CONTRACTS OUTLINE: Professor May, Fall 2000
I. TYPES OF CONTRACTS
A. Formation
1)
Express Contracts—verbal—K based on words
2)
Implied in fact Contracts—based on conduct
3)
Quasi Contract(Implied in Law)—equitable remedy–basis for
restitution NOT A REAL K: fiction of courts to prevent unjust
enrichment
II. Offer and Acceptance
A. Methods
1) Bilateral Contract—promise for a promise: K as soon as promise to
perform OR actual performance is rendered
a. if ambiguous, assume bilateral
 Restatement 2d § 32

UCC § 2-206—offer to make a K shall be construed as inviting
acceptance in any manner and by any medium reasonable in
circumstances (See also §1-201(25)© and §1-102(3))

Davis v. Jacoby-- accepted Δ’s by promise but Δ dies
before  could perform. Δ might have rescinded offer.
Court assumes a bilateral K and holds for 

Restatement 2d § 62:
tender or beginning of invited performance = acceptance by
performance
acceptance by performance = promise to render complete
performance
2) Unilateral Contract—promise for performance: K only after
performance rendered
a. Every offer is revocable until accepted (acceptance by complete
performance—there is no K until performance is rendered
completely)
BUT, once offeree begins performing, offer becomes an option
K in which offeror must keep offeror open for reasonable time and
offeree has option to complete performance or terminate(SEE R2d
§§45 and 87 below)

Petterson v. Pattberg—Δ offered  option to pay
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balance of mortgage at a discount by specified deadline.
When  tried to perform/accept the offer, Δ w/drew offer.
Δ wins: offer in a unilateral K can be w/drawn until
moment that performance is fully rendered
b. Option Contract—start of performance creates an option K:
performer is not bound to complete performance. If complete,
unilateral K is formed.
 Restatement 2d § 45
Option K created by part performance or tender:
(1) when offeror invites acceptance only by performance,
option K is formed when offeree tenders or begins invited
performance, or tenders a beginning of it
(2) offeror’s duty of performance is conditional of the
completion or tender of invited performance

Restatement 2d § 87(2)
An offer that induces action or forbearance of a
substantial character by performer, which offeror should
reasonably foresee, may be binding as an option K to the
extent necessary to avoid injustice.

Drennan v. Star Paving Co.-- relied on bid of
subcontractor, Δ in securing a contract. Δ refused to
perform and  claimed losses by virtue of its reliance on
the offer.
Δ’s promise reasonably induced ’s reliance/action—
Δ’s offer is enforceable

UCC § 2-205—firm offer—
o merchant selling goods
o signed writing
o writing expressly promises not to revoke
B. Mutual Assent
1) Meeting of the Minds
 Subjective (intent in the ‘minds’ of the parties) is IRRELEVANT
 Objective (what parties express/manifest as their intent)—what a
reasonable person would have believed
communication between offeror’s and offeree
custom
prior practice between parties
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Embry v. Hargadine-McKittrick.— employer-employee:
“go ahead, you’re alright”= you’re fired!
not necessary that both parties intended renewal of K; only that a
reasonable person would have understood McKittrick’s words to
imply renewal of contract.
2) What Constitutes OFFER
a. manifestation of commitment
 Manifestation of intent
 certainty and definiteness of terms*(SEE TERMS
BELOW)
 communication by offeror to offeree
b. when it is NOT an OFFER
 offers to accept offers = preliminary negotiations –
Moulton v. Kershaw—response to public offering
proposing acceptance.
invitation to sell  offer



Advertisements
Price tag on item in store window
Acceptance of a reward (unilateral K) is only valid
of offeree knows of offer at time of his acceptance
(performance)
a person who does act being rewarded w/out
knowledge of the reward cannot claim it
Simmons v. U.S.—fishing case:  knew of
fishing competition and caught
prized fish. Adequate consideration:
prize  gift
Its okay if prize is not SOLE
purpose of why  fished, as long as
it was a reason.
c. when it IS an OFFER
 terms are clear; definite; explicit—nothing left open
to negotiation* (less necessary in sale of goods Ks)
Lefkowitz v. Great Minneapolis Surplus Store—Δ
advertised the sale of a stole for $1 to first come. 
performed on the offer and Δ refused to sell,
altering terms.
 wins: Even though it is an ad, it is clear,
definite and explicit—leaves nothing open for
negotiation.
 Induces parties to act (detrimental reliance)
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3) Certainty of Terms
a.. parties and subject matter must be identified
b. missing and ambiguous terms:
Ambiguous terms  offer UNLESS:
 Part performance
 Acceptance by offeree
missing terms:
 COMMON LAW:
Real Estate and other K’s : land and price terms must
be certain
 SALE OF GOODS (U.C.C. governs)
UCC § 2-204(3)—one or more terms left open in a K for
sale  K fails for indefiniteness if parties intended a K and
court can infer missing terms
quantity must be certain or otherwise a formula for
calculating the quantity
o Requirements Contracts—buyer agrees to buy all or a
% of buyer’s needs from seller who agrees to supply
(valid K)
o Output Contract—Seller agrees to sell all or a % of
output to buyer who agrees to buy
UCC §2-306:
(a) In good faith (b) no quantity
unreasonably disproportionate to any estimate

price need not be specified: court can infer market
value unless parties expressly agree otherwise
UCC § 2-305 Open Price Term

place of delivery need not be specified: can infer
seller’s place of business or if none, his residence
UCC §2-308 (see also §§ 1-205 and -208)

time of delivery need not be specified: court can infer
reasonable time
UCC § 2-309

time of payment need not be specified: courts can infer
payment due at time and place at which buyer is to
receive goods
UCC § 2-310(a)
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
Employment K’s
duration must be stated or the K is terminable at will of
parties
Restatement 2d § 90: PROMISSORY ESTOPPEL—promise
which promisor should reasonably expect to induce
action/forbearance of substantial character on part of promisee,
and which does so may be binding in injustice can be avoided only
by enforcement
Hoffman v. Red Owl Stores—promisor can be liable for a
promise made during preliminary negotiations if the
promisor should reasonably expect to induce
action/forbearance…
4) Communication to the offeree
a. offeree must know of the offer at the time of
performance/acceptance
5) Termination of Offer
a. TERMINATION BY LAW
 lapse of time
Restatement 2d § 41—offer ends when specified or at end
of ‘reasonable time’ (question of fact)

death of either party—Restatement § 48

subject of offer destroyed— Restatement 2d § 35

if K becomes illegal—i.e. legislation is passed that
prohibits the actions described by the K—Restatement 2d
§ 35
b. REVOCATION BY OFFEROR
Restatement 2d § 42
 communication to offeree by offeror:
direct communication: offeror tells or writes offeree the
deal is off
indirect communication: must be correct, given by a
reliable source understandable to be a ‘reasonable person’

Dickenson v. Dodds—Δ offered to sell  parcel of
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

land before accepting,  learned that Δ
intended to sell the land to another; Δ left a
note of acceptance for 
 on constructive notice that Δ’s offer
was w/drawn (indirect communication)
Offers made by publication can be revoked by
publication
Offer is IRREVOCABLE if:
detrimental reliance—if offeree reasonably foreseeable
by offeror (i.e. gen K relies on subK in making a bid)
Option K—if offeree gave consideration* for the
promise to keep offer open
**Restatement 2d § 87: no actual consideration is
necessary if it is recited in a signed and written K
Partial performance of unilateral K—majority and
Restatement rule: a K is formed when performance begins
(when offeree starts walking across the bridge) if
performance is rendered w/in a reasonable time.
preparation to begin performance  partial
performance
Firm Offers (UCC 2-205):
 Signed writing by merchant to buy/sell
goods
 Firm terms
 Writing expressly promises not to revoke
IF PERIOD STATED remains open for period
state or 3 months: whichever is LESS
IF PERIOD NOT STATED remains open for
‘reasonable time’ not to exceed 3 months
d. REJECTION BY OFFEREE
 express rejection of offer
Restatement 2d § 38:
Offeree’s power of acceptance is terminated by rejecting
the offer, unless the offeror says otherwise
Manifestation of intent not to accept = rejection

