Is there a Dispute about Contract Terms? Parol Evidence Rule and Exceptions
I. Did the parties intend their written agreement to be completely integrated? If court finds
they did, then parol evidence is admissible. “Courts should admit evidence of consistent
additional terms only if there is evidence that the parties did not intend the writing to embody
the entire agreement.”
1. Would the alleged oral term be consistent with the written agreement?
1. Does it negate an express term of the contract? (broad) Jasen in Long Island Trust
2. OR does it contradict an implied term of the contract? (R.2d § 216 cmt. e)
3. OR does it contradict a silent gap-filler term? (stricter, Hayden(troubling), Breitel in
Long Island Trust)
2. Is it such that would naturally be included in a written agreement?
1. Look to: completeness and detail of the writing (Andrews in Mitchell, Hayden says only
look to this)
2. AND The “surrounding circumstances” (Lehman in Mitchell, Hatley)
1. parties with business exp. are more likely to intend completely integrated deals.
2. parties represented by counsel are more likely to intend completely integrated deals.
3. relative bargaining strength can influence parties to omit essential terms.
II. Did the parties actually agree on the alleged oral terms? Even if parol evidence is admitted
by the judge, the finder of fact still must decide this question.
STRONGEST: BAR ALL
● “Four-corners” approach: Look to contract only.
→ R.1, Andrews in Mitchell v. Lath, Hayden v. Hoadley, Breitel in Long Island Trust,
Ore. Stat. in Hatley,
Benefits: allowing parol evidence would decrease ability of people to rely on written
agreements, increase perjury, and give juries an excuse to decide for the economic
underdog.
● Middle UCC approach: tougher on merchants, looser on consumers.
● Intentions approach: Look to context and surrounding circumstances.
→ R.2d, Corbin, Lehman dissent in Mitchell, Hatley court
Benefits: contracts are very often part-oral and part-written, and perjury is always an
issue, even with the “four corners” approach. It matters whether the parties intended
the agreement to be integrated.
WEAKEST: BAR NONE
Merger clauses: push writings up the scale, making the writing indicative of its own completeness
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III. Cases
1. Mitchell v. Lath (sale of land + alleged oral agreement to remove ice house)
1. Majority denies (Andrews): here, the contract appears to be an elaborate and complete
bargain, and this implies that the oral term could not have been part of the deal.
2. Dissent would disallow (Lehman): “the document alone will not suffice.” Need to look
to “surrounding circumstances”; here, conveyance agreement appears complete, but
ice-house is not necessarily a part of conveyance.
2. Hatley v. Stafford (land lease reserving right to cancel + alleged oral agreement limiting
cancellation to first 30-60 days)
1. Court allows parol evidence. Not inconsistent: Does not negate an express term, but is
such that it would be naturally have been included. Still, not a sophisticated business
transaction → handwritten, and no counsel → informal.
2. Literal reading of contract as having no time limit → harsh result, because the value to
lessee grows over time, eventually to $400 per acre when wheat is ready to be harvested.
3. Hayden v. Hoadley (Vt. 1920), p.400 (conveyance of farm in return for improvements +
alleged oral agreement as to time).
1. Court disallows parol evidence because it contradicts the silent gap-filler term of
“reasonable time” as bona fide term of the K. → troubling; court completing contract
and then looking to its completeness to determine it is “unequivocal and complete”
4. Long Island Trust (N.Y. 1976) (promissory note + alleged oral term that all the guarantors
have to sign onto the renewal. Guarantors renewed w/ only four, and objected when the
bank sued them to recover the loan).
1. Majority allows (Jasen): Where contract is silent on “unconditional guarantee”, oral
terms imposing conditions are not contradictory, so parol evidence is admissible. No
concern about reliability of promissory notes, because banking industry can easily put
that term in their promissory notes. Meadowbrook case.
2. Dissent would disallow (Breitel): Promissory notes usually are, and must be, complete
on their face, so parties can effectively rely on it. Common practice of banking
community is to assume that unconditionality is an implied term of promissory notes.
IV. EXCEPTIONS
1. Fraud: Oral evidence of fraud is NOT allowed to enforce the contract itself, BUT:
1. Allowed in order to rescind the fraud-induced contract.
2. Allowed in order to get out-of-pocket damages (tort damages) (similar to
reliance/restitution), BUT NOT expectancy.
2. Minority view: Oral evidence of fraud not allowed when it contradicts an express term.
1. What if the parol evidence of fraud negates a Merger Clause? Look to the clause to
evaluate the manifestations of intention:
1. General, one sentence clause: Sabo v. Delman (parol evidence of fraudulent intent
admissible in action to render contract void, despite merger clause)
1. Very specific to the term in question: LaFazia v. Howe (specified that buyer did
not rely on seller's representations of profitability, as well as an as-is clause)
2. Damages: “fraud in the inducement” claims are tort actions, so damages are limited to
indemnity for the actual pecuniary loss sustained as a direct result of the wrong (“out-ofpocket” rule), not “loss or benefit of the bargain.” (contract expectancy damages).
2. Mistake
1. Hoffman v. Chapman (Court allows parol evidence to support reforming the contract)
1. Policy concern about encouraging people to be careful? not very significant here.
2. No meeting of the minds? likely not a fair argument in this case.
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Interpretation of Integrated Agreements
I. Most important factor is the plain meaning of the language used. Judge interprets the plain
meaning of an integrated agreement as a question of law. R.2d § 212(2).
II. If the meaning is ambiguous and not plain, the finder of fact weighs any admitted extrinsic
evidence to decide which reasonable interpretation of the language to adopt. R.2d § 212(2).
1. “Plain-Enough” Meaning Rule – Judge decides ambiguity as a matter of law
1. If the meaning of the words themselves is clear, the judge may not consider extrinsic
evidence that “creates” an ambiguity. W.W.W. Associates (N.Y. 1990) – Seller of real
property exercised cancellation clause, the meaning of which was so plain that judge
refused to let buyer argue that it was inserted solely for the buyer’s benefit.
2. However, judge may determine that it is ambiguous, requiring extrinsic evidence.
2. Context Interpretation Rule (Majority) – Judge considers extrinsic evidence
1. Judge must seek to ascertain the intentions of the parties, by considering evidence of
ambiguity consistent with the terms. Pacific Gas & Electric (Cal. 1968) (trial court
wrongly refused to admit evidence supporting a certain meaning of an indemnity clause)
1. Discussions & Circumstances of Negotiations
2. Trade Usage & Course of Dealing – Columbia Nitrogen (prices fell far below K
price, but judge admitted evidence that price readjustments were trade practice &
consistent w/ past course of dealing)
III. Language should be construed against the drafter, especially in the case of one-sided
contracts like insurance policies, etc.
Excuses Under Original Circumstances
I. NON-DISCLOSURE: Was there a relationship creating a duty to disclose certain
information?
1. Arm's Length Dealing: No Duty.
1. Not legally bound to disclose information or intelligence that is equally accessible to
both parties, even if you know the other guy doesn’t know, as long as you don’t make
misrepresentations or lies.
1. Laidlaw v. Organ (U.S. 1817) (buyer of tobacco failed to respond to seller’s inquiries for
“news” because the Treaty of Ghent had just been signed, jacking up the value of tobacco;
remanded to consider whether buyer imposed on the seller)
2. Policy: In the business world, people are entitled to benefit from their dealings and are
entitled to assume that the other party knows the “state of the world.”
2. Fiduciary Relationship: Duty.
1. Legally bound to look out for the other’s interests and not take advantage of even honest
mistakes to their detriment. Applies to status-based relationships, not contract
relationships. (E.g. trustees; lawyer-client; doctor-patient; guardian-minor; ministerparishoner).
1. Jackson v. Seymour (Va. 1952) (brother/agent entrusted with management of sister’s affairs
bought land from her cheap but failed to disclose timber he found on it, instead harvesting
it for his own profit.
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II. MISTAKE
1. A mutual mistake of fact is grounds for rescission.
1. Must be a fact relating to a basic assumption of both parties on which the K was made.
Fundamental to the deal.
1. Sherwood v. Walker (Mich. 1887) (Rescinded K for sale of cow for value as meat
when it was actually a pregnant pedigreed breeder worth almost 10X as much →
difference of material fact as to exactly what they were buying & selling. Not just
how “good” the meat would be, for example.
2. Dissent in Sherwood: No, breeding ability is a question of predicting the future., on
which both buyer and seller were necessarily rolling the dice. Mistake of judgment;
the seller was assuming it was only good for beef & cutting losses, while the buyer
was clearly hoping it would breed. Doesn’t work here b/c price was so low that
buyer essentially took no risk?
2. NOT mistake if there is manifested intent to allocate the risk of loss to one party or the
other.
1. If the adversely affected party assumed the risk, No Rescission.
1. Lenawee County Bd. of Health (Mich. 1982) (buyer assumed risk via an “as-is”
clause in the contract, despite mistake of fact as to condition of the dilapidated,
unlivable property)
2. Beachcomber, if the parties were uncertain as to the nature of the coin.
2. But if the deal contemplated no uncertainty or known risks, Rescind.
1. Beachcomber Coins (N.J. 1979) (Rescinded sale of coin which seller was certain to
be valuable but was actually counterfeit)
2. Zimbalist (Rescinded sale of “Stradivarius” because both thought that the violins
were a Stradivarius and a Guarnerius). Problematic as art w/o the warranty? Or is
context here sufficiently different from art show that buyer can rely on seller’s word?
3. Gartner v. Eikill (Rescinded sale of land because seller represented it as zoned for
development; buyer technically uncertain, but this context is one in which the buyer
should generally expect to rely on the seller’s representations).
