Contracts – Coenen Fall ’06
“The rule follows where its reason leads; where the reason stops, there stops the rule.”
-- Llewellyn.
a.
General Theories of Obligation and Remedies – Introduction : i.
Elements of Breach of K COA :
1.
Must be a legally recognized K.
2.
K must be broken.
ii.
Remedies :
1.
3 Types: a.
Restitution – Give back to P any $ conferred upon
D in the performance of the breached K.
b.
Reliance – Restores P to position he was in before entering K.
c.
Expectancy
– Puts P in position he would have been in had K been fully performed ( U.C.C. 1-106).
i.
* This is the standard measure of damages for breach of K with consideration.
1.
Possible Exception: Non-
Commercial Contracts (e.g.
Sullivan ).
2.
Sullivan v. O’Connor
(Mass. 1973): K btwn dr/pt for nose surgery is enforceable. Damages : Doesn’t have to decide
(because pt only seek damages re 3 rd
surgery; which is recoverable under both reliance and expectancy theories), but suggests that reliance may be more appropriate in this non-commercial setting. Reasons: too hard to gauge expectancy damages in this case. Expectancy damages are more appropriate in commercial breach cases. Looks to policy justifications for moderating damages, says that if too excessive, doctors may start practicing “defensive medicine” (35). * When expectancy damages are too hard to gauge, reliance damages may be more appropriate. *
3.
* General Rule. Punitive Damages are usually not available for breach of K cases: a.
Exception : When there is an independent tort involved.
b.
Whites V. Benkowskis – i.
Facts . K to supply H2O. P sues when cut off. Trial ct finds injury to P and awards
$10 comp. and 2K punitive. Judge reduces comp. to $1 (bc no evidence of any actual
1

injury) and scraps punitive (saying that punitive damages not available when evidence only supports nominal damages). ii.
Held : Comp should go back up to $10 bc it was jury’s job to determine whether actual injury existed / upholds judge’s scrapping of punitive, ruling that punitive damages are not available for ANY breach of K.
In support, cites Chitty (pun. only avail. for breach of promise to marry); Simpson and
Corbin. iii.
Misc : If P wanted to recovery for punitive; they could have filed tort COA (Simpson).
: a.
Agreement with Consideration – The leading Theory: i.
Consideration = Something [promise;act;forbearance] (1) Sought by the promisor; and (2) given by the promisee in exchange for the promise.
1.
Why require consideration?
a.
Fuller says it fulfills 3 functions: i.
Evidentiary – Provides evidence that the promise took place.
1.
* Note – If there is part performance of the promise, it may be valid absent consideration bc it would fulfill this function.
ii.
Cautionary – Ensures that promise was made with caution and not “on a whim.” iii.
Channeling – You must channel your intentions to legally sufficient means.
ii.
Adequacy of Consideration:
1.
General Rule . Courts will not consider the adequacy of consideration: a.
Hardesty v. Smith : i.
Facts . K to buy lamp invention. Buyer refuses payment bc invention worthless. ii.
Held . Even if consideration is valueless, K still valid. As long as buyer gets “a something,” consideration exists. iii.
Gratuitous Promises : Unenforceable due to lack of consideration:
1.
Dougherty v. Salt (“Aunt Tilly Case”): a.
Facts.
Napoleon gets note for $3,000. b.
Held.
Promise is unenforceable; it is a gratuitous promise and lacks consideration.
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c.
Hypo . What if Napoleon gave Tilly a kiss after receiving the note? This still wouldn’t be consideration bc Tilly didn’t seek it; and it wasn’t given in exchange for her promise. d.
Hypo . What if Tilly actually did give Napoleon the
$ and then wanted it back the next day? She couldn’t get it back, because here there would be a valid promise – it fulfills Fuller’s evidentiary function . iv.
Conditional Gift : A conditional gift is not valid consideration:
1.
EX : Tramp Hypo (D tells tramp that if she walks to store, she can buy something on his credit. This promise is unenforceable due to lack of consideration. Although tramp walked to the store, this was merely a condition of the promise, and was not given in exchange for the promise. Tramp’s actions didn’t benefit the promisor).
v.
Forbearance as Consideration :
1.
General Rule . Forbearance of a legal right is sufficient for consideration if that forbearance is sought/given in exch. for promise: a.
Hamer V. Sidway : i.
Facts . Uncle promises nephew $ if he doesn’t smoke, drink or gamble until 21.
Boy doesn’t and sues uncle’s estate for $. ii.
Held . There was valid consideration b.c boy forbore a legal right and forbearance was sought/given in exch. iii.
Hypo . What if boy gave up these things, but only because he didn’t like to do them?
Under Restatement 81, this would be o.k. bc courts won’t look to ulterior motives. As long as legal right is forborne in exchange, this is sufficient consideration. iv.
Hypo . What if it were illegal for boy to smoke until he was 21? No consideration because boy didn’t give up a legal right. b.
Maughs V. Porter : i.
Facts . Woman goes to auction, wins raffle for car. Sues to get car. ii.
Held . There was valid consideration
(woman went to auction; which was sought/given in exchange). BUT, K unenforceable due to illegality of subject. iii.
Misc . Why is this diff. from tramp hypo?
Because her going to auction was not a
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condition of her receiving the prize; it was actually something that benefited D). iv.
Hypo . What if woman went to auction but didn’t read the ad? No consideration bc it wasn’t given in exch.
for promise.
2.
Restatement 81 : Court will not generally look into any possible ulterior motives when ruling whether promise is sufficient consideration.
3.
General Rule . In order for forbearance of a legal claim to sufficiently constitute consideration, the forborne claim must be a valid one : a.
Colorable Claim Doctrine - Forbearance to bring a suit is not sufficient consideration if it is w/ knowledge that the claim is ill founded and void. i.
Springstead v. Nees :
1.
Facts . Nees dies; leaves 2/5 children one property and all 5 the other. 2 children say “we will give you our share of property 2 if you leave us alone about property 1.” When property 2 is sold, other 3 children sue first 2 to collect their interest in property 2. They claim that they forbore a legal claim to property 1 in exchange for promise to get their
2.
share in property 2. D claims that legal claim forborne was not valid so no consideration.
Held . No consideration. P had no legal claim to property 1, so their forbearance of this claim is insufficient for consideration
(colorable claim doct). b.
Exception . Honest Belief/Good Faith Doctrine -
Even if claim is not legally sufficient, forbearance of that claim will constitute consideration if the claim is asserted in good faith. i.
Dyer V. Natl. By-Products:
1.
Facts. P hurt on job. Goes back to work. Claims that Company offers life employment if he does not sue.
He accepts. Then he is laid off.
Claims that his forbearance of a legal claim against company was valid consideration. Company claims it
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2.
was not because there was no valid legal claim to begin with.
Held . Valid consideration.
Although claim may not have been valid, P forbore this claim with
“good faith” as to its validity (honest belief/good faith). vi.
Mutuality of Obligation / Illusory Promise:
1.
General Rule . An enforceable K must have mutuality
(both sides are obligated to do something). This mutuality is absent when only one of the parties is bound to perform and the rights of the parties exist at the option of one only
( “Illusory Promise” ).
a.
De Los Santos : i.
Facts
. P enters K w/D to transport “such tonnage of beets that can be loaded onto P’s trucks by D.” After 2 mos, D tells P they are not needed. P sues D for breach. D claims no valid K bc they were not in fact obligated to do anything at all. ii.
Held . No valid K due to lack of mutuality.
Agreement depended on the will of D only and, therefore, was not mutual in obligation.
D was only obligated to load the amount of beets as he could; so in actuality he didn’t have to load any. This was an illusory promise.
2.
Qualification
: Obligation doesn’t have to be explicit. An implied obligation is sufficient (“A promise may be lacking, and yet the whole writing may be ‘instinct with an obligation,’ imperfectly expressed”): a.
Wood V. Lucy : i.
Facts . Lucy is fashion expert and Ks w/Wood to place her endorsements on products. When Lucy starts placing her own endorsements, Wood sues for Breach of K.
Lucy claims that K not valid bc under K,
Wood was not obligated to do anything at all. ii.
Held . K was valid. Although Wood didn’t promise that he would, in fact, place her endorsements, this promise can be fairly implied by the terms of the agreement. “A promise may be lacking, and yet the whole writing may be ‘instinct with an obligation,’ imperfectly expressed.
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b.
UCC 2-306(2) : A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale.
i.
So , under this provision, if it is K for exclusive dealing, obligation is imposed by statute.
3.
Qualification : Mutuality not always essential if other consideration exists: a.
Weiner V. McGraw Hill : i.
Facts . P works for McGraw hill and is promised job security. After 8 years, P laid off “for cause.” P sues company for breach
K saying that there was an oral K ensuring job security and that this was breached.
Company claims that there was no valid K bc employee was not obligated to do anything (he could leave at any time).
ii.
Held . There was a valid K. Ct. rules that mutuality is not always essential if other consideration exists. Says that employee’s work for company was valid consideration for company’s promise of job security.
4.
Qualification
: Mutuality conditioned on promisor’s satisfaction is not illusory: a.
Mattei v. Hopper : i.
Facts . P (real estate developer) enters into agreement to buy D’s land. There is a
“satisfaction clause” in K which says that P has 120 days to arrange for leases on land.
P deposits $1000 per K. After securing leases, D refuses to sell P land. P sues for breach; D says that there was no valid K because of lack of mutuality (P did not have to do anything if he did not secure leases; it was conditioned on his satisfaction).
ii.