Indirect rejection of offer
passage of time—specified in offer or otherwise a
reasonable amount of time
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counter offer—offeree adds/changes terms of original
offer: constitutes termination of original offer (offeree
becomes offeror)
Restatement 2d § 39
Livingstone v. Evans—Δ offered  his house at a
certain price;  counter-offered a lower price and
then tried to accept the original price but Δ refused.
Δ wins: the counter-offer terminated Δ’s original
offer
6) What Constitutes ACCEPTANCE
a. Who may accept the offer?
 Only offeree—person to which offeror makes the offer
 If Offer is to general public, anyone can accept
 Option can be assigned
b. Terms of Acceptance
 Common law:
conditional acceptance—I accept only if…
if offeror does not expressly accept conditions but he
Restatement 2d § 59
A definite and seasonable
acts upon the conditions, this is an implied in fact K
expression of acceptance is
statements making implicit terms explicit: OK
operative despite statement
grumbling acceptance: OK
of add’l or different terms if
acceptance is not
CONDITIONAL on assent to
the add’l/different terms
additional terms—I accept and…
common law: mirror image rule—acceptance must
look exactly like the offer—additional terms = rejection
Request for Clarification is OK—not necessarily a
rejection
UCC §2-207 Additional Terms aka Battle of the
Forms/Knock Out Rule
 additional terms can be proposed, but not insisted
upon: this is a “seasonable expression of
acceptance”
IF neither party is merchant—K under terms of
original offer
IF one party is merchant—add’l term is part of
K if offeror explicitly assents
all parties merchants—add’l term is part of K
UNLESS:
 offeror objects
 additional term = material alteration
 offer limits acceptance to stated terms
no acceptance by offeror but performance
ensues—writing defines terms + U.C.C. gap-fillers
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 offer and acceptance on particular issue (varying
terms)
knockout rule (MAJORITY rule): disputed
terms are ‘knocked out’ of offer and acceptance and
U.C.C. ‘gap fillers’—(i.e. time of performance)—
control
MINORITY rule: offeror’s terms control
Idaho Power Co. v Westinghouse—applies §2-207

UCC §2-606 Acceptance of Goods
After reasonable opportunity to inspect signifies goods
conform or that he will take them even though they do not
conform, or
Failure to reject in reasonable time under §2-606 with
notification, or
Any act inconsistent with seller’s ownership

Conduct by both parties that recognizes K  = K
c. Communication of Acceptance
 Acceptance of a Bilateral K is not effective until it is
communicated to offeror
objective manifestation of intent—doesn’t matter what
offeree subjectively intended, but offeree must be aware
that offer was made (cannot accept an offer that ya didn’t
know about—i.e. reward)

Acceptance by Silence
 GENERALLY: Silence of offeree does not constitute
acceptance
Exceptions – Restatement 2d §69
(1) If offeree takes benefit of offered services with
reasonable opportunity to reject them and reason
to know they were offered with expectation of
compensation
(2) Offeree has reason to know silence is okay by
offeror’s act or words
(3) Previous dealings made it reasonable that
offeree should notify if no intent to accept
UNSOLICITED GOODS: if ‘offeree’ accepts
unsolicited goods and exercises dominion over them, he
has accepted (except goods sent via mail—statutes usually
say there are ‘gifts’)
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UNSOLICTED SERVICES: (Restatement 2d § 69(a))
where offeree takes benefit of offered services w/
reasonable opportunity to reject them, and reason to know
that they were offered w/ expectation of compensation, this
is ACCEPTANCE
H.B. Toms Tree Surgery v. Brant—implied K that is
legally binding
 Employment Modifications
Pine River State Bank v. Mettille—employment at will
contract modified by promised procedures in
handbook offered to all employees.
Where employment K is for an indefinite
duration, continued employment = acceptance of
new terms of unilateral K as expressed in manual
disclaimer must be conspicuous: Restatement 2d
§ 21
d. Receipt of Acceptance by Offeror
 Delays between offeree’s rendering of acceptance and
offeror’s receipt of acceptance
generally: rejection effective upon receipt, acceptance
effective upon dispatch
MAILBOX RULE (MAJORITY rule):
Acceptance is effective, K is formed, upon
DISPATCH, not receipt, of acceptance
Morrison v. Thoelke—acceptance sent by mail is
effective upon dispatch
 REJECTION BEFORE ACCEPTANCE:
When an offeree dispatches a rejection and
then dispatches an acceptance, acceptance
is only effective if received before the
rejection
 ACCEPTANCE BEFORE REJECTION:
MAJORITY rule: acceptance is
effective upon dispatch (therefore
acceptance governs)—BUT, offeror may be
able to invoke estoppel to prevent the K by
showing that he detrimentally relied on the
rejection
MINORITY rule: if offeror receives the
rejection first, there is no K.
EXCEPTIONS:
 Offer explicitly states acceptance is only
effective when received
 Option K
MINORITY RULE: acceptance effective upon
receipt of acceptance
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II. Interpreting Contracts
A. Implied-in-Fact K’s: based on conduct of parties
1) mutual assent inferred
Pine River State Bank v. Mettile—consideration given by
employee’s continued work at job
2) REMEDY for breach: any available K remedy
B. Filling the Gap
1) Preliminary Negotiations—Courts supply missing terms when:
a. Parties intend to leave term to reasonable implication
b. Parties agree to agree
c. Indefiniteness cured by performance
2) Certainty—Terms of K must be reasonably certain. They are deemed
reasonably certain if:
a. terms provide a basis for determining the existence of a breach
AND
b. basis for giving an appropriate remedy
Restatement 2d § 33
see also UCC §2-204
Joseph Martin Deli—Definiteness as to material matters (i.e. rent)
is essential to enforcement of K: here, parties have not gone
far enough—too large of a gap
3) Choice of Terms—Restatement 2d § 34
 Can still be reasonably certain if one/ both parties have ability to
select terms later
 Part performance may clarify move from preliminary to actual
contract
 Can still use reliance even if uncertainty
4) (AGAIN!) UCC §2-306: (a) In good faith (b) no quantity
unreasonably disproportionate to any estimate
 price need not be specified: court can infer market value unless
parties expressly agree otherwise
UCC § 2-305 Open Price Term

place of delivery need not be specified: can infer seller’s place of
business or if none, his residence
UCC §2-308 (see also §§ 1-205 and -208)
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
time of delivery need not be specified: court can infer reasonable
time
UCC § 2-309

