Contracts Cases
Hawkins v. McGee, 84 N.H. 114, 146 A. 641 (1929)
Plantiff entered into a contract with defendant, a surgeon, to
remove a section of tissue from plantiff's chest and graft it in
replacment of scar tissue on the palm of plantiff's right hand.
Plantiff alleges that defendant at some point guaranteed that he
would "make the hand... a hundred percent good hand". The
jury was instructed to consider two elements of damage: (1)
pain and suffering due to the operation, and (2) positive ill
effects of the operation. Held The defendant owes the plantiff
the difference in value between a "hundred percent good hand"
and the hand in its present condition. The jury instructions were
therefore incorrect. The measure of damages is the difference
between the value of the item with the warranty, had it been true,
and the actual condition of the item at the time of sale, and
other damages as could be reasonably anticipated as likely to
be caused by lack of performance.
Groves v. John Wunder Co., 205 Minn. 163, 286 N.W. 235. (1939)
Plaintiff owned land and the plant for screening gravel that was
on the land. Defendant owned a similar plant nearby. Plaintiff
agreed for the defendant to lease the land, use the plant, and
process the sand and gravel in the land, leaving the property at
uniform grade, substantially the same grade as the road.
Defendant paid $106,000 for the use of the land. Defendant
removed only arbitrary gravel, leaving the land at the end of the
lease not at any uniform grade. The ground was "broken,
rugged, and uneven". Finishing removal of the gravel and
grading would cost defendant over $60,000, but the end result
of the land if the contract would have been upheld would be a
little over $12,000. Held The defendant owes plaintiff, not the
difference between the value of the land if defendant had
performed and the original value of the land, but the value of the
actual performance lacking by breach of the contract. The law
aims to give the promisee what was promised, not the fair
market value of the outcome of performance. One might
contract for something that lowers the value of property, for
instance, and the promisor would still be liable for the work, not
the low-value result.
Acme Mills & Elevator Co. v. Johnson, 141 Ky. 718, 133 S.W. 784
(1911)
Plaintiff contracted with defendant on 29 April 1909 for 2,000
bushels of wheat at $1.03 per bushel "to be delivered from [the]
thresher", and supplied sacks for use in delivering the wheat.
Defendant around 13-15 July 1909 sold his wheat to another
party for the price of $1.16 per bushel. Defendant processed
more wheat on 25 July 1909 and the wheat was ready for sale
around 29 July 1909, at which time the price of wheat was
below $1 per bushel. Held Failure to perform in a contract by
not providing a product only brings about liability for the
difference between the current market price of the product and
the contract price. A defendant on failure is only liable for the
difference in value between a contract price and the market
price of the property at time of delivery. At the time defendant
would have made delivery (the contract doesn't state any
particular type of wheat), the market price for wheat was below
the contract price, and the defendant's failure actually benefited
the plaintiff.
Louise Caroline Nursing Home, Inc. v. Dix Constr. Corp. (1972)
A construction company that did not finish construction on time
is only liable for the amount it would cost to finish construction
minus amount not paid. In this case, the amount not paid was
more than it would cost to finish construction, so nothing was
owed plaintiff.
Rockingham County v. Luten Bridge Co. (1929)
A bridge company was contracted by a county to construct a
bridge. After the county breached the contract and notified the
company, the company continued and finished work anyway.
The county is only liable for work performed up to the breach,
not afterwards.
Leingang v. City of Mandan Weed Board (1991)
When the Weed Board breached a contract by assigning weed
cutting jobs to companies other than Leingang, the trial court
said that Leingang must, besides taking the price of the lost
jobs and subtracting per-job expenses, also subtract other costs
such as insurance to arrive at a net profit. The appeal court held
that fixed cost would have to be paid by plaintiff with or without
breach, so subtracting those costs would make plaintiff pay for
them twice—defendant therefore owed those costs as well.
Kearsarge Computer, Inc. v. Acme Staple Co. (1976)
Acme breached a contract with Kearsarge in which Kearsarge
was to perform services for Acme. Acme had to pay Kearsarge
the full contract price, even though Kearsarge serviced other
clients after the breach, because it wasn't shown that it would
have been impossible to service the other clients but for the
Acme breach.
Parker v. Twentieth Century-Fox Film Corp. (1970)
Parker was awarded the entire amount of a breached acting
contract, even though she turned down a similar contract Fox
had offered her in its place for acting in another film of a
different genre in a different location with slightly different
provisions.
Billeter v. Posell (1949)
Defendant was awarded full wages for employer hiring
someone else (for "floor lady and designer") and offering
defendant a lower wage. The amount owed does not subtract
unemployment compensation, nor does it subtract the lower
salary offered to the employee.
Missouri Furnace Co. v. Cochran (1881)
Missouri contracted with Cochran to deliver a year's worth of
coal at specified delivery dates, and when Cochran breached
Missouri purchased the remainder from another individual. The
courts ruled that Missouri is entitled only to the difference of the
original contract price and the market price on each of the
breached delivery dates—no forward purchasing.
Reliance Cooperage Corp. v. Treat
For a breach in September for staves due in December, a trial
court awarded Reliance the difference between the contract
price and the price at the time of breach, but on appeal the
reversal said that "there is no duty to mitigate damages until
there are damages to mitigate", so the difference between
contract price and the price when the contract was due was
awarded.
Neri v. Marine Retail Corp. (1972)
Buyer breaching contract for boat from boat reseller is awarded
repayment of downpayment minus the profit seller would have
made as well as seller's incidental expenses, even though seller
found another buyer for the boat.
Commonwealth Edison Co. v. Decker Coal Co. (1987)
UCC 2-708 remedies are available only for sellers who are not
entitled to the contract price, so 2-708 is a seller's "fallback"
position and should be limited in scope.
Hadley v. Baxendale (1854)
Mill that paid extra to have a new crank shaft created and
delivered was not entitled to damages from lost profits from the
new shaft being delivered days late, because the damages did
not naturally flow from a late delivery in general and the special
circumstances were not communicated to the other party.
Lamkins v. International Harvester Co. (1944)
Farm owner that ordered a tractor with lights for running at night
did not receive the lights for about a year, but could not collect
for not being able to harvest a crop because of not running at
night because, in the absence of an agreement with the dealer,
it is unlikely the dealer agreed to be liable for these special
circumstances in such large proporion to the cost of the lights.
"tacit agreement" test.
Victoria Laundry (Windsor) Ltd. v. Newman Indus., Ltd. (1949)
Laundry owner ordered boiler from engineering company and,
because of damages, it delivered five months later than
promised. Defendant is liable for lost profits except a few
lucrative deals defendant could not have known about. There
are two types of knowledge: imputed, that a reasonable person
would know in the "ordinary course of things" would cause
liability, and actual knowledge of special circumstances outside
the "ordinary course of things". In this case it was the first, as
the obvious purpose of the boiler by the launderers was for
laundry; had the defendant known about the stopped mill
in Hadley, it would have been the second.
Hector Martinez & Co. v. Southern Pacific Transp. Co. (1980)
Shipping company late in delivering a dragline for strip mining
was on appeal liable for the fair rental value for the period of
delay. Unlike Hadley, the dragline was valuable in itself, and
that it could have been rented "should have been foreseen", not
that it was "the most foreseeable of possible harms."
Prutch v. Ford Motor Co. (1980)
Ford is liable for crop damages from defective equipment, not
because Ford foresaw the consequential damages, but that the
damages were "foreseeable".
Valentine v. General American Credit, Inc. (1984)
Valentine was not awarded damages from breach of
employment contract for mental anguish because an
employment contract is primarily about economic
issues—emotional satisfaction through job security is
secondary.
Hancock v. Northcut (1991)
A contract for building a house is not sufficiently concerned with
emotional well-being that a breach could bring about emotional
disturbance damages.
Brown v. Fritz (1985)
Plaintiff awarded damages for negligent infliction of emotional
distress from breach of contract to sell land, but on appeal the
court reversed the emotion-related damages. In a breach of
contract case, there is no tort of inflicting emotional distress
independent of the actual breach of contract.
Freund v. Washington Square Press, Inc. (1974)
Plaintiff sued because publisher didn't publish his book as
promised. Trial court wanted to give plaintiff $10,000 so that he
could publish the books himself, but the Court of Appeals gave
him nominal damages. Correct damages consist of the benefit
to the plaintiff (in this case, the expected royalties), not the cost
to the defendant (in this case, the cost of publishing), of contract
performance.
Fera v. Village Plaza, Inc., 396 Mich. 639, 242 N.W.2d 372 (1976)
Plaintiffs signed a 10-year lease for a "book and bottle shop" in
defendants' proposed shopping center, but plaintiff's space was
given to another tenant. Whether lost profits can be given as
damages. Jury awarded plaintiff $200,000 in lost profits.
Although earlier cases had not given profits, that's not a rule,
just an indication of how hard it is to pin down lost profits. (In
this case, there is a certain certainty of profits.) The precise
amount is for the jury to decide.
Chicago Coliseum Club v. Dempsey, 256 Ill.App. 542 (1932)
Club contracted with Dempsey for a boxing match, and
Dempsey breached. Lost profits weren't awarded, because they
were too speculative. Expenses made before the contract are
never awarded. Expenses made trying to force the defendant to
comply are not awarded as anything after the breach to try to
get defendant to comply are made at the plaintiff's own risk.
Some related expenses made after the contract could be
awarded.
Security Stove & Mfg. Co. v. American Ry. Express Co., 227
Mo.App 175, 51 S.W.2d 572 (1932)
Plaintiffs secured a booth at a conference and contracted with
defendant to deliver a stove, stressing the urgency that it arrive
on time. No profits were expected. Crucial parts of the stove did
not arrive. Shipping costs were awarded (restitution). Hotel
costs and employee wages (reliance) were awarded, even
though they would have been made had the contract terms
been performed. Booth costs (reliance) made before the
contract were awarded, because it relied on the shipping
contract, which was always available to be made.
Anglia Television Ltd. v. Reed, 3 All E.R. 690 (Court of Appeal,
1970)
Anglia made arrangements to produce a play for television,
spending £1895.35 before contracting with Reed for a leading
man, and then spending £854.65 afterwards. Reed repudiated,
and Anglia was awarded the entire £2750 because Reed knew
and could have assumed he would be liable for this waste and
still chose to accept the contract. (One can have lost profits and
wasted expenditures, but not both.)
L. Albert & Son v. Armstrong Rubber Co., 178 F.2d 182 (2d
Cir.1949)
Plaintiff agreed to buy machines from defendant for
reconditioning old rubber, and two of four were delivered after
WWII had ended. Plaintiff had prepared foundations for the
machines, but this cost might have been more than the profit
plaintiff would have made. Plaintiff can be awarded reliance
expenses minus whatever the defendant can show would have
been plaintiff's loss had the contract been fulfilled.
Boone v. Coe, 153 Ky. 233, 154 S.W. 900 (1913)
Coe verbally promised Boon he could live on a farm in Texas for
12 months and receive part of the crops, and promised to have
a house constructed and waiting for him when he arrived. When
plaintiff arrived with family after traveling 55 days from Kentucky,
defendant breached and plaintiff had to return to Kentucky.
Under the Kentucky statute of frauds, a verbal contract for
performance over a year later is unenforceable, so plaintiff
cannot receive damage of reliance expenses. (They could
receive restitution interest if defendant had benefitted from the
contract.)
United States v. Algernon Blair, Inc., 479 F.2d 638 (1973)
Coastal Steel Erectors, Inc. subcontracted to Blair, who was
contracted to the US, to erect steel using Blair's equipment.
Blair refused to allow Coastal to use equipment, breaching
contract, so Coastal stopped work. Even though Coastal would
have made a loss under performance, under quantum meruit
Coastal should be awarded full damages—not for contract
amount but for what the services could have been purchased
from one in the plaintiff's position (i.e. not what the defendant
promised to begin with).
Kearns v. Andree, 107 Conn. 181, 139 A. 695 (1928)
Farash v. Sykes Datatronics, Inc., 59 N.Y.2d 500, 465 N.Y.S.2d
917, 452 N.E.2d 1245 (1985)
Curtis v. Smith, 48 Vt. 116 (1874)
Oliver v. Campbell, 43 Cal.2d 298, 273 P.2d 15 (1954)
Read
Britton v. Turner, Supreme Court of New Hampshire, 6 N.H. 481
(1834)
Plaintiff contracted to work a farm for $120/year, and then
breached after 9.5 months, suing for $100. The jury awarded
him $95. Is plaintiff entitled to what his labor was reasonably
worth, even though he left without defendant's consent and
without good cause? Yes; in this case, the defendant has
received more than if the plaintiff had immediately breached,
and without quantum meruit the plaintiff would be at a worse
place than if he had immediately breached. (This is different
than a construction project that, when finished, the owner may
refuse it all and gain no benefit. The party contracting for labor
does so with full knowledge that every day they are accepting
performance.)
Cases skipped.
Pinches v. Swedish Evangelical Lutheran Church, Supreme
Court of Errors of Connecticut, 55 Conn. 183, 10 A. 264 (1887)
Plaintiff contracted to construct a building for defendant, but
through a combined error of the plaintiff and the defendant's
architect the ceilings were lower, the windows narrower, and
the seats narrower than the specifications require. Should the
plaintiff's contract price subtract the cost to correct the damages
(which would result in partially dismantling the building), even
though the plaintiff acted in good faith? The plaintiff should be
compensated for services and materials under a special
contract, not entire conformity, if the deviation was not willful,
the other party benefitted, and the compensation is based on
the benefit gained, referencing the contract price. Plaintiff
should be awarded the contract price minus the diminuation in
value from the deviation.
Schwasnick v. Blandin, 65 F.2d 354 (2d Cir.1933)
A lumberman contrated to cut timber left when defendant,
claiming defective work, refused to pay a salary installment. The
plaintiff should get the net benefit for his services minus any
injuries from the defective work. If the promisee unwillfully
breached, he may receive the amount his work benefitted the
promisor. If the promisor breaches, the promisee may abandon
the contract and sue for restitution based upon fair market value,
not benefit to the promisor.
Kelley v. Hance, 108 Conn. 186, 142 A. 683 (1928)
Plaintiff contracted to construct a sidewalk and curb, then left
after only digging a hole. Plaintiff abandoned the work with no
justification, and defendant didn't accept any of the work, so
plaintiff is due nothing. (A contractor who deviates slightly in
good faith can recover if there has been "substantial
performance". If performance is not substantial but the breach
is through negligence, contractor can recover through
quasi-contract. Voluntary acceptance may create an implied
promise.)
Vines v. Orchard Hills, Inc., Supreme Court of Connecticut, 181
Conn. 501, 435 A.2d 1022 (1980)
Plaintiffs put a downpayment of $78,800 on real estate and then
breached becaues of job transfer. They sued for the return of
their deposit, claiming the fair market value of the property had
doubled by the time of trial. A liquidated damages clause
stipulated damages would be 10% of the purchase price. Does
the presence of the liquidated damages clause and the breach
of the plaintiff prevent the return of their deposit? A purchaser
may recover in restitution if able to prove the seller was injustly
enriched, but the burden is on the purchaser. Only partial
performance triggers a claim for restitution, and partial
performance will usually not be worse than no performance.
Similarly, the liquidated damages clause is rebuttable if the
purchaser can show that the seller's damages are substantially
less than that specified in the clause, but the burden of proof is
on the purchaser. (In this case, the purchaser must show that
the property value was higher on the date of breach, not on the
date of trial.)
De Leon v. Aldrete, 398 S.W.2d 160 (Tex.Civ.App.1965)
Plaintiff contracted to buy defendant's land and, after late
payments equalling two/thirds of the purchase price, defendant
declared default and gave the land to someone else. Can
plaintiff get payments back? Plaintiff can get back the payments
minus the damage done to defendant. (A default in itself doesn't
qualify the purchaser for restitution, nor does it terminate the
contract or the vendor's contract rights, but it does give vendor
the option to terminate the contract.)
Pacheco v. Scoblionko, 532 A.2d 1036 (Me.1987)
Plaintiff paid full price of summer camp for child with a contract
indicating no refunds were available after a certain date. After
being informed that child had to take summer school, plaintiff
called defendent but defendant wouldn't allow a refund. Is such
a "no refund" clause enforceable? No; to be enforceable, the
damages must be "difficult to estimate accurately" and the fixed
amount must be a "reasonable forecast". Here, there was no
evidence the amount was in any way in proportion to actual
damage, and probably placed in the contract "for its in terrorem
effect".
City of Rye v. Public Service Mut. Ins. Co., Court of Appeals of
New York, 34 N.Y.2d 470, 358 N.Y.S.2d 391, 315 N.E.2d 458
City contracted with construction company to erect buildings,
and the contract had a clause that charged developers
$200/day for each day the buildings' completion was past due.
The fee may not be recovered by the city. This was not a
reasonable estimate of probably monetary harm to the city, and
was therefore a penalty. Estimations of lost tax revenues are
speculative, and other damages are not pecuniary in nature.
Yockey v. Horn, 880 F.2d 945 (7th Cir.1989)
Yockey and Horn parted ways with an agreement not to
participate in a suite against the other, with breach bringing
damages of $50,000. Horn later voluntarily testified in a
$110,00 suit against Yockey by a third party. Does Horn's
actions warrant Yockey's recovery of $50,000 because of the
liquidated damages clause? Rest.2d § 356 holds that a
liquidated damages clause is enforcable if it was reasonable at
the time of contracting or at the time of injury. Horn's testimony
could have hurt Yockey in several hard-to-determine ways,
such as in the business community, and was thus "difficult to
evaluate"—exactly the purpose of such a clause. Furthermore,
they were also "what was anticipated".
Muldon v. Lynch, 66 Cal. 536, 6 P. 417 (1885)
Plaintiff agreed in writing to create for defendant in a San
Francisco cemetery a marble monument, to be completed
within 12 months for $18,788. The contract stipulated a
"forfeiture" of $10/day for every day it was late. The marble
waited for over two years in Italy, and the defendant tried to
withold $7820 because of lateness. Defendant must pay entire
price, as defendant had not suffered any damages that could be
monetarily compensated, and the payment was therefore a
penalty which cannot be recovered. (Anyway, the contract used
"forfeiture", which is equivalent to "penalty".)
Massman Constr. Co. v. City Council of Greenville, Miss., 147
F.2d 925 (5th Cir.1945)
Equitable Lumber Corp. v. IPA Land Dev Corp., 38 N.Y.2d. 516,
381 N.Y.S.2d 459, 344 N.E.2d 391 (1976)
UCC § 2-302 allows liquidation of damage clauses to be
invalidated because of unconscionability, but in this case the
parties were "commercial entities dealing at arms length with
relative equity of bargaining power."
Wilt v. Waterfield, Supreme Court of Missouri, 273 S.W.2d 290
(1954)
Defendant contracted to sell land for $19,000, plaintiff paid
$1,900, and defendant breached and sold the land for $26,000.
Is a liquidated damages clause of 10% of purchase price
punitive and, if so, can defendant recover more than stated in
the liquidated damages clause? Yes, and yes. Plaintiff was not
harmed other than not getting the land, so the 10% is punative
and invalid. [Wrong, says Garvey; this is not punative, but is a
"shotgun clause" trying to cover crops and such with just one
number.] The land is now worth $26,000, the plaintiff paid
$1,900, so the difference between the unpaid $17,100 and the
value $26,000 gives damages of $8,900.
City of Elmira v. Larry Walter, Inc., 76 N.Y.2d 912, 563 N.Y.S.2d 45,
564 N.E.2d 655 (1990)
Defendant stopped work after disputes on contract for
construction of parking garage. Liquidated damages clause was
held not valid because it dealt with damages for "delay", not
abandonment.
City of Boston v. New England Sales & Mfg. Corp., 386 Mass. 820,
438 N.E.2d 68 (1982)
Plaintiff delayed building a bridge for defendant city, and
although contract specified liquidated damages for delay based
upon flow of traffic, the state didn't have a road ready to connect
to the bridge. "[If] the contingency upon which the
presupposition [of the damages a breach would incur] is based
never happens, the presupposition must vanish," and the
clause is unreasonable.
H.J. McGrath C. v. Wisner, 289 Md. 260, 55 A.2d 793 (1947)
Farmer, after partial performance, sold tomatoes on the open
market. Contract liquidated damages as difficult to determine
and as calculation of the plaintiff's losses from expected partial
performance. Liquidated damages unenforceable because they
did not differentiate full and partial performance, and because
damages from delivering tomatoes on the open market is
ascertainable.
Fretwell v. Protection Alarm Co., Supreme Court of
Oklahoma ,764 P.2d 149 (1988)
Fretwells sued alarm company for negligently failing to fully
investigate an alarm, resulting in $19,000 worth of property
being stolen. Contract limited damages to $50. (Contract, with
Fretwells, Inc., applies to the Fretwells, the third-party
beneficiaries.) (A contract, which creates the duty for related
negligence cases, can also be used to determine damages in a
negligence case.) Clauses limiting damages are not the same
as those liquidating damages and, if explicit, are valid.
(From Laughlin v. Baltalden, Inc., 191 Pa.Super. 611, 159 A.2d
26 (1960), the name given a clause in a contract "is but of slight
weight, and the controlling elements are the intention of the
parties and the circumstances of the case.")
Van Wagner Advertising Corp. v. S & M Enterprises, Court of
Appeals of New York, 67 N.Y.2d 186, 501 N.Y.S.2d 628, 492
N.E.2d 756 (1986)
Van Wagner resold buildboard space, and S & M breached a
lease contract when they bought a building from another
company. The space was "unique as to location for the
particular advertising purpose intented". Physical uniqueness of
a property does not in itself warrant specific performance, but
rather difficulty in determining the property's value for
economically equitable damages to be calculated.
Curtice Bros Co v. Catts, 72 N.J.Eq 831, 66 A. 935 (Ch.1907)
Canning plant sued farmer for not delivering his entire crop of
tomatoes. (Specific performance can be administered for real
estate or for personal property.) Specific performance is proper.
Delivery of the tomatoes might not be able to be replaced
monetarily, and this would directly affect the economic viability
of the factory. "The breach of the contract by one planter differs
but in degree from a breach by all."
Manchester Dairy System v. Hayward, 82 N.H. 193, 132 A. 12
(1926)
Manchester sued Hayward for failing to deliver milk from his
cows. The contract stipulated that the damages from a breach
by one party would be hard to calculate, that there would be
liquidated damages of $5 per cow, and that plaintiff would be
entitled to specific performance. Held: (Parties cannot by
contract decide for specific performance.) The $5 was
inadequate, because the damages were far-reaching could not
be measured. Specific performance is appropriate, because of
the difficulty in assessing damages and to keep others from
breaching. (Instead of affirmative specific performance,
negative specific performance, in which the farmer cannot sell
to others rather than being forced to sell to plaintiff, might be
more manageable to the court.)
Paloukos v. Intermountain Chevrolet Co., 99 Idaho 740, 588 P.2d
939 (1978)
Paloukos gave a downpayment and signed a contract for a
1974 Chevy pickup, and Intermountain later said that it could
not give him one. Held:Specific performance is not appropripate
and "remains an extraordinary remedy." 1) Market value is
readily ascernable. 2) Paloukos doesn't allege that
Intermountain has such a pickup, and the courts can't order the
impossible.
Eastern Rolling Mill Co. v. Michlovitz, 157 Md. 51, 145 A. 378
(1929)
Plaintiff sells scrap metal and contracted with Eastern to
provide scrap metal (which it produced as a byproduct) for five
years at $3 a ton less than the current market for scrap metal.
Defendant breached. Held: Specific performance is appropriate.
It is impossible to know how much scrap metal Eastern will
produce, but specific performance will not be difficult, since
Eastern will be producing scrap metal anyway.
Gartrell v. Stafford, 12 Neb. 545, 11 N.W. 732 (1982)
Standard case that explains that, as land is unique with unique
locality, soil, etc., an action for damages would not "afford
adequate relief."
Loveless v. Diehl, 235 Ark. 805 364 S.W.2d 317 (1962)
When plaintiff wanted to resell land (and could only resell it if
the deal went through), the Arkansas Supreme Court at first
awarded only $1,000 in damages. Upon rehearing, it said that
land should be awarded specific performance as a matter of
course. (The plaintiff had also invested $5,000 in improvements
which would have unjustly enriched the defendant unless
specific performance were granted.)
Fitzpatrick v. Michael, Court of Appeals of Maryland, 177 Md. 248,
9 A.2d 639 (1939)
Michael, after the death of his wife, asked Fitzpatrick, their
nurse, to manage the house, drive the car, and care for him
when ill. In return, Michael would pay her $8/week and would in
his will award her the house and cars. About two years later,
Michael changed his mind. Is specific performance appropriate
for rendering services? Held: No, because services (as
opposed to property) are in general so personal there is no
desire or ability of the court to enforce general performance
without the assent of both parties.
Dallas Cowboys Football Club, Inc. v. Harris, 348 S.W.2d 37
(Tex.Civ.App.1961)
Harris contracted to play exclusively for the Los Angeles Rams
Football Club. The contract, specifying Harris as having "special,
exceptional, and unique knowledge, skill and ability as a football
player," gave the Rams the option to extend the contract. The
Rams chose to renew, and Harris retired and then switched to
Dallas. Is a football player unique to allow specific performance
to force the player not to play for another team? Held: A football
player is not unique, but other similar players may not be
available. A temporary injunction was ordered and the case
proceeded to trial.
Pingley v. Brunson, 272 S.C. 421, 252 S.E.2d 560 (1970)
Brunson contracted to play organ for Pingley's restaurant for
three nights a week for $50 per night, for three years. Brunson
breached after 10 performances. Is specific performance
appropriate to compel a musician to perform on a continued
basis for a long period? Held: No, specific performance is not
appropriate for continued services over a long period of time,
and others with defendant's capabilities were available.
American Broadcasting Companies v. Wolf, Court of Appeals of
New York, 52 N.Y.2d 394, 438 N.Y.S.2d 482, 420 N.E.2d 363 (1981)
Wolf, a broadcaster at ABC, had signed a contract that
contained A) a good-faith negotiation clause concerning the last
90 days of the contract, and B) a right of first refusal clause for
three months after the contract. Before the contract was over,
Wolf signed an exclusive contract with CBS. Did Wolf breach
his contract, and is equitable relief warranted? Held Wolf
breached the good-faith negotiation clause because the
exclusive agreement with CBS did not permit him to sign with
ABC. He did not breach the right of first refusal, because that
was specified to be only after the contract expired. Equitable
relief is not warranted, however; the courts do no like
non-compete clauses after the contract has expired unless the
defendant is engaging in unfair or illegal activities, because
anticompetition impedes the market and keeps the defendant
from earning a living. Injunction for service is both difficult to
inforce and against the Thirteenth Amendment. Monetary
damages may be available, though.
Fullerton Lumber Co. v. Torborg, 270 Wis. 133, 70 N.W.2d 585
(1955)
Defendant was hired as a manager at plaintiff's lumber
company, a Minnesota corporation. The contract had a 10-year
non-compete clause. After three years, the company's business
tripled and after 15 years of employment defendant left to start
his own lumber company. Is the non-compete clause
enforceable? Held No, because it is excessive, an
unreasonable and illegal restraint of trade. (Although Wisconsin
usually makes unreasonable restraints void, the court said it
should be reduced and suggested three years, reflecting the
time in which defendant had made the business successful.)
Data Management, Inc. v. Greene, 757 P.2d 62 (Alaska 1988)
Plaintiff alleged breach of a five-year noncompetition contract
for computer services covering all of Alaska. Is such an
overbroad noncompetition contract modifiable by the
courts? Held Yes, if the company acted in good faith the
contract may be reasonably altered to render it inforceable.
(There are two other options the court could take: simply
characterizing the clause as "unconscionable" and making if
void, and adopting the "blue pencil" rule by deleting parts of the
clause if it is divisible.) If the company overreached willfully,
alteration will be refused.
Northern Delaware Indus. Dev. Corp. v. E.W. Bliss Co., Court of
Chancery of Delaware, 245 A.2d 431 (1968)
Plaintiffs contracted with defendants to expand and modernize
a steel mill. Work did not progress as quickly as planned, and
plaintiffs claimed the contract allowed for extra workers to
speed the work. Should the court order extra workers to get the
job done? Held No; the court cannot get involved in supervising
a complex construction project, and it's not even obvious that
adding new workers would make the work progress more
quickly. Besides, specific performance of personal services
cannot be enforced. Plaintiffs can seek monetary damages later
if appropriate.