Held
. There was a valid K. “A promisor’s duty to exercise his judgment in good faith is adequate consideration to support K.”
Cites Corbin : Promise made conditional on promisor’s satisfaction is not illusory .
vii.
Pre-Existing Duty Doctrine :
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1.
According to Corbin , neither the performance of duty nor the promise to render a performance already required by duty is a sufficient consideration for a return promise: a.
EX: ABC Construction agrees to construct theater for Smith for 60K. After ABC starts work, it discovers that it will cost them an additional 5K to complete work. ABC seeks and receives Smith’s promise to pay the extra 5K. Smith’s promise to pay extra 5K would not be valid because it wasn’t supported by consideration: ABC already had a duty to build theater, so their promise to do so is not consideration.
b.
Implied in Fact K: True K, w/all necessary elements. Just not in writing or oral; instead it is inferred from the conduct of the parties: i.
Services must be beneficial to recipient and carried out so recipient understands that (1) it was performed for him; and (2) it was not rendered gratuitously but in expectation of compensation c.
Promissory Estoppel : i.
Required Elements (Restatement 90):
1.
There must be a promise .
2.
Promisor must have reasonably expected his promise to induce action or forbearance from promisee.
3.
The promise must, in fact , produce action or forbearance.
4.
Reliance must be of a definite and substantial character.
5.
There must be a breach of this promise.
6.
Enforcement must be necessary to avoid injustice .
a.
Comment b: Depends on reasonableness of reliance, definite/substantial character in relation to remedy sought; formality with which promise is made; extent to which Fuller’s functions are met; extent to which other policies such as unjust enrichment are relevant.
ii.
Remedy Available : Reliance ( Wheeler ).
iii.
Pufendorf
: “If a man has suffered any damage from the nonfulfillment of a promise, the promisor is bound by natural law to make good the matter.” iv.
Injustice to be avoided by Promissory Estoppel:
1.
Kirksey V. Kirsksey (1845): a.
Facts
. P’s husband dies. Husband’s brother promises that he will let her live on land if she gives up her house and moves to him. P does this but bro-in-law eventually kicks P off of the land. P sues bro-in-law.
b.
Held . Promise is not enforceable because it is gratuitous (and therefore, there is no consideration for promise).
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v.
General Rule : Even in the absence of an enforceable K (e.g. lack of valid consideration), promisee can still recover damages if he acted in a detrimental way in reasonable reliance on the promisor’s promise:
1.
Ryerss V. Trustees : a.
Facts . D promises $100 to church congregation if they build a new church. In reliance on this promise, they build a new church, but D refuses to give them $. D claims promise is unenforceable bc there was no consideration.
b.
Held . Reliance on a charitable promise is enough to render that promise enforceable, even in the absence of a valid K (due to lack of consideration, in this case).
2.
Seavey V. Drake : a.
Facts . Ps father lets him live on land. He adds labor/$ to land. Father dies & P sues estate, saying that father promised him land and that he acted in reliance on this promise. Estate argues that promise is unenforceable bc there is no valid K (due to the fact that it was an oral promise and the SOF requires writing.
b.
Held . Even in the absence of a valid K, promisee can be compensated if he acted to his detriment in reasonable reliance on promisor’s promise. In this case, it would be unjust not to enforce father’s promise, because son acted detrimentally in reliance of it.
3.
Wheeler V . White : a.
Facts . Agreement – White will secure loan for
Wheeler. White tells Wheeler he will do this and tells Wheeler to go ahead and start knocking down buildings and getting the property ready. Wheeler does this and then White says he will not be securing the loan. Wheeler sues on basis of promissory estoppel. White claims that he has no cause of action because there was no K.
b.
Held . Although there was no K, Wheeler can still sue based on promissory estoppel because he acted in reasonable reliance upon White’s promise to secure loan (all elements of P.E. are met). Says that in P.E. causes of actions, reliance damages are all that are available.
4.
Hoffman V. Red Owl Stores : a.
Facts . Company offers P store. In reliance, he sells his store to get the $ to open company’s store. After
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a while, company reneges. No K bc terms were too indefinite.
b.
Held . Absent a K, P can still recover based on P.E.
He acted detrimentally in reasonable reliance upon company’s promise to give him a store.
5.
Elvin V . Franklin : a.
Facts
. Aretha Franklin agrees to perform in P’s show. In reliance on this promise, P spends $ and makes necessary arrangements. No actual K is signed but Franklin ensures P that she will do it.
Franklin never shows up and P sues for (1) breach
K; (2) P.E. b.
Held . P cannot sustain breach K, but can sustain cause of action for P.E. because he performed in reliance upon her promise and Franklin should have reasonably expected him to do this.
6.
Local 1330, US Steel Workers v . US Steel Company: a.
Facts. Company tells workers they will keep plant open if it regains profitability. Workers rely on this promise and do extra work. Company claims profitability not re-established and closes plants.
Workers sue for promissory estoppel.
b.
Held.
Workers can’t recover. Company’s promise was conditional on re-establishing profitability and this condition was never met. Therefore, company never breached its promise. In other words, there was no promise to keep the plants open.
7.
Kearns v. Andree : a.
Facts.
P makes oral K with D for D’s purchase of land. In reliance on promise, P makes improvements to land that D has requested. D then repudiates K. K not enforceable due to SOF.
b.
Held. Court finds for P based upon U.E. – but
Coenen says this can also be P.E. COA.
d.
Unjust Enrichment
: (“Quasi-K”) i.
Requirement Elements :
1.
P confers a benefit upon D; and
2.
Retention of that benefit by D w/out compensation to P would be unjustified .
ii.
Remedy Available: Restitution.
iii.
Dobbs : When one person confers a benefit upon another not required by K or legal duty, the recipient of the benefit is often unjustly enriched and required to make restitution of the benefit or its value.
iv.
General Rule : In order for unjust enrichment to be found, benefit receiver must be “on notice” that the giver expects compensation
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for the benefit (either by the words/actions of giver or the nature of the benefit conferred). v.
Gift / Volunteer Principle : There is no unjust enrichment if the benefit conferred upon D was done so gratuitously or officiously or if services were rendered to gain a business advantage.
1.
To inquire as to whether or not benefit was conferred gratuitously, court will often look to whether or not P requested compensation for the benefit.
a.
If there was a request, usually U.E. will be found because this suggests that benefit was not gratuitous.
b.
If there was no request, usually U.E. will not be found, UNLESS the nature of the benefits are such that one would not expect to receive them gratuitously ( Sparks ).
2.
Bloomgarden v. Coyer : a.
Facts . D sets up business deal btwn. developer and investor. Never suggests that he is doing so in anticipation of compensation. In fact, suggests that he is doing so in order to get business for his company. After deal occurs, sues for finder’s fee.
b.
Held . D is not entitled to recover compensation. D never put receiving parties “on notice” that he expected compensation and parties can infer the opposite from his words and actions. Court concludes that benefit was conferred gratuitously and cannot be compensated.
3.
Qualification . U.E. may be found even if there was no request for compensation if the benefit is of the nature that one would not expect to receive them gratuitously: a.
Sparks v. Gustafson : i.
Facts . D manages building for Sparks
(maintenance, collects rent, finds tenants, etc.) D never asks for compensation. D sues Sparks’ estate for U.E.
ii.
Held . Although D never requested compensation, he can recover on U.E. because the nature of the benefits he conferred upon Sparks was of the nature that
Sparks should have not expected them to be conferred gratuitously.
vi.
Choice / Intermeddler Principle : There is no U.E. if one confers benefit w/out affording other person the opportunity to reject the benefit (Dobbs).
1.
EG: Painter comes and paints your house w/out your knowledge, painter probably can’t recover based on U.E.
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vii.
Rule: P can collect under U.E. even when K is unenforceable:
1.
Gay v. Mooney : a.
Facts. P agrees to provide D with room and board.
D agrees to provide house for P’s children. D breaches. K is not enforceable due to SOF.
b.
Held. Although K is invalid, P can still collect value of house based on U.E. (a benefit was conferred and it wasn’t gratuitous.
2.
Kearns v. Andree : a.
Facts.
P makes oral K with D for D’s purchase of land. In reliance on promise, P makes improvements to land that D has requested. D then repudiates K. K not enforceable due to SOF.
b.
Held. Although K is not enforceable, P can still collect under U.E.
c.
Note . Can also be P.E. COA.
3.
Dawson (Restitution w/out Enrichment) : The promisor whose substantial breach derailed the exchange must restore whatever was given or done in response to and in conformity with its terms and it will not matter whether this had brought profit or advantage to him.
viii.
Rule: When a valid K does exist, non-breaching P can sue on breach of K theory or may choose to abandon K and recover based on UE and recover restitution:
1.
Posner v. Seder : a.
Facts. 1yr. employment K @ 17/week for fabric cutter. Employer breaches K and fires P. P sues for value of work performed (restitution): b.
Held. P can recovery value of work performed – the $ he already received.
2.
Watts v. Watts : a.
Facts. Parties are not married but lived together for
12 years and have 2 kids. Couple breaks up and woman sues man for UE for services that she provided him (cooking, cleaning, childrearing, etc.) b.
Held. P has sufficient facts to raise claim for UE.
ix.
Rule
: Breaching party usually can’t recover for value of work done prior to breach: a.
Kelley v. Hance : i.
Facts. K to excavate sidewalk. After laying down a little bit, worker breaches and sues for value of work done.
ii.
Held. Although breaching party can usually recover for work done, P in this case can’t because there was no substantial performance on his party.
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2.
Exception : If there was substantial performance of K.
a.