time of payment need not be specified: courts can infer payment
due at time and place at which buyer is to receive goods
UCC § 2-310(a)
5) GENERAL DUTY OF GOOD FAITH IN BARGAINING
a. Best Efforts—a lawful agreement for exclusive dealing imposes
a return obligation to use best efforts to promote the product
UCC § 2-306(2)
Wood v. Lucy, Lady Duff-Gordon—promise to use reasonable
efforts is implied from a K (need not be explicit)
C. Parol Evidence Rule
1) Parol Evidence—evidence of a prior agreement (oral/written) that
affects the terms of a subsequent written K
Parol Evidence rule precludes evidence of a such an agreement when
there is a fully integrated, written K and the evidence of earlier
agreements varies, adds to, or contradicts the terms of the writing.
admissibility of parol evidence is determined by JUDGE not
jury—Restatement 2d § 209(2)
2) Integration: a final written expression of one or more terms of an
agreement –Restatement 2d § 209(1)
a. partial integration: written expression not intended to include
all terms of the agreement
b. complete integration: a written expression intended to include
ALL the terms of the agreement—Restatement 2d § 213
 merger clause: a provision in the written K stating that ‘this is
the final agreement (asserting complete integration)
3) Admissibility of Parol Evidence
a. evidence of prior agreements/negotiations may supplement a
partially integrated if:
evidence establishes consistent additional terms—
Restatement 2d § 216
consistent additional term must either:
o be supported by separate consideration OR
o be a term that in the circumstances might
naturally be omitted from the writing
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b. parol evidence may not supplement a written agreement if:
COMPLETE integration (no parol evidence for
complete integration, only partial) –Restatement 2d § 216
evidence contradicts* the terms of the writing
c. Parol evidence is admissible regardless of whether the writing
is partially or completely integrated to establish:
that the writing IS NOT integrated
the meaning of the writing, whether or not integrated
illegality, fraud, duress, lack of consideration or other
invalidating clause (in this case evidence MAY contradict
the written agreement)*
a condition precedent
mutual mistake
ground for granting or denying rescission, reformation,
specific performance or other remedy
Restatement 2d § 214
Lipsit v. Leonard—Δ’s contemporaneous oral promise to give
a share of his business induced  to rely on the promise
to his detriment.  sued for fraud and breach of K.
 can submit parol evidence to support an action in
fraud
Hoffman v. Chapman—agent of both parties made a mistake
in drafting a deed which resulted in the conveyance of
more land than parties had agreed. When mistake was
detected, ’s refused to convey the unsold land.
Parol evidence admissible as proof of a mutual mistake
d. contemporaneous oral agreements (that do not contradict) are
admissible:
they may be viewed either as a prior oral agreement OR
as proof that agreement is only partially integrated
e. parol evidence rule does NOT bar evidence of subsequent oral
agreements
f. parties can avoid admissibility of parol evidence by inserting
‘no oral modification’ clause
UCC § 2-209(2)
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4) UCC Version of Parol Evidence Rule—evidence admissible unless
the matter certainly would have been included in the writing
a. writing intended to be a final expression of agreement may not
be contradicted by evidence of prior written/ oral agreement or of a
contemporaneous oral agreement UCC § 2-202
b. writing may be explained/supplemented by evidence of course
dealing or trade usage, course of performance even if a
complete integration, unless K expressly provides otherwise UCC
§ 2-202 (1)
c. Writing may be explained or supplemented by evidence of
consistent additional terms unless the court finds the writing to be
complete and exclusive UCC § 2-202 (2)
d. determination of uncertain content: use course of performance
or trade usage UCC § 2-208
(see also Restatement 2d § 223 for course of dealing and § 222
for trade usage in non-sale of goods contexts)
Luria Bros. and Co. v. Pielet Bros Scrap Iron and Metal—parol
evidence inadmissible due to presence of a merger clause in
written agreement
5) Determination of Partial vs. Complete Integration
a. ‘four corners approach’(TRADITIONAL RULE):
determination by strict examination of the writing (no
interpretation of intent)
presence of merger clause usually = complete integration
 parol evidence is admissible if the content of the offered
Some
agreement would not ordinarily be expected to appear in
judges look
the written agreement.
to the
Mitchill v. Lath-- agreed to buy land from Δ on oral
writing -condition that Δ remove an icehouse from the property (this
“4 corners
condition was not written into the agreement).
approach”
parol evidence was inadmissible b/c subject of parol
evidence too closely related to the written agreement
BUT
b. ‘any relevant evidence’/’extrinsic circumstances’ test
Other
(MODERN RULE)—more common but not exclusively applied.
judges look
writing is integrated if parties intended an integrated
to the
agreement (CORBIN)
intent of
merger clause is merely evidence of intent
the parties
court will consider any relevant evidence—writing is not
giving exclusive weight in making determination
subjective decision
tends to admit parol evidence
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Hatley v. Stafford—Δ leased farmland to  w/ option that Δ
could buy out  at figure < $70/acre circumstances. Δ
tried to buyout  six months into the lease after the value
had increased to $400/acre.
court could consider the circumstances in deciding
whether to admit ’s proffered parol evidence of a prior
oral agreement limiting Δ option to buyout to 60 days
(instead of 6 months).
D. Interpreting K language—when parties dispute as to meaning of terms
contained in an agreement
1) determinations generally made by judges
2) admissibility of extrinsic evidence as a means to explain a written
agreement is tested by whether the evidence offered is relevant to prove a
meaning to which the language of the instrument is ‘reasonably
susceptible’
Pacific Gas and Electric Co v. G.W. Drayage—parol evidence
is admissible to clarify the meaning of unclear language
3) party seeking to have language interpreted in a light most favorable to
himself bears the burden of proof
4) Restatement 2d § 201:
a. where all parties have attached the same meaning to an
agreement/term, it is interpreted in accordance w/ that meaning
b. where parties attach different meanings, and party A knows that
party B has a different understanding of the meaning, but party B
does not, and party A does nothing to clarify this
misunderstanding, the court will apply the meaning understood by
party B.(*see Rest. 2d § 20 below)
c. if parties attach different meanings and neither party is aware of
the other’s understanding, there is NO binding K b/c there was no
meeting of the minds
Raffles v. Wichelhaus—2 ships called Peerless and each party
understood it to mean the other ship—there is no enforceable K.
5) Restatement 2d § 20—Effects of Misunderstanding
a. there is no manifestation of mutual assent if the parties attach
materially different meanings to their manifestations AND
neither party knows or has reason to know the meaning attached
by the other, OR
each party knows or each party has reason to know the meaning
attached by the other
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b. the manifestations of the parties are operative in accordance with the
meaning attached to them by one of the parties IF:
that party does NOT KNOW of any different meaning attached
by the other, AND the other DOES KNOW the meaning attached
by the first party, OR
that party has NO REASON to know of any different meaning
attached by the other, AND the other HAS REASON to know the
meaning attached by the first party
6) Hierarchy of Extrinsic Aids in determining an uncertain written K
Restatement 2d § 203(b)
UCC § 2-208(2)
Best
worst
a. Express Terms (in the written K)
b. Course of Performance between the parties (if the K has been partially
performed)
c. Course of Dealing (if the parties have K’d in the past)
d. Trade Usage
**these standards are not applicable if the K bars their use
7) Missing/Omitted Terms
a. Restatement 2d § 204—when parties to a bargain sufficiently defined
to be a K have not agreed to a term that is essential to the determination of
their rights/duties, court will supply a reasonable term.
III. Consideration
A. Defined: inducement to a K—element of bargain in a K; quid pro quo
1. Elements:
a. bargained-for exchange
b. legal detriment
(AS DISTINGUISHED FROM GIFTS—promises to make gifts are not
legally enforceable as they lack either of these elements and thus lack
consideration)
Restatement 2d § 71—
a. consideration of a promise requires that the promise be
bargained for
b. promise is bargained for when there is an exchange of promises
c. exchange may consist of :
act other than a promise OR
a forbearance
 creation, modification, destruction of a legal relation
