enforceable
Contracts Issues
1.
2.
3.
4.
Formation
Terms/Interpretation
Performance/Breach/Excuse
Remedies
Bases of Obligation
1.
2.
3.
4.
5.
K= MA (O+A) + C
Detrimental Reliance—Promissory estoppel -- AND Preacceptance reliance
Restitution—implied in law K-- unjust enrichment
Promissory Restitution
Formality—a writing under seal
Promissory Estoppel
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family relationships—Kirksey v. kirksey
charitable subs. – Allegh. Coll. or Marylnd Bank
commercial promise (pension) Katz v. Danny
substantial & material change in position—Fried
v. Frank
unconscionable injury—Tutak v. Tutak
Pre-Acceptance Reliance
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Baird
Drennan/ R2d
Palpable Mistake Rule
Bilateral K
Unilateral K
Option K
Offer
Agreement to Agree
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Part performance --§45
Classic view W ormsor Bridge Hypo
§32—if unclear offeree decides –perform or prom
§24—just say yes & we have a deal
§33—Cartianty of terms
§26—Preliminary negotiations
Lonergan v. Scolnick
creates a power of acceptance
§43- indirect revocation—reliable info
Acceptance

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By means specified by offeror (master!)
§50—Manifestation of assent to the terms
Mirror Image Rule (§59) [contrast to battle
of forms UCC § 2-207]
Rejection
Counteroffer swaps power of accept. (Normile)
Mailbox Rule (henthorn v. fraser)
Acceptance by any means reasonable
timely acceptance. power of accept. lapses
after reasonable time
by silence (contrast UCC)
Consideration
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bargained for exchange (§71)
mutual inducement or benefit detriment
conditional gifts (dougherty)
adequacy of consideration (batsakis)
Past consideration (plowman)
sham/nominal consideration
Illusory/Alternative promise (DuPont or §77)
Moral Obligation (Penn O Tex)
To avoid fraud—alternative view Prof Fried—moral
oblig. just should be enforced
funstions: 1)evidence(iary) of assent, 2) cautionary
(against inconsiderate action), 3) chenneling—simple
& external test for the ct.
Restitution
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
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life rescue (§116) - In re Crisan
property rescue (§117) – Glenn v. Savage
3 party cases – Flooring systems
cohabitation – Watts v. W atts
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consideration—nominal/recited
writing necessary—SoF
prom estoppel applies
Compare—merchants firm offer (UCC)
not enforceable/don’t waste the courts time
(W alker)
Duty to negotiate in good faith (Teachers)
UCC by analogy—some terms can be left out
Statute of Frauds
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§110- things included
§131—Subject Matter, Parties, Essential Terms
§132—several writings ok (Crabtree)
§133- memo not made as such
§134—signature
§129-Exceptions—part perf. on an interest in
land-- $$ not good enough, must have moved in or
made repair
to discourage fraud, perjury, cause memories
fade, encourage deliberation in k making, judicial
efficiency
Interpretation
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COP, COD, UOT—R2d §202
Purpose of parties
plain meaning rule
adhesion K’s
Parol Evidence Rule
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fully or partially integrated?
consistent or contradictory term?
Williston—4 corners
Corbin—intent of parties/extrinsic evidence
merger clause
Nuances of the rule
Analogize to case facts/cite case names
Analogize to UCC
Restatement Section #’s
Spin on facts. “If the facts showed that he relied b y. . .”
Policy/Theory
Read fact pattern twice
Read call of the question
IRAC
state whether counter argument is weak or strong
MUTUAL ASSENT
Promissory Restitution
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
Material benefit (webb v. McGowan)
Maj Rule- Mills v. W yman—Moral oblig not
CONTRACTS
1. Formation
2. Terms/Interpretation
3. Performance/Breach
4.
Remedy
Rollins v. Foster (1998)
Duty to read. Objective test of assent—she signed it!
(vs. Subjective)
K in the CLASSIC sense:
K=MA(O + A) + C
I.
Formation Generally
R2d § 1 Contract Defined
A contract is a promise or a set of promises for the breach of which
the law gives a remedy, or the performance of which the law
recognizes as a duty.
R2d § 17 Requirement of a Bargain
(1) Except as stated in subsection (2), the formation of a contract
requires a bargain in which there is a manifestation of mutual
assent to the exchange and a consideration.
(2) Whether or not there is a bargain a contract may be formed
under special rules applicable to formal contracts or under the
rules stated in §§ 82-94.
Ray v. Eurice Bros. (1952)
Dispute over plans for house. Plans were signed—objectively it
looked like they assented. These guys should have read it—in
absence of fraud, duress etc, a party who has the capacity, reads
it, and signs it—IS BOUND
St. Landry Loan v. Avie (1962)
Illiterate man signs promissory note for nephew (in army)
Failure to read or have doc read to you in absence of fraud etc.,
you are BOUND.
race/class etc played a roll here—he did ask to have it read
(French only—guy translated it)
R2d § 22 Mode of Assent: Offer and Acceptance
(1) the manifestation of mutual assent to an exchange ordinarily
takes the form of an offer or proposal by one party followed
by an acceptance by the other party or parties.
(2) A manifestation of mutual assent may be made even though
neither offer nor acceptance can be identified and even
though the moment of formation cannot be determined.
R2d § 27 Existance of a Contract Where Written Memorial Is
Contemplated
Manifestations of assent that are in themselves sufficient to
conclude a contract will not be prevented from so operating by the
fact that the parties also manifest an intention to prepare and adopt
a written memorial thereof; but the circumstances may show that
the agreements are preliminary negotiations.
II.
Objective Theory
“meeting of the minds”—an agreement about the gist of the
exchange
Test: an OBJECTIVE ONE. Would a reasonable person have
believed that the parties agreed to the terms and agreed to be
bound?
What a reasonable person in the shoes of the parties would
understand the words and conduct to be.
Judge Learned Hand: Twenty Bishops—“even if it were proved by
twenty bishops that either party, when he used the words, intended
something else than the usual meaning which the law imposes
upon them, he would still be held”
You don’t want to make it hard to enforce contracts even with
poor/uneducated etc. because then people/businesses would be
unlikely to enter into contracts with them—therefore ignorance, not
reading or understanding DOES NOT get you out.
Good
1)
keeps people from lying—it
would be too easy to lie and
say “that’s just not what I
intended”
2)
Protects expectation--otherwise people would not be
able to rely on the language of
contracts.
Bad
1)
Benefits more
sophisticated/law-educated
parties
2)
runs counter to the “consent
theory” of contracts--- they are
supposed to enforce
CONSENSUAL agreements
OFFER (Bilateral K)
1.
2.
3.
4.
I.
Offer
No Offer/Preliminary Negotiations
Power of Acceptance—Termination
Cases etc.
Offer Generally
Offer = “Just say yes and we have a deal”
III.
Cases
R2d §24 Offer Defined
An offer is the manifestation of willingness to enter into a bargain,
so made as to justify another person in understanding that his
assent to that bargain is invited and will conclude it.
Requirements:
1) objective manifestation of intent
2) definite terms--- subject matter, price, quantity, time, parties.
§33 (see below)
3) must be communicated to offeree
4) has to create an immediate power of acceptance
5) mere intent to negotiate or intent to make an offer not enough
R2d §33 Certainty
(1) Even though a manifestation of intention is intended to be
understood as an offer, it cannot be accepted so as to form a
contract unless the terms of the contract are reasonably
certain.
(2) The terms of a contract are reasonably certain if they provide
a basis for determining the existence of a breach and for
giving an appropriate remedy.
(3) The fact that one or more terms of a proposed bargain are left
open or uncertain may show that a manifestation of intention
is not intended to be understood as an offer or an
acceptance.
CONTRAST/ANALAGIZE to:
U.C.C.
(sometimes court will put in terms by implication)
II.
No Offer/ Preliminary Negotiations
R2d § 26 Preliminary Negotiations
A manifestation of willingness to enter into a bargain is not an offer
if the person to whom it is addressed knows or has reason to know
that the person making it does not intend to conclude a bargain
until he has made a further manifestation of assent.
(he has more to say about it)
It is NOT an offer if:
(1) lack of definite terms (some exceptions under UCC)
(2) Many recipients—form letters, ads. This is solicitation of a
offer
(3) use of the word “offer” is not determinative (where does this
rule come from—just an addition to objective theory?)
(4) when the offeree knows or should know the offer was made in
jest—would a reasonable person think it was an offer? (Lucy
v. Zehmer)
(5) reserving the right to speak last (lonergan)
(1) An offeree’s power of acceptance is terminated by his
rejection of the offer, unless the offeror has manifested a
contrary intention.
(2) A manifestation of intention not to accept an offer is a
rejection unless the offeree manifests an intention to take it
under further advisement.
R2d § 39: Counter-offers
(1) A counter-offer is an offer made by an offeree to his offeror
relating to the same matter as the original offer and proposing
a substituted bargain differing from that proposed by the
original offer.
(2) An offeree’s power of acceptance is terminated by his making
of a counter-offer, unless the offeror has manifested a
contrary intention or unless the counter-offer manifests a
contrary intention of the offeree.
(e.g. tables the first one)
R2d § 40: Time When Rejection or Counteroffer Terminates
Power of Acceptance
Rejection or counter-offer by mail or telegram does not terminate
the power of acceptance until received by the offeror, but limits the
power so that a letter or telegram of acceptance started after the
sending of an otherwise effective rejection or counter-offer is only a
counter-offer unless the acceptance is received by the offeror
before he receives the rejection or counter-offer.
(rejection, counteroffer, acceptance is effective upon receipt)
R2d § 43: Indirect Communication of Revocation
An offeree’s power of acceptance is terminated when the offeror
takes definite action inconsistent with an intention to enter into the
proposed contract and the offeree acquires reliable information to
that effect.
IV .
Cases/etc.
Lonergan v. Scolnick (1954)
Real estate in Joshua Tree—3 potential offers: 1) ad in paper, 2)
form letter, 3) “act fast” letter. None are offers b/c in all cases it
was apparent that he had more to say. See § 26.
Also R2d § 25—expression of a fixed purpose
ACCEPTANCE (Bilateral K)
III.
Power of Acceptance
An offer creates a power of acceptance in the offeree—
it can be terminated by acceptance or by one of the following:
R2d § 36: Methods of Termination of Power of Accept.
(1) An offeree’s power of acceptance may b terminated by:
a) rejection or counteroffer by the offeree
b) lapse of time
c) revocation by the offeree
d) death or incapacity of the offeror or offeree
(2) In addition an offeree’s power of acceptance is terminated by
the non-occurrence of any condition of acceptance under the
terms of the offer.
R2d § 38: Rejection
1.
2.
3.
4.
I.
Generally
Mirror Image Rule
Mailbox Rule (deposited acceptance)
Cases etc.
Acceptance Generally
R2d § 50 Acceptance of Offer Defined; Acceptance b y
Performance; Acceptance By Promise
(1) Acceptance of an offer is a manifestation of assent to the
terms thereof made by the offeree in a manner invited or
required by the offer.
(2) Acceptance by performance requires that at least part of what
the offer requests be perfromed or tendered and includes
acceptance by a performance which operates as a return
promise
(3) Acceptance by a promise requires that the offeree complete
every act essential to the making of a promise.
b)
II.
Mirror Image Rule
R2d § 58: Necessity of Acceptance Complying with Terms of
Offer
An acceptance must comply with the requirements of the offer as
to the promise to be made or the performance to be rendered.
R2d § 59: Purported Acceptance Which Adds Qualifications
A reply to an offer which purports to accept but it is conditional on
the offeror’s assent to terms additional to or different from those
offered is not an acceptance but is a counter-offer. (Exception—
see UCC 2-207 below)
manifestation of mutual assent as soon as put out
of the offeree’s possession, without regard to
whether it ever reaches the offeror; but
an acceptance under an option contract is not
operative until received by the offeror.
Exceptions To Mailbox Rule

