CONTRACTS FOR DUMMIES – FALL 2021
Contents
I. The Legal Basis for Recognizing and Enforcing Promises ...................................................... 4
INTRODUCTION TO PROMISSORY LIABILITY ...............................................................................................4
Bayliner Mariner Corp. v. Crow.............................................................................................................................4
UCC Article 2 Basics...............................................................................................................................................4
Hawkins v. McGee.................................................................................................................................................5
REMEDYING BREACH ...........................................................................................................................5
Damages – R § 344 (p. 20/21) ...............................................................................................................................5
Sullivan v. O'Connor ..............................................................................................................................................5
Naval v. Charter ....................................................................................................................................................6
White v. Benkowski ...............................................................................................................................................6
CONSIDERATION AS A BASIS FOR ENFORCEMENT ........................................................................................6
Consideration Defined ..........................................................................................................................................6
Hamer v. Sidway ...................................................................................................................................................6
Bilateral and Unilateral Contracts .........................................................................................................................7
Mills v. Wyman .....................................................................................................................................................7
Hypo: Lawn mowing .............................................................................................................................................7
Gratuitous Promises .............................................................................................................................................7
Dyer v. National By-Products, Inc. ........................................................................................................................8
Feinberg v. Pfeiffer Co...........................................................................................................................................8
Recognized Exceptions to Bargain Req. ................................................................................................................8
Webb v. McGowin ................................................................................................................................................8
Harrington v. Taylor ..............................................................................................................................................9
Kirksey v. Kirksey ...................................................................................................................................................9
Land Lake v. Columber ..........................................................................................................................................9
Rewards (p. 93) .....................................................................................................................................................9
Strong v. Sheffield .................................................................................................................................................9
Mattei v. Hopper ...................................................................................................................................................9
Structural Polymer v. Zoltek ...............................................................................................................................10
Output and Requirements Contracts ..................................................................................................................10
Wood v. Lucy, Lady Duff-Gordon ........................................................................................................................10
RELIANCE AS A BASIS FOR ENFORCEMENT ............................................................................................... 10
Ricketts v. Scothorn ............................................................................................................................................10
Feinberg v. Pfeiffer Co. revisited .........................................................................................................................11
Promissory Estoppel – R. 2d § 90 (p. 126) ..........................................................................................................11
Wright v. Newman ..............................................................................................................................................11
Cohen v. Cowles ..................................................................................................................................................11
D&G Stout v. Bacardi ..........................................................................................................................................11
RESTITUTION AS A BASIS FOR ENFORCEMENT .......................................................................................... 12
Key Terms ...........................................................................................................................................................12
Cotnam v. Wisdom ..............................................................................................................................................12
Problem, p.148 – the Suggestion Box .................................................................................................................12
Callano v. Oakwood Park Corp. ...........................................................................................................................12
Mechanic's Liens .................................................................................................................................................12
Pyeatte v. Pyeatte ...............................................................................................................................................13
II. Creating Contractual Obligations ..................................................................................... 13
THE NATURE OF ASSENT .................................................................................................................... 13
Fundamental principles ......................................................................................................................................13
Theories of Assent ..............................................................................................................................................13
Lucy v. Zehmer ....................................................................................................................................................13
Pepsico Case .......................................................................................................................................................13
Specht v. Netscape Communications Corp. ........................................................................................................14
Lamps Plus, Inc. v. Varela ....................................................................................................................................14
Intent to Be Bound (p. 189) ................................................................................................................................14
Tribune-Type Agreements ..................................................................................................................................14
THE OFFER...................................................................................................................................... 15
Defined................................................................................................................................................................15
Owen v. Tunison .................................................................................................................................................15
Bumper Hall Pen -- pg 187 ..................................................................................................................................15
Fairmont Glass v. Crunden-Martin Woodware ...................................................................................................15
Advertisements as Offers ....................................................................................................................................15
Lefkowitz v. Great Minn. Surplus Store ..............................................................................................................16
THE ACCEPTANCE ............................................................................................................................. 16
Corinthian v. Lederle Labs ...................................................................................................................................16
Silence as Acceptance .........................................................................................................................................16
Formation under UCC Article 2 ...........................................................................................................................16
Acceptance at Common Law – Mirror Image Rule .............................................................................................16
TERMINATION OF THE POWER OF ACCEPTANCE ........................................................................................ 17
When is the power of acceptance conferred to the offeree by the offeror terminated? ..................................17
Limiting the Power of Revocation: Options Contracts ........................................................................................17
Dickinson v. Dodds ..............................................................................................................................................17
UCC Firm Offer Rule ............................................................................................................................................18
Restatement 45 & Brooklyn Bridge Hypo ...........................................................................................................18
Drennan v. Star Paving Co. ..................................................................................................................................18
Rejection under an Options Contract by Offeree ...............................................................................................19
Common Law Mailbox Rule ................................................................................................................................19
State v. Rios.........................................................................................................................................................19
ACCEPTANCE VARYING OFFER: CONTRACT FORMATION & CONTRACT TERMS ................................................. 19
Last Shot Fired Doctrine ......................................................................................................................................19
Battle of the Forms .............................................................................................................................................20
UCC 2-207 - Changes Common Law ....................................................................................................................20
Article 2 Roadmap...............................................................................................................................................20
Dorton v. Collins & Aikman .................................................................................................................................20
C. Itoh & Co. v. Jordan Int’l Co. ...........................................................................................................................20
Northrop Corp. v. Litronic Industries ..................................................................................................................21
The UCC Knockout Doctrine ................................................................................................................................21
PRECONTRACTUAL LIABILITY................................................................................................................ 21
Generally .............................................................................................................................................................21
Hoffman v. Red Owl ............................................................................................................................................21
Dixon v. Wells Fargo N.A. ....................................................................................................................................21
Cyberchron v. Calldata ........................................................................................................................................22
Reliance Issues ....................................................................................................................................................22
Evertite v. Greene ...............................................................................................................................................22
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THE REQUIREMENT OF DEFINITENESS .................................................................................................... 23
Toys Inc. v. F.M. Burlington .................................................................................................................................23
III. Statute of Frauds ............................................................................................................ 23
INTRODUCTION TO SOF ...................................................................................................................... 23
Statute of Frauds Steps .......................................................................................................................................23
Justifications for the SoF .....................................................................................................................................24
CONTRACTS WITHIN THE STATUTE OF FRAUDS......................................................................................... 24
Common SoF Provisions......................................................................................................................................24
MY LEGS!!!! .........................................................................................................................................................24
The One-Year Provision ......................................................................................................................................24
CR Klewin, Inc. v. Flagship Products, Inc. ............................................................................................................24
Informal Extensions of Employment ...................................................................................................................25
Lifetime Agreements...........................................................................................................................................25
Interests in Real Property ...................................................................................................................................25
Suretyships ..........................................................................................................................................................25
Langman v. Alumni Ass'n of the University of VA ...............................................................................................26
The Main Purpose Rule .......................................................................................................................................26
Central Ceilings v. National Amusements ...........................................................................................................26
Leading Object Rule ............................................................................................................................................26
SATISFYING THE STATUTE OF FRAUDS .................................................................................................... 26
Satisfying the Writing Requirement At Common Law ........................................................................................26
Satisfying the SoF in the Digital Age....................................................................................................................27
Crabtree ..............................................................................................................................................................27
STATUTE OF FRAUDS AND THE SALE OF GOODS ........................................................................................ 27
UCC 2-201(1) .......................................................................................................................................................27
EXCEPTIONS TO THE STATUTE OF FRAUDS ............................................................................................... 27
Methods that Limit SoFs .....................................................................................................................................27
Part Performance Exceptions..............................................................................................................................27
Estoppel Exception to SOFs.................................................................................................................................28
Monarco v. Lo Greco ...........................................................................................................................................28
2-201 and Exceptions to SOF ..............................................................................................................................28
IV. Policing the Bargaining Process ...................................................................................... 29
INTRODUCTION & CAPACITY ............................................................................................................... 29
Methods ..............................................................................................................................................................29
Douglass v. Pflueger ............................................................................................................................................29
Capacity to Contract- Minors ..............................................................................................................................29
Mental Capacity to Contract ...............................................................................................................................29
Ortelere v. Teachers’ Retirement Bd. .................................................................................................................29
Cundick v. Broadbent ..........................................................................................................................................29
Kenai Chrysler v. Denison ...................................................................................................................................30
OVERREACHING ............................................................................................................................... 30
Generally .............................................................................................................................................................30
Alaska Packers Ass'n v. Domenico ......................................................................................................................31
Exceptions to PEDR .............................................................................................................................................31
3
Schwartzreich v. Bauman-Basch .........................................................................................................................31
Watkins & Son v. Carrig ......................................................................................................................................32
PEDR Limitations .................................................................................................................................................32
Austin Instrument, Inc. v. Loral Corp. .................................................................................................................32
Undue Influence..................................................................................................................................................33
