I.
Contracts Outline Fall 2012
Theories of Obligation
a. Agreement with Consideration/Contract
i. Rules for making agreements- must be proven using Reasonable
person standard
a. Simply saying “this is not a K” does not make the
agreement unenforceable; esp if dealing with subject
matter usually encompassed in enforceable
agreements- Tilbert v. Eagle Lock Co. –p. 454 (court
found this benefit plan enforceable the man died on
the same day that the company ended the plan)
b. promises within a family may be enforceable-Morrow
v. Morrow p. 453 (but have to prove this and court was
not persuaded in this case)
c. Party asserting there is a K must prove offer,
acceptance and consideration (morrow v. morrow p.
453)
d. Mutual assent (meeting of the minds) required
1. Raffles v. Wichelhaus- peerless ships
case- (no assent=no binding k) p. 459
ii. No mutual assent no enforceable agreement in
Restatement second of K §20 (1)
1. (a) neither party knows what the other
thinks the meaning is
2. (b) both parties know what the other
party thinks the K to mean
iii. but if one of the parties knows it is enforceable
Restatement §20 (2)
1. Dickey v. Hurd- the offeror knows that the
offeree thinks the K to mean (enforceable
K) - p. 462
iv. BUT BE CAREFUL usually courts just decide
which interpretation is more reasonable
1. Colifax Envelope Corp v. Local No. 4583m Chicago Graphic Communications
Intern- (peerless is unusual courts
usually just decde which is more
reasonable)p. 463
ii. Elements
1. Offer-determine by what a reasonable person would believe
the interaction to mean in light of all the circumstances (offer
or merely an invitation to offer?)
a. Requirements
i. Clear, definite and explicit leaves nothing open
for negotiation= offer Lefkowitcz v. Great
Minneapolis Suprlus store, inc- p. 463
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ii. Advertisements (depends on legal intention) –
determined by reasonable person
1. advertisement if goods for sale at certain
price not enforceable offer
a. Ford Motor Credit Co v. Russellcourt said that the company did
not have unlimited cars and not
every could qualify so not an
offer-p. 465
2. Advertisement made to a specific
person offer  enforceable
a. Lefokowitcz v. Great Minneapolis
Surplus store- the advertisement
was to the first person to show up-. So it was an offer-p. 463
iii. Generally- price quotations not an offer (but not
always) p. 469
1. Southworth v. oliver
iv. Offer can be made to more than one person
1. Southworth v. oliver- p. 469
v. General language is not an offer
1. I am asking does not mean I am offering
a. Courteen Seed Co. v. Abraham p.
466
vi. offeror can revoke offer before acceptance
1. James Baird co v. Gimbrel Bros- court
allows this no breach of K and does not
recognize promissory estoppel – no
promise because offer does not equal
promise (so the party that had relied was
sol)- p. 525
2. Drennan v, Star Paving- similar facts to
James Baird- but this court allows for
promissory estoppel cause of action
says offer is a promise- p. 527
b. Option Contracts
i. Definition- offer coupled wit ha promise to keep
the offer open for a designated time
ii. Option K under Common Law
1. Marsh v. Lott- upheld option K –
consideration was only 25 cents court
said will not look into adequacy of
consideration any consideration is
good- p. 503
a. Consideration must actually be
delivered
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iii. Requirements Restatement Second of K
§87(1) an offer is binding as an option K if
1. (a)-it is in writing and signed by the
offeror, recites a purported consideration
for the making of the offer, and proposes
an exchange on fair terms within a
reasonable time; or
2. (b) is made irrevocable by statute
3. consideration doesn’t actually have to be
tendered (only needs recitation of
consideration)
4. Comment b to the restatement above says
mere pretense (grossly disproportionate
consideration) is not good consideration
 bargaining form is ESSENTIAL
iv. UCC- Firm Offers (option contracts)2-205
1. 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
consideration, during the time state 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 oferee must be separately
signed by the offeror.
c. Bi-lateral v. Unilateral offers- determine which by
asking what a reasonable person would think
PRESUMPTION OF BILATERAL
i. Bi-lateral- acceptance is a promise
ii. Unilateral- acceptance by performance(only the
offeror is bound not offeree)
1. When is it binding?
a. Brackenbury v. Hodgkin- court
finds that unilateral k is
enforceable (even though the
action not fully completed) p. 515
b. Wormser approach- have to
complete the action to get the
offerors promise  then he
changed his mind!!!
c. Restatement Second of K §45
i. (1) where an offer invites
an offeree to accept by
rendering a performance
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and does not invite a
promissory acceptance, an
option contract is created
when the offeree tenders or
begins the invited
performance or tenders a
beginning of it
ii. (2) the offeror’s duty of
performance under any
option K as created is
conditional on completion
of the incited performance
in accordance with the
terms of the offer
iii. (a) only good for unilateral
Ks
d. actual beginning is needed not
mere preparation to begin
2. Revocation of Offer
a. Offer can be withdrawn before act
is performed- Peterson v.
Pattberg- p. 517
2. Acceptance
a. Rules
i. Restatement §58 (a)- acceptance must be
definite and unequivocal –probable inference of
assent NOT enough
ii. Restatement Second of K §32- in case of doubt
an offer is interpreted as inviting the offeree to
accept either by promising to perform what the
offer requests or by rendering the performance,
as the offeree chooses (so can either accept by
doing the K or by promising to do the K)
iii. Acceptance must be manifested- White v.
Corlies p. 484 (there was no manifestation in this
case by the builder so no acceptance)
iv. Mail box Rule
1. Acceptance is made when put in the mailAdams v. Lindell- p. 535
a. Policy reasons
i. Fairness- offeror chooses to
deal by mail must deal
with consequences
ii. Offeror is the master of the
offer can draft around it
in the offer
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iii. It has been along for a long
time!
b. when does it apply
i. offer and acceptance by
mail
ii. acceptance is sent by mail
but then retracted before
mail gets there(Morrison v.