4. → In all these cases, parties can easily (and justly) be restored to the status quo.
3. Even if mistake is not mutual, still rescind if the equities favor it:
1. Honest Mistake of Fact (Elsinore: sub made clerical error; not simply an ill-advised
bid or serious negligence making rescission unfair)
2. Prompt Notification (Elsinore: quickly asked to be released from bid rather than
holding out for some advantage AND ALSO bid was so low that the non-mistaken party
should have realized the mistake)
3. No Reliance or Detriment (Elsinore: general simply gave bid to another sub)
4. Prevents unfair outcomes: avoids unjustly enriching non-mistaken party and avoids
punishing honest factual mistakes (no deterrence value).
III. EXPRESS WARRANTY
1. Positive & unequivocal statement concerning the thing sold which is relied on by the
buyer and understood to be an assertion of fact ... not an opinion.
1. Tribe v. Peterson (No express warranty for horse even when seller kept repeating how it
was “plumb gentle”, because this was a opinion of past behavior, not a guarantee that it
would never buck)
2. Johnson v. Healy (builder made factual statement that “nothing is wrong” with the house
AND buyer was reasonable to rely on it, inferring that the builder had sufficient info and
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experience to make that an assertion. really an express warranty case? what about
misrepresentation?
3. Zimbalist – could see this as a warranty case: bill of sale contained an express warranty
that the goods would “correspond to the description.”
2. Part of the contract; remedy is contract damages, not rescission. ???
IV. IMPLIED WARRANTY
1. Contract for sale of real property limited to a certain use implies a warranty that the
property will be available for that use & free of patent defects discoverable upon
reasonable investigation.
1. Hinson v. Jefferson (N.C. 1975) (covenants restricted land to residential use, but
swampiness prevented buyer from obtaining a residential building permit)
2. Policy:
1. Fairer to allocate risks to the party who is best able to discover the defect cheaply and
efficiently with reasonable diligence. (i.e., having every interested buyer order their
own termite inspection would be inefficient and wasteful).
2. Moves away from caveat emptor. “Buyer beware” still applies to things the buyer
should see, but undiscoverable things are the responsibility of the seller to uncover and
disclose.
Excuses Under Changed Circumstances
II. IMPOSSIBILITY (Traditional Doctrine)
1. Performance excused if it is functionally impossible to perform
1. Generally, performance is excused if a basic assumption of the contract is destroyed.
1. Taylor v. Caldwell (K.B. 1863) (Rescinded contract for rental of the Surrey Gardens
and Music Hall when the Hall burned down before the rental date, making planned
concert impossible).
2. American Trading (2d Cir. 1972) (No excuse when Suez Canal Crisis forced ship to
go around Cape of Good Hope, because K did not assume the Suez Canal route, so
ship owner would have had no right to call off the deal at that point).
2. Personal services contracts excused if the persons involved die.
1. Harrison v. Conlan (Mass 1865) (On priest’s death, Rescinded contract for church
organist to play for the priest’s services). what if church got new priest?
III. IMPRACTICABILITY (Modern Conception)
1. Performance excused if supervening event makes it impracticable without “excessive
and unreasonable cost”
1. American Trading (2d Cir. 1972) (No excuse for shippers when Suez Canal Crisis
forced ship around Cape of Good Hope, incurring 31.6% higher costs, because that
difference is not “excessively” outside the normal risks of doing business in this
context)
2. Mishara Constr. (Mass. 1974) (Commercial Impracticability where labor strikes and
picket lines “drastically increased the difficulty and expense” of concrete delivery, and
in this case were “so unusual and had such severe consequences [as to be] beyond the
scope of the risks assigned.”)
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IV. FOR BOTH OF THE ABOVE: Where is the risk? Performing party must not have borne the
risk of the supervening event.
1. When Contract Assigns the Risk, Follow the Contract:
1. Force Majeure Clauses must state the event with particularity.
1. Kel Kim (N.Y. 1987) (No excuse when liability insurance crisis of 1980s made it
essentially impossible to fulfill contractual obligation to obtain insurance)
1. ● Left out of the force majeure clause, which listed only the type of emergencies
that would actually interrupt physical, day-to-day operations under the contract.
2. ● Not objectively impossible to perform.
2. A specified obligation obtain insurance can demonstrate allocation of risk. Kel Kim.
2. When Contract is Silent on Risk or Obligations are Generalized:
1. Performing party bears the risk of loss prior to completion.
1. Tompkins v. Dudley (No excuse where schoolhouse burned down when it was only
95% built and not yet delivered over).
2. American Trading (No excuse when Suez Canal Crisis forced ship to go around
Cape of Good Hope, because the silence of the contract in this context implies that
the owner took all the risks associated with a long voyage into account in price
negotiations--pirates, storms, international crises, etc.)
2. BUT Performing party does not bear the risk with respect to the amount of work which
is “wrought into” the owner’s property and has “become so identified with” it as to have
actually improved it. (“American Repair Doctrine”)
1. Carroll v. Bowersock (When owner’s warehouse burned down during renovation
work, contractor may recover for removing floor and pouring concrete footings, but
not for temporary forms or materials not yet added to structure)
3. Seller of goods bears the risk of loss unless the contract identifies specific goods (rather
than just any goods of the same type).
1. Bunge Corp. (8th Cir. 1975) (No excuse when frost destroyed seller’s bean crop,
because the contract only specified beans “grown in the United States”).
2. Snipes Mountain (Wash. 1931) (Impossibility when potato crop failed because
parol evidence showed parties intended to contract for those specific potatoes).
4. Both Parties Bear Risk of Normal Shifts in Prices / Market Conditions
1. Maple Farms (N.Y. 1974) (No excuse for seller where USDA-fixed price of milk
increased 20% during fixed-price one-year contract)
1. Here, both parties are necessarily taking a risk with a fixed-price K. Also, here
the farmer knew that prices rose 9.5% last year, and still made the contract.
3. How Highly particularized is the Contract?
1. The more highly specific and particularized, the more likely to excuse.
2. The more general, the stronger the argument for leaving parties in their predicaments.
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V. FRUSTRATION OF PURPOSE
1. Rescission if the object of the contract is frustrated by an event that the contract does
not contemplate or allocate risk for.
1. Krell v. Henry (K.B. 1903) (Rescission of contract to rent balcony apartment during
coronation when the coronation was unexpectedly postponed, because the entire purpose
of the rental had been to view the coronation) (Advertised for this purpose, Only rented
for the daytime; parties did not contemplate postponement).
2. Weyerhaeuser Real Estate (Rescission of lease granted to company for strip-mining
because a lack of approval for a permit made mining impossible, though not rental)
(parties contemplated opposition, but not such a tremendously paralyzing public outcry)
3. Chase Precast (Mass. 1991) (Buyer of concrete barriers Excused from future purchases,
because it had to agree not to set up any barriers in order to get rid of an unexpected
lawsuit) (risk of major event slashing quantity was not allocated, even though the record
shows that recipient reductions in quantity were a commonly-accepted occurrence)
2. Damages Prior to Frustration?
1. Traditional English View: NO – Freeze parties in the position at which the event occurs.
2. American View: YES - Allow restitution for benefit conferred prior to frustration AND
for reliance work done by the other party. (contra Fibrosa)
Judicial Supervision: Policy Limits
>> Impulse to protect people who are not competent to form contracts.
I. COMPETENCY OF MINORS
1. Minors have an absolute right to disaffirm the purchase of items which are not
necessities. → “Purpose: protect minors from foolishly squandering their wealth through
improvident contracts with crafty adults.”
1. Halbman v. Lemke (Wis. 1980) (Kid allowed to rescind his purchase of a car when he
paid most of the installments before the engine broke and it subsequently lost all value)
2. Webster Street Partnership (Neb. 1985) (Kids allowed to disaffirm rental of an
apartment; shelter is not a “necessary” because the minors had potential shelter with
their parents).
3. ● This right only survives for a “reasonable time” after reaching age of majority.
2. Minor must restore as much of the consideration as remains in the minor's possession.
R.2d § 14. Where this is not possible, disaffirmance may still be made (Halbmann).
→ Purpose: prevent minors from profiting by disaffirming purchase agreements.
3. Parents have the power to enter into contracts on behalf of minors.
1. Sharon v. City of Newton (571) → furthers policies of parental authority and vibrant
athletic programs; though some courts see danger in neglectful parents waiving kids'
tort rights.
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II. COMPETENCY OF THE MENTALLY ILL
1. No longer totally void under R.2d § 15
1. Person’s contract duties are voidable if:
1. He is unable to understand in a reasonable manner the nature and consequences of
the transaction.
2. He is unable to act in a reasonable manner in relation to the transaction, IF the other
party had reason to know. → i.e., would the deal seem reasonable?
2. Person’s contract duties are not voidable “to the extent that the contract has been
performed, … OR the circumstances have changed so that voidance would be unjust,”
IF the other party did not know of the defect. → Fairness impulse to innocent party.
2. Ortelere (N.Y. 1969) (Void where retired school teacher with psychosis “irrationally”
altered her post-death retirement payments two months before her death, because her
husband would need that money to get by, and the retirement board should have known her
condition could mean that she was unable to form contractual intention). (Dissent though it
rational)
3. “Moment of Lucidity” not enough; must be able to understand what they are doing enough
to make deal on rational terms. Farnum (Mass. 1989) (Person with erratic mental condition
may have signed a deed during a “lucid interval,” but she not understand the context
because she made an irrational sale to a person who knew of her impairment.)
III. UNDUE INFLUENCE
1. Elements
1. Undue susceptibility → E.g., emotional anguish, lack of full vigor due to age or
physical condition, total weakness of mind
2. Over-persuasion → Evidence of the excessive strength of one party influencing a much
weaker party, crossing boundaries of permissive persuasion & eliminating their free
will.
