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CONTRACTS OUTLINE:
Holmes  A promisor has one of two options at law:
1) Keep his promise or
2) Pay damages.
Consequences of Making a Promise Legally Enforceable
1) Has a legally enforceable promise been formed and has it been breached?
a. Answer is yes:
i. Breached against party is entitled to a remedy.
ii. WHAT KIND OF REMEDY?
2) Equitable Remedy:
a. Specific performance:
i. Would your client want SP if you can get it?
1. Where on the spectrum between painting a gorgeous portrait and 500
delivered washers is the promised performance?
2. What are the incentives for, if the person is ordered to do it, to do it
properly?
a. Lumley v. Wagner – did not want to ruin her reputation as an
opera singer! So she would sing fine! However, there is the
argument that she might have sung shittily out of spite.
3. Is there any other way that your client can get this stuff that does not
involve litigation?
4. What type of information would you need to disclose to get expectation
damages  This might push you to seeking SP if you would need to
disclose things you don’t want to be found out.
ii. Ok, so your client DOES want it! CAN WE GET IT?
1. UNIQUENESS? Are the goods unique, in how easy or hard is it to give
value to the promised performance? Can the party be over or
undercompensated?
a. It can be fixed with a value!  NO SP
i. Van Wagner v. S&M Industries  Held that no S.P.
where the value of the “unique qualities” of the
thing/service in question could be:
1. Fixed with reasonable certainty.
2. AND
3. Without imposing an unacceptanly high risk of
undercompensating the injured tenant.
b. No fixed value!  Possibly!
i. Can expectation damages be estimated?
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1. Curtice Bros. v. Catts Very hard to estimate
the damages from the lack of delivery of tomato
crop; it could BANKRUPT THE BUSINESS!
2. Leaves factory HELPLESS BEFORE AN
UNCERTAIN MARKET.
3. Where no ADEQUATE remedy at law exists
(damages), specific performance may be
granted.
2. Are money damages adequate?
a. Can the damages be figured out in some way that is perfectly
compensatory! (Curtice Bros. v. Catts)
b. If no, then SP!
iii. What type of contract is this?
1. PERSONAL SERVICES:
a. Lumley v. Wagner - Court is VERY reluctant to order it.
i. HOWEVER, NEGATIVE INJUNCTIONS - Therefore, you
might want to seek a negative injunction (try to find one
that will give the performer an incentive to then take on
your job – like in Lumley v. Wagner)
2. NON-COMPETITION AGREEMENTS
a. Will be looked at by the court with great scrutiny since there is a
general judicial disfavor of such provisions.
b. For these elements:
i. Necessary to protect trade secrets
ii. Customer lists
iii. Good will of employer’s business
iv. OR, employer is exposed to specific harm because of
the unique nature of the employee’s services.
c. COURT MAY DO THESE THINGS:
i. Hold party to the agreement.
ii. Declare unconscionable and refuse to honor the
noncompetition clause in entirety.
iii. Edit an excessive clause down to reasonableness.
1. Fullerton v. Torberg  Even when those
elements are met, the noncompetition
agreement must be for a reasonable amount of
time, and not excessive! (10 years too much,
change to 3).
2. Court can LOWER the time of the agreement.
3. ARBITRATION CLAUSES:
a. Arbiters can, and often do, impose specific performance
verdicts.
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b. Courts are reluctant to reverse arbitrated decrees of specific
performance.
i. Garyson v. Iris  Court affirms arbitration order that
bankrupt D build a building for P.
iv. When you seek SP, and you show that it is difficult to measure damages…if you
lose the injunction/SP, then you are stuck in the position when going for
expectation damages that YOU CANNOT VALUATE THEM!
1. This is a major consideration for whether or not you want to seek
specific performance!
3) OK, no specific performance!
4) Right to collect some form of money damages!
a. Liquidated damages provision?
b. If yes.
i. To be enforceable, a liquidated damages provision must satisfy either:
1. Looks like a genuine attempt to pre-estimate damages at an ex ante
point in a context where damages would be difficult to measure
a. Muldoon v. Lynch  If it is determined that the clause is, in
fact, a PENALTY, then it is not enforce able. This case puts
emphasis of INTENT of the clause.
i. BURDEN OF PROOF IS ON THE PARTY THAT BENEFITS
FROM THE CLAUSE.
2. OR
3. You can show ex post that said liquidated damages provisions are
close to being expectation!
a. Yockey v. Thorn – When it’s REALLY hard to measure what the
actual damages would be, the court will generally allow the
liquidated damage provision granted that it is a reasonable ex
ante estimation of damages in case of breach.
b. RESTATEMENT 2nd OF CONTRACTS:
i. §356 – Liquidated Damages only allowed in an “amount
that is reasonable in the light of the anticipated or
actual loss caused by the breach and the difficulties of
proof of loss. A term fixing unreasonably large
liquidated damages is unenforceanle on grounds of
public policy.”
c. UCC TEST: “One look or two?”
i. FIRST LOOK – Was the provision reasonable at the time
of the contracting?
ii. BUT YOU CAN GO ON…
iii. SECOND LOOK – Was the provision reasonable at the
time of the breach?
4. GENERAL TEST:
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a. Samson Sales, Inc. v. Honeywell Inc. test:
i. CLAUSE VALID WHEN:
1. Uncertain to the amount of the damages
resulting from breach and difficulty of proof.
2. Contract as a whole is not unconscionable or
unenforceable.
3. Contract consistent with the conclusion that it
was the intention of the parties that the
damages should be limited according to the
clause.
a. THEREFORE, BOTH PARTIES MUST
REASONABLY FORESEE THAT THESE
LIQUIDATED DAMAGES SHOULD BE
INCLUDED IN K!
b. In this case, the provision for $50.00
worth of damages was too low to
possibly be desired by the P!
c. If no: DAMAGES!
DAMAGES:
1) EXPECTATION DAMAGES:
a. PURPOSE: Damages designed to put the breached against party in the same position
where she would have been had the contract been performed;
i. Goal is to reach COMPENSATION (neither more or less)
ii. HOW ARE THESE DAMAGES CALCULATED?
1. PERSONAL SERVICES:
a. Hawkins v. McGee  Difference in the value b/w hairy hand
and the perfect hand he was promised!
b. HOWEVER, Sullivan v. O’Conner – Court has skepticism of
importing contractual relations into the doctor-patient
relationship. Therefore, they award her reliance damages only
(which are typically less than expectation damages).
2. BUILDINGS AND LAND:
a. Louise Caroline Nursing Home v. Dix  Dix fails to complete
building of Nursing home.
i. Plaintiff is awarded enough money from defendants so
as to complete the repairs to the building MINUS any
contract price not yet paid to D.
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1. COST OF REPAIR – CONTRACT PRICE NOT YET
PAID.
ii. THEREFORE, when cost to repair is less than the amount
not paid, NO DAMAGES ARE AWARDED.
1. (cost of repairs = $2000) – (still owe D $3000) =
no damages.
2. They are seen as already justly compensated!
iii. Courts are very adverse to OVER-COMPENSATING
PLAINTIFFs.
b. Groves v. John Wunder Co.  D rents land for $104,00,
damages the land in breach of contract. To repair would cost
$60’000, but value of land would only go from $0 (in current
state) to $12’000 (if repaired).
i. Defendants found liable to P for reasonable cost of
doing what they promised ($60’000).
ii. Resulted in further negotiations where John Wunder
agree to just pay less money to Groves.
c. HOWEVER, Peevyhouse v. Garland Coal & Mining Co.  In a
coal mining lease, when the remedial work is not done the
damage should be the cost of performance BUT for instances
where
i. The difference b/w cost and added-value is
disproportionate
1. $29’000 to repair to effect an added market
value to the land of $300 TOO MUCH
COMPENSATION!
ii. AND
iii. The remedial work is incidental to the main purpose of
the lease.
1. Main purpose was strip-mining, repairs were
remedial.
3. PROMISES TO DELIVER GOODS:
a. IS there a lost volume seller here?
b. YES;
i. Neri v. Retail Marine Corp. – Guy is going to buy boat, it
is made, but he defaults and does not purchase it. He
sues for his money back. Retailer denies, arguing that
lost profits and incidental damages (holding boat for
longer than they would have) should be taken out of P’s
award. P argues that since the boat was sold to a later
buyer, no loss was suffered by seller.
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ii. UCC 2-708(2) – If standard damage measure is
inadequate to put the seller in as good a position as
performance would have because of the loss of a
profitable sale, then seller’s damages shall instead be
“the profit (including overhead) which the seller would
have made from full performance of buyer.”
1. Allows for lost profits because seller
essentially lost a sale. Though the boat will go
to the Buyer B, he is still missing out on the
profits to be gained from Buyer A.
iii. Extremely Context specific  Can’t be a one-of-a-kind
good; only applies when goods are somewhat
fungible!
c. NO:
d. Acme Mills v. Elevator
i. Measure of damages in the difference b/w contract
price and market price of the property at the time and
place of delivery.
ii. Plaintiff benefits by failure to deliver since the price he
is paying has gone down. Replacement wheat will cost
him less than he would have otherwise paid. Therefore
NO DAMAGES.
iii. Our goal is only to compensate, so we should look at
contract-market differential to calculate damages.
1. HOWEVER!
a. Missouri Furnace Co. v. Cochran Cochran breaches on contract to sell
coal and P makes contract with another
party at higher price, suing for
difference between that higher price
and the original contracting price.
i. Damages are on the spot price
of the contract made between
P&D, so the difference
between contract price and
market price at time of
delivery.
ii. WHY? P did not HAVE to enter
new K.
iii. Further market fluctuations in
future contracts do not impinge
on previous contracts!