City Stores Co. v. Ammerman, 266 F.Supp. 766 (D.D.C.1967)
Defendant was constructing a shopping center and was trying
to convince the Board of County Supervisors to rezone the land.
Defendant convinced plaintiff, negotiating a lease at a rival
company's site which was also petitioning for rezoning, to write
a letter stating that he would become a tenant if the rezoning
went through, and in return plaintiff could have a lease. Upon
rezoning, defendant didn't allow plaintiff to have a lease in the
shopping center. Can the court grant equity? Held Yes;
damages are difficult to measure, and benefit to the plaintiff of
expanding business in this location would be almost
incalculable in the future. Specific performance would only be
denied if the difficulty of enforcement by the court would exceed
the benefit to the plaintiff.
Grayson-Robinson Stores v. Iris Constr. Corp., 8 N.Y.2d 133, 202
N.Y.S.2d 303, 168 N.E.2d 377 (1960)
Iris owned a lot and contracted with Grayson to erect a building
that Grayson could rent as a retail department store for 25
years. The contract stipulated that an arbitrator would handle all
disputes. Iris then ran out of money, couldn't raise more, and
told Grayson the work would stop unless Iris would pay more
rent. An arbitrator said that there was no evidence Iris couldn't
raise more money and ordered Iris to complete the job. Should
the courts uphold the arbitrator's decision? Held Yes; A New
York statute says that a written agreement stipulating arbitration
means the court must enforce the decision, and the court must
not make decisions about the merits of the dispute.
Staklinski v. Pyramid Electric Co., 6 N.Y.2d 159, 188 N.Y.S.2d 541,
160 N.E.2d 78 (1959)
New York Court of Appeals upheld arbitration compelling
specific performance by employer of employee.
Matter of Sprinzen and Nomberg, 46 N.Y.2d 623, 415 N.Y.S.2d 974,
389 N.E.2d 456 (1979)
New York Court of Appeals upheld arbitrator's extremely long
noncompete decision.
Garrity v. Lyle Stuart, Inc., 40 N.Y.2d 354, 386 N.Y.S.2d 831, 353
N.E.2d 793 (1976)
New York Court of Appeals did not uphold an aribitrator's
judgment of punitive damages.
John T. Brady & Co. v. Form-Eze Systems, Inc., 623 F.2d 261 (2d
Cir.1980)
New York Court of Appeals upheld arbitrator's large liquidated
damages because they were not explicitly referred to as
punitive.
Congregation Kadimah Toras-Moshe v. DeLeo, Supreme Judicial
Court of Massachusetts, 405 Mass. 365, 540 N.E.2d 691 (1989)
A dying man makes a promise to give money to a synagogue,
put the expected money into their budget, and promised to
convert a storage room into a library and name it after him.
Should the estate be held to the man's oral statement? Held No,
there was no consideration, as the synagogue declared their
intention of what to do with the money independent of the man's
promise. (Putting the money in the budget does not constitute
reliance, but merely a record of the synagogue to itself that it
expected the money.)
Hamer v. Sidway, Court of Appeals of New York, 124 N.Y. 538, 27
N.E. 256 (1891)
Uncle promised nephew that, if the nephew would not drink, use
tobacco, swear, or play cards until his 21st birthday, the uncle
would give him $5,000. The nephew did so, and after the uncle
died the nephew brought this action against the estate. Should
the uncle be held to the promise, even if the nephew's actions
helped the nephew rather than hurt him? Held Yes; a
suspension of a legal right is consideration, regardless of
whether it helps or hurts the party.
Earle v. Angell, 157 Mass. 294, 32 N.E. 164 (1892)
Mary promised her nephew that, if he would come to her funeral
in the event that he outlived her, she would give him $500 from
her estate. Is a promise to give money after death in exchange
for an action valid? Held Yes.
Written v. Greeley-Shaw, 520 A.2d 1307 (Me. 1987)
A man and woman had participated in an extra-marital affair for
some years. The woman wrote up a paper saying that the man
would pay her money, buy her jewelry, visit her, call her, and
take her on trips. The paper also said that the woman would not
call the man at his homes or offices without his permission.
Does this contract contain consideration? Held No, the clause
put in by the woman does not express that it is a condition for
the man's upholding the bargain. For valid consideration, there
must be evidence that the party "sought after" and was
"motivated by" the benefits.
Fischer v. Union Trust Co., Supreme Court of Michigan, 138 Mich.
612, 101 N.W. 852 (1904)
A father gave his daughter a deed to his land, on which there
were several mortgages, and in return the daughter gave him a
dollar. After his death, the mortgages were not paid. Was there
enough consideration to make this a valid contract? Held No;
the dollar was obviously in context just a joke. The real
consideration was the daughter's love and effection, which was
meritorious but not sufficient to make this a contract rather than
a gift. Since the father didn't pay the mortgages, the gift was not
completed and, being null in one part, is null in its entirety.
Simmons v. United States, 308 F.2d 160 (4th Cir. 1962)
American Brewery tagged a fish and offered an award for
catching it. Simmons had heard of the award, but wasn't
thinking of it when he caught the fish. Was the prize money
taxable? Held Yes; If one knows of an offer in a unilateral
contract, one may accept the offer by rendering performance
even if the performance is unrelated to the author.
Schnell v. Nell, 17 Ind. 29 (1861)
Zacharias Schnell made a contract to pay three persons $200
each in annual installments, and in return they would give one
cent each (in addition to his wife's services and his love to
her). Held The contract was invalid because the values were
unequal, being "fixed"—not indeterminate. One cent is a
nominal amount. (The wife's services and his love were
irrelevant as they occurred in the past.)
Batsakis v. Demotsis Court of Civil Appeals of Texas, 226 S.W.2d
673 (1949)
Defendant, in Greece during WWII, needed money so she
asked plaintiff for 500,000 drachmas (US$25 at the time), and
she signed a contract with plaintiff saying he had given her
US$2,000 and that she would pay back US$2,000 with 8% per
annum interest. Must defendant abide by the $2,000 plus
interest in the contract even though plaintiff only loaned her the
equivalent of $25? Held Yes; inadequacy of consideration does
not void a contract. In effect, plaintiff paid defendant $25 to sign
saying she owed him $2000, and the document in that
agreement amounts to valuable consideration.
Embola v. Tuppela, 127 Wash. 285, 220 P. 789 (1923)
Tuppela's $500,000 Alaskan gold mind was sold by his
guardian while he was insane. He told the plaintiff, after loaning
him $270, that if he would loan Tuppela $50 more, if he won his
mine back in court he would give plaintiff $10,000. After winning
back his mine, Tuppela (apparently incompetant again) asked
his trustee to pay plaintiff the money. Was the contract
unconscionable because of the disparity of sums? Held No;
Tuppela was of a sound mind at the time and considered the
contract fair and to his advantage. The uncertainty of the
payback event supports the adequacy of the consideration.
Duncan v. Black, Court of Appeals of Missouri, 324 S.W.2d 483
(1959)
Black contracted to sell Duncan 359 acres of farm land, with a
65 acre cotton allotment. The cotton allotment system was set
up by the Secretary of Agriculture. When the land was only
allotted 49.6 acres, Black let Duncan use a 15.4 acre allotment
on adjacent land, but the next year Black refused to do the
same. Is land allotment valid consideration? Held No;
Consideration the party has no control over is not valid. Land
under the Act was only allotted every year, so there is no way to
know what land will be allotted the next year. Trying to sell an
allottment is like the "purchase of the green cheese monopoly
on the moon." (Besides, selling an allotment would contravert
the Act and would therefore be illegal.) [This needs updated to
talk about the $1500 note, which is the real promise, and if there
is consideration in return.]
Military College Co. v. Brooks, 107 N.J.L. 28, 147 A. 488 (1929)
Defendant wrote a note promising to pay son's school tuition
and equipment. His son was discharged (wrongfully, the
defendant claims), but defendant still wrote notes extending the
payment because he was in no financial condition for a lawsuit.
Even though his son was discharged, is there consideration to
support the note? Held Yes; defendant wrote the note to buy
himself time because he could not afford a lawsuit then alleging
wrongful discharging of the son. The time he bought is
adequate consideration to support the note.
Martin v. Little, Brown & Co., Superior Court of Pennsylvania,
304 Pa.Super. 424, 450 A.2d 984 (1981)
Plaintiff told defendant publisher that parts of a book were
plagiarized, and offered to provide a copy of a book with notes
pointing out the plagiarized parts. Defendant accepted, and
when plaintiff learned that the defendant was pressing claims
for copyright violation, plaintiff sued for payment for his
"services". Defendant sent plaintiff a check for $200, but plaintiff
sued for a third of the damages received by defendant in the
separate lawsuit. Defendant countersued. Was there an implied
contract? Held No; An implied contract is one in which it is
apparent that there was an agreement with consideration. Here,
there was no negotiation of money in exchange for services.
Was there a quasi-contract in which restitution is due? Held No;
volunteers have no right to restitution, and plaintiff volunteered
his services. Can plaintiff get damages for intentional infliction
of mental distress because of the countersuit? Held No; mental
distress damages only arise when the actions surrounding the
action would lead a reasonable person to say "outrageous," and
simply furthering the litigation started by the plaintiff is not
outrageous.
Collins v. Lewis, 111 Conn. 299, 149 A. 668 (1930)
Plaintiff sheriff attached cows from Kline and then realized they
belonged to defendant but that Kline held them under a
conditional sale contract. Kline wouldn't take them back and
defendant didn't have any place to put them, so the sheriff kept
them and sent a letter to defendant saying that the defendant
would be responsible for paying for their upkeep. After the
defendant sold the cows, the sheriff tried to collect for the 38
days' care and keep. Is there an implied contract? Held Yes, an
implied contract in law, says the courts. An implied contract is
when one party does something for another without being
asked, expecting payment, and the other party, knowing the
first expects to be paid, avails him/herself to the offered benefits.
By selling the cows, defendant acknowledged and took
advantage of the care and keep by plaintiff. (A true implied
contract can only exist when there is no express one.)
Seaview Ass'n of Fire Island, N.Y., Inc. v. Williams, 69 N.Y.2d 987,
517 N.Y.S.2d 709, 510 N.E.2d 793 (1987)
Defendants owned seven houses in Seaview but over an eight
year period refused to pay homeowners' fees because they
were not members and did not use the recreational facilities.
Was there an implied contract to pay homeowners'
fees? Held Yes; Defendants knew of the fees and, by owning
houses implicitly took advantage of and must pay for the
upkeep of facilities and services, even if they didn't use them all.
Martin v. Campanaro, 156 F.2d 127 (2d Cir.1946)
Implied contracts are "implied in fact" and arise from intent,
while quasi-contracts are "implied in law" and are "imposed by
law ... irrespective of, and sometimes in violation of, ...
intention." quantum meruit usually refers to quasi-contracts.
Mills v. Wyman, Supreme Judicial Court of Massachusetts, 20
Mass. (3 Pick.) 207 (1825)
Defendant's 25-year-old son was travelling, fell ill, and was
cared for by plaintiff. Defendant afterwards heard and wrote a
letter to plaintiff promising to pay his expenses, but then later
went back on his promise. Is a promise after the fact concerning
a third party a valid contract? Held No, there is no legal
consideration received. Although there may be a moral duty,
there is no legal duty to pay this promise after the fact, making
this an "imperfect obligation." (Some promises after the fact are
valid if they involve prior obligations, such as debts barred by
the Statute of Limitations, debts incurred by infants, and debts
of bankrupts.)
Webb v. McGowin, Court of Appeals of Alabama, 27 Ala.App. 82,
168 So. 196 (1935)
Plaintiff Webb, dropping from an upper level a heavy block as
part of his job saw defendant McGowin below and, in order to
save him from death by the block, fell with the block and
seriously injured himself. Defendant agreed to support him for
the rest of plaintiff's life, but after defendant's death the estate
tried to stop payments. Is a promise based upon moral
obligation a valid contract? Held In this case, yes, because
plaintiff conferred upon McGowin sufficient legal consideration
in saving his life, something that was worth more than, for
example, keeping a cow for someone.
Harrington v. Taylor, 225 N.C. 690, 36 S.E.2d 227 (1945)
Defendant was assaulting his wife when she knocked him down
and attempted to "split his head open" with an ax. Plaintiff
stopped her, which mutilated his hand, and defendant promised
to pay defendant her damages, but later stopped
payments. Held A voluntary humanitarian act is not legal
consideration.
Edson v. Poppe, 24 S.D. 466, 124 N.W. 441 (1910)
Defendant asked plaintiff to dig a well, and plaintiff later noted
the value of the well so defendant promised to pay
defendant. Held Digging of the well was not voluntary and it
conveyed value, so it is sufficient legal consideration to uphold
the contract.
Muir v. Kane, 55 Wash. 131, 104 P. 153 (1909)
Defendants promised orally to pay plaintiff, a real estate broker,
to find a purchaser for their home. A state statute of frauds said
that any such oral agreement was void. After plaintiff found a
buyer, defendants and buyer signed an agreement containing a
clause to pay $200 to plaintiff. Held Even though the original
agreement was still void, the clause was a valid promise based
on past consideration, just like a promise after the end of a
statute of limitations period.
In Re Schoenkerman's Estate, 236 Wis. 311, 294 N.W. 810 (1940)
Schoenkerman, after his wife died, asked his wife's mother and
sister to move in and held take care of the kids. Before he died,
he executed notes promising to pay them. Held The note is
valid, as it acknowledged a moral obligation that "afforded more
than ample consideration", even if there was no prior legally
enforceable obligation.
Kirksey v. Kirksey, Supreme Court of Alabama, 8 Ala. 131 (1845)
Defendant, upon hearing that his brother had died, told his
brother's wife and children to come live on some of his land.
They abandoned their house, seventy miles away. Two years
later he told them to move off his land. Does reliance on
defendant's promise make the promise enforceable? HeldNo,
defendant's promise was "a mere gatuity".
Ricketts v. Scothorn, 57 Neb. 51, 77 N.W. 365 (1898)
Katie's grandfather promised to pay her $2000 if she were to
quit her job (because none of his grandchildren should work),
so she quit her job. Does quitting her job, relying on his promise,
equitably estop the need for consideration? Held Yes; the
plaintiff altered her position for the worse on the faith that the
note would be paid.
Prescott v. Jones, 69 N.H. 305, 41 A. 352 (1898)
Defendant insurance agents sent a letter saying they would
renew an insurance policy for another year unless the plaintiff
notified them otherwise. When the building was destroyed by
fire, the defendants maintained the policy was not in
effect. Held The plaintiff did not pursue any actions in return
(such as answering with a letter) so there was acceptance and
no contract. The statement by the defendant was not a
statement of a current state of fact but of future intentions,
subject to be modified, and therefore the doctrine of estoppel
does not apply.
Allegheny College v. National Chautauqua County Bank, Court of
Appeals of New York, 246 N.Y. 369, 159 N.E. 173 (1927)
A woman promised a $5,000 donation to the college after her
death if they would set up a fund in her name. She gave them
$1,000, the plaintiff accepted, and then plaintiff sued for the rest
after her death. Held The condition of the fund in her name was
sufficient consideration, and the plaintiff accepted those terms,
so there is a valid contract with no need to consider promisory
estoppel. (The general rule is that consideration must be a
benefit to the promisor or a detriment to the promisee, and that
detriment must be something bargained for in exchange for the
promise. Promisory estoppel is really an exception to this rule,
in which the detriment is something that isn't necessarily a
bargained for condition but is nevertheless done in reliance of
the promise, estopping the need for consideration.)
Siegel v. Spear & Co., 234 N.Y. 479, 138 N.E. 414 (1923)
Siegel had purchased furniture from defendant, but had done
so by giving them a mortgage. Plaintiff needed some place to
store the furniture for a while, so defendant offered to store
them and to insure them because he could get a cheaper rate
which plaintiff could pay with the next installment. The furniture
perished in a fire with no insurance. Was the promise to provide
insurance binding? Held Yes, because plaintiff's bringing the
furnitureafter the promise to get insurance was consideration to
make the promise binding. (Whether the defendant relied on the
promise to not get insurance therefore not need be considered.)
Carr v. Maine Central R.R., 78 N.H. 502, 102 A. 532 (1917)
Plaintiff shippers were overcharged by defendant, who said
they could not give a refund without the permission of the
Interstate Commerce Commission. Defendant promised, if
plaintiff would fill out the papers, to forward the request to the
ICC, but then failed to do so before the expiration date, barring
any refund. Held By accepting the papers for the purpose of
forwarding them, defendant is liable for whatever harm occurred,
because their promise imposed upon them a tort duty. As a
contract, though, there was no consideration to make this a
legally enforceable agreement.
Hart v. Ludwig, 347 Mich. 559, 79 N.W.2d 895 (1956)
Defendant promised to care for plaintiff's orchard, but stopped
after the first year. Can an action be brought in tort for
nonperformance? Held No; misfeasance may bring either a
contract or a tort action alleging negligence, but
nonfeasance—"simply the violation of a promise to perform the
agreement"—may only bring a contract action, as there is no
duty separate from the contract.
Sommer v. Federal Signal Corp., 79 N.Y.2d 540, 583 N.Y.S.2d 957,
593 N.E.2d 1365 (1992)
Plaintiff sued defendant fire alarm monitoring company in tort
for damages in not reporting a fire quickly enough. Held When
duty arises out of law, an action should be in tort, and when a
duty arises out of an agreement, the action should be on
contract. Special relationships will allow a tort, but not simple
claims of negligence arising out of a contract. The action should
proceed under contract when essentially the plaintiff is seeking
enforcement of a bargain. The terms "misfeasance" and
"nonfeasance" should not be controlling.
East Providence Credit Union v. Geremia, Supreme Court of
Rhode Island, 103 R.I. 597, 239 A.2d 725 (1968)
Plaintiff loaned defendant money, holding a vehicle for collateral
with a promise from defendant to pay insurance on it.
Defendant became unable to pay insurance and plaintiff agreed
to pay insurance, adding the insurance plus interest to plaintiff's
bill. The vehicle was involved in a collision. Is plaintiff precluded
from recovering on its loan contract because it failed to fulfill its
promise to pay the insurance? Held Yes; the interest promised
in return is legal consideration. Even if there were no interest
(i.e. this is a purely gratuitous promise), under the Restatement
there would have been promisory estoppel (promise of future
action, in contrast with equitable estoppel, a promise based on
the current facts) because 1) there was a promise that would
reasonably induce action or forebearance, 2) the forebearance
occurred, and 3) injustice can only be avoided by enforcing the
promise.
I. & I. Holding Corp. v. Gainsburg, 276 N.Y. 427, 12 N.E.2d 532
(1938)
Defendant promised money to the Beth Israel Hospital Ass'n to
help with its humanitarian work. Held The promise can be
enforced as a unilateral contract binding when acted upon,
without resort to promissory estoppel, because the Ass'n incurs
expenses in its humanitarian work and the gift was for those
expenses. Dissent There needs to be evidence that the
promise induced the acts of the Ass'n and that the acts would
not have occurred but for the promise.
Salsbury v. Northwestern Bell Tel. Co., 221 N.W.2d 609 (Iowa
1974)
Defendant telephone company sent a letter to a newly-formed
college promising to pay $15,000. The college failed shortly
after opening. HeldCharitable subscriptions should be enforced
even in the absence of consideration, unless the fund raising
compaign does not call for binding subscriptions. This is for
public policy reasons, and to follow the tentative draft of
Restatement of Contracts § 90(2).
Seavey v. Drake, Supreme Court of New Hampshire, 62 N.H. 393
(1882)
Plaintiff alleged Seavey was his father and that Seavey had
given him a strip of land. In return, plaintiff had gave up
defendant's debt of $200. Plaintiff thereafter improved the land
and built a house. Held In equity, the improvement of the land is
sufficient consideration, whether the promise was a promise to
give or to sell the land—the giving up of the debt is irrelevant.
This part performance allows the equity court to get around the
statute of frauds concerning transfer of land not in writing.
Monarco v. Lo Greco, 35 Cal.2d 621, 220 P.2d 737 (1950)
Natale and Carmela Castiglia were married in 1919 and
convinced Carmela's son Christie to come work on the farm
they bought half ownership in. In return, Natale promised to give
Christie their half of the farm. After 20 years, Natale died and in
a will left everything to his grandson. Held The farm goes to
Christie. Christie's reliance in working half his life on the farm
estopped the grandson from pleading the statue of frauds.
Forrer v. Sears, Roebuck & Co., Supreme Court of Wisconsin, 36
Wis.2d 388, 153 N.W.2d 587 (1967)
Sears (defendant) convinced plaintiff farmer, who used to work
at Sears, to leave his farm and come back to Sears to receive
"permanent employement." Plaintiff sold his farm and rented his
barn at a loss and, four months after becoming a permanent
employee at Sears, was discharged without cause. Held There
is no cause of action. The promise given by Sears was one that
was foreseeable to induce an action, and the plaintiff did
perform that action, but there's no justice that only promisory
estoppel can bring about, as the promise for "permanent
employment", which can be terminated at will, was performed
the moment plaintiff was hired. (There was furthermore no
additional consideration that would have prevented permanent
employment from being terminable at will.)
Hunter v. Hayes 533 P.2d 952 (Colo.Ct.App.1975)
Defendant promised plaintiff a job on a construction project if
she would quit her $350/month job at a telephone company.
Plaintiff quit, defendant refused to hire her, so Plaintiff went
without work for two months. Held Plaintiff awarded $700
because of promissory estoppel. Damages are calculated by
the reliance interest loss.
Stearns v. Emery-Waterhouse Co., Supreme Judicial Court of
Maine, 596 A.2d 72 (1991)
Defendant hardware store orally promised 50-year-old plaintiff a
job until he turned 55. Plaintiff left his job at Sears and was
hired by defendant. Plaintiff's position was eliminated before he
turned 55. Does plaintiff's detrimental reliance on the promise
get around the statute of frauds stipulation against oral
contracts that cannot be performed in one year? Held No;
although other jurisdictions have held otherwise, reliance
actions by the plaintiff cannot bring about promissory estoppel
to counteract the statute of frauds unless the promisor is shown
to have fraudulent intent. (Similarly part performance is rejected
in counteracting the statute of frauds in an employment context.)
(Equitable estoppel can avoid application of the statute of
frauds for employment.) (If services were performed, plaintiff
can seek application of quantum meruit.)
Goldstick v. ICM Realty, 788 F.2d 456, 465 (7th Cir.1986)
Using promissory estoppel to get around the statute of frauds
for continued employment is particularly troublesome because it
is too easy to show reliance and most employment is
employment at will.
Goodman v. Dicker, United States Court of Appeals, District of
Columbia, 169 F.2d 684 (1948)
Defendants, local distributors for Emerson Radio & Phonograph
Corp. in D.C., told plaintiffs that their application for a franchise
had been approved and that radios were coming. Plaintiffs hired
salespeople and sold radios, but no radios came and the
franchise was not approved. Held The detrimental actions by
plaintiffs because of defendants' promise estopped the lack of
proving there was a contract. Under such promissory estoppel,
the damage is the loss sustained—the cash outlays (reliance),
not the lost profits (expectancy).
American Nat'l Bank v. A.g. Sommerville, Inc., 191 Cal. 364, 216 P.
376 (1923)
Sommerville sold Tomlinson (defendant) two automobiles, and
Tomlinson signed two contracts stating that he received the
automobiles and that if Sommerville assigned the payments to
a third party, Tomlinson could not claim lack of consideration or
lack of delivery. Sommerville assigned debts to investment
company who assigned debts to plaintiff Bank, and Tomlinson
claimed the automobiles had never existed. Held The wording
of the contract cannot of their own force preclude Tomlinson
from claiming lack of consideration, but if plaintiff relied on the
statements in the contract, estoppel in pais would preclude
Tomlinson from showing the falsity of those statements.
D'Ulisse-Cupo v. Board of Directors of Notre Dame High School,
202 Conn. 206, 520 A.2d 217, 221-223 (1987)
Held Even though a misrepresentation is not sufficiently
promissory or definite to invoke promissory estoppel in contract,
if the representation contained false information defendant
might still be liable in tort even for innocent misrepresentation if
defendant had a duty to know the truth.
Fried v. Fisher, 328 Pa. 497, 196 A. 39 (1938)
Brill and Fisher were partners in a florist business, and they
leased a building from Fried. Fisher wanted to get out of the
florist business and start a restaurant in another town, so Brill
agreed and Fried said that he would release Fisher from his
obligation under the lease. Brill later defaulted, and Fried sued
Fisher. Held Fried's promise to release Fisher from the lease
caused Fisher to reliantly change his position, so under
promissory estoppel Fried's promise must be enforced.
Mahban v. MGM Grand Hotels, Inc., 100 Nev. 593, 100 Nev. 593,
691 P.2d 421 (1984)
Defendant leased space in a hotel for an arcade, and the
contract gave either party the right to terminate if premises were
damaged and lessor could not put them in tenatable condition
within 180 days. The building burned, but 10 weeks later
defendant sent a letter saying that reconstruction would occur.
After defendant decided not to reopen, is defendant liable for
breach? Held Yes; although the letter did not waive the right to
terminate, the doctrine of equitable estoppel precludes
defendant from using the right to terminate because of the
implications of the letter. Equitable estoppel is thus here a
defense to a defense, not in itself a cause of action.
Levine v. Blumenthal, Supreme Court of New Jersey, 117 N.J.L.
23, 186 A. 457 (1936)
Plaintiff leased space to defendants for a women's clothing
store at $2100 for the first year and $2400 for the second year,
divided into equal montly payments. Defendant during the first
year said that because of economic conditions they could not
pay the increased price for the second year, and would go out if
business if forced to pay the original second year price, so
plaintiff continued to accept the first year's monthly rate for the
second year. Plaintiff then sued to collect the
difference. Held The original agreement is enforceable. Any
agreement to lower the agreed price is a separate agreement
and must come with its own consideration—promising to pay
what one legally already had a duty to pay is not consideration.
General economic adversity would not have released
defendants from their original obligation to pay. (Acceptance of
part payment does not relieve defendant from full performance,
but slight variations, such as prepayment, could be considered
consideration.)
Davis v. General Foods Corp., 21 F.Supp. 445 (S.D.N.Y.1937)
Plaintiff wrote defendant saying she had created a recipe, and
defendant wrote back saying any compensation would be at
defendant's discretion.Held A letter giving defendant unlimited
right to decide later the nature and extent of compensation is
not consideration. (Since there is no contract, there is
consequently no recovery in quantum meruit.)
Nat Nal Service Stations, Inc. v. Wolf, 304 N.Y. 332, 107 N.E.2d
473 (1952)
Defendant, wishing to get a discount from its supplier, told
plaintiff Wolf that if he purchased gasoline from defendant and
they accepted the order, they would pass on their discount. Is
this a contract not to be completed within one year and
consequently barred by the statute of frauds? Held There is no
contract covered under the statute of frauds. [There was a
cause of action on completed sales.] The original contract did
not bind either party to take any action—the defendant could
buy gas anywhere, the defendant could decline to accept the
order, and defendant could at any time decline to give future
discounts. Each time defendant accepted an order a separate
contract forcing a discount, which was not covered by the
statute of frauds, came into play.
Obering v. Swain-Roach Lumber Co., Appellate Court of Indiana,
86 Ind.App. 632, 155 N.E. 712 (1927)
Plaintiff lumber company signed a contract with defendants,
relatives and heirs of J. Henry Buhner, that if plaintiff bought
Buhner's land plaintiff would sell it to defendants and keep the
lumber from it. Does this contract have mutuality? Held Yes;
even though the contract upon signing was binding on neither
party because it was contingent upon an act by plaintiff, the
moment plaintiff performed that act the content was binding on
both parties. If a contract is dependent upon a future act of
plaintiff, that act will provide an acceptance of the offer and
consideration.
