brought an action for ejectment against her.
Eleanor is suing for enforcement of contract.
Issue(s):
Is a contract that is made to satisfy the wishes of a decedent that obligates the executor of the decedent’s estate to
provide the decedent’s wife a home for the remainder of time she be a widow and unmarried, in exchange for an annual
sum of £1, and the promise to maintain the home in good order enforceable?
Holding:
A contract that contains its own sufficient consideration, regardless of whether the motive to establish this contract was
due to a moral feeling to satisfy a decedent’s wishes, is enforceable.
Reasoning:
The fact that the motive to create this agreement was to satisfy the wishes of the decedent has no bearing on the
consideration. As in the eye of the law, consideration means something of value moving from Plaintiff, be it some
benefit to Plaintiff, or some detriment to the Defendant, but it must move from Plaintiff. The wishes of the decedent do
not in any way move from the Plaintiff, it moves from the decedent. However, there is nothing to indicate that the
ground rent was payable to a superior landlord. The stipulation for the payment is not a mere condition, but an express
agreement, and demonstrates sufficient legal consideration that is independent from the moral feeling which inclined
the executors to enter into such a contract.
Notes:
Robert C. Browning v. O. Arthur Johnson
Supreme Court of Washington
70 Wash.2d 145 (1967) - (Landenbach,.J.)
Parties:
33) Robert C. Browning – (Plaintiff / Appellant) – Osteopath Practice Seller
34) O. Arthur Johnson – (Defendant Appellee) Osteopath Practice Purchaser
Procedural History and Outcome:
Plaintiff motions for declaratory judgment, Trial Court rules in favor of the Defendant on the latter contract, stating it
was “adequate consideration.” Plaintiff appeals, insisting that his promise was unsupported by consideration, and that
the promise was a child of a mistake. Appellate Court affirms.
Facts:




Plaintiff entered into a contract to sell his practice and equipment to Defendant. Contract was believed to be
valid and enforceable by both parties and their attorneys.
Before the contract effective date, Plaintiff sought to be released from the undertaken obligations.
Defendant at first objected. Later, they agreed to enter another contract where Defendant agreed to forgo his
claims, in exchange for a payment of $40,000.
Some months later, tired of his bargain, brought an action for declaratory judgment and restitution.
Issue(s):
Is a promise made by “A” to pay “B” a sum of money, in exchange for “B” releasing “A” from his obligations under a
previous contract enforceable?
Holding:
A promise to pay another sum of money in exchange for a release of an obligation under another contract contains
sufficient consideration to uphold a contract.
Reasoning:
This agreement is a unilateral contract – one in which a promise is given in exchange for an act or forbearance. Here,
Plaintiff promised to pay Defendant $40,000 in exchange for Defendant’s act of giving up the contract of sale. The
requirement of sufficient consideration to support a promise is met by a detriment incurred by the promisee or a benefit
received by the promise at the request of the promisor. A detriment is defined by giving up something which
immediately prior thereto the promisee was privileged to retain, or doing or refrain from doing something which he was
then privileged not to do, or not to refrain from doing (Williston, treatise Contracts).
The legal detriment suffered by the Defendant through Plaintiff’s inducement constitutes sufficient consideration to
uphold the contract.
(The trial court concluded that this bargain contained “adequate consideration.” Courts, however, generally do not
inquire into the “adequacy” of consideration, that is, into the comparative value of the promises and acts exchanged.
Rather, the trial court most likely meant to say “sufficient consideration.”)
Notes:
William Levine v. Anne Blumenthal
Supreme Court of New Jersey
117 N.J.L. 23 (1936) - (Heher,.J.)
Parties:
35) William Levine – (Plaintiff / Appellant) – Lessor
36) Anne Blumenthal – (Defendant Appellee) Lesseee
Procedural History and Outcome:
Trial Court ruled in favor Plaintiff and found that as a matter of fact, “an oral agreement had been made to alter the terms of the
written lease, with respect to the rent paid,” but that it was not supported by “a lawful consideration.” Defendant appeals, Supreme
Court affirms.
Facts:
 Plaintiff leased premises to Defendants for the purpose of a retail shop. Term was 2 years to commence on May 1, with an




option to renew for 3 years. Rent was $2,100 for the first year, and $2,400 for the second, payable in advance equal
monthly installments.
As year 1 came to a close, Defendant advised Plaintiff that it was impossible for them to pay any increase in rent. Their
business had so fallen down that they had great difficulty in meeting present rent of $175 per month. If Plaintiff insisted
upon the increase called for in the lease, they would be forced to remove from premises or perhaps go out of business.
Defendant alleges that Plaintiff “agreed to allow them to remain under the same rental ‘until business improved.’” Plaintiff
concedes that Defendant informed him that “they could not pay the increase called for in the lease because of adverse
business conditions,” but alleges that he “agreed to accept the payment of $175 each month on account.”
Defendant paid $175 for the first 11 months of the second year. The renewal option was not exercised. Defendant
surrendered premises at the expiration of the term.
Plaintiff is suing for the unpaid balance on the second year’s rent – $25 for each of the first 11 months, and $200 for the
12th month.
Issue(s):
Where in middle of a lease, a Lessor orally agreed to alter the terms of a written lease with respect to the rent paid, due to Lessee’s
notification of her inability pay an increased amount of rent, does such an agreement contain sufficient consideration for an
enforceable contract?
Holding:
To impose the obligation of a contract upon the subsequent agreement, it must rest upon a new and independent consideration.
Since it fails to be supported by valid consideration, it is not legally enforceable.
Reasoning:
It is elementary that the subsequent agreement, to impose the obligation of a contract, must rest upon a new and independent
consideration. A promise to do what the promisor is already legally bound to do is an unreal consideration. To support a contract,
consideration consists of either a benefit to the promisor or a detriment to the promisee. An act or forbearance required by a legal
duty owning to the promisor that is neither doubtful nor the subject of honest and reasonable dispute is not sufficient
consideration. Yet, any consideration for the new undertaking, would satisfy this rule – undertaking to pay part of the debt before
maturity, pay at another location, or pay in property. The test is whether there is an additional consideration adequate to support an
ordinary contract, and consists of something which the debtor was not legally bound to give. There is authority for this view, where
there is no illegal preference, a payment of part of a debt “accompanied by an agreement of the debtor to refrain from voluntary
bankruptcy” is sufficient consideration for the creditor’s promise to remit the balance of the debt. So tested, the secondary
agreement is not supported by valid consideration.
Notes:
Alaska Packers’ Association v. Domenico
United States Court of Appeals, Ninth Circuit
117 Fed. 99 (1902) - (Ross, Circuit .Judge)
Parties:
37) Alaska Packers’ Association (Defendant / Appellant) – Boat Provider/Salmon Cannery
38) Demenico – (Plaintiff / Appellee) – Sailors / Fishermen
Procedural History and Outcome:
Trial Court ruled in favor of the Plaintiffs. Defendant’s appeal, Appellate Court reverses and remands to court below to
enter judgment.
Facts:






Plaintiff entered into a written contract with Defendant under which they agreed to sail on a vessel provided by
Defendant to Alaska for the fishing season, where Defendant had a salmon cannery that they had invested
$150,000 into, and then return.
Plaintiffs agreed, as sailors and fishermen, to do “regular ship’s duty, both up and down, discharging and
loading; and to do any other work whatsoever when request to do so by the captain or agent of Alaska Packers.”
Plaintiffs were to be paid $50-60 for the season ($0.02 for each red salmon he took part in catching of).
Work commenced in April, and on May 19, the Plaintiffs ceased working, and demanded $100 for their services.
The superintendent on hand stated he had no authority to modify the contract and was unable to induce the
Plaintiffs to continue working. On May 22, he “yielded to their demands” due to the remoteness of their location
and shortness of the season. He signed a document increasing their salaries to $100.
After completing the season and returning to San Francisco, Plaintiffs were informed that they would be paid
the originally bargained $50-60. Plaintiffs are suing to enforce the modified contract.
Issue(s):
Where in middle of an employment contract, an employer agrees in writing to alter the terms of the contract with
respect to the salaries due to the employee, do the altered terms to the agreement contain sufficient consideration for
an enforceable contract?
Holding:
A subsequent agreement entered into whereby one party promises to increase compensation in exchange for the other
party’s agreement to complete their obligations that they were previously obligated to perform, lacks sufficient
consideration to enforce a contract.
Reasoning:
The Plaintiffs, without any valid cause, refused to continue services they were under contract to perform, unless
Defendant would agree to increase their compensation. Consent to such a demand, if given, was without consideration,
because it was based upon Plaintiffs’ agreement to render the exact services and none other, which were already under
contract to render. In Lingenfelder v. Brewing Co the court held a contract where the owner of a building agreed to pay
its architect an additional sum because of his refusal to to otherwise proceed with the contract to be void, stating that:
“Under the new promise, he was not to do anything more or anything different…He was to receive the same
service…That a promise to pay a man for doing that which he is already under contract to do is without consideration.”
Notes:
Alfred L. Angel v. John E. Murray, Jr.
Supreme Court of Rhode Island
113 R.I. 482 (1974) - (Roberts, Chief Justice)
Parties:
39) Alfred L. Angel – (Plaintiff / Appellee) – A Newport Citizen
40) John E. Murray, Jr. – (Defendant) Director of Finance of City of Newport
41) James L. Maher – (Defendant / Appellant) Refuse Collection Service Provider
Procedural History and Outcome:
Bench Trial Court entered a judgment ordering Defendant Maher to repay $20,000 to the city of Newport. Defendant Maher
appeals. Supreme Court reverse and remands for entry of judgment for Defendant.
Facts:
 Maher provided the city of Newport with a refuse-collection service under a series of 5-year contracts beginning in 1946.

On March 12, 1964, he and the city entered into another such contract commencing on July 1, 1964, and terminating on
June 30, 1969. He was to receive $137,000 per year in return for collecting and removing all combustible and noncombustible materials generated in the city
In June 1967, Maher requested an additional $10,000 per year from the city council because there had been a substantial
increase in the collection cost, due to an unexpected and unanticipated increase of 400 new dwellings, as opposed to the
average annual increase of 20-25. At a public meeting of the council, he explained in detail the reasons for his request, and
the council agreed. He made a similar request the following year, and received the same amount for that year as well.
Issue(s):
Is an agreement to increase the price provided for a service, after work has commenced, due to the unexpected and unanticipated
increase in cost to provide the service, enforceable?
Holding:
An agreement to increase the price of a service that one is already under an obligation to perform is enforceable if the parties
voluntarily agree, and if (1) the promise modifying the original contact was made before the contract was fully performed on either
side, (2) the underlying circumstances which prompted the modification were unanticipated by the parties, and (3) the medication is
fair and equitable.
Reasoning:
Trial justice found this agreement to be in violation of law because he found that the additional payments were unlawful because
they had not been recommended in writing to the city council by the city manager, and because he found that Maher was not
entitled to extra compensation because the original contract already required him to collect all refuse generated within the city, and
therefore included the additional 400 units. He also found the 400 units to be within the contemplation of the parties when they
entered into the contact. He based it on the rule of preexisting duty (a promise to pay a man for doing something which he is already
under contract to do, is without consideration). While there is precedent to uphold the rule of preexisting duty, it is because courts
will not enforce an agreement procured by coercion or duress and hold the parties to their original contact. However, they have
been reluctant to apply the rule when a party encounters unanticipated difficulties and the other party, not influenced by coercion
or duress, voluntarily agrees to pay additional compensation for work already required to be performed under contract. There is a
modern trend that does away with the rigid application of the preexisting duty rule. Courts have found it necessary to enforce
agreements that modify contracts when unexpected or unanticipated difficulties arise during the course of performance, even
though there is no consideration for the modification, as long as it is agreed voluntarily. The UCC states that “[a]n agreement
modifying a contact [for the sale of goods] needs no consideration to be binding” (§2-209(1)). ALI’s Restatement 2nd of Contracts
provides: “A promise modifying a duty under a contact not fully performed on either side is binding if the modification is fair and
equitable in view of the circumstances not anticipated by the parties when the contract was made…” We believe that §89D(a) is
applicable here it “enforced a modification if the parties voluntarily agree and if (1) the promise modifying the original contact was
made before the contract was fully performed on either side, (2) the underlying circumstances which prompted the modification
were unanticipated by the parties, and (3) the medication is fair and equitable. There is no doubt here that this agreement was
voluntary. This modification was made in middle of a contract that had not been fully performed by either party. The original
agreement was made under the premise that the increase would be about 20-25 units per year, not 400, this it went beyond any
previous expectation, and it was a substantial increase in units, thus one cannot say that the $10,000 increase was not fair and
equitable.
Notes:
Rehm-Zeiher Co. v. F.G. Walker Co.
Court of Appeals of Kentucky
156 Ky. 6 (1913) - (Carroll, J.)
Parties:
42) Rehm-Zeiher Company – (Plaintiff / Appellant) Whisky Distributor
43) F.G. Walker Co. – (Defendant / Appellee) Whisky Distiller
Procedural History and Outcome:
Trial Court jury ruled in favor of Defendant. Plaintiff appeals. Appellate Court affirms.
Facts:
 Plaintiffs were in the business of selling whiskey that they purchased from distillers. They entered into an agreement to



purchase whisky from the Defendants. (1909 – 2,000 cases; 1910 – 4,000; 1911 – 4,000; 1912 – 5,000) (At the price of:
Quarts - $6.70; Pints - $7.20; Half Pints - $7.70)
Contract contained a provision that required Plaintiff not to hold Defendant liable if he lost whisky to a fire, and if for any
unforeseen reason, Plaintiff couldn’t use the full amount, Defendant would release them for the amount desired by
Plaintiff.
Plaintiff brought this suit to recover for damages for its failure and refusal to furnish 2,596 of the 4,000 cases of whisky it
was supposed to provide in 1911 – a damage in the sum of $6, 798.
It appears that the price of whisky increased in the early part of 1911, and Defendant initially refused to delivery any
whisky, but then upon request, furnished a partial amount, but then refused to deliver any more.
Issue(s):
Is a contract between a buyer and seller that stipulates a set of products to be purchased, at a specific price, but contains a provision
that requires the seller to release the buyer from part of the contact, should the buyer, for any unforeseen reason find that it cannot
use the full amounts stipulated in the agreement, enforceable?
Holding:
Contracts that contain a provision that requires the other party to release them from a contract, either partially or, in its entirety, if
it chooses not to perform its obligations, lack mutuality and are thus unenforceable.
Reasoning:
This contract places no limitation whatsoever upon the meaning of the words “unforeseen reason,” so that any reason that the
company might assign for not taking the whisky would relieve it of any obligation to do so. It was not necessary for the reason
should be a good reason or a reasonable reason. If the Defendants had sought by a suit to compel Plaintiff to take in the full
stipulated amount, it is clear that Plaintiff would have won such a suit by pleading that some unforeseen reason had arisen that
justified them in not taking the maximum amount. If the contract was not enforceable by the Defendant, either in whole or in part, it
was clearly lacking in such mutuality of obligation, and thus is rendered non-enforceable. Therefore, Defendant was not obligated to
furnish any whisky to Plaintiff during any portion of the contract, and the fact that they did voluntarily choose to funish some, it does
not deny them the privilege to refuse to furnish the remainder.
Notes:
Otis F. Wood v. Lucy, Lady Duff-Gordon
Court of Appeals of New York
222 N.Y. 88 (1917) - (Cardozo, J.)
Parties:
44) Otis F. Wood – (Plaintiff / Appellant) Employee?
45) FLucy, Lady Duff-Gordon – (Defendant / Appellee) Fashion Designer
Procedural History and Outcome:
Trial Court jury ruled in favor of Plaintiff. Defendant appeals. Appellate Court reverses. Plaintiff appeals. Court of Appeals
reverses.
Facts:




Defendant is a creator of fashions, who manufacturers of dresses, millinery and like articles would pay for a
certificate of her approval. The things she designed, fabrics, parasols and what not have a new value in the
public mind when issued in her name.
Plaintiff was employed to help her turn this into money. He was to have the exclusive right, subject to her
approval to place her indorsements on the designs of others. He also was to have the exclusive right to place her
designs on sale, or license others to market them. In return, she was to receive 50% of all profits and revenues.
The agreement was to last at least one year, and continue until terminated, 90 days’ notice required.
Plaintiff claims to have kept his portion of the contract, and that Defendant broke it, when she placed her
indorsement on merchandise without his knowledge and withheld profits.
Issue(s):
Is an agreement where one party is given the exclusive right to sell or market a certain product or service for another,
enforceable?
Holding:
A contract where one party is given the exclusive right to sell or market a product or service for another is enforceable.
The acceptance of exclusive agency is an assumption of duties. A promise to pay a percentage of profits and revenues
resulting from such exclusive agency and to render the accounts periodically, is an implied promise to use reasonable
efforts to bring profits and revenues into existence.
Reasoning:
Defendant insists that the agreement lacks the elements of a contract because the Plaintiff does not bind himself to do
anything. We however think that such a promise is fairly to be implied. A promise may be lacking, and the whole writing
may be “instinct with an obligation” (McCall Co.). If that is so, there is a contract here. Implication of a promise
manifests here in many circumstances. Defendant gave an exclusive privilege. She was to have no right for at least a year
to place her indorsements or market her own designs except through the agency of Plaintiff. The acceptance of the
exclusive agency was an assumption of its duties. The terms of Defendant’s compensation indicate that without his
efforts, she could never get anything. Thus, without an implied promise, the transaction cannot have such business
“efficacy as both parties must have intended that at all events it should have” (The Moorcock). Plaintiff also goes on to
promise that he will account monthly for all moneys received by him, that he will take out all such patents, trademarks,
copyrights as may be necessary to protect the rights and articles affected by this agreement. In determining the intent of
the parties, the promise has a value, and helps enforce the conclusion that Plaintiff had duties. His promise to pay 50%
of profits and revenues resulting from exclusive agency and to render accounts monthly was a promise to use
reasonable efforts to bring profits and revenues into existence.
Notes:
Omni Group, Inc. v. Seattle-First National Bank
Court of Appeals of Washington
32 Wash.App. 22 (1982) - (James, J.)
Parties:
46) Omni Group, Inc. – (Plaintiff / Appellant) Real Estate Developer
47) Seattle-First National Bank – (Defendant / Appellee) Selling Property
Procedural History and Outcome:
Trial Court jury ruled in favor of Defendant. Plaintiff appeals. Appellate Court reverses and remands.
Facts:


Omni group entered into an earnest money agreement to purchase the Clark’s property, subject to review, and
purchaser’s satisfaction, of an engineer’s and architect’s feasibility report. Omni decided to forgo this report.
The terms were finalized, and then the Clarks refused to proceed with the sale.
Trial judge decided that making the agreement subject to the feasibility report rendered the promise illusory.
Issue(s):
Is an earnest money agreement to purchase property, subject to purchaser’s satisfaction of an engineer’s and architect’s
feasibility report illusory?
Holding:
A contract that contains a provision that gives a party the power to terminate is valid and is not illusory, where the
option can be exercised upon the occurrence of specified conditions.
Reasoning:
A contractor can, by the use of clear and appropriate words, make his duty expressly conditional upon his own personal
satisfaction with the quality of the performance for which he and bargained in return for which his promise is given.
Such a limitation on his own duty does not invalidate the contract as long as the limitation is not so great as to make his
own promise illusory – 3A A. Corbin, Contracts § 644 at 78-79 (1960).
Omni’s agreement to purchase was subject to two conditions (1) Omni must receive an engineer’s and architect’s
feasibility report. This language requires Omni to attempt in good faith to obtain it. (2) That the report be “satisfactory”
to Omni. Such a condition may require performance personally satisfactory to the promisor, or it may require
performance acceptable to a reasonable person. Whether or not it was the case, is a question of fact.
Mattei v. Hopper – a satisfaction clause in a real estate contract that bases one party’s performance on satisfaction of a
condition, doesn’t render it illusory.
Notes:
Andrew D. Ricketts v. Katie Scothorn
Supreme Court of Nebraska
57 neb. 51 (1898) - (Sullivan, J.)
Parties:
48) Katie Scothorn – (Plaintiff / Appellee) Granddaughter of John C. Ricketts / Promisee
49) Andrew D. Ricketts – (Defendant / Appellant) Executor of John C. Ricketts’ Estate
Procedural History and Outcome:
Trial Court jury ruled in favor of Defendant. Plaintiff appeals. Appellate Court reverses and remands.
Facts:


Plaintiff was informed by her grandfather, John C. Ricketts that none of his grandchildren had to work for a
living, and neither should she. He signed a promissory note indebting himself in the amount of $2,000 at the
amount of 6% per annum. She then left her job. About a year later, with her grandfather’s consent, she got a
new job. He paid one’s year’s interest on the note. Before his death, he expressed regret on not being able to
pay it. At another time, he expressed to his daughter, Plaintiff’s mother, that if he could sell his Ohio farm, he
would pay out the proceeds.
Trial judge decided that making the agreement subject to the feasibility report rendered the promise illusory.
Issue(s):
Can a promise to indebt oneself to another, that requires no benefit to be conferred in return to Promisor, and no
detriment to be suffered by Promisee be enforced?
Holding:
A promise that causes the promisee to enter into engagements, or make expenditures based on the promised, so that
the promisee must suffer a loss, or an injury, if the promise is not fulfilled, is enforceable on the equitable principle of
promissory estoppel.
Reasoning:
Although the note had no consideration, and did not require the Plaintiff to do or to refrain from doing anything, was
clearly a gratuitous promise, and her decision to leave her original job was a voluntary act, it can be enforced on the
basis of promissory estoppel.
Notes that are based on a promise to give something that lacks consideration can be enforced if it can be proven that
the donee has entered into engagements or made expenditures based on the promise, so that he must suffer loss or
injury if the note is not paid. This is based on the equitable principle that after allowing the donee to incur obligations on
the faith that the note would be paid, the donor would estopped from pleading want of consideration – Simpson
Centenary College v. Tuttle
“A contract given in expectation of the payee performing certain services without any contract binding him to serve, will
not support an action…But when the payee changes his position to his disadvantage, in reliance on the promise, a right
of action does arise…” – Reimensnyder v. Gans referencing Ryerss v. Trustees.
Supreme Court decision – equitable estoppel is applicable here. The grandfather influenced her to give up her job, and
thus put her in a worse position on the faith of the note being paid. Its inequitable to not enforce the note on the
grounds of consideration.
Notes:
Congregation Kadimah Toras-Moshe v. Robert A. DeLeo
Supreme Judicial Court of Massachusetts
405 Mass. 365 (1989) - (Liacos, Chief Justice)
Parties:
50) Congregation Kadimah Toras-Moshe – (Plaintiff / Appellant) Promisee
51) Robert A. DeLeo – (Defendant / Appellee) Decedent / Promisor
Procedural History and Outcome:
Trial Court Defendant. Plaintiff appeals. Appellate Court affirms.
Facts:

Decedent suffered from an illness, was visited by the Rabbi, during one of those visits, decedent orally promised
to give the Congregation $25,000, which was then allocated by the Congregation in their budget to be used to
build a library in his name. He then passed away intestate.
Issue(s):
Can a promise to donate to a Congregation a sum of money be enforced, where the Promisor passed away intestate
before having a chance to fulfill his promise, and the Congregation has allocated the pledge within its budget to create a
library in the Promisor’s name?
Holding:
An oral promise that does not contain consideration cannot be enforced based on promissory estoppel where the only
action the promisee has taken in reaction to the promise is to allocate the funds within their budget for a specific
project.
Reasoning:
Trial Court determined that this was an oral gratuitous pledge, with no indication as to how to should be used, or what
was required, if anything, in return. No legal benefit to promisor, no detriment to promisee, and thus no consideration.
Also, there is no evidence that the plans to name the library after him induced him to make this promise. As for reliance,
“allocation in a budget” is insufficient to find reliance or an enforceable obligation.
Restatement §90 (1) A promise which the promisor should reasonably expect to induce action or forbearance by
promisee…is binding if injustice can be avoided only by enforcing the promise... (2) A charitable subscription…is binding
under (1) without proof that the promise induced action or forbearance. – Court decided that there is no injustice in
declining to enforce the decedent’s promise. Furthermore, this was an oral promise sought to be enforced against an
estate. To enforce such a promise would be against public policy.
Notes:
W.O. Lucy v. A.H. Zehmer
Supreme Court of Appeals of Virginia
196 Va. 493 (1954) - (Buchanan, J.)
Parties:
1) W.O. Lucy – (Plaintiff / Appellee) Purchaser
2) A.H. Zehmer – (Defendant / Appellant) Seller
Procedural History and Outcome:
Trial Court ruled in favor of Defendant. Plaintiff appeals. Appellate Court reverses.
Facts:
While out drinking, Plaintiff offered to purchase a farm owned by Defendant for $50,000. He had previously requested
to purchase it, and was denied on multiple occasions. This time, they conversed for 40 minutes, and Defendant
expressed doubt that Plaintiff could come up with $50,000. Plaintiff said he could, and invited him to draft a contact.
Defendant drafted an agreement on the back of a bar receipt. Plaintiff examined it, and asked him to rewrite it so it shall
include Defendant’s wife, and have her sign it. Defendant obliged, and gave it to his wife to sign, she initially refused, but
when whispered that it was a joke, she signed. Plaintiff was not told that it was a joke. He offered $5 to finalize the deal,
at that point Defendant realized that Plaintiff was serious, and refused to take it. Defendant left the bar, enlisted his
brother to help him raise $50,000, performed a title check and reiterated his intention to Defendants, who then refused
to sell. Plaintiff sued for specific performance. Defendant claims that the whole matter was a joke and that no binding
contract was ever made between the parties.
Issue(s):
Is a contract to sell property, where the seller insists that was drafted and executed for the sake of a joke, and where the
buyer was not aware of this, and on the basis of the contract, went ahead, raised the necessary funds, and performed a
title check, enforceable?
Holding:
Mutual assent is essential to a valid contract, but law imputes to a person an intention corresponding to the reasonable
meaning of his words and acts.
Reasoning:
Record indicates that Defendant was not intoxicated to the extent of being unable to comprehend what he was doing.
The 40 minute discussion before signing, the rewriting to include the wife, and the provision to examine title, and a lack
of a request to return the document, are persuasive evidence that the execution was a serious business transaction,
rather than a casual jesting matter.
In contracts, “We must look to the outward expression of a person as manifesting his intention rather than his secret
and unexpressed intention. ‘The law imputes to a person an intention corresponding to the reasonable meaning of his
words and acts.” – First Nat. Exchange Bank of Roanoke v. Roanoke Oil Co.
Mental assent is not requisite for the formation of a contract. If words or acts of one of the parties have but one
reasonable meaning, his undisclosed intention is immaterial except when an unreasonable meaning which he attaches
to his manifestations is known to the other party. – Restatement §71, p. 74.
Law judges agreements exclusively from those expressions of their intentions which are communicated between them –
Clark on Contracts
Notes:
Raffles v. Wichelhaus
Court of Exchequer
159 Eng.Rep. 375 (1954) - (unknown)
Parties:
1) Raffles – (Plaintiff / Appellee) Seller
2) Wichelhaus – (Defendant / Appellant) Buyer
Procedural History and Outcome:
Trial Court ruled in favor of Defendant.
Facts:
Plaintiff entered into a contract to sell Defendant a shipment of cotton that was to arrive from Bombay to Liverpool in a
ship named “Peerless.” Plaintiff shipped the cotton on said ship which arrived in Liverpool in December, but Defendant
refused to accept delivery of it, claiming that Plaintiff had breached the contract, for they had meant that the cotton to
be shipped on the ship named “Peerless” which arrived in Liverpool from Bombay in October.
Issue(s):
Where two parties enter into a contract for the sale and purchase of merchandise to be shipped on a ship with a specific
name from a specific location to another, but it is later realized that there are two such named ships, sailing from the
same location to the same destination, albeit two months apart, and one party intended for the merchandise to be
shipped on the first ship, while the other meant the second, is the contract enforceable?
Holding:
Where it is clear that a buyer and seller had two different intentions within their agreement, there is no consensus
meeting of the minds, and thus, no contract.
Reasoning:
There is nothing in the contract to demonstrate that the parties meant any particular ship named “Peerless.” However,
it appears that two ships called “Peerless” were about to set sail from Bombay to Liverpool, thus there was a latent
ambiguity, and testimony has been given to demonstrate that Plaintiff meant one “Peerless,” while the Defendant
meant the other. Thus, there was no consensus ad idem (meeting of the minds), and therefore, no binding contract.
Notes:
Wrench, LLC v. Taco Bell Corp.
United States District Court, Western District of Michgan
51 F.Supp.2nd 840, reversed on other grounds, 256 F.3d 446 (6th Cir. 2001 (1999) - (Quist, District Judge)
Parties:
52) Wrench, LLC – (Plaintiff) Marketing Idea Conceiver
53) Taco Bell Corp. – (Defendant) Marketing Idea Seeker
Procedural History and Outcome:
Trial Court ruled in favor of Defendant on other grounds.
Facts:





Plaintiffs developed a character known as “Psycho Chihuahua” as a feisty dog, with a “do-not-back-down” attitude.
Ed Alfrero and Rudy Pollack worked respectively as the Creative Services Manager and Vice President of Administration and
Employee Programs of Taco Bell. After seeing Plaintiff’s materials at a trade show, they began discussions about using
Psycho Chihuahua, a dog with an “insatiable craving” for Taco Bell. Eventually, Pollack requested a proposal of terms, they
were given. Although Taco Bell didn’t explicitly reject it, or indicate that it was ceasing further discussions, they didn’t
accept it.
Taco Bell hired a new advertising agency. They had previously used dogs, including a Chihuahua, in a commercial for Nissan.
They presented several ideas to Taco Bell, including a commercial using a male Chihuahua passing up a female Chihuahua to
get to a person eating Taco Bell food.
At Alfaro’s insistence, Wrench’s Chihuahua materials were passed along to the agency with a note suggesting Psycho
Chihuahua as an icon. Taco Bell launched the agency’s campaign.
Plaintiff sued and listed several charges in his complaint, including breach of implied contract.
Issue(s):
Is a contract implied in fact where one provides another with material for an advertisement campaign, and the other does not
accept or reject the proposal, enlists another to come up with an advertisement idea, who then comes up with a similar idea, that
ends up being used for the campaign?
Holding:
Where one party can demonstrate that he disclosed an idea to the other party, at the other party’s request, and the other party
understood that compensation was expected for the use of the idea, can be used to support a claim of an implied in fact contact.
Reasoning:
A contract may be implied in fact when the intention to enter the contract “is not manifested by direct or explicit words between
the parties,” but is instead “gathered by implication or proper deduction from the conduct of the parties, language used, or things
done by them, or other pertinent circumstances attending the transaction (Miller v. Stevens). An implied contract, like other
contracts, requires mutual assent and consideration” and is treated in all other respects like an express contract (Spruytte v.
Department of Corrections). Implied in fact contracts arise where one accepts a benefit from another for which compensation is
customarily expected. Thus, where evidence shows that the parties understood that compensation would be paid for services
rendered, a promise to pay fair value may be implied, even if no agreement was reached as to price, duration, or other terms of the
contract. Taco Bell argues that Plaintiffs cannot prove the existence of an implied contract because the parties did not agree on any
the essential terms that would normally be included in a licensing agreement. Plaintiffs argue that their understanding was that Taco
Bell would pay for the use of Psycho Chihuahua materials if they decided to use it, is by itself sufficient to support an implied in fact
contract.
Case law establishes that a plaintiff may support a claim of implied in fact contract by showing that the plaintiff disclosed an idea to
the defendant at the defendant’s request and the defendant understood that the plaintiff expected compensation for use of his
ideas.
Notes:
Joseph Lonergan v. Albert Scolnick
Court of Appeals of California
129 Cal.App.2d 179 (1954) - (Bernard, Presiding Judge)
Parties:
54) Joseph Lonergan – (Plaintiff / Appellant) Purchaser
55) Albert Scolnick – (Defendant / Appellee) Seller
Procedural History and Outcome:
Trial Court ruled in favor of Defendant. Plaintiff appeals. Appellate Court affirms.
Facts:






Defendant placed an ad in the paper stating “Joshua vic. 40 acres,…need cash, will sacrifice.” In response to
Plaintiff’s resulting inquiry, he wrote a letter briefly describing the property, giving directions as how to get
there, and that his rock bottom price was $2,500 case, and stating that “this is a letter form.”
Plaintiff responded on April 7, saying that he was not sure he had found the property, asking for its legal
description, asking several identifying factors, and suggesting a bank as escrow agent, should he desire to
purchase it.
Defendant responded on April 8, confirming that the identifying factors matched the actual property, providing
the legal description, confirming that the bank choice was acceptable, and then saying “If you are really
interested, you will have to decide fast, as I expect to have a buyer in the next week or so.”
On April 12, Defendant sold the property to a third party for $2,500.
Plaintiff received the April 8 letter on April 14, and on April 15 wrote back, that he would immediately proceed
to have an escrow opened, and would deposit $2,500 therein and asking for the deed to be forwarded to the
escrow agent. On April 17, he opened an escrow, deposited $100, agreeing to furnish $2,400 at an unspecified
time.
Trial Court found that because Plaintiff delayed more than a week, despite the imposed prompt acceptance
condition, no contract had been entered.
Issue(s):
Plaintiff is suing for specific performance, or if specific performance is not possible, for the difference in value of the land
and $2,500.
Holding:
There was no contract here.
Reasoning:
There can be no contract unless the minds of the parties have met and mutually agreed upon some specific thing.
The advertisement was a mere request for an offer. The letter response letter contains no definite offer, and clearly
states that it is a letter form. It merely provides Plaintiff with further particulars, if he was interested in the matter. The
April 8 letter added nothing. It merely answered some questions and stated that if Plaintiff was really interested, he
would have to act fast. The statement that he expected to have a buyer in the next week or so indicated that Defendant
intended to sell to the first-comer, and was reserving right to do so. Plaintiff should have known that he was not being
given time in which to accept an offer that was being made, but that some further assent from Defendant was required.
That further assent was never received, and Plaintiff did not act immediately. Thus, it is clear that no contract was
entered.
Notes:
J.W. Southworth v. Joseph Oliver
Supreme Court of Oregon
284 Or. 361 (1978) - (Bernard, Presiding Judge)
Parties:
56) J.W. Southworth – (Plaintiff / Appellant) Purchaser
57) Joseph Oliver – (Defendant / Appellee) Seller
Procedural History and Outcome:
Trial Court ruled in favor of Plaintiff. Defendant appeals. Appellate Court affirms.
Facts:





Defendant first approached Plaintiff, his neighbor, to determine his possible interest in purchasing grazing land identified
on a map. Plaintiff was interested, but the price, terms, and treatment of certain grazing permits, which another was
interested in were not determined. At some later time, Plaintiff telephone Defendant to renew his interest and confirm that
he had the money prepared. He was told that progress was being made and he would soon have the information to
establish the land value.
Several days later, Plaintiff received a letter from Defendant stating “enclosed please find the information about the ranch
sales….” The information included estimated values of the lands, improvements, permits, as well as terms available for
purchase.
Plaintiff responded with a letter stating that he accepts the offer for sale.
Defendant replied informing Plaintiff that he had “misconstrued our prior negotiations and written summaries… that was
not made as or intended to be a form offer of sale, and especially was not an offer of sale of any portion of the lands…
memorandum… was for informational purposed only, and as a starting point between us and you and others also interested
in the properties…. do not consider that we at this point have any binding enforceable contract with you.”
Plaintiff is suing for specific performance.
Issue(s):
Where A who had made his intent clear that he was interested in purchasing land from B, and was then sent a letter summarizing
the estimated value of the land and permits, as well as a list of terms available, and A responded that he accepts the offer, but B
then responded that the initial letter was merely an informational summarization, has an offer and acceptance to an offer taken
place?
Holding:
A letter received, that would be construed by a reasonable person receiving that letter, considering the surrounding circumstances,
to contain an offer, is an offer, and if accepted, can enforce a legally binding contract.
Reasoning:
Any conduct of one party, from which the other may reasonably draw inference of a promise, is effective in law as such (Kitzke v.
Turnidge).
It is often difficult to make a distinction between offers and preliminary negotiations (Restatement 1 of Contracts §25) and this
particularly acute in cases involving price quotations. Although a price quotation, standing alone, is not an offer, there may be
circumstances under which a price quotation, when considered together with facts and circumstances, may constitute an offer
which, if accepted, will result in a binding contact. Offers may be made to more than one person, the fact that such a quotation was
sent to multiple people, does not, of itself, require holding such a price quotation as not an offer.
To determine the correct interpretation, the first and strongest guide is the particular expression of what a reasonable person would
think, had he been in the position of the offeree. Next up is the language used – if there are no words of promise, undertaking or
commitment, the tendency is to construe the expression to be an invitation for an offer or mere preliminary negotiations in the
absence of strong, countervailing circumstances. Another guide is the determination of the receiver of the purported offer. If the
expression named a party(ies) it is more likely construed as an offer.
The surrounding circumstances here indicate that a reasonable person receiving this letter, would have construed it to be an offer. It
was already known that Plaintiff was interested in purchasing the land. A serious discussion had taken place regarding the sale of the
particular land, and it had been terminated with the understanding the Defendant would determine the value of the land, and that
Plaintiff will undertake to arrange financing. Additionally, the fact that the letter contained information relating to the terms of
purchase, and was not addressed to an indefinite group, strengthens this narrative.
Notes:
Morris Lefkowitz v. Great Minneapolis Surplus Store
Supreme Court of Minnesota
251 Minn. 188 (1957) - (Murphy, Justice)
Parties:
58) Morris Lefkowitz – (Plaintiff / Appellant) Purchaser
59) Great Minneapolis Surplus Store – (Defendant / Appellee) Seller
Procedural History and Outcome:
Trial Court denied Defendant’s motion for an amendment of findings of fact, for a new trial, entered into a judgment for in favor of
Plaintiff for the sum of $138.50. Defendant appeals. Appellate Court affirms.
Facts:




Defendant placed advertisements in a newspaper in consecutive weeks stating: “Saturday 9AM Sharp, 3 Brand New Fur
Coats Worth to $100, First Come First Served $1 each” and the following week stating: “Saturday 9AM, 2 Brand New Pastel
Mink 3-Skin Scarfs Selling for $89.50 out they go Saturday. Each… $1 Black Lapin Stole Beautiful, worth $139.50… $1, First
Come First Served.
Plaintiff was the first to present himself at the appropriate counter at Defendant’s store on both occasions, and demanded
the advertised coat and stole, ready to pay the price of $1. Defendant refused to sell the merchandise, stating by a “house
rule” the offer was intended for women only.
Trial Court disallowed Plaintiff’s claim for the value of the fur coats since these values were speculative and uncertain, the
only indication was the advertisement was the advertisement which said “up to $100.” He allowed the claim on the “1 Black
Lapin Stole… worth $139.50” and held that the value was established and granted judgment $1 less than that amount.
Defendant contends that a newspaper advertisement offering items for sale at a named price is a “unilateral offer” which
may be withdrawn without notice.
Issue(s):
Where “A” saw an advertisement commissioned by “B” for the sale of a product, offering for sale on a first come, first served basis,
specific items worth up to a specified amount, and items worth a specified amount, and “A” was the first to present himself at the
specified time and location, but was informed that the sale was for women only, does “A” have a cause of action against “B”?
Holding:
A clear, definite, explicit offer that leaves nothing open for negotiation constitutes an offer, acceptance of which will complete a
contract. After publishing, an advertiser cannot impose new conditions upon his offer to sell that are not contained within the
published offer.
Reasoning:
Where the offer is clear, definite, explicit, and leaves nothing open for negotiation, it constitutes an offer, acceptance of which will
complete the contract. Whether in any individual instance a newspaper advisement is an offer rather than an invitation to make an
offer depends on the legal intention of the parties and the surrounding circumstances. The offer by Defendant of the Lapin fur was
clear, definite, and left nothing open for negotiation. By being the first to appear at the seller’s place of business, Plaintiff was
entitled to performance on the part of Defendant. Thus, there was here a sufficient mutuality of obligation to constitute a contract
of sale. Regarding the “House Rule,” the advertisement contained no such restriction. While an advertiser has the right at any time
before acceptance to modify his offer, he does not have the right to impose new or arbitrary conditions not contained in the
published offer
Notes:
John Leonard v. Pepsico, Inc.
United States District Court, Southern District of New York
88 F.Supp.2d 116, aff’d, 210 F.3dm 88 (2d Cir. 2000) (1999) - (Kimba M. Wood, District Judge)
Parties:
60) John Leonard – (Plaintiff) Consumer
61) Pepsico, Inc. – (Defendant) Advertiser
Procedural History and Outcome:
Trial Court ruled in favor of Defendant.
Facts:




Pepsi ran a commercial advertising “Pepsi stuff” that can be redeemed for “Pepsi points.” One of the items in the
commercial referred to a Harrier jet worth 7,000,000 points. Pepsi referred viewers to their catalog to see the actual “stuff”
available for redemption. The jet was excluded from the catalog.
Plaintiff was determined to redeem the Harrier jet and figured out that he could purchase 7,000,000 Pepsi points for
$700,008.50. He raised that sum of money, sending Pepsi a check for that amount, filling out the order form, with a letter
stating that the check was to purchase additional Pepsi Points “expressly for obtaining a new Harrier jet as advertised in
your Pepsi Stuff commercial.”
Defendant’s fulfillment house rejected Plaintiff’s submission and returned the check, explaining that the requested item
was not part of the Pepsi Stuff collection. It was not included in the catalog, or on the order form, only the listed items can
be redeemed. The jet within the commercial was simply included to create a humorous and entertaining ad.
Plaintiff and Defendant disagree over whether the advertisement “clearly offers the new Harrier jet for 7,000,000 Pepsi
Points” and whether a “reasonable person would agree with [this] analysis of the Commercial.”
Issue(s):
Where a company runs a commercial that is misconstrued by a consumer to offer a Harrier Jet in exchange for 7,000,000 rewards
points that can be purchased for $700,000 but the company does not include the jet within their rewards catalog, where the
company only included the plane in jest, does the consumer have a cause of action?
Holding:
Advertisements that lack clear, definite, explicit terms cannot be constitute a legitimate offer, acceptance of which would create a
binding contract. An offer that requires a reciprocal promise cannot be construed to be a rewards offer. An advertisement that
would not be construed to be a serious offer by an objective, reasonable person, cannot be taken to be a serious offer.
Reasoning:
Advertisement as Offer – The general rule is that an advertisement does not constitute an offer. It is possible to make an offer by an
advertisement directed at the general public, but there must ordinarily be some language of commitment, or some invitation to take
action without further communication (Restatement 2nd of Contacts § 26 cmt. B). Such advertisements are understood to be mere
requests to consider, examine and negotiate (Corbin on Contracts §2.4, 116-17). The exception to the rule that advertisements do
not create any power of acceptances in potential affairs is where the advertisement is clear, definite, explicit, an leaves nothing
open for negotiation, in that circumstance, “it constitutes an offer, acceptance of which will complete the contract” (Lefkowitz v.
Great Minneapolis Surplus Store). This advertisement differs from Lefkowitz in that I was not in itself sufficiently definite, it
specifically reserved the details of the offer to a separate writing, the catalog. Additionally, the ad lacks a limitation such as “first
come, first served.” A customer would not usually have reason to believe that a shopkeeper intended exposure to risk of multitude
of acceptances resulting in a number of contracts, exceeding the shopkeeper’s inventory (Farnthsworth, supra at 242). Thus, no
contract could be formed.
Rewards as Offers – The Harrier jet cannot be construed as a rewards offer because the commercial did not direct anyone who
appeared at Pepsi headquarters with 7,000,000 points on a specific day?? would receive it. Rather, it urges consumers to
accumulate points and refer to the catalog to determine how they could redeem them. The commercial sought a reciprocal promise,
expressed through acceptance of and in compliance with, the terms of the Order Form. The fact that the jet was not included,
should have affected Plaintiff’s understanding of the offer.
Objective, Reasonable Person Would not have Considered the Commercial an Offer – In evaluating what a commercial actually
offers consumers, one must determine what an objective, reasonable person would have understood the commercial to convey. If it
is clear that an offer was not serious, no offer has been made. To have the power of an offer, it must be an act that leads the offeree
reasonably to conclude that a power to create a contract is conferred. A reasonable person evaluating this commercial would
understand it as mere puffery, not as statements of fact (Hubbard v. General Motors Corp). Additionally, the price of 7,000,000 Pepsi
Points would accumulate to roughly 190 Pepsis a day for 100 years. No reasonable person would buy or drink that amount. The
actual cost of a Harrier Jet is roughly $23 million, even an objective reasonable person unaware of this fact, would conclude that
purchasing a fighter plane for $700,000 is a deal too good to be true.
Notes:
La Salle National Bank v. Mel Vega
Appellate Court of Illinois, Second District
167 Ill.App.3d 154 (1988) - (Lindberg, Presiding Judge)
Parties:
62) La Salle National Bank – (Plaintiff / Counter-Defendant / Appellant) Purchaser
63) Mel Vega – (Defendant / Counter-Defendant / Appellee) Seller
64) Borg (Counter-Plaintiff / Appellee)
Procedural History and Outcome:
Trial Court ruled in favor of Counter-Plaintiff. Counter-Defendant La Salle appeals. Appellate Court affirms.
Facts:


There was a contract of sale to be signed between La Salle and Vega for the purchase of a property owned by Vega. The
contract had a rider which said “upon the trust’s execution, this contract will then be in full force.” The contract was signed
by La Salle’s agent, and then by Vega, but was never signed by La Salle’s trustee.
La Salle sued Vega for breach of contract, seeking specific performance. At that point Borg intervened, and countersued the
two other parties, claiming that he had a different contract of sale for the same property.
Issue(s):
Whether a contract that was formed and executed by the buyer’s agent and the seller, but not be the trustee, who, as per a rider to
the contract, was required to execute to put the contract in full force?
Holding:
An offerer has complete control over an offer and may condition acceptance to the terms of the offer. The language of an offer may
also govern the mode of acceptance required. Thus, the rider’s provision governs the contract at bar.
Reasoning:
A contract is “an agreement between two competent parties, upon a consideration sufficient in law, to do or not to do a particular
thing” (Steinberg v. Chicago Medical School). The formation of a contract requires an offer, an acceptance, and consideration. The
offer made by Mel, could only be accepted by execution of the document at issue by the trust, and the document was not executed
by the trust.
An offer is an act on the part of one person giving another person the legal power of creating the obligation called a contract. From
the language within the rider, it is apparent that there was to be no contract until it was executed by the trust. Thus, La Salle’s
agent’s presentation of the document he executed did not constitute an offer because it did not give Mel the power to accept it.
When Mel signed it and returned it to La Salle’s agent, he made an offer which could then be accepted by the trust’s execution.
An offerer has complete control over an offer and may condition acceptance to the terms of the offer. The language of an offer may
also govern the mode of acceptance required. Thus, the rider’s provision governs the contract at bar.
Notes:
Steve Hendricks v. Eugene Behee
Missouri Court of Appeals, Southern District
786 S.W.2d 610 (1990) - (Flanigan, Presiding Judge)
Parties:
65) Steve L. Hendricks d/b/a Hendricks Abstract & Title Co. – (Plaintiff / Appellant) Escrowee
66) Eugene Behee – (Defendant / Counter Plaintiff) Appellee) Buyer
67) Artice and Pearl Smith (Defendant / Counter Defendant / Appellee) Sellers
Procedural History and Outcome:
Trial Court denied Defendant’s motion for an amendment of findings of fact, for a new trial, entered into a judgment for in favor of
Plaintiff for the sum of $138.50. Defendant appeals. Appellate Court affirms.
Facts:


On March 2, Bahee sent a written offer to purchase real estate owned by The Smiths, to their real estate agent, who then
forwarded it on March 3, to the Smiths. The Smiths countersigned it on March 4.
Before being notified that the Smiths had accepted their offer, Bahee withdrew his offer by notifying the real estate agent.
This was on either March 5, 6 or 7.
Issue(s):
Where an offer was made in writing by a buyer, was sent to the seller’s agent, who forwarded it to the seller, who countersigned it
and returned it to the agent, but the offer was withdrawn by the buyer through notifying the agent, before buyer had been notified
of the acceptance, has a contract been entered?
Holding/Reasoning:
There is no contract until acceptance of an offer is communicated to the offeror. An uncommunicated intention to accept an offer is
not an acceptance. When an offer calls for a promise, as distinguished from an act, on the part of the offeree, notice of acceptance is
always essential. A mere private act of the offeree does not constitute an acceptance. Communication of acceptance of a contract to
an agent of the offeree is not sufficient and does not bind the offeror. The exception is where the offer is supported by
consideration. Notice to the agent, within the scope of his authority, is notice to the principal, and agent’s knowledge is binding on
the principal.
Notes:
Louisa Elizabeth Carlill v. Carbolic Smoke Ball Co.
Court of Appeal
[1893] 1 Q.B. 256 (1893) - (Lindley, L.J.)
Parties:
68) Luisa Elizabeth Carlill – (Plaintiff / Appellee) Customer
69) Carbolic Smoke Ball Co. – (Defendant / Appellant) Manufacturer of Product
Procedural History and Outcome:
Trial Court ruled in favor of Plaintiff. Defendant appeals. Appellate Court affirms.
Facts:


Defendant posted an advertisement in a few newspapers stating “100£ reward will be paid by the Carbolic Smoke Ball
Company to any person who contracts the increasing epidemic influenza, cold, or any disease caused by taking cold, after
having used the ball three times daily for two weeks according to the printed directions supplied with each ball. 1000£ is
deposited with the Alliance Bank, Regent Street, shewing our sincerity in the matter.”
Plaintiff bought one of the balls and used it as directed, thrice daily, for nearly two months, when she contracted influenza.
Issue(s):
Where a medicine manufacturer posts an advertisement stating that if anyone uses their product as properly instructed, and still
contracts the disease the product is meant to prevent, they would be entitled to a reward, and stated within their ad that a sum of
money was being placed in reserve for this purpose to demonstrate their sincerity, can a person who took the product as instructed,
contracted the disease, claim the advertised reward?
Holding/Reasoning:
Lindley, L.J. – This is an express promise to pay under certain conditions. The fact that Defendant wrote that “1000£ is deposited
with Alliance Bank, Regent Street, shewing our sincerity in the matter,” demonstrates that this promise wasn’t merely puffery, and
was intended to be a promise. It is contended that it isn’t binding because it wasn’t made with anyone in particular. However,
advertisements that offer rewards are offers to anyone who performs the conditions named in therein, and one who performs those
conditions, can be said to have accepted the offer. Thus, it is a binding, enforceable contract.
It is also contended that the advertisement is so vague that it cannot really be construed to be a contract. While it is vague and
uncertain in some respects, it should be construed to mean whatever seems to be the most reasonable.
Bowen, L.J. – Usually, an acceptance of an offer ought to be notified to the offeror, so that the two minds may come together.
However, if it is desirable to do so, an offeror may dispense with the need to give notice. He may dictate how an offer should be
accepted. If he expressly or impliedly intimates in his offer that it will be sufficient to act on the proposal without communicating
acceptance, performance of the condition is sufficient without notification. Here, Defendant states that the reward will be paid to
anyone who performs the conditions. Using the common sense reflection of the offer, he impliedly indicates that he does not
require notification of acceptance of the offer.
Another argument was that there was no consideration for the promise. Consideration manifests here in two ways. First, an
inconvenience sustained at the request of the other party is consideration, and here, the Plaintiff took the trouble of using the
smoke ball. Second, Defendant received a benefit from this user, because the use of the ball promoted their sale.
A.L. Smith, L.J. – It is also contended that Defendant intended that offerees, accepting the offer, would actually notify them so that
they could superintend the experiment. However, there is no such clause in the advertisement to read such a clause into it.
Notes:
Corinthian Pharmaceutical Systems, Inc. v. Lederle Laboratories
United States District Court, Southern District, Indiana
724 F.Supp. 605 (1989) - (McKinney, District Judge)
Parties:
70) Corinthian Pharmaceutical Systems – (Plaintiff) Pharmaceutical Distributor
71) Lederle Laboratories – (Defendant) Pharmaceutical Manufacturer
Procedural History and Outcome:
Trial Court ruled in favor of Defendant.
Facts:





Defendant, a pharmaceutical manufacturer, frequently sold products to Plaintiff. Defendant periodically issued a price list
to its customers for all its products. Each stated that orders were subject to acceptance by Lederle at its home office, and
indicated that the prices shown “were in effect at the time of publication, but are submitted without offer and are subject
to change without notice…[changes in price] take immediate effect, and unfilled current orders and back orders will be
invoiced at the price in effect at the time shipment is made.”
Plaintiff made several purchases of a specific vaccine from Defendant over a two year period. Their largest single order was
for 100 vials.
Defendant sought it necessary to increase the price from $51 to $171 per vial. Defendant notified its staff of this change on
May 19 through a letter that was circulated internally, and it was to take effect on May 20. Plaintiff didn’t know of this
letter until several weeks later.
Defendant also wrote a letter dated May 20, to be sent to its customers, informing them of the price change. Plaintiff
somehow gained knowledge of this on May 19. In response to its knowledge, they placed an order for 1,000 vials by calling
Defendant’s computer ordering system. After placing the order, the system gave Plaintiff a tracking number, and Defendant
sent out two written confirmations of this order, stating that “order is to receive the $64.32 vial price.”
On June 3, Defendant sent an invoice to Plaintiff for 50 vials, priced at $64.32 per vial. The 50 were sent to Plaintiff and
were accepted. Defendant sent Plaintiff a letter at the same time stating that “enclosed represents a partial shipment of the
order” and stated that under Plaintiff’s standard terms and conditions of sale, the normal policy would be to invoice the
order at the price when shipment is made. However, in light of the magnitude of the price increase, Plaintiff had decided to
make an exception, and ship a portion at the lower price, while the balance would be priced at $171 and that “If for any
reason you wish to cancel the balance of the your order, please contact us…”
Issue(s):
The question here is whether Defendant agreed to sell Plaintiff the vaccine at $64.32 per vial.
Holding/Reasoning:
An offer is the “manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his
assent to that bargain is invited and will conclude it” (H. Greenberg, Rights and Remedies Under UCC Article 2). Plaintiff’s “order” on
May 19 was the first offer. Nothing before this can be construed to be an offer.
Acceptance need not be the mirror-image of the offer (UCC §2-207). However, the offeree must still do some act that manifests the
intention to accept the offer and make a contract. Defendant did not communicate or do any act prior to shipping the 50 vials that
could support acceptance. Automated tracking numbers, and confirmations are not acts of acceptance.
“…a shipment of non-confirming goods does not constitute an acceptance if the seller seasonably notifies the buyer that the
shipment is offered only as an accommodation to the buyer” (UCC 2-206(b)). Here, Defendant sent the 50 vials with a letter
stipulating that this is an accommodation, and indicated that Plaintiff can cancel the balance. Thus, the partial fulfillment of the
order does not constitute an acceptance.
Therefore, Defendant’s price quotations were mere invitations to make an offer and that by placing an order, Plaintiff made an offer
to buy 1,000 vials at the low price, that by shipping 50 vials at the low price, Defendant’s response was non-conforming, but the
non-conforming was a mere accommodation and thus, constituted a counteroffer.
Notes:
Industrial America, Inc. v. Fulton Industries, Inc.
Supreme Court of Delaware
285 A.2d 412 (1971) - (Herrmann, Justice)
Parties:
72) Industrial America, Inc. – (Plaintiff / Appellant) Broker Specializing in Mergers of Businesses
73) Fulton Industries, Inc. – (Defendant / Appellee) Business
74) Bush Hog (B-H) – Business
Procedural History and Outcome:
Trial Court ruled in favor of Defendant. Plaintiff appeals, Supreme Court reverses, and enters judgment against defendant in the
amount of $125,000.
Facts:




Plaintiff was retained by B-H to help find it a partner for a merger. After several failed attempts, B-H decided forego work
with Plaintiff, but failed to communicate this to him.
Plaintiff saw an advertisement in a newspaper stating that Fulton Industries was seeking a merger, and included: “Brokers
fully protected.”
Plaintiff reached out to them about a possible merger with B-H. They were interested, and requested that he arrange a
visit. Plaintiff sent a letter to B-H advising them of Fulton’s interest. At that point, Fulton’s executive vice president called BH’s president directly and arranged a meet. Plaintiff first became aware of this in response to a request to offer his
assistance. Despite several such attempts, neither business sought any further assistance from him, although B-H promised
to keep him informed. Eventually, a merger between the two businesses consummated.
Plaintiff brought an action against both businesses for his broker commission, and obtained a $125,000 judgment against BH on the grounds that it was the procuring cause. However, they failed to obtain such a judgment against Fulton, on the
basis that Plaintiff never accepted the offer, whereby he failed to prove subjective intent.
Issue(s):
Whether Fulton’s offer of guaranty invited acceptance by performance, whether Plaintiff knew of the offer, and whether Plaintiff’s
course of action constituted a performance amounting to an acceptance.
Holding/Reasoning:
It is not the subjective intent, but the overt manifestation of assent that controls the formation of a contract. Where an offeror
requests an act in return for his promise, and the act is intentionally performed, the performed act becomes the requisite overt
manifestation of assent. – Restatement of Contracts §20 (1st?).
The offer itself need not be the chief motivation for the acceptance of an offer (Fulton claimed that Plaintiff intended to accept B-H’s
offer). A unilateral contract may be enforced when the promisor has received the desired service even though the service was
primarily motivated by a reason other than the offer.
There is no need to notify the offeror of the acceptance, if doing the act is sufficient acceptance, and the promisor knows that he is
bound when he sees that action has been taken on the faith of his offer (Williston). The Trial Judge ruled that Fulton’s knowledge of
Plaintiff’s submission of B-H’s name to it was notice to Fulton of an act constituting acceptance of its offer. The Trial Judge erred in
submitting the issue of subjective reliance. There was no relevant issue of fact of Plaintiff’s subjective reliance upon Fulton’s offer.
The offer invited acceptance by performance, Plaintiff knew of the offer at the time of performance, and he performed.
Notes:
Mary Glover v. Jewish War Veterans of United States
Municipal Court of Appeals for District of Columbia
68 A.2d 233 (1949) - (Clagett, Associate Judge)
Parties:
75) Mary Glover – (Plaintiff / Appellant) Police Informant
76) Jewish War Veterans of the United States – (Defendant / Appellee) Reward Offerer
Procedural History and Outcome:
Trial Court ruled in favor of Defendant. Plaintiff appeals, Court of Appeals affirms.
Facts:



Maurice L. Bernstein was murdered on June 5, 1946. The following day, Defendant took an add out in several newspapers
offering a $500 reward “to the person or persons furnishing information resulting in the apprehension and conviction of the
persons guilty of the murder...”
A day or so later, one of the suspects, was arrested and police received information that the other murderer was Reginald
Wheeler, and his girlfriend was the daughter of the Plaintiff. Police visited Plaintiff on June 11, she answered their
questions, and on the basis of those answers, police were able to locate, arrest, and convict Reginald Wheeler.
On June 12, Plaintiff first learned of the reward that had been offered by Defendant.
Issue(s):
Can a person claim a reward that had been offered, if they perform the condition before knowing that a reward had been offered?
Holding/Reasoning:
There can be no contract unless the offeree knew of the offer when offeree performed the act, and intended to accept the offer.
“It is impossible for an offeree actually assent to an offer unless he knows of its existence” (Williston).
“It is impossible that there should be an acceptance unless the offeree knows of the existence of the offer” (Restatement of
Contracts [doesn’t source a section])
Notes:
Ever-Tite Roofing Corp. v. G.T. Green
Court of Appeal of Louisiana
83 So.2d 449 (1955) - (Ayers, Judge)
Parties:
77) Ever-Tite Roofing Corp – (Plaintiff / Appellant) Roofing Contractor
78) G.T. Green – (Defendant / Appellee) Homeowner
Procedural History and Outcome:
Trial Court ruled in favor of Defendant. Plaintiff appeals, Court of Appeal reverses.
Facts:




Defendant executed and signed an instrument on June 10 for the purpose of obtaining services of Plaintiff in re-roofing
their residence. It was to be signed by Plaintiff’s sale representative, who, however, was without authority to accept the
contract for and on behalf of Plaintiff.
It contained the following provision: “This agreement shall become binding only upon written acceptance hereof, by the
principal or authorized officer of the Contractor, or upon commencing performance of the work. This contract is not subject
to cancellation…”
It was necessary for Plaintiff to obtain credit reports and approval from the lending institution which was to finance the
contract. On receipt of the proposed contract in Plaintiff’s office, on the day following its execution, Plaintiff requested said
credit report. Eventually, Defendant was approved.
The next day, June 18 or 19, Plaintiff engaged its workmen and two trucks, loaded the trucks with the necessary materials
and proceeded to Defendant’s residence for the purpose of doing the work. Upon arrival, workmen found others in the
performance of the work Plaintiff was contracted to do. Defendant then informed Plaintiff that the work had been
contracted to other parties two days before and forbade them to do the work.

Issue(s):
Where one hires a company to perform a job, and signs a contract that includes a provision that the contact is only binding upon
written acceptance of the offer, or upon commencement of performance of work, and the contract was not signed by the proper
person of the hired company, and the company hired workers and purchased materials for the job, and upon arrival at the site,
found another company had been contracted for the job, and was forbidden from working, can the company maintain a cause of
action?
Holding/Reasoning:
The general rule of law is that an offer may be withdrawn before its acceptance. Restatement of Contracts states: “The power to
create a contract by acceptance of an offer terminates at the time specified in the offer, or, if no time is specified, at the end of a
reasonable time. What is a reasonable time is a question of face depending on the nature of the contract proposed, the usages of
business and other circumstances of the case which the offeree at the time of his acceptance either knows or has reason to know.”
The contract did not specify a time within which it was to be accepted, or within when work was to be commenced. The delays to
process Defendant’s application were not unusual. Contract was accepted by commencement of performance of contracted work.
This began at the time of the loading of trucks to be transported to Defendant. This commencement occurred before any notice of
dissent by Defendant was given to Plaintiff. Thus, it is a complete contract.
Notes:
Theodore Russell v. Texas Co.
United States Court of Appeals, Ninth Circuit
238 F.2d 636 (1956) - (Halbert, District Judge)
Parties:
79) Theodore Russell – (Plaintiff / Appellee) Property Owner
80) Texas Co. – (Defendant / Appellant) Gas Lessor
81) Northern Pacific Railway Company – Mineral Rights Owner
Procedural History and Outcome:
Trial Court ruled in favor of Plaintiff. Defendant appeals, Court of Appeals affirms.
Facts:




Plaintiff owned a piece of land known as “section 23.” The previous owners acquired this land from Northern Pacific, who
had executed a warranty deed reserving the mineral rights. They also granted a gas lease on this land to Texas Co.
Texas Co. conducted extensive operations, pursuant to the lease, and also used it in connection with operations carried on
by it on other lands, which was not pursuant to the lease.
Plaintiff offered a revocable license for the continued use of the property in its operations associated with other land,
commencing on October 30, at $150 per day, and included a provision stating that “your continued use of the roadway,
water and/or materials will constitute your acceptance of this revocable permit.” Texas Co. continued using the property
until November 22, and it was not until December when Plaintiff was informed that the offer was rejected.
Trial Court entered a judgment in favor of Plaintiff for $3,837.60 ($3,600 due under the revocable license and $237.60 due
for the use under the mineral reservation). Texas Co. appeals the $3,600, on the grounds that the offer was not accepted.
Issue(s):
Whether an offeree may deny the existence of a contract by a claim of lack of intention to accept an offer, when he accepts and
retains the benefits offered to him by the offeror, when the offer contains a provision stipulating that acceptance of the benefits will
be deemed by offeror to be an acceptance?
Holding/Reasoning:
Where the offeree exercises dominion over things which are offered to him, such exercise of dominion in the absence of other
circumstances showing a contrary intention is an acceptance. If circumstances indicate that the exercise of dominion is tortious the
offeror may at his option treat it at an acceptance, though the offeree manifests an intention not to accept” (Restatement of
Contracts §72(2)).
Plaintiff’s offer was clear and the terms stated that the continued use of section 23 in connection with activies and operations on
other lands would constitute an acceptance of the offer. Texas Co. continued to use the property in this manner, and thus, accepted
the offer. The true test is whether the offeror was reasonably led to believe that the act of the offeree was an acceptance. Based on
the facts, it seems evident that this test is met.
Notes:
S. Allen Schreiber v. Olan Mills
Superior Court of Pennsylvania
627 A.2d 806 (1993) - (Popovich, Judge)
Parties:
82) S. Allen Schreiber – (Plaintiff / Appellant) Regular Person with a Telephone
83) Olan Mills – (Defendant / Appellee) Telemarketer
Procedural History and Outcome:
Trial Court ruled in favor of Defendant. Plaintiff appeals, Superior Court affirms.
Facts:



Plaintiff received unwanted phone calls from Defendant.
Plaintiff sent Defendant a letter requesting to be removed from their call list, and notifying them that if it calls Plaintiff
again, Plaintiff will consider it that Defendant entered into a contract for Plaintiff’s listening services.
Defendant called Plaintiff on two occasions following that letter, causing Plaintiff to send Defendant an invoice for her
listening services.
Issue(s):
Where “A” sent a telemarketer a letter requesting to be removed from their call list, and informing them that if they call again, “A”
will consider the telemarketer to have entered into a contract with him to retain his listening services, and the telemarketer called,
and failed to pay “A” for his services. Can “A” maintain a breach of contract suit?
Holding/Reasoning:
Court found that the sole purpose of the letter was to encourage Defendant to remove Plaintiff from its calling lists, and not to
solicit a purchaser for “listening services.” The sole purpose of any additional calls that Defendant made to Plaintiff was to solicit
order and not to obtain “listening services.” Consequently, as a matter of law, the parties did not enter into a contract.
Notes:
Beneficial National Bank, USA v. Obie Payton
United States District Court, S.D. Mississippi
214 F.Supp.2d 679 (2001) - (Tom S. Lee, Chief Judge)
Parties:
84) Beneficial Nation Bank, USA – (Plaintiff) Credit Card Account Issuer
85) Household Bank – (Plaintiff) Credit Card Account Maintainer
86) Obie Payton – (Defendant) Credit Card Holder
Procedural History and Outcome:
Trial Court ruled in favor of Plaintiff.
Facts:







In April 1995, Defendant purchased a home satellite system which was financed through a credit card with Beneficial. In
February 2001, Defendant filed a suit against both Plaintiffs alleging that his participation in this transaction was induced by
fraudulent misrepresentations and other wrongful conduct on the part of Household and its agents.
Shortly thereafter, Plaintiffs brought this action to compel arbitration, contending that the claims asserted by Defendant
are governed by an arbitration agreement that is part of Defendant’s cardholder agreement.
Defendant’s cardholder agreement stated that Beneficial “may choose to make any change effective only if you use your
Account on or after a specified date.”
A year after being approved for the card, Beneficial sent out a notice advising that changes were being made to the
Cardholder Agreement, and a provision for mandatory arbitration was to become part of the agreement unless the
cardholder rejected the change.
Defendant didn’t notify Beneficial within the thirty day period that he didn’t agree to accept the changes.
In May 1999, Defendant’s account was assigned to Household. Included in a notification of the assignment, was a provision
for arbitration, substantially like that set forth in Beneficial’s.
Defendant continued to use his account.
Issue(s):
Is a mandatory arbitration provision added to a credit card agreement binding upon a cardholder so long as the cardholder receives
notice of the change?
Holding/Reasoning:
Defendant maintains that he never agreed to arbitrate any disputes with Plaintiffs, and that the original agreement’s “change of
terms” provision only authorized changes to existing terms, not to add new terms.
Bank One v. Coates: “Bank One could validly amend its agreement to add an arbitration clause, just as it could have amended the
agreement to add or change any other term on the agreement.”
Defendant maintains that Coates is distinguishable since the provision in the original agreement said “change or amend,” whereas
here it only said “change.” Court is of the opinion that there is no practical difference between “change” and “amend.”
Relying on Long v. Fidelity Water Systems, Inc., Defendant argue that his failing to affirmatively opt out of the arbitration provision is
immaterial, since a valid and binding agreement may not be predicated on nothing more than his failure to reject the arbitration
provision. The Court found this California ruling to be unpersuasive.
Defendant maintains that the wrongful acts occurred before the arbitration provision was added to the agreement, thus this cause is
not governed by the provision.
Many courts have recognized that “if [an] arbitration clause contains retroactive time-specific language… then [the court] may apply
the arbitration provision to events relating to past events.” This particular provision lacks “retroactive time-specific language.”
However, in the court’s opinion, it is sufficiently broad to cover the dispute.
Defendant asserts that the provision is unconscionable because it designates the National Arbitration Forums as the arbitral forum.
However, “the rules governing the conduct of NAF arbitrations belie [Payton’s] speculation that suspected bias by NAF has any
realistic potential for affecting decision of arbitrators in NAF arbitrations” (Coates).
Notes:
George Dickinson v. John Dodds
Court of Appeal, Chancery Division
2 Ch.D. 483 (1876) - (James, L.J.; Mellish, L.J.)
Parties:
87) George Dickinson – (Plaintiff / Appellant) Offeree
88) John Dodds – (Defendant / Appellant) Offeror / Seller
89) Thomas Allan – (Defendant / Appellant) Buyer
Procedural History and Outcome:
Trial Court entered a decree in favor of Plaintiff, for specific performance. Defendants appeal. Court of Appeal reverses.
Facts:





“I hereby agree to sell to Mr. George Dickinson the whole of…belonging to me for the sum of 800…. (signed) John
Dodds…P.S. – This offer to be left over until Friday, 9 o’clock A.M….”
Thursday afternoon, Plaintiff was informed by a Mr. Berry that Dodds had been offering or agreeing to sell the property to
Allan. Plaintiff went that even to Dodd’s mother-in-law, where Dodds was staying, and left with her a formal acceptance in
writing. The document never reached Dodd.
Friday morning at about 7AM, Berry, acting as an agent for Plaintiff, found Dodds and handed him a duplicate of the
acceptance, and explained to him its purpose. A few minutes later, Plaintiff himself found Dodds and handled him another
duplicate, but Dodds declined to receive it, stating he had already sold the property.
Property was sold to Allen for £800, with a £40 deposit.
Plaintiff seeks specific performance.
Issue(s):
Where “A” makes an offer to sell property to “B” and creates a document stating that the offer will be available until a specified time
and day, and “A” goes and sells the property to “C,” “B” learns from another that “A” might be selling the property to “C,” yet “B,” to
no avail, attempts to accept “A”’s offer, has an enforceable contract between “A” and “B” been formed?
Holding/Reasoning:
Although the document states “I hereby agree to sell” it was nothing more than an offer, and was only intended to be an offer. For it
says at the end “This offer to be left over until Friday, 9AM….” Also, Plaintiff admits that he required time to consider whether he
would enter the agreement or not. The promise to leave the offer on the table until Friday morning, it but a naked promise, as it did
not contain consideration, and was not binding. An offeror, need not expressly state that “I withdraw my offer” to retract the offer.
An offeror is bound in some way to let the offeree know of his retraction. However, where the offeree knows from other sources
that the offeror is no longer minded to sell him the property, offeree can no longer accept the offer.
Notes:
Humble Oil & Refining Co. v. Westside Investment Corp.
Supreme Court of Texas
428 S.W.2d 92 (1968) - (Smith, Justice)
Parties:
90) Humble Oil & Refining Co. – (Plaintiff / Appellant) Buyer
91) Westside Investment Corp. – (Defendant / Appellee) Seller
Procedural History and Outcome:
Trial Court granted Westside’s motion for summary judgment. Court of Civil Appeals affirmed. Supreme Court reverses and rules in
favor of Humble.
Facts:



On April 5, 1963, Westside entered into a written contract for an exclusive and irrevocable option to sell Humble a tract of
land for a consideration of $35,000. It provided that Humble might exercise the option by giving notice at any time before
9PM on June 4, and by paying Westside the sum of $1,750 as earnest money + $50 consideration, within 10 days.
On May 2, Humble sent Westside a letter informing them of their intent to exercise the option, but included that “the
contract of sale is hereby amended to provide that Seller shall extend all utility line to the property before the date of
closing.”
On May 14, Humble paid $1,750 to the designated escrow agent and wrote a letter informing Westside that Humble
intended to exercise their option, and stated that “the exercise of said option is not qualified and you may disregard the
proposed amendment to the contract suggested in letter of May 2.”
Issue(s):
Where “A”(seller) enters into an option to purchase contract with “B” (buyer), and “B” opts to purchase but requests an amendment
to the terms of purchase, does that amendment request terminate the option contract, or is “B” still free to accept the option as is?
Holding/Reasoning:
“It is lad down in the law of offers that a qualified or conditional acceptance is a rejection of the offer… it does not raise a contract
because the minds of the parties do not meet in agreement upon the same terms… Such an acceptance is a counter-proposal for a
new contract… An option is a contract, the negotiations for making of which are concluded by the execution and delivery of the
option. The minds of the parties have met in agreement, the distinctive feature of which is that the optionor, for a consideration,
binds himself to keep the option open for election by the optionee, for and during the time stipulated... Under an option, the act
necessary for a binding promise to sell, is not… an acceptance of the offer, but rather the performance of the condition of the option
contract…” (James on Contracts §838).
“If the original offer is an irrevocable offer, creating in the offeree a ‘binding option,’ the rule that a counteroffer terminates the
power of acceptance does not apply. Even if it is reasonable to hold that it terminates a revocable power… A ‘binding option’ is such
a contract and an offer in writing, that allows a time for acceptance and that is irrevocable by virue of a statute, it itself is a unilateral
contract. A counteroffer by such an offeree, or other negotiation not resulting in contract, does not terminate the power of
acceptance” (1 Corbin on Contracts §91)
Humble’s May 2 letter did not terminate the option contract. Humble, for valuable consideration, purchased the right to keep the
option contract open for the time specified, and the right to create a contract of purchase. Although he had the right to accept or
reject the option, he was not precluded from negotiation relative to the contract of sale as distinguished from the option. The option
is consideration an independent agreement, and it gave the optionee the right to purchase the property within the time specified.
Westside was bound to keep the option open. Humble did not surrender or reject the option on May 2. The option to purchase was
still a binding obligation at the time Humble exercised it on May 14.
Notes:
A.A. Marchiondo v. Frank Scheck
Supreme Court of New Mexico
78 N.M. 440 (1967) - (Wood, Judge)
Parties:
92) A.A. Marchiondo – (Plaintiff / Appellant) Real Estate Broker
93) Frank Scheck – (Defendant / Appellee) Property Seller
Procedural History and Outcome:
Trial Court entered a decree in favor of Defendant. Plaintiff appeals. Supreme Court reverses.
Facts:




Defendant offer to sell real estate to a specified prospective buyer, and agreed to pay a commission to Plaintiff, who was
the broker.
The offer had a six-day time limit for acceptance.
On the morning of the sixth day, Defendant’s revocation was received by Plaintiff. Later that day, Plaintiff obtained
offeree’s acceptance.
Plaintiff claims breach of contract and seeks the promised commission.
Issue(s):
Where a seller of a property promises a commission to a real estate broker for the sale of his property to a specific prospective
purchaser, but informs the broker that he revokes the offer to sell to the prospective purchaser, a few hours before the purchaser
informs the broker of his acceptance, is the broker entitled to receive the promised commission?
Holding/Reasoning:
We are not concerned about the revocation of the offer. With certain exceptions, the right of a broker to the agreed compensation,
or damages… is not defeated by the refusal of the principal to complete or consummate a transaction. Defendant’s offer of
commission was a unilateral contract. The offer was for an act to be performed, a sale. Although, many courts have held that the
principal has the right to revoke the broker’s agency at any time before the broker has actually procured a purchaser, the reason
there is because until there is performance, there is no consideration. Other courts have held that part performance of the
consideration may make such an offer irrevocable. Part performance by an offeree of a unilateral contract results in a contract with
a condition – full performance. Plaintiff here partially performed prior to receipt of Defendant’s revocation, thus a contract was
formed.
Restatement (2) of Contracts § 45: (1) Where an offer invites an offeree to accept by rendering a performance and does not invite a
promissory acceptance, an option contract is created when the offeree begins the invited performance or tenders a beginning of it.
(2) The offeror’s duty of performance under any option contract so created is conditional on completion or tender of the invited
performance in accordance with the terms of the offer. (Section frequently applies to agency arraignments, particularly offers made
to real estate brokers.)
Notes:
James Baird Co. v. Gimbel Brothers, Inc.
United States Court of Appeals, Second Circuit
64 F.2d 344 (1933) - (Hand, Circuit Judge)
Parties:
94) James Baird Co. – (Plaintiff / Appellant) Contractor
95) Gimbel Brothers, Inc – (Defendant / Appellee) Subcontractor
Procedural History and Outcome:
Trial Court entered a decree in favor of Defendant. Plaintiff appeals. Court of Appeals affirms.
Facts:






Defendant submitted a bid to Plaintiff and other contractors, offering to supply the linoleum needed for a construction
contract at a quoted price. With that bid in mind, Plaintiff submitted its bid for the construction contract.
“If successful in being awarded this contract, it will be absolutely guaranteed… and… we are offering these prices for
reasonable, prompt acceptance after the general contract has been awarded.”
In recalculating its offer, Defendant realized that he underestimated the size of the contract by 50%.
Upon realizing this, but not before Plaintiff had submitted its bid, Defendant retracted the offer and submitted a new offer
quoting a larger price.
Plaintiff was awarded the construction project based on the original bid, and the bid was formally accepted two days after
the bid was retracted.
Trial Court held that there was no contract.
Issue(s):
Where a general contractor relies on an offer from a sub-contractor to deliver materials for a portion of the contracted task , when
placing a bid – an offer that was made available to all prospective bidders, and the sub-contractor rescinds the offer before the
contractor’s offer has been accepted, can the contractor maintain a cause of action against the sub-contractor?
Holding/Reasoning:
Restatement §35(2): A contract cannot be created by acceptance of an offer after the power of acceptance has been terminated.
The acceptance here was to occur “after the general contract has been awarded.” Thus, since the offer was rescinded before the
general contract was awarded, there was no offer available at the time of the offeree’s acceptance. Therefore, there was no
contract.
The doctrine of “promissory estoppel” is to avoid harsh results of allowing the promisor to repudiate when the promisee has acted
in reliance upon the promise. However, an offer for an exchange is not meant to become a promise until a consideration has been
received – counter promise, or whatever else is stipulated. Here, Defendant offered to deliver linoleum in exchange for Plaintiff’s
acceptance, not in exchange for its bid. This offer could only become a promise to deliver, only when the equivalent is received –
when the Plaintiff promises to take and pay for it. Thus, no claim can be made based upon promissory estoppel.
Notes:
William Drennan v. Star Paving Co.
Supreme Court of California
51 Cal.2d 409 (1958) - (Traynor, Justice)
Parties:
96) William Drennan – (Plaintiff / Appellant) General Contractor
97) Star Paving Co. – (Defendant / Appellee) Subcontractor
Procedural History and Outcome:
Trial Court entered a judgment in favor of Plaintiff. Defendant appeals. Supreme Court affirms.
Facts:



Plaintiff was preparing a bid on a project, and received several bids from sub-contractors to perform various parts of the
project. Defendant called and placed a bid to perform one of the tasks, bid was the much lower than all of the competing
bids, and Plaintiff relied on that bid in calculating its own bid for the project.
The bid was successful. The following day, Plaintiff visited Defendant’s office, where he introduced himself and was
immediately told that Defendant had made a mistake in their bid, and they couldn’t do it for the price they had bid, and
named a substantially higher price.
Plaintiff had to engage another subcontractor to perform that work, the cost was more than the amount Defendant had
stated in its bid, Plaintiff is suing for damages – difference in the amount expended and the bid.
Issue(s):
Where a general contractor relies on a bid from a sub-contractor, when placing its main bid, and the sub-contractor rescinds the
offer after the contractor’s offer has been accepted, but before the contractor had a chance to inform the sub-contractor of the
acceptance, can the contractor maintain a cause of action against the sub-contractor?
Holding/Reasoning:
The offer was not an irrevocable offer in exchange for Plaintiff’s use of its figures in computing its bid. There also isn’t any evidence
to prove that Plaintiff’s use of Defendant’s bid was acceptance of Defendant’s bid, binding Plaintiff upon condition that he receive
the main contract. Thus, this was not a bilateral agreement.
Defendant’s offer was a promise to perform on the condition that Plaintiff would win the bid. Defendant had reason to expect that if
its bid proved the lowest, it would be used by Plaintiff. It “induced action of a definite and substantial character on the part of the
promisee” (Restatement §90(1)). The offer was silent on revocation. In determining whether Defendant had a right to revoke the
offer, we can analogize from an offer for a unilateral contract, where Restatement 1 of Contracts §45 provides that upon
commencement of performance, offeror cannot revoke the offer.
When Defendant made the offer, he knew that by making the lowest possible offer, Plaintiff would be likely to accept it, and that the
lower the Plaintiff’s bid, the more likely it would be for the bid to be accepted. Defendant had reason not only for Plaintiff to rely on
his bid, but to want him to. It is only fair that Plaintiff should have at least an opportunity to accept Plaintiff’s bid after the general
contract had been awarded to him.
Although Defendant contends that his bid was a mistake, there was no way for Plaintiff to know that when he submitted his bid.
Restatement §90 (1) A promise which the promisor should reasonably expect to induce action or forbearance on the part of the
promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by
enforcement of the promise.
Restatement 1 of Contracts§45: If an offer for a unilateral contract is made, and part of the consideration requested in the offer is
given or tendered by the offeree in response thereto, the offeror is bound by a contract, the duty of immediate performance of
which is conditional on the full consideration being given or tendered within the time stated in the offer, or, if no time is stated
therein, within a reasonable time.
Notes:
Adams v Lindsell
Court of King’s Bench
106 Eng.Rep. 250 (1818) - (unknown)
Parties:
98) Adams – (Plaintiff / Appellant) Buyer
99) Lindsell – (Defendant / Appellee) Wool Dealer
Procedural History and Outcome:
Trial Court entered a judgment in favor of Plaintiff. Defendant appeals. Court of King’s Bench affirms.
Facts:



Defendant offered to sell a certain amount of wool to Plaintiff on September 2. The offer provided for acceptance by
written notice sent through the regular mail. Based on timing, Defendant expected to receive a response by September 8.
Defendant misaddressed the letter containing the offer, thus Plaintiff didn’t receive the offer until September 5. That
evening, Plaintiff wrote an acceptance and mailed it back to Defendant.
On September 8, having not received a repose, Defendant sold the wool to a third party.
Plaintiff is suing for breach of contract. Trial court held that Plaintiff’s acceptance was valid, and that any delay was caused
by Defendant’s misaddressing of the initial offer.
Issue(s):
When a written offer is proposed by an offeror via postal mail, is the offeree’s acceptance of the offer valid if mailed within the time
frame specified within the offer, if such manner of acceptance is permitted by the offer?
Holding/Reasoning:
When a written offer is proposed by an offeror via postal mail, the offeree’s acceptance of the offer is valid if mailed within the time
frame specified within the offer, if such manner acceptance is permitted by the offeror. Plaintiff’s delay was due to no fault of his,
but rather Defendant’s – he misaddressed the initial offer. Plaintiff acted promptly upon receiving the offer. Thus, Plaintiff’s
acceptance was valid, and the contract became binding, when Plaintiff placed the offer in the mail.
Notes:
Minneapolis & St. Louis Railway Co. v. Columbus Rolling-Mill Co.
Supreme Court of the United States
119 U.S. 149 (1886) - (Mr. Justice Gray)
Parties:
100)
101)
Minneapolis & St. Louis Railway Co. – (Plaintiff / Appellant) Railway Company / Buyer
v. Columbus Rolling-Mill Co. – (Defendant / Appellee) Rails Seller
Procedural History and Outcome:
Trial Court entered a judgment in favor of Defendant. Plaintiff appeals. Supreme Court affirms.
Facts:








December 5: Plaintiff sent a letter to Defendant requesting a quote for the price of 2,000-5,000 tons of iron rails.
December 8: Defendant replied via letter it would sell 2,000-5,000 tons of iron rails for $54 per ton.
December 16: Plaintiff sent a telegram to Defendant requesting an order for 1,200 tons of iron rails at $54 per ton.
December 18: Defendant replied via telegram that it would not fulfill this order.
December 19: Plaintiff sent another telegram requesting an order for 2,000 rails at $54 per ton.
Defendant did not respond.
January 19: After repeated inquiries, Defendant denied the existence of a contract
Plaintiff suing for breach of contract.
Issue(s):
When a written offer is proposed by an offeror via postal mail, is the offeree’s acceptance of the offer valid if mailed within the time
frame specified within the offer, if such manner of acceptance is permitted by the offer?
Holding/Reasoning:
A contract requires mutual assent. So long as an offer as neither been accepted nor rejected, the negotiation remains open, and
imposes no obligation upon either party. One may decline to accept, or the other may withdraw his offer, and either rejection or
withdrawal leaves the matter as if no offer had ever been made. A proposal to accept, or an acceptance, upon terms that are
different than those offered, is a rejection of the offer, and puts an end to the negotiation, unless the party who made the original
offer renews it, or assents to the medication suggested. The other party, having once rejected the offer, cannot afterwards revive it
by tendering an acceptance of it.
Here, Plaintiff’s telegram dated December 16 was an acceptance upon terms than those offered, and thus constituted a rejection of
the initial offer. Therefore, the offer was no longer on the table when Plaintiff attempted to accept the offer according to the
original terms on December 19.
Notes:
Textile Unlimited v. A..BMH and Company, Inc.
United States Court of Appeals, Ninth Circuit
2140 F.3d 781 (2001) - (Thomas, Circuit Judge)
Parties:
102)
103)
Textile Unlimited – (Plaintiff / Appellee) Buyer
A..BMH and Company, Inc. – (Defendant / Appellant) Seller
Procedural History and Outcome:
Trial Court ruled in favor of Plaintiff. Defendant appeals. Court of Appeals affirms.
Facts:








Over the course of ten months, Textile bought goods from A..BMH in approximately 38 transactions. Each followed a similar
pattern – Textile would send a purchase order to a broker in California, A..BMH would respond with an invoice, followed by
a shipment and an order acknowledgement.
Tucked in the back of the invoice and the face of the acknowledgment were terms that had not adorned the purchase
order.
The terms provided that any disputes would be resolved by arbitration in Atlanta, Georgia under the Commercial
Arbitration Rules of the American Arbitration Association. The arbitration was to be governed by Georgia law, and any court
action was to be brought solely within the Superior Court of Fulton County, Georgia. It also contained a provision in fine
print stating that Textile was “deemed to have accepted these terms in full” if Textile did not respond within 24 hours.
Textile did not respond within 24 hours.
After receiving a shipment in September 1998, Textile refused to pay, alleging that the yarn was defective.
A..BMH submitted the matter to arbitration in Atlanta, Georgia.
Textile protested, contending that the arbitration clause had not been woven into the contract.
Textile filed an action in the United States District Court for the Central District of California to enjoin arbitration.
Issue(s):
Where “A” places an order from “B” to purchase goods, and “B” sends an invoice, followed by a shipment and an order
acknowledgment, and tucks in some new terms of sale within the fine print of these documents, including a term forcing arbitration
as the required mode of dispute resolution, and states that if “A” does not respond within 24 hours, these terms will have been
deemed to have been accepted in full, and “A” fails to respond. Can “A” successfully enjoin an action for arbitration compelled by
“B”?
Holding/Reasoning:
U.C.C. §2:207 (1): A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable
time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless
acceptance is expressly made conditional on assent to the additional or different terms.
However, even when the parties’ written expressions do not establish a binding agreement under §2:207(1), a contract may arise
based on their subsequent conduct pursuant to §2:207(3).
U.C.C. §2:207(3): Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale
although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of
those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other
provisions of this Act.
Textile did not “give specific and unequivocal assent” to the supplemental conditions. Thus, a contract containing the new terms
that A.BMH attempted to pin on Textile was not formed under §2:207(1).
If the parties exchange incompatible forms “all of the terms on which the parties’ forms do not agree drop out, and the U.C.C.
supplies the missing terms” (Diamond Fruit Growers, Inc. v. Krack Corp.).
Since no contract was formed under §2:207(1) and the exchanged forms are incompatible with each other, §2:207(3) governs and
drops out the terms that were not agreed upon. Thus, the arbitration provision is unenforceable.
Notes:
Rich Hill v. Gateway 2000
United States Court of Appeals, Seventh Circuit
105 F.3d 1147 (1997) - (Easterbrook, Judge)
Parties:
104)
105)
Rich and Enza Hill – (Plaintiff / Appellee) Buyer
Gateway 2000 – (Defendant / Appellant) Seller
Procedural History and Outcome:
Trial Court ruled in favor of Plaintiff. Defendant appeals. Court of Appeals reverses.
Facts:





The Hills ordered a computer from Gateway 2000 by phone.
Gateway shipped the computer, and included a written agreement in the box, which were to govern unless the customer
returns the computer within 30 days. Included, was an arbitration clause.
The Hills kept the computer for more than 30 days, and later filed a suit in federal court alleging RICO violations against
Gateway on behalf of themselves and class of purchasers.
Gateway sought to compel arbitration.
The district court found that no valid arbitration agreement between the parties, and found that the Hills were not given
adequate notice of the arbitration clause.
Issue(s):
Where “A” places an order from “B” to purchase a product, and “B” sends the product along with a list of terms to govern the
transaction, unless “A” were to return the product within 30 days, and included in the terms is an agreement to arbitrate disputes,
can “A” maintain a cause of action against “B” in relation to this transaction outside of arbitration?
Holding/Reasoning:
Terms inside a box of software binds consumers who use the software after an opportunity to read the terms and reject them by
returning the product (ProCD Inc., v. Zeidenberg).
Plaintiffs contend that ProCD is distinguished because it’s software. However, ProCD is not about the law of software, its about the
law of contracts. Also, the computer the Hills purchased contained software within it.
Practical considerations support allowing venders to enclose the full legal terms with their products. For a variety of reasons,
cashiers cannot be expected to read legal documents to customers before ringing up sales.
The Hills contend that ProCD should be limited to executory contracts and should therefore not apply because both parties’
performance was complete when the box arrived. This is legally and factually wrong. Legally because ProCD concerns
the formation of a contract, no the performance, and factually because the computer came with a warranty, a warranty
that the Hills have invoked, thus, performance of the contract has not yet been completed.
The Hills attempt to argue that ProCD is irrelevant because Zeidenberg was a merchant, and they are not. UCC §2:207(2)
states that “additional terms [following an acceptance of an offer] are to be construed as proposals for addition to a
contract. Between merchants such terms become part of the contract, unless…” Zedenberg was not excluded by the
“unless” clause, and even if he was, the opinion stated that when there is only one form, §2:207 is irrelevant.
The Hills would have a better argument id they were first alerted to the bundling of hardware and legal-ware after
opening the box and wanted to return the computer in order to avoid disagreeable terms, but were dissuaded by the
expense of shipping. However, even if that was the case, the Hills knew that the carton would include some important
terms, and they did not seek to discover them in advance.
Notes:
William Klocek v. Gateway
United States District Court, D. Kansas
104 F.Supp.2d 1332 (2000) - (Vratil, District Judge)
Parties:
106)
107)
William Klocek – (Plaintiff) Buyer
Gateway 2000 – (Defendant) Seller
Procedural History and Outcome:
Trial Court ruled in favor of Plaintiff..
Facts:




Klocek ordered a computer from Gateway 2000.
Gateway shipped the computer, and included a written agreement in the box, which were to govern unless the customer
returns the computer within 5 days. Included, was an arbitration clause.
Klocek kept the computer for more than 5 days, and later filed a suit regarding the computors.
Gateway moved to dismiss, requesting the court to enforce the arbitration clause.
Issue(s):
Where “A” places an order from “B” to purchase a product, and “B” sends the product along with a list of terms to govern the
transaction, unless “A” were to return the product within 5 days, and included in the terms is an agreement to arbitrate disputes,
can “A” maintain a cause of action against “B” in relation to this transaction outside of arbitration?
Holding/Reasoning:
The UCC governs this transaction under both Kansas and Missouri law. There was definitely a contract for sale of the computer. The
issue is whether the terms conditions were included as part of the agreement.
Gateway urges the Court to follow the decision in Hill v. Gateway, an identical case, except that Gateway gave the customer 30 days,
instead of 5. Hill relied on ProCD where a software license which was contained inside a product box was enforced. The court stated:
“A vendor, as master of the offer, may invite acceptance by conduct, and may propose limitations on the kind of conduct that
constitutes acceptance. A buyer may accept by performing the acts the vendor proposes to treat as acceptance…” Hill followed this
analysis noting that “practical considerations support allowing vendors to enclose the full legal terms with their products.”
Both cases concluded that UCC §2:207 was irrelevant because the cases involved only one written form. However, this court
believes that under Kansas and Missouri law, §2:207 applies, there is nothing stated within which requires another form before the
provision becomes effective. In fact, §§2:207(1) and (2) provide that “where an agreement has been reached orally… and is followed
by one or both of the parties sending formal memoranda embodying the terms so far agreed and adding terms not discussed.”
Additionally, ProCd provides no explanation for its conclusion that the “vendor is the master of the offer.” In typical consumer
transactions, the purchaser is the offeror, and the vendor is the offeree. Vice versa is possible, but factual evidence to assert this
here is lacking.
Under §2:207, the standard terms either constitute an expression of acceptance, or written confirmation. If it is an expression of
acceptance, it would constitute a counteroffer, only if Gateway expressly made its acceptance conditional on Plaintiff’s assent.
However, Gateway provides no evidence that it informed Plaintiff that the transaction was conditioned on Plaintiff’s acceptance of
the terms. Additionally, the fact that they shipped the goods with the terms attached did not communicate any unwillingness to
proceed without Plaintiff’s agreement.
Because Plaintiff isn’t a merchant, and he did not expressly agree to the terms, under K.S.A. §84-2:207 cmt. 2, the terms did not
become part of the agreement.
The act of keeping the computer past five days is not sufficient to demonstrate that Plaintiff expressly agreed to the terms.
Notes:
Christopher Specht v. Netscape Communications Corporation
United States Court of Appeals, Second Circuit
306 F.3d 17 (2002) - (Sotomayor, Circuit Judge)
Parties:
108)
109)
Christopher Specht – (Plaintiff) Software Downloader
Netscape Communications Corporation – (Defendant) Software Provider
Procedural History and Outcome:
Trial Court ruled in favor of Plaintiff. Defendant appeals. Court of Appeals affirms.
Facts:




Plaintiff downloaded software programs “SmartDownload” and “Communicator” together from Defendant’s website. They
were captioned together as “SmartDownload Communicator” and the webpage urged Plaintiff to “Download With
Confidence Using SmartDownload.”
Communicator had a clickwrap containing all the license terms, which required the downloader to accept them to proceed
with installing the software.
Although they were downloaded together, SmartDownload did not contain such a clickwrap, but listed terms and
conditions lower down on the webpage, which required some scrolling in order to see. Plaintiff was not aware of this, and
was not led to believe that there were any specific terms involved with the installation of SmartDownload.
Included in the terms for SmartDownload listed on the webpage was a clause compelling arbitration to resolve disputes.
Issue(s):
Whether a user who downloaded a software program which did not have a clickwarp containing the software’s license agreement,
and the agreement was instead posted on the website below the download link, requiring scrolling to see, had reasonable notice of
and manifested asset to such an agreement.
Holding/Reasoning:
Although an onlooker would have seen Plaintiff click on the “Download” button, a consumer’s clicking on a download button does
not communicate assent to contractual terms if the offer did not make clear to the consumer that clicking on the download button
would signify assent to those terms.
The principle of knowing assent applies with particular force to provisions for arbitration. Clarity and conspicuousness of arbitration
terms are important in securing informed assent. To bind another to such an agreement, in must be accomplished n a way that each
party will fully and clearly comprehend that the agreement to arbitrate exists and binds the parties.
Listing the license agreement on the next scrollable screen did not put Plaintiff on “inquiry notice.” A reasonably prudent offeree in
Plaintiff’s position would not necessarily have known or learned of the existence of the agreement prior to acting, so as to assent to
such an agreement.
Most of the cases cited by Defendant in support of their inquiry notice argument are drawn from the world of paper contracting. A
physical document is distinguished from a notice concealed at the bottom of a webpage that requires scrolling to see.
Reasonably conspicuous notice of the existence of contract terms and unambiguous manifestation of assent to those terms by
consumers are essential if electronic bargaining is to have integrity and credibility. A reasonably prudent offeree in Plaintiff’s
position would not have known or learned, prior to acting on the invitation to download, of the reference to SmartDownload’s
license terms hidden below the “Download’ button on the next screen.
Notes:
Cairo, Inc. v. Crossmedia Services, Inc.
United States District Court, N.D. California
2005 WL 756610 (2005) - (Ware, J)
Parties:
110)
111)
Cairo, Inc. – (Plaintiff) Website Owner
Crossmedia Services, Inc, – (Defendant) Website Owner
Procedural History and Outcome:
Trial Court ruled in favor of Defendant
Facts:







Crossmedia operates a website that displays advertisements and available merchandise at local stores. Webpages on their
website contain a notice stating that by continuing to use the website, users agree to CMS’s terms of use. The notice
contained a link to the full terms of use. The terms contained a clause stating that any disputes arising from the terms of
use would be adjudicated in state or federal court in Chicago.
Cairo operated a similar website, but compiled their information from third parties, including CMS. They collected the
information via “robots” or “crawlers” that visited websites, including CMS’s and recorded the data therein. Their website
contained information from CMS’s site.
CMS sent a cease and desist letter to Cairo.
Cairo brought this suit seeking a declaratory judgment that it did not infringe upon CMS’s intellectual property rights.
CMS motioned to dismiss for improper venue, because pursuant to the forum selection clause in the terms of use, Cairo’s
suit should have been brought in Chicago.
Cairo argues that there was no contract formed to render the terms of use binding on them.
Cairo acknowledged that it was aware of the terms of use as of the day before it received the cease-and-desist letter.
Issue(s):
Does a party’s repeated and automated use of a website, the content of which is offered to users subject to stated terms of use,
impute knowledge to the party of the terms of use?
Holding/Reasoning:
“While new commerce on the Internet has exposed courts to many situations, it has not fundamentally changed the principles of
contract. It is standard contract doctrine that when a benefit is offered subject to stated conditions, and the offeree makes a
decision to take the benefit with knowledge of the terms of the offer, the taking constitutes acceptance of the terms, which
accordingly become binding on the offeree” (Register.com v. Verio, Inc.)
Cairo visited CMS’s website with knowledge of CMS’s Terms of Use. Thus, there was an acceptance of the terms, and are thus
binding upon them.
This case is distinguished from Specht v. Netscape Communications in that Cairo knew of the terms at least “the day before CMS sent
its letter threatening legal action,” whereas in Specht the plaintiffs had no reason to know that Netscape’s terms were further down
on the page, and required scrolling to see.
Also, Cairo’s repeated and automated use of CMS’s web pages can form the basis of imputing knowledge to Cairo of the terms on
which CMS’s services were offered even before Cairo’s notice of CMS’s cease and desist letter.
Notes:
George Varney v. Issac Ditmars
Court of Appeals of New York
217 N.Y. 223 (1916) - (Majority: Chase, J; Dissent: Cardozo, B.)
Parties:
112)
113)
George Varney – (Plaintiff) Architect Employee
Issac Ditmars – (Defendant) Architect Employer
Procedural History and Outcome:
Trial Court ruled in favor of Defendant. Plaintiff appeals.
Facts:







Varney was hired by Ditmars in October 1910 to be an architect, as the rate of $35 per week.
On February 1, 1911, Varney and another designer had a conversation with Ditmars regarding their employment. Ditmars
agreed to pay them an extra $5 per week, if they would continue working for him and complete certain projects that had
been sitting around for three years. If they continued working in this manner, he would give them a “fair share” of his
profits when he would close his books in January 1, 1912.
Varney continued working and was paid $49 per week.
On November 6, 1911, Ditmars told Varney he wanted him to come into work on Election Day. Varney replied that he did
not want to work that day, as he wanted to remain home and vote in a local election. Varney did not show up at work on
Election Day. On that day he became ill, and remained ill and unable to work until December 1, 1911.
On November 11, 1911, Ditmars sent a letter to Varney informing him that he was upset that Varney did not work as
requested on Election Day, and due to his absence and disobedience, he was being fired.
Upon recovery, Varney went back to the office and requested to start working again, according to the agreement that was
made on February 1. Ditmars said that there was no agreement, and refused to allow him to continue working.
This is a suit brought by Varney seeking to enforce the February 1 agreement where Ditmars agreed to pay Varney a “fair
share” of his profits.
Issue(s):
For a contract to be valid, must the agreement made be definite and explicit enough to permit the full intent of the parties to be
ascertained with a reasonable degree of certainty?
Holding/Reasoning:
The statement alleged to have been made by Ditmars about giving Varney a fair share of his profits is vague, indefinite, and
uncertain. It cannot be computed from anything that was said by the parties or by reference to any document, paper or other
transaction. Therefore, the minds of the parties cannot be said to have met upon a particular share of the profits, or upon a plan by
which such share can be computed or determined. The contract was never consummated. It was left subject to the will of Ditmars
and for further negotiation.
In case of “goods,” words such as “fair and reasonable value” are synonymous with “market value,” and can be understood to be
meant as a promise to pay fair, reasonable, market value, which can be shown by direct testimony, from those competent to give
such testimony, which derives from experience and knowledge. This contract however, is not only uncertain, but is affected by so
many other facts that are in themselves indefinite and uncertain that the intentions of the parties are pure speculation. A fair share
may be any amount from nominal to a material part according to the particular views of the person whose guesswork is considered.
“For the validity of a contract, the promise, or the agreement, of the parties to it must be certain and explicit, and that their
intention may be ascertained to a reasonable degree of certainty. Their agreement must be neither vague or indefinite, and, if thus
defective, parol proof cannot be resorted to.”
“There is no contract so long as any essential element is open to negotiation” (Petze v. Morse Dry Dock & Repair Co.,)
Varmey could have possibly recovered his regular salary for the time he was without work, but it was not part of his complaint.
Dissent (Cardozo, J.)
It does not have to be the case that “fair share” is indefinite and uncertain enough not to support a contract because its meaning is
not ascertainable. Varney could have presented sufficient evidence of the meaning “fair share” as contemplated by himself and
Ditmars. He failed to do so, and thus the agreement is unenforceable. He did provide enough evidence of the wages he should have
been paid. He was not an “at will” employee, and is entitled to these wages.
Notes:
Oglebay Norton Company v. Armco, Inc.
Supreme Court of Ohio
52 Ohio St. 3d 232 (1990) –()
Parties:
114)
115)
Oglebay Norton Company – (Plaintiff) Shipper
Armco, Inc. – (Defendant) Iron Company
Procedural History and Outcome:
Trial Court ruled in favor of Plaintiff. Defendant appealed, Court of Appeals affirmed. Defendant appeals, Supreme Court affirms.
Facts:





In 1957, Oglebay entered into a long term contract with Armco, where Oglebay agreed to meet all of Armco’s iron ore
shipping needs in the Great Lakes, and Armco agreed to pay a flexible shipping rate, set according to primary and secondary
market factors described in the contract.
The contract was extended periodically, most recently through 2010.
Between 1983 and 1985, the market changed and shipping rates were no longer made public. As a result, the parties could
no longer rely on the market factors described in the contract for determining the shipping rate. They mutually agreed on a
rate in 1984, but were unable to agree thereafter. Oglebay filed for a declaratory judgment to set the shipping rate, and
they continued to perform pending the court’s decision.
In August 1987, Armco filed a counterclaim seeking to have the contract declared no longer enforceable.
In November 1987, the trial court issued a declaratory judgment setting the rate at $6.25 for 1986, and ordering the parties
to mutually agree on, or submit to mediation to determine the rate through 2010.
Issue(s):
Does a contract become unenforceable when one of its key terms becomes indefinite but the parties still intend to be bound by the
agreement?
Holding/Reasoning:
Intent to be bound: Whether the parties intended to be bound, even upon failure of the pricing mechanisms, is a question of fact.
The trial court had ample evidence to conclude that the parties did so intend.
Since the parties intended to be bound by the contract, the trial court had the authority to determine a reasonable rate for
Jurisdiction to impose shipping rate: Oglebay’s services, even though the price mechanism of the contract had failed.
Restatement 1 of Contracts §33 cmt. e: “Where [the parties] intend to conclude a contract for the sale of goods and the price is not
settled, the price is a reasonable price at the time of delivery if (c) the price is to be fixed in terms of some agreed market or other
standard as set or recorded by a third person or agency and it is not so set or recorded. UCC §2:305(1).”
Jurisdiction to impose future negotiations / mediation:
Restatement 2 of Contracts §362 Effect of Uncertainty of Terms: “Specific performance or an injunction will not be granted unless
the terms of the contract are sufficiently certain to provide a basis for an appropriate order.”
Cmt. b: “Before concluding that the required certainty is lacking, however, a court will avail itself of all the usual aids in determining
the scope of the agreement. Expressions that at first appear incomplete may not appear so after resort to usage, or the addition of a
term supplied by law.”
Ordering specific performance was necessary since the undisputed changes in the market prices, and the length of the contract
make it impossible to award Oglebay with accurate damages due to Armco’s breach.
Notes:
Robert Blinn v. Beatrice Community Hospital and Health Center, Inc.
Supreme Court of Nebraska
270 Neb. 809 (2006) - (Garrard, J.)
Parties:
116)
117)
Robert Blinn – (Plaintiff) Employee
Beatrice Community Hospital and Health Center – (Defendant) Employer
Procedural History and Outcome:
Trial Court granted Defendant’s motion for summary judgment. Plaintiff appealed, Court of Appeals reversed. Defendant appeals,
Supreme Court affirms.
Facts:







Blinn, aged 67, was an at-will employee at Beatrice… Hospital.
In June 2002, Blinn received a job offer from a different hospital for a position he can hold until retirement.
Blinn met with Larry Emerson, Beatrice’s administrator about the offer and sought reassurances of his job security. Emerson
said that Blinn was doing a good job, that he did not want him to leave, and that they had “at least five more years of work
to do.”
Blinn also met with the chairman of Beatrice’s board of directors. The chairman told him that he wanted him to stay.
After the two conversations, Blinn decided to remain at Beatrice, believing that his job was secure.
In January 2003, Blinn was asked to resign and was terminated in February 2003.
Blinn alleges that his at-will contract was modified after oral representations made during the aforementioned
conversations, and brought this suit seeking recovery based on breach of an oral contract, and promissory estoppel claims.
Issue(s):
Does an action for promissory estoppel based on a promise that is insufficiently definite to form a contract exist as long as the
promisee’s reliance on the promise is reasonable and foreseeable?
Holding/Reasoning:
The assurances allegedly given to Blinn were not sufficiently definite in form to constitute an offer of a unilateral contract. Although,
had it been definite enough, it would have been enforceable. It is not clear whether Beatrice manifested a clear intent to make a
promise as an offer of employment other than employment at will, and to be bound by it, so as to justify an employee in
understanding that a commitment has been made. Whether a proposal is meant to be an offer for a unilateral contract is
determined by the outward manifestations of the parties, not by their subjective intentions. There must be a meeting of the minds,
or a mutual understanding between the parties to the contract. The statement “we’ve got at least five more years of work to do” is
not a clear offer of definite employment and does not manifest intent to create a unilateral contract.
Promissory estoppel is based upon the principle that injustice can be avoided only by enforcement of a promise – a promise which
the promisor should reasonably expect to induce action or forbearance is binding if injustice can be avoided only by enforcement of
the promise. Under Nebraska law, there is no requirement of “definiteness” in an action based on promissory estoppel. It is
sufficient that the reliance be reasonable and foreseeable.
Therefore, while the statements made to Blinn were insufficiently definite to offer a contract on terms other than an at-will
employment, there is a genuine issue of material fact as to whether Blinn was promised terms of employment that could reasonably
have expected to induce him to forgo the job opportunity in the other hospital.
Notes:
Nebraska rejects this view, but the opinion says to compare the following restatements:
Restatement §2 Promise; Promisor; Promisee; Beneficiary (1) A promise is a manifestation of intention to act or refrain from acting
in a specified way, so made as to justify a promisee in understanding that a commitment has been made. (2) The person manifesting
the intention is the promisor. (3) The person to whom the manifestation is addressed is the promisee. (4) Where performance will
benefit a person other than the promisee, that person is a beneficiary.
Restatement §90 Promise Reasonably Inducing Action or Forbearance (1) A promise which the promisor should reasonably expect
to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is
binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice
requires. (2) A charitable subscription or a marriage settlement is binding under Subsection (1) without proof that the promise
induced action or forbearance.
Restatement §90 cmt. a: Relation to other rules.... This Section is often referred to in terms of "promissory estoppel," a phrase
suggesting an extension of the doctrine of estoppel. Estoppel prevents a person from showing the truth contrary to a representation
of fact made by him after another has relied on the representation....
Certainly reliance is one of the main bases for enforcement of the half-completed exchange, and the probability of reliance lends
support to the enforcement of the executory exchange. See Comments to §§72, 75. This Section thus states a basic principle which
often renders inquiry unnecessary as to the precise scope of the policy of enforcing bargains. Sections 87-89 state particular
applications of the same principle to promises ancillary to bargains, and it also applies in a wide variety of non-commercial
situations.