Britton v. Turner : i.
Facts . Worker breaches 1yr. employment K for $120 after working for 9.5 mos. and providing employer with $100 in labor.
ii.
Held.
Although it was P who breached K, he can recover benefit he has conferred upon
D because there was substantial performance.
3.
Exception : If receiver of benefit actually accepts the work prior to its abandonment (which courts would hold to be an implied promise to pay).
a.
In Kelley
, D did not accept the builder’s work prior to abandonment.
b.
In Britton , court said that by allowing employee to work day after day, this was equal to employer accepting his work (implied acceptance).
e.
Promises for Benefits Received (Past Consideration): i.
Restatement 86 : 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.
1.
A promise is not binding: a.
If the promisee conferred the benefit as a gift or for other reasons the promisor has not been unjustly enriched; or b.
To the extent that its value is disproportionate to the benefit.
2.
Factors considered in determining whether subsequent promise will be enforced: a.
The definite and substantial character of the benefit received.
b.
Formality in the making of the promise (e.g.: if it’s in writing, the detail used in the promise, etc.) c.
Part performance of the promise.
d.
Reliance on the promise or the probability of such reliance.
e.
Specificity of promise.
ii.
Note : Promises for benefits received COAs are similar to U.E.
COAs, but it goes a little further, because with this kind of COA, there is an actual promise for the benefit received. iii.
Mills v. Wyman :
1.
Facts
. P takes care of D’s son. After finding out about this, P promises to pay for the expenses that they occurred
(no classical consideration since services pre-date promise).
D doesn’t pay and P sues.
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2.
Held
. Father’s promise can’t be enforced because there was no pre-existing consideration for the services.
3.
Misc. Under Restatement 86, you can argue this was decided correctly because father was not unjustly enriched by P’s actions.
iv.
Webb v. McGowin :
1.
Facts.
P navigates block so it won’t hit D and as a result is crippled for life. Afterwards, D promises to pay P and does until he dies. P then sues D’s estate to continue payment.
2.
Held.
Promise (although past consideration) is valid.
(Why was this promise enforced? Factors: There was a greater detriment to P than in Mills , more formal promise; there was significant part performance here; longer lapse of time btwn. services and promise to ensure promise was made cautiously).
v.
Boothe v.
Fitzpatrick :
1.
Facts
. P takes care of D’s bull when he gets loose. D subsequently promises to pay P for services.
2.
Held . Although past consideration, promise is enforced bc of material benefit to D. Considers subsequent promise the equivalent of accepting the promise.
vi.
Harrington v. Taylor :
1.
Facts . Woman saves man from getting his head cut off by axe and messes up her hand doing it. D makes subsequent promise to pay for damages to hand. He pays her a little and doesn’t continue. P sues.
2.
Held
. Promise not enforceable bc they were “voluntary and humanitarian.” There is no consideration. (Diff. in this case and Webb ? See Webb holding).
vii.
Edson v. Poppe :
1.
Facts . Property renter has well-driller drill him a well.
After seeing the well and using it, landowner promises to pay well-driller the “reasonable value” of services.
Landowner then fails to pay and says that promise is unenforceable bc it is past consideration .
2.
Held . Promise is enforceable: a.
Substantial and definite benefit? Yes.
b.
Formality? No.
c.
Part performance? No.
d.
Reliance? No.
e.
Specificity? No.
f.
Then why is promise enforceable? BC of moral considerations – it would be unjust to not compensate well-driller. This case is so close to
U.E. and D’s promise pushes us over the edge.
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viii.
Restatement 82(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 a SOL.
1.
E.G. X and Y old acquaintances. X borrows $ from Y 25 years ago and promises to pay him back in 1985. X never pays $ back and Y demands the $ is 2005. At this time, the
SOL has expired, so Y can’t collect. BUT, X says that he will pay Y back anyway. According to 82(1), this would be binding.
ix.
* Henderson
(‘Promises Grounded in the Past’):
1.
Henderson thinks that these promises should be enforced because they fulfill Fuller’s cautionary function (promise is made after the performance to afford an opportunity for deliberation and exercise of caution on behalf of the promisor).
f.
Obligation Arising from Tort : i.
General Rule : No liability in tort for breach of K.
1.
Exception : When D has a legal duty which exists apart from the contractual duty.
a.
* Note: Only applies to misfeasance (negligent performance of K) and not nonfeasance (failure to perform K).
2.
Mauldin v. Sheffer : a.
Facts . K for engineering plans. D’s designs were defective and as a result, P must pay for redesign, and must pay clients for readvertising. P also loses a customer due to defects.
P sues D for negligence.
b.
Held.
P can sustain tort COA because D owed him a legal duty (through a state statute) to exercise reasonable/ordinary care. Since this is an independent legal duty, tort COA can be sustained.
3.
Hargrove v.
Oki Nursery : a.
Facts . K for sale of grape vines. D sells P diseased vines. P sues D for tort of fraudulent representation.
b.
Held.
Tort COA can be sustained because complaint alleges fraudulent misrepresentation
(which is a legal duty).
4.
Foley v.
Interactive Data : a.
Facts . Employee sues after company fired him because of whistle-blowing for “tortious breach of the implied covenant of good faith and fair dealing.” b.
Held.
Tort COA can’t be sustained because good faith performance obligation was a contract term
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and tort remedies are generally excluded for breaches.
5.
Vanlente v.
University of Wyoming : a.
Facts . Employee sues after Univ. fires him after he refuses to retaliate against another employee for breach of implied covenant of good faith and fair dealing.
b.
Held.
Tort COA can’t be sustained. A breach of implied covenant of good faith/fair dealing will only be sustained if a special relationship of trust and reliance is demonstrated through parties. Here, there was no relationship and, therefore, no tort.
ii.
Busch v. Interborough Transit – The difference between breaches of K and tort are sometimes unclear. The main difference is that the former arises under agreement btwn. parties and latter is a violation of a duty fixed by law.
iii.
Speidel (“The borderland of K”): Remedies for tort is to restore P to position occupied before the tort. D must restore or correct P’s loss through compensation. Unlike breach of K, mental anguish and punitive damages can be included. Finally, D must pay P damages which are not foreseeable at the time of tort (unlike the
Foreseeability rule in breach of K COAs).
iv.
Prosser/Keeton: American courts have extended the tort liability for misfeasance to virtually every type of K where defective performance may injure promisee. There is liability whenever the misperformance involves a foreseeable, unreasonable risk of harm to P.
v.
Restatement 402A : You are liable for physical harm caused by selling any product in a defective condition unreasonably dangerous to user or consumer or his property if: (a) seller is engaged in the business of selling such a product; and (b) it is expected to and does reach the user or consumer without substantial change in the condition in which it is sold. This rule applies even if seller exercises all possible care in preparation/sale of product and even when user has not bought the product from or entered into K with seller.
vi.
Advantages of suing for Tort over breach of K:
1.
Punitive damages available;
2.
You can sue in tort even absent a K.
g.
Obligation Arising Solely From Form : i.
Even absent consideration, promise may be enforceable if supported by a writing:
1.
EX: Restatement 87 – Offer is binding as an option K if it is in writing and signed by the offeror, recites a purported
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consideration for the making of the offer, and proposes an exchange on fair terms within a reasonable time. h.
Statutory Warranty : i.
Express Warranty : Something expressly stated or written.
2-313 (2) Express warranties by the seller are created as follows: a.
Any affirmation of fact or promise made by seller which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.
i.
Note : “Basis of bargain” presumed; seller has burden of proving otherwise by proving
(1) that buyer actually knew of true condition prior to K; (2) that buyer inspected goods before K. b.
Any description of the goods which is made part of the basis of the bargain creates an express warranty that the goods shall conform to the description.
c.
Any sample or model that is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to sample/model.
2-313(3) Not necessary that seller use formal words such as
“warrant” or “guarantee” or that he have a specific intention to make a warranty, but an affirmation merely of the value of goods or a statement purporting to be merely the seller’s opinion or commendation of the goods does not create a warranty.
2.
* Under UCC, court must consider following factors * a.
Whether statements were an affirmation of fact or promise or a description of the goods or were merely just the seller’s opinion .
b.
If former, must determine whether the statements became part of the basis of the bargain .
i.
Presumed. Seller must prove against this
(see above).
c.
If so, must determine if the warranty was breached.
3.
Factors indicating mere opinion statements ( Keith v.
Buchanan ): a.
Lack of specificity.
b.
Made in an equivocal manner.
c.
Statements which reveal that goods are experimental in nature.
16

ii.
Implied Warranty : Something implied through the actions/interactions between seller and buyer.
1.
UCC 2-315: Implied warranty of fitness for a particular purpose exists when ( Keith ): a.
The purchaser at the time of K intends to use the goods for a particular purpose . b.
The seller at the time of K has reason to know of this particular purpose. c.
The buyer relies on the seller’s skill or judgment to select or furnish goods suitable for the particular purpose. a.
The seller at the time of K has reason to know that buyer is relying on his skill and judgment.
2.
UCC 2-314: Implied warranty of merchantability
( Webster ): a.
A warranty that goods shall be merchantable is implied in a K for their sale if the seller is a merchant with respect to goods of that kind…goods to be merchantable must at least be as fit for the ordinary purposes for which such goods are used
(Note: Food/Drink included).
iii.
Keith v. Buchanan :
1.
Facts . P buys yacht. He tells salesmen that he wants ocean-going boat and brochure describes yacht as
“seaworthy.” P sues for breach of express warranty and implied warranty of fitness for a particular purpose.
2.