Paul v. Rosen, 3 Ill.App.2d 423, 122 N.E.2d 603 (1954)
Defendant made an agreement to sell retail liquor business to
plaintiff at a price to be determined by inventory, contingent on
plaintiff securing a five-year lease from the owner. Before
defendant could get the lease, plaintiff refused to do an
inventory, so defendant sued claiming an anticipatory
breach. Held The contract was void and therefore
unenforceable because it was contingent on plaintiff securing
the lease but put no duty on plaintiff so secure it, so there was
no mutuality.
Gurfein v. Werbelovsky, 97 Conn. 703, 118 A. 32 (1922)
Defendant sold plate glass to plaintiff with the option of plaintiff
to cancel the order up to the time of shipment. Can the plaintiff
sue for specific performance? Held Yes; As the plaintiff only
had an option to cancel before shipment, after shipment the
contract would be binding on plaintiff so there was
consideration to make this a binding contract.
Wood v. Lucy, Lady Duff-Gordon, Court of Appeals of New York,
222 N.Y. 88, 118 N.E. 214 (1917)
Lady defendant, who gave her approval to apparel, made an
agreement with plaintiff to have the exclusive right to place her
indorsements on articles of clothing, subject to her approval. In
return he would give her one half of all profits, take out any
needed copyrights and trademarks, and provide reports of sales.
Defendant breached the exclusivity and marketed her own
designs, claiming the orginal agreement was void because,
under it, the plaintiff was not obligated to do anything. Held The
agreement might not have obligated plaintiff in so many words,
but the exclusivity of the agreement implied he was to make his
best efforts to sell her label, giving consideration to the
agreement.
Omni Group, Inc. v. Seattle-First Nat'1 Bank, Court of Appeals of
Washington, 32 Wash.App. 22, 645 P.2d 727 (1982)
Defendants Clarks (now represented by First National Bank)
sold property to Omni with a contract that Omni would get an
engineer's and architect's feasibility report and, if satisfactory,
would notify defendants. Omni didn't express whether it was
satisfied or not. The Clarks refused to proceed with the
purchase, claiming the contract was not valid because Omni's
promise was illusory. Held Omni, if satisfied, was obligated to
notify Clarks of their acceptance, so their promise was not
illusory. This falls into the strain of cases in involving promisor
"satisfaction" and is therefore not an illusory promise.
Lima Locomotive & Mach. Co. v. National Steel Castings Co., 155
F. 77 (6th Cir. 1907)
Agreement for purchase of steel stated that seller would supply
"all [the buyer's] requirements in steel castings for the
remainder of the present year ...." Held There is mutuality
because the buyer is not just promising to supply the steel the
buyer desires, but all the steel the buyer requires for the
business, and the buyer is obligated to buy from the seller.
Feld v. Henry S. Levy & Sons, Inc., Court of Appeals of New York,
37 N.Y.2d 466, 373 N.Y.S.2d 102, 335 N.E.2d 320 (1975)
Plaintiff, owner of the Crushed Toast Co., made an agreement
to purchase and defendant to sell all the bread crumbs
produced by defendant, with six-month notification by either
party for termination. Defendant stopped producing
breadcrumbs and, after plaintiff refused to pay a higher price,
dismantled the equipment and started selling the input bread
product to others. Defendant maintains the contract did not
require it to produce bread crumbs, only to sell those it
produced. Held This is known as an "output" contract and
under section 2-306 of the UCC there is sufficient mutuality to
uphold the contract. The UCC also states that for exclusive
agreements the seller must use good-faith efforts to supply the
product—something that is a question of fact here. Only a
"genuine imperiling of the very existence of its entire business
caused by the production of the crumbs would warrant
cessation of production of that item."
Fort Wayne Corrugated Paper Co. v. Anchor Hocking Glass
Corp., 130 F.2d 471 (3d Cir.1942)
Fort Wayne contracted to supply corrugated paper to Capstan
Glass Co. for packaging glass products, and Capstan agreed to
buy it. The agreement could be cancelled with a one-year
notification, with stipulations of how much paper had to be
supplied and purchased during that period. Capstan's parent
corporation suspended all glass production, but Capstan didn't
give notice for over a year. Held Fort Wayne had no cause of
action because Capstan's requirements had ceased.
Cancellation by notice, on the other hand, was appropriate
when Capstan wanted to avoid its obligations, which was not
the case here.
Corenswet, Inc. v. Amana Refrigeration, Inc., 594 F.2d 129 (5th
Cir.1979)
Corenswet had an exclusive wholesale dealership which
Amana wanted to terminate based upon a contract for indefinite
duration but that any party could terminate "at any time for any
reason." Corenswet said the termination was "arbitrary and
capricious." The UCC has a general obligation of good faith, but
§ 2-309(2) allows successive, indefinite contracts to be
terminated at any time. Held UCC § 2-309(2) applies, allowing
termination with the notice given in the contract for franchises
and dealerships. Both parties were given equal ability to "cut the
knot" should the relationship turn sour. "What public policy does
abhor is economic overreaching—the use of superior
bargaining power to secure grossly unfair advantage." That's
different from the "good faith" provision.
Sheets v. Teddy's Frosted Foods, Inc., Supreme Court of
Connecticut, 179 Conn. 471, 427 A.2d 385 (1980)
Defendant had hired Sheets indefinitely as a quality control
director. Plaintiff alerted defendant to substandard quality of
frozen food products that violated the Connecticut Uniform
Food, Drug and Cosmetic Act, and in return defendant fired
plaintiff. Should the defendant's motion for strike based upon
insufficient complaint be sustained? Held No; Although
contracts terminable at will do not require a showing of just
cause, an employer can be "responsible for damages in tort for
a demonstrably improper reason for dismissal, a reason whose
impropriety is derived from some important violation of public
policy." The employee's job and expertise was to check quality,
so the employer can't make him chose between termination and
criminal sanction. Dissent This ruling would give employees a
"sword" to force their employers to keep them. The Act in this
case concerned grades of food and did not jeopardize
consumer safety, so the plaintiff should have called in an
anonymous tip to the commissioner. Besides, this is the sort of
decisions the legislature makes, so it's out of scope for the
judiciary.
Price v. Carmack Datsun, Inc., 109 I11.2d 65, 485 N.E.2d 359
(1985)
Plaintiff Price was injured in an automobile accident and filed
under his employer's group health insurance plan. Defendant,
who had sought to discourage him from filing, discharged the
plaintiff. Held Plaintiff failed to state a cause of action.
Discharge can only sanctioned if it violates a "clearly mandated
public policy," but this was a private matter. "We consider that
the discharge of an employee for filing a claim under a policy in
which he is a beneficiary does not violate a clearly mandated
public policy."
Embry v. Hargadine-McKittrick Dry Goods Co., Court of Appeals,
Missouri, 127 Mo.App. 383, 105 S.W. 777 (1907)
Plaintiff empry had been requesting a decision on
reemployment from defendant McKittrick, so a few days before
the end of the year he went to see McKittrick to say that, if he
wasn't given an answer on reemployment, he would quit then
and there. Defendant asked how his work was going, and
plaintiff said they were busy. Defendant said, "Go ahead, you
are all right. Get your men out, and do not let that worry you." Is
defendant held to a reemployment contract? Held Yes; Even
though there must be a meeting of minds by an agreement of
intentions in a contract, intentions are judged by words and
actions, and in this case a reasonable person would judge
defendant's words as promising reemployment.
Kabil Developments Corp. v. Mignot, Supreme Court of Oregon,
279 Or. 151, 566 P.2d 505 (1977)
Plaintiff Kabil negotiated an oral contract with Mignot's Inland
Helicopters for helicopter service, but Mignot later claimed that
there was no contract. Defense objected to letting the jury hear
Kabil's testimony that Mr. Monroe (Kabil's vice president)
thought there was a contract. Held Even though an objective
test has won over the old "actual intent" or "meeting of the
minds" test, and even though the actual words of the contract
as interpreted by a reasonable person still win, that's no reason
to prevent testimony of one's intent to have a contract, which is
different than intent of terms of the contract, anway.
New York Trust Co. v. Island Oil & Transport Corp., 34 F.2d 655
(2d Cir.1929)
Island Oil, in order to operate near Mexico, set up subsidiaries
operated by Mexicans and sold oil back to Island. Some of
these subsidiaries were mortgaged and lost by foreclosure, and
one of them sued the company that had bought Island to pay for
the oil it had "purchased." Held There was no contract to uphold.
Besides writings, the general situation should be examined to
determine intent, and a reasonable personal would have seen
that this was a sham to evade the law and that there were really
no sales or commercial transactions going on.
Robbins v. Lynch, 836 F.2d 330, 332 (7th Cir.1988)
In law, intent is a conclusion rather than a fact.
McDonald v. Mobil Coal Producing, Inc., Supreme Court of
Wyoming, 820 P.2d 986 (1991)
McDonald was terminated from Mobile, and he sued alleging
that the employee handbook, which indicated that open
communication was better than unionizing, overrode the
original at-will contract. The handbook contained a welcome
letter that indicated that its contents would be in effect until
changed, and also contained the sentence, "It is not a
comprehensive policies and procedures manual, nor an
employment contract." Held (The "nor an employment contract"
disclaimer was not conspicuous, so it isn't valid.) "Mobil's
subjective 'intent' to contract is irrelevant, if Mobil's intentional,
objective manifestations to McDonald indicated assent to a
contractual relationship." Whether the objective manifestations
of assent were sufficient is a mixed question of law and fact that
must be determined through further proceedings. Dissent The
handbook was available before McDonald signed the original
contract, so how could it modify the original contract? This
decision effectively does away with employment-at-will in
Wyoming, because it says that a company might inadvertently
by any communication alter the original contract. Besides, there
was insufficient consideration for the alteration.
Kari v. General Motors Corp., 79 Mich.App. 93, 261 N.W.2d 222
(1977)
An employee handbook talked about severance pay but stated
in two sections that the handbook did not constitute a
contract. Held The handbook was not a contract as it contained
no promise and no expectations of the employee to perform so
as to rely on the promise. There's hardly any way the defendant
could have indicated more that this was not a contract other
than by not mentioning the severance plan.
Pine River State Bank v. Mettille, 333 N.W.2d 622 (Minn.1983)
An employee handbook can be a contract if it contains an offer
and it is communicated to an employee by dissemination. In an
at-will situation, the employee's continued employment can be
considered acceptance and consideration for a new unilateral
contract.
Torosyan v. Boehringer Ingelheim Pharmaceuticals, Inc., 234
Conn. 1, 662 A.2d 89 (1995)
Held 1) All employer-employee relationship have a contract, if
only implied. 2) The default rule for implied employment
contracts is employment at will. ... (the rest is semi-important as
a summary)
Moulton v. Kershaw, Supreme Court of Wisconsin, 59 Wis. 316,
18 N.W. 172 (1884)
Defendant sent plaintiff a wire stating that they were in the
position to offer Michegan salt at a low price. Plaintiff wired back
ordering 2,000 barrels of salt, but defendant wired back
withdrawing their letter. Was there a contract (i.e. an offer an
acceptance)? Held No, this was just a general business notice
trying to get the plaintiff to deal with them. There was no offer to
sell a specific quantity of salt. (This is not to say that an offer
might not specifically allow the specific quantity to be specified
later, but this was not one of those offers.)
Joseph Martin, Jr. Delicatessen v. Schumacher, Court of Appeals
of New York, 52 N.Y.2d 105, 436 N.Y.S.2d 247, 417 N.E.2d 541
(1981)
Plaintiff tenant and landlord agreed to rent an apartment for five
years from $500/month for the first year up to $650 for the fifth,
with a renewal option for five years more "at annual rentals to
be agreed upon." Landlord, when the tendant wanted to renew,
raised the price to $900/month. Was there a contract for the
renewal? Held No; an agreement to agree with a material term
left for future negotiation is unforceable. There was not even a
hint of what the price might be.
Southwest Eng'g Co. v. Martin Tractor Co., 205 Kan. 684, 473
P.2d 18 (1970)
Parties did not reach agreement on terms of payment for a
generator. Held The contract is enforceable—even though one
or more terms are left open does not make the contract
indefinite, if the parties intended to make the contract and there
is a reasonably certain basis for remedy.
Empro Mfg. Co. v. Ball-Co Mfg., Inc., United States Court of
Appeals, Seventh Circuit, 870 F.2d 423 (1989)
Empro gave Ball-Co a letter of intent to buy the latter, "subject
to" the approval of the Empro board of directors and
shareholders, and with general terms and conditions to be
placed in a later "Asset Purchase Agreement." Ball-Co backed
out, and Empro sued. Held The letter is not binding. Terms
missing does not always make the contract invalid. (The key
thing is whether the missing terms are so important that a
contract would not arise even if the parties wished to be bound.)
The words "subject to" should not be dispositive, but in this case
they objectively indicate that the parties did not intend to be
bound. (Expenditures surrounding drafting the letter do not
make the letter a valid contract.)
Wheeler v. White, Supreme Court of Texas, 398 S.W.2d 93 (1965)
White promised Wheeler that he would get him a loan from a
third party and that, if he couldn't get him a loan, he would loan
him the money himself. Terms such as amount and payment of
interest were not spelled out. White said that Wheeler could go
ahead and tear down buildings and prepare land in preparation
for the construction Wheeler wanted to do. White couldn't get
the loan, so Wheeler sued. Held The contract is indefinite and
therefore unenforceable, but White cannot plead this because
he is estopped by his tacitly allowing Wheeler to reliantly tear
down buildings. There is no contract, so damages are only the
reliance costs, not the loss of future profits.
Howard v. Beavers, 128 Colo. 541, 264 P.2d 858 (1953)
Plaintiff in Colorado agreed to exchange houses with defendant
in Hollywood, who owned a more expensive house, with a
mortgage for the difference in price. Mortgage repayment terms
were not spelled out. Defendant refused to move. Held The
terms are too indefinite for there to be a contract, but plaintiff is
due his $36 expenditures in coming to Hollywood to see the
house.
Raffles v. Wichelhaus, Court of Exchequer, 2 Hurlstone &
Coltman 906 (1864)
Defendant contracted with plaintiff to buy cotton arriving from
Bombay, and the contract noted that the cotton would be
aboard the Peerless. A ship named Peerless arrived in October
with nothing aboard, and when another ship named Peerless
arrived in December with the cotton, defendant refused to buy
the cotton. Held If the two parties meant two different ships
named Peerless, there is ambiguity in the contract and
therefore no contract.
Flower City Painting Contractors v. Gumina Constr. Co., 591 F.2d
162 (2d Cir. 1979)
Flower contracted to paint apartments, and Flower took the
terms to mean that Flower would only paint the internal walls.
When Flower refused to paint the external walls, Gumina
cancelled the contract. Held The contract could be intepreted
two different ways, so as there was no meeting of the minds
there was no contract. There was an industry standard practice
that could interpret the express terms to mean both internal and
external walls, but Flower was a new contractor and couldn't be
expected to know that.
Dickey v. Hurd, 33 F.2d 415 (1st Cir.1929)
Hurd in Massachussetts offered to Dickey in Georgia to sell
land in Georgia, stipulating that Dickey had until 18 July 1926 to
accept. Hurd really meant that the price should have be paid by
then, but Dickey only thought he had to accept by then, which
he did. Hurd refused to sell the land. Held The contract is
effective, because Dickey made it clear his interpretation in
letters, so Hurd cannot sit by and allow Dickey's
misinterpretation until the time limit expires.
Cobaugh v. Klick-Lewis, Inc., Superior Court of Pennsylvania,
385 Pa.Super. 587, 561 A.2d 1248 (1989)
Golfer Cobaugh, upon reaching the ninth hole, found a car with
signs indicating that anyone making a hole-in-one would win the
car. Cobaugh did, but defendant refused to give the car, saying
that it was a prize for a tournament two days
earlier. Held Cobaugh gets the car. A offeror is held to the
manifest intent, not subjective intent. Klick-Lewis should have
taken down the signs or specified which tournament the car was
for. Plaintiff had no reason to know that the car was for a
different tournament, so the mistake was unilateral. (There was
also consideration: the promisor benefitted by the publicity it
gets when it gives away a car.) Dissent A hole-in-one is
governed by chance, so this was a gambling contract, illegal
under Pennsylvania law, even though many illegal gamblings
occur all the time for charity events.
Glover v. Jewish War Veterans of United States, Post No. 58, 68
A.2d 233 (D.C.Mun.Ct.App. 1949)
Held Offers of reward are governed by contract law, so if a
party does not know of they offer they are not eligible for the
reward, even if they perform.
Caldwell v. Cline, 109 W.Va. 553, 156 S.E. 55 (1930)
Cline sent a letter offering to sell Caldwell land but that Caldwell
must accept within eight days. Caldwell accepted within six
days of receiving the letter, which was more than eight days
after it was sent. Held An offer made by post is made when it is
received—before that, the words have "no legal existence."
Textron, Inc. v. Froelich, 223 Pa.Super. 506, 302 A.2d 426 (1973)
A broker had a telephone conversation to sell rods, and the
buyer said he would check and get back to the seller. Five
weeks later the buyer called back and accepted, to which the
seller replied, "Fine, thank you." Do oral offers terminate at the
end of the conversation? Held Not necessarily; if no expiration
is specified, the offer terminates at the end of a reasonable time
based upon the nature of the contract and the circumstances
either knows or has reason to know.
Allied Steel & Conveyors, Inc. v. Ford Motor Co., United States
Court of Appeals, Sixth Circuit, 277 F.2d 907 (1960)
Ford purchased machinery from Allied and sent them an
agreement that said it was not binding until signed by Allied.
The agreement also said that Allied would be liable for injuries
from Allied negligence and from Ford negligence during
installation. While installing the machinery, an Allied employee
was hurt from a Ford employee's negligence. Allied, who later
signed the agreement, claimed the agreement was not in effect
at the time of injury. Held Allied accepted the contract when it
began the installation, and the later signing was just a record of
that agreement. An indication of a method of acceptance did not
exclude other methods of acceptance, and acceptance
occurred when Allied started performance.
Panhandle Eastern Pipe Line Co. v. Smith, 637 P.2d 1020, 1022
(Wyo.1981)
Held Exclusive methods of acceptance, especially if
unreasonable, must be expressed explicitly if they are to be
upheld.
Davis v. Jacoby, Supreme Court of California, 1 Cal.2d 370, 34
P.2d 1026 (1934)
Caro Davis was treated as a daughter by her uncle and aunt
Whitehead, so years later when the Davises were living in
Canada and Mrs. Whitehead became ill, Mr. Whitehead wrote
them and asked them to come look after him and Mrs.
Whitehead. Mr. Whitehead promised that, if they were to come
care for the Whiteheads, the Whiteheads would leave the
Davises everything in their will. Mr. Davis said they would come
after finishing up some business, and on the day the business
was taken care of they found out Mr. Whitehead had committed
suicide. After arriving and caring for Mrs. Whitehead, the
Davises discovered everything had been left to
nephews. Held Mr. Whitehead made a contract to create a will,
and Mr. Davis accepted his offer with a promise to come care
for Mrs. Whitehead. In ambiguous cases such as this, the law is
predisposed to find a bilateral rather than a unilateral
contract—that is, a promise for a promise rather than a promise
for performance.
Jordan v. Dobbins, 122 Mass. 168 (1877)
Dobbins promised Jordan that if Moore refused to pay Jordan
for goods sold on credit, Dobbins would guarantee the amount.
Jordan sold goods to Jordan not knowing that Dobbins had
died. Held The death of Dobbins revoked the offer because
Jordan had not need performed. [The same goes for incapacity
as for death.]
Petterson v. Pattberg, Court of Appeals of New York, 248 N.Y. 86,
161 N.E. 428 (1928)
Defendant had a bond on Petterson secured by a mortgage on
land. Defendant told Petterson that if he paid off the mortgage
early, he would write off the $780 bond. When Petterson came
to defendant's house, defendant said that he had sold the
mortgage and that the deal was off. Held The offeror can
revoke a unilateral offer at any time, even immediately before
acceptance by the offeree—even if the offeror sees the offer
coming to accept. [Now Restatement of Contracts Section 45
says that once performance begins, the offer cannot be revoked,
as an option contract has been created.]
Brackenbury v. Hodgkin, Supreme Judicial Court of Maine, 116
Me. 399, 102 A. 106 (1917)
A mother asked a daughter in a letter to come live with her and
take care of her, and in return the daughter could have the
house. After plaintiff daughter moved in the mother instigated
arguments and finally deeded the house to a son. Held The
mother owes the daughter the land, because the mother's letter
was an offer, in writing as required for land, and the plaintiff
came and began performance on the offer.
Dickinson v. Dodds, (Court of Appeal, Chancery Division), 2 Ch.D.
463
Dodds on Wednesday offered in writing to sell Dickenson a
piece of property and said the offer would be open until Friday.
On Thursday Dodds sold the property to Allan, and Berry told
this to Dickenson. Held Dodds could withdraw the offer at any
time, even though he said it would be open for a certain amount
of time, because there was no consideration. Barry's informing
Dickenson of the sale was adequate notice of Dodd's
revocation.
Thomason v. Bescher, Supreme Court of North Carolina, 176 N.C.
622, 97 S.E. 654 (1918)
Defendants Bescher executed a writing under seal promising,
with consideration of $1, to convey land to Thomason if he paid
$6,000 before a certain time. Thomason within that time
declared his acceptance and indicated he was willing to pay,
after which Bescher tried to withdraw the offer. HeldBescher
must give specific performance without need for consideration,
because the writing was under seal. Once plaintiff indicated
acceptance and was ready and willing to comply, defendant has
to perform.
Marsh v. Lott, 8 CalApp. 384, 97 P. 163 (1908)
Plaintiff paid defendant $0.25 for the option to buy property, and
the option could be extended for 30 days. Defendant extended
the option and the next day the defendant withdrew the
option. Held The plaintiff is owed specific performance; the
$0.25 is not too small consideration for an option. Any
consideration, however small, is sufficient for an option,
because § 3391 only says that there has to be adequate
consideration for the exchange, and the price of the land itself
was sufficient.
Smith v. Wheeler, 233 Ga. 166, 210 S.E.2d 702 (1974)
Held A seller may not withdraw from an option even if the
consideration for the option was not actually given, because an
agreement that says there is consideration is an implied
promise to pay that consideration.
James Baird Co. v. Gimbel Bros., Inc., United States Court of
Appeals, Second Circuit, 64 F.2d 344 (1933)
Plaintiff and other contractors were bidding on a project.
Defendant measured amount of linoleum needed,
underestimating by 50%, and sent an offer to all contractors.
Plaintiff got the bid but before accepting the offer for the
linoleum, the defendant rescinded the offer. Held Defendant
could withdraw the offer before it was accepted. Plaintiff's
acceptance of a separate bid does not create promissory
estoppel and would not constitute acceptance, because plaintiff
would not have been bound to the defendant by the acceptance
of the bid. There was no consideration for an option, either.
Drennan v. Star Paving Co., Supreme Court of California, 51
Cal.2d 409, 333 P.2d 757 (1958)
Plaintiff contractor was creating a proposal for the "Monte Vista
School Job", and defendant telephoned a bid. Plaintiff received
the contract, but when conveying acceptance to defendant,
defendant rescinded the offer because they had made a
mistake. Held Defendant is bound to the offer. Referencing
Restatement Section 90, defendant submitted the bid with the
full knowledge and indeed the desire that plaintiff would rely on
the bid in bidding for the larger contract. The loss resulting from
the mistake should fall on the party who caused it. (General
contractor is not free to delay acceptance in hopes of getting a
better price, though.) [Drennan is "the law in most places"
(407).]
Loranger Constr. Corp. v. E.F. Hauserman Co., 376 Mass. 757,
384 N.E.2d 176 (1978)
E.A. Coronis Associates v. M. Gordon Constr. Co., 90 N.J.Super.
69, 216 A.2d 246 (1966)
Subcontractor Coronis gave a bid to Gordon, and Gordon's
general contracting bid was accepted. Before Gordon accepted
Coronis' offer, Coronis revoked it. Held The promise could be
enforced under promissory estoppel, but under UCC § 2-205
the promise could not be enforced because there was no writing
indicating the offer would be held open.
Southern California Acoustics Co. v. C.V. Holder, Inc., 71 Cal.2d
719, 79 Cal.Rptr. 319, 456 P.2d 975 (1969)
Holder used subcontractor Acoustic's bid in its own bid,
publishing Acoustic as the subcontractor, but then later
changed subcontractors. Acoustic sued claiming they had
forgone subcontracting with other general contracts because of
the publication. Held Holder was not bound to use Acoustic;
there was no promissory estoppel because there was no
promise to uphold—Holder did not promise Acoustic anything.
Hoffman v. Red Owl Stores, Inc., Supreme Court of Wisconsin,
26 Wis.2d 683, 133 N.W.2d 267 (1965)
Red Owl Stores promised Hoffman that he could have a
franchise for $18,000, so Hoffman sold his store's fixtures an
inventory, bought a lot, bought a house in another town and
moved his family, all on Red Owl's suggestion. Red Owl later
raised the price Held Hoffman should be awarded the price of
his actions through promissory estoppel under Restatement §
90 (Hoffman relied on promises that would reasonably induce
action), paying amounts to avoid injustice. Held That specific
terms such as lease, building space, etc. were not presence
does not matter, as promissory estoppel is not a breach of
contract concept. Held Promissory estoppel applies to
Hoffman's wife's selling of a bakery building, even though § 90
does not usually apply to third parties, because Red Owl's had
reason to foresee action by the third party in reliance on the
promise.
Skycom Corp. v. Telstar Corp., 813 F.2d 810 (7th Cir. 1987)
Citing Hoffman, Held "Even when a contract fails to become
effective as a whole, particular terms may bind under
promissory estoppel ...."
Livingstone v. Evans, Supreme Court of Alberta, 4 D.L.R. 769
(1925)
Defendant offered to sell land to plaintiff for $1800. Plaintiff
wired back to send the lowest price, offering to pay $1600.
Defendant wired back that he could not lower the price. Plaintiff
then accepted the original offer, but defendant had already sold
the land. Held There is an enforceable contract. Even though
the counter-offer by plaintiff amounts to a rejection (even
though it was attached to an inquiry), defendant's specifically
standing by the original price amounts to a reinstatement of the
original offer.
Idaho Power Co. v. Westinghouse Electric Corp., United States
Court of Appeals, Ninth Circuit, 596 F.2d 924 (1979)
Idaho Power inquired to Westinghouse about a voltage
generator, and Westinghouse sent back a price quote that
limited their liability. Idaho Power sent back a purchase order
that did not include any liability limitations and claimed that it
"supercedes all previous agreements." The generator allegedly
caused fire damage. Held Idaho Power's purchase order
constituted acceptance to Westinghouse's offer because it
contained essentially the same terms. It was not a counter-offer,
even though some things differed, because UCC § 2-207(1)
changes the common law to allow a "definite and seasonable
expression of acceptance or a written confirmation" to constitute
an acceptance. Held The acceptance was valid because the
variances did not expressly make the contract conditional upon
them, as provided for by UCC § 2-207(1). Held The "knockout"
rule, in which differing terms can be decided later, does not
apply because there were no explicit liability limitations in the
purchase order.
Roto-Lith, Ltd. v. P.P. Bartlett Co., 297 F.2d 497 (1st Cir. 1962)
Roto-Lith ordered adhesive that proved to be defective from
Bartlett. Bartlett sent an acknowledgement with the shipment
that denied warranties, and stated that the buyer should notify
seller if that was unacceptable. Held The terms were not part of
the original contract, as they constitute material alterations
under UCC § 2-207(2). Held The reply, though, was not an
unconditional acceptance under UCC § 2-207(1) because it
was contingent upon acceptance of the buyer of the new
demands. The seller did not intend to make an unconditional
acceptance, because the additions were only burdensome to
the offeror—the buyer. Held The buyer is bound to the clause
disclaiming warranties, because the reply constituted a
counter-offer, and the buyer accepted that offer by its use of the
product. [Roto-Lith was later overruled.]
