Contracts Outline
Fall 1998—Prof. Soper
Farnsworth text
I.
CONSIDERATION AS A BASIS FOR ENFORCEMENT 44-55
Consideration: benefit to promisor, detriment to promisee.
1. debt—where someone has gotten something and now enforce the
payment of the debt—benefit to promisor
2. covenant—sealing doesn’t help today if there is no consideration
3. assumpsit—must be detriment to promisee
Hamer v. Sidway (pg47) (47) (f8)—An uncle promised his nephew $5,000 if he
gave up drinking, smoking and gambling until 21. He fulfilled the promise,
uncle promised to pay later, he died, executor argued that there was no
detriment to promisor because nephew was better off. Court said that he gave
up a legal right. Also could argue there was no benefit to promisee, but it could
be argued that the uncle did receive a benefit.
(If behavior is already illegal, bargain may not be valid. Already required not to
do it, so no detriment).
§79—Adequacy of Consideration; Mutuality of Obligation
If the requirement of consideration is met, there is no additional requirement
of: (105)
(a) a gain, advantage, or benefit to the promisor of a loss, disadvantage, or
detriment to the promisee; or
(b) equivalence in the values exchanged; or
(c) “mutuality of obligation”
Gift Promises (pg52) (49)—reasons for not enforcing:
Private (reasons that focus on fairness between the parties)
1. Promisor
a) not enriched b) may have acted rashly
2. Promisee
a) no harm
Public (society)
1. Gifts are sterile transactions in the market
2. Administrative—hard to prove—statement of present intent is very close,
but not a promise
Executed Gifts—gave the money. Ct says you can’t get it back
1. There is proof of the promise
2. Now we don’t care if you acted rashly
Peppercorn Theory (pg54) (68)—The idea that even something trifling in value
can be consideration as long as it is bargained for. The courts don’t want to
second guess people’s contracts.
1
1. A promises to sell Blackacre for $1 (worth $5000).
2. A promise to sell option to buy Blackacre for $1.
(1) looks like you are just trying to turn it into an exchange, so according
to §71, may not be consideration.
(2) an option can be worth $1, so probably okay.
II.
FORBEARANCE TO SUE AS CONSIDERATION 55-62
Fiege v. Boehm (pg55)-- promised not to institute bastardy proceedings
against  if he agreed to pay. After blood tests proved he was not the father, he
stopped paying, and she started bastardy proceedings. She tries to recover,
and he claims no K because the promise to forbear was based on an invalid
claim. Ct says that if she honestly believed that the claim was valid, then a K
did exist. There was consideration. Even if it was a worthless claim, he bought
peace of mind.
see chart (15) (3) (8)
Belief / Objective
Valid
Valid
X
Invalid
X
III.
Invalid
X (if colorable in
1st Restatement )
UNBARGAINED FOR RELIANCE 62-67; 84-98
Feinberg v. Pfeiffer (1962) (pg62 & 104) (16 & 22)-- worked for Pfeiffer for 37
years. President promises to pay her a pension as a reward for her years of
service and says that she can retire at any time. She works for another year
and a half and retires. She would have worked longer, but the promise was a
major factor in her decision. Later, the company stops paying the pension.
The ct says she has no right to recover because there is no mutuality of
obligation, and her past services are not valid consideration, nor was her
continued employment of a yr and ½ . She could have been fired or left the
next day. However, the promise was enforceable because she relied on it. (see
promissory estoppel)
Kirksey v. Kirksey (1845) (pg84) (18)— receives offer from brother-in-law
after husband’s death for land if she wants to move. Check first for a
bargain—no. Is it a gift? Ct. says yes. Dissent thinks that her loss and
inconvenience is sufficient consideration.
Today would probably get a different result under §90.
Use the up the ante test to find out if it is a bargain. (pg86)
2
Central Adjustment Bureau, Inc. v. Ingram (pg86) (18)—Former employees of
CAB left to form their own collection agency in violation of the non-competition
contracts they all signed after being hired. ’s argue that there was no
consideration because they had already started working. The ct says that
continued employment is sufficient consideration to support a non-competition
K because they could have been fired. Dissent thinks that additional
consideration is necessary, because after employment starts, the ’s have no
other options and are forced to sign. ’s bargaining position has been
eliminated—like duress. (Promotions are nice, but were not part of the
promise).
An employer may change the handbook to termination at will provided that the
employer gives notice. (pg95—Bankey)
IV.
RELIANCE AS A BASIS FOR ENFORCEMENT 98-107; 107-116
see chart (21)
Contracts
1
6
Promissory Estoppel
1
Estoppel “In Pais”
1
2
2
3
5
6
20th century
5
6
Must have an ind. cause
of action
Deceit
Misrepresentation
(broken promise)
Material
Fact
Scienter /intentional
Reliance
Damage
§90—Promise Reasonably Inducing Action of Forbearance
1) A promise which the promisor should reasonably expect to induce action of
forbearance on the part of the promisee or a third person and which does
induce such action or forbearance is binding if injustice can be avoided only
by enforcement of the promise. The remedy granted for breach may be
limited as justice requires.