d. performance/return promise may be give to promisor or to
another person; and may be given by promisee or another person
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Restatement 2d § 81—
a. that what is bargained for does not itself induce the making of
the promise does not prevent it from serving as consideration of
the promise
b. that a promise does not itself induce performance or a return
promise does not prevent that performance or return promise from
serving as consideration for the promise
B. Bargain
1. Bargain vs. Precondition—acts required in order to fulfill a promise
that do not confer a benefit on the promisor nor a legal detriment on the
promisee are mere preconditions, not consideration and thus do not make a
promise legally enforceable
Kirksey v. Kirksey—Δ wrote his sister-in-law ‘If you will come
down and see me, I will let u have a place to raise your
family.’ Two years after she moved, he changed his mind
and asked her to leave.  claims the expenses she incurred
in moving = consideration.
Δ’s act did not breach the K b/c there was no K (no
consideration).
2. Benefit (that promisor receives as part of bargain)
a. need not be economic
Hammer v. Sidway--’s uncle promised to pay  $5,000 if 
abstains from drinking, smoking, swearing and gambling
until age 21. Δ, uncle’s executor refused to honor the
promise claiming lack of consideration.
 wins: forbearance of a legal right = consideration
(legal detriment)
b. but moral obligation  consideration (MAJORITY RULE, see
MINORITY RULE—moral obligation is sufficient
consideration—below)
Mills v. Wyman—(MAJORITY RULE)  provided
board, nursing, and care to Δ’s son who he found ill
while the son was traveling. After  rendered
services to the son, Δ sent a written promise to pay
for the services rendered. Δ later refused to pay.
Moral obligation  consideration to enforce a
promise for services already rendered: past
consideration = no consideration for present
promise.
3. Promises to Surrender/Forbear a Legal Right
a. Restatement 2d § 74—Settlement of Claims
(2)execution of a written instrument surrendering a claim
under which one is under NO duty to execute =
consideration if the execution of the written instrument is
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bargained for even though he is not asserting the claim or
defense and believes that no valid claim or defense exists.
b. must be at least a molehill
claim cannot be ‘utterly baseless’; it must be based on
some ‘legal foundation’
Duncan v. Black—Δ K’d to sell  some farm land and K
had clause that Δ would also give  an allotment of
cotton. Δ gave  the cotton the first year, but 2nd
year  asked for more and Δ refused ( was not
entitled to more).  threatened to sue for breach of
K, and in consideration of not suing, Δ gave 
promissory note $1500. Δ never gave the $ and 
sued.
’if claimant in good faith makes a
mountain out of a molehill, the claim is
doubtful, BUT, if there is no discernible
molehill in the beginning, the claim has no
substance’
claim upon which a settlement is based
must be made in good faith and must have
some foundation
4. Adequacy of Consideration
a. nominal consideration—i.e. ‘in consideration of $1.00 paid…’
usually courts will not make judgments about the amount of
consideration, but in cases where consideration is so small that it is
really a ‘gift masquerading as a K’
Fischer v. Union Trust Co.—A father deeded some
property to his daughter and promised to pay the
outstanding mortgages on it. Daughter laughingly
gave the father $1 as consideration. At father’s
death, estate refused to continue mortgage
payments, claiming the promise was not binding for
want of consideration.
promisor’s love and affection is not sufficient
consideration
$1 payed as a joke  consideration
Schnell v. Nell—’s wife granted Δ $200 in a will. Will
was invalid but  promised to make the payment in
exchange for 1 cent consideration, then  revoked.
this nominal amount did NOT constitute
sufficient consideration
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b. EXCEPTIONS:
promise is under seal (in state that recognizes seal—most
don’t)
 promise is relied upon
 moral obligation promise (MINORITY enforces see
above)
charitable subscriptions in writing w/ consideration or
reliance (Promissory Estoppel)
Congregation Kadimah Toras-Moshe v. Deleo—
oral promise of a gratuitous pledge: no legal
benefit to promisor or detriment to
promisee—no consideration
Courts will not usually no enforce
gratuitous promises
MAJORITY of courts DO enforce
written gratuitous promises aka charitable
subscriptions even w/out consideration
c. BUT, courts do not require that adequate consideration means
= value of promises exchanged
Batsakis v. Demotsis—During WWII,  loaned Δ
500,000 Greek drachmas (~US$25.00) to get back
to the USA. Δ promise to pay  $2000. Δ later
refused to pay the debt, claiming inadequate
consideration.
Inadequacy of consideration does not void a K,
AS LONG AS THE CONSIDERATION HAS
SOME VALUE.
A party that receives the benefit it seeks will not
be relieved of a bad bargain
b. recited consideration—MAJORITY of courts hold that
evidence that consideration was recited in a written agreement but
not actually given may be used to show no bargain was
exchanged
c. past consideration—generally, past consideration 
consideration: current promise cannot be exchanged for some
benefit that the promisor has already received, BUT
EXCEPTIONS:
pre-existing debt: promise to repay a pre-existing debt
that was excused b/c of a technical defense (i.e. running of
statute of limitations) is enforceable w/out additional
consideration
Restatement 2d §§ 82, 83
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 Mills v. Wyman—(MAJORITY RULE)  provided
board, nursing, and care to Δ’s son who he found ill while
the son was traveling. After  rendered services to the
son, Δ sent a written promise to pay for the services
rendered. Δ later refused to pay.
Moral obligation  consideration to enforce a promise
for services already rendered: past consideration = no
consideration for present promise.
moral obligation (MINORITY RULE): a promise to pay
for benefits received will sometimes be enforceable on
grounds of moral obligation to prevent injustice
Restatement 2d § 86: Promise for Benefit Received
1) promise made in recognition of a benefit
previously received by promisor from promisee is
binding to extent necessary to prevent injustice
does not apply to gifts
does not apply to extent that value of
promise is disproportionate to the benefit
Webb v. McGowin-- was crippled in course of a
heroic act to prevent harm to Δ. Δ promised
to pay  a sum of $ weekly for rest of ’s
life. Δ died first and his estate refused to
honor the promise.
Moral obligation is sufficient
consideration when promisor received a
material benefit. (MINORITY RULE)
C. Legal Detriment—a promise to do something one is not legally obligated to
do, or omission of an act someone has a right to do
1. MINORITY VIEW: some courts hold that there is valid consideration if
promisor receives a benefit, even if promisee did not “suffer” a detriment
2. Pre-Existing Duty Rule—there is no legal detriment if a party
promises something it already has a legal duty to do or forbears from
doing something he is legally prohibited from doing.
a slight change in terms of the pre-existing duty satisfies
requirement of consideration
UCC § 2-209-in Sale of Goods context, modifications to K’s
can be made w/out additional consideration
Promise to pay part of a debt  consideration for the
relinquishment of the debt b/c debtor is has pre-existing duty to
pay the full debt (MAJORITY).
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MINORITY and UCC: some courts and UCC enforce
promises to pay part of debt as consideration to relinquish
the debt
EXCEPTIONS to the MAJORITY rule:
 payment terms are slightly changed
 debtor refrains from declaring bankruptcy
(relinquishment of a legal right)
 honest dispute as to the debt
 check marked “payment in full” is cashed by the
creditor
common law: creditor forfeits no rights
to rest of outstanding debt????
UCC § 1-207: entire debt is discharged,
unless creditor reserves his right by writing
“w/ recourse” on the check
DOES NOT APPLY TO ACCORD &
SATISFACTION!!!
3. Forbearance to Bring Suit
a. A promise NOT TO SUE in exchange for a benefit = VALID
CONSIDERATION if:
 claim (basis of the suit) was valid
 claim was NOT valid, then:
 parties reasonably believed that the claim was
valid (MAJORITY RULE) OR
validity was uncertain or the promisor
subjectively believed it was valid (Restatement 2d
§ 74)
D. Mutuality—that each party to the K provides consideration to the other in
exchange for the other’s promise
1. Implied mutuality: one party’s consideration can be implied
Wood v. Lucy, Lady Duff Gordon—implied that  will make
reasonable, good faith efforts to promote Δ’s goods
2. Illusory Promises
a. Restatement 2d § 77 Illusory and Alternative promises
a promise or apparent promise is not consideration if by
its terms the promisor reserves a choice of alternative
performances UNLESS:
 each of the alternative performances would have
been sufficient consideration alone, if bargained for