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b. Illinois Central R.R. v. Crail
i. Wholesale market price or
retail market price?
ii. Context specific!  Wholesale,
because that would be
compensatory! Loss suffered
was the loss of wholesale price.
b. LIMITS ON EXPECTATION DAMAGES:
i. FORESEEABILITY:
1. Hadley v. Baxendale:
a. ELEMENTS – Damages limited to:
b. General Damages – Damages that flow from a given type of
breach without regard to the particular circumstances of the
victim.
c. Consequential Damages – Above and beyond that are a result
of buyer’s particular circumstances. Limited to:
i. Harms that arise naturally; reasonably foreseeable to
both parties.
1. Defendant had reason to foresee the damages
as probable result of the breach.
ii. AND/OR
iii. Special circumstances that were specifically
communicated b/w the parties:
1. HOW COMMUNICATED?
2. Globe Refining Co v. Landa Cotton Oil Co. 
Has to be some sense that consideration of the
resulting liability became encompassed in the
bargain. TACIT AGREEMENT! (fact that there
was no discussion about transportation costs in
K shows that liability for those costs was
unforeseeable).
3. But we’re not looking for subjective intent…so
where is the line where that meets objective
fact?
a. Victoria Laundry v. Newman 
IMPOSES REASONABLE MAN
STANDARD ON THIS DOCTRINE!
b. D should have foreseen, by trade of
laundry-women, that the boiler was to
be for their work and D should have
realized without it, there would be lost
profits.
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4. LIMITATION, where the cost of damages
suffered by buyer far outweigh the cost of the
performance by the seller, creates
presumption that those damages were not
foreseeable by the seller. (Lamkins v.
International Harvester)
iv. Walking the Line - Often, parties will want to keep
their circumstances vague enough for them to keep
the damages while at the same time being vague
enough for the opposing person to not use them to up
the price of the contract they are entering.
ii. Certainty:
1. Damages can be recovered only if their amount is reasonably certain of
computation. Damages that are not reasonably certain of computation
are referred to as “speculative.” Where amount is not reasonably
certain, P can recover only nominal damages. Divided into two
categories based on the certainty with which profits can be speculated.
2. OFTEN IN RELATION TO LOST PROFITS:
3. New Businesses:
a. IN THE PAST  Lost profits were not allowed for new
businesses because those profits are inherently speculative.
b. NOWADAYS  Case-by-case basis, and if lost profits can be
determined with reasonable certainty - example, by
comparison with similar local businesses – then they can be
awarded.
i. Mindgames, Inc. v. Wester Pub. Co.  Posner denies
lost profits because of their speculative nature.
ii. Freund v. Washington Square Press, Inc.  author
denied recovery because it would have been for
royalties, and sales of the book were too uncertain.
iii. Fera v. Village Plaza, Inc.  There was enough evidence
to ascertain potential profits for a store that failed to
open due to breach on D’s part.
1. Though there is a high burden of proof (here
days and days of testimony), lost profits for
new businesses may be awarded!
4. Existing Businesses
a. Depends on the certainty which they can estimate the lost
profits!
b. Generally, profits from existing business are not treated as
speculative and are recoverable since future profits can be
estimated from past profits.
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i. HOWEVER, must still be ascertainable.
ii. Chicago Coliseum Club v. Dempsey  Profits are so
dependant on circumstances that they are
unascertainable.
iii. Mitigation:
1. YOU ARE NOT PRECLUDED TO A RECOVERY IF YOU DID NOT MITIGATE,
ONLY THE COMPONENT OF THE DAMAGE MEASURE THAT COULD HAVE
BEEN AVOIDED THROUGH STEPS!
2. CONTRACTS FOR THE SALE OF GOODS:
a. UCC §2-715(2) - if a seller fails to deliver, buyer has a right to
cover (buy substituted goods and sue for damages). If the
buyer fails to cover, she will be barred from recovering any
consequential damages that could have been prevented
through covering.
b. UCC §2-704(2) – If buyer repudiates, seller cannot run up
damages by incurring freight charges for packing, delivery and
so forth.
3. EMPLOYMENT CONTRACTS:
a. If an employer wrongfully terminates the employment, the
employee is under a duty to mitigate by looking for a
comparable job.
b. Often opens the door to a judge’s subjective value judgments
i. Parker v. 20th Century Fox:
1. MAJORITY: “working on a western is different
from working in a feminist musical”
2. DISSENT: “NO, they are both movies and
therefore the same kind of employment”)
4. CONSTRUCTION CONTRACTS:
a. Rockingam County v. Luten Bridge Co. – A contractor is under a
duty to not add to the owner’s damages by continuing to work
after the owner breaches the contract. In particular, a
contractor cannot recover for expenses in continuing
construction after owner repudiates contract.
b. No duty to take a replacement job! At the same time, if you
take a replacement job, the profits from that are not subtracted
from damages.
c. IN TOTAL, expectation damages are very hard to get!! Even though they are the typical
remedy!
d. BUT NOT THE ONLY REMEDY!
2) Reliance Damages!
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a. PURPOSE  To restore the victim to the position he would have occupied if the event or
transaction had never occurred.
i. Recover your detriments!
ii. Only losses that you put into the contract in reliance on the other party’s
performance!
iii. POLICY -- Security Stove & Mfg. Co. v. American Ry. Express Co. – Reliance
damages serve a particular goal of reimbursement which better suits the
compensation goal!
b. AWARDED WHEN:
i. Expenses have been generated towards performance of a contract that was
then breached.
1. Chicago Coliseum Club v. Dempsey  Dempsey refuses to fight;
damages allowed for all material expenses incurred
a. AFTER SIGNING OF CONTRACT.
i. Travel TO signing of contract not allowed.
b. TOWARDS COMPLETION OF CONTRACT.
c. HOWEVER, NOT amounts that were speculative or any
expenses incurred AFTER BREACH.
2. LIMITATION  When D can show that fulfillment of his promise would
have resulted in a material detriment to the P, then that amount can be
deducted from reliance damages. L. Albert & Son v. Armstrong Rubber
Co.
c. When the basis of the claim is not breach of contract, but an action of promissory
estoppels  Often reliance damages are the default remedy!
i. Sullivan v. O’Connor – Reliance damages are lower than expectation measure
and therefore better in medical cases where the court hesitates to impose hefty
expectation damages upon the defendant.!
ii. If you have the choice to sue on breach of contract versus promissory estoppels,
then choose the former b/c expectation damages are often more!
3) RESTITUTION DAMAGES:
a. PURPOSE: To prevent unjust enrichment by returning things to the status quo and
taking away any benefits given to the defaulting party by the plaintiff.
b. Unenforceable Contracts:
i. Available to recover value of a benefit conferred on another where the benefit
was conferred under a contract that is unenforceable because of the Statute of
Frauds, doctrine of impossibility or other comparable excuses, such as mutual
mistake.
ii. Boone v. Coe  P invited to live on farm by D in an unenforceable contract. P is
not entitled to restitution because they merely sustained a loss, however if
they conferred material benefit to D, that would be recoverable.
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c. Breach of Contract:
i. Can usually bring a claim for either EXPECTATION DAMAGES or RESTITUTION IN
QUASI-CONTRACT (QUANTUM MERUIT).
ii. Measured by market value of the plaintiff’s performance rather than by actual
enrichment of defendant.
iii. Losing Contracts:
1. GENERAL RULE: P can bring suit for restitutionary damages where D is in
material breach, even if contract is a losing one.
a. Plaintiff has made a losing contract, where market value of
goods or services to be provided to defendant was greater than
contract price  NO EXPECTATION DAMAGES!
b. However, under quantum meruit, P can recover market value of
goods or services that were provided; contract price does not
set limit on the value of benefit conferred.
c. United States v. Algernon Blain, Inc. -- Quantum meruit Allows
promisee to recover the value of services he gave to D
irrespective of whether he would have lost money on the
contract and had been unable to recover in a suit on the
contract for expectation damages.
iv. EXCEPTION FOR FULL PERFORMANCE:
1. Where innocent party has fully performed  innocent party is limited
to the contract price for performance.
2. Oliver v. Campbell  Once performance has been completed (trial
over), the plaintiff is limited to only receive the contract price that has
not yet been paid.
v. WHEN PLAINTIFF IS IN BREACH:
1. Under modern law, breaching party can bring quantum meruit suit to
recover benefits conferred to other party, subject to an offset for that
party’s damages.
2. HOWEVER:
a. Stark v. Parker  Not allowed when P breaches.
b. Britton v. Turner  Allowed when P breaches! (minus damage
done to D by breach)
i. Vines v. Orchard Hills: Breaching party must establish
that other party was UNJUSTLY enriched by showing:
ii. Is there a benefit conferred on the other party?
1. If no, then NO DAMAGES.
2. If yes! THEN  What were losses of the
breached against party?
iii. SO, amount is benefit conferred LESS the proven
damages!
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PART TWO: IDENTIFYING THOSE PROMISES THAT ARE ENFORCEABLE
1) Start with a promise!
2) Is this promise supported by consideration?
a. If so, and all other elements for legally enforceable contract are met, you should be able
to recover expectation damages when there is a breach.
b. STEP ONE OF INQUIRY: Is there e benefit to promisor or detriment to promisee?
(Hamer v. Sidway)
i. ELEMENTS:
ii. Benefit to promisor.
iii. OR
iv. Detriment to promisee.
1. Congregation Kadimah Toras-Moshe v. DeLeo  No Contract because
neither of these existed!
2. Pitts v. McGraw-Edison  Employee who retires and gives up
information voluntarily did so on a voluntary basis and not as
consideration
a. NOTHING PROMISOR DID REQUIRED OR INDUCED PLAINTIFF
INTO GIVING THE INFO!