2) A charitable subscription of a marriage settlement is binding under (1)
without proof that the promise induced action or forbearance.
Ricketts v. Scothorn (pg98) (21)—Granddaughter received a note from her
grandfather for $2000 so she would be able to quit her job. She did quit, and
her grandfather died, and executor refused to pay claiming no consideration.
While there is no consideration (because she did not promise to do anything,
and he did not ask her to quit; it was just a gift), she relied to her detriment.
3
Promissory Estoppel (pg101)??
Cohen v. Cowles Media Co. (pg107)—newspaper was supposed to keep his
identity confidential. When they didn’t, he was fired. He sued for damages and
won. If no bargain, aren’t you relying at your own risk? The point of a promise
is to invite reliance
What do you have to show under §90? (23)
1. reasonable the promisee would rely
2. the promisee did rely
D&G Stout v. Bacardi (pg110) (24)—Stout thinking about selling, but on
Bacardi’s assurances they would stay with them, Stout stayed in business.
However, Bacardi jumps, and they have to sell for $550,000 less than before.
Stout argues that even though Bacardi was not a part of the deal, they relied
on the promise to their detriment. Bacardi argues that the relationship is
terminable at will, so they relied at their own risk. Stout wins—the ct says that
Stout reasonably relied on the promise. Gives reliance, not expectancy (can’t
get future profits, only the difference in the sale prices).
V.
PROMISE FOR PROMISE 116-121; 121-132
Promise for promise is bilateral ($50 to babysit, you say okay)
Promise for performance is unilateral ($500 to catch a thief, you say okay, don’t
know if you can catch the thief)
illusory promise—(19) if the promisor reserves the right to escape performance
altogether, then you really haven’t promised anything, and it is not sufficient
consideration. There is no mutuality and no K.
Horse hypo (wkst)—Seller says promises to deliver horse “unless I change my
mind before tomorrow”.
Suits by buyer:
1) seller fails to deliver—no recovery, no promise broken
2) buyer relies and incurs costs, still no promise
Suits by seller:
3) Buyer reneges before day of delivery—no recovery, no consideration
for buyer’s promise (this is the classic case)
4) Seller relies, then buyer revokes—no suit (offer, not a promise)
5) Seller delivers, buyer reneges—seller wins because consideration does
exist once seller makes up his mind.
If one side has a free way out, then the other side does too.
4
Scott v. Moragues Lumber (1918) (A pg3)—Buyer is lumber co./Seller is ship
owner. Seller promises to charge certain amount for charter if he buys a
certain ship. No need to decide if promise is illusory because once ship is
bought, conditions are met, and buyer wins. Situation #5.
Look at the hypos on (28). I don’t understand them.
Have to decide if it is illusory if lumber company (buyer) wanted out before
seller buys the boat (Sit. #3). May or may not be illusory [why?]
1. If there are other boats out there and it doesn’t matter which one, then the
promise is probably illusory.
2. If this is the only boat that will work, then the promise might not be illusory.
Strong v. Sheffield (pg119) (20) (29)— promises to forbear suing on debt
until he decides to forbear no longer. Illusory, because there is no
consideration. She can’t rely on any period of time of forbearance.
He actually did forbear for 2 years. Why isn’t this consideration? Ct says that
she didn’t want the act of forbearance, she wanted a promise to forbear. [a
large discussion in my notes that I should go over pgs29-31]
Maetti v. Hopper (pg121) (20) —real estate developer () wants to buy ’s land,
but the K is expressly subject to  finding satisfactory leases.  says she won’t
sell.  found the leases and paid, but the  won’t give the deed. Satisfaction
clauses are still consideration because “A promise conditional upon the
promisor’s satisfaction is not illusory since it means more than that validity of
the performance is to depend on the arbitrary choice of the promisor” (pg123).
 wins.
Satisfaction clauses
1. objective standard—reasonable person
2. subjective—“good faith” satisfaction (honestly not satisfied)
how do you show bad faith?
- Show you just didn’t like the price
- can only get at good faith by proving bad faith
Eastern Air Lines v. Gulf Oil (pg125) (21) (33)—Eastern and Gulf had a K for
jet fuel. Price should reflect market value. Could get out of the K, but only if
they go out of business—easy to see that it is not illusory. K is valid, so should
be enforced. [I don’t understand this—study it later]
VI.
INTERPRETING TO FILL GAPS 133-37; 629-638
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Wood v. Lady Duff Gordon (pg133) (22) (35)—K gave  exclusive right to place
her endorsements on products and exclusive right to market her designs and
she gets half of the profits. She placed her own endorsements, and  sues. 
argues that it is illusory because he didn’t promise anything. Cardozo says the
promise is implied, so there is a K.
best efforts v. good faith [what do I do with this?]
Zilg v. Prentice-Hall (pg630) (111) (37)—K to publish book about the Dupont
family. After problems develop about the nature and the tone of the book, the
publisher cuts the advertising budget and reduced the amount of the first
printing. Author sues, and ct says that good faith is enough and the initial
printing satisfies good faith. (best efforts cannot be everything the author
would do, because he’s not paying) (court may have said that you have to give
best efforts at first to give the book, then good faith in any continuing efforts.