Held . Since salesmen made affirmations of fact about the boat which became part of the basis for the bargain, D is liable for breach of express warranty // Since P did not rely on the salesmen’s judgment (instead he relied on judgment of friends he had inspect boat), there is no COA for implied warranty.
iv.
Webster v . Blue Ship Tea Room :
1.
Facts . P orders fish chowder and she chokes on bone.
Sues for breach of implied warranty of merchantability.
2.
Held . Since it is traditional that fish bones may be in fish chowder, their presence does not impair their fitness or merchantability and, therefore, there is no COA for implied warranty of merchantability.
i.
Statute of Frauds : MYLEGS i.
* SOF Checklist *
17

1.
Does SOF apply to this case?
2.
If so, is there adequate writing? (eg: Restatement 131,
Jonesboro Investment ).
3.
If not, is there a legally recognized exception? (eg: Shoor ,
UCC).
4.
If not, is there another legal doctrine that would mitigate the effect of non-compliance? (eg: Promissory Estoppel).
ii.
Adequate Writing Requirement:
1.
Restatement 131: a.
To be valid under SOF, there must be writing which: i.
Reasonably identifies subject matter of K.
ii.
Is sufficient to indicate that a K with respect thereto has been made btwn. parties or offered by the signor to the other party, and iii.
States with reasonable certainty the essential terms of the unperformed promises.
2.
Other Info: a.
Memo can take form of several writings, as long as there is evidence that they relate to same transaction
(Restatement 132).
b.
Memo does not need to have been created specifically for purpose of serving as a memo of a K
(Restatement 133).
c.
Signature need not be handwritten – any symbol will do if made or adopted with intent of authenticating the writing as that of the signor
(Restatement 134).
d.
May be signed at any time before or after K formulation (Restatement 136).
e.
If original memo lost/destroyed, its contents may be shown by an unsigned copy or by oral evidence
(Restatement 137).
3.
Jonesboro Investment Corp v. Cherry : a.
Facts . K to sell land for $. When D breaches, P sues. D claims not valid due to SOF. Although in writing, writing does not state terms and conditions, so it does not satisfy SOF.
b.
Held . K is invalid – terms and conditions must be stated in writing to take transaction out of SOF.
iii.
Examples of Exceptions to SOF:
1.
Surety : Promise to pay for the debts of another must be in writing.
a.
Exception . Leading Object/Main Purpose Rule – when the leading object of the promisor is to subserve his own interests or purpose, his promise
18

is not within SOF although it may be a promise to pay for the debts of another: i.
Schoor v. Holmdel :
1.
Facts . D is atty. for a land development company. P hired to do surveying and engineering. D promises to pay P for their services.
When D breaches promise, P sues.
D claims that promise is not enforceable bc it is surety and is not in writing.
2.
Held . BC D had substantial personal interests in company, his promise to pay for company’s debts does not fall into SOF, so promise is enforceable.
iv.
Other Legal Doctrine to Mitigate Non-Compliance:
Promissory Estoppel :
1.
Restatement 139: “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 the action or forbearance is enforceable notwithstanding the SOF if injustice can be avoided only by enforcement of the promise.” a.
Factors to consider: i.
Availability / adequacy of other remedies.
ii.
Definite / Substantial character of action or forbearance in relation to the remedy sought.
iii.
The extent to which the action or forbearance corroborates evidence of the making of the terms of the promise, or the making of the terms are otherwise established by clear and convincing evidence.
iv.
Reasonableness of action/forbearance.
v.
Foreseeability of action/forbearance.
2.
McIntosh v. Murphy : a.
Facts . P moves to Hawaii for employment (1 year
K). P is fired after 2 ½ mos of employment. D claims K is invalid bc it could not be performed in 1 year (K took effect 2 days before date P was suppose to start employment) and was not in writing, therefore invalid under SOF.
b.
Held . K is valid based on promissory Estoppel although not in writing as required under SOF.
Since purpose of SOF is to prevent fraud, it would
19

make no sense to apply it in cases where fraud would be the result.
v.
UCC 2-201 (Goods > $500):
1.
Must be in writing sufficient to indicate that a K for sale has been made and must be signed by the party against whom enforcement is being sought.
2.
Writing not insufficient bc it omits or incorrectly states a term agreed upon, but K is not enforceable beyond quantity of goods shown in such writing.
3.
* Note: Partial performance is a substitute if goods have been accepted or payment has been made and accepted.
vi.
Partial Performance & SOF:
1.
In most states (and UCC), reliance in the form of part performance is sufficient to bar assertion of the SOF as a defense.
a.
Expectancy Damages for Breach of K w/Consideration –
Rules/Rationales/Applications i.
General Rule: Non-breaching party can be awarded expectancy damages for a breach of K w/consideration ( puts him in position he would have been in had K been performed ).
1.
Policy (Fuller/Purdue): Private Ks encourages private autonomy, which should be protected // One who enters K foregoes opp. to enter other Ks, and should be compensated when breached // Expectancy damages promote and facilitate reliance on business agreements.
ii.
Cost of Completion vs. Difference in Value for Land Ks:
1.
Groves v. John Wunder : a.
Facts . K for land lease. Lessee promises to leave property @ uniform grade, but fails to do this. It costs leasor 60K to complete work that leasee was supposed to. However, if work had been done, land value would have increased by only 12K.
b.
Held.
Majority says that leasor should get 60k
(reasonable cost of completion), dissent says he should get 12K (difference in value had K been performed). Note: These are both expectancy damages, they are just different ways of measuring it.
2.
Peevyhouse v. Garland : a.
Facts . Same situation as in Groves . Here, cost of completion was 25K and difference in value was
300.
b.
Held.
P entitled only to difference in value ($300) because the cost of completion is totally
20

disproportionate to the difference in value. Court relies on a state in this case which says that no person can recover a greater amount in damages that he would have had K been fully performed.
3.
Rock Island v.
Helmerich : a.
Facts . K to strip mine land. Minor agrees to restore property to as close as prior condition as possible. Completion costs: 375K; Difference in
Value: 6K.
b.
Held.
Overturns Peevyhouse . There is now a statute that wasn’t there during Peevyhouse which imposes the duty on a minor to restore land. In this case, K included clause that required lessee to bear the cost of restoration. Therefore, 375K is appropriate.
4.
Restatement 346 – The cost of remedying the defect is the amount awarded as compensation for failure to render the promised performance.
iii.
Breach of Construction Ks:
1.
General Rule : a.
Owner: Cost of Completion - K price b.
Contractor: K price – Cost of Completion.
2.
Thorne v.
White : a.
Facts .
K to build roof for 225. Builder breaches; owner forced to find another builder for 582.
Owner sues for difference.
b.
Held.
Difference between 2 Ks would have been the proper measure of damages, except for the fact that 2 nd K called for work that the 1 st K did not.
Therefore, this award would put owner in a better position than if K had been performed. So, owner can only recover what it cost him to complete the same work, over and above original K price. c.
Rule.
Nonbreaching party can only recover for losses which are the natural consequence and proximate result of the breach.
3.
Morello v.
J.H. Hogan : a.
Facts . K for 44K masonry work. After doing 9K of work, contractor breaches and P is forced to spend 54K to complete.
b.
Held. P should get 10K (difference in what he expected to pay under K and what he had to pay after breach). The 9K figure is included in the 54K.
4.
Freund v.
Washington Square Press :
21

a.
Facts . K for D to publish P’s book. D breaches and P asks for cost of completion to publish book; analogizing it to construction contracts.
b.
Held.
P did not contract here for publishing of book but instead for % of book sales. Since this # is unknown, P only gets nominal damages.
5.
Warner v.
McLay : a.
Facts .
K for building construction. Owner breaches by running contractor off. Contractor claims he is entitled to 10 % profit.
b.
Held.
P is entitled to K price – cost of completion and expenses.
6.
HYPO : Coenen contracts with X to build Neiman mosaic for 200. X begins work and spends 100 (materials & labor) and Coenen runs X off. X would have spent another 10 to complete project.
a.
X would receive expenditures (100) + Expected profit (90) = $190 .
iv.
Breach of Employment Contracts :
1.
Handicapped Children’s Board v. Lukaszewski
: a.
Facts . Schoolteacher Ks w/school for 1 year employment @ 1K. Teacher leaves and gets another job for more $ and school has to find a replacement for her. The only other qualified applicant that they hire gets paid $1K more per year. School sues teacher for 1K. However, teacher says that the school gained a more valuable teacher due to her breach, and that therefore, there are no damages.
b.
Held.
School should receive 1K. Damages are measured by expectations of parties ; so it doesn’t matter that teacher 2 may be more valuable.
c.
Note : This is an example of efficient breach .
v.
Efficient Breach (Posner):
1.
In some cases, a party will be tempted to breach because profit from the breach exceeds the profit from K completion. So, if damages are limited to expectancy; then there will be an incentive to breach because breaching party will gain more than they will have to pay.
Since V is made whole, he won’t care. Therefore, encouraging breaches in these circumstances will not deter future Ks. Further, in situations like this, society is better off if there is a breach.
This shows the economic importance of limiting damages to expectancy.
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2.
EG: Handicapped : By breaching, D is gaining $2K. Since
P is limited to recovering expected profit of 1K, D is better off by breaching – she is still up 1K.
vi.
Breach of Sales K :
1.
* UCC 1-106: The remedies provided by this Act shall be liberally administered to the end that the aggrieved party may be put in as good a position as if the other party had fully performed .
2.