Thoelke) mailbox rule
applies – p. 537
iii. if offeree mails and gets the
letter back should apply
(but would the offeror ever
know?)
iv. overtaking acceptance (the
offeree mails rejection
then mails an acceptance
acceptance arrives first
binding K
2. Exception to mailbox rule: Option Ks
a. Restatement second of K § 64(b) Acceptance is not effective until
received by offeror
b. EXCEPTION : Worms v. Burgessdoes not follow the exception to
the mailbox rule but follows the
mailbox rule itself acceptance
when it is in the mail  p. 538
v. Termination of Power of AcceptanceRestatement Second of K § 36
1. (1) Termination of Power of
Acceptance
a. rejection or counter offer by the
offeree (or what a reasonable
person would see a rejection as
being)
i. Akers v. Jud Sedberry
(court said that Ms.
Sedberry rejected the
offer while not
explicitly implicitly(by
brushing them aside) if
she had an intent to keep
offer open should have
said so- p. 489
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ii. Policy reasons- offeror may
rely on the rejection
(Farnsworth p. 494)
iii. EXCEPTION: Restatement
second of K § 39(2)counter offer does not
terminate offer if the
offeree manifests a contrary
intention or if the offeror
has manifested a contrary
intention (Collins v.
Thompson- (saying I
intend to keep this offer
open does not terminate
the power of acceptance) p.
501
b. lapse of time (what is a reasonable
amount of time)
i. Presumptive Face to face
rule-Akers v. JD Sedberry
Rule (p. 489)- offer is made
face to face convo power
of acceptance ends with the
end of the convo (ms.
Sedberry may have meant
to keep the offer open but
did not state as
much)(quotes restatement
of K § 40)
ii. Specified amount of time in
offer-trumps the
presumptive face to face
rule (but can be problem
with timing-see Caldwell v.
Cline(offeror said must
accept within 8 days but
of when?--> court said 8
days from when offer
received older rule says
the posted date but that is
arcane )- p. 499
c. revocation by the offeror (only
allowed if no consideration)
i. Third person notice of
revocation is good tooDickinson v. Dodds-offeree
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hears from third person
that offeror has been
offering to sell property to
others court says that
this is reasonable notice of
revocation by offerorp.502
d. death or incapacity of the offeror
or offeree
e. Marsh v. Lott
f. Restatement
g. UCC 2-205
2. (2) terminated by the non-occurrence
of any condition of acceptance under
the terms of the offer
b. Acceptance Problems
i. Acceptance with independent conditions versus
qualified acceptance – ardente v. Horan p. 476
1. Absolute Acceptance with mere inquiry
concerning a collateral matter(independent conditions)- accepts and
would like other conditions (but does not
require and is not a counter offer)
2. Qualified acceptance- a counter offer- not
an acceptance – only accepting if
conditions met (I accept ONLY if)
a. Ardent v. Horan- court found that
it was a qualified acceptance- p.
476
ii. Offeror is the master of the offer
1. acceptance must be made in the way that
the offer has asked
a. Elliason v. Henshaw- court says No
K because acceptance sent to the
wrong place- p. 479
2. EXCEPTION- today UCC 2-206(1)(a)
a. An offer to make a K shall be
construed as inviting acceptance in
any manner and by any medium
reasonable in circumstanes
iii. Silence as acceptance
1. Generally silence is not acceptance
a. Offeror cannot create a situation in
which silence is acceptance
2. Exceptions- Restatement Second of k § 69
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a. Implied in fact k- When the offeree
takes the benefit of offered
services with reasonable
opportunity to reject them and
reason to know that they were
offered with expectation for
compensation
i. EXCEPTION- 39 USC § 3009
(2006)- mailing of
unordered merchandise is
unfair method of
competition and unfair
trade practice (can be
treated as gift) p. 487
b. Where the offeror has stated or
given the offeree reason to
understand that assent may be
manifested by silence or inaction,
and the offeree in remaining silent
and inactive intends to accept the
offer
c. Where because of previous
dealings or otherwise it is
reasonable that the oferee should
notify the offeror if he does not
intend to accept
iv. Mirror image rule- the acceptance must be
exactly replicative of the offer
v. No acceptance of the offer
1. Mattei v. Hoppervi. time limits
1. Akers v. JD SEdberry Inc- Ms. Sedberry
did not accept the offer within the 90 days
allotted  no good acceptance – p. 489
3. Consideration (something sought by the promisor, given by the
promisee in exchange for the promise)
a. Definition-Restatement first of K §75
i. An act other than a promise
ii. A forbearance
iii. Creation, modification or destruction of a legal
relation
iv. Return promise
b. Requirements of consideration
i. Must be bargained for –Restatement second of K
§ 81
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ii. Courts do not inquire into adequacy of
consideration
a. Hardesty v Smith-Lampshade case
(p. 51)
2. EXCEPTION!- Wollums case (the RR land
selling case) if it is unfair courts may
look into adequacy of consideration BUT
RARE!--> only do so to exclude the chance
of Specific Performance
iii. Promise must induce consideration
1. But the promise does NOT have to be the
ONLY cause for action –Restatement
Second of K §81 comment b
2. Hamer v. Sidway-uncle promises to give
newphew $$ for abstaining from smoking,
drinking and gambling (p. 64)
iv. Benefit to promisor (in comparison to gratuitous
promise)
c. Consideration Problems
i. No consideration not an enforceable K
1. Daughtry v. Salt- Aunt Tillie Case (p.52)
2. De Los Santos v. Great Western Sugar
Company- beet transporter case- no
consideration for the promise (no
something) p. 77