[more in notes when I study]
VII.
FAIRNESS: CONVENTIONAL CONTROLS 336-348
Reasons to not check for fairness (pg347):
1. no such thing as a just or fair price (especially for unique things)
2. Administrative reasons—costs of courts having to find the price
3. It’s not unfair—you should have check it out.
This may be fine in all but the extreme case (“gross disparity”, “shocks the
conscience”)
McKinnon v. Benedict (pg 337) (61) (40)-- buys land from ,  makes loan of
$5000 if  promises to cut down no trees or make improvements in a certain
buffer zone for 25 years.  paid back the money, and later builds a trailer
park.  sued for breach. Ct said that inadequacy of the consideration was so
gross as to be unconscionable. Detriment to  is minimal, but detriment to 
is severe. Contract is not reasonable.
Tuckwiller v. Tuckwiller (pg341) (62) (42)—Mrs. T quits her job to care for
Mrs. M. In return, Mrs. M offers to will her farm to Mrs. T. Mrs. M dies before
the will can be changed. K is fair and supported by consideration. There was
no way for Mrs. T to know how long the obligation would last, so there was
great risk on her part. Also, not worried about the disparate value here
because Mrs. M can give her farm for nothing to whomever she wants. Have to
look at this as the parties did at the time, not in retrospect. Mrs. T gets the
farm.
6
Black Industries v. Bush (1953) (pg 344) (63) (43)--, Bush says that the
middleman, Black, is making excessive profits in its K with the government,
and the K is against public policy. Only void as against public policy if:
1. Contract by  to pay  for inducing a public official to act in a certain
manner.
2. Contract to do an illegal act
3. Contract which contemplates collusive bidding on a public K.
This doesn’t fall into one of these categories, so it is valid. To rule otherwise
would be to say that all K’s by middlemen are void.
VIII. OVERREACHING: CONVENTIONAL CONTROLS 348-361; 361-374
Pre-Existing Duty Rule (pg352)—“Performance of a legal duty owed to a
promisor which is neither doubtful nor the subject of honest dispute is not
consideration…” §73
Alaska Packers case (pg352) (44)—Workmen signed a K in CA for some work.
When they arrived in AK, they demanded a substantial pay increase. Since it
was impossible to find new people, the owner signed an agreement. At the end,
he only paid them acc. to the first agreement. Ct said the 2nd K was not
binding. A new promise for no further consideration and induced by coercion
is not valid. Didn’t get anything he wasn’t already entitled to. Classic case of
duress.
CL never enforced modifications of K’s. People are unhappy with this in the
modern context.
Schwartzreich (pg354) (45)—Sch. received an offer for a higher salary. He
informed his employer and he got a raise. No coercion or duress, but can say
that it is just a gift promise. How can you distinguish supplication from clubwielding?
1. say they rescinded the old K and made a new one (that’s what the ct
says here)
2. Find anything (a peppercorn, etc) to say they go something.
We are using anything to get around the pre-existing legal duty rule, so we
need a new rule. (46)
§2-209—For modifications, don’t need consideration to be binding. But it
must be done in good faith
§89 Modification of Executory Contract
A promise modifying a duty under a K not fully performed on either side is
binding
(a) if the modification is fair and equitable in view of circumstances not
anticipated by the parties when the K was made; or
7
(b) to the extent provided by statute; or
(c) to the extent that justice requires enforcement in view of material
change of position in reliance on the promise.
NY statute—has to be in writing and “shall not be invalid because of the
absence of consideration”, but can be invalid for other reasons, such as duress.
SEE THE COMPARING CASES WORKSHEET
Arzani v. People (1956) (pg355) (46)—Concrete sub gets an oral promise from
the general to pay half of the higher labor costs due to an unforeseen strike.
Club wielding, but not with proper means. Ct did not enforce it. Would
probably get a different result today.
Watkins & Son v. Carrig (1941) (pg357) (47)— found rock during an
excavation and said that it would be 9x’s the amount agreed upon;  agrees to
pay it.  argues that the original K was rescinded and a new one took its
place.  says the other K was not broken, so the second promise to pay has no
consideration. Ct enforces the 2nd agreement. Prof: undistinguishable from
Arzani.
Lingenfelder v. Wainwright Brewery (1891) (B1)—An architect refuses to
continue when refrigerator K goes to his competitor. Only resumes work when
 promises 5% of fridge costs. Not valid. Transaction was the compromise of a
doubtful claim. The only difference between the 2 K’s was the additional sum
of money. He cannot demand additional compensation. Ct. used the preexisting legal duty rule. Would this be a K under the UCC? Duress?
Angel v. Murray (1974) (B4)—Maher is a trash collector for the city.
Unexpected increase in the number of dwellings, so he asked for additional
compensation, which he was granted twice. General rule—‘A modification of a
K is itself a K, which must be supported by consideration’. Modern rule (3 part
test—cts should enforce agreements when (1) unexpected difficulties arise (2)
during the course of performance, even if no consideration, as long as the parties
(3) agree voluntarily. Here we have unanticipated difficulties, before
performance complete, and voluntary agreement to pay. Ct. says extra money
agreement is binding.