Appendix: Exam Tips............................................................................................................ 34
Exam Tips..................................................................................................................................... 34
Mistakes to Avoid on Exams ......................................................................................................... 35
CONTRACT: A promise or a set of promises for the breach of which the law gives a remedy (R 2d § 1)
Promise: A manifestation of an intent to act or refrain from acting in a specified way, so made as to
justify a promise in understanding that a commitment has been made
Promisor: person manifesting the intention
Promisee: Person to whom the manifestation is addressed
Elements of a Contract (For Rogers’ Purposes) – (1) OFFER and (2) ACCEPTANCE
Supported by CONSIDERATION and INTENT TO BE BOUND
I. THE LEGAL BASIS FOR RECOGNIZING AND ENFORCING PROMISES
INTRODUCTION TO PROMISSORY LIABILITY
BAYLINER MARINER CORP. V. CROW
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Boat Horsepower/Deep Sea Fishing
Rule: Express warranties in Virginia have to be very direct (under article II)
UCC 2-313 – “A statement purporting to be merely the seller’s opinion or commendation of the
goods does not create a warranty”
o Atherton’s opinion of the boat’s probable speed did not create a warranty between
Bayliner and Crow
Bayliner had not violated the “implied warrant of merchantability,” UCC 2-314
UCC ARTICLE 2 BASICS
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Applies to Ks (Contracts) for sale of goods. Goods are defined in 2-105(1)
Applies to sales of goods by and to merchants and non-merchants, but a few provisions apply to
only merchant sellers. Merchants are defined in 2-104 (1).
Article 2 may or may not apply to "hybrid" Ks
o Hybrid: a mix of the sale of a good and a service (ex: hiring someone to install gutters paying for the good and for the labor)
Section 1-103(b) provides that Article 2 does not totally displace the common law
Efficient Breach: Breaching party may be better off from breaching the contract than performing,
because the damages from breaching the contract outweighs the cost of compensating the injured party
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HAWKINS V. MCGEE
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The Hairy Hand Case
T. court judge was correct in allowing jury to find whether there was an enforceable promise
Note: the dividing line between a promise (this will be “a one hundred percent good hand”) and
an opinion (I believe I can fix your hand / in my opinion, this hand should return to full
functionality)
The law is fact-specific, hence remand
Court amends jury instruction to allow for the difference in value between the value of the hand
at present and a good or perfect hand
Even if the hand had not been made worse, but was the same, P is still entitled to the
difference in value from a perfect hand
REMEDYING BREACH
Fundamental Assumptions for Contract Remedies (p.10)
Breach of K damages are compensatory, not punitive
Expectation damages are the customary measure - to give the injured party the benefit of its
bargain
Relief is generally substitutional and not specific (money damages generally awarded)
DAMAGES – R § 344 (P. 20/21)
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Expectation: benefit of the bargain for P'EE. Put P'EE in same place as if P'OR had performed
and not breached
Reliance: P'EE's detriment in reliance on the promisor (often expenses incurred). To "undo the
effect of the breached promise on the P'EE.
Restitution: Compensate for benefit P'EE conferred on P'OR. Puts P'OR in position it would have
been if K not made
Disgorgement: Focuses on benefit to P'OR from breaching, puts P'OR in position they would
have been if K not breached.
o P’or has to relinquish gains from breach
SULLIVAN V. O'CONNOR
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O'Connor specifically promised Sullivan "a Hedy Lamarr nose," and because of this specific
promise the suit could go forward in spite of court's general reticence to enforce breach of
contract on the part of medical doctors
Expectation = promised nose - resulting nose
Reliance = before nose - resulting nose + pain and suffering from 3rd op
Restitution = money back for operation
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NAVAL V. CHARTER
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Article 2 not apply b/c covers transactions and sales of (tangible) goods.
o Books can be tangibles if part of a transaction
o This case, however, involved the sale of a license to produce paperbacks, so no goods
being sold.
Rule: In a breach of contract action, a plaintiff is generally entitled to recover damages for
actual losses caused by the breach.
WHITE V. BENKOWSKI
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“The idiots in Wisconsin”
Rule: Punitive damages are not available for suits brought due to breach of Contract, except in
exceedingly special circumstances, such as when a tort has been caused by breach of contract.
Promissory Fraud: Promisor enters into a contract with no intention to perform. Punitive damages
allowed.
Pareto Optimal: Transactions (or breaches) which makes no one worse off while making someone else
better off
Kaldor-Hicks Efficiency: Promisor's gain from breach exceeds the promisee's loss (looks at net allocation
of resources)
CONSIDERATION AS A BASIS FOR ENFORCEMENT
CONSIDERATION DEFINED
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Main principle of promissory enforcement
A bargained-for exchange which provides
o (a) a benefit for the promisor and/or
o (b) a detriment to the promisee (R 2d § 71)
We look at consideration prospectively from the formation of the bargain
Consideration may consist of
o an act;
o a forbearance; or
o the creation, modification, or destruction of a legal relation. (R 2d § 71)
HAMER V. SIDWAY
 Party forbears from drinking and gambling in exchange for $5000
 RULE: “Consideration means not so much that one party is profiting as that the other abandons
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some legal right in the present or limits his legal freedom in the future”
Forbearance is sufficient consideration for a contract
Freedom **of** Contract: as a member of society, you are allowed to enter into a contract with the
understanding that promises would be enforced
Freedom **from** Contract: the anti-formation bias. Courts are wary to read contracts into facts where
they may not exist.
Peppercorn consideration - generally speaking, peppercorns (trivial amt) are enforceable
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BILATERAL AND UNILATERAL CONTRACTS
Bilateral K - where each party makes a promise to each other (an exchange of promises)
(most common, in exchange for something of value)
 Contracts form when parties exchange promises
 Performance is in the future (promised performance)
 Most business contracts are bilateral Ks
 Hawkins and Sullivan are bilateral Ks
Unilateral K - where one party makes a promise to the other party and seeks a return performance from
that party (a promise for performance, as opposed to a promise to perform)
 EX: Hamer v. Sidway is a unilateral contract
 Promise in exchange for performance (intangible benefit to p'or)
 Reward contracts are unilateral Ks
MILLS V. WYMAN
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Wyman Jr. becomes sick, Mills cares for Wyman Jr until latter dies. Wyman Sr expresses
gratitude to Mills w/ promise to pay son's medical expenses, but never pays
RULE: Moral obligation does not constitute sufficient consideration for a binding contract
o Note: otherwise this would be using Mills’ past performance as consideration, and past
performance is never adequate consideration in contract law
HYPO: LAWN MOWING
If p'or promises $50 to p'ee for mowing lawn, does this have due consideration to form binding K?
 YES. Bargain which provides benefit and detriment to both parties.
 Note: P'ee is plaintiff in a breach of K suit. Injured party is P'ee.
 If mower breaks K and P'ee has to hire another for 75, then P'or entitled to expectation
damages of 25.
GRATUITOUS PROMISES
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The law enforces gratuitous transfers but not gratuitous promises
If no consideration to support a promise, it is a gratuitous promise and not enforceable
Hamer would still be enforceable as a gratuitous transfer if uncle had given money up front
Many gratuitous promises are made verbally and are already not likely to be enforced
If the gift has been made, then the recipient has it and can keep it, but is bound by conditions of
gift if he does.
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DYER V. NATIONAL BY-PRODUCTS, INC.
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Dyer alleges that employer promised lifetime employment (verbally) provided he did not sue for
injury
Two schools of thought
1. Williston approach: if you forbear an invalid claim, there is no real detriment, so no
consideration
2. Restatement (Second) § 74(1)(b)
Settlement of Claims
(1) Forbearance to assert or the surrender of a claim or defense which proves to
be invalid is not a consideration unless
(a) the claim or defense is in fact doubtful because of uncertainty as to
the facts or the law, or
(b) the forbearing or surrendering party believes that the claim or
defense may be fairly determined to be valid
FEINBERG V. PFEIFFER CO.
PROMISSORY ESTOPPEL – Because Feinberg relied on pension payments (and her reliance was
reasonably foreseeable) the promise is enforceable
No consideration, because Feinberg’s past performance as an employee w/ company not
sufficient
RECOGNIZED EXCEPTIONS TO BARGAIN REQ.
(1) Promise to pay a debt barred by the Statute of Limitations
(2) Promise by a person reaching majority reaffirming a promise made when the promisor was a
minor which could have been avoided on that ground
(3) Promise to pay a debt discharged in bankruptcy
Reason for Exceptions: Perhaps because there was originally a quid pro quo (that is a bargain
with consideration) and the later promise removes a legal impediment to enforcement of the
original promise’
WEBB V. MCGOWIN
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Webb allowed himself to be seriously injured in a workplace accident so as to save McGowin
from almost certain death
In recognition of Webb’s act, McGowin promises to pay $15 biweekly for duration of Webb’s
life. Payments consistent for 8 years until McGowin dies, then they cease.
Rule - For a moral obligation to support a subsequent promise to pay, there must have existed
a prior legal or equitable obligation, which for some reason had become unenforceable, but
for which the promisor was still morally bound.
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HARRINGTON V. TAYLOR
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Harrington took an axe blow from Mrs Taylor intended for Mr Taylor
Mr Taylor promises to repay Harrington, and hands her a small sum of money, but nothing else
Harrington sues for breach of K
Rule: In the case of a humanitarian act, voluntarily performed, there is no consideration
sufficient for recovery at law
KIRKSEY V. KIRKSEY
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Promised land for sister to live on if she moved
Gratuitous promises, even if conditional, do not constitute binding contracts
LAND LAKE V. COLUMBER
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Employment terminated in 2001 & violated noncompete presumably by working for a
competitor of Lake Land
Noncompetes are disfavored under the law, but they are enforceable if they are reasonable
REWARDS (P. 93)
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bargain for a return performance (unilateral K)
must be aware of promise when one performs IOT for it to be enforceable
motive is not required for performance, per restatement
STRONG V. SHEFFIELD
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P'or - Louisa Sheffield - gets no benefit but does incur detriment
P'ee - Benjamin Strong - gets a benefit but does he incur any detriment? Louisa's defense is that
he did not, and this K is illusory
"I will keep it until such time as I want it"
RULE: A promise to refrain from collecting a debt for an undetermined period of time does not
constitute valid consideration for a promissory note.
MATTEI V. HOPPER
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Rule: A satisfaction clause in a real-estate contract that bases one party’s promise to perform
on satisfaction of a condition does not render the promise illusory or lacking consideration.
Seller's Defenses:
o Attempt to construe deposit receipt as unilateral K
o "Leases satisfactory to buyer" is a condition to the existence of a K
o Deposit Receipt is illusory and therefore lacks consideration, that is, buyer incurs no
detriment and has a "free way out"
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STRUCTURAL POLYMER V. ZOLTEK
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10-year requirements contract, which means that the buyer SP has 10 years in which it buys its
requirements of carbon fiber from Zoltek (up to 1 million lb more than prior year)
After 5 years, dispute arises and Zoltek doesn't fill orders for two years. SP sues, seeking to
recoup lost profits for the balance of the 10-year term.
Both parties appeal the District court decision (P bc judge reduced damages from jury award)
Zoltek Illusory K Arguments - No detriment for SP as buyer and p'ee
1 - SP had zero requirements for large-tow fiber when K was formed;
2 - Price protection clause gave SP option to purchase from other suppliers whenever it
wanted if they could find it cheaper;
3 - SP was free to buy small-tow fiber, which is interchangeable with large-tow fiber,
from a third party instead of buying large-tow from Zoltek, whenever it pleased
Court's Response to Zoltek's Illusory K Arguments
1 - Good faith. If SP didn't buy any fiber, it acted in bad faith and this would be a
breach of K. UCC 2-306(1)
2 - If Z matched a third party price, SP obligated to purchase from Z, thus no way out for
SP.
3 - If small and large-tow interchangeable, then good faith. Purchases from a third party
small tow seller would be a breach. No free way out for SP.
OUTPUT AND REQUIREMENTS CONTRACTS
Output Contract: requires that the buyer will buy all the goods that the seller produces, as opposed to a
requirements contract as seen in Zoltek, where a seller is required to meet all the requirements that a
buyer has for a given good or product.
WOOD V. LUCY, LADY DUFF-GORDON
Court finds a promise "fairly to be implied" of reasonable efforts by Wood. Cardozo roasts Lucy.
RULES:
(1) A contract may be enforced when there is no evidence of a promise, exchanged as consideration,
in the explicit terms of the contract.
(2) A promise to use reasonable efforts may be implied from the entire circumstances of a contract.
RELIANCE AS A BASIS FOR ENFORCEMENT
RICKETTS V. SCOTHORN
Promissory Estoppel - Ricketts court amends doctrine of Equitable Estoppel to apply in the context of
a promise (p.122)
Actions taken by p'ee must be reasonably foreseeable by the promisor under the terms of the promise
(mentioned in Restatement First, §90 (p. 124))
Court upholds promise, awarding expectation damages (reliance damages would be lost income from
leaving work, this is more appropriate in this case and the way most courts would rule)
Most courts limit damages in promissory estoppel to the reliance interest
Doctrine of P.E. gives courts flexibility on when to enforce ("to prevent injustice")
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FEINBERG V. PFEIFFER CO. REVISITED
What was Feinberg's reliance? (Leaving work)
Was her illness relevant? (NO)
Different result if she had not become ill? (NO, illness was not reasonably foreseeable so not reliance)
PROMISSORY ESTOPPEL – R. 2D § 90 (P. 126)
Promises which induce action or forbearance; that is reliance
Thus, promises without consideration may still be enforceable
Reliance must be foreseeable from the perspective of the p'or.
Enforceable if necessary to avoid injustice
*This is a subjective standard which requires the exercise of judicial discretion
Remedy for breach may be limited as justice requires; i.e., many court limit PE recovery to
reliance damages
WRIGHT V. NEWMAN
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An obligation to provide child support may be enforced through promissory estoppel.
COHEN V. COWLES
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News Confidentiality Case
Newspaper says that a violation under promissory estoppel would violate first amendment right to
free speech (SCOTUS grants cert on constitutional law question)
Is there an argument that a bargain with consideration existed?
Is this just a gratuitous promise with a condition?
 The reliance is Cohen having his identity kept secret and the damage flowing from the breach of
the promise is that Cohen was fired
It comes down to a question of justice or injustice, which determines enforcement
 Court rules that there would be an injustice committed if promise not enforced
D&G STOUT V. BACARDI
In general, Plaintiffs sue for breach rather than PE because P could then get expectation damages (more
$), and because standard is consideration rather than reliance, so a more objective enforceability
standard
 however, D&G only brings a PE claim against Bacardi in this case because the K was an at-will
relationship, so there is no possibility of a breach claim. No cause of action for breach, only for
reliance.
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RESTITUTION AS A BASIS FOR ENFORCEMENT
**Here, we are talking about Restitution not as a basis for enforcing promises, but as a basis for recovery
KEY TERMS
Restitution - broad term used for all grounds of recovery for unjust enrichment
Quasi-Contract - ground for recovering money at C/L
Quantum Meruit - payments for serviced ("as much as is deserved")
Contract Implied in Law - Differs from a Contract implied in fact (real K)
Legal Fiction - refers to K implied in law, no intent to K
Constructive K - K implied in law
COTNAM V. WISDOM
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Doctor entitled to "reasonable compensation"
In common law, no recovery for good Samaritans, exception for professionals
Doctor's remedy in resitution based on beneit he conferred on Mr. Harrison, the decedent, that is
on Harrison's enrichment by reason of the doctor's medical services
Harrison died, so benefit can only be valued by customary "reasonable value" of Doctor's services
(see R 371)
PROBLEM, P.148 – THE SUGGESTION BOX
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If P can prove that D took his idea without reward, he likely has a claim to restitution
Read in light of Callano (stronger claim than Callanos because direct relationship and expectation of
payment)
Bargain - agreement to terms - benefit if company adopts suggestion
CALLANO V. OAKWOOD PARK CORP.
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Property value enhanced by shrubbery
Must be a direct relationship and an expectation of payment for recovery on resitution
 Callanos presented neither re: Oakwood in this case (although they could have a claim against
Pendergrast's estate)
For enrichment to be unjust
 Plaintiff must have expected payment from defendant or, if true facts were known, would
reasonably have expected payment
 Must be a direct relationship between plaintiff and defendant, or a mistake by P in conferring
the benefit
MECHANIC'S LIENS
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Owner----(k)---->General Contractor-----(k)----->Subcontractor
If general c'or doesn't pay sub, sub has no breach of contract claim against the owner and no claim
in restitution (Callano)
But can file a mechanics' lien on Owner's property to secure payment.
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PYEATTE V. PYEATTE
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D-bag law student leaves wife after she paid for his law school. Each had promised to work to
pay for the other’s higher ed.
Rule: Restitution can be the basis for recovery when there is a promise, as opposed to no
promise, but the promise is unenforceable for some reason and the promisee confers a
benefit on the promisor.
II. CREATING CONTRACTUAL OBLIGATIONS
THE NATURE OF ASSENT
FUNDAMENTAL PRINCIPLES
1. Freedom of contract - in a free society we have the right to enter into contracts with the
understanding that we will, generally speaking, be bound by terms
2. Freedom from contract - The law only wants to hold people to contractual obligations who
assented to the deal
 there has to be assent to a contract in order for it to be binding. Contracts entered
into unlawfully are not binding
THEORIES OF ASSENT
1. Subjective or "actual intent" - meeting of the minds, attempt to insure actual intent of parties
2. Objective - actual intent not relevant, focus instead on outward manifestations of parties'
actions. Intended to achieve certainty and uniformity
LUCY V. ZEHMER
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Homie sold house while tipsy, on a signed napkin
Issue – Was there a K? Would a reasonable person believe that Lucy was serious about offering to
sell his farm?
Rule: Objective theory of assent - “A person cannot set up that he was merely jesting when his
conduct and words would warrant a reasonable person in believing that he intended a real
agreement.” (p. 166)
PEPSICO CASE
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$700,000 + Pepsi Points = Harrier Jet?
Sadly, no
Court rules using the objective test, based off the price no reasonable person would have thought
this was a legitimate offer
13
SPECHT V. NETSCAPE COMMUNICATIONS CORP.