1. Unusual Time / Place; Insistence of Immediacy / No Delay; Multiple Persuaders; No
Third-Party Advisers; Insisting no time to obtain attorneys.
3. Not necessarily a strict two-part test, but the second part seems to presuppose the first.
2. Ordorizzi (1966, 578)
1. Vulnerable due to stress & lack of sleep in his recent arrest, questioning, and release.
2. Overpersuasion in that they talked to him alone, at night, in his home, and gave him no
chance to delay his decision or get an attorney.
3. Von Hake (Utah 1985)
1. Old man who sold his ranch to con man showed no evidence of vulnerability and no
evidence of urgency or pressure. He was simply duped, which makes it fraud, not undue
influence.
IV. PUBLIC POLICY
1. Court can declare certain types of contracts to be illegal bargains and unenforceable.
2. States vary. In re Baby M (N.J. 1988) (announcing New Jersey public policy against
surrogacy contracts).
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Judicial Supervision: When Can Courts Declare Modified Agreements Invalid?
I. When Not Supported by Consideration (Traditional Method)
1. Modification of an agreement must be supported by consideration, whether it is seen as a
modification or an entirely new contract.
1. But See UCC § 209(1), which allows modification without consideration for sale or
exchange of goods!
2. Preexisting Legal Duty Rule – A subsequent agreement must rest upon a new and
independent consideration. Anything due as a legal duty cannot count as consideration for
any subsequent agreement. Consideration as a tool for policing the bargain.
1. Levine v. Blumenthal (1936, 597) (no consideration where lessee promised to pay new
agreement in dire financial circumstances of Depression) (would have been stronger to
argue that he was giving up right to go out of business in exchange for lessor’s security)
2. Alaska Packers (1902, p601) (no consideration where contracted fishing workers went
on strike mid-performance and demanded double wages for the same work. They had
already waived their rights to walk off the job by signing the contract)
3. Consideration must be present; mere inadequacy not sufficient to void it. Enforceable as
long as the the person knew exactly what they were bargaining for.
1. Batsakis (p591) (sufficient consideration: loan during WWII: $25 ↔ $2000+interest)
II. When Obtained under Duress
1. Elements:
1. An unlawful/improper threat,
1. Was this action necessary for the party to protect its reasonable expectations under
the contract? Austin Instrument: No; blatant chiseling & extortion.
2. depriving the other party of free will,
3. when no legal remedy is available. “A mere threat … to breach” is not enough; rather,
it must be plain that there was no other recourse, whether turning to some other source
or initiating an immediate lawsuit.
4. Adding to duress: breach in middle of time-sensitive performance (Alaska; Austin)
5. Diminishing duress: careful formalities associated with the breaking of the first
agreement like tearing off sigs, etc. (Schwartzreich)
2. Austin Instrument (1971, 606) (Duress where sub breached radar contract in bad faith,
demanding more $$ and additional work before resuming, and general was on a strict
government deadline with no opportunity either to take another option or seek legal
remedy).
3. Alaska Packers – YES where Bad faith + deprivation of free will & legal remedy with no
chance for other workers or legal action in Alaskan wilderness on short season.
4. Batsakis – NO. Parties knew what they bargained for and the outcome was very uncertain.
5. Embola – NO. Court considered $50 ↔ $10,000 (2000%!) an investment by which the
person would only get $10K on the small chance the borrower both got back to Alaska and
got his mine back.
6. Schwartzreich (1921, 605) – NO, where boss was simply willing to renegotiate the
employment contract after he got a better offer. No beginning of performance, no evidence
of ceremony and intentionality, and none of the three elements of duress.
7. Hackley v. Headley (1881, 623) – NO. Exacting partial release of a debt to take advantage
of the other party’s immediate need for cash is not duress because the debtor is not actually
causing the threat. Policy: need to protect freedom of contract to enter releases.
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III. UNLESS Otherwise Fair and Equitable (Unanticipated Circumstances & Reliance)
1. R.2d § 89: A promise modifying a duty under a contract not fully performed … is binding:
1. (a) if the modification is fair and equitable in view of circumstances not anticipated by
the parties when the contract was made; or
2. (b) to the extent provided by statute; or
3. (c) to the extent that justice requires… (i.e., reliance)
2. If there arises unforeseen, burdensome conditions on the original performance, it is a valid
consideration for a promise of additional compensation for the original performance.
1. Brian Constr. (1978, 612) (Unanticipated Rubble = Consideration, where sub began
work but discovered substantial buried rubble, and general orally agreed to pay extra).
2. Alaska Packers: If the nets really were faulty, could provide consideration for demand
of more $$ if it really impacted their productivity and pay enough.
3. If sub promises 3P owner to do what it promised to general, it’s new contract with new
consideration.
1. When McDevitt v. Stokes (1917) reaches opposite result (jockey in race: “winning”
↔$1K) , seems like it’s really about public policy: gambling nature of the bargain hints
at interference with contract in a regulated, sensitive setting. Also, 3P beneficiary theory
might make this problematic, if the original promise was already intended to benefit the
3P who was the legitimate recipient of the second promise.
Two Special Kinds of Modifications that are OK:
I. Waiver:
1. Must be a voluntary relinquishment of a known right that is not a material part of the agreed
equivalent (can’t waive “heart of the bargain,” b/c would turn K into gift promise)
1. Moon Motor Lodge (1968, 617) (implied waiver of a no-oral-modifications clause,
where owner saw contractor perform extra work and promised to pay for it,, making oral
promise to pay enforceable as a modification for consideration). Equitably, doesn’t
matter whether it was technically waived before the oral promises were given.
2. Quigley v. Wilson (1991, 621)
1. modification, not waiver, where buyer and seller of land renegotiated payment
structure when buyers could no longer pay. Too material to be a waiver.
2. Consideration? Court finds it in unanticipated circumstances of dramatically
plummeting land values + buyers’ unanticipated inability to make $$ off the land.
3. There may be a problem with whether this risk was allocated, but the fact that the
parties manifested intention to be bound to a new agreement cuts the other way.
2. No need for consideration for the actual waiving of the right.
3. A waiver cannot be revoked at common law, though UCC allows if no reliance.
4. A condition is considered waived by a party when party’s conduct would otherwise be fraud
under that condition. Moon Motor Lodge.
II. Accord & Satisfaction
1. Negotiated settlement of a good-faith dispute over money actually due is enforceable,
because each party is giving up their right to stand on their good faith belief.
2. Martin Remodeling (627) (Valid A&S, where debtor sent check with written “paid in full”
condition and seller cashed the check. Cashing = acceptance, and irrelevant if creditor
crossed out the condition.
3. School Lines (628) Where price was clearly stipulated, cashing insufficient “paid in full”
check is not A&S; dispute was about separate money owed, not the price itself.
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RECAP:
Modification – Needs Consideration. Unanticipated circumstances can count (§ 89).
Estoppel – Needs Reliance; Retractable & and could be cured
Waiver – Does not need Consideration OR Reliance. If Reliance is present, Agreement binding;
waiver does not apply. Relinquishment of right cannot be retracted, BUT: UCC § 2-209(5) waiver
can be retracted unless other party has relied! → turning into estoppel?
Judicial Supervision of At-Will Employment
I. Common Law Rule: Employment contracts are at-will and are terminable by either party for
any reason or for no reason at all. Purpose: economic flexibility.
II. Exception: Wrongful/Retaliatory Discharge
1. Can’t fire someone in retaliation for actions that are beneficial as good public policy.
1. Need to balance interests of managerial discretion with protecting employees in their
societally valuable duties like quality control. Teddy's Frosted Foods (1980, 640)
(company liable for firing of food quality control officer for whistle-blowing.)
1. Discrimination; Failure to commit perjury, etc. – violates statutes directly
2. Whistleblowing – violates public policies implied in statutes (consumer protection)
2. Some courts draw narrowly; grievance must not be “too private and individual.” Price v.
Carmack Datsun (Ill. 1985, 645) (company not liable for firing employee with $7K medical
expenses who filed a claim under company health insurance)
3. Some would argue that legislatures are competent enough to handle this problem with
whistleblower statutes, without the courts creating broad causes of action which could
easily be exploited by employees.
4. New York rejects wrongful discharge cause of action entirely
III. Exception 2: Employee Handbook Cases
1. Where employer did not intend binding contract, outward manifestations in an employment
handbook can be sufficient to lead an employee to believe that it intended to create an
employment contract modifying the at-will relationship.
1. McDonald v. Mobil Coal (Wyo. 1991) (handbook’s disclaimers indicated employment
was at-will, but court found them too inconspicuous compared to all the promises that
company would take care of employees and work through any concerns).
2. Need to show that the handbook is either a contract w/ mutual assent & consideration, or
that there was sufficient reliance to invoke promissory estoppel: Giving up the right to
unionize could be consideration for promise to look out for employees’ needs, and showing
up every day could be acceptance of unilateral promise meant to induce that behavior.
Judicial Supervision: When are Standardized Terms Void?
Should general tests of mutual assent be applied to situations where fine print makes the deal
excessively one-sided?
I. R.2d § 211 – Standardized Agreements
1. Party is bound by standardized terms as integrated if he accepts them and has reason to
believe that they are regularly used to embody terms of agreements of the same type,
2. UNLESS the other party has reason to believe that the assenting party would not assent if
he knew that the writing contained the term in question.
3. Doesn’t matter if he knows or understands the standard terms, as long as they are interpreted
11
as treating equally all those similarly situated.