3. Wood v. Lucy, Lady Duff-Gordon- no
consideration for promise to be exclusive
seller of endorsements
ii. not bargained for
1. leaving a job is not necessarily
consideration still must be bargained
for (Kamboj v. Eli Lilly&co. p.83)
iii. No explicit intention
iv. Gratuitous promise (no benefit to promisor)
1. Aunt Tillie case
2. Tramp hypo (the walking to get the coat
was not a consideration but was rather a
condition of a gratuitous promise)
v. Mere recital of consideration –simply saying
something is a consideration does not make it
good consideration  still must bargain for
1. Daughtry v Salt
vi. Mere Pretense-Restatement Second of K §81
1. Maughs v. Porter- the model t auction
case- the court says the $3 given to the
auctioneer is mere pretense (but there is
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still good consideration the woman
showing up is consideration)-p. 61
vii. Thank you consideration-Consideration not
sought by promisor
1. Baehr v. Penn-O-Tex Oil CorpForbearance-usually is consideration
but court said it was not sought by
promisor here court said the promise
to pay rents was given merely as a
business gesture p. 67
viii. Forbearance
1. Objective reasonable claim made in good
faith (not frivolous and not colorable) If
promise not possible forbearance is not
good consideration
a. Springstead v. NEes- the fighting
sibs case (Sophia and george
promise to forbear on their right
to property if other sibs forbear on
their right to the other property
but Sophia and George don’t
court says not good consideration)
–p. 71
b. Neuhoff v. Marvin Lumber and
Cedar Co.- court says that not
every benefit is a consideration
(the forbearance of suing for faulty
windows is not good did not
express that did not improve
reputation) p. 70
ix. Lack Mutuality of agreement/at-will K/illusory
promise
1. Illusory/At-Will K’s- one party can
terminate at will (or if one of the parties
can withdraw at his own will)
2. Mutuality not always necessary for
binding K
a. Weiner v. McGraw Hill, Inc- court
upheld employment K p. 81
3. a promise consitional upon the
promisor’s atisfaction is not illusory since
it means more than tthat validty of the
performace is to depend on arbitrary
choice of promisor must be genuine
(corbin)-Cited in Mattei v. Hopper p. 84
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x. EXCEPTION TO CONSIDERATION pre-existing
duty doctrine
1. performance of a duty or promise to
render a duty already required is not a
sufficient consideration
2. Local 1330 US Steel Workers v. US Steelpromise- to kep factory openconsideration None (because working
harm by the employees was maybe a preexisting duty) p. 118
3. EXCEPTION: Haigh v. Brooks- giving a
piece of paper May be good consideration
p. 88
d. functions of legal Formalities (Fuller)
i. evidence –of the K and of actual promise
ii. cautionary-sorts between promise meant to be
kept and those not
iii. Channeling –helps express thoughts and express
what the other is giving up
iii. Remedies
1. Typically Expectancy but if expectancy too speculative
maybe reliance –Sullivan v O’conner footnote 3 p. 43
2. Liquidation Clauses- specify what damages will be if breach
occurs
a. Common law Test (MD)- Restatement of K §339 (must
have both)
i. Amount fixed is reasonable forecast of just
compensation for the harm that is caused by
breach
ii. Harm that is caused is incapable or very difficult
of accurate estimation
1. HJ McGrath co. Wisner
a. Cannery case- throws out
liquidated damages because there
is a way to calculate damages
(expectancy)- p. 338
b. UCC Test 2-718(1)
i. Damages for breach y either party may be
liquidated in the agreement but only at an
amount which is reasonable in the light of
anticipated OR actual harm caused by the
breach, the difficulties of proof of loss, and the
inconvenience or nonfeasibility of otherwise
obtaining an adequate remedy. A term fixing
unreasonably large liquidated damages is void as
penalty.
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c. TN Test for Liquidated Damages p. 349 Vanderbilt
University v. Dinardo
i. Must be reasonable in relation to anticipate
damages
ii. Measured prospectively at the time the K was
entered into
iii. And not grossly disproportionate to actual
damages
iv. (PRESUMPTION OF PENALTY)
d. Limits to liquidated damages (DUNBAR says:) p. 346
i. Should be calibrated (to the extent of the harm)
ii. Sometimes get liquidated damages when NO
actual damages sometimes cannot p. 346
iii. Negotiation needs to be in there and shown (so
court does not say that one side had unfair
advantage)
iv. Allow for extensions if breach caused by some
third party
v. SAY that the damages are NOT a penalty but are
liquidated damages
vi. EXPLAIN why so this damages are hard to
ascertain (so we are including this clause)
3. Limitations of Damages clause (different than liquidated
damages)
a. Does the limit make the damages so small that they are
unconscionable- Rinaldi and Sons Inc v. Wels Fargo
Alarm Service Inc- p. 353
b. UCC TEST 2-719(3)- consequential damages may be
limited or excluded unless the limitation/exclusion is
unconscionable (cannot limit consequential damages
for injury to person in consumer goods  can for
commercial loss)
iv. things to consider in K formation
1. meeting of the minds, or what a reasonable person would
perceive as being this
a. Embry v. Hargadine McKittrick Dry Goods Co. – court
found that “go ahead your alright. Get your men and do
not let that worry you” was a K formation
2. Outward intention is what we consider for K formation
a. Lucy v. Zehmer- court found that the drunk man had
agreed to sell his farm and made him do so (because he
had written it out, talked specifics, signed and had wife
sign)
3. Contract implied in fact
a. Not stated in express terms or in writing
b. Inferred from Conduct of parties