3. In Re Bayshore Yacht & Tennis Club Condominium Ass’n  A mere
gratuitous promise of a future gift, lacking consideration, is
unenforceable.
v. NOT NOMINAL CONSIDERATION – When there is the recital of the bargain but
no real bargain.
1. Fischer v. Union Trust Co.  Where father goes through a sample
exchange whereby his son gives dollar to daughter to give back to him.
a. HOWEVER, nominal consideration WILL make OPTIONS and
GUARANTIES enforceable if certain conditions are meant 
Mier v. Hadden.
b. WHY? Serve commercial purposes…these are promises
designed to facilitate or further a proposed bargain  LIKELY
TO BE RELIED UPON!
c. WHY? Court in Fischer saw that they were manipulating form to
make a GIFT look like a contract, and hated that!
vi. RESTATEMENT §71:
1. To constitute consideration, a performance or a return promise must be
bargained for through something sought by promisor in exchange for
promise and is given by promisee in exchange, such as:
a. An act other than a promise.
b. A forbearance.
i. Hamer v. SIdway – Giving up legal rights for a certain
amount of time is valid forbearance.
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c. The creation, modification, or destruction of a legal relationship.
vii. WHY CONSIDERATION?
1. Why not enforce gratuitous promises?
a. Such promises are often made impulsively and w/o proper
deliberation.
i. Problem with the MANNER with which promise is made.
ii. So this manner will be eliminated through a formal
promise-making procedure/ceremony/etc.
2. FUNCTION OF FORM:
a. Evidence:
i. Provides evidence to the purport of the contract!
b. Cautionary:
i. Check against inconsiderate action.
ii. Induces the circumspective mind of the one pledging his
future.
c. Channeling function:
i. Simple and external test of enforceability.
viii. PAST CONSIDERATION:
1. TRADITIONAL RULE  Mills v. Wyman – A promise based on moral or
past consideration is simply a donative promise and is therefore
unenforceable.
a. EXCEPTIONS:
b. Debt barred by statute of limitations, followed by promise to
pay.
c. Debt barred by bankruptcy + promise to pay.
2. MODERN RULE: Sometimes enforceable if:
a. The promise is based on a MATERIAL BENEFIT that was
previously conferred by the promisee upon the promisor
b. AND
c. The benefit gave rise to an obligation – even if only moral – to
make compensation.
i. Webb v. McGowin – Webb saves the life of McGowin
but sustains serious injuries as a result. McGowin
promises to pay Webb bimonthly stipend is binding
because of material benefit conferred.
d. HOWEVER, Harrington v. Taylor – Similar promise arises when
someone saves another from injury and is hurt in the process,
but FOLLOWS TRADITIONAL RULE!
i. MODERN RULE STILL NOT ACCEPTED IN ALL
JURISDICTIONS!
e. Restatement §86:
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i. A promise made in recognition of a benefit previously
received by the promisor from the promisee is binding
to the extent necessary to prevent injustice.
1. What does this mean?
a. If a GIFT  not binding!
b. If the value is disproportionate to the
benefit  Not binding!
c. STEP TWO: Consider context and look at relative values of things exchanged!
i. (not saying what you do with the relative values)
ii. According to Hamer and Batsakis  No requirement that value given by one
party be commensurate with the value given by the other!
d. STEP THREE: Formality!
i. Fischer v. Union Trust Co.  Is party trying to use formality to make a gift into a
contract?
3) Was there a bargain?
a. Section 71 and 81 of the Restatement.
PROMISES WITHOUT CONSIDERATION:
1) Promissory Estoppel:
a. FORMER RULE – Reliance was irrelevant; a donative promise was unenforceable even if
it was relied upon.
i. Kirksey v. Kirksey  Guy invites brother’s widow onto his land, she relies on his
services for awhile until he kicks her off the land. No recovery for her reliance
expenses.
b. MODERN RULE – Promise will be legally enforceable when:
i. ELEMENTS:
ii. Promise will be legally enforceable when
iii. Induces reliance by the promisee.
iv. In a manner that the promisor should reasonably have expected.
1. Ricketts v. Scothorn  Grandad intended that grandaughter should give
up her occupation in exchange for money from him…but more
importantly he contemplated such action on her part as a reasonable
and probable consequence of his gift.
c. RESTATEMENT §90:
i. ELEMENTS:
ii. There is a promise.
iii. Promisor has reasonable belief that the promise will induce action or
forbearance on the part of the promisee.
1. First National Bank of Logansport v. Logan Manufacturing Co.--> Bank
should have reasonably expected promisees to rely on their promise to
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extend more money to them; evidence they had ACTUAL knowledge of
reliance.
iv. Promisee IS induced into such action or forbearance.
1. First National Bank of Logansport v. Logan Manufacturing Co.--> They
DID rely on the promise for more money in putting the first loan to
work!
v. ONLY ALLOWED IF injustice can be avoided ONLY by enforcement of the
promise.
1. First National Bank of Logansport v. Logan Manufacturing Co.  It
would be unjust for the bank to recoup the $100,000 originally loaned
without imposing on it the responsibility for the actions of its lending
officer.
2. Drennan v. Star Paving Co. - Between subcontractor who made an
erroneous bid and the general contractor who reasonably relies on it,
the loss resulting from the mistake should fall on the party that caused
it.
vi. ALSO – SOMETIMES, NO NEED FOR THERE TO BE AN OFFICIAL PROMISE
1. Hoffman v. Red Owl Stores, Inc.  Court awarded reliance damages
even though the parties had not entered into a preliminary written
agreement or even begun performance, but one party had nevertheless
prepared to perform.
a. Restatement § 90 “does not impose the requirement that the
promise giving rise to the cause of action must be so
comprehensive in scope as to meet the requirements of an offer
that would ripen into a contract if accepted by promissee.”
i. Does not require there to even be a finalized promise
made!
b. This doctrine often applied by courts where party constantly
dangles the prospect of a final contract before plaintiff,
knowing or having reason to know that P would rely on the
prospect.
i. Implies a bad faith element!
d. CAUTION – Courts are reluctant to uphold promissory estoppel in the context of an
employment contract.
i. Goldstick v. ICM Realty  “Employment at will…remains the dominant type of
employment relationship in this country, and would be seriously undermined if
employees could use the doctrine of promissory estoppel to make alleged oral
contracts enforceable.”
1. Reliance is TOO EASILY SHOWN IN THIS SETTING!
e. As consideration?
i. Some authorities treat promissory estoppel as simply a type of consideration.
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ii. Allegheny College v. Nat’l Chautauqua County Bank  The court held that the
moment P accepted the $1,000, there was an assumption of a duty. That duty to
perpetuate the name of Mary was sufficient to render the subscription
enforceable within the rules that define consideration for a promise regarding
charitable subscriptions.
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SPRING QUARTER – BAIRD
WHEN (AND HOW) PROMISES BECOME LEGALLY ENFORCEABLE:
1) PRECONTRACTUAL LIABILITY:
a. OLD VIEW:
i. Some cases have allowed an offeror to revoke a firm offer notwithstanding the
offeree’s reliance.
1. James Baird Co. v. Gimbel Bros.  Where D made a bid to provide
linoleum to general contractor, retracted, and then offer was accepted,
Judge Hand says that an offer of exchange is revocable up until
acceptance and therefore, no damages.
b. MODERN VIEW = PROMISSORY ESTOPPEL:
i. A firm offer is irrevocable:
1. Offeror should have reasonably foreseen that the offer would induce
reliance by the offeree prior to acceptance
2. AND
3. Such reliance occurs.
a. Drennan v. Star Paving Co.  Guy submits bid including
estimate from subcontractor, who, when bid winner goes to get
accept revokes. Traynor finds promissory estoppel.
2) THE “MEETING OF THE MINDS”
a. GENERAL RULE: A contract is created by words or conduct (“expressions”) by the
parties, and these impressions should be given the interpretation that a reasonable
person standing in the addressee’s shoes would put upon it, rather than the subjective
ACTUAL intent of the addressor.
b. EXCEPTION: If both parties subjectively attach different, equally reasonable,
interpretations to their expressions, no contract is formed.
i. Raffles v. Wichelhaus – Where contract is formed regarding shipments from a
ship named Peerless, there being two ships of that name and each party
thinking of a different one, then the difference in their subjective thoughts
about the term in the contract voided the contract entirely.
ii. LIMITATION – Both readings must be EQUALLY REASONABLE!
1. Embry v. Hargadine-McKittrick Dry Goods Co.  Employee’s
interpretation of events is MORE REASONABLE than employer’s,
therefore COURT FINDS FOR HIM!
a. QUESTION: “For a third-party observer, which reading of the
events would seem more reasonable?”
iii. ALSO – CAN BE A REASONABLE PERSON IN PARTY’S SHOES:
1. Flower City Painting Contractors, Inc. v. Gumina Constr.  Debate
between general and sub-contractors about whether the word UNITS
meant painting exteriors or exteriors+interiors.
a. COMMERCIAL CUSTOM = Interior + Exterior
b. COMMON USAGE = Exterior only.
c. Judge found that since painters were neophytes, they could
reasonably believe in the common usage while the
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experienced general contract could reasonably believe the
trade usage.
i. IF PAINTER WAS EXPERIENCED  LIKELY HELD THAT IT
WOULD BE MORE REASONABLE TO GO BY TRADE
USAGE! NEOPHYTE EXCEPTION!
iv. Principle rests on an assumption of EQUAL FAULT:
1. Dickey v. Hurd  Where there is mutual mistake, and one party
subsequently learns of the other’s erroneous understanding of the
terms of the contract, then that party has a legal duty to inform that
other party of his own understanding of the terms.