4. Cmt e. Standardized terms should be construed to effectuate the reasonable expectations of
the average member of the public who accepts it. The result may be to give the advantage
of a restrictive reading to some sophisticated customers who contracted with knowledge of
an ambiguity or dispute.
II. WARRANTY DISCLAIMERS
1. Key: Is language clear enough to put reasonable people on notice of the warranty
disclaimer?
1. Weisz v. Parke-Bernet Galleries – YES
1. At art auction, a legal authenticity disclaimer on page 1 sufficient b/c reasonable artauction patrons should know that caveat emptor applied).
2. Henningsen v. Bloomfield Motors (N.J. 1960) – NO: Standardized terms were against
public policy because they disclaimed all warranties, including injury liability, and
limiting liability to a 90-day defective-part-replacement guarantee)
1. Phrased in such a way that reasonable people would not infer that they waived their
tort liability as well as liability to fix mechanical deficiencies in the car.
2. Disclaiming a provision as important as the Implied Warranty of Merchantability
requires more equal bargaining strength and clear mutual assent.
1. The fact that all manufacturers used this clause diminished buyers’ bargaining
power and placed them in the unequal “take-it-or-leave-it” situation in which
“members of the public have no other means of fulfilling the specific need
represented by the contract.”
2. Not specifically drawn to the consumers’ attention.
3. Modern UCC – generally follows the spirit of Henningsen. Must be clear to the
consumer rather than hidden.
III. EXCULPATORY CLAUSES
1. Factors to weigh interest in freedom of contract against interest in tort liability:
1. Ascertainability/Conspicuous-ness – To what degree is purpose of contract unclear?
2. Scope: Is the contract overly broad / all-inclusive?
3. Adhesion: To what degree is the contract standardized, creating an imbalance of
bargaining power?
1. Richards v. Richards (Wis. 1994) (exculpatory contract invalid because it was
misleadingly labeled “authorization” instead of “disclaimer,” covered all time and
place, and was very standardized with zero opportunity to negotiate or discuss with a
live person).
2. Economic loss doctrine – Mfrs. of defective products can exculpate themselves from
liability for economic loss--damages to property and business--but not from strict liability in
tort. Superwood (Minn. 1981, 670)
IV. ARBITRATION CLAUSES
1. Agreements to arbitrate have been held enforceable if they fell outside the assenting party’s
reasonable expectations or are unconscionable
1. Broemmer v. Abortion Services of Phoenix (Az. 1992, 676) Standardized form, the
purpose of which was not explained to a high-school plaintiff under emotional stress. It
was also unreasonably favorable to the defendants because it required the arbitrator to
be a licensed OB/GYN.
12
Judicial Supervision: When are Terms Void for Unconscionability?
I. Bargain must be such that “no fair-minded person could propose, and no rational person
could agree to.” Excuse of last resort, when the other policing devices fail to work.
Lopsidedness is not by itself sufficient.
1. Woollums v. Horsley (Ky. 1892) – YES. “Hillbilly hermit” induced to sell mineral rights to
the land for 40 cents / acre, when it was really worth 3700% more (about $15.00/acre).
1. Here, arm’s length dealing with no mistake, no undue influence, no incompetency, no
misrepresentation, and no problems with consideration.
2. BUT contract is simply irrational and ordering specific performance would be unjust.
2. Kleinberg v. Ratett (N.Y. 1929) – SORT OF? No rescission of contract to buy land because
there was no fraud, but specific performance would nevertheless be unconscionable dues to
the presence of unforeseen water pipe easement just under the surface of the land,
prohibiting useful development. why not a mutual mistake case? Why no damages for
innocent breach of express warranty?
3. Waters v. Min Ltd. (Mass. 1992) – YES. Seller was induced by her boyfriend to sell an
annuity investment contract for less than a third of its present value. No rescission on other
theories because any inducements/influence came from 3P, but unconscionable because no
way that any fair-minded person would accept this.
4. Batsakis (WWII loan case) – Perhaps, if all else failed, one could try to argue that the
$2000 was interest on $25 loan and that such high interest (10,000%) is unconscionable.
II. Generally, Two aspects of Unconscionability Required
1. Procedural Unconscionability – How was deal concluded? Elements of undue influence,
unfair dealings, or questionable circumstances? Look to fine print, strange clauses, etc.
2. Substantive Unconscionability – What are the actual terms of the exchange? Is it a fair
exchange that reasonable people would agree to?
3. Courts may be willing to sustain a claim upon only one if it is so out of proportion. See
Williams v. Walker-Thomas Furniture Co. (1965, 693)
1. Shop operated with a cross-collateralization clause in the obscure fine print, distributing
any debts across all items that consumer had bought from them until everything was
paid off. Thereby, the shop retained the right to repossess all the items if the buyer
defaulted.
III. “Every contract imposes upon each party a duty of good faith and fair dealing in its
performance and its enforcement.” R.2d § 205 Examples of bad faith: evasion of the spirit of
the bargain, lack of diligence and slacking off, willful breach, abuse of a power to specify terms,
and interference with performance.
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Conditions – Is there implied conditionality?
I. Constructive Conditions – What Sort of Conditionality is Implied in the Contract?
1. Even without express conditions, conditionality may be implied as a matter of law if:
1. It appears that the parties reasonably would have intended their performance to be
conditional, OR
2. A condition should exist as a matter of policy. When it is simply unfair that one party
should bear the “performance risk” of the other.
2. CONCURRENT PERFORMANCE
1. In exchange transactions, performances are concurrently dependent; no breach
occurs until one party tenders performance and the other doesn’t.
1. Bell v. Elder (Utah Ct. App. 1989) (No rescission/recovery of down payment when
sellers failed to furnish water, because buyers did not tender their promised
performance of acquiring a building permit and paying hookup & installation fees).
2. R.2d. § 234(1) “Where all or part of the performances to be exchanged under an
exchange of promises can be rendered simultaneously, they are to that extent due
simultaneously, unless the language or the circumstances indicate the contrary.”
3.
Cmt b. Simultaneous performance is possible under agreement when:
1. (1) where the same time is fixed for the performance of each party;
2. (2) where a time is fixed for one party’s performance and no time is fixed for the other;
3. (3) where no time is fixed for the performance of either party;
4. (4) where the same period is fixed within which each party is to perform;
5. (5) where different periods are fixed within which each party is to perform (the requirement of
simultaneous performance does not apply here)
4. R.2d. § 238 “...[I]t is a condition of each party's duties ... that the other party
either render or, with manifested present ability to do so, offer performance of his
part of the simultaneous exchange.”
5. Rule still applies in transactions where defects may be apparent ahead of time
(e.g., real estate closings). Seller gets a reasonable chance to cure; breach is not
automatic unless defects are impossible to cure without difficulty in a “reasonable
time”. Want to promote free alienability of property whenever possible.
1. Ziehen v. Smith (N.Y. 1896) (No rescission/recovery of down payment when
buyers discovered a foreclosure action against the property, because the buyer
never actually demanded performance.)
1. Doesn’t matter if it “seemed incurable,” because the seller could have paid
the mortgage or negotiated the lien to cure the problem.
2. Cohen v. Kranz (N.Y. 1963) (No rescission/recovery of down payment when
buyers discovered covenants on title and problems with fence and pool, but
rescinded rather than listing defects and giving seller opportunity to cure).
1. Title with curable defects was not a breach until buyer demanded good title.
Buyer’s rejection of title was an anticipatory breach.
3. Caporale v. Rubine (1981) – (Rescission where seller conveyed the promised
land to someone else; however, buyer cannot sue for damages, since he was also
unable to tender performance at the time.
4. “Time is of the Essence” Clause cuts against giving reasonable time to cure.
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3. SUBSEQUENT PERFORMANCE
1. A promise is a condition precedent to another’s performance when one party’s
performance is to be rendered prior in time to that of the other, OR when the
nature of the agreement makes it reasonable that one party’s contractual obligation is
conditioned on the other party performing first.
1. Conley v. Pitney Bowes (8th Cir. 1994)
1. (Employee’s obligation under benefit plan to exhaust all appeals depends on
employer’s obligations under the plan to notify him of appeal procedures).
2. Wholesale Sand & Gravel (Me. 1993)
1. Contractor hired to install driveway left job and failed to return; when it
repeatedly failed to come back in response to to owner’s calls, owner was
justified in declaring repudiation and hiring someone else, because contractor’s
performance was a condition precedent to owner’s payment.
3. K&G Construction (Md. 1960) (Sub in partial breach was not released from the rest
of its obligations, so leaving the job was a repudiation and sub was not longer
entitled to restitution and lost profits)
1. Intent of the parties seems to be that subcontractor’s promise to perform in
“workmanlike manner” was a condition precedent to contractor’s promise to
make monthly progress payments on work completed. → This is inferred
because it seems clearly intended to prevent general from being on the hook for
substandard work.
2. Sub negligently causes major site damage → Material breach, so general has
no further obligations under the contract. However, instead of declaring total
breach, general declares partial breach and suspends some of its obligations
(here, progress payments). DOES NOT RELEASE sub from continuing with the
rest of its obligations under the contract. DOESN’T MATTER that the progress
payments withheld were for other work already done; progress payments do not
turn one contract into multiple little contracts.
3. Sub leaves job altogether → total, wrongful breach; sub no longer entitled to
any restitution whatsoever.
4. Stanley Gudyka Sales (1990)
1. No rescission, where partner tried to use a failure to pay a $3K debt as
justification for invoking “just-cause” provision to rescind the contract under
which he owed $46K. Must give notice and opportunity to cure the breach,
and should have at most deducted the $3K from his own debts.
2. May not manipulate condition doctrine to breach one’s own contract obligations
in bad faith. Condition doctrine meant to facilitate self-help, not bad faith.
