CONTRACTS I
9.1.09
James Baird v. Gimbel
FACTS
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Def, a merchant of linoleum, sent an employee to the office of a contractor who had
possession of the specifications on the construction of a public building
The employee computed the amount of linoleum which was required, underestimating
the total yardage by half
Not knowing of the mistake, def sent to 20-30 contractors who were likely to bid on the
contract an offer to supply all linoleum at 2 lump sums depending on quality
When def learned of the mistake, he sent all of the contractors a telegraph stating that it
withdrew its original offer and would substitute a new one at double the amount
The telegraph reached the pl, a contractor, after he had made a bid on the contract; his
contract was accepted
Pl tried to formally accept the offer made by def, but def refused to recognize the
existence of a contract; pl sued for damages on breach
TRIAL
 Directed judgment for the def; pl appeals
COURT
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RULING: judgment affirmed in favor of def
Ordinary doctrine: offer was withdrawn before it was accepted
PL: it was a reasonable implication from the def’s offer that pl would act upon it and use
it in its bid
o He could have withdrawn his bid, but the time had passed to submit another, and
he shouldn’t have to lose the entire contract because the cost of linoleum is such
a small part of the entire contract
No contract
o Contractors did not suppose that they accepted the offer merely by putting in
their bids
 If general contractor had withdrawn his bid, subcontractor couldn’t sue
him for breach
o Policy: it doesn’t promote justice to seek strained interpretations in aid of those
who don’t protect themselves
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Promissory estoppel
o An offer for an exchange does not become a promise until a consideration has
been received
 Holding otherwise would be to hold the offeror regardless of the
stipulated condition of his offer
o Def offered to deliver the linoleum in exchange for the pl’s acceptance, not its bid
o That offer could become a promise if pl promised to take and pay for the linoleum
Drennan v. Star Paving
FACTS
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In preparation of bidding on a project, Pl, a general contractor, was receiving bids from
subcontractors by telephone
Def, a subcontractor, gave pl his bid for the paving work for $7K and pl prepared his own
bid accordingly, and he got the contract
The next day def told pl that they made a mistake in their bid and that they couldn’t do it
for less than $15K
Pl found another company that agreed to do the job for $10K; he sued def for difference
TRIAL
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Trial court found def made an offer and pl relied on the bid—entered judgment in favor
of pl for the difference between the new company’s offer and def’s original offer
Def appeals
COURT
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RULING: judgment affirmed in favor of pl
DEF: no enforceable contract—he made a revocable offer and revoked before
acceptance
Was there a contract--No
o There was neither an option supported by consideration nor a bilateral contract
PL: he relied to his detriment on def’s offer (promissory estoppel)
Promissory estoppel
o Def had reason to expect that his bid would be used by pl—it induced pl’s action
 He submitted the bid to get the subcontract
 He had an interest for pl to get the contract
o Pl is not free to delay acceptance in the hope of getting a better price, nor can he
reopen bargaining with the subcontractor
o Pl acted reasonably by mitigating the damages
UCC 2-102
 When the UCC does not apply
UCC 2-105
 The goods
 When evaluating what a good is:
o Doesn’t matter what I deem it to be or not, only depends on legislature’s
definition
Gravamen of the action Test
o Decides whether to apply the UCC or the common law based on the predominate
parts of the contract action
o Determine the difference between Common Law and UCC statutes
 Goods v. services
 Electricity
o good
What predominates the contract? The service of the contract? The goods of the contract? If the
service predominates the contract, the common law applies. If the good predominates the
contract, then the UCC applies
 KNOW THE DIFFERENCE
*In a unilateral contract, the offeeree
 Performance notion in a unilateral contract makes the offer irrevocable
 Option contact
o Under common law
 Somebody in their offer says contract is open for X time for returned
promise
 Mailbox rule does not apply
 Offeror is bound to that offer to not breach said contract until expiration
o Part-performance in a Unilateral Contract
 Know but be cautious Restatement §81 §§1
 “(1) the fact that what is bargained for does not of itself induce the
making of a promise does not prevent it from being consideration
for the promise.”
Baird (§90) & Drennan (§87.2)
 When is it irrevocable?
o The subs cannot revoke their offers even though it is not a formal contract
 There is no contract between Subs & GC until the GC has earned the contract from the
owner
 Application of (Baird) §90 Promise Reasonably Inducing Action or Forbearance
o “(1) A promise which the promisor should reasonably expect to induce action or
forbearance on the part of the promisee or a third person and which does induce
such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice
requires.
o (2) A charitable subscription or a marriage settlement is binding under Subsection
(1) without proof that the promise induced action or forbearance.” P.187
 Counter (Rule of Drennan) §87.2 Option Contract
o “An offer which the offeror should reasonably expect to induce action or
forbearance of a substantial character on the part of the offeree before
acceptance and which does induce such action or forbearance is binding as an
option contract to the extent necessary to avoid justice.” P.187
 §2-205 Firm Offers
o An offer by a merchant to buy or sell goods in a signed writing which by its terms
gives assurance that it will be held open is not revocable, for lack of
considerations, during the time stated or if no time is stated for a reasonable
time, but in no event may such period of irrevocability exceed three months; but
any such term of assurance on a form supplied by the offeree must be separately
sign by the offeror.
 Def of Merchant (§2-104)
 “Merchant” means a person who deals in goods of the kind or
otherwise by his occupation holds himself out as having knowledge
or shall peculiar to the practices or goods involved in the
transaction or to whom such knowledge or skill may be attributed
by his employment of an agent or broker or other intermediary
who by his occupation holds himself out as having such knowledge
or skill.
o
ARTICLE 2 DOES NOT JUST APPLY TO MERCHANTS
 CERTAIN PROVISION(S) OF THE ARTICLE ONLY APPLY TO MERCHANTS
 PAY CLOSE ATTENTION