offeror prohibits mailbox rule by specifying that acceptance is
valid upon receipt
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Option K—must receive acceptance within the deadline

If you reject first, then change mind and accept—the first
letter to reach the offeror is the valid one (§40 see above)

Rejection and Revocation, in contrast, are valid upon
RECEIPT
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Don’t forget §69—sometimes silence is valid acceptance

offeror must dispatch/post within a timely fashion
U.C.C. 2-207—Battle of the Forms
III.
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Methods of Acceptance
The offeror is master of the offer—can specify the prescribed
method of acceptance. (see §60 below)
If not specified, then acceptance by any reasonable means is
valid.
Signing a K is also acceptance
Silence is usually not acceptance, but can be. (See §69
below)
R2d § 60: Acceptance of Offer Which States Time, Place, and
Manner of Acceptance
If an offer prescribes the time, place, or manner of acceptance its
terms in this respect must be complied with in order to create a
contract. If an offer merely suggests a permitted place, time, or
manner of acceptance, another method of acceptance is not
precluded.
R2d § 69: Acceptance b y Silence or exercise of Dominion
<usually silence is not acceptance—exceptions are if offeree takes
the service or exercise dominion over property, if based on past
dealings silence meant acceptance, or if the offeror has given
offeree reason to understand that silence means acceptance AND
offeree intends to accept.
V.
Cases, etc.
Henthorn v. Fraser (1892)
Def offered to sell property—gave them a week to respond. next
day they mailed acceptance. Right after that a revocation was
mailed. Revocation invalid b/c of mailbox rule—acceptance is
active as soon as it was deposited in mail. Very progressive
decision—consistent with R2d and UCC.Under common law—
however the offer was made—you should accept in same fashion.
NOW—any reasonable method of acceptance.
Normile v. Miller (1985)
Miller listed property for sale and Normile made an offer.
Defendant made changes= counter-offer, but did not change the
time provision. therefore, Normile thought he had an option and did
not accept or reject. 3rd party made an offer to Miller and she
accepted it. Reliable information given to normile “you snooze, you
lose” (§43—indirect communication of revocation)
Counter-offer= 1) rejection of original offer 2) transfer of power of
acceptance.
Offer & Acceptance (Unilateral K)
1.
2.
3.
I.
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IV .
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Mailbox Rule
The Deposited Acceptance Rule—acceptance becomes
effective upon post/dispatch (see § 63 below)
This I true even if offeror never gets it (as long as it is through
no fault of the offeree)
The reason is that someone has to bear the risk—protects the
offeree while the letter is in the mail. If the offeror wants to
protect self—they can designate a different method of
acceptance in the offer.
R2d § 63: Time When Acceptance Takes Effect
Unless the offer provides otherwise,
a) an acceptance made in a manner and by a medium
invited by an offer is operative and completes the


General
Classic example—Brooklyn Bridge
Cases
General
An exchange of a promise for performance.
Partial performance not enough to make it irrevocable until
after Petterson.
Old rule: the performance must be completed
New rule (Petterson): part performance creates an option.
(see §45 below)—preparation to perform is not sufficient.
R2d § 45: Option Contract Created by Part Performance or
Tender
(1) Where an offer invites an offeree to accept by rendering a
performance and does not invite a promissory acceptance, an
option contract is created when the offeree tenders or begins
the invited performance or tenders a beginning of it.
(2) The offeror’s duty of performance under any option contract
so created is conditional on completion or tender of the
invited performance in accordance with the terms of the offer.


In all cases where it is unclear whether a bilateral or unilateral
contract was proposed—we presume a bilateral. R2d §32
The Offeree decides if it is unclear—can accept by either
promise or performance.
Offeree has to give noticed that he has completed
performance (bishop v. eaton)
UCC 2-206.
For Sale of goods--- Offer to buy goods invites
acceptance by either a promise to ship, or performance
of the shipment—at offerees option. Once shipment
starts—offeree promises to complete shipment— then
forward it is just like a bilateral K since there are
promises on both sides.
II.
Classic View: Wormser Brooklyn
Bridge Hypo
Professor Maurice Wormser—1916
Classic View of Unilateral K:
$100 to walk across the Brooklyn Bridge
“I revoke”
offeror can revoke until accepted—not accepted till act asked for is
complete—can revoke at halfway point
Unilateral contract does not arise until ACT IS COMPLETE.
Consideration
I.
General
A classical contract is NOT ENFORCEABLE without consideration.
It is a basis for enforcement and avoiding fraud.
It is a bargained-for exchange.
III.
Cases
Bishop v. Eaton (1894)
Brother Eaton promised to pay Harry Eatons debts if Bishop
loaned him money. Bound upon performance—loaning the money.
(not upon notice)
R2d §71(4) Performance is acceptance as well as consideration.
Acceptance is at the time of performance—not at time of notice.
Petterson v. Pattberg (1928)
Offered a discount on the mortgage if he paid before a certain
date. Then he sold the mortgage. The court held he was free to
revoke at any time before the oferee accepted by performing the
act--- acts in preparation for performance/tender not good enough
for acceptance (may be enough for promissory estoppel)
R2d §71: Requirement of Exchange; Types of exchange
(1) To constitute consideration, a performance or a return
promise must be bargained for.
(2) A performance or return promise is bargained for if it is
sought by the promisor in exchange for his promise and is
given by the promisee in exchange for that promise.
(3) The performance may consist of
a) an act other than a promise, or
b) a forbearance, or
c) the creation, modification, or destruction of a legal
relation.
(4) The performance or return promise may be given to the
promisor or to some other person. It may be given by the
promisee or some other person.
ALTERNATIVE VIEW—Professor Fried. Promises just should be
enforceable. We make our own universe—if you make a gist you
cant take it back--- promise should be the same. The law should
respect and enforce moral obligation.
Prof. Melvin Eisenberg—might be a change of circumstances. If its
not bargained for should be able to take it back.
The three functions of legal formality: (Prof. Lon Fuller 1941)
1) evidentiary—evidence of assent
2) cautionary—acts as a check against inconsiderate action
3) channeling—simple and external test of enforceability
II.
Valid Consideration
R2d § 79: Adequacy of Consideration: Mutuality of
Obligation
If the requirements of consideration are met, there is no
additional requirement of
a) a gain, advantage or benefit to the promisor, or a
loss, disadvantage, or detriment to the promisee; or
b) equivalence in the values exchanged
c) “mutuality of obligation”
Bargained For Exchange (cont. §71)
Not just haggling!