Morrison v. Thoelke, District Court of Appeal of Florida, 155
So.2d 889 (1963)
Buyers of property in Orange County sent a contract to the
owners in Texas, who signed the contract and sent it to the
buyers' attorney in Florida. Before the letter reached the
attorney, the sellers called the attorney and repudiated the
acceptance. Since the mail service allows delivery to be
stopped, should the postal service be considered an agent of
the offeree, making acceptance binding upon receipt? Held The
repudiation was invalid, and the buyers own the land. An
acceptance is binding upon being deposited in the mail, not
upon receipt. The line must be drawn somewhere, and
precedent has usualy went with binding-upon-mailing.
Kibler v. Caplis, 140 Mich. 28, 103 N.W. 531 (1905)
Caplis gave Kibler an option to buy hides, the option set to
expire at a certain point. Kibler accepted by telegram and
confirmed by letter. The telegram was never delivered, and the
letter arrived after the option had expired. Held There is no
contract, because both parties knew that the option would
expire at the given time. With options, the acceptance is valid
upon receipt.
H.B. Toms Tree Surgery, Inc. v. Brant, Supreme Court of
Connecticut, 187 Conn. 343, 446 A.2d 1 (1982)
Toms contracted with defendant to do landscaping work.
Defendant kept asking the workers to do more work, and after a
while Toms requested that Defendant pay more, which
Defendant did. This kept occuring for the rest of the work, and
Toms couldn't keep track of everything defendant kept asking
the workers to do, so the trial court awarded Toms more money
"on a time basis" on the theory of imlied contract. Does the
presence of an express contract preclude recovery under an
implied contract? Held In theory, yes, but here there was no
"factual foundation" for the express contract. In other words,
both Toms and the defendant knew that work wasn't going
according to the express contract and did not intend to commit
themselves to it.
Hobbs v. Massasoit Whip Co., Supreme Judicial Court of
Massachusetts, 158 Mass. 194, 33 N.E. 495 (1893)
Plaintiff sent eel skins to the defendant, who kept them for
several months before destroying them. Plaintiff had sent eel
skins in the past, and defendant had paid for
them. Held Defendant's silence constitute an acceptance of an
implied contract to purchase the skins that the defendant had
sent, because past actions had created a pattern of dealing that
would make it reasonable for the plaintiff to expect payment for
the skins. This does not mean that anyone can unilaterally
impose a duty on someone, forcing them to incur an expense in
rejecting an offer.
Austin v. Burge, 156 Mo.App. 286, 137 S.W. 618 (1911)
Defendant's father-in-law bought gift subscription to a
newspaper for defendant. After the subscription expired,
defendant paid several bills from plaintiff, telling plaintiff not to
send more. The newspapers kept coming, and defendant took
them home and read them. Held There is an implied contract.
Even though the defendant hadn't ordered the newspapers, by
using them the defendant implicitly agreed to pay their value.
Morone v. Morone, Court of Appeals of New York, 50 N.Y.2d 481,
429 N.Y.S.2d 592, 413 N.E.2d 1154 (1980)
An unmarried couple had been living together since 1952, with
the woman performing "domestic duties and business services",
expecting to be paid for her services. The man, moreover, orally
told her that he would in return take care of her and share the
net profits of his business with her. Can there be an implicit
contract between an unmarried couple living together? Held No,
because if people are living together there is oftentimes an
assumptions that work will be performed gratuitously. Allowing
implied contracts raises the risk of misunderstanding and allows
for fraud. Can there be an explicit contract between unmarried
people living together? Held Yes; nothing about living together
precludes an explicit agreement from being put into place, as
long as sexual services doesn't form part of the consideration.
Mitchill v. Lath, Court of Appeals of New York, 247 N.Y. 377, 160
N.E. 646 (1928)
Mrs. Mitchill wanted to buy a farm from the Laths, but she didn't
like the ice house. The defendants orally promised that if she
bought the farm, they would remove the ice house. Mrs. Mitchell
bought the farm, with a written agreement, and started
improving it, but Laths didn't remove the ice house. Is the
agreement to buy the ice house valid? Held No; that oral
agreement is obviously linked to, though legally separate from,
the written agreement to buy the farm. Such an oral contract
that modifies the written one is only valid if 1) the agrement is a
collateral one, 2) it doesn't contradict express or implied
provisions in the written contract, and 3) it relates to things one
wouldn't expect would be in the written contract. In this case,
the written contract seems to be full and complete, and one
would expect anything relating to an ice house to be included in
the written contract. Dissent A written contract is only meant to
cover a "limited field," so it couldn't be expected to necessarily
cover later negotiations that rely on the first agreement. The
rule for parole agreements should be 1) there is sufficient
evident of such an agreement, and 2) that the written contract
does not expressly or implicitly preclude any other provisions
outside the written contract.
Hatley v. Stafford, Supreme Court of Oregon, 284 Or. 523, 588
P.2d 603 (1978)
Stafford, manager of Stafford Farm, agreed to rent land to
Hatley. The written agreement said that Stafford could buy out
Hatley at a price not to exceed $70 per acre. Almost eight
months later Stafford tried to buy out Hatley, but Hatley wanted
$400 per ace because he had wheat growing on the field.
Stafford came in and cut down the wheat. Hatley claimed there
was an oral agreement that the buyout period in the written
agreement would only last for 30-60 days from the execution of
the lease. The parties do not dispute that there was no
consideration for the oral agreement. Does the parole evidence
rule throw out the oral agreement, if there was one? Held No.
(The court only decides whether the parole agreement, if there
was one, would legally be effective. If the court determines it
would be, the jury decides whether there actually was a parole
agreement.) The parol evidence rule applies only to those
aspects of a bargain that the parties intended to go into the
written document. The court should assume the written
agreement was complete and only allow a parole agreement if
there is substantial evidence the parties did not intend the
writing to embody the entire agreement. 1) A parole agreement
must not be "inconsistent" with the written document. It is only
"inconsistent" if it condradicts an express term in the written
contract. It must be a term not naturally placed in the document.
Whether a term "naturally" should have been included in a
written document should be construed liberally. Parties with
less business experience may be included not to include all
terms in the written document. Dissent The parole evidence
statute in Oregon says that a written agreement contains all the
terms of the agreement, and it should be interpreted that way.
Hayen v. Hoadley, 94 Vt. 345, 111 A. 343 (1920)
Two parties contracted in writing to exchange properties. As
part of the deal, defendants promised to fix up the property by
shingling the barn, fixing the house roof, and repairing the cellar
wall. Defendants claim there was an oral agreement that they
would have "until October 1, 1919" to complete repairs, would
only use up to $60, and would use No. 2
shingles. Held Evidence of the oral agreement cannot be
introduced. The written contract was complete in itself. (An
incomplete written agreement can be supplemented by parole.)
As it was silent as to the length of repairs, a reasonable time
was implied by the law, and this is part of the written contract
just as much as it had said "reasonable time," so the court can't
allow evidence of oral agreements to change the written
agreement. The plaintiff might have introduced evidence of an
oral agreement to specify what the reasonable time should be,
but they didn't do that.
Interform Co. v. Mitchell, 575 F.2d 1270, 1275-1277 (9th Cir.1978)
There are two views as to integration. The first holds written
agreements to be special and to be integrated as a reasonble
person would see it. Courts can make most of the decisions
here. The other view, held by Corbin, is that written agreements
have unique compelling force and are integrated when the
parties desire them to be and they mean what the parties intend
to mean—what a reasonable person would think doesn't really
matter. Here, the jury has a bigger responsibility of determining
when the written agreement means what the parties want to
express. Corbin's view holds more sway today, but most
jurisdictions don't hold one view to the exclusion of the other.
Luria Bros. & Co. v. Pielet Bros. Scrap Iron & Metal, Inc., 600 F.2d
103 (7th Cir. 1979)
Pielet contracted with Luria to deliver a large quantity of scrap
metal but completely did not perform. Pielet claimed that they
had an oral understanding beforehand that Pielet was
depending upon another company for shipment and that they
may not come through, in which case Pielet would not be able
to deliver. Held Parole evidence is not allowable. Pielet's own
form contained a merger clause, bringing UCC § 2-202 into play.
This court views "inconsistent" as meaning the absence of
reasonable harmony with explicit terms as well as language and
respective obligations of the parties. The written agreement was
for an unconditional shipment of goods, making any oral
agreement of conditional shipment inconsistent with the written
agreement. Held Furthermore, parole evidence of additional
terms must be excluded if they would have almost certainly
been included in the document if agreed upon, and here an
agreement of conditional shipping of such a large order would
likely have been included in the written agreement.
Long Island Trust Co. v. International Inst. for Packaging Educ.,
Ltd., Court of Appeals of New York, 38 N.Y.2d 493, 381 N.Y.S.2d
445, 344 N.E.2d 377 (1976)
Long Island Trust, plaintiff, loaned the defendant $25,000 for 90
days, and then later renewed the loan for another 30 days and
loaned an additional $10,000. Defendant claims the latter note
is not enforceable, because one of the signators had discussed
with the officer of the bank that certain other guarantors, and
one guarantors was missing. Held The note could
unenforceable because of the oral agreement—there cannot be
summary judgment against the defendant. The note did not
expressly state that it was an unconditional guarantee, and
therefore the oral agreement did not contradict it. (The
defendants were not "untrustworthy," "devious," or "negligent,"
any of which would have made the parole agreement invalid.)
Western Commerce Bank v. Gillespie, 108 N.M. 535, 775 P.2d 737
(1989)
The Gillespie estate owed Western $316,000, but the estate
made a deal with Western to settle for $275,000 if the estate
could secure financing within a reasonable time. When the
estate had almost secured the funding, Western tried to
repudiate. Held Western cannot repudiate. The "reasonable
time" term was a condition upon performance of the contract,
not on its formation. The contract was formed, and if Gillespie
performs within a reasonable time, Western cannot repudiate
the contract.
Hargrave v. Oki Nursery, Inc., 636 F.2d 897 (2d Cir. 1980)
Vinyard plaintiffs brought a suit against Oki after purchasing
grape vines, alleging Oki had represented the vines to be healty,
disease-free, and suitable for growing grapes. Held One can
sue for a tort of fraudulent misrepresentation separate from the
contract if there is harm to the plaintiff, not just a dispute about
holding the defendant to a promise.
Lipsit v. Leonard, Supreme Court of New Jersey, 64 N.J. 276, 315
A.2d 25 (1974)
Plaintiff Lipsit worked for Leonard for nine years in New York
under written contracts (during which time Leonard became
incorporated), with Leonard allegedly promising Lipsit that he
would get equity in the business. When they discussed equity,
the terms were unacceptable by the plaintiff. Lipsit accuses
Leonard of breach of contract and fraud because Leonard
allegedly never intended to give Lipsit a stake in the company.
Should summary judgment be issued against the breach of
contract complaint? Held Summary judgment is valid against
the complaint of breach of contract, because 1) the oral
discussions never reached the stage of an enfoceable contract,
and 2) the parole evidence rule would bar the oral discussions
because of the written employment contracts. Should the tort of
fraud and misrepresentation be allowed? Held The tort action
should be allowed to proceed. New York law allows tort cases
based upon fraud to go forward even if not grounded in breach
of contract. However, the damages will not be based on
expectation of the contract, but on restitution—the "out of
pocket rule." If successful, the plaintiff will only be able to
recover out of pocket expenses. [Would he be able to recove
any equity at all?]
Bank of America Nat. Trust & Sav. Ass'n v. Pendergrass, 4 Cal.2d
258, 48 P.2d 659 (1935)
Defendants signed a promissory note with the bank "payable on
demand." When the bank tried to collect, defendants claimed
the bank had promised them that they would be allowed to
operate the ranch on which they farmed for 1932 without being
bothered, that they made the promise without intending to keep
it, and that the bank soon seized the land on which the
mortgage was held after the note was signed. Held Parole
evidence to prove a tort of fraud is inadmissable here. Parole
evidence is allowed to prove independent facts, but this
promise effectively extended the payment of the note for
another year, directly contradicting the words of the written
agreement. [Courts that make an intrinsic/extrinsic distinction of
the parole evidence rule for preventing the rule to allow claims
for fraud in tort are in the minority and criticized.]
Sabo v. Delman, 3 N.Y.2d 155, 164 N.Y.S.2d 714, 143 N.E.2d 906
(1957)
Defendant made a written conract to get plaintiff's patent on a
shoe-cutting machine, and promised orally before signing the
contract to manufacture the machine and use best efforts to
promote it. Defendant only made two machines, and plaintiff
sued for fraud in tort to anull the contract. Does the parole
evidence rule preclude a request to set aside a contract by the
oral arrangement's contradicting the written contract? Held No;
the oral arrangement isn't contracting the terms of the written
contract, but instead there is a complaint of fraud based upon
previous oral arrangement and the request is to set aside the
agreement, not enforce a new term. [Why does this case say
that extrinsic evidence would ever not be disallowed? Isn't
itintrinsic parole evidence that's disallowed?]
LaFazia v. Howe, Supreme Court of Rhode Island, 575 A.2d 182
(1990)
The Howes purchased a deli from plaintiffs Arthur LaFazia and
Dennis Gasrow. The plaintiffs said that, as they dealt in cash,
they didn't have records of income. They showed tax records,
but said that the low numbers were not indicative of the actual
income. The Howes were convinced the deli would make
money, so they bought it. There were clauses in the contract
stating that the Buyer was relying on their judgment, thta no
representations or warranties were made, and that the
agreement constituted the whole agreement. The business
never was profitable, but the Howes kept paying on the contract.
They finally sold the deli and refused to pay the rest. Plaintiffs
filed a suit for the money, and the Howes filed a counter-claim
for misrepresentation. Held The Howes cannot claim
misrepresentation, because they understood and signed a
contract that stated they had not relied on other representation,
while represented by an attorney (who happened to be their
son). This was more than a merger clause—it was specific that
there was no other representation. If the non-reliance clause
isn't true, then there is no way for two parties dealing at arms
length to indicate no reliance. (A person induced by fraud may
normally either sue on the contract to rescind the contract or
sue in tort for damages.)
Rio Grande Jewelers Supply v. Data General Corp., 101 N.M. 798,
689 P.2d 1269 (1984)
A buyer of a computer system sued claiming negligent
representation of the system's capabilities. The contract
disclaimed all prior representations.Held The plaintiff cannot
collect damages, because if a contract that is valid under the
UCC and has a valid disclaimer of warranties under UCC 2-316,
allowing the claim to go forward would effectively allow the
contract to be written and the UCC to be circumvented.
Hoffman v. Chapman, Court of Appeals of Maryland, 1943, 182
Md. 208, 34 A.2d 438
Joseph Stanley Hoffman and his wife sold a house on Lot 4 at
Kensington, on which defendants lived after the agreement was
made, but the draftsperson accidentally made up a deed
conferring the entire lot, not just Lot 4. Plaintiffs sued in equity to
have the deed modified. Should parole evidence be excluded
from modifying the written agreement? Held No, because fraud,
accident and mistake are exceptions to the parole rule. Is the
agreement so vague that the contract must be void? Held No, a
contract must be upheld if by its express terms or implications
the intent of the parties can be determined. Here, there was no
mistake between the parties as to the identity of the property,
there was only an incorrect description. Is there unilateral
negligence on the part of plaintiffs that would allow the
defendants to keep the land? Held No, mere mistake does not
necessarily indicate negligence, and the error of the draftperson
modified the agreement to contradict the understanding of both
parties, so it was not a unilateral mistake.
Bethlehem Steel Co. v. Turner Constr. Co., 2 N.Y.2d 456, 161
N.Y.S.2d 90, 141 N.E.2d 590 (1957)
Plaintiff Bethlehem Steel contracted with a general contractor to
furnish steel for a project. The contract said that prices could be
adjusted up to $15 per ton if "prices for component materials,
labor rates applicable to the fabrication and erection thereof and
freight rates" increased or decreased. Bethlehem raised prices
based upon steel items, and defendant said that the adjustment
clause only referred to materials used to make
steel. HeldPlaintiff should be granted summary judgment,
because when the clause is clear on its face, information
extrinsic to the contract cannot be used to modify the written
contract. Dissent The contract is ambiguous, and the plaintiff is
trying to assign other meanings to commonly used language.
Robert Indus., Inc. v. Spence, 362 Mass. 751, 291 N.E.2d 407
(1973)
While external evidence may not be used to contradict or
change terms, the facts and circumstances surrounding the
transaction may be used to elucidate that terms and remove or
explain any uncertainty.
Pacific Gas & Elec. Co. v. G.W. Thomas Drayage & Rigging Co.,
Supreme Court of California, 1968, 69 Cal.2d 33, 69 Cal.Rptr. 561,
442 P.2d 641
Defendant contracted to fix plaintiff's steam turbine, and the
contract indemnified and insured the plaintiff against damage to
property. Defendant damaged plaintiff's turbine during the work
and plaintiff sued defendant. Defendant claimed the contract
only referred to the property of third parties. Is the contract
unambiguous on its face to disallow extrinsic information of the
circumstances surrounding the contract? Held No. Even though
extrinsic evidence may not be used if a contract is unambiguous,
that extrinsic evidence of circumstances may be used to
determine if the words of the contract actually are ambiguous.
Words are mere symbols that represent ideas which may be
different than those of the judge, and in California "magic
words" may not override the intent of the parties.
Federal Dep. Ins. Corp. v. W.R. Grace & Co., 877 F.2d 614 (7th
Cir.1989)
Posner: The old "four corners" rule, limiting inerpretation to the
words on the page if they appear unambiguous, has some merit
by reducing litigation.
Spaulding v. Morse, 322 Mass. 149, 76 N.E.2d 137 (1947)
Defendant and ex-wife had set up a trust that would pay son
Richard D. Morse (through trustee) $1200/year until he entered
college or university, and then pay him $2400/year for four
years. When Richard joined the US Army, defendant stopped
paying. Held Defendant doesn't have to pay. The agreement
should be interpreted in light of the material circumstances and
pertinent facts of which they had knowledge. The purpose of the
trust was to provide for Richard's maintenance and education,
and this was not needed when he was in the Army.
Allied Van Lines, Inc. v. Bratton, 351 So.2d 344 (Fla. 1977)
Held One cannot defend against enforcement of a contract on
the grounds that the party signed the contract without reading it.
Agricultural Ins. Co. v. Constantine, 144 Ohio St. 275, 58 N.E.2d
658 (1944)
Woman parked her car at an attended parking lot twice a week
for five or six years. She always received a ticket after leaving
the keys in the ignition saying the parking lot was not liable for
the car, but she never read it. One day she came back to find
her car had been stolen and damaged, so she sued for the price
she had to pay to repair the car after her insurance paid the rest.
Was the woman bound to the terms on the ticket? Held No. 1)
Since the attendant assumed control over the automobile, the
defendant became a bailee, not a mere lessor of a parking
space. 2) The ticket was only a "token of identification," not a
bailment contract. The woman had never read it and the
attendant had never pointed out what it said. 3) Even if she
would have read the ticket, public policy does not allow bailees
to relieve themselves of liability from negligence.
Mundy v. Lumberman's Mut. Cas. Co., United States Court of
Appeals, First Circuit, 1986, 783 F.2d 21
Some silverware was stolen from the Mundys, and their
insurance policy limited the liability for theft of silverware to
$1,000. The insurance policy did not originally have such a
limitation, and when the change occurred an update was sent
out informing the Mundays of the change. The Mundays claim
the notice was insufficient. Are the Mundays bound to the new
terms? Held Yes; the notice included a distinctive heading
noting that there had been changes, there was a special section
noting the changes (including the one in question), and the
actual new text was printed in its own section.
Weisz v. Parke-Bernet Galleries, Inc. 67 Misc.2d 1077, 325
N.Y.S.2d 576 (N.Y.Civ.Ct.1971)
Weisz and Schwartz bought paintings purportedly by Raoul
Dufy for ~$3,000 and ~$9,000, respectively, and then found out
they were fakes. The Park-Bernet catalog contained a
disclaiming stating that, although attempts had been made to
verify authenticity, there was no warranty of such. The
auctioneer also announced the disclaimer at the start of the
auction. Held Weisz was not held to the disclaimer, because he
didn't know about it. HeldThe Schwartz' are not bound by the
disclaimer, because even though they knew about it the
reputation of Park-Bernet and the form of the catalog gave the
air of authenticity and implied that warnings should be taken
lightly. [The judgment for Weisz was reversed because the
display in the catalog was prominent and auctions have in
general an implication of caveat emptor.]
Henningsen v. Bloomfield Motors, Inc., Supreme Court of New
Jersey, 1960, 32 N.J. 358, 161 A.2d 69
Henningsen purchased a new car from Bloomfield. At ten days
and 468 miles the steering wheel spun while his wife was
driving and the car was totalled. The sales contract contained,
in small print, a merger clause and a paragraph limiting the
warranty to replacement of defective parts to 90 days or 4,000
miles, whichever was shorter. They sued to recover for personal
injuries, and Bloomfield said that the warranty disclaimer
precluded suits for personal injury. Is the warranty disclaimer
valid? Held No. 1) The disclaimer was in a small font in the
midst of other text that made it hard to find, and there is no
evidence that the plaintiff ever read it. 2) As public policy, the
dealership had unequal bargaining power in relation to the
customer, so the warranty wasn't really bargained for—the
salesperson didn't have the authority to change the clause if he
would have wanted to. 3) Even if the warranty disclaimer were
valid, it was ambiguous to a normal person because it made it
seem like it was only limiting a warranty for parts, not for
personal liability.
Superwood Corp. v. Siempelkamp Corp., 311 N.W.2d 159
(Minn.1981)
Plaintiff purchased a press from defendant. The press failed
and plaintiff sued defendant for negligence. Is a manufacturer of
defective equipment liable in tort for negligence or strict
liability? Held No, those are contracts-based issues that are
covered by the UCC.
Richards v. Richards, Supreme Court of Wisconsin, 1994, 181
Wis.2d 1007, 513 N.W.2d 118
Mrs. Richards wanted to ride with her husband as he drove a
truck for Monkem Co. They said that she could if she would sign
a "Passenger Authorization" form that authorized her to ride in a
particular vehicle, as well as purported to release Monkem from
liability from any future injury in any Monkem vehicle or on any
Monkem property. Mr. Richards had an accident, pinning Mrs.
Richards in the truck, so she sued. Is the exculpatory contract
valid? Held No, the exculpatory contract is void as against
public policy. The point of tort law is to compensate people for
their injuries and provide a deterrance for harmful behavior.
Courts disfavor exculpatory contracts but do not categorically
deny them. This contract had three problems, none of which
alone would have invalidated the contract: 1) the exculpatory
purpose is not evident from the title of the agreement; 2) the
release is overly broad an all-inclusive, allowing riding in one
vehicle but relieving liability for all vehicles;, and 3) it is a
standardized form that did not give plaintiff any room to
negotiate terms.
Broemmer v. Abortion Services of Phoenix, Supreme Court of
Arizona, 1992, 173 Ariz. 148, 840 P.2d 1013
Plaintiff Broemmer was a 21-year-old unmarried high school
student who went to get an abortion. The clinic provided her
with a consent-to-operate form, a medical history form, and an
agreement to arbitrate specifying that the arbitrators would be
doctors, all of which the plaintiff filled out within five minutes. No
one explained the contents of the form to her. During the
operation she suffered a punctured uterus and sued for
malpractice. Is the agreement to arbitrate an adhesion
contract? Held Moeller: Yes. An adhesion contract is one
offered to consumers with no opportunity to bargain without
which the consumer cannot get the goods or services. It was
offered on a take-it-or-leave-it basis, it was particularly
advantageous to the clinic, no one explained the terms or
indicated that she could refuse, and the terms were not
negotiable. Is the adhesion contract enforceable? Held No. The
courts like agreements to arbitrate, as they remove the load on
the courts, but only if both parties agree to them. Adhesion
contracts are not enforceable if they exceed the reasonable
expectations of the plaintiff or if they are unconscionable. Here
it wasn't clear that the plaintiff was waiving a right to a jury trial,
and the high school girl still isn't quite sure what arbitration is.
As it was beyond her expectations that the right to jury trial
would be denied, the issue of unconscionability need not be
addressed. Dissent Martone: This was clearly labeled as an
agreement to arbitrate, and it was signed by an adult. How
could this have went beyond plaintiff's "reasonable
expectations?"
Darner Motor Sales, Inc. v. Universal Underwriters Ins. Co.
An insurance contract is essentially an adhesion contract, which
Restatement (Second) of Contracts § 211 covers nicely.
Halbman v. Lemke, Supreme Court of Wisconsin, 1980, 99
Wis.2d 241, 298 N.W.2d 562
Lemke sold a car to Halbman for $1250, with Halbman paying
$1000 and the title to be transferred after the balance was paid.
At $1100, a connecting rod broke. Halbman took the car to a
garage where the bill was $637.40, which Halbman did not pay.
Lemke sent the title to Halbman, who returned it to Lemke and
disaffirmed the contract. Lemke had the card towed to
Halbman's father's residence, where it was vandalized. Is a
minor who has entered into a contract for something that is not
a necessity, having disaffirmed the contract and returned the
property, liable for damage to the property? Held No. Absent
any misrepresentation of age of the minor or other fraud, the
minor is allowed to disaffirm a contract as long as the property
is returned. To do otherwise would force Halbman to return
more than is in his possession. This doctrine of incapacity or
"infant doctrine" is to keep adults from cheating minors.
Webster Street Partnership v. Sheridan, 220 Neb. 9, 368 N.W.2d
439 (1985)
Two minors rented an apartment then disaffirmed their lease
and asked for their $500 back. The landlord sued for an
additional $630 for accrued rent and expenses. Held A minor,
upon disavowing a contract for a non-necessity, must be
refunded the amount paid. Here the apartment is not a
necessity, as the minors had a home with their parents in which
to live.
Faber v. Sweet Style Mfg. Corp., Supreme Court of New York,
Trial Term, 1963, 40 Misc.2d 212, 242 N.Y.S.2d 763
A manic-depressive plaintiff decided he was going to build a
discount drug store and merchandise mart, so he quickly
purchased land, secured an employee, hired an architect, hired
laborers to begin digging, and secured State Department Labor
approval. He went back to his psychiatrist saying his wife was
keeping him from doing what he wanted to do. The contract for
land was signed on 28 September, and the plaintiff was placed
in a mental institution on 8 October. Later plaintiff wanted to
rescind contract. Can a manic-depressive rescind a contract for
lack of competence? HeldYes, if the status quo can be restored.
Originally competence to contract referred simply to
understanding, but "[i]incompetence to contract also exists
when a contract is entered into under the compulsion of a
mental disease or disorder but for which the contract would not
have been made." This is determined by 1) testimony of the
claimed incompetent, 2) testimony of psychiatrists, and 3)
behavior of the claimed incompetent in the testimony of others.
Here the plaintiff's actions to quickly secure the property and
begin work were abnormal.
Ortelere v. Teachers' Retirement Bd., 25 N.Y.2d 196, 303 N.Y.S.2d
362, 250 N.E.2d 460 (1969)
Grace Ortelere was on leave from school because of a nervous
breakdown. She was diagnosed with involutional melancholia,
which made it hard for her to make decisions. She soon died of
cerebral arteriosclerosis. She elected during this time to have
her retirement benefits paid to her without option, giving her a
high monthly pay with no pay after her death. Her husband, who
had quit his job to come care for her, then had no income after
her death, and sued for invalidation of the retirement contract
based upon her incompetance. Held The involutional
melancholia is sufficient incompetence to void the contract.
Tests for incompetence based solely on cognition are old, 19th
Century tests that based upon outdated psychiatry and ignore
modern recognition of other forms of mental problems.
The Faber rule should be followed. The Board knew of the
mental problems, because she was on leave for a nervous
breakdown and her decision was irrational. Dissent A bright
line test of "capacity to understand the nature and
consequences of the transaction" may ignore those whose
condition prevent them from exercising discipline, but is
outweighed by preventing frivolous claims. Her choice could
have been rational by providing income to support the family.
Farnum v. Silvano, 27 Mass.App.Ct. 536, 540 N.E.2d 202 (1989)
Viola Farnum at 94, in a temporary state of lucidity, sold her
house to her 27-year-old landscaper for half its value. At other
times she was confused and incoherent. Is temporary lucidity
enough competence to make a contract? Held No. While a will
can be made during a lucid interval, capacity to contract
requires more than simply a comprehension of what's going on:
it requres an ability to understand the "nature and quality" of the
transaction by understanding the context and implications of the
decision. As the landscaper was aware of her incompetence,
the contract is voidable.