UCC Sales Provisions (Article 2) :
UCC Provision Situation Equation
2-713
2-712
2-708
Buyers damages for non-delivery or repudiation
* Applies only when buyer has not procured substitute goods (or “covered”).
If buyer has covered, 2-712 applies.
“Cover”; Buyer’s procurement of substitute goods
* Must be done in good faith and without unreasonable delay.
Seller’s damages for non-acceptance or repudiation
(Market Price when buyer learned of breach* – K Price) + Incidental
Damages – expenses saved in consequence of breach.
* Market price determined as of the place for tender or in case of rejection after arrival or revocation of acceptance, as of the place of arrival.
(Cover Price – K Price) + Incidental
Damages – expenses saved in consequence of breach.
2-706
2-714
Seller’s resale including K for resale
* Must be done in good faith and in a commercially reasonable manner.
Buyer’s damages for Breach in regard to Accepted Goods
(K price – Market price at time and place for tender) + Incidental damages
– due credit for proceeds of resale
(“scrap” value).
* If this is inadequate to put seller in position he would have been in, seller awarded profit + incidental damages – expenses saved .
(K price – Resale Price) + Incidental damages – expenses saved.
*Exception – Lost Volume Seller -Where seller has an unlimited supply of goods
(see Neri ).
Value of goods as warranted – Value of goods as accepted.*
* Measured at the time and place of acceptance.
3.
Cooper v. Clute : a.
Facts . K for cotton sales. Seller breaches. K price
= 10 7/8 per pound. Market value is the same.
b.
Held.
Market price – K price. Since these figures are the same here, only nominal damages available.
4.
Neri v. Retail Marine Corp.
a.
Facts . K for boat @ 12K. Buyer makes deposit of
4K and breaches. Boat is sold to 3 rd party for original purchase price. Seller claims his lost profits are 2K and that his other expenses are $600.
Buyer claims he should get nothing because he resold the boat for the same price, and therefore, under 2-706 he gets nothing.
b.
Held . 2-706 doesn’t apply here because seller is a lost volume seller . He had an unlimited amount of boats to sell, and would have made the 2 nd sale even
23

if he had also made first sale. Therefore, move to 2-
708 and seller is entitled to profits . Court concludes that buyer is entitled to profit (2K) plus incidental damages (600). They subtract this from buyer’s deposit (4K).
b.
Qualifications and Limitations of Lost Expectancy Damages: i.
General Rule : Damages for breach of K must have been foreseeable to the parties at the time of K. They must either: a.
Arise naturally from the breach ( general damages) ; or b.
If they arise out of specific circumstances, must have been specially communicated to breaching party at time of K ( special/consequential damages ).
2.
Hadley v. Baxendale : a.
Facts . K for delivery of broken crank shaft that needs to be repaired. Defendant delays their promised delivery date; and this causes the mill to lose profits. Mill operator sues for lost profits.
b.
Held . Operator can’t collect lost profits because they are too remote (were not foreseeable by D at time K was entered into – They are not the type of damages that would arise naturally from breach; and were not specially communicated to D).
3.
Armstrong v.
Bangor Mill Supply Co : a.
Facts . K for repair of broken crank shaft.
Repairman doesn’t do good job and operator has to send shaft back for re-alignment. As result, mill shut down for 6 days resulting in loss of profits.
b.
Held.
Loss of profits is recoverable. c.
Misc.
Why the difference in this case and Hadley ?
i.
This case involves machine shop, and they may have been able to foresee these damages.
ii.
This case involves negligent repair of the crank shaft; not simply delay in delivery.
4.
UCC 2-715(2)(a): Consequential damages resulting from seller’s breach include any loss resulting from general or particular requirements and needs of which the seller at the time of K had reason to know and which could not reasonable be prevented by cover or otherwise.
5.
Restatement 351(3) : Court may limit damages for foreseeable loss by excluding recovery for loss of profits, by allowing recovery only for loss incurred in reliance, or
24

otherwise if it concludes that in the circumstances justice so requires in order to avoid disproportionate compensation.
ii.
Mitigation of Damages :
1.
Rule: Non-breaching party has the duty to take all reasonable steps to mitigate damages.
a.
Clark v. Marsiglia : i.
Facts . K to repair paintings: After order, D revokes order but P keeps going anyway.
ii.
Held.
P can’t recover because he did not take reasonable steps to mitigate damages – he should not have gone on with work after
D revoked order.
b.
Shiavi Mobile Homes v.
Gironda : i.
Facts . Buyer breaches K for sale of mobile home and buyer’s father offers to pay seller
K price if he can’t find his son. Seller rejects this offer and resells to another buyer at lower price. Buyer sues for the difference.
Buyer appeals saying seller failed to mitigate damages.
ii.
Held.
Seller can’t collect due to failure to mitigate. As soon as he couldn’t find original buyer, seller had duty to mitigate.
He could have done this by reasonably pursuing father’s offer.
c.
Walters v.
Marathon Oil : i.
Facts . Oil co. promises to sell P oil and in reliance on this, he purchases gas station.
Then oil company repudiates. P sues under
P.E. and wins. D claims that they failed to properly mitigate damages.
ii.
Held.
P did take all reasonable steps to mitigate damages – they called other oil companies. Further, since they were just a
“mom and pop” operation, they can’t be expected to know of all their options.
d.
UCC 2-704: If goods are unfinished, an aggrieved seller may in the exercise of reasonable commercial judgment for the purpose of avoiding loss and of effective realization either complete the manufacture and wholly identify the goods to the K or cease manufacture and resell for scrap or salvage value or proceed in any other reasonable manner.
2.
Mitigation of Damages in Employment K:
25

a.
Wrongfully discharged employee must reasonable try to secure other employment that is not different or inferior to one of which he was deprived.
i.
Policy – Motivate employees to find other work and discourage laziness // Minimizes unnecessary litigation.
b.
Parker v. 20 th
Century Fox Films : i.
Facts . K for actress to appear in movie.
Producer breaches but offers actress a part in another movie. 2 nd
movie is a different genre and actress won’t have a role as big.
Actress fails to accept 2 nd
movie offer and sues for breach. Producer claims she failed to mitigate damages.
ii.
Held. Actress can collect: in mitigation of damages, employee only has duty to try to secure other employment not different or inferior to 1 st . iii.
Dissent.
Thinks that the test should be not whether any differences exist between 2 jobs, but whether the differences are substantial enough to constitute differences in the kind of employment and to render 2 nd offer inferior .
3.
Hillman: Court will usually not force non-breaching party to accept a new offer from breaching party.
iii.
“Speculative Limit” on Expectancy Damages
:
1.
General Rule : Loss of profits only recoverable to the extent that the evidence affords a sufficient basis for estimating their amount w/ reasonably certainty
(restatement 331).
2.
New Business Rule : Loss of profits from a business that has not yet gone into operation may not be recovered because they are merely speculative and incapable of being ascertained with the requisite degree of certainty: a.
Evergreen Amusement v. Milstead : i.
Facts . Theater owner sues grader for loss profits after a delay in construction results in a delay in opening theater.
ii.
Held.
Follows new business rule. Theater owner can’t collect lost profits because they are too speculative.
iii.
is different from general business enterprise.
3.
*Note : Today, new business rule in decline. Often, all that is required is a reasonably certain factual basis for computation of probable losses.
26

a.
Lakota Girl Scouts v.
Havey : i.
Facts . Girl scouts sue fund-raising management company for breach after they failed to provide K services and caused girl scouts to fall short of their fund-raising goals.
ii.
Held.
Girl Scouts can recover because there is evidence that had D performed, their goals were feasible. Says new business rule not recognized in this state but if it was that it wouldn’t apply because this.
iii.
Rule.
Damages don’t have to be exact calculation. There just has to be a rationale basis for computation.
4.
Corbin on Contracts 1022 : “If the mind of the court is certain that profits would have been made if there had been no breach by D, there will be a greater degree of liberality in allowing the jury to bring in a verdict for P, even though the amount of profits prevented is scarcely subject to proof at all.” iv.
Availability of Damages for Mental Distress :
1.
General Rule: Not allowed for breach of commercial K.
a.
Stewart Exception : Where breached K is a personal agreement involving matters of “mental concern and solicitude,’ damages for mental distress are recoverable –
Injuries must be suffered to the person (e.g. Sullivan v.
O’Connor ). i.
Injuries to property don’t allow for mental distress recovery. ii.
Breach of K cases involving intangible claims (e.g. failure to pay insurance claims; breach of employment K) don’t allow for mental distress recovery. b.
Exception : Damages for mental distress are recoverable where P alleges independent tortious conduct (e.g. unskilled performance of K – Hart ). i.
“Where a definite and objective physical injury is produced as a result of emotional distress proximately caused by D’s negligent conduct,” P may recover for the physical consequences of that mental distress. c.
Chrum v. Charles Heating & Cooling : i.
Facts . D negligently installs furnace and house burns down. P sues for distress. ii.
Held.
P can’t collect for mental distress: injury was to property and not to person; pleading inadequate to support independent tort COA. v.
Availability of Punitive Damages :
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1.
General Rule : Punitive Damages are not available unless there is an independent tort (Restatement 355) ( White v.
Benkowski ). vi.
Other Limitations to Expectancy Damages:
1.
No Loss expectancy in medical contexts (see Sullivan ). a.
Reasons: Too hard to gauge; medical sciences uncertain.
2.
No recovery for loss of reputation/goodwill.
3.
No lost expectancy to attorneys.
4.
Denial of Atty. Fees/Interest: a.
Reasons: Taxing losing party for atty. fees would discourage the poor from litigating meritorious claims. b.