OR, one of the alternative performances would have
been sufficient consideration and there is or appears
to the parties to be a substantial possibility that
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before the promisor exercises his chose of events,
may eliminate the insufficient alternatives
if one side of the agreement is an illusory promise, the K is NOT
binding
b. EX’s: I’ll buy you a car if I fell like it; I ‘ll buy your goods
unless I decide not to
3. Alternative Promises (Restatement 2d § 77)
a. a promise that allows the promisor to choose among several
alternatives that will satisfy mutuality (each alternative must =
consideration separately)
b. EX—I’ll buy your car for $1000 or in exchange for my car.
4. Right to W/draw from Agreement
a. valid if promisor has right to terminate agreement after
performance is rendered (so there is still consideration—i.e. right
to terminate employment after a specified period)
b. valid if termination depends upon ability to perform
c. valid if termination occurs w/ notice
5. Conditional Promises—promise makes performance of act/promise
dependent on occurrence of a future event. VALID if:
a. condition is not w/in promisor’s control
b. condition is partially w/in promisor’s control (promisor must use
reasonable, good faith efforts to satisfy the condition)
EX. if I can secure a mortgage, I will purchase your home
Obering v. Swain-Roach Lumber Co.—If I buy land, I’ll sell u lumber
for $8000 and keep timber rights. Legit consideration.
6. Volunteered Services—in absence of a K, services volunteered to don
entitle the volunteer to compensation (no consideration)
Martin v. Little, Brown, and Co. –there was no unjust
enrichment here.
a. courts can find an Implied-in-Fact K where the benefiting party
knows that the ‘volunteer’ expects payment and allows
performance anyway.
7. Option K—consideration may be merely recited and not given (Rest.
2d § 87
E. Promissory Estoppel
1) equitable doctrine use to avoid injustice by enforcing otherwise
unenforceable promises: it ‘estops’ the promisor from claiming a lack of
consideration
21
Restatement 2d § 90: promise which promisor should reasonably
expect to induce action/forbearance of substantial character on part of
promisee, and which does so may be binding in injustice can be avoided
only by enforcement
Changes from the 1st Restatement
 Courts limit damages as justice requires (reliance is cap)
 Substantial reliance is not required
 Charitable subscription/marriage settlement is binding
w/out proof that promise induced action/forbearance
2) Requirements (to invoke promissory estoppel):
a. reliance on the promise by promise
b. reliance was foreseeable by the breaching party
c. the reliance was detrimental
d. injustice can be avoided only be enforcement of the promise (i.e.
damages are incalculable or insufficient)
3) DAMAGES—limited to reliance
detrimental reliance
Goodman v. Dicker—Δ, rep. of franchisor, encouraged  to apply for a
franchise and told him it would be granted.  relied on this
promise and invested $ in setting up a store. Δ had no authority to
grant this promise and it lacked consideration.
 can invoke promissory estoppel based on his detrimental
reliance on Δ’s promise
DAMAGES:  can only recover reliance damages, not
expectation
East Providence Credit Union v. Geremia—Δs secured a loan from 
using car as collateral. Loan agreed that if Δs insurance lapsed, 
would make payments and add that amount to the balance owed..
 was short $ owed on car loan and Δ agreed to pay the premium,
but didn’t. The car lost its insurance and was coincidentally
destroyed in an accident.
s estopped from claiming no consideration on their promise to
pay the loan, on which Δs reasonably and foreseeably relied
(doesn’t matter here anyway b/c there was a K)
reliance on a gratuitious promise
Ricketts v. Scothorn-- signed a note promising his granddaughter
$2000 so she wouldn’t have to work. She quit her job in reliance
on the promise.  died and his estate refused to honor the promise
for lack of consideration.
 may invoke promissory estoppel, even though promise was
gratuitous, b/c she relied on it and changed her position to her
detriment in such reliance.
22
reliance on a charitable subscription
Allegheny College v. National Chautauqua County Bank-- received a
$5000 pledge to become effective upon death of donor. Agreed
that $ would be used to create a fund named after the donor.
Donor made partial payment while alive and  set aside the pp
until the rest would be received. Donor repudiated the rest. 
sued bank to recover after donor’s death.
there was consideration here (promise to put fund in donor’s
name is a benefit to donor) but even if there wasn’t, consideration
not required to enforce promise of charitable contribution
IV. Defenses: Impossibility, Impracticability, Frustration of Purpose
1. IMPOSSIBILITY
A. Defined: circumstances in which a subject matter essential to the performance
of a K are destroyed through no fault of the parties to the K and the K is
discharged.
temporary impossibility: only temporary discharges the K until the
impossibility ends
partially impossible performance: K duties are only discharged to the
extent that they are rendered impossible
B. Elements:
a. unexpected contingency that affects a basic assumption of fact
essential to the performance of the K
b. unforeseeability of that contingency when the K was signed
c. the contingency arises after the K is signed
d. the risk of the contingency is NOT allocated by an express
agreement/custom
C. Measurement of Contingency
1. objective test: the impossibility is not measured by the specific
impossibility of performance by the particular party claiming impossibility
but rather by a reasonable person
EXCEPT:
a. Impossibility due to bankruptcy
b. Impossibility due to death of a party in a K for personal
service
D. Requirements:
1) General Services—
a. subject matter essential to performance is destroyed
b. no fault of either party
K discharged
Taylor v. Caldwell-- K’d to rent concert hall from K. Hall burned
down (no fault) before the K could be performed.  sued for
breach of K.
23
Court discharged the K: the presence of the hall was an implied
condition, the existence of which was essential for the K to be
performed
2) Construction K’s
a. builders in construction K’s are not generally excused from
their performance obligations by destruction of the subject of the K
BEFORE completion—they are said to have assumed the risk
Builders can cover this risk by expressly disassuming such risks
in the K OR by procuring insurance to cover their risk
Tompkins v. Dudley—Δ guaranteed the performance of a
contractor to construct a schoolhouse, the house burned before
completed.  sued to get the $ already paid on the K.
 wins: Δ assumed the risk, nonperformance is not excused by
a contingency Δ could have protected against through the K
b. in a construction K that is divisible into distinct parts for which
partial payments are rendered, the obligations of the parties as to
the parts that were completed before destruction remain intact.
Carrol v. Bowersock-- agreed to construct floor for Δ. Fire
destroyed the bldg.,  sued to recover for the work already
completed.
builder can recover for work completed under the K which
the owner would have received the benefit of in the absence of
casualty—but NOT preparatory work.
3) Sale of Goods (UCC §§ 2-613, 2-615)
a. TOTAL LOSS: if the K involves specifically id’d goods that
are destroyed or damaged through no fault of the parties, and the
buyer has NOT assumed the risk of such damage, the K is
discharged.
b. PARTIAL LOSS: buyer can choose to either void the whole K
or accept the goods w/ reduction from the K price of the damage.
if goods are replaceable than impossibility does not apply
c. SOURCE OF GOODS
 Specific agreed-upon source: destruction of source excuses
non-performance on the K
 Non-specific source: the destruction of the specific source
that the Δ intended to use does not excuse performance, the
Δ can get the goods from another source
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Bunge Corp. v. Recker—Δ agreed to supply  w/ soybeans.
Δ claimed impossibility b/c severe winter destroyed a large
part of his crop.
Since the K did not specify the source from which the
soybeans had to come, ’s performance was NOT
impossible—he could have gotten the soybeans from
another source.
4) Supervening Illegality of K—if something occurs (i.e. passage of
legislation) to render the subject of the K illegal, the occurrence renders
the K impossible as far as ordering specific performance, but damages
may still be awarded.
a. Restatement 2d § 264—performance of a duty is made
impracticable by having to comply w/ domestic/foreign gov’t
regulation, and the K was formed on the assumption (implied or
express) of the non-occurrence of the event—no SPECIFIC
PERFORMANCE, only damages
Louisville and Nashville RR Co. v. Crowe—consideration for the
K by Δ was lifetime passes aboard RR. Legislation was
passed prohibiting issuance of such passes.  sued for
specific performance
when performance of K is rendered illegal by statute,
common law etc., the only remedy available is damages
2. IMPRACTICABILITY
A. A duty to a K that is not actually impossible, but is commercially
impracticable
C. Requirements
1) extreme/unreasonable obstacle hinders performance, AND
2) obstacle was unforeseen at time K was formed AND
3) Impracticability is not fault of either party, AND
4) Non-occurrence of hampering event was ‘a basic assumption'
B. Situations
1) Force Majeure Clauses—list of events that will excuse performance for
circumstances beyond control of the parties (listed in K)
 Courts read these clauses narrowly
Kel Kim v. Central Markets-- leased a vacant supermarket
to be used as a roller rink (from Δ).  could not find
insurance and asked Δ to relieve the requirement of
insurance coverage claiming that such relief was w/in the
parties’ force majeure clause. Δ refused.
insurance requirement is consideration of the agreement
and cannot be relived for impracticability
25
2) Increase in Expenses—must be extreme to excuse performance or
warrant damages
American Trading and Production Corp. v. Shell Int’l Marine
-- was under K to transport oil for Δ and incurred ~30%
higher costs than expected b/c of a political crisis that
forced it to take a different route than expected.
Mere increase in expenses, especially when not
overwhelmingly significant, and ESPECIALLY when 
has notice of their possibility (in this case) is not sufficient
grounds to find that the K was commercially impracticable.
3. FRUSTRATION OF PURPOSE
A. defined: when essential purpose of a K is frustrated, each party’s duty of
performance is discharged, even if performance is not impossible.
B. Elements:
1) party’s principal reason for making the K is substantially frustrated by
an intervening event
2) non-occurrence of the event was a basic assumption upon which the K
was made (event was unforeseeable at time K was formed)
3) party claiming frustration of purpose did not expressly or impliedly
assume the risk of the occurrence
C. Situations