Legitimate Reasons (from strongest to weakest)
1. Actual legal defense
2. Colorable legal defense
a) good faith belief
b) no belief
3. No legal excuse, but claim “hardship”
a) unanticipated
b) will result in loss?
8
i)
ii)
iii)
loss and put out of business
loss, but still profitable
just want the money
Means Used
1. supplication
2. club-wielding
Roth Steel v. Sharon Steel (1983) (B8) (49)—K by Sharon to sell specific
amounts at special prices to Roth. Due to federal controls, the market
changed, and Sharon couldn’t deliver and was losing money.
2 part test:
1. Whether the party’s conduct is consistent with reasonable commercial
standards of fair dealing in the trade.
2. Whether the parties were in fact motivated to seek modification by an
honest desire to compensate for commercial exigencies.
In this case, it is okay to ask for more money (very liberal), but they did it in
bad faith (by threatening to breach), so they lose. Ct doesn’t even reach
duress.
Is threatening to breach automatic bad faith?
no: Carrig (sympathetic to plight)
yes: Arzani and Roth
See note on Legal-Duty Rule (B16) (50)
Pattern I (raise price in 2nd K, refuse to pay)
Pattern II (agree to pay less than amt. owed, then try to get whole amt.)
It is a lot easier to get out of a K if you haven’t paid yet. After you
pay, you must show duress.
Austin Instrument v. Loral (pg364) (49)—Loral had a navy K to build radars,
awarded a bid to Austin. A 2nd K is not fully awarded to Austin, so they stop
delivery under the first K until they get a price increase. Loral checks with all
other companies, and no one else can fill the order in time, so they agree to
Austin’s demands. Austin’s threat deprived Loral of its free will.
Duress (pg365)—a contract is voidable on the ground of duress when it is
established that the party making the claim was forced to agree to it by means
of a wrongful threat precluding the exercise of free will. A mere threat to
breach is not enough for duress. But if you put that with not being able to get
the goods from another source, it is duress.
9
Payment in Full Checks (pg371) (pg51)—in some cases, if the creditor accepts
the tender of payment, the account is effectively settled and the debtor is
discharged of further liability on the account. The rule: if the creditor knows or
has reason to know, then it is fine.
exception—if it is your money all along, you can take the check and sue
for the rest later.
UCC 2-311—you have to do your best to bring it to their attention
[See notes in this section] (51-53)
Flambeau v. Honeywell (1984) (B18) (53)—K can be paid off early, deal
included $14,000 worth of computer support.  decides its not helpful and
pays everything but the computer support with paid in full on the check and in
a letter.  cashed the check and demanded further payment. Ct. said that it
was payment in full, and the  owes nothing else even though they paid
nothing on the disputed section.
3 rules: (relating to consideration, accord and satisfaction) (B21)
1. compromise in a dispute on entire claim (consistent with CL rule)
2. no dispute, can’t recover—mere refusal not enough
3. no disputed claim, but small dispute on one part—can just pay the
undisputed part.
IX.
NATURE OF ASSENT 138-143; rest 2d 201-203; ucc 2-208; 581-597;
143-152
2 Theories of contract:
1. subjective—meeting of the minds, actual intent
2. objective
Knowledge of other’s meaning:
A
Actual
Imputed
None
B
Actual
No K
A wins
A wins
Imputed (reasonable)
B wins
No K
A wins
None
B wins
B wins
No K
Lucy v. Zehmer (pg140) (55)—The seller contracts in jest to sell his farm. The
buyer thinks it is real, and there is a signed restaurant ticket. Ct. says he has
to sell the farm. Buyer had no knowledge that it was a jest; seller had imputed
knowledge. [a little more here]
Frigalment v. BNS (pg585) (57)—what is a chicken case. [see my notes]—
§2-208—
1) performance
2) express terms
3) course of dealing
10
4) trade usage
Ct. says that  has the burden and fails to meet it—has to prove that chicken
was meant in the narrower sense.
Raffles v. Wichelhaus (pg592) (58)—2 ships named Peerless, seller and buyer
mean different vessels. When any of the terms used to express an agreement is
ambivalent, and the parties understand it in different ways, there cannot be a
K unless one of them should have been aware of the other’s understanding. No
K.
Laserage Tech. v. Laserage Lab. (LTC v. Labs-West) (pg143) (60)—LTC is
buying out a disgruntled minority shareholder. K is the settlement agreement.
LTC claims no K because they didn’t want him to have shareholder (non-voting)
rights—misunderstanding issue. mere memorial v. last clear chance. What
did the parties intend? Ct said that he retains the rights and LTC loses [see
the 3 reasons on 61—then look at the argument for LTC]
Factors to determine whether the parties intended to be bound in the absence
of a document (pg150). Look at whether:
1. there is an express reservation of the right not to be bound in the
absence of a writing
2. there has been partial performance of the contract
3. all of the terms of the alleged contract have been agreed upon
4. the agreement at issue is the type of K that is usually committed to
writing.