4. PARTIAL OR TOTAL BREACH?
1. For a material breach of a condition precedent, the aggrieved party has the
opportunity to either (a) completely rescind contract, OR (b) declare partial breach
so it can continue in K and give the other party a chance to cure the defects.
2. Repudiation is total and material breach. Wholesale Sand & Gravel (1993)
Contractor repeatedly failed to show up to driveway job, and owner finally hired
someone else. Repudiation when the party’s statements or actions can be fairly
interpreted to mean that the party will not or cannot perform its contractual obligations
(“Definite and unequivocal manifestation of an intention” to repudiate). Here,
contractor left job & repeatedly blew owner off.
3. If contract was substantially performed, no material breach.
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5. IS THE CONTRACT DIVISIBLE?
1. Non-performance of the bargain entirely relieves the other party of its duties under
the contract, unless the contract can be seen as divisible.
1. Was it the basis of the parties’ bargain that the contract be performed in its entirety?
If not, the portions of one party’s performance may be impliedly conditioned on the
other party rendering part performance, even if it was not in the agreement.
2. Traditional Common Law
1. Wary of imposing hard-and-fast conditions that the parties never actually agreed to.
2. Stewart v. Newbury (N.Y. 1917)
1. Where construction contract is silent on manner of payment, contract was
“entire” and jury should not have been instructed to impose duty to make
progress payments. Plaintiff who left job early is in breach.
2. Recovery for benefit conferred? Look to see whether payment was meant as
compensation for the completed work, OR for work done along the way.
3. Kelly Construction (N.J. 1918)
1. Where contract for “all the hard brick required at $7 per thousand” was silent on
manner of payment, contract was “entire” and seller halting supply was breach,
because a “failure to pay when a part delivery has been made does not excuse
seller from completing delivery.”
3. Restatement - APPORTIONMENT
1. How to apportion? “Can performance/payment be paired up so as not to damage
the parties”? Look to express K, practical structure of the performance, the sense of
the deal & intention of the parties, custom, what seems to make most commercial
sense, etc. E.g., ”concrete” hard to apportion, but logically separate from windows.
1. By Time (Installments) (R.2d § 233)
1. Performance is all due at one time, unless not possible or otherwise provided.
2. When partially due at one time, other party’s performance (by default) is also
due if it can be so apportioned that there is a comparable part due then.
3. Kelly Constr. would probably have come out differently: “$7 per thousand”
delivered as needed. – this can fairly easily be apportioned, AND it is fairer
to the type of deal the parties have.
2. By “Agreed Equivalents” (R.2d § 240)
1. “Divisible” if performances can be apportioned into corresponding pairs
of part performances that “are properly regarded as agreed
equivalents”, such that part performance triggers a duty in the other party.
2. If court finds “agreed equivalents”, a party may be in partial breach of the
contract but still be able to recover on the contract for a different “agreed
equivalent.”
1. Tipton v. Feitner (N.Y. 1859) (Single Contract to deliver dressed hogs at
one price and live hogs at another price several days later; otherwise
silent. When buyer withheld payment for the dressed hogs when seller
failed to deliver live hogs, seller could still sue under K and buyer could
collect damages for breach of second contract)
4. UCC § 2-307 – GOODS
1. All must be delivered in a single delivery, and payment is not due unless the entire
delivery is made, unless “circumstances give either party the right to make or
demand delivery in lots,” in which case the price may be apportioned. →
circumstances may imply installment contract.
16
Conditions – Is there express conditionality?
I. Express Conditions
1. Condition Defined (§ 224)– An event, not certain to occur, which must occur before
performance under a contract becomes due, unless non-occurrence is excused.
2. Effects of the Non-Occurrence (§ 225)
1. Performance of a duty subject to a condition does not become due.
2. Not a breach unless the party is under a duty that the condition occur.
Classification Howard v. FCIC; Conley v. Pitney Bowes
1. Promise?
OR
Condition?
2. creates duty
defers duty
3. perf. discharges duty
occurrence creates duty
4. non-perf. breaches
non-occurance excuses duty
5. Contract Damages
Restitution
3. Challenge here is interpretation of the contract language, as well as an attempt to ascertain
intention to determine whether the parties intended there to be condition.
2.
4. Conditions of Satisfaction
1. Third-Party Condition of Satisfaction – Other party’s commitment to accept depends on
third-party certification of condition.
2. First-Party Conditions of Satisfaction – obligor’s own commitment depends on him
being satisfied.
1. Objective (utility) OR Subjective good faith (fancy)
5. “Time is of the Essence” Clauses
6. When May a Condition be Excused?
1. Prevention – Parsons
2. Disability - Royal Globe; Semmes
3. Impracticability – Grenier
4. Estoppel – induced reliance (Gilbert)
5. Waiver – voluntary relinquishment of a known right at a moment in time.
7. Nonperformance grounds for rescission IF “so material as to go to the essence” and amount
to a repudiation of the contract. If not, damages possible, but not rescission.
LEVEL OF PERFORMANCE
REMEDY
Substantial
Contract Price Damages
(Small breach; Material part of agreed Cost of Performance OR Difference in Value
equivalent delivered)
No breach of constr. condition if substantial performance
Insubstantial
Rescission + Quantum Meruit (Off-contract just restitution)
(Significant, material breach; not even ● Even a breaching party can recover in quantum meruit if
a material part was delivered)
performance is substantial, because perfect performance is
not generally a condition to payment.
[“Willful” → Bad Faith]
None?
V. PROMISE OR CONDITION?
1. “Is this linguistic expression a condition, the nonoccurrence of which justifies rescission
17
and excuses further performance, or a promise, the breach of which creates liability for
damages?”
2. R.2d § 227(1) – “In resolving doubts as to whether an event is made a condition of an
obligor’s duty, and as to the nature of such an event, an interpretation is preferred that
will reduce the obligee’s risk of forfeiture, unless the event is within the obligee’s
control or the circumstances indicate that he has assumed the risk.”
3. Key factor is whether party subject to condition assumed the risk of event’s non-occurrence.
VI. CASES
1. Gladholm v. Hays (England 1841) (promised date of departure is CONDITON)
1. TEXT: distinct from rest of terms because all the terms use the word “shall”, while the
clause in question uses the word “to leave on [this date]”.
2. CONTEXT: Date of departure for a boat charter “goes to the very root and the whole of
the consideration of the contract”
2. Howard v. FCIC (4th Cir. 1976) (“shall not destroy stalks” is PROMISE)
1. TEXT: Did not use the terms “condition precedent” or similar words like “warranty”,
when elsewhere it explicitly claimed that proof of loss is a condition precedent.
2. CONTEXT: No evidence that farmer fraudulently plowed his stalks under; rather,
reasonable evidence suggests he was used to a different policy and simply didn’t know
about the provision because this clause was only added three years prior. Serious
forfeiture risk of finding a condition, while finding no condition still allows a trial to
proceed to determine damages, fraud, etc.
3. POLICY: Insurance policies are to be construed against the insurer, because general
principal of contract law is to construe language against the drafter
3. Ewell (repayment “when he had sold his timber” is timing, PROMISE)
1. TEXT: not clear?
2. CONTEXT: in loan contexts, payment is not usually conditional! Simply cannot be that
the understanding was that “If I do not sell my timber, I do not have to repay you.”
4. Aimes (payment of broker’s fee “upon closing” is CONDITION)
1. CONTEXT: It is the broker’s job is to ensure that closing occurs. Broker has assumed
the risk that there might not be a deal, which is the purpose of brokers. Circumstances
indicate that brokers took that risk here
5. Assumption of the risk illustrations from § 227.
1. Illus. 1. (General’s payment to Sub due no sooner than “five days after Owner shall
have paid General therefor.” PROMISE. Sub should not have to bear Owner’s credit
risk. Subs do not typically have the luxury of checking out owners’ credit risk when
contracting with the general.
1. BUT SEE Mascioni, where “payments to be made as received from owner” was
sufficient to put the Sub on notice that it was agreeing to assume the risk of Owner’s
nonpayment, especially in the context of the Depression.
2. Illus. 2. (promising payment to Engineer “as soon as the mine is in successful
operation.” is PROMISE) Engineer did not assume the risk that the mine won’t open.
He’s just doing a job and has no real control over opening.
3. Illus. 3. (promising additional payment to Inventor of untested process “as soon as
the mine is in successful operation.” is CONDITION), because in a deal like this,
reasonable to see the inventor has assumed the risk for two reasons: (1) inventor has
some contro AND (2) seems like taking risk for bonus payout.
18
VII. CONDITION EXCUSED DUE TO PREVENTION?
1. “A party who prevents fulfillment of a condition of his own obligation cannot rely on such
condition to defeat his liability” – Parsons.
2. Parsons v. Bristol Dev. (Cal.) (payment of architect fees “only from construction loan
funds” makes architect’s payment expressly conditional on Bristol obtaining a loan.)
1. No Prevention? No; the loan was denied because they did not have clear title, but the
architect did not make any showing to contradict the apparent fact that Bristol made
proper and good faith efforts to obtain the loan.
VIII.
CONDITION EXCUSED DUE TO DISABILITY?
1. Announcement of disability/impracticability is a legal announcement/ legal
intervention excusing performance. If the disability voids the occurrence of a condition
at all, condition does not revive when disability is removed.
1. Semmes (the fact that the Civil War was going on at the end of the limitations period
voided the limitations period entirely; insurance claim may still be brought more than
year after war ended.)
2. Royal Globe Ins. v. Craven (impossible to notify insurer of accident “within 24 hours”,
but the second term requiring of “prompt” notification in any case was nevertheless
violated, because she didn’t actually notify until five months later)
2. Should a “reasonable time” requirement spring up if the express time condition is defeated?
Not clear from the cases.