Odorizzi v. Bloomfield School Dist., California District Court of
Appeal, 1966, 246 Cal.App.2d 123, 54 Cal.Rptr. 533
Plaintiff was arrested on criminal charges of homosexuality.
After being arrested, booked, questioned, released, and without
sleep for 40 hours, the District superintendent and principal
came to his home and said that he should immediately resign
without time to consult an attorney or the District would suspend
him and publicize the proceedings. Criminal charges were later
dropped, so Odorizzi sued to get his position back. Was there
duress or menace? Held No, the school representatives were
acting within their legal bounds under the Education Code. Was
there constructive fraud? HeldNo, there was no special
confidential relationship beyond employer/employee that would
show reliance on the opinions of another. Was there undue
influence? Held Maybe. Undue influence takes unfair
advantage of another's weekness of mind, necessities, or
distress; or an application of excessive strength by a dominant
subject against a servient object. The weaknessess do not have
to be longlasting or wholly incapacitating, but may be a lack of
full vigor. The jury could determine that plaintiff was
incapacitated from excercising judgment by exhaution and
emotional turmoil. Hints of overpersuasion are 1) discussion of
transaction at an inappropriate time, 2) consummation of
transaction in an unusual place, 3) demand that business be
finished immediately, 4) extreme emphasis on consequences of
delay, 5) use of multiple persuaders, 6) absence of third-party
advisors, and 7) statements that there is no time to consult
advisors.
Von Hake v. Thomas, 705 P.2d 766 (Utah 1985)
Von Hake was 82 years old when his ranch he had owned for
40 years was going to be sold through foreclosure. Thomas
persuaded Von Hake that he wanted to help save the ranch. Is
there constructive fraud if Von Hake acts on the advice of
Thomas? Held No. Without some special confidential
relationship in which one completely takes over the will of
someone else, there is only "garden variety" fraud.
Austin Instrument, Inc. v. Loral Corp., Court of Appeals of New
York, 1971, 29 N.Y.2d 124, 324 N.Y.S.2d 22, 272 N.E.2d 533
The Navy contracted with Loral for $6 million for production of
radar sets, so Loral subcontracted to Austin for parts. Loral was
awarded another Navy contract and solicited more bids, and
selected Austin for some of the 40 parts. Austin then said that,
unless Loral would accept increased prices for the first
subcontract and assign all 40 parts to Austin for the second
subcontract, it would cease production. Loral checked all its
other suppliers and no one could even start supplying in time,
and the Navy's contract had all sorts of sanctions for late
delivery, so Loral agreed. Three days after the last shipment
from Austin, Loral filed an action to recoup the raised prices on
a theory of duress. Held This is a classic case of duress. Loral
couldn't renounce the Austin contract because it needed the
parts for the Navy contract, and couldn't get them elsewhere. It
was justified in waiting to file suit because of the likelihood that
Austin would again cease production. Dissent The Appelate
division already determined that there was no damage to Loral,
so this court should not change that factual decision. Loral also
should have checked other suppliers in addition to the ones with
which it was familiar.
Smithwick v. Whitley, 152 N.C. 369, 67 S.E. 913 (1910)
Plaintiff purchased ~14 acres from defendant at $35/acre. After
three years of working the land, defendant said that the deal
was off unless plaintiff paid $50/acre. To keep from losing the
land, plaintiff paid the new price, got the deed, and then sued
for the difference in price on a theory of duress.Held There was
no duress. Duress only occurs when an unlawful act has
deprived another of free will. The plaintiff should have sued in
equity for performance of the contract rather than paying the
higher price.
Wolf v. Marlton Corp., 57 N.J.Super. 278, 154 A.2d 625 (1959)
Husband and wife Wolf bought from Marlton a parcel of land in
a subdivision, paying a downpayment. After running into
marriage difficulties, Mr. Wolf tried to back out and wanted all
his money back. When Marlton refused, Wolf threatened to go
through with the deal and sell the property to someone
undesirable, but Marlton refused to even let Wolf to go through
with the deal. Was Marlton's refusal to go through with the deal
a breach of contract?Held Not with the duress of Wolf. Wolf's
statements were duress, not because of their nature, but
because of the malicious motives and the state of mind induced
by the threats.
Alaska Packers' Ass'n v. Domenico, United States Court of
Appeals, Ninth Circuit, 1902, 117 F. 99
A group of fishers contracted to work on a ship for the season,
some for $50 and some for $60 (plus more for each fish caught).
Out at sea, they got together and demanded $100 or they would
stop working and return to San Francisco. As the company had
invested a lot of money into the enterprise, the superintendent
signed a new contract with them, while stating that he had no
authority to do so. Is there valid consideration for a new contract
with a higher price for work someone is already obligated to do,
if the contract is made in the presence of necessity? Held No.
One cannot introduce consideration by one's own wrong of
refusing to perform on a contract. The new contract cannot be
legally enforced, even if the party requesting better terms relied
on the new contract, because that would allow that party to
profit from breach of the first contract.
Schwartzreich v. Bauman-Basch, Inc., 231 N.Y. 196, 131 N.E. 887
(1921)
Schwartzreich was a coat designer for Bauman making
$90/week. Schwartzreich got an offer for $110/week and told
Bauman, who said that he would raise his pay to $100/week if
he would stay, because he had to get a sample line on the road
soon. They tore up the old contract and made a new one.
Bauman later discharged Schwartzreich, who sued. Is the
second contract enforceable? Held Yes. Two parties can
mutually rescind a contract and make another one, even at the
same time. Once the first contract is rescinded, their mutual
promises provide consideration for the second contract. [Later
decisions have upheld the result but not the reasoning, deciding
that recinding and creating a new contract cannot occur at the
same time if the second has better terms to one party, because
that raises doubt as to the mutuality of the rescinsion, and the
rescinsion of the first and the creation of the second circularly
rely on each other.]
Brian Constr. & Dev. Co. v. Brighenti, Supreme Court of
Connecticut, 1978, 176 Conn. 162, 405 A.2d 72
Plaintiff entered into a contract with defendant to excavate a site,
but upon digging found the remains of a basement of an old
factory that no one had known about. The contract stipulated
that any extra work would have to be authorized by a written
modification. Defendant stopped work until plaintiff orally
promised to pay for the additional work. After removing the
rubble from the factory, plaintiff refused to sign a written
amendment, so defendant stopped work. Is the new agreement
a valid contract? Held Yes. A modification of a contract is valid
if some unforeseen, burdensome condition is discovered during
the performance of the original contract. For unforeseen
circumstances, it matters not whether there is a requirement in
the original contract that additions must be in writing.
Linz v. Schuck, 106 Md. 220, 67 A. 286 (1907)
Contractor started excavation for owner and found an
unforeseen swamp-like condition under the ground. Both
parties agreed the work should be done for more money, and
the contractor then completed the work. Held If there are
unforeseen circumstances, the two parties may agree to a
higher price; requiring explicitly rescinding the old contract
would be a useless technicality.
Schaefer v. Brunswick Laundry, Inc., 116 N.J.L. 268, 183 A. 175
(1936)
Brunswick contracted with D'Elia to build a power plant, who
subcontracted with Schaefer to install steel. Schaefer's
employees went on strike for a while, and Brunswick promised
to pay for the equipment rental during that period. Can a
third-party employee of a subcontractor's employee be held to
an agreement based upon a pre-existing duty? Held No,
Brunswick is not bound to the agreement to pay equipment
rentals. While Brunswick was not a part of the actual agreement
between general and subcontractor, it's not as if it was wholly
independent, as the subcontract was part of the entire job.
Joseph Lande & Son, Inc. v. Wellsco Realty, 131 N.J.L. 191, 34
A.2d 418 (1943)
Plaintiff Lande contracted with a general contractor to install
heating units for a Wellsco. After the general contractor
breached, Wellsco asked plaintiff to install the rest of the
heaters. Held The subcontractor, after the general contractor's
breach, was under no obligation to finish, and its benefits to
Wellsco was sufficient consideration. Performance of a duty
owed to a third party can be consideration—this is a minority
view, but it is gaining popularity.
McDevitt v. Stokes, 174 Ky. 515, 192 S.W. 681 (1917)
Stokes was employed by Shaw to drive horse Grace. Shaw
promised Stokes $1,000 to drive Grade in the Kentucky Futurity
and win, and he did. Shaw only paid Stokes $200. Held Shaw
doesn't owe Stokes anything more. Stokes was already under
an obligation by employment to drive Grace and try to win—if
he would have not, he would have not been doing his job.
Universal Builders v. Moon Motor Lodge, Supreme Court of
Pennsylvania, 1968, 430 Pa. 550, 244 A.2d 10
Moon hired Universal to build a motel and restaurant, and the
contract specified that modification must be in a written, signed
change order. When the masonry contractor's work wasn't good
enough, Moon threatened to get rid of Universal, and induced
Universal to accept a supplemental agreement in which
Universal would pay Moon for damages and do extra work for
Moon at no extra cost. [Somewhere here there must have ben a
promise by Moon to pay Universal for the extra work.] Held The
agreement for Moon to pay Universal must be upheld, even
though it wasn't written. A condition is waived when enforcing it
would approach fraud. An owner cannot request a builder to do
work, stand by and watch it be done, and then claim nothing is
owed because the change order was not in writing.
Nassau Trust Co. v. Montrose Concrete Prod. Corp., 56 N.Y.2d
175, 451 N.Y.S.2d 663, 436 N.E.2d 1265 (1982)
There is a difference between orally modifying a contract, which
requires consideration unless legislation allows it with writing,
and orally waiving a right to require certain performance of the
other party. A waiver can be withdrawn.
Cole Taylor Bank v. Truck Insurance Exchange, 51 F.3d 736 (7th
Cir. 1995)
A waiver, which is an intentional relinquishing of a right, can be
implied. A waiver has a low standard of proof, although courts
don't agree on what that standard is, but it is lower than
modification of the contract and usually lower than estoppel.
Quigley v. Wilson, 474 N.W.2d 277 (Iowa Ct.App.1991)
Quigley sold a farm to the Wilsons, but when they could not
make the payments they wrote up another contract that
reduced the overall price and the yearly payments. After
Quigley was placed in a nursing home, his children as
"co-conservators" sued the Wilsons on the original contract,
saying the modifications did not have the needed consideration.
Were the changes modifications or a waiver? Held The
changes are modfications. They cannot be looked at as simply
a waiver of interest payments or even of price, because even
payment schedules were changed. Is consideration needed fo
the changes to be valid? Held No, because the drastic fall in
land prices and the seller's tax concerns constituted unforeseen
circumstances under Restatement (Second) § 89.
Hackley v. Headley, Supreme Court of Michigan, 1881, 45 Mich.
569, 8 N.W. 511
Hackley hired Headley to cut logs and take them to the river.
When it came time for Hackley to pay Headley ~$6000, Hackley
disputed the measurement standard used and said he would
only pay Headley $4000. Headley would have been financially
ruined had he not taken the money, so he said he would sue
Hackley but took the money and gave Hackley a receipt. Has
duress occurred if the leverage of the compromise depends on
the paricular circumstances of the plaintiff? Held No. Duress is
when "one by the unlawful act of another is induced to make a
contract or perform some act under circumstances which
deprive him of the exercise of free will." duress is determined
solely by the actions of the defendant. Here Hackley had
nothing to do with Headley's dire financial condition, and not
paying the full amount on time would have not been duress had
Headley been financially well off. (It's not duress if the one
doing the threatening has a right to perform the action.)
[Headley sued again and won, saying instead of duress that
Hackley tried to pay less than he knew he owed.]
Capps v. Georgia Pacific Corp., 253 Or. 248, 453 P.2d 935 (1969)
Plaintiff found a lessee for defendant's land and was owed
~$150,000 (5% of the lease price). Defendant only paid plaintiff
$5,000 and, since the plaintiff would have received nothing,
gave a receipt for the $5,000. Held Duress exists when a threat
depends on the financial condition of the plaintiff, reversing the
holding in Hackley v. Headley. Concur If one party induces
another to make a deal based upon the other party's dire
financial conditions, many business transactions might be
subject to a charge of duress. It would be better to simply say
that a receipt for a payment less than what it's acknowledged is
owed is invalid without consideration.
Marton Remodeling v. Jensen, Supreme Court of Utah, 1985, 706
P.2d 607
Jenson hired Marton to remodel his house on a "time and
materials" basis. Jensen claimed the resulting total of ~$6500
was too expensive and sent a $5000 check with "...full and final
satisfaction of ... claims ..." written on it. Marton responded that
the amount was not enough, but then wrote "not full payment"
below and cashed the check. Held The check was an accord
and satisfaction as it was noted "paid in full" and covered a
single, unliquidated claim that was a bona fide
dispute. Held One cannot get around an accord and
satisfaction by writing "not full payment" on the check, because
the law favors an accord and satisfaction as a means of
compromise and if a creditor can reserve rights on an accord
and satisfaction, it would decrease its utility.
School Lines, Inc. v. Barcomb Motor Sales, 146 Vt. 336, 503 A.2d
131 (1985)
Defendant agreed to pay plaintiff ~$16,500 for two bus bodies
and issued a check, but then became irritated with difficulties in
the deal, stopped payment on the check, and issued a new
check for ~$15,000 on which was written "payment in full."
Plaintiff wrote "accepted as partial payment" on the check and
cashed it. Held There was no bona fide dispute over the price
owed, so cashing a check for a smaller amount still allows the
creditor to maintain an action for the balance.
Kilander v. Blickle Co., 280 Or. 425, 571 P.2d 503 (1977)
A tendered "final payment" of a lesser amount doesn't need to
have consideration to be an accord and satisfaction. If the UCC
1-207 applies, a creditor may have the option to collect the
amount "under protest" until the other party requires the first to
waive that option. [In 1995 the ALI amended UCC 1-207 to
explicitly not apply to an accord and satisfaction.]
Wollums v. Horsley, Court of Appeals of Kentucky, 1892, 93 Ky.
582, 20 S.W. 781
John Wollums was a poor, uneducated mountain farmer. W. J.
Horsley was a big-time business man who sent his agent
(paying him $80) to purchase oil, gas, and mineral rights of
Wollums' land for 40 cents per acre. The agent assured
Wollums he would not be bothered by the contract within his
lifetime, even though Horsley knew a railroad would be built
near there soon. Horsley demanded a deed, but Wollums
wouldn't give it, so Horsley sued for specific
performance. Held Specific performance cannot be granted
unless the contract was just and fair in all respects, and all
material facts must be known by both parties. The party moving
for specific performance has a higher burden than the one
resisting. In this case, the contract is a "harsh bargain" because
Horsley knew of land prices in the area and about the railroad,
while Wollums did not.
Kleinberg v. Ratett, 252 N.Y. 236, 169 N.E. 289 (1929)
After paying $2000 down on a piece of land warranted to be
"free of all encumbrances," plaintiffs discovered that a stream of
water went four feet undergound inside a 24-inch pipe, with
open streams some distance from the land going in and going
out. Should plaintiffs have restitution of the $2000? Held No,
there was no fraud involved. Should defendant be granted
specific performance? Held No, because plaintiff did not know
about the water when they signed the contract. [So what should
happen?]
Seymour v. Delancy, 3 Cow. (N.Y.) 445 (1824)
Ellison was to convey to Seymour two farms in exchange for
one third ownership in some lots (of which Ellison already
owned two thirds). The value of the two farms were ~$12,500
according to some and $5,000-$6,000 according to others. Is
specific performance appropriate? Held Yes, because the
value to Ellison of getting the rest of ownership in the lots might
have been more than the monetary value of those
portions. Dissent The weight of evidence shows a disparity in
value, and if that disparity constitutes fraud by shocking the
conscience, specific performance cannot be granted because it
doesn't take into account individual circumstances of the
parties.
Marks v. Gates, 154 F. 481 (9th Cir. 1907)
A perfectly legal agreement under seal said that Gates would
convey to Marks 20% of all property acquired in Alaska. Marks
gave Gates $1 consideration (although Marks later said that he
had given gates $1000 cash and cancelled ~$11,000 worth of
debt), and Gates later wound up with about $750,000 in mining
claims. Held Specific performance should be denied. Although
equity usually doesn't look at the adequacy of consideration
when enforcing specific performance, in this case 1) the
consideration was grossly inadequate, and 2) Gates wasn't
obligated to go to Alaska and neither party knew the nature of
the property that might be affected, so the deal was made "in
the dark."
Waters v. Min Ltd., Supreme Judicial Court of Massachusetts,
1992, 412 Mass. 64, 587 N.E.2d 231
Plaintiff was injured when she was 12 years old, and she
recieved a settlement with which she bought an annuity
contract. She met defendant Beauchemin, who introduced her
to drugs and became romantically involved with her. He
convinced her to sell the contract, worth $189,000 in cash or
$694,000 at term, for only $50,000 to defendants Min Ltd., who
then forgave Beauchemin's debt. Plaintiff was not represented
by legal counsel, although defendants were. Held The sale was
unconscionable, and defendants must repay the annuity with
$18,000 interest. Traditionally, unconscionability meant "such
as no man in his senses and not under delusion would make on
the one hand, and as no honest and fair man would accept on
the other." Later it was restated as when "the sum total of its
provisions drives too hard a bargain for a court of conscience to
assist." Unconscionability is decided on a case-by-case basis,
taking into account oppression, unfair surprise, gross disparity
in consideration, high pressure sales tactics, and
misrepresentation. Here defendant introduced plaintiff to drugs,
exhausted her credit cards, initiated negotations, was an agent
to the negotiations, and profited from the result. Plaintiff, unlike
defendants, wasn't represented by legal counsel. The payment
was one fourth the present worth of the annuity.
Williams v. Walker-Thommas Furniture Co., 350 F.2d 445
(D.C.Cir.1965)
From 1957-1962 defendant Williams purchased household
items from plaintiff on an installment basis, with an "add-on"
clause in the contract that until all the sum total of all items were
paid for, the plaintiff could repossess all goods previously
purchased. Williams purchased a stereo for ~$500, already
owing $164 on a prior purchase, and when she defaulted
plaintiff tried to repossess all items she had purchased since
1957. Defendant had never had the contract explained to her,
and many times had signed the contract without being given a
copy. Held The contract was unconscionable. The court can
find purchases unconscionable (both under common law and
under the UCC § 2-302) if there is 1) a lack of meaningful
choice on the part of one party and 2) contract terms that are
unreasonably favorable to the other party. Reasonableness and
fairness are determined in light of the circumstances existing
when the contract was made.
Smith v. Price's Creameries, Supreme Court of New Mexico, 1982,
98 N.M. 541, 650 P.2d 825
The Smiths signed a distributor agreement with Price's.
Although the Smiths maintain that during negotiations it was
understood that the arrangement would go on as long as they
performed satisfactorily, the contract allowed for termination for
any reason upon 30 days' notice, followed by two years of
non-competition. After about seven months, Price's gave a
thirty-day notice of termination. Is the termination clause
unconscionable and void as a matter of law? Held No, Mr.
Smith had an opportunity to read the contract (the law assumes
he read it, because he signed it), he was an educated man, and
the text was clear. Just because a contract is a hard bargain
doesn't make it unconscionable, if it was negotiated at arm's
length and there is no affirmative showing of mistake, fraud, or
illegality. Did Price's breach its obligation of good faith by
terminating the contract? Held No, Price's didn't breach its
obligation of good faith regardless of its reasons for termination
of the agreement, because the contract, which was negotiated
and signed in good faith, allowed Price's to terminate the
agreement for any reason.
Tymshare, Inc. v. Covell, 727 F.2d 1145 (D.C.Cir.1984)
The doctrine of good faith performance is really no different
than the principle promoted by Judge Cardozo in Wood v. Lucy,
Lady Duff-Gordon: a contract may imply certain duties. "Good
faith" is distinct from removing clauses that cannot be upheld by
law (such as damage liquidation clauses that amount to
penalties), which may have been created in perfectly good faith.
Gianni Sport Ltd. v. Gantos, Inc., Court of Appeals of Michigan,
1986, 151 MichApp. 598, 391 N.W.2d 760
Defendant, a Michegan clothing retailer, signed a contract with
a New York manufacturer and distributor of women's clothing.
The contract had a clause allowing the defendant to cancel any
unshipped or untimely orders for any reason. In June
defendants placed an order to be shipped in October, and then
canceled in late September. Plaintiffs negotiated to sell the
canceled goods at 50% off, but then sued defendant. Held The
termination clause was unconsionable because of 1) the
parties' unequal bargaining power ande 2) the
unreasonableness of the clause. Did the parties have equal
bargaining power? Held No; this holiday order was ~20% of
plaintiff's entire business that year, and defendant's sales were
20 times that of the plaintiff. Was the clause
unreasonable? Held No. Although in many situations a
canceled order could be set aside and sold to another customer,
in the fast-moving women's clothing industry either a canceled
order would have to be absorbed by the plaintiff or the plaintiff
would have to negotiate with the defendant to sell the goods at
a much lower price.
Martin v. Joseph Harris Co., 767 F.2d 296 (6th Cir. 1985)
A seed seller sold seeds to a farmer, and the contract limited
warranty for specific diseases. Held The limitation of remedy
and warranty disclaimer clauses are unconscionable because
the gross disparity of knowledge between the parties and
technical language of the clauses, which the farmer didn't have
the power to modify, effectively removed the "fundamental
principle of freedom of contract" and shifted the risk of loss from
diseased seeds to the party least able to discover the problems.
Jackson v. Seymour, Supreme Court of Appeals of Virginia, 1952,
193 Va. 735, 71 S.E.2d 181
Someone came and looked at Lucy Jackson's 31 acres of land
and they discussed $275 for it, but the didn't strike a deal. Later
Jackson needed money, so she went to her next-door brother,
to whom she was close, and he bought the land, which she had
never seen, for $275. Later he found out it had a lot of timber on
it, of which he cut and sold about 148,055 feet of lumber worth
about $20 per 1,000 feet. Held The contract should be
rescinded because of constructive fraud. There was inadequate
consideration, a confidential relationship of the parties (not at
arm's length), the vendor was in pecuniary distress, and there
was a mutual mistake. The law therefore declares the contract
fraudulent because of its deception, without any moral guilt of
the fraud feasor. If there had been intent to defraud, there would
have been actual fraud. Inadequacy of consideration in itself is
not enough—it's important that the two were not dealing at
arm's length.
Sherwood v. Walker, Supreme Court of Michigan, 1887, 66 Mich.
568, 33 N.W. 919
Plaintiff purchased a cow at a beef price of $80 that the
defendant thought was was barren and would not breed, and
that plaintiff thought was barren but thought it might be able to
breed. Defendant later found out the cow was pregnant, which
would make it worth at least $750, and refused to deliver the
cow. Held Morse: A defendant should be able to rescind a
contract if the cow was sold on the understanding of both
parties that it was barren and useless for breeding and it turns
out it was not, because whether the cow is breedable or not
goes to the whole substance of the agreement—it is not just a
difference of some quality of the object. Even though the
identify of the cow is not in question, "A barren cow is
substantially a different creature than a breeding
one." Dissent Sherwood: This wasn't a mutual mistake—both
parties were in the dark on one attribute: whether the cow would
breed. The plaintiff thought that it would, and defendant thought
that it wouldn't and the plaintiff shouldn't be penalized just
because it turned out he was right.
Aluminum Co. Of America v. Essex Group, 499 F.Supp. 53
(W.D.Pa.1980)
A contract can be rescinded even if the other party is indifferent
to the effects of a mutual mistake.
Beachcomber Coins, Inc. v. Boskett, 166 N.J.Super. 442, 400
A.2d 78 (1979)
Plaintiff, a retail dealer in coins, purchased a coin from
defendant, a part-time coin dealer, for $500. Defendant had
purchased the coin for $450, and both thought the coin to be
genuine. After the purchse, plaintiff found the coin to be a
counterfeit. Held The contract can be rescinded because of a
mutual mistake regarding an "essential fact." Restatement §
502 says that contracts can't be rescinded simply because both
were in doubt regarding a fact, but in this case both parties
mistakenly believed the coin to be genuine. Held The fact that
plaintiff negligently failed to discover the mistake initially does
not preclude recission, because the parties can be returned to
the status quo.
Lenawee County Bd. of Health v. Messerly, 417 Mich. 17, 331
N.W.2d 203 (1982)
Plaintiff bought an apartment for $25,500 believing it could be
used for rental income, but soon after the sale health authorities
condemned the building because of sewage problems and
enjoined habitation, giving the property a negative
value. Held There is a better formula than the distinction
between "running to value" and "touching the substance of the
consideration" as found in Sherwood v. Walker: whether a
mistaken belief relates to a basic assumption of the parties
upon which the contract is made and materially affects the
agreed performance, but not relieving a party who has assumed
the risk of loss in connection with the mistake.
Smith v. Zimbalist, 2 Cal.App.2d 324, 38 P.2d 170 (1934)
Zimbalist, a famous violinist, visited the house of Smith, a
collector of rare violins, and found what Zimbalist described to
be a "Stradivarius" and a "Guarnerius." Smith said he would
take $8,000 for both. They turned out to be cheap
imitations. Held The contract stands because both parties were
mistaken as to the "identify of the subject matter", and Zimbalist
is the one who labeled the violins in the first place.
Gartner v. Eikill, 319 N.W.2d 397 (Minn.1982)
Held The contract can be rescinded because each party
thought the property valuable for commercial use. Even though
the purchaser could have went to City Hall and checked on
zoning, he wasn't negligent because he reasonably relied on
the representation of the seller.
Elsinore Union Elementary School Dist. v. Kastorff, Supreme
Court of California, 1960, 54 Cal.2d 380, 6 Cal.Rptr. 1, 353 P.2d
713
Defendant contrator was getting ready to submit his bid to the
plaintiff school at the last minute when a lower plumbing bid
came in. Defendant had made a sheet with a column on the left
for subcontract bids and a column on the right carrying over the
accepted ones to total. Erroneously thinking the right column
already including a plumbing bid, he subtracted the difference
between plumbing prices. The total therefore included no
allowance for plumbing. The school accepted his bid, the lowest,
and asked if it was correct; he conferred with his clerk in the hall
and reported that it was. The day after his bid was accepted,
defendant informed the school board of the mistake, but it voted
to hold him to the amount. Held The contract may be rescinded
because of a clerical error. The amount given without plumbing
costs was unintended by the the defendant and unexpected by
the plaintiff, as the plaintiff expected the bid to include
plumbing. Held The defendant's error was not through
negligence, even though he conferred in the hall and replied
that that the figure was correct, because he had not yet had
time to go examine his paperwork.
S.T.S. Transport Serv., Inc. v. Volvo White Truck Corp., 766 F.2d
1089 (7th Cir.1985)
Usually the courts allow recission for clerical or mathematical
errors appearing under reasonable care, because they are
difficult to prevent and no social purpose or incentive is effected
by enforcing such terms.
White v. Berrenda Mesa Water Dist., 7 Cal.App.3d 894, 87
Cal.Rptr. 338 (1970)
White gave a bid of $427,890 for constructing a flood control
reserve after making test drills and finding 10% hard rock.
However, the entire area to be excavated extended well beyond
that limited area and was composed of almost 50% hard rock.
The next lowest bid was for $721,851. Held White's error, a
negligent mix of fact and judgment, should allow his bid to be
cancelled. The system should not allow bids to be withdrawn
lightly, but the court should prevent abuses.
Hinson v. Jefferson, Supreme Court of North Carolina, 1975, 287
N.C. 422, 215 S.E.2d 102
Plaintiff purchased land 200 feet by 300 feet, and both parties
understood the purpose of the purpose was to construct a
residence there, as the deed gave restrictions on the type of
residence. Before construction health officials discovered that
the area was subject to flooding and denied plaintiff a deed for a
septic system, making the property worthless for the intended
use. Held A contract can be rescinded through break of implied
warranty when the object in question is not fit for the intended
purpose, and that shortcoming was not known by either party
and could not have been discovered through a reasonable
inspection. This is an exception to caveat emptor. Although
previous mutual mistake cases were really "embryo implied
warranty cases," the circumstances go beyond a mere mistake
to address the implied usability of the object for some purpose.