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c. Elements-Bloomgarden v. Coyer- p.126(failed to show
implied in fact K evidence shoed that he was
expecting benefit for his company not himself)
i. Services carried out to give under such
conditions as to give recipient reason to
understand
1. They were performed for him and not
someone else
2. Not rendered gratuitously but with
expectation of payment
ii. Services beneficial to recipient
iii. Commission type fees person must know or
have reasonable reason to know that the benefit
is given in anticipation of payment
iv. Request for compensation MUST BE at the time
of services/benefit
b. Promissory Estoppel-only used if not consideration (no enforeceable
agreement)
i. Elements1. Restatement First of K § 90
a. Promise
b. Promisor should reasonably expect to induce action or
forbearance
c. Action/forbearance of definite and substantial
character
d. Promise must actually induce the action/forbearance by
promisee
e. Injustice can be avoided only by enforcement of
promise
2. Restatement Second of K § 90
a. Added to above that charitable subscription and
marriage settlement binding under above without proof
that the promise induced action or forbearance
ii. Problems with Promissory Estoppel
1. No enforceable K use Promissory estoppel
a. Elvin Associates v. Franklin- Frankling promised to be
in show but afraid of flying no K signed (not
supposed to be binding until she got there court
enforced because Springer(the producer) had relied on
promise) p. 116
2. Gratuitous Promise
a. Kirksey v. Kirksey- woman moved because brother in
law offered her land kicked her off later court said
it was gratuitous promise (not consideration) p. 90
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3. Promise to Charity (restatement notes §90)- if reliance on
the promise enforceable – Ryers v. Trustees of Presbyterian
Congregation of Blossburg p. 91
4. Promise to Convey Land-Restatement Notes § 90
a. Specific performance to sell land lies if the promisee has
been given possession or given possession and made
improvements
b. Seavy v. Drake- father promised son deed of land son
erected barn, dwelling house, other improvements
father died and executor refused to give the deed
court said msut give deed (no difference in promise to
give or promise to sell) p. 92
5. gratuitous undertakings of bailee-Restatement notes § 90
a. sometimes enforced when relied upon
6. Waiver- Restatement notes §90
a. Allowed to be a binding promise
7. No reliance
a. Alden v. Presley- Elvis promised to pay fiancées
mothers mortgage  he died  in reliance on the
promise she filed for divorce divorce was
dismissed was told that estate would not pay reflied for divorce court says NO RELIANCE (promise
did not induce the action) NO PROMISSORY
ESTOPPEL p. 117
8. Pre-agreement discussions- not generally enforceable (no
offer and acceptance)
a. Exceptions
i. Elvin Associates v. Franklin- Frankling promised
to be in show but afraid of flying no K signed
(not supposed to be binding until she got there
court enforced because Springer(the producer)
had relied on promise) p. 116
ii. Hoffman v. Red Owls Stores- Hoffmans want to
open red owl store act in reliance on the
promise, told to build and that they are good,
move and then no store court finds
promissory estoppel. P. 107
9. No promise –no promissory estoppel
a. Local 1330 US Steel Workers v. US Steel Corp-perhaps
the promise made to employees over the intercom was
not a promise but a rally call, or expression of hope p.
118
10. Conditional promise- condition must be met to enforce the
promise
a. Local 1330 US Steel Workers- employers made a
promise if the employees put forth best efforts and
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increase profitability they would not shut down the
steel factory but profitability figured with both direct
and indirect costs (not profitable) so did not meet
promise  did not allow action for promissory estoppel
p. 118
11. Who decides
a. Jury decides the elements other than can injustice be
avoided (which court decides ) –hoffman v. red owls
stores p.107
iii. Cases where Promissory Estoppel Used
1. Ricketts v. Scothorn- grandfather gave granddaughter (Katie) a
note Katie quite job Gfather died executor refused to
pay out note court found for Katie (equitable estoppel) she
relied on the promise (she was influenced by promise to
worsen her position) p. 95
2. Wheeler v. White- Loan finder was to get loan receiver a loan
to fund the building of a shopping center loan finder told
loan receiver to build and if did not get loan he would fund
no loancourt said promissory estoppel (loan finders promise
induced the action) p. 103
3.
iv. Remedies1. reliance
a. Limit-cannot get more than expectancy –Goodman v.
Dicker(did not allow reliance damages and loss of
profits) p. 357
i. D&G Stout Inc v. Bacardi Imports Inc (allowed
out of pocket expenses, opportunity cost but not
lost wages – p. 259)
2. RARE case can get expectancy as a substitute for reliance
a. McIntosh v. Murphy case- where the guy moved to
Hawaii case
b. Walters v. Marathon oil- allows them to recover
expected profits because lost opportunity (under the
guise of reliance damages) p. 362
3. specific Performance
c. Promissory Fraud- promise not fulfilled along with an intent NOT to
perform the promise
i. Possibly Hoffman v. Red Owl Stores- p. 107 (no evidence)
ii. Remedies
1. Punitive damages allowed
d. Unjust Enrichment-can choose between breach of K (expectancy damages)
and this (restitution damages) (can use K to determine remedies posner v.
Sedar . 142)
i. Other names
1. Quasi Contracts
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ii.
iii.
iv.
v.
2. Quantum Meruit
3. Contract implied in law
Elements
1. Unjustly enriched
2. At expense of another
duty to pay for services not recognized (Bloomgarden v. Coyer p.