IX. CONDITION EXCUSED DUE TO ESTOPPEL OR WAIVER?
Traditional
Common Law:
Examples
EXCUSED BY ESTOPPEL
(induced detrimental reliance)
EXCUSED BY WAIVER
(voluntarily relinquishing known right)
Requires Reliance; Usually Revocable
Does not Need Reliance;
Not usually Revocable
Actions/signals inducing the other party
to rely, which naturally may be pulled
back, so long as other party is protected
Actions/signals manifesting intention to
give something up “forever and always”,
not really about reliance at all.
Gilbert v. Globe & Rutgers
(12-month suit clause)
Porter v. Harrington (prompt pay clause)
Clark v. West (sobriety clause)
1. Insured relied on statements
2. Insurer can revoke, while protecting
insured by restarting 12 month period
UCC 2-209
recognizes the
possibility of:
1. Obligee relied on statements
2. Obligor cannot revoke, because obligee
would be unprotected (forfeiture; cannot
cure late pay, cannot un-drink).
(1) waiver revocable by default....
(2) but if reliance...
(3) then, irrevocable.
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1. ESTOPPEL: Gilbert v. Globe & Rutgers
1. Insured filed claim; insurer stonewalled for a year before finally denying claim. Insured
sued a couple years after that. Insurer claims that a condition of its liability in any suit is
that the suit be brought within 12 months of the date of the incident. Insured claims
estoppel, because they were induced not to sue by stonewalling. Court rejects, because
Estoppel can be retracted/removed and the relevant condition revived/“reignited.”
2. Estoppel instead of waiver because if the agent had been out there waiving the 12-month
clause, the clause would be gone & not reinstated.
3. Parsons v. Bristol Dev.
1. Not estoppel; Bristol did nothing to induce him to believe that it had obtained the
funds, and architect did not rely on any belief that the funds had been obtained.
2. WAIVER: Clark v. West (N.Y. 1908)
1. TEXT: Stipulated that full payment for the work (2/3 of total fair rate) is conditional on
the performance of a clause stipulating that the author abstain from alcohol.
2. FACTS: Author did use alcohol, but publisher said he could drink some and it would be
okay. The use was “not excessive and did not prevent or interfere with the due and full
performance by the [author] of all the other stipulations of the contract.”
3. Held, Author is entitled to be able to put on evidence of waiver at trial, namely that
publisher knew he was drinking, urged him to continue writing, and assured him he
would still get the full money.
4. Can’t waive heart of bargain, so the thing waived must be a condition and not the
consideration in the agreement. Here, argument that abstinence was consideration
flops, because a book was the “material part of the agreed equivalent” bargained-for,
not a sober author. IF he abstains, then his book is worth the full rate.
3. Schultz (team treating injured player is WAIVER of reporting requirement)
1. TEXT: If football player is discharged due to injury and written notice of such injury is
given within 10 days of sustaining it, then player gets full salary.
2. CONTEXT: Injured player missed the 10-day deadline because he reported his injury
orally to his trainers, and the team treated him and watched the injury for a period of
time before determining he could no longer play & filing (by then, late) notification.
3. In this context, the verification and opportunity-to-treat reqts. of the 10d rule were met.
4. Platt Pacific (when condition is an action, failing to do it is WAIVER of condition)
1. Parties agreed that a demand for arbitration must be made “no later than August 12.”
2. Held, the contractual duty to submit to arbitration is conditional on meeting that
deadline; otherwise, no duty arises.
3. Plaintiff argues that failing to meet the deadline has no effect on the duty to submit to
arbitration unless the plaintiffs intended it to be a breach. Court disagrees: “When a
party fails to perform a condition that is within its power to perform, it is not an excuse
that the party did not thereby intend to surrender any rights under the agreement.”
4. Term “waiver” generally indicates voluntary relinquishment of a known right, but here,
“waiver” occurs upon the simple failure to perform an obligation.
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X. WHEN IS TIME MATERIAL? “TIME IS OF THE ESSENCE” CLAUSES
1. Typical time is of the Essence case occurs with a contract to pay money on a stated date.
The question of whether “time is of the essence” (whether performance is expressly
conditional on timely payment) is a question of the intent of the parties; merely inserting the
words is not enough.
2. Porter v. Harrington (Mass. 1928)
1. Borrower suing lender for specific performance on a contract to sell land. Trial court
orders specific performance; this court affirms.
2. Installment payment plan on the land, where the contract makes timely payment an
express condition, and gave the lender the right to void the contract when payments are
late and retain all payments as liquidated damages. Borrower fell behind on payments,
and lender got fed up and “exercised the option” to close the account.
3. TEXT: Contract also included clause: “prompt performance and time are the nature and
essence of this contract and each of its conditions.” C: hard to make this clearer...
4. Lender tried to argue that its duty to convey the land was extinguished when the buyer
fell behind on payments, because it was a condition precedent.
5. Court holds that “When a party without objection has accepted overdue payments not
made in accordance with the strict terms of the contract, an order of business has been
established inconsistent with rigid insistence upon a clause of the contract which in
effect is a forfeiture.” → i.e., accepting delinquent payments is waiver of forfeiture
clauses. Reliance? Yes here, but not required. Not Revocable.
6. Waiver of one condition is not a waiver of the rest of the obligations. → common default
rule in contracts; just b/c waived one month has nothing to do with the next month. In
bank lending agreements, accepting late payments doesn’t mean giving up other rights!
Porter may not be completely accurate, but it makes sense to not allow Lender to get all
his remedies when he has waived some of his rights already.
3. Notes
1. Buyer obligated to accept late deliveries when it failed to reject the goods or notify seller
of the problems, because the court determines intent by looking to the conduct of the
parties after the sale but before the formal rejection.
2. “The Buyer’s silence in the face of seller’s deliveries now precludes it from complaining
about defects, such as delay in delivery, that were readily apparent at the time of tender.”
XI. CONDITIONS OF SATISFACTION
1. Purpose of the COS is to protect the owner’s interests, ensuring that contractor has sufficient
incentive to follow the plans exactly and correct mistakes.
2. What Standard?
1. “Reasonable” standard should be used for matters of “operative fitness, utility, or
marketability”
1. Haymore v. Levinson – awarding recovery to construction company even though
owners were not satisfied with the work, because the owners were asserting many
arbitrary problems with taste and style. “Building Contracts generally fall into a
class where taste, fancy or sensibility is not of predominant importance.”
21
3.
4.
5.
6.
2. Breslow – Granting SJ, because attorney-client relationship falls into “operative
fitness” rather than taste-and-style category; client is not allowed to decline payment
merely because quality of service did not measure up to that “rendered to defendant
by previous attorneys”.
2. Subjective standard is used for matters of “satisfaction” where it means “fancy,
taste, sensibility, or judgment.”
1. Fursmidt v. Hotel Abbey: hotel owner can terminate on its own determination of
“sufficiency and propriety” of drycleaning services. Purpose of such a clause in the
contract is consistent with the hotel owner’s full discretion over the type and quality
of services provided in the hotel.
3. 3P Conditions of satisfaction clauses create an expectation of the exercise of professional
judgment in the “umpire” role. Need a range of discretion in applying standards of
perfection, but can’t collude with other party or simply decline to show up.
May be Excused:
1. Waiver – Maurer v. School Dist. (Owner effectively waived COS by making progress
payments and everything without requesting COS until the very end. Or estoppel?)
2. Impracticability Grenier v. Compratt Constr. Co. (Conn. 1983)
1. Where payment was explicitly conditional on receiving a certain municipal official’s
certificate, Sub’s inability to obtain the letter from the proper person excused any
duty to obtain the letter from that particular person..
2. An alternate method of fulfilling the intent of the condition would be acceptable,
because the intent of the condition was to ensure valid certificates of occupancy,
which were in fact promptly issued.
3. FACTS: Sub completed work and tried to get certificate. Turns out that that
particular official did not write such certificates, so one of his assistants authorized
another official who then issued them. BUT general still refused to pay, and claimed
substantial liquidated damages under the contract.
Failure to Meet = Breach
1. Where architect’s certificate was an explicit condition precedent, it may only be set aside
for fraud or a mistake gross enough to imply bad faith, and simple conformity to
specifications cannot be made the test of whether certification was granted in good faith.
Second Nat’l Bank v. Pan-American Bridge.
Breaching Party May Recover Off-Contract if Substantially Performed. “The refusal of
approval does not enable the buyer to obtain the seller’s property without payment.”
1. Van Iderstine (Where payment conditional on whether an independent broker certified
the quality of the 21,000 vealskins, buyer does not have the right to take all but fail to
pay for the ones not approved)
1. No risk of forfeiture in making them pay for “substandard” skins, because buyers can
easily resell them for market value at probably small loss.
May not be Unfairly Withheld (QUESTIONABLE TO FIND THIS; NOLAN CLOSE)
1. Nolan v. Whitney (Work completed and agreed-upon progress payments made. But
much of the work was “improperly done”, and the architect did not approve, and the
final payment was withheld)
1. RULE: “It is sufficient if the party bound to perform, acting in good faith, and
intending and attempting to perform his contract, does so substantially, and then he
may recover for his work [minus compensation for] slight or trivial defects...
2. Holding: “When he had substantially performed the contract, the architect was bound
to give him the certificate, and refusal to give it was unreasonable”
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What Happens After Breach?
Performance
Substantial (small breach)
(Small breach; Material part of
agreed equivalent delivered)
Insubstantial
(Significant breach; not
even a material part)
[“Willful” → Bad Faith]
Remedy
Contract Price – Damages
Cost of Performance, OR
Difference in Value
Quantum Meruit
(Off-contract just restitution)
None (?)