Software terms case (SCOTUS)
Issue - was license part of the K? Was there assent? Should a reasonable person have known to
scroll down?
RULE: An offeree, regardless of apparent manifestation of his consent, is not bound by or charged
with having inquiry notice of inconspicuous contractual provisions of which he is unaware, displayed
in a format that would not be obvious as contractual to a reasonably prudent offeree.
LAMPS PLUS, INC. V. VARELA




Issue - Did Lamps Plus reasonably assent to class arbitration under arbitration clause?
Reasoning - Federal Arbitration Act (FAA) says that if arbitration clause in a K, it should be enforced,
and to the extent that state law is inconsistent with the purpose of the FAA, state K law is
preempted.
RULE: Class-wide arbitration requires an unambiguous, affirmative contractual basis showing the
parties agreed to it.
DISSENT (Ginsburg, J) - notes that the history of the FAA had nothing to do with
employer/employee arbitration clauses, it was about encouraging collaboration between
merchants, who have relatively equal bargaining power. In this instance, there was no real consent
by employees to arbitrate given the power difference between employer and employee.
INTENT TO BE BOUND (P. 189)
4 factors to ascertain assent (p. 180)
1. Whether there has been an express reservation of the right not to be bound in absence of
a writing
2. Whether there has been partial performance of the contract
3. Whether all of the terms of the alleged contract have been agreed upon
4. Whether the agreement at issue is the type of contract that is generally committed to
writing
What about letters of intent or gentleman's agreements?
 May mean good faith requirement to negotiate but not an intent to be bound
TRIBUNE-TYPE AGREEMENTS