Benefit/Detriment Test
A. either the promisee suffers legal detriment by
1) promising to do what he is legally not
obligated to do
2) OR by refraining from doing what he can
legally do
B. OR the promisor must obtain a legal benefit.
(do not need both A & B)

Mutual Inducement
Must be supported by each other.
A. The promisor is promising in order to induce
conduct
B. The promise must induce the detriment:
1) offeree must know of offer and intend to
accept
2) offeree must be induced to act because of the
promise

Partial Inducement Okay
R2d § 81: Consideration as Motive or Inducing
Cause
(1)
(2)
the fact that what is bargained for does not of itself
induce the making of a promise does not prevent it
from being consideration for the promise.
The fact that a promise does not of itself induce a
performance or return promise does not prevent the
performance or return promise from being
consideration for that promise.

Non-Economic Okay—does not have to be $$

If performance is consideration—a promise to perform is
consideration
R2d §75: Exchange of a Promise for a Promise
Except as stated in 76 & 77, a promise which is
bargained for is consideration if, but only if, the promised
performance would be consideration.
R2d §77: Conditional Promise
1) A conditional promise is not consideration if the
promisor knows at the time of making the promise
that the condition cannot occur.
2) a promise conditional on a performance by the
promisor is a promise of alternative performances
within 77 unless occurrence of the condition is also
promised.
III.
Invalid Consideration
Gratuitous Promises Not enforceable (Dougherty)
Conditional gifts not enforceable
(Willistons Tramp Hypo—tell the tramp to walk to the store and you
will buy him a coat—condition not consideration)
Also like in plowman—condition to pick up check each week.

Test to determine if it is condition or consideration:
1) is the occurrence of the condition beneficial to promisor?
2) if yes, then there is a benefit and consideration
3) if promisee promises to do an act that they are already
legally bound to do, there is no consideration
Adequacy of Consideration
(Batsakis case): “Mere inadequacy of consideration will not void a
contract”
Adequacy is irrelevant as long as there is a bargain (except in
cases of fraud, unequal bargaining power etc.)
Past Consideration
Plowman case—past employment no good—no mutual
inducement
Promises made in return for past detriment or for services already
received.
Past debt-- ??? Not sure about this one.
Illusory Promises
A statement that appears to be promising something, but in fact is
not committing promisor to anything at all.
Du Pont case—both parties have to be bound
R2d §77: Illusory and Alternative Promises
A promise or apparent promise is not consideration if by its terms
the promisor or purported promisor reserves a choice of alternative
performance unless
a) each of the alternative performances would have been
consideration if it alone had been bargained for; or
b) one of the alternative performances would have been
consideration and there is or appears to the parties to be a
substantial possibility that before the promisor exercises his
choices events may eliminate the alternatives which would
not have been consideration.
UCC 2-306
“I’ll buy all that I require”—consideration is promisors parting with
right to buy elsewhere (???)
Moral Obligation (Penn-O-Tex case??)
moral obligation is not consideration
IV.
Remedy
The remedy for a breach of a classic K is FULL
PERFORMANCE—a better remedy than with restitution or
estoppel.
V.
Cases
Hamer v. Sidway (1891)
nephew abstains from gambling, drinking and smoking (things he
has a legal right to do) I exchange for is uncle’s promise to pay him
$$. Benefit/detriment and mutual inducement met. Any
forbearance of a legal right is sufficient consideration.
Dougherty v. Salt (1919)
Aunt promises to give $$ to nephew. She does not ask for anything
in return. Promise is not bargained for= not enforceable.
Baehr v. Penn-O-Tex Oil Corp. (1960)
the lessor of a gas station forbeared on suing b/c of a promise that
the rent would b paid. they argued that “not suing” was
forbearance of a legal right=consideration. Court held that their
reason was for personal convenience (they were out of town. . .)
not for consideration. Rule= the forbearance has to be bargained
for and in exchange for the promise/act of the other. Moral
obligation not enforceable.
Batsakis v. Demotsis (1949)
Gave $25 value in exchange for promise to pay back $2000. She
argued that there was no consideration because _____. the court
said she got what she bargained for. Rule: Inadequacy of
consideration will not void a contract unless it fails (does not
materialize) or is sham consideration.
E.I. Du Pont De Nemours & Co. v. Claiborne-Reno Co. (1933)
D agreed to act as sole distributor and P agreed to continue the
relationship as long as they were satisfied. After several years P
notifies D that the agreement was terminated. The court held that
since the agreement was cancelable at any time by D that it was
not fair to bind P to its promise. If one party can terminate at any
time the promise is illusory. (both parties have to be bound)
Plowman v. Indian Refining Company (1937)
Past employment is not consideration. Condition to pick up weekly
check is also not consideration. Past consideration is NOT good
consideration.
Restitution/Unjust Enrichment
Obligation in absence of consideration can be imposed because of
unjust enrichment.
If there is a traditional K—restitution NEVER applies
I.
General
Definition
There will be liability for a benefit received (unjust enrichment) in
the absence of a promise to pay for that benefit.
Restatement of Restitution § 1
“A person who has been unjustly enriched at the expense of
another is required to make restitution to the other.”
Types of cases:

rescue cases—life or property

3 party cases (Flooring)

incomplete bargaining

cohabitation (Watts)
Express Contracts
Implied In fact
Implied In Law
Lon Fuller (1941)
types of obligation:
1) contract
2) reliance
3) unjust enrichment
II.
Common Law
An act done for the benefit of another without his request is a
voluntary act of courtesy for which no action can be sustained.
(Glenn v. Savage)
there has to be:

request for or knowledge of performance, or

promise to pay afterwards (after finding out)
III.
Modern View
The promise is IMPLIED-IN-LAW or a QUASI-CONTRACT
Implied In fact: no need for explicit mutual assent—court implies
mutual assent from the conduct of the parties
Implied In Law: No explicit or implicit MA, court just inserts
obligation as a matter of law
Elements:
1. benefit to D
2. D knows about it
3. it would be unjust to let D keep benefit
4. benefit was not rendered gratuitously
(Watts v.Watts)
HEALTH/EMERGENCY
Restatement of Restitution §116
Preservation of anothers life or health
1. plaintiff acted unofficiously
2. with intent to charge
3. the services were necessary to preserve the others life or
health
4. person had no reason to know that the other would not
consent
5. it was impossible to the other to give consent
cohabitants may raise claim based on unjust enrichment after
termination if one retains an unreasonable amount of property
acquired through the efforts of both. An implied in law K/
Three approaches:
Wisconsin & California: You can enforce express, implied in fact,
or implied in law. Public policy never a problem.
Illinios (Hewitt v.Hewitt) & Mississippi: Public policy is always a
problem—enforce on none
New York: If you have an express agreement its okay. Implied in
fact and implied in law doesn’t work—family relationship presumed
to be out of love and affection.
Andy’s Glass Shops v. Leelanau Realty (1977-Ohio)
Lessor/Lessee relationship—did the owner receive an appreciable
benefit? Yes. tenant had Andys Glass fix the window and did not
pay—Andys sued the building owner. they did receive a benefit.
(would have had to fix the window anyway!)
Promissory Restitution
I.
General
Material Benefit + Promise to Pay = good restitution case
PROPERTY
Restatement of Restitution §117
Preservation of another’s things or credit
1) in lawful possession
2) reasonably necessary to act
3) no reason to believe owner would refuse
4) intended to charge or keep things
5) things have been accepted by owner
THIRD PARTY ARRANGEMENTS
Restatement of Restitution §110
A person who has conferred a benefit upon another as the
performance of a contract with a third person is not entitled to
restitution from the other merely because of the failure of
performance by the third party.
(example in Flooring—it made a difference that Radisson had not
yet paid Five Star—see below)
Good
1.
people in need of help should
get it
2.
people who help should be
compensated
Bad
A person who promises to pay after the benefit is conferred should
have to pay because it is the moral thing to do.
Minority view—cts don’t like this b/c of strong moral obligation and
past consideration. but the fact that it is in the Restatement gives it
weight.
R2d § 86: Promise for Benefit Received
(1) A promise made in recognition of a benefit previously
received by the promisor from the promisee is binding to the
extent necessary to prevent injustice.
(2) A promise is not binding under subsection (1)
(a) if the promisee conferred the benefit as a gift or for other
reasons the promisor has not bee unjustly enriched; or
(b) to the extent that its value is disproportionate to the
benefit.
THE MATERIAL BENEFIT RULE (§86)