3) OFFERS:
a. When is a communication to be regarded as an offer and when is it to be taken merely
as an invitation to engage in bargaining and negotiation?
i. Very dependent on the surrounding circumstances of the case!
ii. Can be explicit: “I hereby offer you Blackacre in exchange for $40000.”
iii. WATCH OUT! SOMETIMES NOT! SOMETIMES MERELY AN INVITATION TO
NEGOTIATE!
iv. Moulton v. Kershaw  Seller mails out circular to multiple parties saying they
can offer salt at a certain price.
1. NOT AN OFFER BECAUSE:
2. Too uncertain  The original letter did not mention how much salt they
had, and therefore would throw a large amount of uncertainty into the
contract which would make it difficult to enforce.
a. CHANCE FOR UNREASONABLE ACCEPTANCE!
4) ACCEPTANCES:
a. WHEN DO THEY TAKE EFFECT?
b. FIRST YOU MUST DETERMINE WHETHER THE PROMISE WAS UNILATERAL OR BILATERAL!
i. Davis v. Jacoby – When it is ambiguous as to whether a promise is unilateral or
bilateral, there is a presumption at law that the contract was BILATERAL!
1. WHY?  A “bilateral contract immediately and fully protects both
parties…”
c. UNILATERAL CONTRACTS  An offer that is to be accepted by performance of an act.
i. WHAT CONSTITUTES ACCEPTANCE?
1. Performance of the requested act before revocation.
1) Carlill v. Carbolic Smoke Ball Co.  Offer was continuous and never
revoked, and since addressed to “any party” then notice of
acceptance comes with the notice of completion of the act.
a. RULE: So if offeror receives notice of completion of act by
offeree before revocation, then it becomes binding.
2) Cobaugh v. Klick-Lewis, Inc.  Where offer left up after tournament
is performed by golfer, that is still binding.
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a. RULE: “It is the manifested intent of the offeror and not his
subjective intent which determines the persons having the
power to accept the offer.”
i. Lefkowitz v. Great Minneapolis Surplus Store  Ad
was for a deal “first come, first served.” Guy gets
there early, but store refuses to give him a deal
because it was supposed to be for women…court
awards him damages.
b. IF GOLFER REASONABLY BELIEVED THAT OFFER WAS
DIRECTED TO HIM, THEN IT IS BINDING.
ii. REVOCABILITY:
1. OLD RULE  A offer for a unilateral contract was revocable until the
offeree had completed performance of the act specified in the offer.
Therefore, revocable EVEN WHEN OFFEREE HAD BEGUN
PERFORMANCE!
a. Brooklyn Bridge Problem – I offer you a hundred dollars to cross
the Brooklyn Bridge, and I can take that offer back even when
you are 2 feet from completing the task.
b. Petterson v. Pattberg – Man was able to revoke even while the
person coming to pay him was at his door handing the money
out.
2. MODERN RULE  An offer for a unilateral contract cannot be revoked
once performance has begun, unless performance is not completed
within a reasonable time.
a. Restatement Second §45 – “(1) Where an offer invites an
offeree to accept by rendering a performance 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.”
b. Brackenbury v. Hodgkin  Once performance had begun,
offeror was not allowed to revoke her promise to leave her farm
to her daughter and son-in-law if they would care for her during
life.
d. BILATERAL CONTRACTS  Made binding as soon as the offeree FORMALLY ACCEPTS.
i. Mail-Box Rule: Acceptance is valid as soon as it is dropped in the mailbox, not
upon receipt by offeror.
1. Morrison v. Thoelke  Offeror calls to revoke after offeree mails off
their acceptance but before offeror receives it. Court finds that the
offer had BECOME BINDING!
2. Restatement §63(1)  Acceptance completed “as soon as put out of the
offeree’s possession, without regard to whether it ever reaches the
offeror.”
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3. WHY?
a. Encourages contracting by parties at a distance from each other
by making the offeree just as secure as if the contract were
made face-to-face.
i. HOWEVER  what about offeror, who doesn’t know if
he is bound yet?
b. Creates a contract at the earliest possible moment.
4. REQUIREMENTS:
a. Timely Dispatch:
i. If no time specified for acceptance  offeree must
accept within a reasonable time.
ii. Specfied Time in Offer  Starts ticking when the offer
is received. (Caldwell v. Cline  Stating that words have
no existence until they are received by offeree)
b. Proper Manner:
i. Reasonable care.
ii. Acceptable medium of communication.
5. EXCEPTION  Restatement Second § 63(2)  “An acceptance under an
option contract is not operative until received by the offeror.”
e. TERMINATING THE POWER OF ACCEPTANCE:
i. Restatement §36  Power of acceptance terminated by:
1. Rejection or counter-offer by offeree
2. Lapse of time
3. Revocation by the offeror.
4. Death or incapacity of offeror or offeree.
a. Jordan v. Dobbins  “Such being the nature of a guaranty
(where it is revocable anytime before being acted on)…the
death of the guarantor operates as a revocation of it.”
5) LIMITED AND INDEFINITE PROMISES:
a. Implied Promises:
i. Contract is valid when, although a party does not seem to have made a promise
by plain language of their expression, a promise nevertheless is implied (in fact
or in law) from the party’s words or actions.
1. In such cases, the implied promise serves as consideration!
ii. TYPE – “To use reasonable or best efforts.”
1. Wood v. Lucy, Lad Duff-Gordon:
a. Designer promises to give Retailer an exclusive right to market
designer’s services and products, but retailer does not explicitly
promise to market those services and products.
b. Cardozo held that Retailer could enforce a contract of this sort
on the ground that Retailer had made an implied promise to use
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REASONABLE EFFORTS to market Designer’s services and
products.
c. UCC §2-306(2)  ONLY FOR SALE OF GOODS.
i. Provides that unless the parties agree otherwise, a
lawful agreement for exclusive dealing in goods imposes
an obligation “by the seller to use best efforts to supply
the goods and by the buyer to use best efforts to
promote their sale.”
b. OUTPUT CONTRACTS:
i. DEFINITION – Seller agrees to sell all of his output of a commodity to the buyer,
and the buyer agrees to buy that amount from the seller.
ii. RULE: Governed by UCC 2-306.
1. If seller in an output contract wants to produce ANY of the commodity
during the term of the contract, he must sell it all to the buiyer.
iii. LIMITATION - Feld v. Henry S. Levy & Sons, Inc.  UCC §2-306 contains a good
faith exception, whereby the seller can stop performance so long as he does
so in good faith (ex. Threat of bankruptcy if production continued).
1. GOOD FAITH DOES NOT MEAN SIMPLY LOSING PROFITS!
2. EXCEPTION – Corenswet, Inc. v. Amana Refrigeration, Inc.  UCC DOES
not take precedence over the EXPRESS TERMS of the contract; does
not overwrite clause about stopping production “for any time, any
reason on 10 days notice.”
c. INDEFINITE CONTRACT:
i. RULE: An apparent bargain will NOT be enforced if it is found to be too
indefinite.
ii. WHAT MAKES A BARGAIN INDEFINITE?
1. Its terms are so incomplete or uncertain that they show that the
parties did not regard themselves as having completed a contract.
2. OR
3. It is so indefinite that a court cannot determine its material terms with
reasonable certainty or fashion an appropriate remedy for breach.
a. Sun Printing & Publishing Ass’n v. Remington Paper & Power
Co., Inc.  For a contract to be enforceable, the terms need to
be determinable by a third-party! If not able to do this
(meaning the court), then NO CONTRACT
i. Terms need to be determined outside of parties’ mere
wishes, intentions or desires! If not, there is no
contract!
ii. The Contract in question did not stipulate the times that
payment would be fixed, so the Court could not fix
damages (market price of the Canadian Export Co.
during those specified periods).
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b. Restatement Second §33(2) – “The terms of a contract are
reasonably certain if they provide a basis for determining the
existence of a breach and for giving an appropriate remedy.
iii. UCC Gap-Fillers  Provide designated terms that govern if there is a certain
type of gap, or by providing how a certain kind of gap should be filled.
1. Price  Reasonable price at the time of delivery.
2. Place of Delivery  Delivery at the seller’s place of business (or where
the goods known to be in another place are located)
3. Time for shipment or delivery  shipment or delivery within a
reasonable time.
4. Time and Place For Payment  Due at the time and place where the
buyer is to receive the goods.
a. Southwest Eng’g Co. v. Martin Tractor Co.  Even though the
contract failed to include agreement on the terms of payment,
it did not defeat an otherwise valid agreement because this gapfiller could supply the omitted terms.
5. Duration of Contract Requiring Successive Performances  Contract is
valid for a reasonable time (but the parites may terminate the contract
at any time unless otherwise agreed).
iv. PRELIMINARY AGREEMENTS:
1. WE NEED TO FIGURE OUT:
a. Did the parties intend to be bound?
i. Empro Mfg. Co. v. Ball-Co Mfg. Co., Inc.  “Parties may
decide for themselves whether the results of
preliminary negotiations bind them…but they do this
through their words.”
b. If so, to what extent?
2. TYPES:
a. Agreement Contemplating Formalization  Where parties
have reached agreement on the issues they considered to
require negotiation, but have expressed intention to formalize
the agreement as evidentiary memorial…court views as
BINDING.
i. Empro Mfg. Co. v. Ball-Co Mfg. Co., Inc.  “If the full
agreement showed that the formal contract was to be
nothing but a memorial of an agreement already
reached, the letter of intent would be enforceable.”
b. Agreement Contemplating Further Good Faith Negotiations 
Letter of Intent or Commitment.
i. Sometimes seen as not binding (Empro Mfg. Co. v. BallCo Mfg., Co.)