Tribune type I - fully binding preliminary agreement; parties agree on all points of negotiation but
agree to memorialize K on a more formal document (eg Memorandum of Understanding (MOU))
 This is common in high-profile athletic hirings (athletes, coaches), where things move fast and
parties want a binding commitment but not the time for formal K
Tribune Type II - binding preliminary commitment; parties agree on certain major terms but leage
others open for further negotiation. Not binding except that parties agree to further negotiate in
good faith. E.g. Letters of intent expressing that parties do not intend to be bound.
 All that a Tribune II does is obligate the parties to continue to negotiate
 There can be a breach of a Tribune II if one party acts in bad faith after signing letter of intent
(refusal to contact, refusal to negotiate, etc).
Damages are ambiguous issue in Tribune Type II. No real expectation damages because deal not
certain, could be reliance damages if you can prove them
14
THE OFFER
DEFINED


-R 24 - 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
-Corbin - an act whereby one person confers upon another the power to create contractual
relations between them. It must be an act that leads the offeree reasonably to believe that a
power to create a contract is conferred upon them.
OWEN V. TUNISON


There can be no contract for the sale of property, no meeting of the minds of the owner and
prospective purchaser, unless there is first an offer or proposal of sale. Mere statements made with
intent to open negotiations which might later lead to a sale do not constitute an offer.
Court holds that Tunison's response stating "it would not be possible for me to sell unless I was to
receive 16k cash" was not an offer to sell, was no "meeting of the minds," but instead may have
conveyed an intent to open negotiations
BUMPER HALL PEN -- PG 187





"Will you sell us Bumper Hall Pen? Telegraph lowest price."
"Lowest price for Bumper Hall Pen £900." ----- Is this an offer??
"We agree to buy Bumper Hall Pen for the sum of £900 asked by you." ------ Acceptance if this is an
offer.
**The anti-formation bias is amply illustrated by Bumper Hall. It would not be much of a stretch for
court to infer an offer, but because the test for confirmation is so specific, the court held no offer. A
price quote, generally speaking, is nothing more than an invitation to negotiate, and does not
constitute an offer.
**We have the anti-formation bias because court does not want to grant specific performance
unless sure that an offer was present. Anti-formation bias is another way of articulating the
principle of freedom from contract.
FAIRMONT GLASS V. CRUNDEN-MARTIN WOODWARE


Mason Jar order case
When purchaser's letter inquired the price and terms on which the seller would sell the purchaser
the goods, the seller's answer to it was not a quotation of prices, but a definite offer to sell on the
terms indicated, and could not be withdrawn after the terms had been accepted.
ADVERTISEMENTS AS OFFERS



General Rule - Advertisements are considered not to be offers
Concern about quantity - how many widgets are you offering to sell?
Sometimes enforceable if there is limiting language - "first come first served," etc
15
LEFKOWITZ V. GREAT MINN. SURPLUS STORE




Fur coat ad case – Ads are usually not offers, but may be if sufficiently definite
Where the offer is clear, definite, and explicit, and leaves nothing open for negotiation, it
constitutes an offer, acceptance of which will complete the contract.
First ad for fur coats not enforceable, because no value set for fur coats, so damages are impossible
to determine
Second ad for the black lapin stole was enforceable, because value was specific and clear, and
limiting language was present in the ad
THE ACCEPTANCE
CORINTHIAN V. LEDERLE LABS


while both parties are merchants, Article 2 applies to merchants and non-merchants (except for
provision re firm offers in 2-205, which states only applies to merchant sellers)
Under U.C.C. § 2-206, acceptance can be made by shipment of non-conforming goods unless the
non-conforming goods are accompanied by a notice indicating that the non-conforming goods are
offered as an accommodation.
SILENCE AS ACCEPTANCE
Restatement § 69 - Silence is not acceptance of an offer, except where past practices have indicated or
where specifically mentioned by offeree. (Mass. case on p.226 - eelskins, parties had a long history of
seller shipping eelskins and buyer paying for them without explicitly accepting offer)
FORMATION UNDER UCC ARTICLE 2
UCC 2-204(1) - A K for sale of goods may be made in any manner sufficient to show agreement, including
conduct by both parties . . . "
Makes formation more flexible
ACCEPTANCE AT COMMON LAW – MIRROR IMAGE RULE






Acceptance must mirror terms of the offer. If terms are modified then counteroffer under CL.
If offer does not specify means of acceptance, than offeree may accept in any means reasonable
Mirror Image Rule Mitigations
What seemed to be an additional or different term in the acceptance is actually deemed to be an
implied term in the offer, e.g. "first quality good" in Fairmount Glass
The additional or different term in the acceptance is precatory or only suggestive
The offeree takes the offer under advisement while seeking better terms (R 38(2); R 39(2))
16
TERMINATION OF THE POWER OF ACCEPTANCE
WHEN IS THE POWER OF ACCEPTANCE CONFERRED TO THE OFFEREE BY THE OFFEROR TERMINATED?
1 - Lapse of the offer
2 - revocation of the offer by the offeror
3 - offeror's death or incapacity R 48
4 - offeree's rejection
 When an offer lapses depends on the facts! The offeror remains the master of the offer.
**Ordinarily, an offer made during a face-to-face conversation is only valid until the end of the
conversation. Akers v. J.B. Sedberry, Inc., 286 S.W.2d 617 (Tenn. App. 1955)
R 2d § 43 - "An offeree's power of acceptance is terminated when the offeror takes definite action
inconsistent with an intention to enter into the proposed contract and the offeree acquires reliable
information to that effect."
LIMITING THE POWER OF REVOCATION: OPTIONS CONTRACTS
1 - a promise to hold the offer open which is supported by consideration. R 2d § 87(1)(a)
2 - a "firm offer" under UCC 2-205
**Article 2 differs from the Restatement here. Be aware of conflicts like this and when article 2
does apply (because UCC is statute in 49 states, it almost always takes precedent over Rest)
3 - an offer seeking performance rather than a return promise (an offer to enter into a unilateral K; e.g.,
the Brooklyn Bridge hypothetical)
4 - reliance by the offeree on the offer
R 37 power of acceptance under an option K not terminated by rejection, counter-offer, revocation, or
death or incapacity of the offeror
DICKINSON V. DODDS