Cook v. Salishan Properties, Inc., 279 Or. 333, 569 P.2d 1033
(1977)
The plaintiff had purchased a long-term lease only to find the
land suffered from soil erosion. Held Unlike the reasoning
in Hinson v. Jefferson, raw land does not have a breach of
implied warranty when neither party is at fault and the land
could have been inspected before the purchase—otherwise, it
would without reason punish the seller. The purchaser's
necessary reliance on the seller is not as great as with a
purchase of a home.
Johnson v. Healy, Supreme Court of Connecticut, 1978, 176
Conn. 97, 405 A.2d 54
The plaintiff bought a one-family house from its builder, who
said that "there was nothing wrong with it." Over the next few
years, damages was done to the sewage system because the
foundation was unstable. This unstability dated back to an
improper fill placed there before the defendant purchased the
lot. Held A defendant is liabile even for an innocent
misrepresentation, extending the developing warranty liability
and consistent with the trend of limiting caveat
emptor. Held The damages should be the cost of the repairs.
Cushman v. Kirby, Supreme Court of Vermont, 1987, 148 Vt. 571,
536 A.2d 550
The Cushmans bought a house from the Kirbys. At the second
time they looked at the house, they saw a water treatment
system in the basement and asked about the water. Mrs. Kirby
said that the water was fine, just a little hard. Mr. Kirby was
silent. It turns out the water was sulphur water (different from
hard water, which contains calcium but doesn't smell or taste
bad), which smelled and tasted terrible. Treatment would only
bring it to a tolerable level of drinking, so the Cushmans paid
$5,000 to be connected to city water. Held Mrs. Kirby made a
fraudulent misrepresentation because she gave the impression
that she had made a full disclosure when she did not. Held Mr.
Kirby made a fraudulent misrepresentation because he was
silent when Mrs. Kirby spoke her misrepresentation, and he has
a seller had a duty to the buyers. Held The jury is allowed to
assign damages for the price of hooking up to city water, as the
remedy for fraudulent misrepresentation is the amount that
would be needed to bring the plaintiff to the level they expected
had there been no fraud.
Eytan v. Back, 374 A.2d 879 (D.C.App.1977)
Plaintiffs went into a shop and paid $50 for each of three
paintings they thought looked old. They turned out not to be
original 19th century paintings, but reproductions placed in old
frames. Held The shopkeeper had no legal duty to tell them the
paintings were reproductions, because the low price should
have put them on notice of that fact.
Taylor v. Caldwell, King's Bench, 1863, 3 Best & S. 826
Plaintiffs contracted to have use of The Surrey Gardens and
Music Hall for four days for giving four grand concerts. After the
contract but before the specified dates, the music hall burned
down through no fault of either party. Held The defendant is
excused from performance, because the contract contained an
implicit condition of the continued existence of the concert halls,
and defendants performance thereafter became impossible by
the music hall being destroyed.
Roberts v. Lynn Ice Co., 187 Mass. 402, 73 N.E. 523 (1905)
Plaintiff Robert made a contract with defendant to allow use of
his ice house for over three years, but the ice house burned
down before the term was finished. Robert sued for the
remaining rents. Held The defendant owes the rents because
the agreement was a lease, making Lynn effective owner even
to the exclusion of Roberts. If the agreement had merely been a
license, defendant would not owe for the nonexistent ice house.
Harrison v. Conlan, 92 Mass. 85 (1865)
Plaintiff had contracted with a priest to play the organ, and the
priest died and the church closed. Plaintiff sued for the entire
$50. Held The contract effectively ended at the priest's death
because the priest directed the worship services, making the
organist's services dependant on the priest.
Tompkins v. Dudley, Court of Appeals of New York, 1862, 25 N.Y.
272
Plaintiff trustees of a school district sued Chambers, who had
promised to build a school house, for the money they had
advanced him. Chambers had promised to have the building
finished by 1 October 1857, but by then he had about $60 worth
of work left, including some painting and some window hanging.
On 5 October 1857 the schoolhouse burned down, before
acceptance by the plaintiffs and before delivery of the
key. Held The plaintiff is liable for the structure. When someone
contracts to perform, they are not liable if an unforeseeable
catastrophe makes performance impossible, unless, as is here,
they unconditionally agree to perform by a certain date. The
liability should lie on the person who had taken responsibility for
it. [But wasn't the contract breached on 1 October, and
therefore the contract was over and the defendant owed the
school district $60?]
Garman v. Hoover, 95 Pa.Super. 203 (1928)
Plaintiffs agreed to build a house for defendants for $8,300, and
the partially completed house burned down after $5,600 in
progress payments had been made. Defendants had an
insurance policy for $8,000 on the house and collected
$5,609.10. Plaintiffs spent $7,968.59 building another house,
and sued for the contract price without deducting the $5,600
progress payments. Held The defendant should deduct the
progress payments, as they were not payments for successive
stages but instead advance payments for the completed
house. Held The plaintiff doesn't get any of the insurance
proceeds—if the plaintiff wanted insurance proceeds, the
plaintiff could have taken out insurance.
Carroll v. Bowersock, Supreme Court of Kansas, 1917, 100 Kan.
270, 164 P. 143
Plaintiff contracted to put in a new reinforced concrete floor in
defendants warehouse. After the plaintiff removed the old floor,
put in concrete footings, built wooden forms for buildling a
concrete support, and installed reinforcing rods, the warehouse
burned down without fault to either party. Held The plaintiff is
due payment for the work according to the contract that
benefitted the defendant—restitution—which includes cutting
the old floor away and the completed concrete footings. The
plaintiff cannot recover parts or labor for construction of the
columns or forms, because these were temporary structures
that did not give a benefit to the defendant. Dissent The
reinforcing rods were part of the building and should be
recovered for, too.
Olsson v. Moore, 590 N.E.2d 160 (Ind.Ct.App. 1992)
The Moores answered an advertisement to buy Olsson's house
and land. They wanted rennovations so, with the Moores'
permission, they did extensive rennovations. They kept
bargaining and, after the sale of the Moores' house closed, the
house burned down. Held The Moores are due the restitution
for the amount of work they put into the house. Although there
was no contract for the work, they worked with the Olssons'
permission and conveyed value to the Olssens; on the day of
the fire, the Olssons still owned the house.
Lincoln Welding Works v. Ramirez, 98 Nev. 342, 647 P.2d 381
(1982)
General contractor defendant for a sewage-lagoon project
subcontracted to the plaintiff for sheet-piling work for $54,000.
The contract obligated the subcontract to bear the risk of the
entire project until accepted by the district. The plaintiff
completed the work and was paid. A month later, but before
aceptance by the district, a flood damaged a large part of the
work, so the defendant asked the plaintiff to fix the problems.
When the defendant asked for $19,000 for the additional work,
the plaintiff claimed that extended work was incorporated into
the original contract. Held The defendant does not have to pay
for the additional work, because it was done as part of the
original contract, under which the plaintiff promised to do all
work to the satisfaction of the owner, contractor, and architect.
United States Fid. & Guar. Co. v. Parsons, 147 Miss. 335, 112 So.
469 (1927)
A fire destroyed an almost-completed house. The contract had
said that the owner must maintain insurance, but the owner did
not. Held The risk of loss is still on the contractor. The fact that
the contract held the owner to maintian insurance is one more
reason to hold the owner contemplated a completed building.
Lucenti v. Cayuga Apartments, Inc., 48 N.Y.2d 530, 423 N.Y.S.2d
886, 399 N.E.2d 918 (1979)
Under the Uniform Risk Act a vendor had contracted to sell land
and two buildings for $108,000. Before title or possession was
transferred, a building was destroyed by fire. The vendor
suggested that the vendee take the proceeds of the vendor's
expected insurance to rebuild, but vendee refused. After the
vendor received $45,000, the vendor attempted to return the
vendee's $1,000 deposit, saying that the vendee had cancelled
the contract.Held There should be specfic performance, and
the vendor owes from the insurance money $20,000 for the
value of the building and $7,500 for the cost of removing its
remains.
Louisville & Nashville R.R. Co. v. Crowe, 156 Ky. 27, 160 S.W. 759
(1913)
Plaintiff gave railway a strip of land through his farm in return for
annual rail passes between Kentucky and Tennessee for the
rest of his life. When the Supreme Court outlawed such passes,
the railroad would only give plaintiff some free trips between
lines and denied further liability. Held The equitable thing to do
would not be to give the land back, because of public interest
reasons, but to require the railroad to pay the plaintiff for the
value of the annual tickets, taking into account the rides the
plaintiff has already taken.
The Isle of Mull, 278 F. 131 (4th Cir.1921)
The Isles Steamship Co., a British corporation, charted the
steamship The Isle of Mull for five years to plaintiff for GBP
1350/month. The British government assumed control of the
steamship for the war, and paid the owner around GBP
2361/month. Is the plaintiff owed the difference? Held No, when
the government took control of the vessel, the contract was
"wholly discharged," and the owner gets the profit just as the
owner would have had to live with any loss.
Kel Kim Corp. v. Central Markets, Inc., Court of Appeals of New
York, 1987, 70 N.Y.2d 900, 524 N.Y.S.2d 384, 519 N.E.2d 295
Plaintiff Kel Kim leased a supermarket from defendants for 10
years with two 5-year renewal options. The contrat said that Kel
Kim would maintain $500,000 single-person insurance and $1
million per-accident insurance. The contract contained a force
majeure clause that excused performance "by reason of labor
disputes, inability to procure materials, failure of utility service,
restrictive governmental laws or regulations, riots, insurrection,
war, adverse weather, war, Acts of God, or other similar causes
beyond the control of such party ...." The insurance carrier gave
Kel Kim notice that it wouldn't renew insurance coverage, and
Kel Kim was unable to find alternate insurance. Defendants
gave notice of default and ordered Kel Kim to vacate the
premises within 30 days. Should Kel Kim be excused from
performance because of impossibility? Held No, impossibility is
a narrow defense regarding the destruction of the object of the
contract. Kel Kim should have made allowance to find
insurance. Should Kel Kim be excused from perforamce
because of force majeure? Held No, force majeure clauses
should be narrowly interpreted, and losing insurance is
substantially different than the kinds day-to-day commercial
operations listed.
Bunge Corp. v. Recker, United States Court of Appeals, Eighth
Circuit, 1975, 519 F.2d 449
Farmer Recker made an agreement, one of a series of
agreements, with the plaintiff for 10,000 bushels of No. 2 yellow
soybeans for $3.35/bushel. The contract was for any soybeans,
as long as they were grown in the continental US. Severe winter
weather struck Missouri, and in January, when the market price
for beans were $4.98, plaintiff visited defendant and saw that
the beans in the field could not be harvested. Plaintiff extended
the deadline until April, at which time the price of beans was up
to $5.50. Held The farmer cannot claim a UCC 2-613 act of
God defense, becuase the contract was for any old beans, not
the particular ones damaged in the field. Held The defendant
might be able to reduce damages by fixing the breach date in
January and using the lower bean market price, claiming that
the plaintiff had extended the due date in bad faith under UCC
2-613, but the defendant would have to raise that defense and it
would have to be tried—the damages cannot be reduced if the
bad faith defense has not been raised and tried.
Snipes Mountain Co. v. Benz Bros. & Co., 162 Wash. 334, 298 P.
714 (1931)
Plaintiff grower contracted to sell 100 tons of potatoes, it being
understood that they were being grown by the grower. Natural
causes caused a small yield, and plaintiff could only deliver 64
tons. The plaintiff sued for payment of the 64 tons, and
defendant counterclaimed for damages for the undelivered 36
tons. Held The plaintiff is excused from producing the 36 tons,
because there was an implied condition in the contract that the
plaintiff would be able to produce all 100 tons. As this was
understood by both parties, the contract can be modified to
specify, "potatoes grown on the followin described premises."
Whitman v. Anglum, 92 Conn. 392, 103 A. 114 (1918)
Plaintiff milk peddler Whitman contracted with Anglum to buy
from Anglum 175 quarts of milk per day. Whitman was to pick
up the milk from Anglum. If Whitman didn't take the milk,
Whitman was to pay ayway. If Anglum didn't produce, Anglum
was to have been liable. Connecticut's commissioner of animals
quarantined Anglum's cattle, and even Anglum himself was not
allowed to leave the farm. The cows were then killed to prevent
the spread of foot and mouth disease. Held Anglum is still liable,
because this was an "absolute and unconditional undertaking"
to deliver milk daily. Even if the contract had Whitman coming to
get the milk, which he couldn't do because of the quarantine,
the delivery could have been performed "substantially if not
literally" by getting milk from elsewhere.
Mineral Park Land Co. v. Howard, 172 Cal. 289, 156 P. 458 (1916)
Defendants were building a bridge across a ravine for public
authorities, and contracted with plaintiff to haul all the gravel
and earth needed for the bridge from plaintiff's land in the ravine.
After defendants had removed about half the quantity they
needed, they procured the other half from another supplier
because the rest lay below water level and would have cost 10
to 12 times the normal cost to get it out. Held The defendant is
excused from performing because of impossibility, which is the
same as "not practicable" here. Impossibility can apply to a
substantially unexpected cost, but not performance that would
simply be more expensive than anticipated or would entail a
loss.
American Trading & Prod. Corp. v. Shell Int'l Marine, Ltd., United
States Court of Appeals, Second Circuit, 1972, 453 F.2d 939
Defendant Shell charted an American Trading vessel to
transport cargo from Texas to India for ~$400,000, which was
calculated based on the American Tanker Rate Schedule
(ATRS) for transport through the Suez Canal. Because of war
the Suez Canal was closed, forcing the vessel to navigate the
Cape of Good Hope, arriving in India 30 days late and taking a
trip twice as many miles. American Trading sued defendant for
an extra ~$130,000. Held The closing of the Suez Canal does
not provide an excuse of impossibility, because the contract did
not stipulate an exclusive route, and the price calculation at
most indicated that the Suez Canal was the most probable
route. Held There is no excuse of commercial impractibility
(Restatement of Contracts § 454 (1932)), because the extra
costs incurred were only 1/3 of the total price. The alternate
route was well recognized. Moreover, the captain was alerted to
instability in the region far enough in advance to have diverted
and avoided some expenses.
Maple Farms, Inc. v. City School Dist., 76 Misc.2d 1080, 352
N.Y.S.2d 784 (1974)
Plaintiff milk seller had for years sold milk to school districts and
for years the price of raw milk had been mandated by the U.S.
Department of Agriculture. The Department mandated a 20%
increase, which would have caused plaintiff to lose over $7,000
if forced to perform. Held Even if the price increase was related
to unanticipated grain-crop failures and large amounts of
American grain sold to Russia, any business person could have
anticipated a price increase. Prices fluctuate, and the price had
risen 9.5% the year before.
Mishara Constr. Co. v. Transit-Mixed Concrete Corp., 365 Mass.
122, 310 N.E.2d 363 (1974)
Mishara, a contractor, contracted with subcontractor Transit to
deliver cement when Mishara wanted it. Because of a picket
line, Transit didn't deliver contract and Mishara bought it
elsewhere. Mishara sued for the cover damages, and wanted
the just to instruct that Transit "was required to comply with the
contract regardless of picket lines, strikes, or labor
difficulties." Held Sometimes picket lines present commercial
impractibility, sometimes they are only inconveniences.
Sometimes they are foreseen, other times they are a surprise. It
depends on the circumstances.
Krell v. Henry, Court of Appeal, 1903, [1903] 2 K.B. 740
Plaintiff Krell advertised a room with windows perfect for
viewing the King's procession, and defendant Henry came and
looked at the room and asked the housekeeper about it. In
letters, Henry agreed to rent the room for GBP 75 for two days
(not the nights). The King fell ill and did not process, so Krell
sued for the GBP 50 balance and Henry counter-claimed for his
GBP 25 deposit. Held If it appears that a contract depended on
the existence of something, the contract shall be considered to
have an implied contract regarding the existence of the thing.
Allowing parole evidence to be introduced, it's clear that the
King's procession was the foundation of the contract, even
though the letters making up the contract didn't state that. The
criteria are: 1) The thing was the foundation of the contract. 2)
The thing was prevented. 3) The event preventing the thing was
unforeseen.
Lloyd v. Murphy, Supreme Court of California, 1944, 25 Cal.2d 48,
153 P.2d 47
On August 4, 1941, plaintiffs leased to defendant for five years
land on which to sell new automobiles, do repairs, and sell
gasoline. In early 1942 the government ordered a hold on new
car sales, then allowed limited sales using a system of priorities.
Defendant, who continued selling new cars elsewhere,
breached the contract claiming commercial frustration, in which
"Performance remains possible but the expected value of
performance to the party seeking to be excused has been
destroyed by a fortuitous event, which supervenes to cause an
actual but not literal failure of consideration...." Held There was
no commercial frustration. 1) The risk of the frustrating event
must be reasonably unforeseeable (as the purpose of a
contract is to give a businessman some certainty), but here the
risk of war and the government's previous actions made new
car sale restrictions foreseeable. 2) The value of the lease has
not been destroyed, because the sale of automobiles have not
been made impossible, only restricted. Defendant, after all,
continues to sell automobiles on other property.
Weyerhaeuser Real Estate Co. v. Stoneway Concrete, Inc., 96
Wash.2d 558, 637 P.2d 647 (1981)
Plaintiff leased mineral rights to Stoneway for nine years to strip
mining of sand and gravel. The contract said that payment
would be made even if Stoneway didn't get any minerals from
the land, and required a one-year notice before termination
even if getting minerals from the land became uneconomical.
Both parties expected up to a two-year wait to obtain permits,
but because of an unexpected public outcry over the
environmental effects of strip mining the permits were not
granted after five years. Held Stoneway may break the lease
because there was frustration of purpose. While both parties
expected a slight delay, it was totally unexpected that permits
would be impossible to obtain. Dissent It doesn't make sense
to say that it's expected that permits be difficult to obtain, yet
say that it's unexpected that permits would be impossible to
obtain.
Chase Precast Corp. v. John J. Paonessa Co., Supreme Judicial
Court of Massachusetts, 1991, 409 Mass. 371, 566 N.E.2d 603
The Commonwealth, throught the deparatment of public works,
hired Paonessa to install concrete barriers in place of a grass
median. Paonessa contracted with Chase to supply the
concrete barriers. The department-Chase contract contained a
standard provision allowing the department to eliminate
portions of work it found unnecessary. The Paonessa contract
held no such provision. After a public outcry against the project,
Paonessa stopped work and frustration of purpose (commercial
impractibility) in which "a party's principal purpose is
substantially frustrated without his fault" by the the occurrence
of csome event removing a basic assumption on which the
contract was made, under Restatement (Second) of Contracts §
265 (1981). Chase sued. Held Paonessa is relieved of further
performance because the circumstances were unforeseen and
Paonessa didn't take on the risk of a reduction in the quantity of
barriers. Even though there was no clause in the Chase
contract removing assumption of risk from Paonessa, Chase
had supplied barriers before and knew about the standard
clause as was in the department's contract, and about the "Unit
Price Philosophy" in the construction industry which only the
quantity of work actually accepted is paid for.
Glaholm v. Hays, 2 Mann & Granger 257 (1841)
A vessel was chartered to leave England on February 4 and go
to Trieste, pick up some cargo, sail to England to get paid for
the freight. The shipowner sued the freighters for refusing to
accept the vessel, but the freighters pointed out the ship hadn't
left on February 4. Held It makes more sense here to view the
February 4 stipulation as a condition precedent to performance
rather than a promise with damages as a remedy. Both parties
were aware that the success of the venture dependend upon
the commencement of the voyage on time.
Howard v. Federal Crop Ins. Corp., United States Court of
Appeals, Fourth Circuit, 1976, 540 F.2d 695
The Howards allege that their tobacco crop was damaged by
heavy rains. Before inspection by the insurance company, the
plaintiffs plowed under the tobacco crops. The insurance
agreement stated in 5(b) that it is a condition precendent to
payment that the plaintiff establish the production of the crop
and that the crop was damaged. In 5(f) it read that the crops
shall not be destroyed until the insurance company makes an
inspection. Held Section 5(f) does not on its fact make not
plowing under crops a condition precedent to payment. It
doesn't say that payment will be withheld if crops are destroyed.
The two clauses don't purport to state the same kind of thing
using different words, as might "condition precedent" and
"warrant". It is undecided whether 5(f) was inserted because, if
the crops were destroyed, proof would be impossible or simply
more difficult—it is simply decided that 5(f) doesn't necessarily
make not plowing under crops a condition precedent to
payment.
Merrit Hill Vineyards, Inc. v. Windy Heights Vineyard, Inc., 61
N.Y.2d 106, 472 N.Y.S.2d 592, 460 N.E.2d 1077 (1984)
Plaintiff purchaser of a house found out that defendants had
failed to secure a title insurance policy and a FHA mortgage
confirmation statement. Plaintiff sued for return of deposit and
for damages for defendant's failure to perform. Held The
securing of the two items were conditions precedent to the
formation of the contract, as they were under a section entitled
"Conditions Precedent to Purchaser's Obligation to
Close." Held Plaintiff is due only the return of the deposit, not
further damages, because failure to fulfill a condition precedent
is not a breach of contract subjecting the defendant to
damages.
Gray v. Gardner, Supreme Judicial Court of Massachusetts, 1821,
17 Mass. 188
An agreement with whaling oil traders promised to pay the
traders $5198.87 for a past shipment, but that if future
shipments were more than the previous year, that obligation
would be void. The ship Lady Adams neared Nantucket
carrying oil, but had not arrived at the dock and drop anchor by
the end of the specified period, so plaintiff sued for payment of
the amount, as the shipments had not arrived to surpass those
of the previous year.Held A ship at see, even if in sight, has not
arrived, and so this condition that would relieve the defendant of
an obligation did not occur.
Parsons v. Bristol Dev. Co., Supreme Court of California, 1965,
62 Cal.2d 861, 44 Cal.Rptr. 767, 402 P.2d 839
Bristol hired plaintiff to architect and construct a building. The
agreement in 4(b) stipulated that phase two of the project would
be conditioned on Bristol's obtaining a loan. The agreement
also said in 4(d) that if any work was abandoned or suspended,
the architect would be paid for services rendered. Bristol
thought the loan was going to go through and told the plaintiff to
continue with phase two, paying plaintiff 25% in advance as the
contract required, and then the loan fell through and Bristol
stopped the project. Held The plaintiff is not due damages over
the 25% already paid, because securing the loan was a
condition precedent to the second phase. Held Section 4(d)
does not provide an alternate source of payment, it only
provides an acceleration of payment—it assumes the loan has
been obtained, as is references the terms in 4(b). Held The
condition precedent is valid, even though the condition related
to the defendant, because Bristol tried to obtain the loan in good
faith. Held Plaintiff cannot be paid under collateral estoppel,
because Bristol never claimed that the funds had been obtained,
it simply told plaintiff to go ahead with phase two. Held There is
no evidence that Bristol breached its duty to give plaintiff notice
when the funds did not come through, and if there were such
evidence, there is no evidence that plaintiff was harmed by any
such delay.
Seldeen v. Canby, 259 Md. 526, 270 A.2d 485 (1970)
Held When one party conditions performance on something
being available, there is an obligation on that party to act to
attempt to get that object.
Mascioni v. I.B. Miller, Inc., Court of Appeals of New York, 1933,
261 N.Y. 1, 184 N.E. 473
Plaintiffs worked as a subcontractor under defendants, who
were were working for the owner. The contract said that
"Payments [are] to be made [to the plaintiffs] as received from
the Owner." The owner didn't pay defendants, so they didn't pay
plaintiffs. The trial judge allowed parole evidence that showed
the plaintiffs expressly assummed the risk they might never be
paid. Did the clause create a condition precedent to payment, or
merely fix the time of payment to coincide with owner payments,
thereby creating a unconditional obligation to pay
plaintiffs? Held The clause should be interpreted as a condition
precedent, because the trial judge through the parole evidence
showed that, while the defendants originally held the risk of lack
of owner payment, they transferred that risk to the plaintiff
through this clause. (As this construction is possible with the
given text, it's not necessary to decide whether the text
unambiguously stated one way or another.)
Ewell v. Landing, 199 Md. 68, 85 A.2d 475 (1952)
Landing loaned cash to Payne, who promised to repay him
when he had "sold his timber." Payne died and it is wasn't
proved whether Payne had sold his timber. Held The intention
of the parties is that Payne unconditionally owed Landing
money in return, and the selling of the timber was simply a
convenient event to which to bind the time of repayment.
Amies v. Wesnofske, 255 N.Y. 156, 174 N.E. 436 (1931)
The Wesnofskes hired Amies and Hines, real estate brokers, to
find a buyer for a house, promising them half on signing of a
contract and half on closing. The plaintiffs found buyers, but
after signing the contract the buyers couldn't get the finance
they wanted and backed out of the sale. Plaintiffs sued for the
other half. Held Signing was a condition precedent to payment
of the other half, and the words "when" and "after" should be
construed to mean "if." Held If the seller would have actively
prevented the sale, they would have destroyed the condition
precedent, but here they were neutral so the condition
precedent stands.
Royal-Globe Ins. Co. v. Craven, Supreme Judicial Court of
Massachusetts, 1992, 411 Mass. 629, 585 N.E.2d 315
Craven's insurance policy contained a 24-hour notice
requirement for hit-and-run accidents, and required that she
"promptly" report accidents. Craven had an accident and didn't
report it until four months later, three months after she was
released from intensive care. Held Even if Craven is released
from the 24-hour-requirement because she was disabled, that
only tolls the requirement, and does not remove it, so that after
her disability she is still required to promptly report the
accident. Held Royal-Globe is not estopped from denying her
liability because of failure of notice by its initially processing her
claim, because estoppel only occurs when the estopped party
induces the other party to perform some action. Here Craven
had already performed the action of not submitting the claim on
time before Royal-Globe's actions occured. Held Royal-Globe
is not liable for Craven's accident, because her notice was not
prompt as required by the agreement.
Semmes v. Hartford Ins. Co., 80 U.S. (13 Wall.) 158 (1871)
Plaintiff suffered a loss by fire and brought a suit to his fire
insurance company six years later. The plaintiff claimed that the
12-month limitation on bringing an action imposed by the
contract should be suspended because of the civil war, but the
lower court said that the limitation was like a statute of
limitations, and the disability of war only suspended the
obligation temporarily, and because the period before the war
and after the war adds up to over 12 months, the plaintiff cannot
bring the action. Held A contract requirement doesn't come
from the same legal source as a statute of limitations, and it isn't
subject to the same restrictions. Limitations in a contract don't
open and close during disabilities, creating an accumulation of
time. The war made compliance with the contract impossible,
completely removing the bar to the plaintiff's recovery.
Monteiro v. American Home Assurance Co., 177 Conn. 281, 416
A.2d 1189 (1979)
Plaintiff filed an insurance claim two years after a fire on a
contract with a 12-month limitation. Plaintiff requested that the
limitation be suspended because his attorney was mentally ill
during those 12 months. Held although a contract for service is
subject to an implied legal condition that the party be physically
able to perform, but the attorney was not a party to the contract.
New York Life Ins. Co. v. Statham, 93 U.S. (3 Otto) 24 (1876)
Life insurance policies were subject to cancellation for
non-payment of premiums, but the government after the start of
the Civil War outlawed payments between North and
South. Held Plaintiff was prevented by the government from
paying through no fault of the insured, so restitution is due of
the premiums paid minus the benefits enjoyed.
Gilbert v. Globe & Rutgers Fire Ins. Co., Supreme Court of
Oregon, 1919, 91 Or. 59, 174 P. 1161, 178 P. 358
Defendant insurance company told plaintiff that it would be
paying for fire damage that occurred in 1912, but after a year
the insurance company made clear that it was not going to pay.
The plaintiff brought an action in 1916. The insurance
agreement said that actions must be filed within 12
months.Held The insurance company does not have to pay.
The insurance company was estopped from invoking the
limitation clause while they were claiming to pay the amount,
but after the plaintiff was aware they insurance company was
not going to pay, the estoppel was removed and the plaintiff did
not bring the suit within 12 months after that. Did the defendant
waive the limitation by its promise to pay, and is the limitation
permanently removed because of the waiver? Held No; there is
a difference between a waiver and an estoppel. A waiver is a
voluntary giving up of a right, while here estoppel is a condition
where a party's own actions by law prevent them from doing
something, and estoppel can be removed here upon notification.