Exception: If K provides for recovery, courts will usually enforce. c.
Exception: P may recover atty. fees as reliance damages if P wasted fees due to D’s breach (e.g. can recover for title search if vendor of land repudiates). c.
Reliance Damages as Alternative for Breach of K w/Consideration: i.
General Rule
: If expectancy damages can’t be reasonably ascertained (too speculative), then reliance damages can be applied
(puts P into position he was in before entering agreement) (see
Sullivan v. O’Connor – suggests that in a non-commercial setting, reliance may be more appropriate because expectancy is too hard to guage).
1.
Chicago Coliseum Club v. Dempsey : a.
Facts . Boxer repudiates K for boxing match.
b.
Held.
P can recover expenses between K signing and breach which were incurred as necessary expenses in furtherance of K performance. Loss of profits can’t be recovered because they are too speculative. Any expenses P incurred prior to K are not recoverable either.
ii.
Sometimes, expenses incurred before K may be recoverable, if those damages are in contemplation of parties @ K signing
1.
Anglia TV v. Reed : P prepares to make film and spends $ on director. Then signs K with actor and actor repudiates.
Court allows recovery of expenses made prior to K because actor knew about them when signing K.
iii.
Rule: In a suit for reimbursement of reliance damages, court will not put P in a better position than he would have been in had K been fully performed:
1.
Formula : Non-breaching party gets: $ spent in reliance on breached K - $ saved in consequence of breach.
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2.
L .
Albert & Son v. Armstrong Rubber : a.
Facts . P agrees to sell D four refiner machines to recondition old rubber. Seller breaches K by delivering late. Buyer fails to prove expected profit, but does sue for value of foundation that it built for the refineries. b.
Held. Normally, non-breaching party would get expectancy damages: Prospective earnings of machines – their price – cost of installing them.
However, P has not proved expectancy in this case and only asks for reliance ($ they spent building foundation for machines). Says that buyer can recover $ 3K for foundation, but that if seller can prove that buyer would have incurred extra expenses had K been performed, then this will be subtracted from that $3K.
3.
Fuller & Purdue : a.
* 2 Kinds of reliance damages : i.
Essential Reliance – $ spent to perform K, to prepare to perform K, and losses involved in entering K itself (e.g. forgoing opportunity to enter other Ks).
1.
In this case, we must limit recovery to K price, because if we don’t, we are permitting P to shift to D his own contractual losses, when D is guilty of nothing more than breaching K. ii.
Incidental Reliance - $ other than acts necessary to perfect P’s rights of K (e.g. $500 spent in Nurse ).
1.
Here, it is ok to allow recovery to exceed K price iv.
Coppola v. Kraushaar :
1.
Facts . P orders wedding dresses to be delivered day before wedding. Tells seller that he needs these dresses. Seller fails to deliver and wedding called off – P sues for $500 he spent for wedding.
2.
Held.
P can only recover $10 dress deposit. Can’t recover
$500 bc they were too remote.
d.
Validity of Clauses Providing for Specific Remedy in Event of Breach: i.
General Rule (Restatement 339): Requirements for a liquidated damages clause to be valid:
1.
Amount must be a reasonable forecast of just compensation for harm caused by breach.
2.
It must be incapable / very difficult to accurately estimate the harm.
3.
Comment b: If K promises same damages for breach of a trivial or unimportant part of the K as for the breach of the most important part of the K or the whole K, this is invalid.
29

4.
* If these conditions are not met, clause will be void as a penalty .
ii.
UCC 2-718 : Damages for breach by either party may be liquidated in agreement but only at an amount that is reasonable in the light of the anticipated or actual harm caused by breach and, in a consumer K, the difficulties of proof of loss and inconvenience of otherwise obtaining adequate remedy .
iii.
McGrath v. Wisner :
1.
Facts . K for sales of tomatoes. Grower breaches. K provides for $300 liquidation.
2.
Held.
Liquidation clause not valid. Court rules that it is not a reasonable forecast of prospective damages. Also, prospective damages aren’t incapable of ascertainment. iv.
Better Food Markets v. American Telegraph :
1.
Facts . Alarm company fails to respond to signal and call police and store is robbed. K has liquidation clause to $50.
2.
Held . Clause is valid bc damages were impossible to predict (their failure to respond could have had no consequences of large consequences) and this was a reasonable endeavor to find an average. v.
Validity of Clauses when no actual damages exist:
1.
Southwest Engineering Co. V. US : Holds that a party can recover under a liquidating damages clause even though the other party’s breach caused no actual damages. As long as the liquidating damage provision is a reasonable forecast of the anticipated damages at the time the parties agree to it, it is valid even if later developments cause the actual damages to be less or nonexistent.
2.
Some courts have held, however, that nonbreaching party can’t collect under liquidating clause if no actual damages result. vi.
Dunbar – What should be included in Liquidated Damages Clause:
1.
Damages should fall in range btwn. upper & lower limits of foreseeable damages at K signing.
2.
Parties should actually seriously negotiate amount and include in K that parties have done so.
3.
For Ks where parties have time limits, provide for reasonable extentions to adjust for delays.
4.
Make amount vary with extent of breach.
5.
Include words “liquidated damages.” (not dispositive, however).
6.
Include facts which caused party to include provision in K
(e.g. “actual damages were difficult to ascertain”). vii.
* Liquidation clauses different from limitation of damages:
1.
Rinaldi & Sons – Limitation of damages to $50 diff. from liqudated damages clause and subject to diff. rules.
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2.
UCC 2-719(3) : In sale of goods, setting, consequential damages may be limited or excluded unless the limitation or exclusion is unconscionable . Limitation for injury to person in the case of consumer goods is prima facie unconscionable but limitation where loss is commercial is not. e.
Remedies for Promissory Estoppel: i.
General Rule : For P.E., reliance damages will be awarded.
1.
Goodman – “True measure of damage is the loss sustained by expenditures made in reliance of promise.”
2.
Restatement 90: Remedy for P.E. “limited as justice requires.” ii.
Goodman v. Dicker :
1.
Facts . D encourages P to apply for franchise license to sell radios and tells him it would be granted. In reliance, P spends $ in preparation for doing business as radiosalesman. Then, D repudiates. P sues for breach of K.
Trial court finds that no K exists but that P can collect based on P.E.
2.
Held.
P can collect what he spent in reliance of D’s promise. However , trial court erred in awarding expected profits.
iii.
D & G Stout v. Bacardi :
1.
Facts . P is negotiated with another company for sale.
Knowing this, Bacardi promises that they will continue to use P as their exclusive distributor. Based on that promise,
P turns down initial offer for sale. Then, Bacardi repudiates promise. Realizing it can no longer be selfsustaining, P has to sell at a lower price due to loss of bargaining power.
2.
Held.
P can collect difference between 1 st
offer & 2 nd offer. They acted in a detrimental way in reliance on
Bacardi’s promise and Bacardi is liable under P.E.
iv.
Walters v.
Marathon Oil :
1.
Facts . Oil company promises P to supply him w/oil. In reliance, P buys land to build a gas station. Promise reneged by oil company. P sues under P.E. (this is not challenged) and for 22k in loss profits. Marathon claims loss profits not available under P.E.
2.
Held.
P can recover loss profits because he relied on D’s promise and those damages are ascertainable. Plus, he forbeared other opps. based on D’s promise.
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f.
Restitutionary Relief and Theories of Obligation: i.
Used for Unjust Enrichment: A monetary remedy is restitutionary in nature insofar as it requires D to repay P the monetary value of any benefit that P conferred on D.
ii.
** Restatement 371 : If sum of $ is awarded for restitution, it may as justice requires be measured by either: a.
A reasonable value to the other party of what he received in terms of what it would have cost to obtain it from a person in P’s position.
i.
Comment a: based on market price of such a substitute.
b.
The extent to which the other party’s property has been increased in value of his other interests advanced.
Comment b – Party seeking restitution for part performance is commonly allowed the more generous measure of reasonable value, unless that measure is unduly difficult to apply, except when he is in breach.
iii.
Craswell (Ways to measure Restitution):
EG: K for house construction. D builds ½ house and then homeowner repudiates. What builder can collect re restitution:
1.
Any increase in market value of D’s property.
2.
What it would have cost for D to get what he received from another in P’s position (fair market value).
3.
½ of price home-owner agreed to pay for full house.
4.
Whatever builder spent to build ½ house.
iv.
Where non-breaching P confers benefit & elects restitutionary recovery :
1.
Rule : Once other party breaches K, non-breaching party can waive K entirely and sue quantum meruit for reasonable value of work performed (“with the breach falls the K”),
even if that value exceeds K price. K price does not govern restitutionary relief (although it can be used as evidence): a.
Susi v. Zara Contracting : i.
Facts . Zara Ks w/US to build airport and then Zara sub-Ks w/Susi. During excavation, Susi encounters unexpected soil condition and their work is delayed. As result, Susi asks for more $ for extra work necessary. Dispute follows and Zara eventually takes over work and uses Susi’s rented equipment. Susi sues for reasonable value of worked performed.
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ii.
Held.
Since Zara defaulted on K, Susi can waive K entirely and sue in quantum meruit for reasonable value of work performed.
“With the breach fall all other parts of the
K.” b.
Posner v.
Seder : i.
Facts . 1yr. employment K for $17/week.
Employer breaches and fires employee.
ii.
Held.
P has the option of suing based on K or may waive K and sue in quantum meruit for value of services.
c.
Limitation : When K is fully performed: i.
Oliver v.
Campbell:
1.