Dickinson knew that Dodds had offered/agreed to sell the property to Allan, THEN he goes to the
house and gives the message to the mother-in-law. Train encounter came after all this.
Rule: for an options K to be enforceable, the option must be supported by consideration
If an offeree was aware that offeror intended to sell to someone else, this is sufficient
communication for revocation. Dickinson's awareness made the K unenforceable
Anti-Formation Bias
17
UCC FIRM OFFER RULE


2-205 UCC - "Firm Offer" Rule (p. 237) - "An offer by a merchant to buy or sell goods in a signed
writing which by its terms gives assurance that it will be held open is not revocable, for lack of
consideration, during the time stated or if no time is stated for a reasonable time, but in no event
may such period of irrevocability exceed three months; but any such term of assurance on a form
supplied by the offeree must be separately signed by the offeror."
 Applies only to merchants
 Must be a signed writing which gives assurance that an offer will be held open for either a
specific or reasonable period of time. Not revocable for lack of consideration.
 "One question can be; however, when is a party a merchant? Merchant is defined in 2-14, but
what happens if for example a shoe manufacturer decides to sell some used machinery and
makes the offer in a signed writing - is the shoe manufacturer a merchant WRT used machinery
(they certainly are for shoes) ?"
Merchant: a person who deals in goods of that kind or otherwise holds himself out as having
knowledge or skills peculiar to the goods involved in the transaction UCC 2-214
RESTATEMENT 45 & BROOKLYN BRIDGE HYPO







A says to B - I'll give you $$ to walk across the Brooklyn Bridge
B starts to walk across bridge
A changes his mind, catches up to B, and says "I revoke"
Restatement 45 - an option contract is created once performance is commenced
Addresses the issue of when a K is actually formed when there is an offer for return performance
(unilateral K)
At what point is the offeror's power of revocation terminated when there is an offer for return
performance?
 R 45 - creates an option K once offeree begins performance of a unilateral offer
 Offeror can no longer revoke but offeror's duty to perform under the K conditional on offeree's
completion of performance.
R 32 - In case of doubt, offer is interpreted as inviting acceptance by either a return promise or
return performance, whichever offeree chooses
DRENNAN V. STAR PAVING CO.



Sub-c’or made mistake in bid which gen. c’or used in its bid
Unilateral mistake is a defense to the enforceability of a K, BUT reliance upon a mistake could
cause court to rule that K was formed.
Unilateral mistake may allow party to refrain from performance, but in that instance damages are
still due to injured party
18
REJECTION UNDER AN OPTIONS CONTRACT BY OFFEREE
-
can reject, and then change mind and accept
Under 2-205 (firm offer rule under Article 2)
o in certain circumstances, an offer in writing is not revocable
o if offeree in firm offer, can you reject and then later change your mind and accept? Is
there a diff rule/should there be a diff rule in common law?
 some case law that supports that if you reject firm offer, can’t change mind
 whereas if there is a 30 day option contract (such as with real estate), can reject,
since paid consideration to make offer irrevocable for that period of time
COMMON LAW MAILBOX RULE
-
-
Acceptance effective upon dispatch – R 63
Why that rule?
o rationale: offeree needs to know he has a deal
Revocation effective upon receipt – R 42
o if you reject, effective upon receipt. If you accept, effective upon dispatch
Issue of the overtaking rejection, e.g. acceptance by mail followed by an overtaking rejection by
email or FAX – mailbox rule generally controls
o would still be a contract even with a FAX rejection, so offeror could hold the offeree to
the deal
Exception – if offeror reasonably relies on the overtaking rejection, the offeree may be estopped
to apply the mailbox rule and enforce the K.
o so if offeree changed their mind again and did want the property/etc. after accepting
and then sending a rejection, it would be too late if the offeror relied on the overtaking
rejection and then sold the property/etc. to someone else
STATE V. RIOS
 Plea bargain. Criminal defendant asks for better terms. Where is consideration?
Consideration: Benefit to p'or (quicker trial, easier conviction), Detriment to p'ee (accepting a
conviction), Benefit to p'ee (mitigation of sentence), Detriment to P'or (not convicting D of a greater
offense). Consideration goes both ways.
 Rule: A mere inquiry regarding the possibility if different terms, a request for a better offer, or a
comment upon the terms of the offer, is not ordinarily a counteroffer (R 38)
ACCEPTANCE VARYING OFFER: CONTRACT FORMATION & CONTRACT TERMS
LAST SHOT FIRED DOCTRINE
Last Shot Rule: Performance, or the beginning of performance, by the recipient constituted acceptance
of the terms of the final offer in the series. Accordingly, under the mirror image rule, it is advantageous
to have fired the "last shot" before that (as last terms submitted would control).
19
BATTLE OF THE FORMS


Typically - buyer sends a "purchase order" on its form. Seller responds with acknowledgement form
which contains different terms. At CL, that is a rejection and a counteroffer.
Traditionally, under CL when buyer accepts goods, accepts seller’s counteroffer, and the terms of K
are those of seller's acknowledgement form (the counteroffer)
Article 2 UCC replaces the CL mirror image rule and last shot rule
UCC 2-207 - CHANGES COMMON LAW





2-207(1) - K formed if there is a definite and seasonable expression of acceptance even though it
states additional or different terms (does not treat this as a c/o which it would be under CL)
If so, terms of K determined in 2-207(2)
What if there is no definite and seasonable expression of acceptance under 2-207(1) but parties
partially or totally perform? Obviously then K exists.
Then go to 2-207(3) - conduct contract 2nd sentence speaks to terms of conduct K (superseded
Last Shot Doctrine)
UCC "gap-fillers" govern over conflicting or absent terms in a K or conduct K
ARTICLE 2 ROADMAP
Once you have a subsection (1) K,
Then you go to subsection (2) to determine the terms.
If conduct K, then subsection (3) governs (conduct Ks are valid even if no subsection 1 K)
DORTON V. COLLINS & AIKMAN



Carpet mart claims that C&A breached by supplying defective carpet
Battle of the Forms case
Under U.C.C. § 2-207, an acceptance containing different or additional terms is effective, and
when between merchants, the additional terms are deemed accepted.
C. ITOH & CO. V. JORDAN INT’L CO.



Sale of steel, arbitration clause
Because Arbitration isn’t a missing or necessary term covered by Article 2’s gap-filler provisions,
Jordan’s arbitration clause isn’t part of its contract with Itoh
Rule: When a contract is established not by parties’ writings, but by parties’ conduct, the
established contract consists of those terms on which the writings of the parties agree, together
with any supplementary terms incorporated under any other provisions of the UCC.
20
NORTHROP CORP. V. LITRONIC INDUSTRIES


Sale of wire boards. Difference in warranties in purchase order and offer.
Under the knockout rule, if an acceptance contains terms that are additional to or different from
those in the offer, the conflicting terms in both the offer and acceptance are replaced with neutral
provisions from the Uniform Commercial Code
THE UCC KNOCKOUT DOCTRINE

Where a definite and seasonable expression of acceptance under 2-207(1) contains terms different
than the offer
 If between merchants 2-207(2)(c) applies bc each party is assumed to have given notice of
objection per comment 6
 Comment 6 says that the conflicting terms knock each other out and the K contains terms that
the parties agree on plus Article 2 "gap fillers"
PRECONTRACTUAL LIABILITY
GENERALLY


Usually, courts award damages for precontractual liability under Promissory Estoppel,
Under a few cases, courts award damages based on restitution
 This is normally where parties are in long, drawn-out negotiations, where one party either
begins to perform or makes specific preparations for performance in hopes that contract is
formed
 EX: Drennan, where there was reliance by gen'l contractor on sub contractor's bid
HOFFMAN V. RED OWL


Franchising grocery store, moved and bought property in reliance on RO’s promise
RULE: To support an action for promissory estoppel, a promise need not contain all of the
essential details of the proposed transaction between the promisor and the promisee, so as to be
equivalent to an offer that would result in a binding contract between the parties if accepted by
the promisee.
DIXON V. WELLS FARGO N.A.