Does Semmes v. Hartford Ins. Co. indicate that, once a clause
is removed, it is removed for good? Held No, Semmes was
about an impossibility that arose out of the control of either
party, not an estoppel as is the case here.
Gilbert Frank Corp. v. Federal Ins. Co., 70 N.Y.2d 966, 525
N.Y.S.2d 793, 520 N.E.2d 512 (1988)
Held Insurance company is not estopped from invoking
12-month limitation, because its offer to settle the claim (which
defendant rejected) did not lull the plaintiff into thinking that the
limitation was not in force. Besides, the offer was made after the
end of the limitations period, so there was nothing the plaintiff
could have relied that would create estoppel.
Doctorman v. Schroeder, 92 N.J.Eq. 676, 114 A. 810 (1921)
A contract declared that "time is of the essence," and said that
$1500 would be made on 19 December or payments would be
forfeited and the agreement nullified. On that date vendee could
only pay $500, so the vendor agreed to extend the deadline to
2:30pm on 20 December if the payment would be made in cash.
Vendee arrived with the $1000 in cash at 3:00pm. Held Both
parties agreed to the specified the deadline, so there's no
reason not to uphold it, even if the vendee was late by only
minutes.
Sahadi v. Continental Illinois Nat'l Bank & Trust Co. of Chicago,
706 F.2d 193 (7th Cir.1983)
A bank argued that no materiality analysis be conducted
because the contract expressly stated that a payment must be
made on or before a certain date. Held A "condition" and
whether something is "material" are really the same thing. It
must be determined if payment on the certain date really is a
condition, and such a determination cannot be made
mechanistically.
Porter v. Harrington, Supreme Judicial Court of Massachusetts,
1928, 262 Mass. 203, 159 N.E. 530
Plaintiff contracted to buy two lots for $60 up front and $10 per
month until the balance was paid off. The contract stated that
time was of the essence and that if prompt payment was not
made, everything would be forfeited at "liquidated damages."
One lot was paid for after three years. The year after that
plaintiff made no payments, then for the next three years
plaintiff made $60 in installments, another $60 in installments,
and then $40 in one lump sum. The next year, when plaintiff
tried to pay $30, the defendant said that defendant had
"excercised the option" and closed the account, even though
the plaintiff was ready to pay the entire amount in full. Held The
plaintiff is allowed to continue the contract. The contract should
normally be upheld as to its provisions for lack of prompt
payment, but a contract must go out of its way if it wants to
prevent a waiver by one party. In this instance, the defendant's
continued acceptance of late payments lulled the plaintiff into
thinking that the plaintiff could pay late, and it would be
unconscionable to forfeit all of plaintiff's rights with no warning.
Bead Chain Mfg. Co. v. Saxton Products, 183 Conn. 266, 439 A.2d
314 (1981)
Held Under the UCC, a buyer's delay in rejecting and notifying
seller of late deliveries waived the time-essence clause that and
obligated the buyer to accept the late deliveries.
Clark v. West, Court of Appeals of New York, 1908, 193 N.Y. 349,
86 N.E. 1
The defendant hired plaintiff to write three law books, and made
a contract that said that plaintiff would be paid $2 per page for
each book, and and extra $4 per page if the plaintiff abstained
from alcohol. After completion of the books, defendant refused
to pay the extra $4 because plaintiff had not completely
abstained from alcohol, but plaintiff alleged that defendant had
waived this part of the contract. Are the two prices, $2 and $4,
consideration for writing the book and consideration for
abstaining from alcohol, which would mean that the
consideration could not be waived; or is abstaining from alcohol
a condition precedent to fulfilling the contract, which can be
waived? Held The condition of abstaining from alcohol can be
waived by the defendant. The subject of the contract was
writing books, not abstaining from alcohol, and abstaining from
alcohol was just to ensure timely and quality deliverables; as
such it can be waived. The contract shows that the agreed upon
worth of the work was $2 per page. Held By accepting the first
book and paying $2 per page, knowing plaintiff had not
completely abstained from alcohol, but telling plaintiff that the
full amount would be paid even though plaintiff had not strictly
abstained, the defendant effectively waived its rights to the
condition precedent of abstaining from alcohol.
Schultz v. Los Angeles Dons, Inc., 107 Cal.App.2d 718, 238 P.2d
73 (1951)
A football player's contract said that he would not be dismissed
in event of an injury if the injury was reported in writing to the
Club within 10 days. The plaintiff was injured and Club doctors
examined the player, reported to the Club, which reported the
information to its insurance company. The Club tried to
terminate the plaintiff's contract, paying him only $500 of $8,000,
because of his failure to provide written notice as stated in the
contract. HeldThe purpose of the notice was to make sure the
defendant was aware of any injury so that doctors could attend
to it, and so that it could be reported to the insurance company.
By having doctors examine the patient, accepting a status
report from the doctors, and sending a report to the insurance
company, the Club waived its right to terminate the contract
because of failure to give written notice of injury. For the player
to actually give a written notice to the Club under the
circumstances would have been a redundant, "idle act."
Inman v. Clyde Hall Drilling Co., Supreme Court of Alaska, 1962,
369 P.2d 498
Inman was employed by defendant until they terminated his
employement. His employment contract had said that he must
notify the company within 30 days for any claims, and that he
must not file suit before six months from the notice. The contract
further said that this was a condition precedent to any recovery.
Inman filed a suit for wrongful termination less than a month
later. Did plaintiff's lawsuit provide enough notice to the
defendant? Held No, the contract plainly says that the notice
must be made six months before filing a suit. Is the condition
precedent void as against public policy? Held No; although the
courts should not enforce decisions that result in unfairness,
there is no evidence that what the parties agreed to are
unreasonable—there's not even any indication of why such a
requirement was made. Both parties knew and understood the
condition. Isn't non-compliance with the contract something that
the defendant must raise as a defense during the trial, and not
really a condition precedent (even though the defendant calls it
that) that must be satisfied before the trial? Held No, both
parties agreed that this would be a condition precedent to
recovery that plaintiff must meet, not an affirmative defense the
defendant must raise. If the defendant breached the contract,
doesn't that excuse the plaintiff from the condition precedent
provision? Held No, if the defendant breached one part of the
contract it doesn't relieve a condition in another part of the
contract precedent to recovery by the plaintiff.
Aetna Cas. & Sur. Co. v. Murphy, Supreme Court of Connecticut,
1988, 206 Conn. 409, 538 A.2d 219
Murphy was a third-party plaintiff dentist who impleaded
third-party defendant Chubb Group insurance company. Chubb
moved for summary judgment on the grounds that Murphy had
failed to comply with the reasonably timely notice provision in
the insurance agreement by waiting two years before reporting
that he was being sued by Aetna for the way he dismantled his
office when terminating a lease with Hopmeadow Professional
Center. HeldIf the insurer suffered no material prejudice from
the delay, the noncompliance with the condition of timely notice
can be excused because it is not a material part of the contract.
This is only true if: 1) This was a contract of adhesion; 2) Literal
enforcement would result in forfeiture, relieving Chubb from any
obligation; and 3) There might be something short of forfeiture
that could protect Chubb's interest. Held Summary judgment
against Murphy is appropriate. The burden of proving the
insurance company was not materially prejudiced is on the
insured seeking to be excused, and Murphy has not met that
burden.
Grenier v. Compratt Constr. Co., Supreme Court of Connecticut,
1983, 189 Conn. 144, 454 A.2d 1289
Plaintiffs Grenier entered into a settlement agreement under
which they would complete blasting work on roads by June 30
and receive $25,500. The contract required a certificate of
occupancy to be acquired from the city engineer. The plaintiffs
completed the roads by that date, the city engineer did not
normally issue such certificates so on July 10 the assistant city
attorney authorized the building inspector to issue such a
certificate. The contract had a liquidated damages clause that
allowed escalating "penalties." Held The plaintiffs are excused
from getting the certificate, not because of substantial
performance, but because getting the certificate was
impractical—alternately, the independent party was acting in
bad faith—and the certificate was not material to the contract:
the subject of the contract was building roads, not getting
certificates. Held The liquidated damage clause is not
invalidated just because it uses the word "penalty" or because it
contained escalating damages.
Loyal Erectors, Inc. v. Hamilton & Son, Inc., 312 A.2d 748
(Me.1973)
Progress payments are for protection of the builder, and a
retainage fund contingent upon expert approval is for the
protection of the owner.
Second Nat'l Bank. v. Pan-American Bridge Co., 183 F. 391 (6th
Cir.1910)
Held The condition precedent that the architect issue a
certificate of acceptance of the contractor's work can be set
aside by a showing of bad faith by the architect—not merely
from a showing of conformity of the work and/or "unreasonably
and unfairly" withholding the certificate.
Maurer v. School Dist. No. 1, 186 Mich. 223, 152 N.W. 999 (1915)
Held Plaintiffs were not at fault for the architect not issuing a
certificate of acceptance, because the architect withheld the
certificate because of a delay, and the contract only allowed the
architect to withhold the certificate because of noncompletion of
the work.
Nolan v. Whitney, Court of Appeals of New York, 1882, 88 N.Y.
648
Nolan contracted to do mason work for the two buildings in
Brooklyn, and was paid installments. The last payment was not
made because the architect withheld approvale; Nolan had
substantially conformed to the contract in good faith, but the
architect withheld approval for trivial defects. Held Nolan can
recover the unpaid payment. Nolan is entitled to recover for
substantial conformance unless barred by the disapproval of
the architect. The architect's refusal to approve the work, which
was subsantially conforming, was unreasonable, and hence
dispenses with the necessity of the approval.
Van Iderstine Co. v. Barnet Leather Co., 242 N.Y. 425, 152 N.E.
250 (1926).
Plaintiff contracted to sell vealskins to defendant, to be
approved by a third party Jules Star & Co. Star rejected 6,000
skins. Held Plaintiff can only recover if the third party withholds
a certificate dishonestly and in bad faith. Unlike construction
projects, in which non-approval still leaves value conferred to
the other party, in this case no value was conferred to the
defendant. Substantial performance is therefore not
appropriate—the plaintiff can resell the goods, which were not
special order, at market price.
Fursmidt v. Hotel Abbey Holding Corp., Supreme Court of New
York, Appellate Division, 1960, 10 A.D.2d 447, 200 N.Y.S.2d 256
Plaintiff and his father, who had been providing valet and
laundry service at the Hotel Abbey for many years, contracted
to do so for three more years at $325/month. The plaintiffs,
according to the contract, had to meet with the approval of the
defendant, "who shall be the sole judge of the sufficiency and
propriety of the services." Defendant discharged plaintiffs and
got laundry service from a third party at $250/month. The trial
court held that the defendant's dissatisfaction had to be
unreasonable. Held For there not to be a breach of contract,
the defendant's dissatisfaction must only have been bona fide,
not necessarily reasonable. This particular type of satisfaction
agreement regards "satisfaction" as "fancy, taste, sensibility or
judgment," not "operative fitness, utility or marketability." The
agreement provided that defendant have strict control over
almost every aspect of the plaintiff's activities, and the primary
purpose of the arrangement was ensuring the satisfaction of
guests, giving rise to a subjective standard of protecting and
enhancing the good will of the hotel.
Haymore v. Levinson, 8 Utah 2d 66, 328 P.2d 307 (1958)
Plaintiff sold a partially finished house to defendants, who put
$3,000 in escrow but refused to give the final payment unless a
specific list of items were performed. Held The plaintiffs must
be given the final amount, less $261 for as the total value of
minor deficiencies. Building contracts regard "operative fitness,
mechanical utility or structural completion," not "taste, fancy or
sensibility," and approval may not be withheld without without
reasonable justification.
Breslow v. Gotham Securities Corp., 77 Misc.2d 721, 354
N.Y.S.2d 550 (N.Y.Civ.Ct.1974)
Defendant contracted with plaintiff attorney, but after finishing
the SEC Regulation A public stock offering was complete, the
defendant would not pay the full amount to the plaintiff because
the quality of service did not measure up to that of previous
attorneys. Held Dissatisfaction of the defendant has no bearing
in the face of performance, as because such contracts are in
the category of operative fitness or utility, not personal
satisfcation.
Morin Bldg. Prods. Co. v. Baystone Constr., Inc., 717 F.2d 413
(7th Cir.1983)
Held "[T]he reasonable person standard is employed when the
contract involves commercial quality, operative fitness, or
mechanical utility which other knowledgeable persons can
judge.... The standard of good faith is employed when the
contract involves personal aesthetics or fancy."
Nichols v. Raynbred, Court of King's Bench, 1615, Hobart, 88
Kingston v. Preston, Court of King's Bench, 1773, 2 Doug. 689
Plaintiff contracted with defendant to work for him for a year and
a half, then he would go into partnership with the defendant's
nephew, defendant would go out of business, plaintiff would
give security of GBP 250 per month until it reached GBP 4000,
and would take over the defendant's business. Plaintiff worked
the said amount of time, and then sued the defendant for not
turning over the business. Held Lord Mansfield: The plaintiff
must first give the defendant the security. There are three types
of agreements: 1) mutual and independent, 2) are conditions
and independent, and 3) mutual conditions to be performed at
the same time. Here the giving of the security was a condition
precedent to the defendant handing over the business.
Price v. Van Lint, Supreme Court of New Mexico, 1941, 46 N.M. 58,
120 P.2d 611
Defendant promised to loan plaintiff Price $1500 by February 1,
1940 to build on land, and the plaintiff in return promised to
provide a mortgage to the defendant as security. Defendant
placed $134 in plaintiff's account so that plaintiff could buy the
land, and both parties knew that the money would have to go to
Amsterdam and it would take a while for the deed to get back.
Defendant told other lenders that defendant would lend the
money, so they provided lumber. Defendant decided not to lend
the money, so plaintiff was delayed in finishing the building and
opening it as a nightclub. Were the plaintiff's promise to provide
a mortgage and the defendant's promise to lend the money
independent, and thus there can be no recovery, or dependant,
in which case the defendant must loan the money even without
the mortgage. Held The loans were independant, and the
defendant owes damages for breach for not providing the loan
in time. Mutual promises by default should be considered
dependent unless language indicates otherwise. But where
there are mutual promises to pay money or to provide some act,
and the time of performance of one occurs or could occur after
the other, they are independent. Here both parties knew that it
was likely the deed wouldn't get back from Amsterdam in time
to have the mortage be given to the plaintiff before the loan was
given, so the promises are independent. Held Plaintiff must pay
the $35 cost of the attorney presiding over the substitute loan to
plaintiff, but not the $46 from the outrageously 60%
high-interest loan not anticipated by the parties. The defendant
likewise couldn't hvae anticipated the extra $21.30 for roofing
materials in installments because of the absence of the lended
money. The $5/day loss in profits is speculative and should not
be allowed, but the $62.50 in rent lost can be corraborated.
Conley v. Pitney Bowles, United States Court of Appeals, Eighth
Circuit, 1994, 34 F.3d 714
Conley, who worked for Pitney Bowles, was injured in an
automobile accident. For benefits under the Employee
Retirement Income Security Act (ERISA), his employment
contract required Conley to exhaust administrative remedies
before suing for denial of disability benefits. The contract also
required a written notice of any denial to be sent to Conley,
explaining the exhaustion requirement. The Pitney Bowles letter
to Conley did not explain the exhaustion requirement. Is the
letter containing an exhaustion requirement a condition
precedent to Conley following the exhaustion
requirements?Held Yes. When a contract contains multilateral
conditions and one is to occur in time before the other, the first
is a condition precendent to the other. Does public policy
require Conley to exhaust the administrative remedies
nonetheless? Held No, the freedom to contract is a more
important public policy. Should Conley be held to have been
constructively aware of the requirement through the employee
handbook? Held Not as far as the summary judgment
goes. Dissent This holding holds form over substance. Conley
gave the letter and handbook to his attorney, and in this case
the attorney dropped the ball.
Bell v. Elder, 782 P.2d 545 (UtahCt.App.1989)
The Bells contracted to purchase land, and the contract said
that the seller would supply water, and that the Bells would pay
a hookup and installation fee. The seller did not supply water,
so the Bells sued the seller for the downpayment even though
the Bells had not paid the feeds. Held The Bells may not sue for
breach, because they themselves have not performed. As no
time was specified for either act, the acts are concurrent
promises and a party may not sue for breach by the other party
when the first party has not performed.
Ziehen v. Smith, Court of Appeals of New York, 1896, 148 N.Y.
558, 42 N.E. 1080
Plaintiff contracted to buy land from defendant. Plaintiff would
give $3500 on 15 September 1892 and defendant would give
plaintiff the mortgage. There was another mortgage on the
property of which neither knew on the day of performance, but
that later came to light. Plaintiff sued defendant for not being
able to hand over the mortgage. Held The plaintiff cannot
maintain an action because, for this concurrent promise, the
plaintiff did not perform or demand performance of the other
party. This requirement would not be in effect if it were obvious
that the other party could not perform on that day, but here
neither party knew of the other mortgage on the day of
performance.
Neves v. Wright, 638 P.2d 1195 (Utah 1981)
Held A buyer may not unilaterally rescind a contract just
because they found out that the buyer did not have title on the
day of the contract formation without inquiry into the specifics of
the situation, such as whether the buyer would be able to
acquire the title.
Cohen v. Kranz, Court of Appeals of New York, 1963, 12 N.Y.2d
242, 238 N.Y.S.2d 928, 189 N.E.2d 473
Plaintiff contracted to buy defendant's house for $40,000 and
put $4,000 down. Closing was to occur on 15 November but got
pushed back to 15 December. On 30 November plaintiff's
attorney wrote the defendant that plaintiff had discovered
defects in the title (which turned out to be no certificate for the
swimming pool and a problem with a fence, but this wasn't
stated) and demanded a refund of the deposit. On the closing
day, 15 December, plaintiff demanded a refund but didn't get
one. Held Plaintiff may not recover the deposit because, by not
providing specific information on the defects of the title so that
the defendant could remedy it, the plaintiff anticipatorily
breached the contract. Defendant was not in breach because
plaintiff did not tender performance and did not demand
performance on the part of the plaintiff. A defendant will be
automatically in default with an incurable title, but with a curable
title the plaintiff must tender and demand
performance. Held Defendant may recover damages for the
decline in value of the house before its sale because of the
anticipatory breach of the plaintiff. The defendant need not have
cured the title by that time because, with the anticipatory breach
by the plaintiff, such an action would have been useless.
Caporale v. Rubine, 92 N.J.L. 463, 105 A. 226 (1918)
Caporale and Rubine contracted to exchange lands, with deeds
to be exchanged on 1 May 1917 and titles to be exchanged in
1926. Rubine sold his land to someone else because Caporale
had a bad title. Caporale sued for damages. Held Caporale is
relieved from duty because Rubine was not able to perform,
and Caporale was not yet required to have a good
title. Held Caporale may not recover damages because he was
not "able and ready to perform", as he could not have conveyed
a good title.
Beecher v. Conradt, Court of Appeals of New York, 1855, 13 N.Y.
108
Plaintiff contracted to convey land to the defendant, who would
pay five installments to the defendant. On the fifth and final
installment, the plaintiff sued the defendant for failure to pay,
but plaintiff provided no proof that plaintiff was ready and able to
convey the land to plaintiff. Plaintiff claimed to have the right to
sue on individual installments without showing willingness to
convey the land. Held Although originally the plaintiff could sue
for individual installments, because this is the last installment
due it is as if the plaintiff is suing for the entire amount.
Therefore, the defendant must pay all to get the deed, and the
plaintiff must convey the land before recovering the unpaid
amount from a suit.
Osborne v. Bullins, Supreme Court of Mississippi, 1989, 549
So.2d 1337
Osborne, a Ph.D. in political science, sought out Bullins, who
had a seventh grade education, to buy Bullins Food Mart from
Bullins. After finding he could not obtain funding, Osborne tried
to back out. The contract said that if one party could not perform,
the $500 earnest money would be refunded to the buyer. The
court below held that the land should be transferred to Osborne,
that the deed be be deposited with the clerk of the court to be
conveyed to Osborne upon payment, that Osborne owe Bullins
for the price of the land, and that Buillins get a vendor's lien on
the land and have all the other rights of a creditor. Held The
clause does not relieve Osborne of performance because it
doesn't say that the contract is voided if one party cannot
perform. Although this may sound odd, if the contract meant to
void itself upon nonperformance, it would normally have
allowed the seller to keep the earnest money as
damages. Held Specific performance is proper, even though
this is not a right and is usually invoked for a buyer of land,
because really it's not specific performance—it's just a money
judgment against the buyer. Normally the burden would be on
the seller to find another buyer and then recover the difference
in sale price from the buyer. Here the fair solution is to put that
burden on the buyer rather than the seller to find an alternate
buyer.
Trachtenburg v. Sibarco Stations, Inc., 477 Pa. 517, 384 A.2d
1209 (1978)
Held A judgment can be in law and still be equitable. The
vender must transfer the deed to the land before getting a
judgment in their favor.
Stewart v. Newbury, Court of Appeals of New York, 1917, 220 N.Y.
379, 115 N.E. 984
Stewart gave an estimate for building a concrete mill building for
Newbury, but there is dispute over when payments were to be
made: defendants Newbury claim that the usual method of 85%
every 30 days was to be used, but plaintiff denies this. Over a
month later, after plaintiff had completed only the first floor,
plaintiff sent defendants a bill which defendants declined to pay
because they claimed the work was not to specification. Plaintiff
then abandoned the job. The judge gave jury instructions that if
there was no agreement as to payment times, payment should
have been made at reasonable times and the plaintiff would be
justified for abandoning the work. Held The plaintiff was not
justified in abandoning the work, because if there is no
agreement on payment times on a contract for work, the work
must be substantially completed before payment can be
demanded.
Kelly Constr. Co. v. Hackensack Brick Co., 91 N.J.L. 585, 103 A.
417 (1918)
Plaintiff had a contract to build a school, so plaintiff contracted
with defendant Hackensack to supply bricks during the entire
construction, but the contract did not indicate when payment
would be made. After several deliveries, plaintiff did not pay
defendant so defendant stopped supplying bricks. Plaintiff
covered from the market, and sued defendant for the
difference. Held Summary judgment for plaintiff. Even though
the Uniform Sales Act says that delivery of goods and payment
should be concurrent unless otherwise agreed, these were
installment deliveries and thus part of a whole delivery, and
payment is not due until the entire delivery is completed. [UCC
§ 2-307 says that if circumstances give either party the right to
demand or deliver in lots, payment can be demanded in lots.]
Tipton v. Feitner, Court of Appeals of New York, 1859, 20 N.Y. 423
Plaintiff contracted to sell hogs to defendant, the first batch of
dressed hogs in possession of the plaintiff to delivered
immediately for one price, and a second batch of live hogs at
another price to be delivered later after they arrived to plaintiff.
The batch of dressed hogs arrived to defendant, but defendant
did not pay for them so the plaintiff sold the live hogs to another
party. Was the delivery of the live hogs a condition precedent to
payment for the dressed hogs that already arrived? Held No;
the defendant owes the plaintiff for the price of the delivered
dressed hogs. There was no language indicating either way in
the contract, but there was also no indication that the plaintiff
was extending credit to the defendant. Although this was part of
one transaction, the two species of objects were different in
type, different in price, and had different delivery
dates. Held The plaintiff may have been in default on the
second shipment at the time this action commenced, but for this
the defendant can have a second action or subtract that amount
from the award against the defendant. The defendant is still
obliged to pay for the first shipment.
Oshinsky v. Lorraine Mfg. Co., United States Court of Appeals,
Second Circuit, 1911, 187 F. 120
Plaintiff manufacturer sued buyer for payment, but defendant
claimed the goods were not delivered on time. The contract
specified that the goods be delivered "at the specified dates: ...
Stock: Nov. 15". The stock (remaining goods) were delivered a
day late. Held For defendant. The contract is specific as to the
date of delivery, and as the trial court ruled time is of the
essence (a contract for the sale and delivery of goods), delivery
must be on that date and none other.
Ramirez v. Autosport, 88 N.J. 277, 440 A.2d 1345 (1982)
UCC § 2-601 carries forth the "perfect tender" (as opposed to
"substantial conformance") rule, but mitigates its harshness by
balancing the interests of buyer and seller.
Prescott & Co. v. J.B. Powles & Co., Supreme Court of
Washington, 1920, 113 Wash. 177, 193 P. 680
The buyer contracted for 300 crates of Australian onions to be
shipped to San Francisco in March. The buyer wired to cancel
the order, but the wire didn't arrive before the ship set sail.
There was only one ship leaving each month, and at the last
minute the US government required that wheat related to the
war be shipped on the vessel, leaving only enough room for 240
crates of onions. The buyer refused delivery because the
complete order was not filled. Can the seller be excused for not
completely filling the order by the specified time because the
US government took over part of the ship?Held No. Plaintiff
sued for full performance on the contract and rules are rules.
Beck & Pauli Lithographing Co. v. Colorado Milling & Elevator
Co., 52 F. 700 (8th Cir. 1892)
Defendant ordered lithographic printings to be delivered in 1889,
entailing preparations of sketchings on stones over a period of
two or three months. The plaintiff shipped the products by rail;
four boxes did not arrive until 1 January 1890, and one did not
arrive until 4 January 1890. Held The buyer may not refuse the
shipment. Unlike an executory contract for sale of goods, "this
was a contract for artistic skill and labor" the products of which
could not be transferred to another buyer. As such, absent
some explicit clause in the contract making timeliness a
condition presedent, time is not of the essence. If there is any
injury to the buyer, the buyer may sue for damages.
Bartus v. Riccardi, City Court of Utica,'Oneida County, New York,
1967, 55 Misc.2d 3, 284 N.Y.S.2d 222
Defendant contracted to buy a Model A-660 hearing aid from
plaintiff, a franchisee of Acousticon. Model A-660 had been
discontinued, so plaintiff provided a newer, improved Model
A-665. Defendant didn't like the hearing aid and returned it,
finding out that the newer model had been substituted.
Acousticon offered to either provide a new Model A-665 or the
older Model A-660, but by this time the defendant didn't want to
purchase a hearing aid at all, and claimed that under UCC §§
2-601 and 2-602(2)(c) he had the right to reject the shipment
because of lack of perfect tender. Furthermore, even if he did
accept the product, he may subsequently refuse it under §
2-608(l)(b) because of the seller's assurances. Held The
defendant may not refuse the product. UCC § 2-508 allows a
seller to cure a non-conforming delivery before the contract
deadline, and if the original product was reasonably expected to
meet the requirements (as was the case here with the new,
improved model), the seller may cure the non-conforming
delivery even after the deadline.
Oddo v. General Motors Corp., 22 U.C.C.Rep. 1147
(N.Y.Sup.Ct.1977)
Plaintiff purchased a new car and, after driving 17 miles, the
electrical system burst into flames. The dealer refused to take
back the car, saying that it was only liable to replace the
electrical system which was under warranty. Held The buyer
may rescind the deal. UCC 2-601 allows the courts to consider
cases like these unconscionable to only hold the seller to the
warranty, as they car had barely been driven and the plaintiff
reasonably expected the car to perform safely, thus shaking the
confidence of the buyer. A warranty cannot repair shaken
confidence.
Worldwide RV Sales & Service v. Brooks, 534 N.E.2d 1132
(Ind.Ct.App. 1989)
Plaintiff put money down on a motor home, specifying that it
should have two air conditioners, one in the front and one in the
back. When plaintiff went to pick up the motor home, it only had
one air conditioner in the center. The defendant offered to take
out the air conditioner, leaving a hole, and put in two air
conditioners as had originally been requested. Held The buyer
may reject the item and get a refund under UCC
2-601. Held The seller cannot claim UCC § 2-508 because the
seller did not make a "conforming delivery" or substitute a a
"conforming tender."
Fortin v. Ox-Bow Marina, Inc., 408 Mass. 310, 557 N.E.2d 1157
(1990)
Plaintiffs Fortins tried to revoke their acceptance of a boat four
months after purchasing it and after using it for several outings
during the summer, and sued for a refund of the purchase price
and other incidental costs. The engine had overheated twice
and there were problems with the pump and electrical
equipment, among othe problems. The defendant replaced the
engine, but the plaintiffs later revoked acceptance
anyway. Held The plaintiffs may revoke the purchase, even
after a delay in notification, because they were in constant
communication with the defendant trying to rectify the problem,
and the UCC doesn't penalize people for working with the seller
to try to reach accommodations to minimize losses.