1. WHEN, according to Empro?
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a. When one party makes it clear that they
are free to walk away from the deal,
that privilege is also given to the other
side.
b. When it is made clear that either party
assumes that it can negotiate terms in
addition to, or different from, those in
the letter of intent.
c. IN ADDITION – No reliance!
ii. ENFORCEABLE EXCEPTIONS:
1. Express Preliminary Agreements to Negotiate in
Good Faith  This is enforceable.
2. Implied agreement to negotiate in good faith.
a. REQUIREMENTS – Prevents party from…
b. 1 - Renouncing agreed upon terms of a
deal without trying to negotiate the
unresolved terms.
c. 2 - Abandoning the negotiations
without having made good faith effort
to consummate them.
d. 3 - Insisting on terms that are either
inconsistent with or do not carry out
the intent of those terms that have
been agreed upon,
IDENTIFYING THE BARGAIN IN A COURT OF LAW:
1) THE PAROL EVIDENCE RULE:
a. PROBLEM: Often, although an agreement has been put into writing, one partry will
claim there was ALSO an EARLIER oral or written agreement that was not included in the
writing, but was intended to be part of the contract. Admissibility of alleged additional
agreement turns on this rule…
b. RULE: Parol evidence will not be admitted to vary, add to, or contradict a written
contract that constitutes an integration.
i. Leaves open what constitutes parol evidence and what constituts integration.
c. WHAT IS PAROL EVIDENCE?
i. Any evidence of an alleged earlier oral or written agreement that is within the
scope of the writing.
ii. NOT ALLOWED IF IT IS INCONSISTENT WITH THE WRITTEN AGREEMENT.
(Hatley. V. Stafford).
d. HOW DO WE DETERMINE IF CONTRACT IS FULLY INTEGRATED OR NOT?
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i. OLD VIEW: A writing would be treated as an integration if taken as a whole and
on its face the writing appears to be an instrument that completely expressed
the parties’ agreement.
1. Intent as a matter of form – was writing a complete instrument?
2. Mitchill v. Lath  Since the agreement deals with almost all material
elements of the property being sold, on its face the writing is a
completely integrated contract and the side deal was not included and
cannot be brought as parol evidence.
ii. MODERN VIEW: Today, many or most courts follow a competing test whereby a
writing is deemed to be an integration only if the parties actually INTENDED it to
be an integration.
1. Hatley v. Stafford  “The court should presume that the writing was
intended to be a complete integration, at least when the writing is
complete on its face, and should admit evidence of consistent additional
terms only if there is substantial evidence that the parties did not intend
the writing to embody the agreement.”
a. Court will consider ANY relevant evidence to determine parties’
intent (Masterson v. Sine).
2. Hatley v. Stafford  “The fact that a writing exists does not bring the
rule into play if the parties do not intend the writing to embody their
final agreement.”
3. EXCEPTION TO THE PAROL EVIDENCE RULE – “NATURALLY OMITTED
TERMS”
a. ALLOWED ONLY IF:
i. The side agreement does not conflict with the written
lease?
1. If oral term contradicts writing  then NOT
admissible!
ii. The term concerns a subject that similarly situated
parties would not ordinarily be expected to include in
the written agreement.
1. If it should NATURALLY have been in the
agreement  NOT ADMISSIBLE.
2. What evidence court should look for to
determine if it naturally should have been in
the agreement?
a. Nature of parties – neophytes or
sophisticated businessmen?
b. Relative bargaining Strengths.
c. Length of the written contract.
d. Whether they employed lawyers.
e. EXCEPTIONS TO THE RULE:
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i. SEPARATE CONSIDERATION  Parol evidence if the written integration and
alleged parol agreement are each supported by separate consideration.
ii. NATURALLY OMITTED TERMS  (see above section on integration!)
iii. LACK OF CONSIDERATION  PArol evidence is always admissible to show a lack
of consideration.
iv. EVIDENCE TO EXPLAIN OR INTERPRET TERMS OF WRITTEN AGREEMENT  Rule
does not bar admission of extrinsic evidence to show what the parties meant by
the words used in their written agreement.
1. RATIONALE  Such evidence explains the written agreement rather
than adding to, varying, or contradicting the written agreement.
a. WWW Associates Inc. v. Giancontieri  “An analysis that begins
with consideration of extrinsic evidence of what the parties
meant, instead of looking first to what they said and reaching
extrinsic evidence only when required to do so because of some
identified ambiguity, unnecessarily denigrates the contract and
unsettles the law.”
2. “PLAIN MEANING” APPROACH:
a. RULE:
b. IF:
i. There is no ambiguity in a written contract on its face,
1. OBJECTIVE STANDARD: Federal Dep. Ins. Corp v.
WR Grace & Co.  “Language in a contract is
not rendered ambiguous simply because the
parties do not agree upon its meaning.”
ii. And
iii. No special meaning attached to the words of a written
contract by custom or usage,
1. SEE BELOW ON THIS.
c. THEN:
i. Terms of the contract are to be interpreted only
according to their plain meaning
ii. Extrinsic evidence is inadmissible either to:
1. interpret the contract
2. Or
3. To establish that the contract is ambiguous so
that extrinsic evidence should be admitted to
clarify its meaning.
d. TRADITIONAL APPROACH:
i. WWW Associates Inc. v. Giancontieri  Because
contract on its face is unambiguous, court refuses to
allow parol evidence that would change the contract.
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1. “By ignoring the plain language of the contract,
plaintiff effectively rewrites the bargain that
was struck.”
e. ALTERNATE (modern, gaining ground) APPROACH:
i. Increasing tendency to be more liberal and allow
extrinsic evidence to show what the parties intended by
their words without regard to “plain meaning.”
ii. P.G.&E. Co. v. GW Thomas Drayage and Rigging Co. 
NEW TEST:
1. If reading the contract shows two (or more)
possible readings of the words
2. Then Judge must allow extrinsic evidence that
would prove one of those two possible
meanings.
3. COURSE OF PERFORMANCE, DEALING, AND USAGE:
a. RULE: Extrinsic evidence is admissible to show any special
meanings attached to words used in the written agreement
deriving from course of performance, dealing or usage.
b. APPROACH: Courts are becoming increasingly liberal in
admitting such evidence, even if it contradicts implications to be
drawn from the writing.
i. Columbia Nitrogen Corp. v. Royster Co.  “UCC 2-202
expressly allows evidence of course of dealing or usage
of trade to explain or supplement terms intended by
the parties as a final expression of their agreement.”
1. TEST: “Can the proffered evidence of course of
dealing and trade usage reasonably be
construed as consistent with the express terms
of the agreement?”
ii. TEST (as per Frigaliment Importing Co. v. B.N.S.
International Sales Company).
1. Was particular commercial usage known to
both parties?
2. Was the usage so general and universal that
knowledge on D’s part can be inferred?
CONTRACTS WITHOUT BARGAINING:
1) ACCEPTANCE THROUGH COUNTEROFFER?
a. So an offer is made, and you reply with a counteroffer. Is this a valid for of acceptance?
b. RULE:
c. A counteroffer terminates the offeree’s power of acceptance
i. Livingstone v. Evans  “The plaintiff’s counteroffer [was]…in law a rejection of
the defendants’ offer which freed them [defendants] from it.”
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d. But original offer can be revived by the original offeror.
i. Livingstone v. Evans  Offer effectively terminated by offeree, yet revived by
offeror (“his statement that he could not reduce the price strikes me as having
but one meaning, namely, that he was still standing by it and, therefore, still
open to accept it”).
e. CAREFUL: Power of acceptance is NOT terminated by an inquiry concerning the offer or
by a request for different terms!
i. TEST: Would a reasonable person in the offeror’s shoes think that the
communication from offeree was itself an offer that could be accepted?
2) OTHER CONDITIONAL OR QUALIFIED ACCEPTANCES:
a. GENERALLY: Conditional or qualified acceptances generally terminate the offeree’s
power of acceptance (same rationale as counteroffers).
b. EXCEPTIONS:
i. ACCEPTION COUPLE D WITH REQUEST  valid.
ii. “GRUMBLING” ACCEPTANCE  Acceptnace accompanied with expression of
dissatisfaction is valid as long as not actual dissent.
3) EXCHANGE OF BOILER-PLATE, WRITTEN DOCUMENTS FOR OFFER AND ACCEPTANCE:
a. ADDITIONAL TERMS:
i. UCC §2-207(2)  Additional terms contained in the acceptance are to be
construed as proposals for additions to the contract.
1. EXCEPTION, if parties are both MERCHANTS, these proposed additional
terms become part of the contract.
2. UNLESS:
a. Offer expressly limits acceptance to the terms of the offer.
b. The additional terms would materially alter the contract.
c. Offeror either notifies the offeree within a reasonable time that
he objects to the additional terms or has already notified
offeree of objection.
b. DIFFERENT TERMS:
i. Courts have struggled to decide what effects should be given to different terms
in the acceptance due to the fact that 2-207(2) is limited only to additional
terms.
ii. THREE VIEWS:
1. Knockout Rule:
a. MAJORITY RULE.
b. Different terms do not become part of the agreement, but they
negate those terms in the offer from which they differ.
c. Richardson v. Union Carbide Indus. Gases, Inc.”  NJ adopts the
knockout rule.
i. WHY? Other rules would result in any offeror ALWAYS
prevailing on its terms solely because it sent first form
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 not desirable result “particularly when the parties
have not negotiated for the challenged clause.”
2. MINORITY – Different terms are treated as additional terms.
a. Different terms will most likely drop out anyway because they
“materially alter the contract.”
3. MINORITY – First-Shot Rule
a. Differing terms in acceptance always drop out
b. This means that the offeror’s stipulations are always controlling.