Foreclosure case
Rule: Under the doctrine of promissory estoppel, a negotiating party to an agreement may not
break a promise made during negotiations if the other party has relied on the promise to their
detriment.
Generally, freedom from contract principles mean there is no good faith requirement to negotiate
(there is a good faith requirement to perform once K entered into, but none to negotiate).
21
CYBERCHRON V. CALLDATA



Computer Workstations
RULE: A plaintiff may recover damages for reliance when there is a clear and unambiguous promise,
reasonable and foreseeable reliance on the promise, and an injury resulting from the reliance,
even though no agreement between the parties exists.
Quantum Meruit is another way to say claim in restitution, where there is unjust enrichment by one
party. Here there is no K and no unjust enrichment on the part of Grumman.
RELIANCE ISSUES





R 2d 90 - foreseeable reliance on a promise
 Reliance on a gratuitous or donative promise, e.g. Wright v. Newman (child support case),
Scothorn, Feinberg (promise of pension was gratuitous, but reliance upon it)
 Pre-Contractual reliance, e.g. Hoffman v. Red Owl, Dixon, and Cyberchron - reliance occurs
during negotiations for what may or may not be a contract. Expansion of R 90 to precontractual
negotiations, beyond just donative promises)
R 2d 87(2) - foreseeable reliance on an offer, e.g. Drennan (Drennan leads to 87(2) from 90 and 45,
holding an implied subsidiary promise not to revoke the offer. Because of Drennan we now have
87(2) which makes offers enforceable where there is foreseeable reliance on that offer)
R 2d 45(1) - beginning of performance in response to an offer for a unilateral K creates an option K
and thus makes the offer irrevocable, e.g. Brooklyn Bridge hypothetical.
R 2d 87 (2) could apply to pre-performance reliance such as when recipient of a unilateral offer flies
from Dallas to NYC in preparation for walking across the bridge.
Expansion of R 90 from reliance on a donative promise to pre-contractual reliance
EVERTITE V. GREENE


K for a roof, no acceptance in response to Greene's offer, but Evertite loaded up a truck and came to
Greene's residence, but Greene had already hired another roofer who was there when Evertite
arrived.
Evertite sued for breach of K. Held - breach, because Evertite's arrival was not mere preparation for
performance, but the beginning of performance itself.
 ROGERS DISAGREES - "Where I would come out on that deal is I would not apply R 90, because
what was bargained for was shingles on a roof, not the arrival, so the arrival was mere
preparation for performance. I would not apply R 87 or 45 because I don't think it's unjust!
Evertite screwed up by not accepting, so their reliance, whether foreseeable or not, did not lead
to an injustice. The reason I bring this up is that just because there is reliance, does not mean
you are guaranteed recovery. There is a lot of discretion re what is unjust or not.”
22
THE REQUIREMENT OF DEFINITENESS





Courts need definite terms to know what the terms are to know (1) if there was a breach, and (2) to
determine what damages should be.
What are the two functions of definiteness? (Definiteness issues in Fairmont Glass and Pyeatte v.
Pyeatte)
See R 2d 33 and UCC 2-204(3)
 UCC 2-204(3) is more liberal than Restatement - "even though one or more terms are left open,
the contract does not fail for indefiniteness if the parties have intended to make a contract and
there is a reasonably certain basis for giving an appropriate remedy"
Why was it not an issue in Wood v. Lucy, Lady Duff-Gordon?
 Because this was an output K, the court implied reasonableness as a term. Courts can impose
terms if needed from preliminary negotiations, etc. to meet the definiteness requirement.
Wood v. Lucy is an example of a reference to an external standard of reasonableness.
In cases like Dixon, many courts held that a bank's promise to modify a loan was too indefinite to be
enforceable
TOYS INC. V. F.M. BURLINGTON


Toy store lease agreement
In Vermont, a lease agreement that contains an option provision will be enforced if it contains a
practicable, objective method of determining the essential terms.
III. STATUTE OF FRAUDS
INTRODUCTION TO SOF
STATUTE OF FRAUDS STEPS
1 - Is there a K?
2 - Is K within the SOF or not?
(Lingo - Ks within the SOF must be in writing. Ks not within or without SOF need not be in
writing)
3 - If it is, is there a writing which satisfies the SOF?
4 - Are there any exceptions to the SOF? If so, which apply?
Article 2 UCC is more liberal in terms of what writings satisfy SOF than CL
Are contracts which fall within the statute of frauds void or voidable?
 Some states say void/unenforceable, but "that's really an inappropriate use of that term"
 Void: as a matter of law, no K exists. Completely unenforceable.
 Voidable (invalid)
 A contract falling under the SOF is invalid - a SOF defense must be raised for a court to
consider it. If it's not successfully raised then a court cannot consider it.
 K may be enforceable only against one party, and not the other
23
JUSTIFICATIONS FOR THE SOF



Evidentiary - a writing gives written evidence not only of the existence of a K but the terms of a K
Cautionary - suggests to the parties that they will probably be bound by K if signed, so parties will be
more cautious before signing
Channeling - helps courts decide intent (if both signed, then can infer intent to be bound)
CONTRACTS WITHIN THE STATUTE OF FRAUDS
COMMON SOF PROVISIONS





Ks for the sale of real estate or lease for more than one year
Ks to answer for debt of another (suretyships)
Ks not to be performed within the parties' lifetimes (not in Texas)
Ks not to be performed within a year of their making (the year runs from the time of contracting to
the time of completed performance)
Ks for the sale of goods over $500 (UCC 2-201)
MY LEGS!!!!
Within SoF (Generally)
Marriage – consideration by marrying a party or third person
Year – takes more than one year to complete
Land – K in interest of land
Executor/administrator – E/A of estate promises to answer for a duty of the decedent
Goods – Over $500. UCC 2-201
Suretyships – Ks where a party assumes the debt of another
THE ONE-YEAR PROVISION



The year runs from the time of contracting until the time of completed performance, not from the
time of contracting until the time of dispute about the terms of the K
The actual performance need not take more than one year to complete
General judicial hostility to the one year statute which was generally not to trust witnesses'
memories for longer than a year. Ill-suited to achieve that goal.
CR KLEWIN, INC. V. FLAGSHIP PRODUCTS, INC.



Judicial Hostility to the One-Year provision
If it's theoretically possible, it means that so long as could possibly complete in one year, then oneyear provision does not apply. If standard is reasonable possibility, it's not reasonable that Klewin
could build 20+ buildings within a year, so K within SOF. Former is the more hostile to SOF, and that
is what the court holds.
A contract does not fall within the statute of frauds’ one year provision unless, by the specific
terms of the contract, it is impossible for performance to be completed within one year.
 Majority Rule
24
INFORMAL EXTENSIONS OF EMPLOYMENT


Oral renewals binding for term less than one year
 Indefinite extensions enforced in most jurisdictions, because most courts will say this is a
month-to-month, year-to-year extension, etc
Most jurisdictions hold that written agreement to extend employment is only needed for an
agreement to extend for a definite time more than one year
LIFETIME AGREEMENTS
Because we may die at any time, a lifetime agreement MAY be performed in full within one year.
Examples:
1. A promises to work for B for 5 years - within SOF
2. A promises to work for B for life - not within SOF
3. A promises to work for B for 5 years or the rest of A's life, whichever is shorter - not within SOF
4. A promises to work for B for 5 years, but performance is excused upon A's death - within SOF
(under majority rule)
 Some courts have held that while failure to perform is excused because of death of a party,
the agreement itself is still for a term that would be subject to SOF
INTERESTS IN REAL PROPERTY



encompasses contracts "to transfer to any person any interest in land" R 125(1)
 "any right, privilege, power, immunity, or combination thereof" R 127
this provision of SOF has never been controversial
Contracts for Sale of Land
 Contracts creating a partnership for the purpose of buying/selling real estate not within SOF
 Leases usually do fall within SOF, because tenant pays for interest in the land upon which they
are living (most legislatures have carved out exception for short term leases of real property,
sometimes but not usually limited to leases for residential purposes)
 Mortgages fall within SOF
SURETYSHIPS







EX: Strong v. Sheffield
A surety is normally someone who is jointly and severally liable with the principle
 Whereas a guarantor generally comes in to fill the principal's obligation after the principal fails
to do so
Principal/Obligor/Debtor - the person incurring the debt
Surety/Secondary Obligor - the person agreeing to assume liability for another's debt
Obligee/Creditor - The person lending the money
Reason for SOF provision - consideration in suretyships only flow one way, so it is important to
ensure that surety intended to be bound (evidentiary function), party more likely to agree to
suretyship if knows will be binding (cautionary function)
If creditor releases the debtor in exchange for secondary obligor's promise, that is not a suretyship. It
is a novation, and does not fall within SOF.
 Secondary obligor becomes primary (sole) obligor
25
LANGMAN V. ALUMNI ASS'N OF THE UNIVERSITY OF VA



PH: trial court ruled for Ass'n, says no meeting of the minds. Langman appeals, Supreme Ct VA says
that a grantee who accepts a deed becomes contractually bound by its provisions, but UVA also
brings SOF defense
 Deed contained a mortgage assumption clause and Ass'n never signed the deed (this is typical
though - normally grantors sign deeds, grantees do not)
UVA's promise was to Langman, not the creditor, so not a suretyship (but even if suretyship,
enforceable under Main Purpose Rule)
Rule - The grantee of a deed is implicitly bound by the terms of the deed even if the grantee
indicates no express intention to be bound by those terms.
THE MAIN PURPOSE RULE
If a surety's main purpose is its own pecuniary or business advantage, the gratuitous or sentimental
element often present in suretyship is eliminated, the likelihood of disproportion of the values
exchanged between the surety and the obligee is reduced, and the commercial contract commonly
provides evidentiary safeguards . . . there is less need for cautionary or evidentiary formality
CENTRAL CEILINGS V. NATIONAL AMUSEMENTS