126-court found that no evidence that Bloomgarden was seeking
personal payment for his services)
1. Voluntary (gratuitously)
a. Gifts of a friend voluntary/gratuitous OR services
(expect & get payment for)
i. Sparks v. Gustafson- the family friend took care
of building promisor promised to sell buyer
made improvements out of pocket-- >seller sold
to third partycourt said not a volunteer
unjust enrichment p. 132
2. officious Intermeddlers-someone who confers a benefit
without asking receiver
a. Free Choice Principle
i. One may not force a benefit upon another
against his will
ii. Or deprive him of choice in the matter
3. services rendered to give business advantage
Use of Unenforceable Contract
1. To calculate Damages –Posner v. Sedar p. 142
2. To prove that person is not officious intermeddler/volunteerGay v. Mooney p. 136
3. Willful Abandonment of K
a. Contract k
i. if substantial performance on k can still
recover (under quantum meruit) – Kelly v. Hance
p. 143 (no recovery because no substantial
performance)
b. Employment K
i. Generally employees can recover for their
services rendered – damages caused by breach –
Britton v. Turner p. 145
c. Purchase Agreement
i. Default Rule- defaulting purchaser cannot
recover any amount paid to seller
1. Exception: should look at how much
performance (delon v. Aldrete) p. 150
Remedies
1. Restitution –generally
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a. How to calculate when services have been rendered:
according to Posner v. Sedar full services- the amount
already paid p. 142
b. Employmenti. When the employee breaches employee gets
1. the amount of service rendered –damages
to employer for breach –Britton v. Turner
p.145
2. Exception
a. Purchase agreement
i. The purchaser breaches
1. Seller can get expectancy
damages(otherwise unjustly enriched) DeLeon v. Aldrete p. 150
e. Promise for past benefit received-still have to have consideration-just not
consideration I nteh traditional sense
i. Elements of Binding Promise- Restatement second of K §86 (1)
1. Promise
2. Made in recognition of benefit previously received by promisor
3. Necessary to prevent justice
ii. Not Binding Restatement second §86 (2)
1. Promise conferred as a gift (or promisor not unjustly
enriched?)
2. The value of the promise is disproportionate to the benefit
iii. Factors to consider to determine if enforceable promiseComment b of the restatement second of K §86
1. Definite and substantial character of benefit received
2. Formality in making of promise
3. Part performance of the promise
4. Reliance on the promise or probability of reliance
iv. Types of Cases where BPPBR used
1. Debts barred by statute of limitations
2. Debts incurred by infants (someone dependent on parents)
a. Mills v. Wyman- promise to pay man for caring for sick
son  son was not a child but was manhood so dad
not responsible for his mroal oblgiations so not
enforceable promise p. 160
3. Debts of bakrupts
4. Some other moral obligation (is it more like block navigator or
more like the ax case?)
a. Webb v. McGowin- block navigator case promisor
promised the life saver to pay him of the rest of his
life saving someones life is more substantial than
returning a bull (which had been found to be
enforceable promise to pay for) presumption
17
f.
g.
h.
a.
offer/acceptance and consideration , prob also reliance
on promise court found for the promisee
b. Harrington v. Taylor- the D promsised to pay P for
damages to hand when the P saved the D’s life (wife
assaulted him with ax)court said not enforceable
promise (not as much reliance on the promise as block
navigator? Not as formal?--> made in the heat of the
action )
c. Sometimes court find enforeceable even from just
one factor -Edison v. Poppe- well dug on D’s property
(at request of the tenant) land owner offered to pay the
well-digger for services after it was dug then did
notcourt said enforceable promise (even though no
reliance, no part performance, no formality in promise-.factors seem to weigh against it)  this was almost
unjust enrichment case
Arising from Tort
i. When breach of a professional contract (principal and agent, bailor
and bailee, attorney and client, Phsyician and patient, carrier and
passenger, master and servant)
1. Can choose between Breach of K or tort (or can use both but
only recover on one)
a. Sullivan v. O’conner-bad nose job case
b. Mauldin v. Shaffer- architect negligent in drawings
court found tort action can stand p. 174
ii. nonfeasance and misfeasance (mauldin v. Shaffer p. 174)
1. Nonfeasance only K action
2. Misfeasance can choose between K or tort
iii. Fraud-elements- Hargrave v. oki Nursery, Inc. p. 180
1. Representation of material
2. False
3. Intent to deceive
4. Reliance
5. Injury
Obligation from form
i. P. 189-191-least frequent
ii. Seal, in writing (have gone down)
iii. Today most states mere donative promise with a seal and no
consideration is unenforceable
Obligation from statutory warranty
Express-elements UCC 2-313(Keith v. Buchanen- boat buyer case find a
breach of express warranty p.192)
i. promise or affirmation of fact and NOT opinions
1. Presumption that statements during negotiation are
affirmations of fact and NOT opinions
2. opinions (aka puffing or sales talk) are:
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a. not specific
b. equivocal (ambiguous)
c. reveal the goods are experimental
ii. Statement must be part of basis for bargain
1. Reliance not needed anymore
2. Burden is now on Defendant to prove the bargain does NOT
rest on promise
3. NEED ONLY be a factor in consideration inducing buyer into
entering bargain
4. EXCEPTION when buyer inspects waives objection to
warranty except where the defect was not visible
iii. Breach of warranty
b. Implied of fitness 2-315 (Keith v. Buchanen boat buyer case no breach
of implied warranty of fitness b/c seller did not know buyer was relying on
him for purchase of goods p. 192)
i. purchaser intends to use good for particular purpose
ii. seller knows that the purchaser intends to use good for this purpose
iii. buyer relies on the seller’s skills or judgment to furnish suitable goods
iv. seller knows the buyer is relying on goods
v. breach of warranty
c. Implied of merchantability -2-314–Webser v. Blu Ship Tea Room
chowder case n breach of implied warranty p. 199)
1) merchant/seller who deals with particular type of goods/Property
2) standard or performance of conformity (custom)
3) failure of product to meet standard
4) damages
iv. Remedies
A. Buyers Damages for breach of accepted goods-Ucc 2-714 p. 274
(2) can recover value of goods accepted at the time and place
of acceptance-value would have been if as warrantied –unless
special circumstances show proximate damages of different
amount
II.