Sullivan v. O’Connor (pg147 & 7)??
X.
THE OFFER 153-163; 163-171; 171-178
§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.
Corbin says: An offer is an act whereby on e person confers upon another the
power to create contractual relations between them.
Owen v. Tunison (1932) (pg154) (62)—letters back and forth for the sale of
property. Seller says “would not be possible to sell unless I was to receive
$16,000”. Buyer accepts, and seller says they aren’t selling. Ct says there was
no offer by the seller, so no K.
Look at 3 things:
1. language used
11
2. form of communication (#of recipients)—should imply first come first
serve
3. context (open terms, prior communications, trade usage)
Harvey v. Facey (1893) (pg156) (63)—seller answers an inquiry about how
much he would sell for by saying, “lowest price for pen…” This is a harder case
because it was in response to an inquiry about how much he would sell for.
But the ct still finds no K—he only answered the second question.
Fairmount Glass v. Gruden-Martin Woodenware (1899) (pg158) (64)—seller
answers a specific inquiry with prices, but doesn’t give amounts. Buyer
accepts. Ct. says it is a K. The seller said “for immediate acceptance”, and
there is no other way to understand this except as an offer. The seller is
therefore bound if the offer is accepted.
I. Advertisements—ads are not usually offers to sell because they do not
contain sufficient words of commitment to sell (R2d §26, comment b). But if
the ad contains a particular number of units in a particular manner, then it
may be an offer (ex. first come, first served) (Emmanuel’s pg10).
Craft v. Elder & Johnston (1941) (pg163) (65) (28)—advertisement to sell a
sewing machine for $26. Customer tries to buy, seller refuses. Ct. says this is
not a breach because not an offer, so no K is formed. It is a mere invitation to
negotiate. The ct. treats this as very well settled.
Lefkowitz (1957) (pg165) (65) (28)—cheap scarves and fur coats…the ct says
that where an ad is “clear, definite and explicit, and leaves nothing open for
negotiation, it constitutes an offer”. The store claimed there was a house rule
to sell to women only, but since the ad did not say that, the  wins. The
second time, though, he knows about the house rule, so the offer does not
apply to him. Because the ad says first come, first serve, we are not reluctant
to say this is an offer. If it doesn’t say that, then it may not be an offer,
because you can still sell to whomever you want.
II. Auctions (UCC 2-328; R2d §28) (67)
1. Advertise
2. Bidders attend
3. Goods put up
4. Bid
5. Hammer
Where is the offer and where is the acceptance? #4 and #5—sale complete at
fall of the hammer. [
With or without reserve—w/reserve is normal.
12
With means that the auctioneer can withdraw the goods from the sale. So
putting them up is not an offer to sell.
Without means that there is an irrevocable offer to sell, and the auctioneer
cannot withdraw the goods if the bids are too low.
Mistaken Bids (pg168)
Elsinore Union Elem. v. Kastorff (pg171) (68) (29)—Contractor submitted bid
for school, accidentally leaves off the plumbing costs. Ct. holds that he is not
held to the original offer.
1. material mistake
2. the other party can be put in status quo
3. unilateral v. mutual mistake (not easy to get out by mutual mistake, but
happens)
4. clerical mistakes v. mistakes of judgment (the stupider the mistake, the
easier to get out of—people aren’t relying that a clerical error will occur).
Is there an implicit promise for the sub to keep the K open? (70) yes—
consideration is that I used your bid in my bid. (but the sub doesn’t
want the bid used, he wants a job).
Is the general bound to use the sub? no, its just an option.
XI.
THE ACCEPTANCE 179-188; 189-198 (30-33)
2 kinds of contracts:
a. Unilateral—only accepted by performance
b. Bilateral—accepted by promise or performance
§62—acceptance by performance is an implied promise in a bilateral K.
[there is so much more in my notes, but I don’t get it] (71-72)
Mailbox Rule (pg219-223) (73) (s11)—default rule—favors offeree
Accept—effective on dispatch
Revoke—effective on receipt
In an option K, notice must be received by the 10th day. We distinguish
because offeror is the master of the offer. An option K says the offeror can’t
revoke, so offeree is in driver’s seat, so only fair to put on offeree and give favor
to offeror.
International Filter v. Conroe Gin, Ice (1925) (pg180) (73) (31)—There is
proposal by seller (not an offer) that has to be approved by an executive officer.
The buyer says that it is fine (offer), and the exec officer okays it (acceptance).
Two issues: 1) even by your own terms, not an exec officer (ct. says that the
president is an exec off.), 2) is saying okay enough acceptance? The
acknowledgment sent could serve as notice, but court says that it’s not
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required. That contradicts §56 which says to accept with a promise, you have
to give notice unless it is clearly dispensed with. (§54 says that to accept by
performance, no notice required unless requested).