Krell v. Henry—Δ placed deposit on a room to be rented from which
to watch King’s coronation.  advertised the rented room to be
used for this purpose and exclusively rented the room for the
daytime (during the coronation). Coronation was cancelled and Δ
refused to pay the balance (he didn’t use the room)
When the essential purpose of the K is frustrated, each party’s
duty of performance is discharged, even if performance is not
impossible (Δ can still rent the room, but not for the purpose
intended)
 SALE OF GOODS (UCC § 2-615)
comercially impracticable situations
4. REMEDIES
A. Part Performance prior to discharge of K duties
1) Restitution recovery
2) Reliance recovery
party receives the K rate or reasonable value of the part performance
26
B. No benefit conferred on party, only detriment to performing party
1) generally, no recovery, BUT,
2) Reliance sometimes (see below)
Restatement §2d § 272—recovery in impossibility and frustration of
purpose ‘may go beyond mere restitution and include elements of reliance
by the claimant even though they have not benefited the other party’
C. Reformation of K—some courts will reform the problematic provisions and
make the K performable
V. STATUTE OF FRAUDS
 A K that falls “within the Statute of Frauds” will only be enforced if in writing and
if  prevails on merits
 A K that falls “outside the Statute of Frauds” need not be in writing
 Sometimes, in the interest of EQUITY, an oral K may be enforced, even though it
falls within the Statute of Frauds
A. K for Sale of Goods UCC § 2-201
1) goods priced >$500 MUST be in WRITNG
2) EXCEPTIONS (defenses to statute of frauds claim):
a. goods received and accepted § 2-201(3)(c)
b. part payment/performance made § 2-201(3)(c)
initially unenforceable agreement may become binding
through reliance by parties upon the K
c. special manufacture § 2-201(3)(a)
d. no objection to confirmation between merchants within 10 days
of receipt § 2-201(3)(a)
e. Admission—party admits to existence of an unwritten, oral K
§ 2-201(3)(b)
B. K for sale of land Restatement 2d § 125
1) K for sale of land must be in writing
C. K that CANNOT BE PERFORMED IN UNDER 1 YEAR (Restatement 2d
§ 130)
1) 1 year limit begins from date K is formed, not date of initiation of
performance
a. 1 year performance must be IMPOSSIBLE: mere low
likelihood (like for one’s lifetime) is not impossible—person could
die in 1 year
performance requirement must be able to be met if K is
prematurely terminated in 1 year (thus a K for 2 years is not
27
fulfilled if terminated before 1 year, so within statute of
frauds)
b. mere ability to be terminated w/in 1 year is still w/in statute of
frauds
D. K in consideration of marriage (promise of $ in exchange of marriage—i.e. to
daughter) is w/in Statue of Frauds: must be in writing
E. Consequences of Oral K w/in Statute of Frauds
1) MAJORITY VIEW—VOIDABLE
a. K unenforceable, not void: although K cannot be enforced via
lawsuit, K is valid for all other purposes (i.e. parol evidence; if
subsequent writing refers to the oral K)
b. Only party to the K can invoke the Statute of Frauds
2) MINORITY VIEW—VOID
a. NO K for any purpose
F. Common Law Elements of writing (Restatement 2d § 131)
1) purpose of the K
2) Terms & Conditions of the agreement
3) Parties to the K
4) Consideration (actual or recited)
5) Signature
G. U.C.C. § 2-201 Requirements
1) writing sufficient to indicate a K for sale btwn. parties to the K
AND
2) signed by party against whom enforcement is sought
3) Must state a quantity (if stated incorrectly, enforceable only up to
amount recited)
4) Must state (even if incorrectly)
a. price U.C.C. § 2-305
b. time and place of payment
c. quality of goods
H. Modifications/Rescission
1) oral rescission –okay
2) modifications must meet requirements of written K
J. PROMISSORY ESTOPPEL & STATUTE of FRAUDS Restatement 2d §
139
28
1) a promise which the promisor should reasonably expect to induce
action/forbearance on the promisee or third person, and which does so
is enforceable notwithstanding the Statute of Frauds if injustice can be
avoided only by enforcing the promise. Remedy limited as justice
requires.
2) Factors in determining remedy:
a. availability/adequacy of other remedies i.e.
cancellation/restitution
b. definite/substantial character of action/forbearance in relation to
remedy sought
c. extent to which action/forbearance corroborates evidence of the
promise (clear and convincing evidence)
d. reasonableness of action/forbearance
e. extent to which action/forbearance was foreseeable by promisor
Seymour v. Oelrich-- had job, Δ orally promised  new job for 10
years for $100 more than  was then receiving.
Δ was estopped from invoking Statute of Frauds b/c Δ’s
promised induced  to substantially change his position.
 received expectation damages
BUT different outcome in Stearns v. Emery-Waterhouse—Court
reversed trial court’s application of promissory estoppel prohibiting its use
to enforce employment K’s for + 1 year (public policy reason)
K. REMEDIES
1) Restitution (unjust enrichment)
a.  can recover market value of benefit conferred upon Δ
b. reliance sometimes available
2) Promissory Estoppel
VI. POLICING THE BARGAIN
A. CAPACITY TO CONTRACT
1) Minors lack legal capacity to contract, and can disaffirm any K during
minority, w/in reasonable time after majority (Restatement 2d § 14)
a. if non-minor party suffers damage, limited to restitution
remedy, if minor retains goods
b. after minor becomes adult, it can expressly or implicitly ratify
the K
reliance by other party would ratify the K post-minority
2) Mental Incompetence
3) Intoxication (majority rule)
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B. MODIFICATION OF K DUTIES
1) Legal duty rule—if a party promises another to do what the promisor
is already legally obligated to do, the promise lacks consideration
(Restatement 2d § 73)
pre-existing duty
official duty—public officer acting w/in scope of duty (can’t recover
reward for bravery)
acting OUTSIDE scope of official duty—no legal duty rule
a. modifications of rents and wages (UNENFORCEABLE)
Foakes v. Beer—agreement to accept payment of a lesser
sum on or after due date  consideration
(UNENFORCEABLE)
Alaska Packers Ass’n v. Domenico—Upon arrival in
laska, Δ demanded higher wages or threatened
refusal to work.  had no alternative so agreed, but
then refused to pay.
no add’l consideration for higher wages, and no
modification through extortion
b. BUT, payment of a lesser sum + additional act to constitute
add’l consideration IS sufficient
2) NO Pre-existing duty rule, when:
a. SALE OF GOODS—UCC § 2-209(1)
 no consideration needed if in good faith
must be outside of Statute of Frauds
unless original K expressly prohibits modifications
b. COMMON LAW—Restatement 2d § 89(a)
original K is rescinded and new K is executed
fair/equitable in light of unanticipated change in
circumstances
Brian Construction v. Brighenti—Oral promise
by  to pay more after Δ refused to continue
work due to unforeseen circumstances in
construction K (too much rubble made work
more expensive). Δ returned to work after
’s new promise, then quit.
unforeseen circumstances/add’l
consideration
c. NO ORAL MODIFICATION CLAUSE—K specifying
modification only by writing, can still be orally modified if:
implied-in-fact K is formed (parties conduct = terms of
K)
30
WAIVER—parties waive requirement of written
agreement
Universal Builders v. Moon Motor Lodge—
and Δ have a construction K w/ no oral
modification clause. Δ’s agent orally
requested modifications, watched  do
work, and then Δ refused to pay.
Δ’s conduct = wavier of no oral
modification clause.
waiver can be retracted if retraction before
waived condition was to occur
Promissory Estoppel—to extent justice requires when
there is reliance
3) Economic Duress—modifications made under economic duress (one
party to another), are UNENFORCEABLE
a. K is voidable if party was forced to agree to it by use of a
wrongful threat precluding the exercise of his free will
Austin Instrument v. Loral Corp—K unenforceable
when modification induced by duress
Party claiming duress must show that immediate
possession of needful go was threatened/goods
could not be obtained from another source (cover
was infeasible)
b. REMEDY—RESTITUTION
4) Accord and Satisfaction—agreement where one party agrees to
accept, as FULL SATISFACTION, a different performance than that
which was stated in the K
a. Discharges original duty
b.Check Tendered as Payment in Full
 COMMON LAW
good faith dispute as to amount of debt
debtor tenders a check for lesser amount
debtor indicates on check that it is
intended as a full satisfaction (‘paid in full’)
if creditor
cashes the
check, debt is
discharged
 UCC § 1-207/§3-311
creditor can cash check tendered as ‘payment in full’
and still reserve right to sue for balance IF he writes
words of protest on the check
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C. Nondisclosure
1) generally, no duty to disclose information, even if that information is
known by non-disclosing party
2) misrepresentation is actionable if:
a. misrepresentation of a material factor in the K
b. justifiable reliance on the misrepresentation
c. “½ truths”
Cushman v. Kirby—intentional non-disclosure of
information crucial to the K (whether water from
well near house is hard or not), it is deceptive and
fraudulent, and K is unenforceable
d. Affirmative concealment of a fact (i.e. covering up a termite
problem)
e. fiduciary relationship
D. Mistake (Restatement § 152)
1) MUTUAL MISTAKE discharges K duty when:
a. mistake has a material effect on agreed exchange
b. requiring of performance must be unfair
c. risk is not allocated by K terms
d. REMEDY—rescission of K
Sherwood v. Walker—barren, oops, pregnant cow!
K in which both parties are mistaken as to a material fact about