Movie Theater done by Labor Day
RULE - An agreement does not come within the Statute of Frauds’ requirement that a promise to
pay the debt of another be in writing when the main purpose of the promise to pay the debt of
another is to gain a benefit for the promisor.
LEADING OBJECT RULE
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
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(Another name for MPR)
Judicially created exception to the application of the SOF.
Alternatively, could say that it is a different interpretation of the facts, not law, and a holding that
not a pure suretyship, because benefit to guarantor (if want to keep SOF intact)
SATISFYING THE STATUTE OF FRAUDS
SATISFYING THE WRITING REQUIREMENT AT COMMON LAW

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1 - Must identify parties to the K
2 - Must show that parties made a K
3 - Must set forth the nature of the K, including some indication of what the parties contracted
about
4 - Must state the essential terms of the K
 Almost all litigation re satisfactory writings centers on this step
Careless Cancellation - cancellation in writing signed by the party seeking to be charged which
satisfies the requirement
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SATISFYING THE SOF IN THE DIGITAL AGE


Federal statute only applies when states have not passed UETA
UETA in brief - electronic signature satisfies SOF, electronic record satisfies the writing requirement
CRABTREE
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Crabtree able to meet the 3rd requirement by piecing together payroll cards which he got from the
employer that clearly referenced the employment agreement.
HELD - that writing requirement was satisfied because employer had signed to employment
agreement, and memo was pursuant to that agreement
STATUTE OF FRAUDS AND THE SALE OF GOODS
UCC 2-201(1)


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Covers contracts for the sale of goods for more than $500
 Replaces CL "essential term" requirement - easier to meet the writing requirement under 2-201
than under CL!
Steps
 1 - Does Article 2 apply?
 2 - Does SOF provision apply (is transaction for 500+)
 3 - Is there a writing that satisfies SOF?
Writing not insufficient because it omits or incorrectly states a term agreed upon
Only specific term that must be in writing is the quantity
EXCEPTIONS TO THE STATUTE OF FRAUDS
METHODS THAT LIMIT SOFS
1 - Limit the scope; e.g. narrow interpretation of 1-year provisions such as in Klewin v. Flagship
2 - Broaden the range of writings and signatures that satisfy the Statute, e.g., piecing together writings
to supply essential terms, as in Crabtree
3 - Judicially created exceptions to the SOFs - reliance; part performance; unjust enrichment
PART PERFORMANCE EXCEPTIONS
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For the one-year provision, full performance is necessary
Real Estate Ks - Part performance, if for example one begins making improvements to the property
prior to passing of title (A question that often arises is performance of the contract or not - if you
enter into an option to purchase the property and are paying rent as a lessee already, is that part
performance? probably not, unless all or part of that rent goes to purchase price) (Another issue is
that often the remedy sought is specific performance, and courts are reluctant to order specific
performance unless there is clear and convincing proof that there was in fact part performance of
the real estate contract prior to title passing)
2-201(3)(a) - for specifically manufactured goods not suitable for sale to others
 provides an exception to the SOF for an oral K for the sale of goods for $500+ where the seller is
specially manufacturing goods for the buyer, which he cannot sell to anybody else in the
ordinary course of his business, and he has made a substantial beginning in the manufacture of
the goods
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ESTOPPEL EXCEPTION TO SOFS



Originally used where a breaching party (a) falsely stated that it would execute a writing or (b)
stated that no writing was necessary
R 139(1) - applies estoppel in a manner similar to R90 (CL promissory estoppel rule), except it
applies to SOF in order to stop the application of a SOF defense
R139(2) - adds a list of circumstances which are significant in determining whether an injustice
would result by a failure to enforce an oral promise that falls under the SOFs
 Here the question is whether an injustice would be committed if a SOF defense was raised
MONARCO V. LO GRECO
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
RULE – unconscionable injury from reliance on promise or unjust enrichment that would result if
promise not enforced estops application of the SOF defense
Which was present in Monarco?
 Reliance on promise, D forbears from other opportunities to work on farm. Court also notes
unjust enrichment is present because Natale gained value of property from Christie's work. (so
both elements are present)
2-201 AND EXCEPTIONS TO SOF


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2-201, 1-103(b) and estoppel - Does estoppel apply to Ks for sale of goods falling under 2-201?
 Majority rule - 1-103(b) "displacement of CL must be explicit for CL to not apply," and 2-201 is
not explicit
 Other courts treat 2-201 as self-contained and state that CL provisions do not apply
Does a writing that satisfies 2-201 also necessarily satisfy the one-year provision? (CL writings need
essential terms)
 Widgets for 5 years, more than $500 - one-year provision at Cl and 2-201
 Easier to satisfy writing requirement under Article 2 (signed writing that specifies quantity).
Could theoretically have a situation where the writing satisfied 2-201 but not the CL provision.
2-201(2) - "read your mail" exception as between merchants. Contains 6 distinct elements (p. 404)
 "Between merchants if within a reasonable time a writing in confirmation of the contract and
sufficient against the sender is received and the party receiving it has reason to know its
contents, it satisfies the requirements of subsection (1) against such party unless written notice
of objection to its contents is given within 10 days after it is received."
 Buyer could lose SOF defense if no objection made within 10 days
 This provision only applies where merchants on both sides of the deal.
 First question: are the buyer and seller both merchants?
 Then - are all 6 elements met?
2-201(3)(b) - "If the party against whom enforcement is sought admits in testimony or otherwise
that a contract is made, the contract is enforceable" – eliminates laughing defendant
 if D admits K was made in court, then K enforceable despite SoF defense
 Eliminates the so-called "laughing defendant" rule from CL (where a plaintiff invoking the SOF
could have admitted a contract was made but still invoke the SOF)
 Bars SOF defense even if no writing
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IV. POLICING THE BARGAINING PROCESS
INTRODUCTION & CAPACITY
METHODS
1. Status of the party seeking relief from a promise, i.e. capacity to contract
2. Behavior of parties during the bargaining process, i.e. forms of overreaching such as duress, fraud,
misrepresentation, undue influence, etc.
3. Result or substance of the bargain- e.g. illegal contracts, unconscionability (covered in chapter 6)
DOUGLASS V. PFLUEGER


Hawaii’s child labor law provides for the protections of the infancy doctrine and renders inapplicable
the general rule that contracts entered into by minors are voidable in the employment context.
Arbitration agreement would normally be binding, but it was buried so Douglass did not have notice
CAPACITY TO CONTRACT- MINORS
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Necessities exception- a relative term depending on the minor’s (and their parents’) situation.
o Contract to pay a lawyer’s fees a necessity? If so, minor obligated to pay.
Contract is voidable, not void; minor has a reasonable time to disaffirm after reaching majority
Ratification of contract by a minor after reaching majority can eliminate the right to disaffirm, such
as a minor continuing to pay rent after reaching majority
Minor who disaffirms can get restitution for payments made to a seller but must return the goods,
no matter the condition.
MENTAL CAPACITY TO CONTRACT

R 15- Contracts voidable “by reason of mental illness or defect.”
 (1)(a)- cognitive test- old standard test applied by many courts which requires inability to
understand in a reasonable manner the nature and consequences of the transaction.
 (1)(b)- non-cognitive test- newer test which requires inability to act in a reasonable manner
relating to the contract and the other party has reason to know of their condition
ORTELERE V. TEACHERS’ RETIREMENT BD.

Applies non-cognitive standard
1. System knew or should have known of Grace’s condition
2. No significant harm to system
3. Medically classified psychosis
CUNDICK V. BROADBENT
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Held- Cundick was mentally competent
Which mental capacity test does the court apply? Cognitive
Court holds that weak-mindedness is relevant regarding overreaching or fraud but no evidence of
that here.
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KENAI CHRYSLER V. DENISON
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Issue - was there actual or constrictive notice of guardianship
o Held at trial - yes. Formal guardianship = constructive notice
 Contract between David and Kenai is void
Kenai appeals seeking car back, since contract was voided at trial court.
Valid guardianship renders any K made by the ward void. R 2d 13.
Contract under guardianship is void, contract with a minor is voidable - Minor must disaffirm
the contract within a reasonable time after reaching the age of majority
OVERREACHING
GENERALLY