White v. Corlies & Tift (1871) (pg184) (75) (32)—Builder tries to accept by
performance by buying the materials, but the court says that is not enough of
an evidentiary trail; the materials could have used for any job. Tagging or
loading onto a truck and showing up are better ways of accepting by
performance because there is evidence you intended to perform (“mere
preparation v. performance”). Another way to read the holding is that the
contract is bilateral because the  said that you have to accept between 5-6 by
phone. So the offer requests a promise, and the performance is therefore not
enough to accept.
Ever-Tite Roofing Co. v. Green (1955) (pg187) (76) (32)—the ct. held the offeror
must allow a reasonable amount of time to accept by commencing
performance.
§69—Acceptance by Silence (77)
(1) Where an offeree fails to reply to an offer, his silence an inaction operate as
an acceptance in the following cases only:
(a) Where an offeree takes the benefit of offered services with reasonable
opportunity to reject them and reason to know tha they were offered
with the expectation of compensation.
(b) Where the offeror has stated or given the offeree reason to understand
that assent may be manifested by silence or inaction, and the offeree in
remaining silent and inactive intends to accept the offer.
(c) Where because of previous dealings or otherwise, it is reasonable that
the offeree should notify the offeror if he does no intend to accept the
offer.
(2) An offeree who does any act inconsistent with the offeror’s ownership of
offered property is bound in accordance with the offered terms unless they
are manifestly unreasonable. But if the act is wrongful as against thofferor
is it an acceptance only if ratified by him.
1(a)—if you take the benefit, you have accepted. If you keep it, knowing
the price, you have to pay. (if unsolicited merch, though, it is a gift)
1(b)—offeror is being held to the K, silence isn’t usually acceptance in
order to protect the offeree
1(c)—custom or previous dealings.
Allied Steel v. Ford (pg190) (78) (32)—When an offeree fails to comply with the
suggested method of acceptance, but instead begins to perform, is a K formed?
Ct. said yes. (different from white because the  knew they were accepting).
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XII.
TERMINATION OF THE POWER OF ACCEPTANCE 198-211; 212-219
How can you terminate acceptance? (§33) (pg198)
1. lapse of offer
- when it runs out
- if not specified, then after a reasonable time
2. revocation by offeror
3. rejection or counter offer by offeree
- explicitly
- implicitly (won’t pay more than $xx)
4. death (pg218)
Option K—a firm offer that includes the promise to keep open for a time
UCC 2-205—applies to merchants, in writing, and signed (nothing on
consideration.
R2d §87—need it in writing, and purported consideration.
Toys, Inc. v. FM Burlington (pg202) (83)—option K to renew lease. Where an
optionee gives notice of exercising the option buy later disputes the terms of
the agreement, may the optionee enforce the option? no [read this case later]
Ragosta v. Wilder (pg212) (84)—fork shop case. unilateral K that can only be
accepted by performance. Seller revokes before date of performance, buyer
sues for breach. Ct. hold there is no breach. [read this later too]
Rejection of an Irrevocable Offer (pg217) (85) (36)
R2d §37—says that if you have an option K, then you can reject, and still
accept within the allotted time. Soper disagrees. You can’t accept, then reject,
either. You may have bought:
1. the right to wax hot (accept, then reject)
2. the right to wax cold (reject, then accept) (if he relies, that’s different)
3. the right to decide once and for all (Soper thinks you are here)
[ask Al to explain this to me again]
XIII. BATTLE OF THE FORMS (2-207) 161-2; 223-226; 226-248 (rev.
casebook); (86) (170-177) (38) (11) (s27)
Mirror-Image Rule 223-226 “Traditionally, an acceptance must ‘be on terms
proposed by the offer without the slightest variation’. Thus the acceptance
must mirror the offer, making the offeror the ‘master of the bargain’, such that
he can avoid any contract that is not on his own terms”
Counter-offers:
1)
Rejection and proposal
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2)
3)
(expressly conditional)
Neither accept or reject, but risk revocation of offer
prob 2, pg216 “I am still considering, but is it possible to get…”
Accept with proposal
no leverage now, just pleading for different terms
Ardente (pg225) (87 & 92) (39) (12)—Buyer wanted furniture to remain with
the house. Ct. said that buyer loses because it was not expressly conditional
(#2). (Could be #3 because they sent a check and signed.)
Last Shot Rule—the last terms win; court assumes that everyone is reading the
contracts.
In typical battle of the forms, buyer sends form, and seller sends a form back
with varying terms. If you apply the mirror image rule, no K. If you apply last
shot, you accept seller’s terms by performing.
But people aren’t reading these forms, so 2-207
2-207
1) Expression of Acceptance=Acceptance (despite varying terms)
unless expressly conditional
2) Additional Terms (between merchants) are part of K
unless a) object in advance
b) material
c) object later
3) Where no K is formed by writings, but conduct shows K.
Terms? Those on which both agree, conflicting terms drop out, no
last shot rule, code supplies others (i.e. implied warranty).
1) K? despite varying terms?
Yeswhat terms? go to 2
Nobut performance, what terms? go to 3
Roto-Lith (1962) (A5) (177) (38,39) (12)—offer to buy cellophane bags. 
(seller) returned the acceptance and said no warranties.
Was the acceptance expressly conditional?