the substance of the K is NOT enforceable
must go to very nature of the K, mere quality is not
grounds for rescission
2) UNILATERAL MISTAKE
same elements as mutual mistake, PLUS
a. enforcement would be unconscionable OR
b. other party knew of mistake/actually caused it
Elsinore Union Elementary School Dist. v. Kastorff—Δ submitted
Erroneous bid for construction K; notified  of the error and
school “accepted” bid in spite of notification of error. Δ refused to
do work.
a party (esp. in construction K) can be relieved of duty to
perform if other party knew of mistake and suffered no detriment
as a result
E. Breach of Warranty (Implied/Express)
1) Usually in Sale of Goods (UCC § 2-312)
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F. Unconscionability and K’s of Adhesion
1) Unconscionability—Restatement 2d § 208 / UCC § 2-302 comment 1
a. matter of law (decided by judges)
must shock conscience of court
b. determined by circumstances at time K was made
2) Types of Unconsiconability
a. procedural: unfair bargaining process (K of adhesion)
Williams v. Walker Thomas Furniture Co.—
unconscionable terms in K; K is unenforceable
b. substantive: unfair bargaining outcome
3) REMEDIES:
a. whole K deemed unenforceable
b. unconscionable part of K rendered unenforceable
c. unconscionable clause is limited to avoid unconscionable result
VII. CONDITIONS
A. Definition—condition = event not certain to occur, which must occur before
performance under a K becomes due
Restatement 2d § 224—failure to perform a condition (or nonoccurrence of conditioned event) discharges other party’s duty to perform
B. Promises vs. Conditions (SEE FLOWCHART!!!)
1) promise is not on/off but rather can be partially performed
vs.
2) condition—on/off switch that creates/extinguishes duty to perform
under K
breach of promise = damages
breach of condition = no K, no damages (forfeiture)
3) conditions work a forfeiture when not performed; SO courts prefer to
interpret K as promise when possible
courts may excuse nonoccurrence of a condition if not a material
part of exchange (Restatement 2d §§ 227, 229)
Jacob v. Youngs and Kent—when party inadvertently breaches a
condition, court will view it as a promise to avoid forfeiture and
award damages
4) condition as an implied promise
a. Best Efforts (good faith inferred) Wood v. Lucy, Lady Duff
Gordon
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C. Conditions Subsequent vs. Conditions Precedent
1) conditions subsequent: event discharges an already existing duty of
performance (uncommon)
a. Burden of Proof on party who owes duty must prove condition
subsequent occurred
2) conditions precedent—event that must occur before other party has
duty of performance
a. Burden of Proof on party to whom duty is owed must prove
condition precedent occurred
Gray v. Gardner—if greater quantity of whale oil arrived this year than last year,
K was void—who has burden of proof,  or Δ?
depends on whether precedent or subsequent
C. Express Conditions
1) language (“provided that;” “when;” “as soon as;” “if;” “after” suggest
condition)
2) intent of the parties—circumstances
3) control—if occurrence of event is w/in control of one party, likely a
condition
D. Conditions of Satisfaction—agreement that makes K conditional on one
party’s satisfaction w/ the other’s performance
1) objective standard of reasonableness is used re:
a. commercial value
b. quality
c. operative fitness
d. mechanical utility
2) subjective standard of satisfaction (must be in GOOD FAITH) when:
a. fancy
b. taste
c. judgment
3) satisfaction of a 3rd party, not to the K (i.e. architect in K btwn. builder
and recipient of structure)
a. good faith conditions of 3rd party satisfaction are enforceable
4) Applicable Situations
a. Architect certification
subjective
b. Portrait painting
no unjust enrichment,
 may be forfeiture
c. K to build on another’s property
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objective
unjust enrichment and forfeiture
E. Assurance of performance as a condition (UCC § 2-609/Restatement 2d §
251)
1) if a party is reasonably concerned over the other party’s unlikely
performance, can request assurance of performance (refusal to provide
assurance = failure to meet a condition and discharges K)
F. Excusing Conditions
1) nonmaterial breach – K is enforceable
a. Factors determining whether breach is material or not
(Restatement 2d § 241)
extent to which injured party is deprived of expected
benefit
adequacy of damages
extent to which breaching party would suffer forfeiture
good faith and fair dealing or bad faith breach?
VIII. SUBSTANTIAL PERFORMANCE
primarily applies to building K’s (excuses condition of complete performance
if work is substantially performed—builder can collect for restitution)
A. Factors of Substantial Performance
 Was breach material or not?
Minor breach + substantial performance = injured parties can claimed
damages but must perform its obligation (pay on K)
NO FORFEITURE when breach is MINOR
Δ can offset remedy by amount of damages he incurred
before he breached
1) Performance must meet essential purpose of K
a. extent of contracted-for benefits that innocent party has received
b. extent to which damages = adequate compensation for breach
(instead of specific performance)
c. extent to which a forfeiture will result if substantial
performance is not applied
d. good/bad faith?
e. SOME COURTS hold willful breach impedes substantial
performance
Plante v. Jacobs—defects in house do not mean no substantial
performance
DV instead of CC when CC = unreasonable economic waste for
correction that is expensive but adds little value to house
Britton v. Turner—substantial performance in employment context: 
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breached employment K and sued for restitution –value of services
conferred on Δ
B. SALE OF GOODS UCC §§ 2-508; 601; 602; 606; 608; 612
§ 2-601: Perfect Tender Rule: if goods or tender of delivery fail in
any respect to conform to K,
PERFECT TENDER DOES NOT APPLY TO SERVICES
1) BUYER CAN:
a. reject entire shipment
 BUYER MUST reject w/in reasonable time (§2-602(1))
b. reject only defective goods
c. accept whole portion
buyer may revoke acceptance, only if nonconformity
substantially impairs value of goods to him AND
revocation occurs w/in reasonable time (§ 2-608)
2) SELLER CAN:
a. provide other solution (than buyer’s rejection)
b. cure the defect (§ 2-508)
if cure is insufficient, Buyer can reject
TO CURE, SELLER MUST:
o Seasonably notify of intent to cure
o 2nd attempt must meet requirements of perfect
tender rule
TO CURE POST K-determined performance, SELLER
MUST:
o have reasonable grounds to believe initial tender
was good
o seasonably notify buyer of intent to cure
o Seller has reasonable add’l time to cure
o Buyer must accept w/in reasonable time if he hasn’t
altered his position
3) INSTALLMENT K:
a. buyer can reject non-conforming goods when flaw substantially
impairs the value of the installment & cannot be cured (§ 2-612)
if seller offers to fix (and can), buyer must accomodate
4) DAMAGES:
a. cost of completion
b. diminution in value (if repair would be economic waste or CC
is disproportionate)
c. restitution
if no substantial performance, damages = benefit unjustly
conferred
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IX. ANTICIPATORY BREACH
A. Definition—definite, unequivocal manifestation of intent by a party not to
render promised performance in time specified in K (before the time specified in
K)
B. Determinative Factors
1) words
2) conduct
3) insistence on terms not part of K
4) cannot be mere request
C. Effects
1) non-repudiating party is excused from performance
2) non-repudiating party can cancel the K and immediately sue for
damages (Restatement 2d § 253/UCC § 2-610)
not for unilateral K’s
installment K, only applies to particular installment (nonbreacher would need to sue on each installment after it comes due)
repudiation may be retracted before other party changes
position in reliance on repudiation (i.e. before cover) Restatement
2d § 256(1) / UCC § 2-611)
3) if one party merely indicates potential inability to perform, the other
party may suspend performance and request adequate assurance of
performance as a condition of the K; failure to give assurance w/ in
reasonable time (UCC = 30 days) = repudiation (Restatement 2d §
251/UCC § 2-609(1))
EXCEPTION: if non repudiating party has already completed
performance, must wait for repudiating party to actually breach (at time set for
performance) and then can sue for breach)
D. REMEDIES
1) GENERAL RULE: Kp – Mp (Contract price minus Market price @
time specified for performance under K)
Cargill v. Stafford—whether time when buyer learned of breach
or time specified of performance is when price should be
pegged?
peg price @ time of performance
2) UCC’s BUYER’S REMEDIES (§ 2-712):
a. SUSPEND PERFORMANCE AND:
await performance by repudiating party for
commercially reasonable time
OR
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 resort to any remedy for breach of K (at time of
repudiation)—even if non-breacher has urged repudiator to
retract the repudiation
3) UCC’s SELLER’s REMEDIES when buyer repudiates (§2-702; 703; 706;
708; 709; 710)
a. Seller may:
 W/hold delivery of goods
 Resell and recover damages (if sold for less than K price) (§2706)
 Recover damages for non-acceptance/recover the price
 Cancel
b. Seller’s damages:
[Kp – Mp] + incidental damages (§2-710)– expenses salvaged b/c
of breach
 Market price pegged at:
o Trial before performance specified, pegged at time nonbreacher learned of repudiation (UCC §2-723)
MAJORITY VIEW
o MINORITY VIEW: time of performance/tender is due
o ALTERNATIVE VIEW: reasonable time after buyer
learned of breach