material benefit

in recognition of benefit received

not conferred as a gift

proportionate to the benefit received
Good
IV.
Cases
Glenn v. Savage (1887)
Plaintiff sought to recover for services he performed to save
defendants lumber from being swept away—even though he was
not requested to do so by def. Ct said it was a gratuitous act and
does not give rise to a duty to pay. have to either 1) know about it
or 2) after finding out promise to pay.
In re Estate of Crisan (1961)
Defendant collapsed in store & hospital took her in and cared for
her till her death. They tried to collect from her estate the cost of
the emergency service and care. Court applied the elements of
R.Rest. § 116.
Flooring Systems Inc. v Radisson Group Inc. (1989)
Radissons agent (CSA) invited the subcontractor (Flooring) to bid
on carpeting at Radisson. CSA accepted bid from Flooring and
entered into K with Five Star (General Contractor) Five Star then
entered into a subK with Flooring. Five Star went bankrupt and did
not pay Flooring for the work. therefore, Radisson did not pay Five
Star. Ct. held that even though there was no contract between
Raddison and Flooring, Radisson still had to pay because
otherwise they would be unjustly enriched. (may have been
different if they had already paid in full to Five Star)
Watts v. Watts (1987) Supreme Ct. of Wisconsin
Upon termination of non marital cohabitation agreement the
plaintiff sought an order of business & personal assets
accumulated during the cohabitation. Although there was no
express K, the court allowed recovery. Rule: Unmarried
1.
2.
Bad
Promises in general should be
enforceable—if people want to
bind themselves to gratuitous
transfers –why not?
promise to do something + cts
belief that it should be done=
enforceability (Fuller)
3.
4.
5.
6.
II.
no evidence that promisor
intended to be bound
we don’t want to discourage
gratuitous acts of kindness by
making them binding
taking moral obligation as
consideration—slippery
slope—all promises binding
cts want to draw the line on
enforcing morality
Remedy
Court limits enforcement to the reasonable value of the services
rendered—not the full promised amount if disparity is great.
III.

Other cases where Subsequent
promises are enforced
Promise to pay a debt barred by S/L
R2d § 82: Promise to Pay Indebtedness; Effect on the
Statute of Limitations
(1) A promise to pay all or part of an antecedent contractual
or quasi-contractual indebtedness owed by the promisor
is binding if the indebtedness is still enforceable or would
be except for the effect of the statute of limitations.
<Any acknowledgment of the existence of the debt functions
as an implicit promise to pay. Part payment of the debt is also
an implicit promise>
Promissory Estoppel (§90)
I.

Promise to pay a debt discharged in bankruptcy
R2d § 83: Promise to Pay Indebtedness Discharged in
Bankruptcy
An express promise to pay all or part of an indebtedness of
the promisor, discharged or dischargable in bankruptcy
proceedings begun before the promise is made, is binding.
* Only the new promise is enforceable.

Promise to pay a debt incurred by an infant
R2d § 85
Debt incurred by an infant—promises to pay after the
child has come of age. (??)
General
Un-bargained for Reliance.
Detrimental reliance—used in lieu of consideration to enforce a
promise.
* (Distinguish from Equitable Estoppel (estoppel in pais)
which is a misrepresentation of existing facts. Cts are
more willing to rely on EE than on PE. (example—
insurance policy expires Nov 15, but carrier tells you Dec
15. house burns down Dec 1—carrier equitably
estopped from claim of expired policy. In Ricketts—the
“fact” was a promise. ) More reasonable to rely on
existing fact: “I put $2000 in your account. Its done”
R2d § 90: Promise Reasonably Inducing Action or
Forbearance
(1) A promise which the promisor should reasonably expect to
induce action or forbearance on the part of the promisee or a
third person and which does induce some action or
forbearance is binding if injustice can be avoided only by
enforcement of the promise. The remedy granted for breach
may be limited as justice requires.
(2) A charitable subscription or a marriage settlement is binding
under Subsection (1) without proof that the promise induced
action or forbearance.
§90 Elements:
IV.
Cases
Mills v. Wyman (1825)
25 year old son came back from overseas and became ill. Mills
took in son and cared for him till he died. Wyman (father) promised
to pay for the service and later refused. Ct. held that moral
obligation is not enforceable. Also—benefit was received by a third
party. There must be some pre-existing obligation or it is not
enforceable (debt for example). This is The MAJ. RULE
Webb v. McGowin (1935/36)
Plaintiff saved the defendant from grave danger by placing himself
in danger and subsequently suffering harm. He promised to pay
upkeep for the injured guy which he did for 8 years till his death.
executors of estate refuse to pay. Ct held that a moral obligation
was sufficient consideration to support a subsequent promise if the
promisor has received a MATERIAL BENEFIT. Minority Rule.
Judge Samford, concurring—said that the law says no way can
this guy recovery—but courts have to enforce not only the law but
also justice. Quoting Chief justice Marshall: “I do not think that law
ought to be separated from justice, where it is at most doubtful”
1.
2.
3.
4.
a promise
reasonable forseeability that promisee or a 3rd party will rely
actual reliance
enforcement of promise necessary to avoid injustice
With respect to element 4—don’t forget “Substantial &
material change in position” (Fried v. Frank—Flower Shop) v.
“Unconscionable injury” (Tutak v. Tutak—marriage New York)
Also in other jx’s—“risk of substantial injustice”
II.
Remedy
Remedy can be limited to what is required to even out the injustice.
“as justice requires”
III.
Special Applications/Circumstances
Family Relationships





Gifts between family members are assumed to be
gratuitous—not generally enforceable on contract or
restitution theory
See if promise is too indefinite?
However, courts will enforce PE if there was actual reliance.
See Kirksey (no obligation), Ricketts (Equitable estoppel
theory=obligation), and Greiner (PE).
Reliance= substantial change in position
Charitable Subscriptions

§90(2) explicitly states they are enforceable even if reliance is
not proved. MINORITY VIEW. policy= want to enforce
charitable donations.

Enforced by Consideration
a) if the promisor asks the promisee to do something in
exchange for the promise there may be adequate
consideration.
b) If charitable pledges are made in reliance on other
pledges, the pledges are consideration for each other

Enforced by Detrimental Reliance
If charity allocates funds and makes commitments in
reliance on the pledge, pledgor is estopped from denying
obligation
Good
1.
charities rely on donations for
their existence/activities
2.
§90(2) is a good thing—we
want charities to get their
money
Bad
3.
characterizing who is
charitable and who is not can
be problematic
4.
people might not write a check
for a charity for more than they
have in their bank account
right now—may discourage
installment gifts
Marriage Settlements
R2d §90(2) says they are enforceable even if no evidence of
reliance.
Don’t know what this means-- ??
Commercial Promises: Pensions
Must be actual reliance. (employee might have retired anyway;
employer may argue that would have been fired anyway)
Commercial Promises: Prior to Contractual
Agreement
Promises exchanged prior to entering into contracts:

courts will sometimes enforce when one party has relied upon
another’s promise (Universal Computer)