Ct. says it is a K, and the last shot rule applies (not knockout like
clause 3 says). They resurrected it.
The ct. used materiality to decide if it was expressly conditional,
and said that the no warranty term was implicitly expressly
conditional, but was supposed to look at if it is explicitly stated or
if it’s dickered.
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This decision has been almost universally criticized.
Koehring (1977) (A pg7) (39) (12)—telegraph offers back and forth,  says “as
is, where is”,  says specific conditions. Ct. says no K. The replies were not
acceptances (although labeled as such), they were rejections and counteroffers.
Implicitly expressly conditional—like Roto-Lith, but this time they are
dickered terms and 2-207 doesn’t cover dickered terms. Roto-Lith makes
sense in this context.
If performance, 3 won’t help because if disputed terms drop out, left with
no price or delivery method. Now want to say last shot rule.
Dorton v. Collins (1972) (C12) (92) (177) (40) (12)—carpet case.  (buyer)
doesn’t want arbitration,  (seller) does. Ct. says that DC got it wrong because
they used clause 3 where arbitration dropped out, and buyer won. Instead,
this Ct says that “subject to” is not strong enough to make it expressly
conditional, so there is a K. Go to clause 2, and ask if arbitration is material.
If yes, then no arbitration/if no, then arbitration. Courts are split on whether
arbitration is material.
Jordan International (1977) (C18) (93) (40) (12)—steel coils case. This time
the arbitration clause is part of “expressly conditional” language. It is
expressly conditional, so no K. Go to 3, performance, you don’t get arbitration
because the disputed terms drop out and it is not supplied by the code.
Seller is even worse off here. At least if not expressly conditional (as in
Dorton), they could argue the point of materiality. The ct. responds by
saying seller can just walk off, and not perform. OR make it expressly
conditional up front.
Materiality (A8)—Comment 4 suggests that the test is whether the term would
constitute surprise or hardship.
Ways to make things Expressly Conditional (A10)
1) Pre-printed form (use 2-207 language) (put Jordan and Dorton together.
2) HELP!!!!!! You can make it expressly conditional, but you can’t resurrect
the last shot rule. What?
Also, what are the 3 tests on A10. I don’t get it!!
Knockout Doctrine (C20)
Step-Saver (C5)—Step is buying software from TSL and reselling it. Customers
are suing SS, who is in turn suing TSL. The box top included no warranty
language. SS says that the language materially alters the K they already have,
so it drops out. TSL says that there was no K on the phone. The K is when it
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is purchased. So is it expressly conditional? The court applied the three tests
[help...I can’t finish this. I have so many questions]
ProCD (1996) (C24) (96)—Database of 3,000 phone books.  ignored the
license and started selling the information. ProCD proposed a K that a buyer
would accept by using the software after having an opportunity to read the
license at leisure. Since  did not return the goods if terms were unacceptable,
he agreed to them. Judge also says this case only has one form so not
governed by 2-207.
Hill v. Gateway (1997) (C32) (96)—computer ordered over the phone and
delivered by mail. A K does not have to read to be effective. People accept the
risk of unwanted terms when they do not read the K. There is no reason to
require the salespeople to read all the terms over the phone when they can be
read and accepted later. ProCD applies, and by keeping the computer for over
30 days, the Hills accepted Gateway’s terms including arbitration.
see chart (97) (42)
Daitom (1984) (C37) (97)—commercial dryers. read the case, then read my
notes. get the three approaches down cold (C43) I get the outcome of the case,
I just really need to understand the underlying arguments.
XIV. PRE-CONTRACTUAL LIABILITY 248-253; 253-268; 268-285
Davis v. Jacoby (A11) (104)—Husband wants family friends to come care for
his wife in an exchange for the estate. A letter is sent (the offer), and the
friends sent a letter accepting (acceptance?). The husband committed suicide,
cared for the wife anyway. After her death, the will gave the estate to someone
else. The lower ct. said that the husband wanted performance, so it is
unilateral and the offer expired when he died. This court says it is a bilateral
promise because he wanted the promise his wife would be taken care of after
his death.
 They wouldn’t have gotten reliance because they performed after the
death of Mr. Whitehead.
 The reasons given by the court are weak because you may want to
know that the carrot is high enough so they will start performance
 Need to focus on the offeree, not the offeror. But this court focuses on
the offeree.
Ragosta v. Wilder (pg266 & 212) (107)—unique because it is not to seller’s
advantage to have a bilateral K. [look at this]
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Drennan v. Star Paving (pg253) (105)—sub submitted bid for paving work.
General used it and was awarded the K. He went to tell the sub, and before he
tells the sub, the sub revokes. The court rejects the idea that there was a
promise to keep it open or consideration for that promise and the idea that
using the bid is acceptance of a conditional K. But they consider reliance.
 The difference between §45 and §90 is the remedy. In §45, you get
the K, in §90, you get reliance only.
 If you are a sub, can you avoid §90? Yes, you can say it is revocable
at any time, but generals are not likely to use you.
 Can you say, if you use me, then you have to award the K to me? Yes,
you can get a K before the bid is accepted.