4) UCC’s BUYER’s REMEDIES and DAMAGES when seller repudiates (§§2711-717)
a. Buyer may:
 Cover and recover damages as to all goods affected—whether
or not id’d in K (§2-712)
[ Kp – Cost of Cover ] + incidental /consequential
damages (§ 2-715)– expenses saved b/c of breach
 Recover damages for non-delivery (§ 2-713)
 [ Kp – Mp (when buyer learned of breach) ] + incidental
/consequential damages – expenses saved b/c of breach
 Recover the goods failed to be delivered
 Obtain specific performance/replevy goods (§2-716)
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Oloffson v. Coomer-- refused to accept Δ’s repudiation of K to buy
corn. Cover was immediately and easily available,  covered at
high prices on date corn should have been delivered.
buyer must cover w/in commercially reasonable period (not way
later when it is easily accessible immediately) (§§2-610;712; 713)
X. COMMON LAW REMEDIES
Expectation Damages
 Diminution in Value
 Cost of Completion
Reliance Damages
Restitution Damages
A. EXPECTATION—get injured party to position he would have been in had K
been performed
Hawkins v. McGee—Dr. promised 100% perfect hand and delivered a deformed
one:  gets damages for value of hand promises – value of hand rendered
(minus expenses  expected to pay)
1) Includes profits that are FORESEEABLE and CERTAIN
Hadley v. Baxendale—no profits b/c damage was not foreseeable or
warned to breaching party: they might not have breached if they
knew gravity of consequences
2) Measurement of Expectation Damages:
a. Cost of Completion (when breach is willful and damages are
not disproportionate)
Groves v. John Wunder Co.—one who wrongfully & willfully
breaches a construction K is liable for the reasonable cost
of completing the required work, rather than the value that
the work would add to the land.
b. Diminution in Value—when CC would produce a windfall to
 --is disproportionate to the damage caused by Δ’s breach
Peevyhouse v. Garland—restoration of land to previous
condition would cost $29,000 but would raise value
by only $300
even though this is a construction K, value of
land vs. cost of work is SO grossly disproportionate
that damages are limited to DV
Restatements 1st § 346/ 2d § 348: ugly fountain—worth to 
vs. objective worth favors CC for 
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B. RELIANCE—as if K was never made: places injured party in position where
he would be if there had been no K (restore status quo)
1) expectation damages are not sufficiently certain (too speculative)
(Restatement 2d § 349)
Chicago Coliseum v. Dempsey—no way to predict how much $$ K
would have generated and  accepted risk.
2) K price is limit to reliance damages
C. RESTITUTION –recovery of benefit conferred/unjust enrichment to other
party
Equitable remedy; not on the K
1) damages = benefit Δ received by ’s performance (Restatement 2d §
371)
2) Quantum Meruit—reasonable value of services rendered (based on
what others would charge
U.S. v. Algernon Blair—restitution damages available even if  would
have lost $$ if K had been performed
not a K remedy; an equitable remedy so consequences K doen’t
matter
3) USED WHEN expectation is too uncertain and reliance is not a fair
measure
willfulness may bar restitution remedy
4) EMPLOYMENT K’s—modern view: even breaching employee can
recover in restitution (Britton v. Turner)
D. SPECIFIC PERFORMANCE—equitable remedy: enforce performance on
contract
1) USED WHEN:
a. remedy at law is inadequate
b. K is for unique goods, including land
Restatement 2d § 360—Factors determining adequacy/type of
damages
 Difficulty of proving damages w/ reasonable certainty
 Difficulty of procuring a suitable substitute performance by means
of $ damages award
Likelihood that award of $ damages could not be collected
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E. CONSEQUENTIAL DAMAGES
1) don’t flow directly/immediately from breach but as a result (i.e. lost
profits due to breach)
2) must be foreseeable to breaching party (Hadley v. Baxendale)
3) must be certain
F. INCIDENTAL DAMAGES
1) reasonable costs of reselling/repurchasing
goods/shipping/advertising/storage etc.
G. SALVAGEABLE EXPENSES
1) expenses/materials non-breaching party can recover/still use
H. LIQUIDATED DAMAGES (Restatement 2d § 356/UCC § 2-718)
1) CANNOT BE A PENALTY
2) Enforceable if damages are difficult to estimate at time of K formation
3) Must be reasonable at time of K or when enforced
City of Rye v. Public Service Mut. Ins. Co.—no enforcement when liquidated
damages = penalty
J. DUTY TO MITIGATE DAMAGES
1) non breaching party must mitigate damages after the other breaches
2) cannot run up expenses
Rockingham v. Luten Bridge Co.—Δ breached and warned ,
builder that it could not fulfill its K obligation.  finished
work (built useless bridge) anyway in knowledge of Δ’s
anticipatory repudiation.
 CANNOT recover for work done after knowledge of
Δ’s breach—duty to mitigate and especially not to run up
damages in bad faith.
XI. SALE OF GOODS REMEDIES
A. Breach by Seller (BUYER’s REMEDIES) UCC § 2-711
1) EXPECTATION Damages
a. Failure to Deliver
 Cover--§ 2-712
Cover – Kp +
[(Conseq. + Incident. Damages) – (Salvaged Expenses)]
Cover-KP + C/I –SE
 No cover--§ 2-716
Mrkt p. (when buyer learned of breach) – [KP + C/I –SE]
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 Specific Performance --§ 2-716
Only when unique goods and no available cover
(specially made products)
b. Late/Delayed Delivery
 If buyer repudiates:
Mp at time due – Mp at time delivered
 If buyer accepts goods:
Cost to rent until they arrive + lost profits
c. Non-conforming goods
 If buyer accepts--§ 2-714
Mp (of conforming goods at time non-conforming goods are received) – Mp
goods as received + C/I
2) RELIANCE Damages UCC § 2-715—Reasonable expenditures made
under K when expectation can’t be shown
a. Incidental Damages §2-715(1)
 Damages resulting from seller’s breach
 Expenses reasonably incurred in receipt; inspection;
transportation; and care of goods rightfully rejected
b. Consequential Damages § 2-715(2)
 Seller must know or reasonably should know at time of K
of consequences of breach
3) RESTITUTION Recovery
a. advanced payments
4) Limitations
a. duty to mitigate
b. certainty of damages
c. foreseeability of damages (Restatement 2d § 351)
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B. Breach by Buyer (SELLER’s REMEDIES) UCC § 2-703
Seller CAN:
 W/hold delivery
 Stop delivery by any bailee § 2-705
 Id goods to K notwithstanding breach or salvage unfinished
goods § 2-704
 Resell and recover § 2-706
 Recover damages for non-acceptance § 2-708
 Or recover on price §2-709
 Cancel
1) EXPECTATION Damages
a. resell goods § 2-706
Kp – resale price + [I- SE]
b. recover damages § 2-708(1)
Kp – Mp at time set for delivery
c. LOST VOLUME SELLER (could have sold 2x goods if no
breach—resell of un-purchased goods  recovery of lost profits):
lost profits (profit seller would have made)+ Conseq./Incid.
§ 2-708(2)
Neri v. Marine Retail Corp—could have sold 2 boats
d. Incidentals § 2-710: reasonable charges, expenses,
transportation, care, custody
2) Action for the price (~SPECIFIC PERFORMANCE)
a. § 2-709—when seller delivers and buyer fails to pay, seller can
sue for price
 If goods accepted by buyer or goods already shipped to
buyer (risk of loss passes to buyer)
Kp + I
 Seller cannot resell goods id’d to the K (special goods
made for buyer)
Kp – SE
 Seller must hold for buyer for reasonable time the goods
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C. Liquidated Damages § 2-718
1) Buyer’s breach, seller w/holds goods:
a. buyer entitled to some resitution for payments/deposits already
made (--seller’s expenses due to buyer’s breach)
 SELLER KEEPS:
o Consequential damages
o OR if no Consequential damages, then
o 20% Kp or $500—whichever is less
XII. SERVICES
A. Property Owner’s Remedies when Contractor Breaches
1) BEFORE PERFORMANCE—Expectation Damages
 Kp – [CC(B) + PP(C) + SE(D)]
OR
 Lost profits (A) + unreimbursed, unsalvageable expenses(E)
LOST PROFIT
WORK NOT DONE (COST OF COMPLETION)
PART PAYMENTS (PP)
SALVAGEABLE EXPENSES (SE)
UNREIMBURSED, UNSALVAGEABLE EXPENSES
A
B
C
D
E
2) SUBSTANTIAL PERFORMANCE—Expectation Damages
 Kp – [Damage caused (CC or DV + Conseq. Dmgs.) + PP]
3) AFTER PERFORMANCE—Restitution Damages
 Reasonable value
 Market value increase
 Asserted subjective benefit
B. Contractor’s Remedies when Owner Breaches
1) Expectation Damages
 Part Performance: CC + C/I
 Substantial Performance:
if correctable w/out economic waste: CC + C/I
if correction is disproportionate:
DV (value as promised – value rendered)
2) Specific Performance—generally not enforced: can’t force someone to
physically do something
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C.
EMPLOYMENT
1) Breach by employer—EMPLOYEE’s REMEDIES
a. Expectation: remaining K wages – substituted wages (cover)
only if substituted wages are available: not required to
accept inferior or substantially different work
Parker v. 20th Century Fox—Shirley MacLaine
b. Duty to mitigate (if possible)
2) Breach by employee—EMPLOYER’s REMEDIES
a. Employee’s wages – [wages for replacement +C/I]
b. Duty to mitigate
c. NO SPECIFIC PERFORMANCE
d. RESTITUTION for advanced wages
3) NOTE—permanent employment = employment at will (Forrer v.
Sears Roebuck)
D. SUBSTANTIAL PERFORMANCE OF CONSTRUCTION K’s
1) minor breach
2) If material breach = restitution
3) damages measured by:
a. cost of repair/replacement to render construction at what K
promised (CC)
OR
b. where repair/replacement is not economically feasible
(disproportionate)—DV (difference btwn value as built and what it
would have been worth properly constructed per K)
Pinches v. Sweedish Evangielical (Kp –DV)
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