4) SILENCE AS ACCEPTANCE:
a. GENERAL RULE: Silence of an offeree does not constitute acceptance. (McGlone v.
Lacey).
i. RATIONALE  To prevent an offeror from placing an offeree involuntarily in a
situation where offeree must either take an affirmative action to reject the offer
or else become liable on a contract.
b. EXCEPTIONS:
i. OFFEREE LEADS OFFEROR TO BELIEVE THAT SILENCE WILL CONSTITUTE
ACCEPTANCE:
1. Hobbs v. Massasoit Whip Co.  Silence constitutes acceptance where
the offeree, by her own prior words or conduct, gave the offeror
reason to interpret her silence as an acceptance.
a. ELEMENTS:
b. Silence.
c. Retention of stuff for an UNREASONABLE time.
d. Previous business relationship allowed P reasonable assumption
of acceptance through silence.
ii. UNJUST ENRICHMENT AS IMPLIED CONTRACT:
1. Liability may be imposed on a person who receives a benefit from
another, even in the absenmce of a promise to pay for benefit.
2. ELEMENTS:
a. He has conferred a benefit to the defendant.
b. He conferred the benefit with the expectation that he would
be paid its value.
i. MUST BE REASONABLE:
ii. Martin v. Little, Brown & Co.  “A promise to pay for
services can only ne implied when they rendered in
such circumstances as authorized the party performing
to entertain a reasonable expectation of their payment
by party benefited.”
1. WHERE CIRCUMSTANCES EVIDENCE THAT
ONE’S WORK HAS BEEN VOLUNTARILY GIVEN,
NO INFERMENT OF INTENTION TO PAY.
c. The defendant knew or had reason to know of the plaintiff’s
expectation.
i. Martin v. Little, Brown & Co.  “Appellant’s letter did
not suggest that he intended to be paid.”
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d. IN ADDITION – May be able to get RESTITUTION DAMAGES IF
defendant would be unjustly enriched if her were allowed to
retain the benefit without paying its value.
5) THE PROBLEM OF SHRINK-WRAP PROVISIONS:
a. 7th CIRCUIT VIEW:
b. ProCD, Inc. v. Zeidenberg  They are VALID AND ENFORCEABLE!
i. Offeror is the master of the offer and can therefore choose what constitutes
acceptance.
ii. In this case, that means clicking the agreement to terms and conditions.
iii. PURCHASER HAD OPPORTUNITY TO INSPECT, AND RETURN THE PRODUCT IF HE
DID NOT LIKE THE TERMS.
c. Hill v. Gateway  Similar case: offeror as “master of the offer” can determine what
constitutes acceptance, here that being retention of product for more than 30 days.
i. “If (terms inside the box) constitute the parties’ contract because the Hills had
an opportunity to return the computer after reading them, then all must be
enforced.”
ii. “By keeping the computer beyond 30 days, the Hills accepted Gateway’s offer,
including the arbitration clause.”
iii. NOTE HOW IMPORTANT THE RETURNABILITY IS HERE! GIVES OFFEREE
CHANCE TO REJECT OFFER!
d. ALTERNATIVE VIEW:
i. Klocek v. Gateway NOT VALID!
1. Standard terms are not communicated at the time of sale and are
therefore ADDITIONAL OR DIFFERENT TERMS.
2. “Because plaintiff was not a merchant, additional or different terms
contained in the Standard Terms did not become part of the parties’
agreement unless plaintiff expressly agreed to them.”
MISTAKE AND EXCUSE:
1) NONDISCLOSURE:
a. GENERAL RULE: Party who proposes a contract does not have an obligation to
affirmatively disclose facts concerning subject matter of the contract.
i. Laidlaw v. Organ  No duty to disclose that war had ended, thus likely affecting
tobacco prices.
b. EXCEPTIONS: Disclosure required under CONSTRUCTIVE FRAUD Doctrine.
i. Fiduciary Relationships.
ii. Relationships of trust of confidence.
1. Jackson v. Seymour  Businessman buys land from invalid sister, which
is worth a lot more, COURT FINDS CONTRACT VOIDED FOR FRAUD!
2. ELEMENTS:
a. Confidential relationship between the parties.
b. “Gross inadequacy of the price.”
3. “Where inadequacy of price is such as to shock the conscience, equity is
alert to seize upon the slightest circumstance indicative of fraud, either
actual or constructive.”
iii. Differences in Bargaining Positions:
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1. Disclosure may be required where a material fact is known to one party
by virtue of his special position and could not be readily determined
by the other party in the exercise of normal diligence.
iv. Posner – “Good Faith” In Dealing With Already Signed Contracts
1. Market Street Associates Ltd. Partnership v. Frey  Once you have a
contract with a company, you are in a cooperative relationship (and the
distrust that makes negotiating parties scrupulously read contracts
vanishes) and therefore have a duty to disclose any relevant terms that
they might not know about.
a. If MSA thought that Frey was AWARE OF THE PROVISION, then
acted in Good faith and no duty to disclose!
b. If MSA thought Frey was NOT AWARE OF THE PROVISION, then
DUTY TO DISCLOSE!
2) MUTUAL MISTAKE:
a. Mistaken assumption shared by both parties as to the conditions of the outside world.
b. OLD TEST:
i. Did mistake concern the “substance” or “identity” of the contract’s subject
matter (in which case the contract would be voidable) or only its accidents or
collateral attributes (contract would NOT be voidable).
ii. Sherwood v. Walker  Walker contracted to sell Sherwood a cow that both
parties believed was barren. Walker discovered cow was pregnant and refused
to sell. Contract was rescinded due to mutual mistake in SUBSTANCE (cow was
a breeding cow rather than a meat cow).
iii. Beachbomber Coins, Inc. v. Walker  When bargain is based on a mutually
shared belief regarding an “essential fact’ that turns out to be wrong, then
MUTUAL MISTAKE.
c. MODERN RULE:
i. Where parties enter into a contract under mutual mistake concerning a basic
assumption of fact on which the contract was made, the contract is voidable
by the adversely affected party if:
1. Mistake has a material effect on the agreed exchange
2. AND
3. Adversely affected party did not bear risk that assumption was
mistaken.
a. Beachcomber Coins, Inc. v. Walker  This applies only when
there is some uncertainty regarding whether or not the fact
may be mistaken.
i. If NO UNCERTAINTY  MUTUAL MISTAKE DEFENSE IS
VALID!
3) CHANGED CIRCUMSTANCES JUSTIFYING NONPERFORMANCE:
a. RULE: Performance of a contract will normally be excused if the performance has been
made impracticable by the occurrence of an event whose nonoccurrence was a basic
assumption on which the contract was made. (Taylor v. Caldwell).
i. UNLESS  Adversely affected party has explicitly or implicitly assumed the risk
that the contingency might occur.
1. Lincoln Welding Works v. Ramirez  Where agreement says that
plaintiff bears the risk of loss to its work until formal acceptance, that
clause is accepted by the court.
Baird/Bernstein - 2009
b. LIMITATION- Destruction of a construction work in process.
i. Carroll v. Bowerstock  Contractor allowed to recover on all the work put in
that conferred a benefit on the defendant.
1. TEST: You can recover for work that “would have inured to
[defendant’s] benefit as contemplated by the contract if the fire had
not occurred.”
a. Recover for the removal of the old floor.
b. Recover for installation of support structures.
c. Completed floor was not finished – no recovery.
c. FRUSTRATION:
i. ELEMENTS: Performance may be excused under the doctrine of frustration,
where:
1. The PURPOSE or VALUE of the contract has been destroyed
2. By a supervening event that was NOT REASONABLY FORESEEABLE at
the time contract was entered into.
3. Krell v. Henry  Guy rents rooms to watch coronation parade, but
performance was excused by the cancellation of the procession because
the whole value of the contract had been destroyed by cancellation of
the coronation.
POLICING THE BARGAIN
1) DURESS AND COERCIVE RENEGOTIATIONS:
a. AN EXCEPTION: Levine v. Blumenthal  Renegotiation made invalid because of “lack of
consideration” for new promise.
i. Baird - This case is simply wrongly decided: the renegotiation was helpful for
BOTH parties in that leasor was receiving more than market value for space at
the time and leasee was getting their space and able to keep their business.
b. COERCIVE NEGOTATIONS  Alaska Packers - Contract invalid because they meant to do
what they were originally contracted to do, and provided no consideration for this.
c. DURESS RULE  A contract is voidable on the ground of duress where consent was
induced by wrongful threats.
i. ECONOMIC DURESS – Valid defense to the enforcement of a contract where:
ii. ELEMENTS:
1. One party commits or threatens to commit wrongful act (including
breach) that would place the other in a position that would seriously
threaten his property of finances unless other party enters into
contract.
2. NO ADEQUATE means are available to avoid or prevent the threatened
loss other than entering into the contract.
a. Alaska Packers’ Association v. Domenico  Alaska Packers
would not have been able to get other fishermen in time for the
season.
i. When a party “by taking advantage of the necessities of
his adversary, he obtains a promise for more, the law
will regard it as nudum pactum, and will not lend its
process to aid in the wrong.”
Baird/Bernstein - 2009
b. Austin Instruments, Inc. v. Loral Corp.  Found duress because
it was shown that Loral “could not have obtained the items in
question from other sources in time to meet its commitment to
the Navy under the first contract.”
i. ELEMENTS:
ii. CAN JUSTIFY NON-PERFORMANCE OF RENEGOTIATED
CONTRACT WHEN:
iii. Immediate possession of needful goods is
threatened…or threat of breach.
iv. AND
v. Impossible to obtain goods from another source
1. Loral exhausted its list of “approved vendors”
and since they were working with high-grade
military hardware, it would be unreasonable to
require Loral to go with untested and unfamiliar
or disliked vendors.
vi. AND
vii. Action for breach of contract would not be adequate.