 Lack of consideration is not fatal to a §90 claim. (pg255)
§87(2) seem to say that there are offers w/o implied promises to keep them
open that you can still rely on. Soper thinks there are none, that at best it is a
restatement of §90
Holman Erection v. Orville (pg259)?? (106)—general is not promising to use you.
Why might you have a weaker §90 case in Ragosta than Drennan? no implicit
promise to keep it open.
BUT you were running the risk of someone beating you, not seller revoking.
Indefinite (open) terms
1. What did parties intend?
2. What is the court able (willing) to do?
Intend
Did you intend to be bound? Is the writing mere memorial?
a) not bound (until parties decide)
b) fully bound (ct. to supply terms if parties can’t)
 that opens the 2nd question, what are the courts willing to do? see eg.
UCC 2-204; 2-305; 2-308; 2-309
c) partially bound—duty to bargain in good faith. Don’t want the court to
fill in terms, but still want a remedy if bad faith.
a & b are the only ones in the common law.
Hoffman v. Red Owl Stores (1965) (pg268) (109)-- wants a franchise.
Mutually agreed to invest in small grocery. “Advised” to sell the grocery (loses
summer business). Told all along that $18,000 would be enough.  put a
down payment on a lot in Chilton. Sold the bakery and moved the family to
Chilton. Deal fell through because Red Owl kept raising the price and
changing the terms.
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







He can’t just sue under K because the terms were never definite (critical
open terms pg269)
So which of the three is it? b (fill in the terms with other red owl stores) or c
(duty to continue to bargain in good faith on the open terms).  ran the risk
of not being able to agree on layout and rent, but not on how much he
contributes
To make it a §90 case, have to find #1, no K
What was the promise broken? $18,000 is sufficient. Consideration? going
and getting experience
Why can’t the $18,000 and the experience be a K? because they aren’t
bargaining—they just advise. It is a gratuitous promise by Red Owl
No consideration, but reliance and you should have foreseen this
What would K give in remedies? profits as a red owl franchise [huh].
What is Red Owl’s argument? We didn’t make a promise, just a statement
of present position. Some evidence that Hoffman viewed it that way too. He
keeps going along until the price gets too high; maybe he knew it wasn’t a
promise.
Channel Home Centers v. Grossman (1986) (pg272) (112)—easier than
Hoffman. Channel signed a letter of intent to rent at the ’s request. Court
asks 1) Did both parties intend to be bound? 2) Are the terms of the agreement
sufficiently definite to be enforced? 3) Was there consideration? The court
answers yes, yes, and the letter of intent was consideration.
 What shows the promise? 1. the language of the letter, and 2. both took
action in reliance.
 Ct. found a K, duty to negotiate in good faith
 see another confusing discussion on 112 of my notes.
Wheeler v. White (pg271)— promises a loan if  can’t get one anywhere else.
 relies. Court said that critical terms were left open (but they weren’t that
critical—shows the reluctance of courts to fill in terms), so no K. But gives him
§90 reliance. There was no option of c (partially bound).
XV.
STATUTE OF FRAUDS 286-290; 294-303 (f9)
5 require writing under the statute. We will use 3:
1) K can’t be performed in a year
2) sales of good over $500
3) K for the sale of interests in land or real estate
3 Questions to ask:
1) Does it fall within the statute?
2) Is it written?
3) If not, does it fall within the exceptions? (2-201)
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



If a lifetime provision, it can be performed in one year if you die, so no
writing required.
As in Hamer, the letter five years later can be the writing. It doesn’t have to
be contemporaneous
Don’t need a writing for a 5 year non-competition agreement because if you
die, then by definition, you won’t be competing
code is more liberal (pg299) §2-201
XVI. INTERPRETATION: PAROL EVIDENCE RULE 565-581; 597-611 (s23)
Gianni v. Russell (1924) (pg566) (119)-- is renegotiating his lease with a new
owner. He agrees not to sell tobacco as part of the agreement. He claims that
the consideration for that is that he has exclusive rights to sell soft drinks, but
it is not in the writing.
In the lower court, evidence gets in and then Gianni wins.
In this court, evidence doesn’t get in.
 There are two steps:
1) whether the evidence gets in
2) if so, then persuade it is true.




Need a good explanation for why it is not in the writing. ex. deeds
A contemporaneous letter is fine, only bars contemporaneous oral
agreements
After the agreement writings and promises are not covered by this; goes into
precontractual liability
The only reason for parol evidence is evidentiary; no societal reason to make
sure you think about the K (unlike Statute of Frauds)
see diagram (120) [talk about difference between integrated and not]
Williston & Corbin
W says look at the final form
C says hear all the evidence and then decide
Masterson v. Sine (1968) (pg570) (122)--
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Bollinger v. Central PA (1967) (pg578) (121)—K for city to do road work.
Supposed to recover the dirt. Evidence gets in due to the exception that you
can reform the written agreement if it is mutual mistake.
Mitchell v. Lath (1928) (pg577) (123)
Seagram (pg577) (123)
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