courts will be influenced by which was in a better position to
avoid the detrimental effect—equitable argument
Third Party Reliance
A third party that relies on a promise bewteen the first two. Bank—
gives line of credit to Mfg. Co.--- Suppliers. Bank cuts off money
and suppliers don’t get paid. Suppliers sue bank b/c they promised
a line of credit.
IV.
Cases
Kirksey v. Kirksey (1845)
Pre reliance. Plaintiff moves her family relying on brother-in-laws
promise. It appears to be a gift rather than bargained for exchange
b/c no consideration. (What about his comfort of having them
close??) Court does not recognize PE and says moving was a
condition of the gift.
Ricketts v. Scothorn (1898)
Plaintiff relies upon grandfathers promise to pay so she doesn’t
have to work. Ct held that there was no consideration (receiving
money not conditional on her quitting job) but recognized that
defendant meant for her to rely and that she did in fact rely and
alter her position. Ct. applies Equitable Estoppel and states that
the fact misrepresented IS the promise. Here gave her a note and
said “here, its done.” (see above). Note was the fact, but note was
just a promise.
Greiner v. Greiner (1930)
Mother promised son an 80-acre section if he moved back onto
land. he relied on her promise to give him the deed—PE applied. it
is enforceable.
Fried v. Fisher (1938 Pennsylvania)
Two partners have lease for 3 years for a flower shop. Fisher asks
landlord if he can get out of lease to go start a new business
(restaurant) landlord says “no problem” Then, when partner #2 and
the flower shop fail—he sues both of them for rent. Fisher relied
(PE applied.) Fried argues that he is better off now—no detriment.
Ct. says a “substantial & material change of position” is enough to
prove reliance.
Suna Tutak v. Koren Tutak et.al. (1986 New York)
Father promises support and a house to her if she marries his son.
She does, he doesn’t fulfill promise. They say she has not suffered
an “unconscionable injury” in reliance on the promise. They see no
risk of injustice—harsh rule.
Allegheny College v. National Chautaqua County Bank (1927)
Johnston pledged $5000 after her death if they would set up a
memorial fund in her name. Cardozo found O+A+ Consideration
(naming of scholarship) because the DR was lacking. (Cardozo
has to do his dance b/c this is before §90(2) was added—with R2d
in 1979)
Kellogg—dissent. It was a gratuitous gift!
Maryland National Bank v. United Jewish Appeal Federation
(1979)
UJA tried to enforce a charitable pledge against the donor’s estate.
Ct. held that there was no detrimental reliance b/c funds went to
general fund. (even though they argued other pledges may have
relied upon his pledge- consideration) Policy—don’t discourage
charitable donations.
Rejects §90(2)
Katz v. Danny Dare (1980)
Danny Dare induces Katz to retire –spent 13 months persuading
and Katz finally retires based on $13,000 per year promised. DD
tried to renege when he thought K was well enough to work again.
Said he would have been fired anyway and therefore could not
have relied upon the promise of pension (Hayes v. Plantation Steel
Co.-- 1982)—guy announced retirement, then they gave pension
offer. It has to be in reliance on the promise.
(Feinberg v. Pfeiffer Co-1959) Board passed a resolution saying
she could have pension when she retired. two years later she
retired. She relied on promise in making her decision to retire. (No
risk that she would have been fired)
Universal Computer Systems v. Medical Services Assn. (1980)
Pre-Acceptance reliance Form of Prommissory Estoppel: Offer
may be irrevocable even if the offeree did not seek the specific
protection of an option contract, if the offeree expends resources
or changes position in the belief that the offer will remain open.
Common in General contractor/Sub Contractor relationships.
II.
Majority Rule: Drennan –§87(2)
R2d § 87(2)
An offer which the offeror should reasonably expect to induce
action or forbearance of a substantial character* on the part of
the offeree before acceptance and which does induce such action
or forbearance is binding as an option contract to the extent
necessary to avoid injustice.
*but Prince says you prove the same amount of reliance
Stated by Justice Traynor in Drennan
Reliance is reasonable—adopts PE to pre-acceptance reliance.
Qualifications (note that these are Drennan qualifications—they
do not appear in 87(2)!! ):

Palpable Mistake Rule. If general contractor knew the bid was
too low—it would not be reasonable for him to rely on it, and
thus not just to enforce it

If subcontractor makes it clear + explicit in the bid that it IS
revocable—then court will uphold that

General must accept contract promptly after receiving the
job—not fair to keep subcontractor on the hook after that—no
shopping around!

Court will only enforce reliance on an offer for a reasonable
time

Cannot assert reliance if negotiations are reopened
DIFFERENT from §90 b/c:

here you need reliance of a substantial character

does not have the third person clause
As this is treated like an option contract, the mailbox rule does not
apply.
Good
1.
takes the practices of the
industry into consideration—
an implicit option? (Legal
Realism—economic analysis)
2.
Traynor is worried about the
sub—and takes steps to see
that they are not hurt by the
rule (see qualifications)
III.
Bad
3.
Is Traynor legislating here?
4.
Minority Rule: Baird
A bid is an offer and Promissory Estoppel does not apply to
offers—it is only used in place of consideration when Mutual
assent is found. (Justice Hand in Baird)
Promise—made with no expectation of considration
Offer--- contemplates specific consideration
Pre-Acceptance Reliance §87(2)
I.
General
Limits the offerors power to revoke. Usually they can revoke at any
time prior to acceptance. This is an exception—
IV .
Cases etc.
James Baird Co. v. Gimbel Bros., Inc. (1933—Ct. Of Appeals 2d
Circuit)
Justice Hand. Plaintiff is general contractor and defendant is
linoleum seller subcontractor. Ct. held that subcontractors bid was
an OFFER not a promise. That if there was to be an option to keep
that offer open there had to be consideration. No consideration
because Baird had not made a promise in return. It is unfair to bind
only one party and not the other—therefore REJECTS preacceptance reliance as PE.
Drennan v. Star Paving Co. (1958 California Sup. Ct)
Justice Traynor: Same facts as Baird except the sub is a paving
company. The court relies upon §90 Prommissory Estoppel to
conclude that a bid that the subcontractor should have reasonably
expected reliance of a definite/substantial nature
on should be enforced to avoid injustice. §87(2) endorses
Drennan.
II.
Characteristics

CONSIDERATION: An Option to keep an offer open is like a
contract within a contract—it needs its own consideration.
MINORITY RULE. Unlike regular consid. it does not have to
be exchanged—recitation is enough. Can be nominal. (This is
an exception to the rule about sham consideration – most
courts do not follow this exception—see Berryman.)

MAILBOX RULE: Does not apply. Acceptance is valid upon
RECEIPT.
WRITING: It must be in writing and therefore falls within
Statute of frauds (???)
PROMMISSORY ESTOPPEL: Is applied when there is an
implied or express promise to keep the offer open.
UNILATERAL K: Don’t forget §45—part performance on a
unilateral K creates an option.