Standard substantial-performance case is a performing party (e.g., contractor) who is seeking payment
for work already completed. Two Issues:
I. Has substantial performance occurred?
1. How much physical work been done/delivered, measured by total amount of work & by total
contract price. If alleged damages are very large compared to the contract price, easier
argument to say performance wasn’t substantial.
II. How should contract damages be measured?
1. Cost of Performance, OR Difference in Value?
I. SUBSTANTIAL PERFORMANCE (813-822)
1. Plante v. Jacobs (Wis. 1960) (Substantial Performance, because while there were many
things wrong with the house, but in the end none of them went to the essence of the bargain
or were very important to remedy except the living room wall)
2. Jacob & Youngs v. Kent (N.Y. 1921) (Substantial Performance, rejecting owner’s argument
that the use of the correct pipes is a condition, and that because the wrong pipes were used,
all obligations excused.)
3. Reynolds v. Armstead (Colo. 1968) (NOT Substantial Performance where color of veneer
bricks was wrong; lower court erroneously still awarded contract damages because quantum
meruit was zero.
4. Worcester Heritage Society, Inc. (Mass. Ct. App. 1991) (Substantial Performance where
buyer completed most of the promised exterior restoration of the historic house and also
gutted interior before running out of money and halting the work, but not expressly
repudiation, which would have been a total breach. Here, forfeiture risk is great if Society is
allowed to reclaim the house rather than simply hold him liable for cost of completion.
Tichnor Bros. v. Evans (Vt. 1918) (Substantial Performance where buyer receives goods,
but refuses to pay because seller breached promise not to sell to other merchants. Seller is
entitled to the contract price minus any damages)
II. ASSURANCE OF DUE PERFORMANCE
1. If one has grounds to believe that other party will commit total breach, may suspend
performance and demand adequate assurance of due performance under R.2d § 251.
2. Failure to give assurance within a reasonable time counts as repudiation.
3. BUT any independent suspension of performance in anticipation of a likely breach will be
done at party’s own risk. Reasonable belief that the other party will not be able to perform is
not an excuse for nonperformance.
1. Hathaway v. Sabin (1891) (performer suing venue owner after venue owner failed to
prepare for concert due to snowstorm, assuming performers would be held up. Court
finds total breach and awards contract price. Risk should fall on venue, not performers.
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III. GOODS: PERFECT TENDER RULE
1. Buyers have the right to reject all goods if they “fail in any respect to conform to the
contract” UCC § 2-601 Llewellyn wanted to say “material respect”, which would reject the
perfect tender rule.
2. “Conformity” means perfect performance of contract, NOT perfect goods. “Substantial
performance” rule does not apply in commercial contracts for goods.
3. TEST:
1. Goods or Services?
1. Look to the primary thrust of the contract: primarily the delivery of a good with
labor incidental (custom computer software), or primarily the rendering of a service
with a delivery incidental (installing a roof on a house)?
2. If Goods, determine the obligations under the contract, including implication from
circumstance, particular course of dealing, and trade usage.
3. Determine whether the goods actually meet the standard.
4. If they fail, the buyer may reject in good faith.
5. Must consider forfeiture risk.
4. Printing Center of Texas, Inc. v. Supermind Pub. Co. (Tex. Ct. App. 1984)
1. Publisher/buyer suing printer/seller for breach of contract for printing 5000 of its books,
alleging defects and seeking return of deposit. Jury found for Publisher/buyer. This
court affirms.
2. Goods or Services? Contract to print books is arguably services governed by common
law, but here plaintiff sued under UCC.
3. Obligations: contract specified only quantity, trim size, type of paper, & cover.
4. Met Standard? number of books had off-center artwork, wrinkled pages, etc. → Held,
falls under implied warranty of merchantability, § 2-314.
5. Good faith rejection?– here, yes. Defects were not minor. Still contestable, and under
CL court would scrutinize perf. more closely; how many were damaged, etc.
6. Forfeiture Risk must be considered here, because the books are manufactured specially
for this publisher.
5. Can’t prevent rescission for impracticability/force majeure: any imperfect delivery
entitles the buyer to rescind & refuse all. Prescott v. J.B. Powles (Wash. 1920)
1. Obligations: contract specified sale of “300 crates” of onions.
2. Defective? Only shipped 240 crates because the only ship was requisitioned.
3. Good faith rejection? Yes. Seller may not force the buyer to accept incomplete
performance due to impossibility.
4. Forfeiture Risk was assumed by seller in a situation like this. If all onions had gotten on
board, but rats ate 60 crates, can’t force buyer to accept the rest.
6. Time is not of the essence under UCC unless it appears that the parties intended time
to be a strict condition. Beck & Pauli Lithographing (8th Cir. 1892)
1. Seller/Artist suing Buyers for contract price on sale-of-goods contract when buyers
refused to accept. Court directed verdict for buyers; here reversed.
2. FACTS: Lithographing contract provided that artist would prepare the designs, submit
them for approval, engrave them “in first class style”, and furnish the printed materials
within 1889. Expensive and drawn-out process finally wrapped up in December, but the
shipments did not arrive until the first few days of January 1890.
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1. Obligations: design, engrave, and print custom papers; furnish “within 1889.”
2. Defective? A few days into 1890.
3. Good faith rejection? “not justified by the trifling delay,” time is not a material part
of the bargain here, and was clearly not a strict deadline. Substantial performance.
4. Forfeiture Risk is very significant. In a contract for artistic work and skill, the items
are unique, and they cannot simply sell them elsewhere.
7. Substitute of conforming tender must also be perfect. Worldwide RV Sales & Service
1. Rescission where contract for motor home specified clearly that it would be outfitted
with “dual roof air conditioning”, but they only built it with one.
2. Dealer’s offer to “fix” it by installing two more in the proper places, and taking the
original out would leave a hole in the roof!! Not perfect under PTR. Rescission.
IV. GOODS: ACCEPTANCE & INEFFECTIVE REJECTION
1. Acceptance in the face of nonconformity effective when the buyer has a reasonable
opportunity to inspect the goods and signifies to the seller that it will take them in spite of
nonconformity, OR when buyer fails to make an effective rejection.
2. After Acceptance, Buyer may only revoke if it can demonstrate that any nonconformity
“substantially impairs [their] value to him”.
1. Fortin: Look to the subjective needs of the buyer, and the “totality of the circumstances”
in each particular case. Even cosmetic defects can qualify if they go unrepaired despite
numerous complaints, or are such that they make unusual or excessive maintenance
necessary for use. Even if they are curable, they reduce the value if they occur in a
series and shake the buyer’s confidence and raise his apprehension of the good.
2. Plateq Corp. (Conn. 1983) Judge Peters
1. Contract to custom-build tanks. Builder/Seller was in breach for major delays. BUT
buyers’ inspector looked them over and noted only a few more deficiencies, which
seller promised to remedy by the next day. Inspector implied that a truck would
arrive soon to pick them up. Instead, buyer issued general cancellation.
2. Acceptance Valid under UCC.
1. Inspector knew about the nonconformity and still manifested willingness to take
them. Waived. § 2-606(1)(a)
2. AND buyers failed in their “nastygram” to offer an alternative means of and
opportunity to cure. § 2-606(1)(b)
3. Revocation Wrongful.
1. No impairment of value.
2. Forfeiture risk was very great. Tanks could not be resold.
3. Fortin v. Ox Bow Marina (Buyers revoked acceptance of powerboat after 4 months).
1. Valid Revocation:
1. Massive problems impairing value, and “not cosmetic or insubtantial”: engine
overheating twice, pumps defective, electronics malfunctioning, toilet not
working, etc. Some were repaired by seller, but many were not despite repeated
complaints, despite the fact that the seller manifested an intention to repair it and
attempted to do so.
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Third-Party Beneficiaries (843-854)
I. Intended Beneficiaries (Creditor/Donee) – R.2d § 302(1)
1. Recognizing the beneficiary’s right to performance must be appropriate to effectuate the
intention of the parties.
1. Where there is doubt as to whether reliance is reasonable, considerations of procedural
convenience or public policy may require recognizing the beneficiaries right even if the
parties did not explicitly so intend
2. Need either (a) a money obligation by promisee to beneficiary which the promise would
satisfy (creditor beneficiary) OR (b) evidence of promisee’s intent to give the beneficiary
the benefit from promisor’s performance (donee beneficiary)
1. Examples of Such Evidence: Promise is to to perform promisee’s duty to beneficiary; to
discharge beneficiary’s lien on promisee’s property; to satisfy duty of third person; to
make a gift to beneficiary, etc.
2. Bottom line: beneficiary is intended if, under the circumstances, beneficiary is
reasonable in relying on these manifestations to confer a right on it.
3. Illustrations :
1. 8. A conveys land to B in consideration of B's promise to pay $15,000 as follows: $5,000
to C, A's wife, on whom A wishes to make a settlement, $5,000 to D to whom A is
indebted in that amount, and $5,000 to E, a life insurance company, to purchase an
annuity payable to A during his life. C is an intended beneficiary under Subsection
(1)(b); D is an intended beneficiary under Subsection (1)(a); E is an incidental
beneficiary...
2. 10. A, the operator of a chicken processing and fertilizer plant, contracts with B, a
municipality, to use B's sewage system. With the purpose of preventing harm to
landowners downstream from its system, B obtains from A a promise to remove
specified types of waste from its deposits into the system. C, a downstream landowner,
is an intended beneficiary under Subsection (1)(b).