1. Loral would still have to obtain gears
elsewhere…with consequences that they would
have missed government delivery schedule.
viii. AND
ix. Found by court that free will has been deprived!
2) UNCONSCIONABILITY:
a. Unconscionable contracts are unenforceable.
b. ELEMENTS:
i. PROCEDURAL - Absence of meaningful choice on the part of one of the parties
1. Adhesion Contracts – Where parties occupy unequal bargaining
positions, and the party in the inferior position is forced to adhere to
the terms of the other’s printed form on a “take it or leave it” basis
rather than having terms dickered out.
a. Henningsen v. Bloomfield Motors  Consumer at mercy of car
companies if he wants to own a car, since they control all of the
market + he buys it only from a dealer who has no negotiating
power over warranty exculpation clauses.
2. Party’s lack of knowledge of provisions in contract:
a. Williams v. Walker-Thomas Furniture Co.  When party of
inferior bargaining power “signs a commercially unreasonable
contract with little or no knowledge of its terms, it is hardly
likely that his consent, or even an objective manifestation of his
consent, was ever given to all the terms.”
ii. AND
iii. SUBSTANTIVE - Contract terms are UNREASONABLY favorable to one party.
1. Henningsen v. Bloomfield Motors, Inc.  Terms must be so extreme as
to appear unconscionable according to mores and business practices of
the time and place!
Baird/Bernstein - 2009
2. LIMITATION – Brower v. Gateway 2000, Inc.  Where only parts of a
contract are substantively unconscionable, those specific parts may be
deemed unenforceable and unconscionable
a. THIS CASE Though arbitration clause was generally
acceptable, they needed to find a different arbiter because the
one chosen was too unreasonably favorable to Gateway.
CONDITIONS:
1) A condition is “an event, not certain to occur, which must occur, unless its nonoccurence
is excused, before performance under a contract becomes due.” Restatement, Contracts
2d §224
2) EXPRESS CONDITIONS:
a. Explicit contractual provision which provides that either:
i. A described event or state of the world must occur before a party has a duty
to perform.
1. Condition Precedent – a condition under which some state of affairs
must occur before a party has a duty to render performance.
2. Kingston v. Preston  Servant must pay a certain amount of security
before promisor has duty to give the business over to him.
ii. OR
iii. If a described event or state of the world occurs or fails to occur, a party will
be released from a duty to perform.
1. Condition subsequent – A condition under which occurrence or nonoccurrence of a state of affairs extinguishes or terminates a duty to
perform that previously had arisen.
b. IMPORTANT  WHILE PROMISE IMPLIES THAT BREACH = DAMAGES, WITH
CONDITIONS, BREACH = RELIEVES YOU OF LEGAL DUTY.
c. How do you determine whether it is a promise or condition?
i. RULE: Depends on parties’ intent as evidenced through the words of the
contract.
1. Kingston v. Preston  “The dependence or interdependence of
covenants was to be collected from the evident sense and meaning of
the parties.”
a. HERE, “the essence of the agreement was, that the D should not
trust to the personal security of the plaintiff, but, before he
delivered up his stock and business, should have good security
for the payment of the money.”
ii. What if parties’ intent is unclear?
1. WORDS USED:
a. Words such as “provided,” “if” and “when” usually indicate that
an express condition rather than a promise was intended.
2. IN CASE OF DOUBT, CONSTRUE PROVISIONS AS PROMISES:
a. Price v. Van Lint  “where a contract contains mutual promises
to pay money or perform some other act and the time for
performance for one party is to, or may, arrive before the time
Baird/Bernstein - 2009
for performance by the other, the latter promise is an
independent obligation.”
b. Restatement 2d §234(1)  “Where all or part of performances
to be exchanged under an exchange of promises CAN BE
rendered simultaneously, they are to that extent due
dimultaneously UNLESS THE LANGUAGE OF THE
CIRCUMSTANCES indicate the contrary.”
c. Howard v. Federal Crop Ins. Corp  Since doubt, seen as
promise and not condition. (therefore, FCIC can sue for
damages for any damage suffered by breach).
3. CANONS OF CONSTRUCTION:
a. Expressio Unious – Howard v. Federal Crop Ins. Corp  Use of
the term “condition precedent” in one provision means that the
lack of that term in another is telling.
d. Party benefitting from the occurrence of something has the BURDEN OF PROOF OF
SHOWING THAT THE EVENT HAS HAPPENED. (Gray v. Gardner)
i. Gray v. Gardner  Party (holding condition subsequent) getting out of legal
duty through the occurrence of an event must have burden of showing that the
event happened.
e. EXCUSE OF CONDITIONS:
i. A condition will be excused if the party favored by the condition wrongfully
prevents or hinders the fulfillment of the condition.
1. Wrongful = The other party would not have reasonably anticipated the
type of prevention or hindrance that occurred.
2. Termination of a business  Whether closing down the business
constitutes a wrongful prevention depends on the tytpe of contract
involved.
a. Good faith required for closing ofbusiness!
b. Feld v. Henry S. Levy & Sons, Inc.  UCC §2-306 contains a good
faith exception, whereby the seller can stop performance so
long as he does so in good faith (ex. Threat of bankruptcy if
production continued).
ii. Impossibility  If unforeseen event renders compliance with a specific
condition impossible, then that condition is simply rendered unenforceable.
1. Semmes v. Hartford Ins. Co.  Duty to file claim within 12 months of
accident is rendered impossible by the Civil War, so therefore that
clause is simply rendered void.
3) DOCTRINE OF SUBSTANTIAL PERFORMANCE:
a. WHAT?
i. This allows a party to bring suit on a contract as a plaintiff for expectation
damages even though he has breached the contract by not rendering a perfect
performance.
b. HOW?
i. A determination of substantial performance is a question of fact to be governed
by the circumstances of each case.
ii. Plante v. Jacobs TEST:
1. Did the performance meet the ESSENTIAL PURPOSE of the contract?
a. FACTORS TO CONSIDER:
Baird/Bernstein - 2009
b. Extent of the contracted-for-benefits that innocent party has
received.
c. Extent to which damages will be adequate compensation for
breach.
d. Extent to which forfeiture will occur if the doctrine is not
applied.
e. Extent to which the breach was wrongful or in bad faith.
c. APPLICATION:
i. Construction Contracts
1. This doctrine has been applied primarily to cases where an owner does
not pay because of faulty work.
2. WHY? Unjust to allow an owner to retain the value of a building free of
charge just because the contractor made some small deviation from
agreed specifications.
ii. NOT APPLIED IN SALE OF GOODS - Perfect Tender Rule – UCC §2-601
1. Substantial performance is insufficient for a seller of goods
2. Seller must make a tender of goods that conform “perfectly,” rather
than merely substantially, to the contract specifications in order to put
the buyer under the obligation to take and pay for the goods.
a. Printing Center of Texas Inc. v. Supermind Pub. Co.  Buyer has
right to reject goods in good faith if they fail to conform to
either the express or implied terms of the contract.
i. SELLER HAS DUTY TO SHOW BAD FAITH ON PART OF
BUYER.
ii. Includes both expressed and implied specifications 
here the seller knew books were for sale to the public,
so “it was implied in the contract that the books be
commercially acceptable and appealing to the public.”
d. DAMAGES:
i. PARTY IN BREACH  If party has substantially performed, they can enforce the
contract and sue for expectation damages.
1. HOWEVER, other party is entitled to an off-set for damage resulting
from the fact that the performance was not perfect (Plante v. Jacobs).
2. HOW MEASURED?
a. Cost of Completion:
i. Most cases  Amount it would cost to repair the
deficiency in the performance or to make the work
conform to the contract.
b. Diminution in Value:
i. Measure of damages will be the amount by which the
deficiency in the performance diminishes the value of
the performance when:
1. ELEMENTS:
2. Repair or reconstruction would involved
“substantial economic waste.”
3. OR
4. Cost-of-completion damages would be
disproportionate to the end to be served.
Baird/Bernstein - 2009
a. Jacob & Youngs, Inc. v. Kent  Where
cost to replace pipes would be
$200’000 and the pipes and the
material difference between pipes is
minimal, THEN ONLY THE DIMINUTION
IN VALUE CAUSED BY DIFFERENCE IN
PIPES can be awarded.
b. Plante v. Jacobs – No recovery for
misplaced wall because it would be
disproportionately costly to replace it.
CONTRACTUAL RELATIONSHIPS AND THE RIGHTS OF THIRD PARTIES:
1) THIRD PARTY BENEFICIARIES:
a. Huh? Can a person who was not a party to the bargain and who gave no consideration
enforce the contract if he had been benefited by the contract’s performance?
b. MODERN RULE: Third-party beneficiary may sue and recover in appropriate cases.
i. Seaver v. Ransom  “The court in that leading case attempted to adopt the
general doctrine that any third person for whose direct benefit a contract was
intended could sue on it.”
c. TEST: Third Party Must be Either a Donee Beneficiary or a Creditor Beneficiary
i. The restatement dubs these categories “intended beneficiaries” and
“incidental beneficiaries.”
ii. RATIONALE  If we’re looking at “what the parties would have wanted,” it is
likely that the parties would have only wanted one cause of action against him
and they would thereby limit the beneficiaries who can bring action.
iii. Creditor Beneficiary (Intended Beneficiary):
1. Restatement 2d 302(1)(a) – “The performance of the promise will satisfy
an obligation of the promisee to pay money to the beneficiary.”