III.
UCC: The Merchants Firm Offer
Option that does NOT NEED consideration. there are not many 2205 cases: one example—raincheck)
§87(1) (b)
**Part (b): Irrevocability by statute
This is not really necessary b/c if there is a statute—of
course you follow it. You don’t need the Restatement to
tell you to follow a statute—its just a reminder that this is
one of the ways an offer can be made irrevocable.
UCC 2-205: The Merchant’s Firm Offer <An offer by a merchant
to buy or sell goods is not revocable when:
1) it is made in a signed writing that says offer will be
held open (over the phone is never enough) See
Shoney’s (below)
2) They have to be signed separately from the other
terms. (protection from hiding the firm offer in a
form prepared by the offeree—has to eb called to
their attention)
3) Good= a moveable; Merchant= one who deals in
goods of the kind—not a consumer
4) It has to be an offer. Is a price quote an offer?
(Might be just preliminary negotiations)
The period of irrevocability is
1) what is stated in the offer
2) a reasonable time period
3) but in no case longer than 3 months (but may be
renewed)>
IV .
Cases
Option Contracts §87(1)
** the only way you can make a bilateral agreement irrevocable
I.
Creation
R2d § 87(1): Option Contract
An offer is binding as an option contract if it
(a) is in writing and signed by the offeror, recites a purported
consideration for the making of the offer, and proposes an
exchange on fair terms within a reasonable time; or
(b) is made irrevocable by statute
An Option to keep an offer open is like a contract within a
contract—it needs its own consideration.
Berryman v.Kmoch (1977) Kansas S. Ct.
Entered into an agreement to purchase land. Option was created
and consideration was recited but not paid. ($10) Berryman tried to
get out of the option to sell to Kmoch. Kmoch said he detrimentally
relied upon it—by looking for buyer’s etc. (tried to get §90 PE). You
have to have consideration to keep an option open. Consideration
has to be real—not just an illusory promise! (in this case he
promised nothing and was bound to nothing) Ct. is not sympathetic
to Kmoch b/c he is a businessman and should have kown better—
should have created a better K (he drew it up).
Hoffman v. Red Owl Stores (1965) Wisconsin S. Ct.
Hoffman was assured by an agent of red Owl that if he did certain
thinsg he could get a Red Owl store for $18,000. He followed all
the advice at great expense—moved family, sold bakery, bought
store, subsequnetly sold store, got loan from father in law etc.
There was no contract—no consideration. But court used §90 PE
to enforce to avoid injustice.
Mid-South Packers inc. v. Shoney’s Inc. (1985)
III.
U.C.C.-- § 2-207
** Strongest candidate in the UCC for revision
No Mirror Image Rule under this statute.
An acceptance on new terms does not turn it into a counter-offer,
unless the acceptance is EXPRESSLY made consitional on the
new terms. (Trouble is that now forms have expressly conditional
boilerplate language! )
Rules:
1) if at least one party is a non-merchant—the new terms DO
NOT become a part of the contract w/out express agreement.
2) If both parties are merchants, then the new terms
AUTOMATICALLY become part of the contract unless:
a) the offer expressly limits acceptance to the new terms
(offeror is still master of the offer. if they do not want any
terms added they can put language in the orginal offer to
that effect)
b) the new terms materially alter the offer (must result in
SURPRISE or HARDSHIP). Matreial: arbitartion clause,
limits on liability, choice of law/forum, alteration in price,
quantity or goods.
IV .
1.
2.
3.
4.
Analysis
is it sale of goods? If no, use common law. (applies to
everyone, not just merchants!! )
Was there an offer? (Use classical k rules to see)
if they used their own form, was sellers acceptance
expressly conditional? ( did they make it clear that they did
not agree if the new terms were not accepted?)
If yes—then the acceptance is really a rejection and a
counter-offer
If no—then they go on to determine if the additional terms
have become part of the agreement/contract.
has seller assented to the new terms? do they materially
alter the agreement?
Battle of The Forms: UCC § 2-207
I.
General
Problem arises b/c business do not get together and hash out a
single document. In realty buyer makes on offer on their PO form,
seller accepts on standardized acceptance form. each form has
detailed boilerplate terms—they don’t agree. Which form is the
offer, which is acceptance, and if there is a contract—whose terms
do you use?
II.
Common Law: Mirror Image Rule
Under the common law Mirror image rule any acceptance that
changes the terms is a rejection + counter-offer.
Offers may be accepted by conduct as well as words
(performance.)
Last Shot Rule
Therefore, every form exchanged has new terms in boilerplate and
therefore is a COUNTER-OFFER. When goods are finally
shipped/accepted—this constitutes acceptance. The last form
before shipment wins—its terms rule. (Poel)
V.
Cases
Poel v. Brunswick –Balke-Collender Co. (1915)
Offer to buy rubber. Rubber guy wrote back with new terms added.
Buyer accepted and added more terms. Buyers boss says it is
invalid b/c he did not have authority to negotiate. Ct said that this is
not an acceptance but a counter-offer. R2d §59.
Shilsey+Birch v. TreeTop (1987) 7th Circuit
Dehydrated apples—sold to nabisco for making strawberry and
blueberry toastettes. Have done ten deals in the past. Agreed over
the phone. Treetop sends an acknowledgement that contains
arbitration clause. (new term) Therefore—counteroffer. Last shot
rule applies once the apples are shipped and accepted. Last
shipment—bad apples! But they cannot sue b/c of of arbitration
agreement. It can be HAPPENSTANCE which one is the “last
shot.”
many courts as a per se rule state that arbitration clause is a
material alteration
UCC 2-207: expressly conditional stuff. If terms are unclear b/c of
battle of the forms— all the terms are in the K.
UCC §2-204: Formation in General
subsection (3)
Even though one or more terms are left open a contract for sale
does not fail for indefiniteness if the parties have intended to make
a contract and there is a reasonably certain basis for giving an
appropriate remedy.
UCC §2-305: Open Price Term Provision
(1) the parties if they so intend can conclude a contract for sale
even though the price is not settled. in such a case the price
is a reasonable price at the time of delivery if
a) nothing is said as to price; or
b) the price is left to be agreed by the parties and they fail
to agree; or
c) the price is to be fixed in terms of some agreed market
or other standard as set or recorded by a third person or
agency and it is not so set or recorded
(2) A price to be fixed by the seller or the buyer means a price for
him to fix in good faith.
(3) . . .
(4) . . .
**they still will not figure out a missing quantity term, and if the
price term is vague or ambiguous (as opposed to missing the
K is invalidated. Why should cts have to figure it out?
IV .
Agreement to Agree
I.
General
“Contract to Bargain” (Professor Knapp)
“Agreement to negotiate” (Professor Farnsworth)
“Binding preliminary agreement” (Judge Leval)
Postponed Agreement; parties have agreed to agree at a later
time. Some terms left open—not to an objective standard but to
whatever they agree to in the future.
II.
Common Law
Under the C.L. these are NOT ENFORCEABLE
§27—contract may be formed even if a written doc. was
contemplated later
§33—certainty of terms
Cts split—will sometimes supply missing terms (esp. if the K has a
coherent formula to determine the term) but often won’t!
The cts shouldn’t have to do this!
Good
1.
language of K may indicate
intent to eb bound—if they
intended to be bound they
should be
2.
III.
UCC
Bad
1.
if the y intended to be bound
they should have made a
good contract- clear terms
2.
this wastes the courts time!
Duty to negotiate in good faith
Cts look at:
1)
2)
3)
V.
usage of trade
course of dealing (did parties have same clause in prior K’s?)
course of performance
Cases
Walker v. Keith (1964)
Plaintiff rented property for ten years under a lease that had an
option to rent for ten more years—rent for the additional ten year
period was to be agreed upon by the parties. They said said rental
value should reflect comparative business conditions. Ct. held that
the failure of the parties to include essential contract terms renders
the offer and acceptance ineffective and no K is formed. The
parties have merely an agreement to agree which is not binding
w/out the material terms being either agreed upon, or having a
definite method/formula for reaching a decision about those them.
Teachers Insurance & Annuity Assoc. of America v. Butler (1987)
After negotiations for a construction loan, material terms were
agreed upon but the partied did not agree on all the necessary
terms to complete the deal. Butler began talking to other lenders to
get a more favorable loan package. Ct. held that parties are bound
to negotiate in good faith all the trems not decided in the
commitment letter which constituted a binding agreement.
Teachers Insurance & Annuity Co. v. Tribune Co. (1987)
Defendant is the owner of New York Daily News—they wanted to
add a provision about how they would account for the loan on their
balance sheets b/c they were anticipating an IPO. negotiations
broke down ostensibly over this issue—TIAA claimed that the real
reason was the downturn in interest rates.(Same as in TIAA v.
Butler) Ct. held that defendants insistence on a condition that
wasn’t in the original scope of the parties agreement had breached
a duty to bargain in goo faith.
Pennzoil v. Texaco
Pennzoil + Getty Oil made preliminary agreement on joint venture
to buy all Getty stock at $110. Meanwhile, Getty got a better offer
from Texaco at $125 a share. Getty board approved formal merger
agreement with Texaco. Pennzoil sued in Texas cts for and got a
actual damages of 7.53 billion + punitive damages of 3 billion. (wall
street journal called it the “largest civil judgment in history”. In
order to stay enforcement of of the judgement pending appeal they
would have had to post appeal bond in amt of 12 billion. They
argued this was unconstitution—won at district & appekate level
but lost at S. Ct.
My question for Prince—why didn’t Pennzoil sue Getty—was Getty
already merged with texaco?
defense beyond $5000 in amount or value of remedy
(UCC 1-206)
(3) . . .
(4) . . .
(5) In many states other classes of contracts are subject to the
requirement of a writing.