General principle - no advantage should be gained from a gross unfairness in bargaining
Doctrinal Examples:
o Duress - during precontractual negotiation or a K renegotiation or modification
o The Pre-Existing Duty Rule (PEDR) - as applied into a K renegotiation or modification
 Modifications without new consideration generally not enforceable
 Pre-existing duty rule applies to K mod/reneg
o Misrepresentation or Fraud
o Undue Influence
*Parties can always renegotiate a deal. They can always change the deal - the Pre-Existing Duty Rule
just says that there is a requirement of consideration if there is an agreement to change the deal
Duress
Duress (p.435-36)
 Economic coercion where victim has no reasonable alternative
 But threat of a lawful (as opposed to unlawful) action is probably not duress. Thus, threat of a
lawsuit is not duress at least where there is some reasonable basis for the underlying claim, e.g.
Fiege v. Bloom (child support in exchange for no paternity suit case) (NO! she had a lawful basis
for claim and it was reasonable even if mistaken - the claim of a lawsuit is usually not duress
where there is some reasonable basis for the underlying claim)
 But an unjust and inequitable threat may constitute duress even though the threat is not illegal
 Is it duress to force an at-will employee to sign a non-compete after employment begun such as
in Lake Land v. Columber? Should it depend on whether the non-competition is enforceable?
 Noncompete in at-will is usually judicially disfavored, so enforceable only to the extent that they
are reasonable
 Prenup the day before the wedding. Duress?
o Possible, but it is more likely that post-nups will be treated as duress. Post-nups
threaten the dissolution of marriage or breakup of family as opposed to the prevention
or modification of wedding
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ALASKA PACKERS ASS'N V. DOMENICO

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PEDR - If parties enter a new agreement under which one party agrees to do no more than he
was already obligated to do under an existing contract, the new agreement is unenforceable
for lack of consideration.
Employment K modified w/o consideration
Did not D agree to the increase in wages? What effect is the D's assent? (effect of the assent is
that there is a defense to PEDR)
R 73 - modern version of the pre-existing duty rule
o “Performance of a legal duty owed to promisor . . . is not consideration. Performance is
consideration if it is substantially different from previously agreed-upon performance.”
EXCEPTIONS TO PEDR
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2-209(1) - no consideration needed - but comment 2 requires good faith for the modification
o CL - no good faith standard. UCC imposes this and modifies consideration requirement
NYS - no consideration if the modification is in writing. What result in Alaska? Domenico would
win.
R 89 - no consideration required if modification fair and equitable in view of circumstances not
anticipated and where K not fully performed
Reliance where PEDR would apply? R 89(c)
o "to the extent that justice requires enforceability bc of reliance on that promise"
Reliance can be exception to PEDR
SCHWARTZREICH V. BAUMAN-BASCH
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
P suing for lost wages based on modified employment contract after he is fired.
Why does court award an amount on his increased wage? Because of his missed opportunity.
What happened to the PEDR? The courts don’t like this rule.
Did P and D enter into two or three contracts? 3 contracts, the original and the modified one,
and the recision agreement (oral).
Is there a breach issue? It wasn’t an at will employment contract, it was for a year, and because
of that, BB breached if they fired S without cause, which they did. Thus entitled to expectation
damages- lost wages.
RULE - Where a contract is cancelled by mutual consent of the parties at the same time that a
second contract is made by the same parties regarding the same transaction, the second
contract is enforceable regardless of which terms have been changed between the first and
second contracts.
31
WATKINS & SON V. CARRIG

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
Why does the court hold that the PEDR does not apply? Because the court doesn’t like it.
Would the PEDR likely ever apply in New Hampshire? The court’s language suggests not- they
state that any modification has a partial recision and modification.
Would R 89 be applicable here? It did not exist at the time of this case. Dean Rogers says no, but
acknowledges that he might be in the minority.
Is it relevant that New Hampshire is known as the granite state? I mean, probably.
Could duress be a grounds for contract avoidance? Court says plaintiff has a request- would
Carrig have a duress claim? Probably not.
PEDR LIMITATIONS
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PEDR- R 73
2-209(1) and Comment 2- legitimate commercial reason, and good faith for the modification to
be enforceable
R 89- Circumstances not anticipated, and 89(c)- reliance
Rescission and Modification- Schwartzreich p. 443
Watkins v. Carrig p.445- partial rescission
AUSTIN INSTRUMENT, INC. V. LORAL CORP.
Rule - A contract is voidable on the ground of economic duress if it is established that the party
making the claim was forced to agree to the contract by means of a wrongful threat precluding the
exercise of his free will.
Navy - - - - - Loral (c'or/plaintiff) - - - - - - Austin (Sub c'or/defendant)
 Held - Loral deprived of its free will
o Liquidated damages from K with navy
o Jeopardize future gov't Ks
o Loral's normal legal remedy for breach inadequate
 Delay in disaffirmance of first K until after performance of second K completely reasonable
under the circumstances
32
UNDUE INFLUENCE

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Separate grounds of K avoidance from misrepresentation or fraud
Undue influence where victim's free will is overcome or destroyed by someone with a
bargaining advantage
Focus on the relationship of the parties - undue susceptibility by one party (mismatch which
creates unfair advantage) and over-persuasion by the other
Often involves a confidential relationship, e.g., guardian and ward, attorney-client (note on 465)
Sometimes occurs in short period where special circumstances create the mismatch and overpersuasion results
o Ordorizzi (note 3, p.466) - O, schoolteacher, arrested on criminal charges of homosexual
activity. Principal visits O at house and says he needs to resign otherwise arrest will get
publicized. O resigns, later sues to rescind resignation on grounds he lost his free will.
HELD: O's resignation was rescindable due to undue influence.
Can also arise in spousal agreements, see Strong v. Sheffield (might have claim for UI in agreeing
to ensure her husband's debt)
"You will have to know the difference between undue influence and duress, which are closely
related"
How different than duress?
o Focus more on undue susceptibility of party claiming avoidance and the relationship
with other party which takes away the first's free will.
Duress typically concerned with economic coercion.
Capacity to K issue? Certainly might be a separate question, as in Howe v. Palmer, but not in
cases like Odorizzi (note 3, p 456).
o “In terms of issue spotting, you could see an issue of capacity in an undue influence
prompt, but not necessarily"
33
APPENDIX: EXAM TIPS
Exam Tips
1. Come to the exam knowing the law
2. Issue spotting - do you see the problem and parts of the problem?
3. Reasoning and analysis - reasons to support your conclusion, i.e. applying the law to the facts ("I
could care less what the conclusion is so long as it is reasonable - which is determined by your
analysis")
4. Expression - is your answer readable? Use paragraphs, avoid stream-of-consciousness, learn to
spell recission, judgment (JUDGMENT HAS ONE 'E' AND NOT 2 IN LAW - broh wth), restitution,
etc.
5. Information - when appropriate, give evidence of class attendance and your work in the course.
("As discussed in class, UCC 2-207 displaces the common law mailbox rule when a contract for
the sale of goods is at issue")
6. Divide your time into 3 parts
a. Read the question carefully more than once (applies to MC and issue-spotter) ("a lot of
people only start thinking deeply when they are writing")
b. Organize your answer - start at the beginning, and jot down key words to help you not
leave everything out (formation, consideration, defenses, alternative bases for recovery,
damages - refer to roadmap) ("you would not start an answer talking about Statute of
Frauds, that would be in the middle. It might be obvious whether there was a K,
consideration, etc, but worth spending time on for better perspective and more points")
c. Write your answer. Use precedent and analogize from cases we've discussed, refer to
the Restatement/Article 2 when appropriate ("If you cite some restatement provision
that I have to look up while I a grading your exam, you can bet that's not what I was
looking for.") (You can just say "as R 90 provides,")
7. "I'm looking for the best 40-60 minute answer for the essay, not the best possible answer.
Abbreviations and contractions are okay. ("the hairy hand case, K, p'or, p/d, etc are fine")
8. Manage your time according to the weight given the essay and MC questions to your final grade
("Let's say for purposes of the discussion the exam will be weighted 50% essay and 50% MC that means spend half your time on each")
9. If you get stuck on something, leave it and come back after some time
10. Do your best to forget about the exam once complete, and enjoy the holidays
a. When Rogers was taking the bar, bar study group wanted to talk about exam at lunch.
no no no no no
b. "I will go over the exam in the Spring - essay and multiple choice, probably" - usually in
groups during office hours. But in any case don't worry about this until Jan.
34
Mistakes to Avoid on Exams
1. Don't state unsupported conclusions (Rogers gives no credit for unsupported conclusions)
2. Don't tell me about torts or criminal law or legreg
3. Don't repeat the facts of the question in your answer. I wrote the question and don't want to
reread it.
4. Don't rewrite or alter the question or argue the facts - take facts as stated.
5. Don't overlook that one might reasonably come to a different conclusion and state why. ("Better
exams say, 'well, if I'm wrong about this, other answers might say thus and such about the other
party prevailing'")
6. Don't tell me that article 2 applies only to merchants. (lawl @ my cold call) (and also know when
article 2 does apply - if you miss that article 2 applies to your fact pattern it could completely
skew your answer)
7. Don't tell me that "basically the issue is" or even use the word "basically" (same applies to
"essentially") ("I'm not looking for basics, I'm looking for precision)
35