Remedies
a. Expectancy (standard way of compensation for breach of K)
i. Definition- purpose to put the person where would have been if K
had been performed
1. General damages- those damages that flow naturally or
ordinarily from breach
2. Special damages- (consequential damages) –additional
damages that will make injured party whole (such as loss of
profits for loss volume seller)
ii. Ways to measure (way in which K breach DOES NOT matter)
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1. Cost of performance
a. Groves v. John Wunder Co p. 241- (gravel removing and
leveling case) decides this is proper way to determine
expectancy damages for breach of K
b. Rock Island Improvement Company v. Helmerich &
Payne, Inc.- mining case with reclamation statute the
case law said apply difference in value but court
chose cost of performance (convicned that the
precedent is not good law because of reclamation
statute) p. 254
2. Fair market value benefit (Difference in value of the land as is
and what it would have been if K fulfilled)  this will only be
different than cost of performance when the action is
dependent on market value
a. Peevyhouse v. Garland Coal & Mining Co.-(strip mining
case) chose this method p. 251
3. Construction K
a. when the contractor breaches
i. The cost of completion-contract price
1. Morello v. JH Hogan Inc- subcontractor/prime contractor case (sub
contractor breaches) p. 260
b. when the homeowner breaches
i. the builder can recover lost profit (K price –full
cost of performance) + cost of expenditures
(SUBTRACT OUT anything you still have that is
worth something from cost of expenditures)
1. Warner v. Mclay- p. 262
4. Employment K
a. Employee breaches
i. Difference in damages of breach and the K
1. Handicapped Chisldren’s Education Bd. Of
Sheboygan County v. Lukaszewski- Court
said measure of damages is the price of
the new teachers K (who had more
experience and therefore had to be paid
higher) – the breaching teachers K
price the school board had tried to
mitigate damages (but was
unsuccessful—Only teacher that applied
and was qualified) p. 266
b. Employer breaches
i. Full value of K-cost of performance
ii. Salary agreed upon-amount employer
affirmatively proves that employee has earned
or with reasonable effort might have earned
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from other employement –Parker v. twentieth
century fox film corp. p. 293
5. Sale of Goods- UCC (remedies liberally administered UCC 1305(a) p. 273
a. Seller Breaches
i. UCC 2-713 p. 273
1. Mrkt value (when buyer learns of
breach)- K price +incidental and
consequential damages-expenses saved
by the breach
a. Cooper v. clute-No damage- p. 272
2. Cover 2-712 p. 273
a. (1) after a breach- buyer can cover
in good faith and without
reasonable delay
b. (2) Buyer MAY recover the
difference between cost of
performance and the K price +
incidental or consequential
damages(2-715) – expenses saved
in consequence of breach
ii. Buyers Damages for breach of accepted goodsUcc 2-714 p. 274
1. (2) can recover value of goods accepted at
the time and place of acceptance-value
would have been if as warrantied –unless
special circumstances show proximate
damages of different amount
2. (3) incidental and consequential damages
can also be recovered
b. Buyer Breaches (non-acceptance or repudiation)
i. UCC 2-708- p. 274
1. (1) Mrkt price at the time and place for
tender- unpaid k price + incidental
damages- expenses saved in consequence
of breach
2. (2) if damages in (1) does not put the
seller where he would have been if K fully
performed measure damages by profit
(including overhead) + incidental
damages (due allowance for costs
incurred and credit for payment or
proceeds of resale)
a. Two types of cases under this
21
i. Manufacturer seller who
does not complete work
because seller walks away
ii. Loss volume seller-Neri v.
Retail Marine Corp- but
buyer has already put some
down payment triggers
2-718 court finds 2-708
(2) is applicable( sller can
get loss of profit +
incidental damages) 
buyer can get deposit-loss
of profits-incidental
damages)p. 275
ii. 2-706 Sellers resale
1. seller can resell in good faith and in
commercially reasonable manner can
recover resale price-K price + incidental
damages(2-710)- expenses saved
iii. Limitations on Expectancy Damages
1. Cannot recover more than would have if K had been fully
performed –Peavy Hosue v. Garland Coal & Mining Co- p. 251
2. Damages msut be reasonable and not unconscionable (peavey
house)
3. Damages must be measured to the injured pary- Restatement
second of K §347 Comment B
4. Measure damages against the original K
a. Thoren v. White- Roofing case roof repairer
breached homeowner hired another roofer sued
for difference in 2nd K and 1st K court said could not
recover this amount 2nd K was fundamentally
different than 1st K-p. 259
5. Damages must be reasonably ascertainable/not speculative
i. Freud v. Washington Square Press- Book
royalties case could not determine what
Freud’s profit would have been nominal
damages ONLY p. 261
a. New Business Rule- loss of profit is definite element of
damages in an action for breach of K or in an action for
harming an established business which has been
operating a sufficient length of time to afford a basis of
estimation with some degree of certainty as to the
probable loss of profits, but loss of profits rom a
business which has gone into operation may not be
recovered because they are merely speculative and
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incapable of being ascertained wit the requisite degree
of certainty
a. Evergreen Amusement Corp V. Milstead (no
recovery allowed for loss of profits when the
contract delayed the building of a movie
theater (MD court does not apply new
Bussienss rule-but says that profits uncertain)
new business cannot ascertain what profits
would have been) p. 307
b. EXCEPTION: when it is a single venture apart
from general business operations NEW
BUSSIENS RULE DOES NOT APPLY! Lakota Girl
Scout Council Inc v. Havey Fund-Raising
Management incallows recovery of damages p.