One year provision—if it can possibly be completed within a
year it doesn’t need a writing (for example lifetime
employment—possible to have it complete in one year if
employee dies.) It is covered by SOF if there is NO WAY it
could be complete in year. (2 year employment K for
example)
Oglebay Norton Co. v. Armco (1990)
Great example of courts notion that an agreement to be bound
should be enforced even if the terms are not so clear. The parties
had a 25 year relationship (in force since 1958 + was supposed to
go through 2010) Had a provision for figuring out the price but it
failed—they disagreed—etc. Ct. declared contract valid, fixed a
priuce for the current season, and ordered the parties to negotaite
or mediate for the price for the remaining years of the K.
Statute of Frauds
I.
General
Some contracts have to be in writing. (Lots of contracts don’t! )
Comes AFTER the analysis of “Is there a contract?”
It is an AFFIRMATIVE DEFENSE that must be raise early.
** Compliance with the statute does not, by itself, make a contract
enforceable. But failure to comply with the statute may keep the
claim out of court on the merits -- even if it is supported by
consideration. (However there may be claims of restitution or
estoppel)
II.
Analysis
Questions to ask:
1) is it within the scope of the SOF?
2) If yes, is there a sufficient writing?
3) If no, are there any exceptions to invoke and equitable
exception?
Scope of SOF
R2d §110: Classes of Contracts Covered
(1) The following classes of contracts are subject to a statute,
commonly called the Statute of Frauds, forbidding
enforcement unless there is a written memorandum or an
applicable exception:
(a) a contract of an executor or administartor to anser for a
duty of his decedent (the executor-administartor
provision);
(b) a contract to answeer for the duty of another (the
suretyship provision);
(c) a contract made upon consideration of marriage the
marriage provision);
(d) a contract for the sale of an interest in land (the land
contract provision);
(e) a contract that is not performed within one year from the
making thereof (the one-year provision);
(2) The following classes of contracts, which were traditionally
subject to the Statute of Frauds, are now governed by the
Statute of Frauds provisions of the Uniform Commercial
Code:
(a) a contract for the sale of goods for the price of $500 or
more (UCC 2-201)
(b) a contract for the sale of securities (UCC 8-319)
(c) a contract for the sale of personal property not otherwise
covered, to the extent of enforcement by way of action or
Sufficient Writing
R2d §131
Unless additional requirements are prescribed by the particular
statute, a contract within the Statute of Frauds is enforceable if it is
evidence by any writing, signed by or on behalf of the party to be
charged, which
(a) reasonably identifies the subject matter of the
contract,
(b) is sufficient to indicate that a contract with respect
thereto has been made between the parties or
offered by the signer to the other party, and
(c) states with reasonable certainty the essential
terms of the unperformed promises in the contract.
R2d § 132: Several writings
The memorandum may consist of several writings if one of the
writings is signed and the writings in the circumstances clearly
indicate that they relate to the same transaction.
R2d § 133: Memorandum Not Made as Such
Except in the case of writing evidencing a contract upon
consideration of marriage, the Statute may be satisfied by a signed
writing not made as a memorandum of a contract.
<love letter exception>
R2d § 134 : Signature
The signature to a memorandum may be any symbol made or
adopted with an intention, actual or apparent, to authenticate the
writing as that of the signer.
<i.e. letter head is good enough>
Exceptions
1.
2.
3.
4.
part performance w/ regards to land
reliance on a K—promise of performance
reliance that a writing has already been done (Equitable
estoppel)
Reliance on a PROMISE of a writing (Promissory estoppel)
Part performance:
R2d § 129
Applies only for contracts in transfer of an interest in land and
only suits that are for specific performance (not damages etc.)
Part performance is an equitable doctrine which is why relief is
limited to enforcement of performance. (see Winternitz)
Reliance on a K:
R2d § 139: Enforcement by Virtue of Action in Reliance
(1) A promise which the offeror should reasonably expect to
induce action or forbearance on the part of a promisee or
third person and which does induce the action or forbearance
is enforceable notwithstanding the Statute of Frauds if
injustice can be avoided only by enforcement of the promise.
the remedy granted for breach is to be limited as justice
requires.
(2) In determining whether injustice can be avoided only by
enforcement of the promise, the following circumstances are
significant:
(a) the availability and adequacy of other remedies,
particularly cancellation and restitution;
(b) the definite and substantial character of the action or
forbearance in relation to the remedy sought;
(c) the extent to which the action or forbearance
corroborates evidence of the making and terms of the
promise, or the making and terms are otherwise
established by clear and convincing evidence;
(d) the reasonableness of the action or forbearance
(e) the extent to which the action or forbearance was
foreseeable by the promisor.
Plaintiff claimed that he was hired for a 2 year contract. No formal
writing, but several pieces of writing including timecard and note
written by arden’s secretary. SOF does not require the writing to be
in one document. It can be pieced together by separate writings,
connected with one another either expressly or by referencing the
same transaction/subject matter.
Also, writing can be MADE LATER!
Winternitz v. Summit Hills Joint Venture (1987)
Plaintiff claimed part performance to defeat bar by the SOF. This
doctrine can only be used to get specific performance NOT money
damages. They had oral agreement to renew their lease and allow
W. to assign it to a purchaser.
** §139 PE is harsher than §90 promissory estoppel because you
have to show a “definite & substantial” reliance—and because it is
a last resort only. (have to look at other remedies first.) therefore a
donative promise is more easily enforced than a contract—
because if the contract falls under SOF you have to use 139!
McIntosh v. Murphy (1970)
Guy took job in Hawaii for one year period. employer contends that
it was at will and even if not, the claim is still w/out merit b/c he
would have needed a writing if his K was for a year and a few
days. It all depends on how you count the days of the year. ,Ct.
held that either part performance or equitable estoppel will take the
K out of the SOF. It was foreseeable that he would rely, he did rely,
therefore Murphy is estopped from pleading SIF as a defense.
Must also show injustice in addition to elements of §139.
Reliance on a Writing:
Cohn v. Fisher (1972)
This only gets you past the SOF defense—you still have to look at
the existence of a contract.
1. Equitable estoppel: Misrepresenting facts about the existence
of a writing. (It’s signed and its here)
2. Promissory estoppel: Misrepresenting that he would give a
writing. “Just come here and start work and I’ll give you a
writing then.’
III.
Policy
Originated in England in 1677. adopted by most US states.
Abolished in England except as to sale of interest in land.
1.
2.
3.
4.
IV .
avoid fraud and perjury
clarity—you could be mistaken (memories fade)
encourages deliberation before entering a K—makes people
take it seriously
judicial efficiency
UCC § 2-201
Statute of Frauds for the Sale of Goods.
1.
2.
3.
4.
writing must be signed
by the party to be charged
does not have to have explicit terms of the contract, just has
to evidence that there is a K (It must have a quantity term, but
doe s not have to have a price term)
If both parties are merchants the receiver has to respond
within ten days to any writing he receives.
exceptions:
1) if parties admit that a contract was formed
2) if there has been part performance—but then enforce only to
the extent of the performance
3) if there is 100% performance, (Full Perf.), then it is totally
enforceable notwithstanding the SOF
4) Indivisible goods. If the K is for one indivisible good (boat, car
etc.) then putting down a dep. is sufficient performance to
make it enforceable.
5) Product manufactured specially so that it cannot be resold is
enforceable notwithstanding SOF
V.
Cases
Crabtree v. Elizabeth Arden Sales Corp. (1953)
NOTE:
What about electronic commerce? Authenticated v. signed.
(proposed changes to Article II)
II- sale of goods
II (a)-- lease of goods
II (b)—software (derailed b/c of problems)
nature of the performance and opportunity for objection
to it by the other, any course of performance accepted
or acquiesced in without objection is given great
weight in the interpretation of the agreement.
(5) Whenever reasonable, the manifestation of intention of
the parties to a promise or agreement are interpreted as
consistent with each other and with any relevant course
of performance, course of dealing, or usage of trade.
Interpretation
I.
General
Interpretation vs. Construction
Interpretation= process by which a court gives meaning to the
contractual language when the parties attach materially different
meaning to that language
Construction= judicial role in determining the legal effect of that
language.
this is a cumbersome & unnecessary distinction—just use
“interpretation”
R2d §200: Interpretation of a promise or agreement or a term
thereof is the ascertainment of its meaning.
II.
Standards & Tests
Subjective Approach
If parties attach materially different meanings to the language there
is no mutual assent & therefore no contract. The Peerless/Raffles
case (two boats called Peerless—one in Oct & one in Dec. each
party thought it was a different Peerless—no “meeting of the
minds”—no K)
Prof. Gilmore—“the untrammeled autonomy of the free will”
Objective/External Approach
Holmes said 1) the subjective approach made the enforcement of
contracts too difficult, and 2) the external method was fairer b/c a
speaker should always expect his words to be understood in
accordance with normal usage. This reasonable person standard
led to the conclusion that language could be given a meaning that
neither party intended.
Modified Objective Approach
Corbin & R2d §200
In interpreting a K the court should ask two questions:
1) Whose meaning controls the interpretation?
2) What was that party’s meaning?
Court should admit all evidence including subjective intent.

The purpose of interpretation is determining the meaning of
the language. R2d §200.