Plante v. Jacobs, Supreme Court of Wisconsin, 1960, 10 Wis.2d
567, 103 N.W.2d 296
Plaintiff contracted to build a house for defendant Jacobs.
When the house was completed, there were numerous little
defects and a wall between the kitchen and the living room that
made the living room about one foot smaller. Was there
substantial performance so that the plaintiff recover on the
contract, or must the plaintiff recover on quantum
meruit? Held There was substantial performance so that the
plaintiff may recover on the contract. Substantial performance,
unless the contract makes every detail the essence of the
contract, is less than perfection. Here the stock floor plan did
not detail the construction, and there were no blueprints. Should
damages be diminished value, cost of replacement, or should
the defects be separated out? Held If it doesn't result in
confusion, the small defects to which low repair costs can be
assigned should be separated out for cost of replacement, while
the items the replacement of which would cause economic
waste should be assigned their diminished values. Here the
costs of repairing plaster cracks, repairing the patio, and
reconstructing the patio wall do not incur economic waste and
should be assigned the cost of replacement. Moving the wall
between the kitchen and the living room would cause economic
waste, so it should be assigned diminished value, and there
happens to be no diminished value to the house in this case,
even though it's not what the defendants wanted. [This resaults
in the strange outcome that, the larger the defect, the less
recovery, because if moving the wall had cost less the plaintiffs
would have had to pay for it, but because the defect is so large
here the diminished value rather than the cost of repair rule is
used.]
Jacob & Youngs v. Kent, 230 N.Y. 239, 129 N.E. 889 (1921)
After living in a house for over a year, defendant discovered that
the pipes installed in the walls by plaintiff were not made by
Reading. The plaintiff had inadvertently made this mistake,
defendant's architect hadn't even noticed the difference, and
the quality of the pipes were the same. Held There was
substantial performance because the mistake was
"unintentional and trivial." Parties may specify that performance
of every term must be a precedent to recovery, but if there is
silence the law is slow to impose a huge burden for a small
defect.
Reynolds v. Armstead, 166 Colo. 372, 443 P.2d 990 (1968)
Plaintiff contracted to apply a brick veneer matching the color of
the other bricks of the defendant's house. The bricks didn't
match, but the structure was sound. Held There was not
substantial performance, but under quantum meruit the plaintiff
is given ~$500 for the value of the work, and defendant is
awarded ~$250 in damages because of the lack of performing
fully.
Glazer v. Schwartz, 276 Mass. 54, 176 N.E. 613 (1931)
Plaintiff had contracted to build a house and garage for $14,700
and had been paid $13,000. The plaintiff substantially
performed but not fully, by willfully not supplying certain
materials. Held In Massachusetts, there can be no recovery on
the contract without complete performance. There can be no
recovery under quantum meruit with a willful breach. Plaintiff
may therefore recover nothing, and must pay for not supplying
the materials.
Ficara v. Belleau, 331 Mass. 80, 117 N.E.2d 287 (1954)
After contracting to install a heating and cooling system for
$6200 and receiving $4200, the contractor willfully abandoned
work. The owner got the work finished by paying another
contractor $2361. Held The plaintiff gets only $361, even in
light of willful breach, because the plaintiff should be made
whole and no more.
Hadden v. Consolidated Edison Co. of New York, 34 N.Y.2d 88,
356 N.Y.S.2d 249, 312 N.E.2d 445 (1974)
Hadden had worked for Edison for over 40 years, and was
receiving a pension. After learning that Hadden had recently
received secret payments from contractors doing business with
Edison, the company tried to cancel pension
payments. Held The pension payments must be reinstated.
Using the idea of substantial performance from construction
contracts, Hadden's years of work for Edison is not negated by
a few years of impropriety. Hadden's willful breach is only one
consideration to take into account.
Worcester Heritage Society, Inc. v, Trussell, Court of Appeals of
Massachusetts, 1991, 31 Mass.App.Ct. 343, 577 N.E.2d 1009
Trussell contracted to restore the exterior of a house for the
Society, and the contract said that time was of essence for
conveyance of the property. The work took longer than
expected, and Trussel was still trying to finish painting the
outside of the house, although he had made significant
progress. Trussell had ran into money problems, but hopefully
that would be rectified by his settling an estate. The Society
tried to rescind the contract. Held As Trussell was still trying to
finish the work and was making steady progress, the contract
could not be rescinded. Even though Trussell breached the
contract, his conduct didn't try to abrogate the contract or to go
to its essence. The time-of-essence clause referred to closing
and conveyance, which happened on time. The Society could
always get another contractor to do the work and charge
Trussell, but it may not rescind the contract.
Tichnor Bros. v. Evans, 92 Vt. 278, 102 A. 1031 (1918)
Seller sold postcards to seller and agreed not to sell postcards
elsewhere. Buyer refused to pay, claiming seller sold cards
elsewhere. Held Selling cards elsewhere did not go to the
essence of the contract and was an independent promise, so
buyer isn't relieved from the obligations of the contract.
Riess v. Murchison, 503 F.2d 999 (9th Cir.1974)
Held If a buyer of land agrees to farm the land, the seller later
sues, and the court determines substantial performance, the
buyer must continue performance or be subject to another suit
for complete breach.
Wholesale Sand & Gravel, Inc. v. Decker, Supreme Judicial Court
of Maine, 1993, 630 A.2d 710
Decker hired Wholesale to install gravel driveway with payment
to be given in 90 days. Wholesale thought it had 90 days to
complete the work, but said it would complete the work in a
week. The land was muddier than expected, and a bulldozer got
stuck, so Wholesale decided to wait for things to dry. Decker
called twice, and both times Wholesale said they would "get
right on it." Finally Decker said gave Wholesale one more
chance, but Wholesale didn't show up the next day as promised,
45 days into the contract. Held The reasonable amount of time
of completion was 60 days, but Wholesale aniticpatorily
breached the contract because its words or conduct showed a
refusal or inability to perform that was definite, unequivocal, and
absolute. Dissent Although there was a disagreement about
the amount of time allowed to perform, there was no
unequivocal words or actions showing a refusal or inability
perform, and they hadn't even reached the 60 days the court
found was a reasonable amount of time.
K & G Constr. Co. v. Harris, Court of Appeals of Maryland, 1960,
223 Md. 305, 164 A.2d 451
The subcontractor contracted to do earth moving for plaintiff
contractor in a "workmanlike manner", with time of the essence.
Plaintiff was to pay progress payments to defendant. The
defendant would carry insurance. The defendant's bulldozer
operator struck the edge of plaintiff's house and caused
damage amounting to twice one monthly payment. Plaintiff let
defendant continue work, but when defendant did not pay for
damage, plaintiff did not pay progress payments, so defendant
stopped work altogether. Plaintiff got the work done elsewhere
for $450 more. The court held the defendant owed for the
damage, and the defendent paid that. Held Defendant owes the
$450 for the difference in cost as it totally breached the contract.
The promises to do the work and to pay progress payments
were dependent. When defendant did the damage there was a
breach, and when plaintiff let work continue, plaintiff considered
the breach partial. When defendant stopped work, that was a
total breach, allowing the plaintiff to get the work done
elsewhere. Did having insurance mean that defendant didn't
have to pay for the damage? Held No, the insurance company
denied liability and having insurance doesn't allow the
defendant to perform the work negligently.
Stanley Gudyka Sales Co. v. Lacy Forest Products Co., 915 F.2d
273 (7th Cir. 1990)
Lacy hired Gudyka to sell wood products and split the
commission. When Gudyka owed Lacy $3,000 in commissions,
Lacy cancelled the contract even though Lacy owned Gudyka
$46,000 in commissions. Held Lacy may not use this breach to
avoid contractual obligations, because the breach was not
proportional to the need and therefore insignificant. Lacy could
have used the self-help method of deducting the amount from
commission payments. Held Because Lacy knew how much
was owed, Lacy was obligated to give notice to Gudyka.
This case is easy, it's not sleazy, it just make me a little queezy
That the name "Lacy" sounds so much like "Lady Lucy", or
"Ludy Lacy," or something else crazy
But it's a simple case, a sad, sniffle, self-help chase for
commissions
For the wood that Gudyka should o' sold if it could
Hathaway v. Sabin, Supreme Court of Vermont, 1891, 63 Vt. 527,
22 A. 633
There was a contract for plaintiff to entertain in an opera house.
Defendant was to provide the opera house and pay plaintiff $75
after the entertainment. There was a snow storm and at
10:00am defendant decided not to turn on heating for the opera
house, even though this process didn't need to commence until
4:00pm. Held Defendant owes plaintiff $75 because by not
providing the opera house the defendant prevented plaintiff
from fulfilling the plaintiff's duty. Held The defendant is not
excused because the snowstorm made plaintiff's performance
impossible, because plaintiffs were able to make a train and
arrive in town in time anyway. Defendant guessed wrong. As
defendant made the decision in the morning, long before the
deadline, the defendant probably didn't want to have the
concert because there would be no audience, not because
there would be no entertainment. Held There's no dispute to
give to a jury. The plaintiffs upheld all of their end of the bargain,
so the defendant owes them $75.
Turntables, Inc. v. Gestetner, 52 A.D.2d 776, 382 N.Y.S.2d 798
(1976)
Seller promised to sell buyer goods on credit, but then seller
became suspicious of buyer's ability to pay and did not ship the
products. Buyer sued to recover damages. Held Under UCC §
2-609, the seller has protection if there were reasonable
grounds for suspecting the buyer could not pay. Here others
had reported that the buyer would not pay, and the buyer had
several bills. It turns out that the "Fifth Avenue Showroom" was
a telephone answering service, the Island Park factory was
owned by someone else and the buyer owned nothing there.
The seller did not breach because the buyer gave no
assurances and purported to cancel the contract.
Norcon Power Partners v. Niagara Mohawk Power Corp., 110
F.3d 6 (2d Cir. 1997)
Some are concerned that the UCC § 2-609 allowances to ask
for assurances might not really solve problems, and just prolong
the dispute because the parties.
Trapkus v. Edstrom's Inc., 140 Ill.App.3d 720, 489 N.E.2d 340
(1986)
If all the parts of a contract are interdependent and common to
one another and to the consideration, the contract is indivisible.
If the contract is divided up into units or installments so that
each past performance is a rough compensation for past
performance by the other party, the contract is divisible. This
doesn't mean that all contracts with installments are
divisible—hinges on the intent of the parties: if the parties would
have thought about it, would they be satisfied to exchange the
part performance, regardless of what would happen later?
Cherwell-Ralli, Inc. v. Rytman Grain Co., Supreme Court of
Connecticut, 1980, 180 Conn. 714, 433 A.2d 984
Cherwell contracted to sell Rytman meal in installments, with
shipments based upon weekly requests and payments 10 days
afterwards. They buyer was almost always behind in payments,
but the buyer kept sending shipments. After almost a year, the
buyer was concerned the seller's plant might close, so the buyer
sought and got assurances and paid for more shipments. Then
a driver not employed by the seller told the buyer this would be
his last shipment, so the buyer stopped payment on the check
and asked for assurances from the buyer. The buyer went out
of business because of excess of inventory, and sued the buyer
for nonpayment; the buyer counter-sued for stopping
installments. Held The seller may cancel the contract of future
installments "if the buyer's conduct is sufficiently egregious" as
to "constitute substantial impairment of the value of the whole
contract" thereby breaching the contract. Held The seller was
not required to provide assurance, as the buyer's fears were
unfounded, a fact the court determined. The buyer had just
received assurances and the truck driver was not a reliable
source of information.
Greguhn v. Mutual of Omaha Ins. Co., Supreme Court of Utah,
1969, 23 Utah 2d 214, 461 P.2d 285
Greguhn had worked as a mason for almost 30 years. One day
a scaffold fell beneath Greguhn, but he survived by holding onto
the wall with one hand and to the scaffold with the other until
help came. Soon his back started hurting, and his doctor
discovered that he had for many years had a condition known
as "spondylolisthesis" and the fall had put pressure on his
nerves and he could not return to work as a mason. His
insurance company notified him that they would stop payments
because of his preexising condition. The jury found that the
defendant had repudiated the contract, and awarded the
plaintiff a lump sum for future payments based upon his life
expectancy. Held The lump sum for future installments is
inappropriate for a contract with installments based solely on
repudiation. If the defendant fails to pay in the future, plaintiff
can bring another action and the court can create whatever
remedy is appropriate. The plaintiff also might recover or
die. Dissent This is not just a delay in payment but a complete
repudiation of the contract, which should allow the plaintiff to
recover for the whole contract. There is no need to prove
continued disability, as plaintiff's disability is total and
permanent. This is a suit of damages (and therefore
expectancy), not a suit for specific performance. Public policy
should keep the plaintiff from having to come back and relitigate
future breaches.
Caporali v. Washington National Ins. Co., 102 Wis.2d 669, 307
N.W.2d 218 (1981)
On facts similar to Greguhn v. Mutual of Omaha Ins.
Co., Held the plaintiff is awarded future monthly installments
with interest payable as they become due, with the caveat that
noncompliance would result in a lump sum payment or similar
equitable remedy.
Huffman v. Martin, 226 Ky. 137, 10 S.W.2d 636 (1928)
Defendants bought a house for $7,000, paying $3,000 down
with the balance on a note payable in 10 years. After three
years defendants abandoned the house, move to another state,
and communicated that they planned to pay no more. Held If a
contract is purely executory on the part of one party, there can
be no anticipatory breach that would allow the other to sue
before the due date of the obligation. [The contract should have
contained an acceleration of payments upon breach clause.]
Reigart v. Fisher, Court of Appeals of Maryland, 1925, 149 Md.
336, 131 A. 568
The Fischers contracted to sell defendant Rigart about seven
acres of land, but after discovering that there was only 4.764
acres Reigart asked for his money back and the Fishers sued
for specific performance. Held Specific performance is
appropriate. Any misrepresentation of a material term—one that
may reasonably be supposed had it been known would have
prevented the contract from taking place—would relieve the
defendant from all duties. Here, however, there is evidence that
the defendant didn't care about the specific amount of land, but
just wanted a place to live and liked what he saw. Held The
contract cannot be voided because of changing conditions. If
the contract was beneficial to begin with, changing conditions
won't relieve the defendant of duties.
Keating v. Price, 58 Md. 532 (1882)
Land conveyed happend to have a few feet less of waterfront
on a creek and along a road than represented. Held The
vendee is not obligated to accept the property, as vendee
intended and communicated to the vendor that vendee intended
to use the land for a cannery and needed access to the creek
and to the road, so this term was material.
Bartlett v. Department of Transf., 40 Md.App. 47, 388 A.2d 930
(1978)
Vendor sold to defendant a parcel of land at a price based upon
its acreage, and both saw it be staked out. Later it was
determined that there was more land than staked out, so vendor
sued to rescind the contract. Held The contract should not be
rescinded because the mutual mistake was not material, but the
price should be adjusted to take into account the extra acres.
The parties contracted for a plot of land, not a specific acreage,
and if they had know about the different acreage they would still
have performed the contract, they would simply have adjusted
the price.
Lawrence v. Fox, Court of Appeals of New York, 1859, 20 N.Y. 268
Holly owed plaintiff. Holly loaned money to defendant and
defendant promised to pay plaintiff. Plaintiff sued
defendant . Held Holly's loan to defendant is consideration for
defendant to pay plaintiff. Held A promise to pay a third party is
just as valid as if the defendant was keeping the money in
trust.Held Once defendant promised to pay plaintiff, Holly could
not have discharged defendant from that
obligation. Dissent The defendant had no obligation to plaintiff
because of lack of privity. This is not like a trust, in which the
agent has in trust a specific thing to convey. Here the Holly
could have decided that the defendant should pay Holly, or
Holly might pay the defendant, and in both cases the defendant
would be relieved from duty.
Seaver v. Ransom, Court of Appeals of New York, 1918, 224 N.Y.
233, 120 N.E. 639
Mrs. Beman had a will which said that Mr. Beman would get use
of the house and plaintiff niece would receive $1,000. Mrs.
Beman wanted the house to go to the niece, so Mr. Beman said
that he would put even more in his will for the niece. Plaintiff
sued for $6,000 after Mr. Beman died without putting her in his
will. Held This can't be a trust, because Mr. Beman only got use
of the property, not ownership of the actual property. Held The
plaintiff should get the $6,000. New York allows parties to make
a contract for the benefit of a third party, and allows the third
party to sue on it, in cases of 1) some pecuniary obligation such
as a debt, 2) close family relationship, 3) public contracts such
as a municipality, and 4) where the benefit runs directly to the
third party. This holding can be sustained either by considering
the close aunt-niece relationship upholding an action for
specific performance, or as damages on contract on the
grounds that the promise to pay the niece was consideration for
use of the house.
Drewen v. Bank of Manhattan, 31 N.J. 110, 155 A.2d 529 (1959)
As part of a divorce settlement, husband placed the two
children in his will giving them 30% of his estate and promised
never to reduce the quality or quantity of their shares. After the
wife died, the husband changed the will to give the children life
estates instead of outright gifts. After he died, the wife's estate
sued even though the remaining son had no problems with the
new arrangements. Held The beneficiary son can sue, as can
the wife's estate, to enforce the "promises for which valuable
consideration has been received."
Pierce Assocs. v. Nemours Foundation, 865 F.2d 530 (3d
Cir.1988)
A general contractor creates a "buffer zone" between the owner
and the subcontractors. There may be a departure from this
typical pattern in which a contractor and subcontractor do away
with this buffer zone and allow the owner to directly enforce
rights against the subcontractor, but this must be spelled out in
the contract.
Heyer v. Flaig, Supreme Court of California, 1969, 70 Cal.2d 223,
74 Cal.Rptr. 225, 449 P.2d 161
Defendant drafted a will for Doris Kilburn, knowing she intended
to marry immediately after, leaving everything to her two
daughters. Doris married Glen Kilburn a few days later, and six
months later she died. Under Probate Code § 70, marrying after
a will revokes a will if the new spouse was not included. The
daughters sued. Held An attorney drafting a will is liable to
intended beneficiaries for any negligence. Duty to third parties
is not based upon privity but upon public policy through
balancing several factors: the extent to which the transaction
was intend to affect the plaintiff, the foreseeablility of harm to
the plaintiff, the degree of certainty that the plaintiff suffered
injury, the closeness of the connection between the conduct
and the injury suffered, the moral blame attached to the conduct,
and the policy of preventing future harm. Held The statute of
limitations is referenced from the death of the testatrix, because
1) the the defendant owed a continuing duty to the testatrix, and
2) no one else intervened to take over that duty up until her
death.
Clagett v. Dacy, 47 Md.App. 23, 420 A.2d 1285 (1980)
Held An attorney acquires a duty to a third party who is not an
employer/client only through contract and only when the third
party is a genuine third party beneficiary of the contract.
General theories of negligence must still be proved.
Hale v. Groce, 304 Or. 281, 744 P.2d 1289 (1987)
Plaintiff sued an attorney who was directed by a client to
prepare a testamentary instrument to give a give to the plaintiff,
but this provision wasn't included before the client died. The
plaintiff brought a suit on both tort negligence and breach of
contract theories. Held Negligence and breach of contract are
two separate things. This case involved the lack of using
professional skill to fulfill objectives, so this is purely a tort claim.
Robson v. Robson, United States District Court, N.D. Illinois,
1981, 514 F.Supp. 99
Birthe sued her father-in-law Ray, Sr., who had made a contract
with her husband, Ray, Jr. regarding their 50% shares in P.B.
Services, Inc. The contract was that Ray, Jr. would operate the
business and Ray, Sr. would get $1,000 per month for life.
Upon the death of either, the shares of the company would go
to the other and the spouse of the decedant would get $500 per
month for five years or until remarriage, whichever came first.
Ray, Jr. and Berthe developed marriage problems and were
going through a divorce, and two days before Ray, Jr. died he
and Ray, Sr. modified the contract to remove any reference to
Berthe. Can Birthe, a third-party donee beneficiary sue for her
benefits of the contract? Held No. A third-party creditor
beneficiary's rights vest immediately, and the original
contracting debtor party has no right to modify the contract. In
contrast, here the third-party donee beneficiary's rights were
contingent upon certain circumstances that had not occurred
when the modification took place: the death of Ray, Jr. Because
the rights of Birthe, a third-party donee beneficiary, depended
on the occurrence of certain events that had not taken place,
and because Birthe had not detrimentally relied on the promise,
Birthe does not have standing to sue for her rights. But was
there sufficient consideration to make the
modifications? Held Birthe, not a party to the contract, does not
have a right to challenge adequacy of consideration. Anyway,
Ray, Jr. benefitted by excluding Birthe from the contract and
Ray, Sr. benefitted by not having to pay out the money to Birthe,
so there was adequate consideration.
Meyer v. Walker-Smith Grocer Co., 60 Tex.Civ.App. 462, 127 S.W.
1118 (1910)
Plaintiff Meyer conveyed real property to defendant in an
agreement that defendant would purchase goods from her
bankrupt son, E.M. Meyer, at a bankruptcy auction and give
them back to him later when he would be able to pay for them.
E.M. later made a compromise deal with defendant that
released the defendant from the terms of the deal with plaintiff.
The plaintiff sued saying that she had rights in the contract and
benefitted by seeing that things were done that she wanted in
her son's life. Held Once plaintiff makes a contract for the
benefit of a third party and it is accepted, the plaintiff has to
legal right in that contract because, after all, the third party
beneficiary could sue on that contract so the third party has a
right to discharge the contract as well.
Rouse v. United States, United States Court of Appeals, District
of Columbia Circuit, 1954, 215 F.2d 872
Winston was making payments on a note for a heating system
from Associated Contractors, Inc., and when Winston sold the
house Rouse agreed to take over the payments. Winston
defaulted on the note and the United States, which had
guaranteed the loan, sued Rouse. Can Rouse in defense claim
that Winston fraudulently represented the condition of the
heating plant? Held Yes, because Rouse is only liable to
Associated Contractors through Winston, and so he can use
Winston's alleged fraud as a defense to Associated Contractors,
and he can make this defense to an assignee of Associated
Contractors' claim as well. Can Rouse claim that Associated
Contractors didn't install the heating system
satisfactorily? Held No, Rouse didn't contract to discharge
Winston's liability, but only contracted to make payments to
Winston's creditor. It's immaterial whether Winston was actually
indebted to the creditor—Rouse would have to make the
payments even if there was no heating system, if he promised
to make the payments.
Langel v. Betz, Court of Appeals of New York, 1928, 250 N.Y. 159,
164 N.E. 890
Plaintiff agreed to sell property to Hurwitz and Hollander, who
assigned it to Benedict, who assigned it to defendant Betz. The
defendant asked for a two week postponement of performance
because the title search was still going on, but after the delay
defendant did not show up to perform. Did defendant assignee
take over not only rights but also duties, allowing a suit by the
plaintiff for nonperformance? Held No. Even though the
Restatement says that by default an assignee takes on duties
along with rights, the law currently remains that, outside of any
explicit transfer of duties, an assignee only agrees to take on
rights. Even the request for delay was not an explicit demand to
enforce a right, so by that act defendant did not explicitly take
on any duties.
Cook v. Lum, Supreme Court of New Jersey, 1893, 55 N.J.L. 373,
26 A. 803
Ellen Green deposited $2,316 with Kase, and in return Kase
gave Green a slip of paper with a column of numbers, the total
of $2,316, and a date. Green gave the paper to Ellen Cook, and
then Green died. Cook sued Kase saying that the paper
assigned the deposited money to Cook. HeldJudgment for th
edefendant. One can legally deliver a gift to another with a
donative intention as long as it completely strips the donor of all
dominition over the article. In this case an ambiguous piece of
paper with a few numbers is not sufficient to provide evidence
of a complete conveyance of all rights over the article in
question.
Cooke v. Belzer, 413 N.W.2d 623 (Minn.Ct.App.1987)
The donor gave the donee an item in return for a dollar, and the
donee thought the donee was doing the donor a favor by taking
on the tax consequences of the item. Held This was no give. A
gift must be voluntary and gratuitous—an exchange with no
consideration.
Cochran v. Taylor, Court of Appeals of New York, 1937, 273 N.Y.
172, 7 N.E.2d 89
Defendant gave a signed, sealed offer to Chenault to sell him
property if he gave her notice within a certain time period.
Defendant told Chenault that she was withdrawing the offer, but
Chenault assigned the option to plaintiff, who gave notice to the
defendant of his intention to buy. Plaintiff sued defendant when
she refused to sell. Held The sealing of the instrument provided
a presumption of adequate consideration. Held The contract
was assignable, as there was nothing in its terms that required
performance specifically be Chenault. Its terms even asserted
that the instrument be binding on "assigns".
Lojo Realty Co. v. Isaac G. Johnson's Estate, Inc., 253 N.Y. 579,
171 N.E. 791, (1930)
Held An assignee may not get specific performance if the
assignee does not tender a bond executed by the assignor.
P/T Ltd. II v. Friendly Mobile Manor, Inc., 79 Md.App. 227, 556
A.2d 694, (Md.Ct.Spec.App.1989)
The UCC has a presumption of assignment of duty along with
right because most goods are fungible, unlike services which
call for the craftsmanship of a particular worker.
Macke Co. v. Pizza of Gaithersburg, Inc., Court of Appeals of
Maryland, 1970, 259 Md. 479, 270 A.2d 645
Virginia Coffee Service, Inc. had a contract with pizza shops to
lease space for cold drink vending machines. The contract
talked about how Virginia would keep the machines in good
working order and pay commissions, while Pizza would provide
space, water, and electricity. Virginia sold to Macke, and Pizza,
which had specifically wanted to work with Virginia and not
Macke, tried to terminate the contract. Held Delegation of
duties is allowed when there is no express prohibition in the
contract and the product (as here) or service in question does
not rely on the unique skill or quality of the assignor.
British Waggon Co. v. Lea & Co., 5 [Q.B.D.] 149 (Q.B.Div'l Ct.,
1880)
Parkgate Waggon Co. leased railroad freight cars to defendants
Lea & Co., promising to keep them in repair. Parkgate went into
liquidation and assigned rent rights to British Waggon Co. and
British promised to keep the cars in repair, but Lea refused to
pay saying that Parkgate had voluntarily liquidated and that Lea
had no privity with British. Held Entering liquidation didn't stop
Parkgate from existing, so it could assign its agreement if it
wanted. Held The freight repairs weren't unique to Parkgate, so
Lea must continue to make payments if the repairs are being
made, even if Parkgate is unable to do the actual repairs.
Crane Ice Cream Co. v. Terminal Freezing & Heating Co., 147 Md.
588, 128 A. 280 (1925)
Terminal contracted to sell and Frederick to buy ice. Frederick
sold his business to Crane, but Terminal terminated the
contract. Held The rights of the contract cannot be assigned to
Crane because they were based upon Terminal's knowledge
and past experience with Frederick, and involved extending him
credit. Terminal didn't know anything about Crane. Furthermore,
Frederick also attempted to assign his duties to Crane, and
Terminal shouldn't be forced to accept the performance of a
stranger.
Allhusen v. Caristo Constr. Corp., Court of Appeals of New York,
1952, 303 N.Y. 446, 103 N;E.2d 891
Defendant, a general contractor, contracted with Kroo to do
painting work in New York City schools. The contract had a
clause that said that any assignment of interests without the
written consent of the defendant would render the contract void.
Kroo assigned the payments, not the contract, to Marine
Midland Trust Co., who assigned them to
plaintiff. Held Payment rights in a contract may be assigned
unless there is specific language in a contract denying such a
right, as was here, because parties still have a right to
contract. Held Usually the breaching of a non-assignment
provision would result in damages, but here the language
plainly says that such a breach will make the contract void.
[UCC 9-318(4) makes any account assignment provision
ineffective. In other words, a prohibition against a delegation of
duties, unlike a prohibition against a delegation of rights, is
effective.]
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Copyright © 2002-2003 Garret Wilson