309
6. Special damages must be communicated and known to both
parties- must be“reasonably foreseeable”- See Restatement
Second of K §351(3) p. 288
i. Hadley v. Baxendale- broken crankshaft case
court said can not recover special damages(loss
of profits) because factory worker did not tell
courier that this was the only crankshaft and the
mill was stopped p. 281
ii. Spang industries inc. v aetna casualty & surety
co. p. 285
b. EXCEPTION-Tacit Agreement test- D has knowledge
of damages and tacitly agrees to assume the risk(not
used very often)
i. Lamkins v. International Harvester co. p. 287
7. Disproportionality Limit(common law doctrine)- the damages
are disproportionate to what would ahev gotten if K had been
fulfilled
a. EXCEPTION- UCC 1-103 (b)- says that UCC can displace
common law under UCC 2-715 (2)(a)- consequential
damages include ANY LOSS
8. Mitigation Limit (when a party tells you to stop you must
stop)
a. Services
i. Clark v. Marsiglia- court said the P had a duty to
mitigate damages (and stop when the D told him
to stop cleaning paintings) p.288
b. Purchase K
i. Schiavi Mobil Homes Inc v. Gironda- Court said
that damages needed to reflect the lack of the P’s
23
mitigation of damages (could have sold to the
father of the buyer and mitigated) p. 290
c. Employement agreement
i. Employer breaches
1. Employee does not have to take an
inferior or substantially different job to
mitigate damages
a. Parker v. Twentieth Century-Fox
Film Corp says the second role
was substantially different and
inferior (dissent disagrees) p. 293
9. Mental Distress-generally nto recoverable for breach of
commercial K
i. Chrum c. Charles Heating and Cooling inc say
this is commercial contract no recovery for
mental distress (house burnt down because of
faulty radiator)(BUT also says if amend claim for
tort action maybe can get mental distress if
negligence proven & physical injury) p. 315
ii. White v. Benkowski- no mental distress for loss
of water
b. EXCEPTION- if K breached on personal agreement
matters can get emotional distress- Stewart v. Rudner
p. 317
i. Ex. Sullvian v O’conner- personal
agreemement could get mental distress
10. punitive damages-generally cannot get
11. denial of lost expectancy in medical contexts
a. in Mass
b. Not in NH
12. denial of recovery for loss or reputation or goodwill
13. denial of lost expectancy to attorneys
a. cannot get full expentacy damages (at most can get
restitution)
14. interest – important
a. theory going back to the point of time when you started
losing money
b. But that is not the way it works, can only get interest
from day the judgment is entered (unless the damages
is liquadted--> well defined)
c. But not the rule in NC (don’t be quick to assume that
this is the rule/ varies state to state)
15. attorneys feesa. generally courts do not award losing parties attorneys
fees
b. exceptions
24
i. if party specifically agrees in the K for recovery
of reasonable attorneys fees
ii. there are some special statutes that specifically
address the subject of attys fees and make the
recovery of attorneys fees permissible and
mandated (sometimes) including for Plaintiffs in
breach of K
1. ex. TILA & magnuson-moss warranty Act
– sometimes brining small consumer
actions is that they are not worth the loss
2. warranty – you cannot disclaim state
implied warranty under federal law if you
make and express warranty (until after
the express warranty expires)
b. Reliance
i. Definition- to put the P back where he was before entering the
agreement
1. For Breach of K(when expectancy is too speculative)
a. Can get damages incurred after the signing but before
the breach; i.e. anything that was expensed in reliance n
the K to further the terms of the K
i. Chicago Coliseum Club v. Dempsey (did not
allow los profits, did not allow expenses before K
with Dempsey, cannot get expenses in
restraining and forcing compliance with K, BUT
did allow expenses after the signing and before
the breach) p. 323
b. Exceptions/Limits
i. Remoteness- still must tell the other party of
special damages that may occur
1. Coppola v. Krasushaar- states the above p.
331
ii. damages before K signed
1. can get them if both parties knew that it
was such as would likely be wasted if K
was broken- Anglia Television LTd. V.
Reed-p.329
iii. if K would have caused a loss to a party
1. take this into consideration (so the
injured party cannot receive more from
the breach than he would have received
from the K) –L. Albert & Son v. Armstrong
Rubber Co- p.329 (said injured party
could get his outlay in preparation for
performance- the amount he would have
lost if K had been performed)
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2. Promissory estoppel
c. Restitution –when MATERIAL breach injured party can choose which
damage he wants
i. Definition- amount corresponding to any benefit conferred y the P
upon the D in the performance of a K disrupted by the D’s breach
ii. Ways to Measure –according to restatement below §371 comment bgenerally get the more generous amount  except when he is in
breach(realmark Developments, Inc. p. 366)
1. Restatement (second) of K §371 (a)
a. The reasonable value to the other party of what he
received in terms of what it would have cost him to
obtain it from a person in the claimants position
(usually based on mrkt price according to comment a)
2. Restatement (second) of K §371 (b)
a. The extent to which the other party’s property has been
increased in value or his interests advanced
3. Craswell Approach p. 367 (C)
a. Amount to be paid (start with K price and determine
how much has been done (percentage) allow
recovery of percentage of the K price that correlates to
the percentage of the work that has been done
4. Craswell Approach p. 367 (d)
a. Whatever the injured party actually spent toward the K
iii. When Restitution is used and the Rules for them
1. Where a Non-breaching P conferred a benefit and elects
Restitutionary Recovery
a. P can choose between suing for breach of k=expectancy
and unjust enrichment=Restitution
i. United States for Use of Susi Contracting Co v.
Zara Contracting co p. 368
b. No cap- with the breach falls the K
i. EXCEPTION: if the K is nearly fully performed
there is a cap (the contract amount) so the
injured party can not get more than the full
contracting amount
1. Oliver v. Campbell- p. 372
2. Where a Non-Breaching P conferred a benefit but had a
negative expectancy (Losing K)
a. Cap usually imposed- Use Craswell (c) approach (most
you can get is the prorated K amount)
i. some courts cap at the K amount  esp if
material breach occurs later in K
3. Where a Non-Breaching P conferred a Benefit but Cannot
Prove Lost expectancy (or reliance)- if MATERIAL breach
26
a. Expectancy is too speculative or for some other reason
is unavailable can get restitution (if cannot get
reliance because of losing k)
b. Restitution damages not limited when losing K (Bausch
& Lomb, Inc v. Bressler) p. 377 (give restitution
damages- the amount that the non-breaching party
enriched the other party- the benefit received)
c. How to calculate(net out the benefit): take the
enrichment that the non-breaching party gave to the
breaching party SUBTRACT the benefit the nonbreaching party received
i. Osteen v. Johnson- p. 382 (MUST HAVE
MATERIAL BREACH!)