If the parties attach the same meaning that meaning governs
even if the objective standard would have a diff. result—
mutual understanding controls. R2d § 201(1)

If parties attach different meanings you look to see if one
party knew or had reason to know the understanding of the
other. R2d § 201(2)

Court will consider UOT, COD, COP
UOT—Usage of trade
COD—Course of dealings
COP—Course of Performance
R2d § 202: Rules in aid of interpretation
(1) Words and other conduct are interpreted in the light of all
the circumstances, and if the principle purpose of the
parties is ascertainable it is given great weight.
(2) A writing is interpreted as a whole, and all writings that
are part of the same transaction are interpreted together.
(3) Unless a different intention is manifested,
a) where language has generally prevailing
meaning, it is interpreted in accordance with that
meaning;
b) technical terms and words of art are given their
technical meaning when used in a transaction
within their technical field. (i.e. “chicken”)
(4) Where an agreement involves repeated occasions for
performance by either party with knowledge of the
Standard maxims:
Noscitur a sociis – “it is known from its associates” word can be
read in its immediate context
Ejusdem generis – “of same kind/class/nature” A general term
with a specific one will be deemed to include only thing like the
specific one. (“cattle, hogs, and other animals” probably include the
sheep but not the farmers pet dog)
Expressio unius exclusio alterius – “expression of the one is
exclusion of the other” If one or more specific terms are listed and
there are no gemneral terms, then other specific items of like kind
that are not listed are not included. (“the cattle & the hogs” does
not include the sheep)
Ut magis valeat quam pereat – “that the thing would rather have
effect than be destroyed” An interpretation that makes the K valid
is preferred to one that makes it invalid.
Omnia praesumuntur contra proferentum – If language can be
given two meanings you choose the meaning that favors the party
that did not draft the K—favors party of lesser bargaining power.
Interpret contract as a whole – writing or writings that form one
transaction should be read as one- read the whole context.
Purpose of the parties – principle apparent purpose of the parties
is given great weight. Use with caution.
Specific provision is exception to a general one – If two provision
are inconsistent the more specific one will be read as an exception
to the general one.
Handwritten or typed provision control printed provision If a written
contract has both typed and handwritten provisions- and they are
inconsistent—the handwritten ones prevail.
Public interest preferred – if the public interest is affected by the K,
the K will be interpreted in a way that is favorable to the public
interest.
III.
Problem Areas
Satisfaction clauses
When possible, interpret this by an objective standard— would a
reasonable person be satisfied, vs. subjective standard—is this
individual satisfied (good faith)
Objective/Reasonable—used in commercial context: quality of
work, operative fitness, mechanical utility
Subjective/Good Faith—used only when personal aesthetics are
an issue—artist painting a picture etc. Parties may also expressly
agree to adopt the subjective standard.
Problems with subj standard: puts the party that has to be satisfied
in a stronger position than seller—too much bargaining power.
Also economic waste—leads to forfeitures.
R2d §228
requires that a reasonable person standard be applied in
interpreting a satisfaction clause (desire to avoid forfeiture)
Contracts of Adhesion
Always a standard pre-printed form, although not ALL forms are
adhesion contracts.
Adhesion is when it’s a “take it or leave it” deal—usually with
insurance.
= inequality in bargaining power between the parties. (in fact it
might not even be a bargain)]

Doctrine of Reasonable Expectations
When the K contains a term that one party, had he known of
the term, would not have assented, and the other party had
reason to know this, the term will not be enforce.
Only enforce terms that could reasonably be expected.

R 2d § 211:

IV .
Adhesion K’s have three types of terms:
1) dickered or bargained for terms
2) standard form terms that people expect
3) standard form terms that people do not expect (that
eviscerate the bargained for terms)
This creates as exception to the Duty to read
Often applied to contracts of adhesion, although the doctrines
are separate. Generally applied only to insurance contracts,
though there is no rule to that effect.
Cases
Joyner v. Adams (1987)
Plaintiff is an owner of property & contracts with defendant to
develop the property. Three years later, the defendant becomes
the lessee b/c lot os not rented out or whatever. . . Plaintiff
contends that the rent escalation clause of the lease was triggered
by defendants failure to properly develop the property. def.
disagrees with interpretation. RULE: If one party had knowledge of
the others meaning then the K should be enforced pursuant to the
meaning of the innocent party. §201(2). Ct rejects the rule that you
construe against the person who drafted the K—this rule only
applies typically in adhesion K’s and in situations where one party
has stronger bargaining position--- and the presumption is that the
person who drafted it has reason to know of different meaning
attached by other party. It does not apply in this case!
Frigaliment Importing Co. v. B.N.S. International Sales Corp.
(1960)
Plaintiff ordered “chicken” from defendant, intending to buy young
cicken suitable for frying & broiling. Defendant believed that
considering the weights ordered at prices fixed by the parties that
the order could be filled with a mixture of young chicken and older
stewing chicken (“fowl” not “chicken” according to plaintiff).
rule is that the party who seeks to interpret the terms of the K in a
way that is narrower than their standard meaning bears the
burden.
1) look at K itself
2) usage of trade
3) negotiation of parties
4) extrinsic evidence at time K was made—market price
5) course of performance—allowed 2d shipment
6) definitions from other resources—USDA
Morin Building Products Co. v. Baystone Construction, Inc. (1983)
GM Corp refused aluminum siding wall for aesthetic reasons—did
not pay. (there was a satisfaction clause) But aluminum walls are
functional, not aesthetic.
Objective/reasonable standard: utility
Subjective/good faith: aesthetics
C&J Fertilizer, Inc. v. Allied Mutual Insurance Co. (1975)
Insurance contract coverage for burglary required that there be
external evidence of forced entry. (To draw a distinction between
inside & outside jobs) C&J was burgled—it was an outside job.
According to representations made by the agent it would have
been covered—but was not b/c no signs on exterior of building.
Doctrine of Reasonable Expectations
Adhesion terms cannot eviscerate the bargained for terms!
(where does this come from??)
Parol Evidence Rule
I.


Generally
written agreement cannot be supplemented by evidence of a
prior or contemporaneous oral agreement
only works to exclude evidence; does not affirmatively make
evidence admissable


rationale-- worried about perjury, slippery memory,provides
certainty in K’s, parties have to be diligent/careful about what
they put into written agreement
alternatively—potential for people to hide behind a writing
when they really did say something else—can take advantage
of people this way—unfair.
II.
1.
2.
Fully/Partially Integrated
Is it truly a PER problem or something else? Has to be a final
writing & someone is trying to ADD terms into that writing
based on prior writings or oral agreements. (PER does not
apply to subsequent oral agreements)
Is it partial or complete integration?

complete—when there is a complete exhaustion of all
terms in the agreement—everything is included in the
writing. In this case the court will reject the admission of
any extrinsic evidence. Nothing can contradict or
supplement the writing

partial—some terms may be left out. Cts look to extrinsic
evidence to the extent that it does not contradict or
change the terms of the K. It can only supplement it.
CONSISTENT TERM OR CONTRADICTORY TERM. A
term contradicts (directly negates) the writing when it
either (a) renders the writing invalid (majority) or when it
varies the writing or is not in complete harmony with it
(minority).
contradicts—cant use it
consistent—you can use it

III.
Two ways to determine if it is complete or partial
integration:
Williston—Four Corners: You only look at the document,
based on classical K law. Maj. Rule.
Corbin/Restatement—Look at the intent of the parties
and looks beyond the 4 corners. Lease it to the finder of
fact. Merger clause is NOT conclusive—just evidence of
parties intent.
(Extreme example is the two couples—one couple takes
the house with other couple having an option to
purchase it—the option ends up in the hands of a
bankruptcy trustee & when he tries to excercise the
option they say “but we meant that the option was only
for family members! ” Traynor says—looks partially
integrated. Highly critisized.
Exceptions
Does not apply to:
1)
2)
3)
4)
IV .
subsequent modification or understanding
when used for interpretation
(for example if there was an issue of what “cut in winters”
meant—issue of interpretation—evidence extrinsic to the
writing is of course allowed)
evidence introduced to establish a collateral agreement
between the parties
evidence offered to show that agreement is invalid for any
reason such as fraud, duress, undue influence, incapacity,
mistake, or illegality
Merger Clause
A statement in the K that writing is intended to be final & complete.
Three views on the merger clause:
1) conclusive of parties intent & therefore absolutely enforceable
2) Adhesion K therefore not enforceable at all
3) mere evidence of intent
V.
Cases
Thompson v.Libby (1885—Minnesota)
Plaintiff claimed an additional term (warranty) that was not in the
writing for the sale of some logs. Ct. says the writing is a complete
integration—looks complete on its face. therefore the Parol
Evidence Rule applies and there is no enforcement of the left out
term. Uses 4 corners test to see if it is a complete integration.
Sherrodd, Inc. v. Morrison-Knudsen Company (1991 Mont)
Sherrodd entered into agreement to move earth, but was told orally
that it was less earth and they agreed on a price based on the
lesser amount of earth. They then started work. Later, after much
work had been done AND they realized that they discussed price
was too low for the amount of work, then the Morrison Co.
presented a written K with the old $ amount on it. They told
Sherrodd if he didn’t sign it he wouldn’t be paid for work already
completed, and also gave him a contemporaneous oral assurance
that he would be paid the correct amount.
Sherrod—might have said that there was term left out (price per
sq. inch) of the K, but in this case the PER may have excluded
evidence .
Instead he tried to get rid of the K b/c of fraud, and recover
on a restitution theory.
** Contracts with Plain Meaning rule. Sometimes cts
say PER when they mean PMR—for example “I know
what this means—no parol evidence!”