Facts. Lawyer represents client in divorce proceeding for flat fee of
2.
$850. Lawyer fully performs and client wins in court. After services complete, client fires lawyer and only pays him $550. Lawyer sues
quantum meruit for reasonable value of services (5K).
Held. Although non-breaching party can waive K and sue quantum meruit for reasonable value of performance, this not available when K has been fully performed.
v.
Where non-breaching P confers Benefit but had a “Losing K”
1.
Restatement 373 (comment d): Even if P would have lost
$ if K had been performed, he is still entitled to recover the reasonable value of the work he has performed.
vi.
Where a non-breaching P conferred Benefit but Can’t prove
Lost Expectancy :
1.
Restitution available even when expectancy and reliance are not: a.
Bausch & Lomb v. Bressler : i.
Facts . K giving B&L exclusive distribution of Sonomed products in certain territory. In exchange, B&L pays a $500k “prepaid royalty.” Sonomed breaches by selling products w/in B&L’s exclusive territory.
B&L sues for breach & 550K in lost profits.
ii.
Held.
B&L can’t collect for lost profits because they are too speculative. Since reliance can’t exceed expectancy, P can’t collect reliance because there is evidence that P would have lost $ under this K.
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However, B&L can get their “prepaid royalty” back under U.E.
2.
* Corbin : Injured party’s alternative remedy by way of restitution depends on extent of the non-performance by D.
Injured party can’t maintain action for restitution of what he has given D unless D’s non-performance is so material that it is held to go to the ‘ essence
’ – it must be such a breach as would discharge the injured party from any further K duty on his own part. A minor breach by one party does not discharge the K duty of the other and, therefore, the other party can’t be entitled to restitution. a.
Osteen v.
Johnson : i.
Facts . K for promotion of country singer in exchange for $2,500. Promoter agrees to get singer studio time; to press and send out a record; and if the 1 st
record met with success, to press and send out a 2 nd
record.
Promoter breaches by (1) adding someone as co-author of song even though P wrote song by herself; and (2) by not pressing and sending out 2 nd record although 1 st was met with success. Only remedy that P can prove is restitution.
ii.
Held.
Failure to press 2 nd
album was a substantial material breach and P can collect
$2,500 by way of restitution.
vii.
Where P confers Benefit but K is invalid or unenforceable :
1.
Rule : Restitutionary relief may be granted to a party whose agreement is unenforceable (e.g. because of SOF): a.
Gay v. Mooney : i.
Facts. P agrees to provide D with room and board. D agrees to provide house for P’s children. D breaches. K is not enforceable due to SOF.
ii.
Held. Although K is invalid, P can still collect value of house based on U.E.
b.
Kearns v. Andree : i.
Facts. P makes oral K with D for D’s purchase of land. In reliance on promise, P makes improvements to land that D has requested. D then repudiates K. K not enforceable due to SOF.
ii.
Held. Although K is not enforceable, P can still collect under value of land based on
UE.
viii.
Where P has Materially Broken K after Conferring Benefit :
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1.
Rule
: P who has committed material breach of K can’t recover on K theory but if they conferred benefit on D prior to breach, and it is unjust for D to retain benefit, breaching party may collect for restitution:
2.
Britton v. Turner : a.
Facts . Worker breaches 1yr. employment K for
$120 after providing employer with $100 in labor.
b.
Held.
Although it was P who breached K, he can recover benefit he has conferred upon D (note the substantial performance on P’s part prior to the breach).
3.
Kelley v. Hance : a.
Facts. K to excavate sidewalk. After laying down a little bit, worker breaches and sues for value of work done.
b.
Held. Although breaching party can usually recover for work done, P in this case can’t because there was no substantial performance on his part.
4.
De Leon v. Aldrete : a.
Facts. K for sale of land. After paying $1,070 out of $1,500 total due, P breaches K and landowner then sells it to another party for $1,300.
b.
Held. Although P breached, he can still recover what he has paid (1070) minus the injury to landowner due to breach (200) = 870. (Note:
Landowner would be unjustly enriched by this amount if he was allowed to keep P’s $).
g.
Specific Performance: i.
General Rule : Where no adequate remedy exists at law (when K item is unique), court of equity may order specific performance:
1.
Curtice Bros. v. Catts : a.
Facts .
P is tomato canner and enters K with D
(tomato grower) for delivery of tomatoes for canning. P sues for specific performance to get tomatoes delivered and stop D from selling to 3 rd party.
b.
Held .
P entitled to specific performance because he needs these tomatoes to sustain his business
2.
Land Ks always appropriate for specific performance
(because land is unique ): a.
Kitchen v. Herring : i.
Facts .
K for sale of land. Seller breaches and buyer tries for specific performance.
Seller claims that specific performance is not available because the land is valuable
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due to lumber and that seller can, therefore, receive an adequate remedy at law: ii.
Held .
P entitled to specific performance because land is unique.
ii.
UCC 2-716 (Buyer’s right to Specific Performance / Replevin) :
1.
Specific Performance may be decreed if the goods are unique or in other proper circumstances. In a K other than consumer K, specific performance may be decreed if parties have agreed to that remedy.
2.
The decree for specific performance may include such terms and conditions as to payment of the price, damages, or other relief as the court may deem just.
3.
*Note- The UCC is in line with the common law here in that is makes specific performance the exception rather than the rule.
a.
Reasons: If s.p. awarded, there would be no efficient breach / courts don’t want to force ppl. to be in relationship they don’t want to be in – this would lead to more litigation.
iii.
Fansworth : Modern tendency is to liberalize granting of specific performance whenever damages are regarded as inadequate.
iv.
Limitations on Specific Performance :
1.
Only available when remedy at law inadequate.
2.
Unfair Advantage Taking – a.
EG: Coenen Ks with 99 year old grandmother for
Coenen because he unfairly took advantage of poor granny.
3.
Not available for personal services.
a.
HOWEVER, if personal services are unique, then court may enjoin breaching party from providing those services for 3 rd
person (E.G. Dempsey case).
v.
Note : With SP, courts of equity will inquire into the adequacy of consideration.
her to sell house in exchange for $99 and an REM poster.
b.
Here, court wouldn’t grant specific performance for
a.
The Nature of Assent : i.
Rule: If one’s words/acts, judged by a reasonable standard , manifest an intention to agree, it is immaterial what may be the real but unexpressed state of his mind (IE: Expressed intention matters not unexpressed intention).
1.
Embry (Missouri, 1907):
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a.
Facts. P tells boss he needs K extension or he will find other job. Boss says “don’t worry” and P continues work. b.
Held. D bound to K bc his actions would allow reasonable man to assume he assented to terms.
(Unexpressed intention is immaterial) (379).
2.
Lucy (Va, 1954): a.
Facts.
“High as a Ga. Pine” – agreement to sell farm at bar. b.
Held . D is bound by agreement bc his actions conveyed that he assented to terms.
3.
Hotchkiss v .
Nat’l City Bank of NY
: Words/acts are what matters – “even if twenty bishops” said that party intended something other than the usual meaning of his acts/words, it doesn’t matter.
4.
Whittier: Thinks that mutual meeting of the minds should be essential in K formation – if party carelessly misleads the other party into the reasonable belief that there was assent, it should be a tort, but no K.
5.
Balfour v. Balfour: There are some agreements that have offer, acceptance & consideration but are still not Ks because parties didn’t intend them to have legal consequences (e.g. agreements between husband & wife / 2 friends promising to exchange Xmas presents). Rule :
There is no K if ordinary people don’t’ intend there to be legal consequences to the agreement.
6.
Corbin : When subject matter is of a kind customarily dealt with in enforceable Ks, and parties have acted under agreement, court likely to look with distaste at provisions that seem to exclude all sanction/remedy.
7.
Tilbert v . Eagle Lock Co.
: a.
Facts . Employer offers certificate to employee payable at death. Letter stated that there was no K and was revocable at any time. Company discontinues certificates by notices, but man dies that same morning before notices were given. b.
Held . There was an offer, consideration & acceptance (employer offered certificate, sought good will of employee, and by staying on for 7 years, P accepted that offer & gave consideration).
Since P accepted offer, employer had no right to revoke after acceptance. Also, since P died that day, offer was still valid for the whole day. c.
Cargill Commission v. Mowery : i.
Facts . P negotiates w/grain co. for purchase of wheat and D uses “code word” to indicate
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how many bushels he wants to sell (D intended 3,000 but P reasonably took it to mean 35K). Thinking it bought 35K bushels, P resells on market. ii.
Held
. P can recover bc mistake wasn’t his fault and he relied on the mistaken promise. ii.
Rule
: For a valid K, there must be a mutual “meeting of the minds”:
1.
Raffles v . Wichelhaus (“Peerless” case): a.
Facts . P (seller) enters K for sale of cotton and agrees to deliver it to D on ship called “peerless.”
There are 2 peerlesses!! P ships it on “peerless” that leaves in Dec. but buyer breaches, saying he wanted it on “peerless” that arrived in Oct. b.
Ruling
. K not valid bc there was no “meeting of the minds.”
2.
Dickey v. Hurd :
3.
Restatement 20:
(1) There is no manifestation of mutual assent to an exchange if parties attach materially different meanings to their manifestations and:
(a) neither party knows or has reason to know the
meaning attached by the other.
(b) each party knows or each party has reason to know
the meaning attached by the other.
(2) The manifestations of the parties are operative in accordance with the meaning attached to them by one of the parties if:
(a) That party does not know of any diff meaning
attached by the other, and the other party know the
meaning attached by the 1 st
party; or
(b) That party has no reason to know of any different
meaning attached by the other party, and the other
party has reason to know the meaning attached by
the 1 st
party.