4. Where the P has conferred a benefit but the K is invalid,
frustrated or unenforceable
a. Can get restitution (if not valid K or if no promissory
estoppel)
b. Can get it under unjust enrichment
5. Where the P has Materially Broken the K after conferring a
benefit
a. Can get restitution(unjust enrichment)- but must get
the lesser amount
d. Other remedies
i. Punitive- typically not available in breach of K law-White v.
Benkowski
1. Ill-gotten gains ( in the pratt case p 398) court does not award
 because that is a form of punishment
ii. Pain and Suffering-not typically recoverable in K law
1. White v. Benkowski
iii. Nominal
iv. Specific Performance- available when no other remedy at law
1. Land Ks have peculiar value specific performance only
adequate remedy- Kitchen v. Herring p. 387
2. Generally personal property cannot get specifics performance
(Bell v. Concrete Products Inc) p. 392
a. Exceptions
i. But if not remedy at law can get specific
performance
1. Curran v. Barefoot Case the corut
allowed SP for the sale of property and
the personal property in the house (it was
unique and could not be replaced)- p. 391
3. Generally sale of goods cannot get specific performance
i. Pratt Furniture v. McBee- does not allow specific
performance on chairs K because chairs are NOT
27
4.
5.
6.
7.
III.
unique – p. 398 (also brings in idea of efficient
breach)
b. EXCEPTIONs- (Courts may require a receiver to fulfill
the K to avoid the problem of involuntary servitude )
i. -if unique items sale of goods(say bonsai of
aaron Rodgers) UCC 2-716
1. Curtice Brothers CO v. Catts-gave specific
performance for tomatoes because
preparation and timing was key so that
made it unique
ii. if the injured party is unable to cover
1. can get specific performance no
adequate remedy at law Stephans
Machine & Tool Inc v. D&H Machinery
Consultants Inc –(couldn’t get expectancy
maybe because too speculative) p. 394
iii. if injured party cannot find a similar k
1. Laclede Gas Co v. Amoco Oil co- court
allows specific performance for sale of
gas because it is a long term K (hard to
get)-p. 394
Generally cannot get specific performance for Personal
services
a. Courts do not want to require involuntary servitude
b. May enjoin the party from performing services to others
(dempsey case)
cannot get specific Performance if unfair advantage
a. the RR case Wollums v. Horsley p. 396 (where one man
offers to buy another’s land because knows the RR is
coming and can make money)
i. (this may be the exception to the courts do not
look into the adequacy of consideration)
Lack of mutuality of performance
a. If one party breaches because knows the other cannot
pay
b. Court may make non-breaching party put up bond and
force the repudiating party to perform but if nonbreaching party does not no specific performance
c. Indefiniteness of agreement
i. If the K is ambiguous no specific performance
No specific performance if the performance is impractical to
force or is difficult to enforce
8.
Other Contract Rules
a. Shoe Principle- assignee stands in the shoes of the assignor (so we look at it
if the assignor –Not the assignee were in the action)
28
b. Statute of Frauds
i. Requirements for the Statute of frauds-Restatement Second of K
§131
1. Writing(does not have to be K but some form of writing &can
be read together to satisfy the statue)a. Reasonably identifies subject matter of K
b. Indicates K has been made between the parties or
offered by the signer to the other party
c. Reasonable certainty the essential terms of the
unperformed promises in the K
d. Case: Sterling v. Taylor- memo was used to determine
whether the sale of apartments would satisfy the statute
of frauds court said not clear so no! Also, they allow
extrinsic evidence (that supports one side or another)
but it cannot contradict the writing itself p. 213
ii. Purpose of the Statute of Frauds
1. Prevent fraud/perjury
2. Prevent non-enforcement of K
iii. Types of K that require writing
1. Land
a. Exception- it is fraud for vendor to inisit upon absence
of writing when the K is partly executed –Seavy v. Drake
p. 92
2. Marriage
3. Agreements not to be performed within a year
a. Mcintosh v. Murphy- employment K for a year
question of when it was accepted does it fall within
statute of frauds court says does not matter because
it is a question fo equitable estoppel (and they find for
the employee who moved and who was the harmed
party) p. 223
4. Sale of real estate/realtors
5. Wills
6. Surety- one person takes over another’s debt
a. EXCEPTION
i. Main purpose rule Restatement of K §184 –
(exception to Surety provision) if person takes
over someone else’s debt and in doing so it
benefits promisor only not within the statute of
frauds (no writing required)
1. Howard M Shoor Associates Inc v.
Holmdel Heights Construction Co- atty is
sued to pay for debts of construction
comp he represents  court finds the
main purpose rule applies not within
29
statue of frauds (do not need writing) p.
208
7. Sale of goods UCC-2-201
a. Sale of goods for more than $500 –must have writing
i. Exceptions
1. (3)(a)- special goods that cannot be sold
to others
2. (3)(b)-D admits K but the K is
unenforeceable
3. (3)(c)- goods which payment has been
made and accepted or which have been
received and accepted –can apportion for
part of the goods (so you have to pay for
what you actually get)
iv. Questions to ask about statute of frauds
1. Does the statute apply?
2. Does a memo, note or other writing satisfy the statute?
3. If within the statute and no writing, is there an exception?
4. Any other doctrine mitigate what otherwise would be the
effect of noncompliance?
a. Equitable estoppel?
i. Compare mcintosh v. murphy (not within staute
of frauds but allows promissory estoppel)p. 223
and Dumas v. Infinity Broadcasting (not within
statute of frauds and DOES not allow promissory
estoppel) p. 229
v. Examples of Statute of Frauds
1. Hawaii Revised Statute §656-1
2. UCC 2-201
vi. Exceptions to Statute of frauds-UCC 1-103 (b) MOST IMPORTANT
PROVISION OF UCC
1. Part-performance
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