2. A third party can enforce the contract if the promisee’s primary intent
was to discharge an obligation he owed to the third party.
a. Lawrence v. Fox – Holly makes contract with Fox whereby Holly
loans Fox $300 dollars today as long as he pays $300 to
Lawrence the next day, as Holly owes Lawrence that money.
3. RATIONALE: Prevents unjust enrichment and excessive litigation (Holly
would sue Fox, and would then be sued by Lawrence).
4. Must there be an actual obligation owed to third party?
a. GENERAL RULE: A third-party beneficiary is a creditor
beneficiary if the promisee, in making bargain with promisor,
intended to satisfy an obligation she BELIEVED she owed to
third-party beneficiary (whether or not she actually owed an
obligation.”
b. It is sufficient if there is a supposed or asserted obligation
owing to third party (Hamill v. Maryland Casualty Co.).
iv. Donee Beneficiariy (Intentional Beneficiaries):
1. Restatement 2d 302(1)(b) – “The circumstances indicate that the
promisee intends to give the beneficiary the benefit of the promised
performance.”
Baird/Bernstein - 2009
2. TWO TYPES:
3. Intent to Confer a Gift:
a. If the promisee’s primary intent in contracting is to confer a gift
on the beneficiary.
i. Seaver v. Ransom  Niece is a proper third-party
beneficiary because her aunt made the contract in
hopes that the house be conferred as a gift to her niece.
4. Intent to Confer a Right to Performance:
a. If the promisee intended to confer on the beneficiary a right
against promisor to some performance, other than a gift.
v. NOT ABLE TO ENFORCE – Incidental Beneficiary
1. Restatement 2d. 302(2) – “An incidental beneficiary is a beneficiary who
is not an intended beneficiary.”
2. A third party who would be benefited by the performance of a contract,
but who is neither a creditor nor donee beneficiary.
3. CANNOT BRING SUIT UNDER THE CONTRACT!
4. Eee…
d. What if Bruce does a really bad job of mowing lawn?
i. You can sue Douglas for breach of contract! The fact that Douglas promised to
mow the lawn does not mean that you’re off the hook if performance does not
take place.
e. What if Douglas promises to mow my lawn? He delegates to Bruce who gets right to
collect money from me, and then Douglass runs off to Rio de Janeiro!
i. I can either sue Baird or sue his brother!
2) Assignment of Rights and Delegation of Duties:
a. Assignment of Rights:
i. RULES:
1. GENERAL RULE: All contract rights are assignable.
a. EXCEPTIONS: A right may not be assigned if an assignment
would “materially change the duty of the obligor, or materially
increase the burden or risk imposed on him by his contract, or
materially impair his chance of obtaining return performance or
materially reduce it’s value to him.
i. Rights whose assignment would materially change the
obligor’s duty.
1. Personal service contracts – Where the effect
would be to require the obligor to perform
PERSONAL SERVICES TO ASSIGNEE!
a. If my right is for you to mow my lawn, I
can’t assign that right to someone else
so that you would then have to mow
HIS lawn!
b. Personal service = Whether the
performance so involves the personality
or personal characteristics of the
obligor that it would be unfair to
require onligor to render performance
to third person!
Baird/Bernstein - 2009
2. Output contracts are generally not assignable –
assignee might have far different output or dar
different requirements than A, the assignment
could materially change duty of B.
ii. Rights whose assignment would materially increase
the burden or risk of the obligor:
1. Insurance policies – the right to be insured is
not assignable.
a. You might be able to assign the
BENEFITS of the policy though!
2. Credit  where personal credit is involved,
substitution of debtors may materially increase
obligor’s risk.
a. Evan agrees to loan to Holly, so Holly
cannot assign that loan to Cheryl.
Cheryl might be more liable to not pay
me back than Holly.
iii. Assignment that would materially change contract
terms:
1. Assignments do not change the TERMS of a
contract!
2. Evan agrees to deliver box of cookies to Holly at
Holly’s house. Holly assigns right to that box of
cookies to Lucy. Evan is NOT OBLIGED TO
DELIVER COOKIES TO LUCY’S HOUSE; the
contract terms remain the same and Lucy may
pick up the cookies at Holly’s house!
ii. REQUIREMENTS FOR EFFECTIVE ASSIGNMENT:
1. Any manifested intention by a party to a contract to make a PRESENT
transfer of rights under the contract to another person will constitute
an assignment.
a. TEST: Did the language manifest an intent by the assignor to
divest himself completely and immediately of the right in
question and transfer the right to the assignee?
iii. Future Rights:
1. Under existing contract  Generally held to be assignable.
2. Continuing business relationship  Some courts at common law allow
assignment of right to payments that are expected to arise out of a
continuing business relationship.
3. Future contract  At CL, rights under a future contract or a future
business relationship are NOT assignable. Assignment is a transfer, and
you cannot transfer something you do not have!
iv. Contractual Provisions Prohibiting Assignment:
1. TRADITIONAL VIEW:
a. At common law, such a provision is valid though not favored.
b. Prohibitions on assignments are construed as promissory in
nature:
Baird/Bernstein - 2009
i. Therefore, assignor can still assign the right and the
right would be valid as between the obligor and the
assignee, but the obligor could then SUE THE ASSIGNOR
FOR BREACH OF CONTRACT!
1. Unless special injuries, obligor could generally
get only nominal damages!
c. HOWEVER – if the prohibition is in the form of a CONDITION,
then that is completely valid!
2. RESTATEMENT APPROACH:
a. Adopts rules of construction against such provisions.
b. Contractual provisions that prohibit assignment of “the
contract” is to be construed to bar only the delegation by the
assignor of her duties or conditions, not an assignment of right
sunder contract.
c. Contract terms prohibiting assignment of “rights under the
contract” –
i. Gives the obligor a right to damages in the event of a
prohibited assignment, but NOT to render assignment
ineffective.
ii. Not to forbid the assignment of a right to damages for
breach of the whole contract to the assignment of a
right arising out of the assignor’s due performance of
entire obligation.
iii. To be for the benefit of the obligor, and not prevent
assignee from acquiring rights against assignor, nor to
prevent obligor from rendering performance to the
assignee as if there were no such prohibition.
v. RIGHTS OF ASSIGNEE AND OBLIGOR:
1. Assignee:
a. Assignee can enforce her rights by direct action against obligor.
b. Once obligor has knowledge of the assignment, he must render
performance to or pay the assignee.
i. If he does so to the assignor, at own risk.
2. Defenses available to obligor against assignee:
a. Defenses that arise out of either a problem with the contract or
from the contract itself.
vi. Multiple and competing Assignees:
1. Under Comon law, if prior assignment is revocable, a subsequent
assignment revokes the prior assignment, and subsequent assignee
therefore prevails over prior.
2. “New York Rule”  First in time prevails.
b. DELEGATION OF DUTIES:
i. GENERAL RULE: Any contractual duty can be delegated unless the obligee has a
substantial interest in having the original obligor perform the duty personally.
1. Except where performance by a delegee would vary materiall from the
performance promised by obligor, a contractual duty may be
performed by a delegee without constituting a breach of contract.
Baird/Bernstein - 2009
2. PERSONAL SERVICES  IF contract requires performance by, for
example, a portrait painter, author or tracher than that right cannot be
delegated without obliges consent.
a. HOWEVER – Macke v. Pizza – More “fungible” services such as
ditch-digging, house construction, etc. can be delegated if “the
quality of the performance remains materially the same.”
ii. Contractual restrictions?
1. Provisions that limit either party’s right to delegate duties are normally
enforced. Such provisions evidence the parties’ intent aht the services
involved are personal, so that performance by anther would not
constitute the bargaind-for consideration.
a. Restrictions on delegation DO NOT CLASH WITH POLICY OF FREE
ALIENABILITY!
iii. Effect of valid delegation of duties:
1. Obligee can enforce against the delegor and the delegee!
a. Delegation places the primary responsibility to perform on the
delegee.
b. Delegor becomes SECONDARILY LIABLE – as surety – for
performance of the duty.
2. UCC – A delegation of performance entitles the oblige to demand
assurances of performance form the delegee!
TORTS AND CONTRACTS, TOGETHER AT LAST!
1) INDUCEMENT OF BREACH OF CONTRACT
a. PRIMA FACIE CASE:
b. Defendant’s interference with existing contract
i. Not limited to servants/masters
ii. Lumley v. Gye  Expanded the role from only master/servant to ANY TYPE OF
VALID CONTRACT!
1. Opera singer was induced to sing at another opera house instead of the
one she contracted to sing at
iii. EVEN TERMINABLE AT-WILL CONTRACTS!
1. It is the interference with THE RELATIONSHIP that is the bad thing, and
not the contract itself!
iv. Exception, illegal contracts.
c. Intent:
i. Defendant must have been aware of the existing contract and that she intended
to cause the interference.
ii. MORE NEEDED IN CASES WHERE THE INTERFERENCE IS WITH COMMERCIAL
RELATIONS LESS THAN CONTRACTUAL:
1. This includes prospective economic advantage!
2. Della Penna v. Toyota  “a plaintiff seeking to recover for alleged
interference with prospective economic relations has the burden of
pleading and proving that the defendant’s interference was wrongful
‘by some measure beyond the fact of the interference itself.’”
Baird/Bernstein - 2009
d. Causation
i. Actual and proximate.
e. Special Damages
i. Actual damages
ii. Consequential damages
iii. Mental suffering
iv. Damage to reputation.
v. Punitive.
f. What about hired CONSULTANTS?
i. JD Edwards & Co. v. Podany  Consultants generally have the right to give
advice that would induce an interference with a constract.
1. LIMITATIONS:
a. The advice must be limited to such that is given within the
scope of the engagement.
b. The advice must be done in good faith
i. Cannot use the job to hurt others out of animosity or
for own personal benefit.