3. 12. B contracts to build a house for A. Pursuant to the contract, B and his surety S
execute a payment bond to A by which they promise A that all of B's debts for labor and
materials on the house will be paid. B later employs C as a carpenter and buys lumber
from D. C and D are intended beneficiaries of S's promise to A, whether or not they have
power to create liens on the house... (????)
4. 15. A buys food from B, a grocer, for household use, relying on B's express warranty. C,
A's minor child, is injured in person by breach of the warranty. Under [UCC § 2-318],
without regard to intentions of A or B, the warranty extends to C...
II. Incidental Beneficiaries – R.2d § 302(2)
1. If someone is not an intended beneficiary, then there is no duty to them and they have no
right to sue on the promise.
1. Illustrations :
1. 16. B contracts with A to erect an expensive building on A's land. C's adjoining land
would be enhanced in value by the performance of the contract. C is an incidental
beneficiary. . . .
2. 19. A contracts to erect a building for C. B then contracts with A to supply lumber
needed for the building. C is an incidental beneficiary of B's promise, and B is an
incidental beneficiary of C's promise to pay A for the building.
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2. Lawrence v. Fox (N.Y. 1859)
1. Third-party creditor suing promisor for breach of promise to pay third party $300. Court
denys a motion to dismiss and the jury finds for the third-party. Affirmed.
2. FACTS: Holly – $300 loan → Fox, in consideration of promise to give to Lawrence.
3. Issues:
1. Lack of Consideration?
1. Court: no consideration problem here; these are bargains, not gifts; a promise to
pay the other person’s debt is historically valid as consideration in an exchange.
2. Lack of Privity?
1. No mutual assent; Fox argues that he can’t be sued by Lawrence because Fox
didn’t promise Lawrence anything.
2. Court holds that the express promise to Holly created an implicit promise to
Lawrence to pay him $300.
3. Efficiency argument that they should be able to settle the debt between
themselves rather than involving the original promisee.
4. Concurrence is of the opinion that Fox’s promise to pay back the $300 was actually
made to Lawrence back through Holly as agent. No basis in the facts for an agreement
between Lawrence and Holly authorizing Holly as agent. BUT: Lawrence arguably
ratified that authority after the fact by suing.
5. Dissent argues that the trust concept is a more viable & reliable way to enforce
promises on behalf of third-party beneficiaries; however, requires a special intention on
part of the recipient to be the custodian, rather than simply the recipient of a loan.
Here, the money was not explicitly a trust fund given to Fox in Lawrence’s name
3. Seaver v. Ransom (N.Y. 1918)
1. Niece suing uncle’s estate on promise by uncle to aunt to pay niece in his will. Trial
court awarded judgment to niece; here, affirmed.
2. Wife wanted to change her will to leave house to niece instead of husband, but was
afraid she would die before it was ready for her signature. Husband/uncle promised her
that if she would sign it and leave the house to him, he would leave niece a
corresponding amount in his will. He didn’t, and niece sued.
3. Court finds no significant difference between this case and a case where either there had
been no promise but the niece was actually their daughter (legal obligation), or a case
where the will had expressly provided that the money was going to the uncle on
condition that he give it to the niece in his will.
4. Donee beneficiary case; i.e. spouse relationships imply that a promise made to the
husband will benefit the wife, giving her the right to sue the 3P promisor even though
there was no other reason to believe that husband “owed” the wife anything.
1. Seaver v. Ransom expands this to extended family situation.
2. Also, If this was merely a promise to make a gift, it is not enforceable. Rather, she
extracted from the uncle a promise to complete the gift in her stead → her signature
on the imperfect will was consideration.
5. Key is that there is a strong basis for inferring that they intended the 3P to have the
gift; even more key in cases of donee beneficiaries.
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Assignment and Delegation (875-882)
Assignment = Transfer of rights Obligees: Assignor → Assignee
Delegation = Transfer of duties Obligors: Delegator → Delegate
I. Elements of Assignments
1. Voluntary manifestation of intent by the owner of a right to transfer it immediately and
irrevocably to another person. Assignee may then enforce that right against the other party.
2. Must be complete relinquishment. Assignor cannot retain anything.
3. No formalities required unless the right is embodied in a negotiable written instrument.
4. Obligor (other party to original deal) need not consent, though must be given notice.
II. Elements of Delegations
1. Assumed in an assignment unless clearly indicated or assignment is the right to buy land.
2. A promise to the delegator to perform the duties intends the obligee as 3P beneficiary.
3. This promise is enforceable by either the assignor or the other party to the original K
III. Limitations
1. Invalid if contract specifically prohibits it, if contrary to public policy, or if the nature of the
contract means that assignment would infringe on the other party’s rights (kosher meat
contract → non-kosher packer), place an undue burden on the other party, or defeat a
substantial interest in having the original obligor himself render or control performance
(i.e., contract for very personal services).
2. Balance interest in free assignability with the reasonable expectations of parties.
3. Only already-existing rights and duties may be transferred. May not transfer, say, a power
of acceptance to an offer.
IV. INTERPRETATION AND INTENTION: What do the words mean?
1. Clear language of Assignment of rights & duties controls.
2. Generic, Ambiguous Assignments: “Buyer hereby transfers this contract to A”
1. Land: Assignee gets the option to execute the contract, but is not forced to do so.
2. Everything else: Ambiguous instruments of transfer are interpreted, when in doubt, as
including the transfers of the rights and the delegation of the duties. Assignee/Delegee
is promising to perform the duties, with the original other party as the intended third
party beneficiary. R.2d § 328
V. EFFECT:
1. Assignee now owes duties to other party as 3PB of Assignment. [Other Party v. Assignee]
2. Other party now owes its duties to assignee, not assignor [Assignee v. Other Party],
provided notice of the assignment is given.
1. Dinslage v. Stratman (Neb. 1920)
1. Administrator of creditor’s estate suing debtor. Stratman owed his mother $1,400;
she orally assigned the right to $1000 of that debt to her granddaughter. Stratman
paid the assignee. When grandmother’s estate sued him, the court held that there had
been an effective assignment and an effective discharge of his obligations.
2. Valid intention to relinquish all rights, plus notice. Oral assignment OK (especially in
the family context) because debt was never formalized to begin with.
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3. **Enough for intent to assign that there is a lack of manifest intention to retain**
2. Herzog v. Irace (Me. 1991)
1. Promisee’s assignee is suing obligors for payment of settlement agreement.
2. FACTS: Obligors were retained as plaintiffs’ lawyers in a tort suit. Plaintiff
incurred unrelated $doctor bills he couldn’t pay, and so he paid with a note assigning
to the doctor right to payment out of the proceeds of his tort action. A year later he
got a $20K settlement. Plaintiff told obligors he would pay the doctor himself, but
never did.
3. HELD, Assignment of rights to the doctor was effective. Enough that the letter does
not manifest intent to retain any control.
4. Assignment cannot be revoked unilaterally by Assignor; statements purporting to
revoke were ineffective.
3. Exception: Real property contracts require clear and unequivocal manifestation of A’s
assumption of duty to go through with the sale.
1. WHY? greater difficulty on issue of payment in real property transactions, because
of the larger sums involved and need to assume mortgages.
2. Langel v. Betz (N.Y. 1928)
1. Seller suing buyer’s assignee for specific performance of contract to buy land.
Trial court awards specific performance; here reversed.
2. FACTS: assignee asked for more time to close the deal; seller argues that this
operated as an implicit promise to assume the assignor’s obligations under the
contract. (Cohen v. Kranz; Ziehen v. Smith)
3. Held, NO. Needs to be an unequivocal act; however, this was a request, not an
assertion of rights to the deal. May not infer a promise to assume assignor’s
duties without circumstances indicating to the contrary. Assignee is not bound; it
has an option contract.
1. WHY?
1. No bargain between the assignee and the other party or promise to
assignor of which other party is 3P beneficiary. Court here weighs the
circumstances and finds them not sufficient to imply a promisor/promisee
relationship between other party and assignee.
2. Court suggests that if the assignee sued to enforce the deal, that would
operate as an implied assumption of the duty to perform.
4. Assignee now has a right of action not only against the Obligor, but also
against the Assignor.
VI. Misc.
1. Gratuitous Assignments are revocable unless in writing; This is a harder line than in
Dinslage and Seaver in the context of family relationships.
2. When making the assignment breaches an express contract provision banning assignment,
assignment invalid in some cases, but in other cases it should be upheld with appropriate
damages.
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Statute of Frauds (907-930; case examples not assigned)
I. Agreements which are unenforceable without “some memorandum or note thereof … in writing
and signed by the party to be charged” or someone that party authorizes.
1. Contracts for the Sale of Land
1. Includes agreements assigning the right to purchase the land to a third person.
2. Some states interpret “party to be charged” narrowly to only include the seller.
2. Contracts Not to be Performed Within One Year
1. OK as long as it might conceivably be performable within one year, though some courts
may invalidate contracts if they are not reasonably expected to meet that time frame.
1. Valid termination-option clause can make a multi-year agreement OK under SOF.
2. Not OK if terms of the agreement require full performance to last more than one year,
even if performance beyond one year becomes impossible for other reasons.
3. Contracts in Consideration of Marriage
1. Mutual promise to marry one another is technically OK, though actions on it are met
with disfavor.
2. OK when marriage is a condition to the exchange.
3. Not OK when marriage is the consideration in the exchange.
4. Promises to Answer for the “Debt, Default, or Miscarriage of Another”
1. Important that there first be an actual promise by the debtor to the creditor; if the only
promise is one made between the third party itself and the creditor, valid.
2. Guarantor must actually make the promise to the creditor; promise to the debtor to pay
the debtor’s debts merely makes creditor 3P Beneficiary.
5. Sale of Goods where K price is $5000 or more (UCC § 2-201)
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