4.
Restatement 201: a.
A agrees to sell and B to buy a quantity of eviscerated ‘chicken.’ A tenders ‘stewing chicken’ or ‘fowl’; B rejects on the ground that the K calls for ‘broilers’ or ‘fryers.’ Each party makes a claim for damages against the other. It is found that each acted in good faith and that neither had reason to know of the difference in meaning. Both claims fail.
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b.
The Offer : i.
Rule : To figure out whether something is an offer, you evaluate the surrounding circumstances and ask yourself whether a reasonable person would have thought it was an offer:
1.
Southworth v. Oliver : a.
Facts . D (landowner) talks to P about possibility of selling property. D asks if P would be interested and he said yes. D sends P letter with “info” and price quote. Letter says that terms are negotiable.
D also sent info to other potential buyers. P accepts
“offer” but D says it wasn’t an offer.
b.
Held .
D’s letter was an offer – surrounding circumstances were such that a reasonable person should have took D’s letter to be offer.
2.
Courteen Seed v.
Abraham : a.
Facts . Seller sends seed sample to P and asks P if interested in buying. P says “your price too high..,wire firm offer .” Seller sends letter saying
“we are asking 23 cents per pound.” P accepts offer. Seller breaches, saying it wasn’t valid offer.
b.
Held . There was no offer – the word “asking” doesn’t constitute offer.
3.
Fairmount Glass v. Grunden : a.
Facts.
P wants to purchase “10 carloads” of mason jars and sends letter to D for quote. D writes back
“for immediate acceptance.” P accepts & orders 10 carloads. D breaches saying it was sold out. D claims letter wasn’t an offer just a quote.
b.
Held.
Letter was an offer & not just a quote.
Looks @ language “for immediate accept.” Offer was definite & acceptance was definite – “10 carloads” has specific industry meaning.
4.
UCC 2-204(3) : Even though 1 or more terms are left open a K for sale doesn’t fail for indefiniteness if the parties have intended to make a K and there is a reasonably certain basis for giving an appropriate remedy
5.
UCC 2-311(1) : Agreement otherwise sufficiently definite (2-204(3)) to be K not invalid by fact that it leaves particulars of performance to be specified by one of the parties. Any such specification must be made in good faith and w/in limits set by commercial reasonableness ii.
Newspaper Ads as “Offers”:
1.
General Rule: Newspaper ads are not offers, but instead are invitations for offers: a.
Exception: When offer is clear, definite and explicit, and leaves nothing open for negotiation, it constitutes an offer, acceptance of which will complete the K.
2.
Lefkowitz :
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a.
Facts .
Newspaper ad for fur coats & scarfs. P shows up to store and tries to get coat, but D refuses, saying it is only available to women.
b.
Held.
Although newspaper ads are generally not offers, this one is because it was clear, unambiguous with definite terms. Once P went to store, he accepted offer and gave consideration for D’s promise.
c.
The Acceptance : i.
Mirror Image Rule : Acceptance must be mirror image of offer to be valid. If it adds terms or conditions, it is a C/O:
1.
Exception : Acceptance may be valid despite conditional language if acceptance is clearly independent of condition
( Williston ).
ii.
Ardente v. Horan :
1.
Facts . D makes offer to sell land to P. P accepts, but add conditions (they want furniture). D refuses & doesn’t sell.
2.
Held.
Acceptance was conditional & didn’t create enforceable K – acceptance must not impose add’l conditions.
iii.
Rule.
Offeror is master of offer & has power to determine acts that are sufficient to constitute acceptance:
1.
Eliason v. Henshaw : a.
Facts . D sends P offer letter to buy flour & says
“please write by return of wagon if accept” (which knowingly meant that he wanted to receive answer in time it took for wagons to haul flowers). P delays response & sends acceptance to wrong place.
b.
Held . P violated terms of offer & his acceptance is not valid.
2.
UCC 2-206(1)(a) : Unless unambiguously indicated by language/circumstance, offer to make K construed as inviting acceptance in any manner & by any medium reasonable in the circumstances.
iv.
Rule . Party must manifest acceptance by words/acts to offeror – intention to accept is not enough:
1.
White v. Corlies : a.
Facts . D (merchant) sends offer to P (builder) to build office. Before sending acceptance, P goes out
& buys materials. D revokes offer.
b.
Held . No K bc P didn’t perform overt act to manifest acceptance.
v.
Rule.
Silence/Inaction is not acceptance ( Ducommun ), unless
(R69):
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1.
Offeree takes benefit of offered services with reasonable opportunity to reject & reason to know that they were offered with the expectation of compensation.
2.
Oferror states/gives oferee reason to understand that assent may be manifested by silence or inaction, and offeree in remaining silent and inactive intends to accept the offer.
3.
BC of previous dealings or otherwise, it is reasonable that offeree should notify offeror if he does not intend to accept.
vi.
Unilateral Ks (Seeks performance in exchange, not promise):
1.
Wormser (Bklyn Bridge): Acceptance when act is done .
2.
Rule : All necessary for acceptance is performance of act requested: a.
Brackenbury : i.
Facts . D writes to daughter/SIL asking them to move & take care of her and promising house in return. Ps do it but mom kicks them out & breaches.
ii.
Held . K is enforceable bc Ps performed act requested.
3.
R45: a.
Option K is created when offeree tenders or begins invited performance or tenders a beginning of it.
b.
Offeror’s duty of performance under option K conditional on completion/tender of invited performance in accordance with terms of the offer.
4.
Rule : Offer under unilateral K may be withdrawn at any time b4 act is done (even 1 sec. b4 – Williston ): a.
Petterson : i.
Facts . D offers P $ off his mortgage if he pays it in cash. P goes to house & before he gives $, D revokes.
ii.
Held . Sine D revoked b4 acceptance, no K.
vii.
Reliance on Offer Before Acceptance :
1.
R87(2) : An offer which offeror should reasonably expect to induce action/forbearance of substantial character on the part of offeree before acceptance & which does induce such action/forbearance is binding as option K to the extent necessary to avoid injustice.:
2.
Gimbel Bros : a.
Facts . D (subK) submits offer to P (general K) for linoleum for public K, but makes mistake and underestimates cost. P uses quote in his bid & wins bid. D retracts offer, saying there was no acceptance.
b.
Held
. P can’t recover bc language of D’s offer
(“looking for prompt acceptance after general K has
41

been awarded”) looks for usual communication of acceptance. P could’ve protected himself by requiring K b4 submitting bid.
3.
Drennan : a.
Facts . D (suK) submits offer to P (generalK) for paving part of K, but underestimates. P uses quote for bid & wins. D repudiates, saying there was no acceptance.
b.
Held . P can recover under R87(2), because it was reasonable for D to expect (due to custom), that P would rely on his offer b4 acceptance.
viii.
Bargaining @ Distance :
1.
Mailbox Rule : Acceptance in which mail is an acceptable mode of acceptance is effective when deposited in mail properly addressed with sufficient postage affixed (also applies to option Ks).
a.
Exception : Offeror can work around this by specifically requiring receipt of acceptance in offer.
2.
Adams v. Lindsell : a.
Facts . D sends offer to P by mail for wool, but misdirects mail & P doesn’t get till late. P accepts offer & sends back, but by the time D gets acceptance, he already sold. b.
Held . Once P sends offer, it is a valid offer and if accepted w/in specified time, becomes enforceable
K.
3.
Worms v . Burgess : a.
Facts . P elects to exercise option w/in specified time. Sends it in mail, but it gets there after deadline. D refuses to perform, saying no valid acceptance.
b.
Held . Mailbox rule applied & acceptance was valid d.
Duration of Offers : as soon as it was mailed.
i.
Restatement 36 :
1.
An offeree’s power of acceptance may be terminated by: a.
Rejection or counter-offer by offerree; b.
Lapse of time; c.
Revocation by offeror; d.
Death/incapacity of offeror or oferee;
2.
Non-occurrence of any condition of acceptance under terms of offer.
ii.
Lapse of Time: If offer made in a face-to-face conversation, acceptance must be done immediately. If not face-to-face, must be done in a reasonable amount of time ( Akers v. Sedberry – offer to resign accepted 3 days later).
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1.
Exception: Offeror can always choose to keep the offer open for acceptance for whatever period of time they want.
iii.
Caldwell v. Cline :
1.
Facts . K for sale of land. Offeror leaves offer open for 8 days. Offeror says that this means 8 days from signing offer / Offeree says that this means 8 days from receipt of offer.
2.
Ruling . 8 days from receipt – there is no offer until offeree knows about it.
iv.
Dickinson v .
Dodd :
1.
Facts
. D sends P an offer to sell land open until “Friday @
9AM.” Before that time & before P had accepted, P found out that D had offered to sell to another, but D never contacted D and revoked explicitly.
2.
Held . By offering to sell to another & since P knew of this, there was an effective revocation.
v.
Marsh v .
Lott :
1.
Facts . P given option to purchase land for consideration of
.25 until 6/1/05 with privilege of 30 day extention. P elects to extend for 30 days & then b4 30 days is up, exercises the option. Trial court says .25 cents is insufficient consideration for the option & K is not valid.
2.
Held . 25 cents is sufficient consideration for option.
Option Ks fall under different rules.
vi.
UCC 2-205 : Signed, written offer giving assurance that offer will be held open is not revocable for lack of consideration during the time stated or if no time stated for a reasonable time (not to exceed
3 months).
43