Contracts I Final Outline – Gabaldon – Fall 2011
A K is enforceable when…
1. Mutual Assent = Offer + Acceptance
2. And
a. Consideration
b. Detrimental reliance
c. Moral obligation
d. Clarity of terms
3. Also consider:
a. Definiteness
b. Statute of frauds
c. Parol evidence rule
4. Unconscionability/Adhesion
5. Alt. recovery-restitution
Cause of Action for Breach of K:
1. Existence of K
a. Mutual assent
b. Consideration
c. Reliance
d. Sufficiently clear terms
e. Restitution
2. Material breach of duty and damage
K Not Enforceable/voidable:
1. K for illegal actions
a. Unless the plaintiff didn’t know the K was illegal
2. K’s between infants
a. If infant and adult, infant not bound but adult is
ATTACK HINTS
Scenario 1:
1.
2.
3.
4.
P claims breach of K
D presents all defenses
P asks for remedy
D argues limitations on remedy
Scenario 2:
1. P claims D is unjustly enriched
2. D argues defenses
a. Volunteer, officious intermeddling
Questions to Ask:
1. What is the claim?
a. Breach of K?
b. Promissory Estoppel?
c. Restitution?
2. Is there a basis to enforce the claim?
a. Is there consideration?
i. Was there a bargain?
ii. Are there implied terms to act in good faith?
b. Is there reliance on the promise?
i. Promissory estoppel?
1. Did D make a promise?
2. Could D reasonably expect P to rely on it?
3. Was P’s action induced by the promise?
4. Is enforcement of the promise necessary to prevent injustice?
ii. Equitable estoppel?
1. Did P rely on a statement of facts that D never intended to be true or act on?
c. Is there a moral obligation to enforce the promise?
d. Did D promise to pay money in recognition of material benefit to P? (McGowin) RESTITUTION
e. Can P get restitution?
i. Did D receive unjust enrichment at P’s expense?
ii. Can D assert defenses?
1. P conferred the benefit as a volunteer
2. P was an officious intermeddler
3. Was there proper offer and acceptance?
a. Did the parties express mutual assent to be bound?
b. Was there an offer?
c. Did D terminate the offer?
i. Expiration
ii. Revocation or option
iii. Did the offeror die?
iv. Rejection, counter-offer not a mirror image?
d. Was there acceptance?
i. What is the offer?
ii. Did the acceptance invite performance?
iii. Did the offeree perform?
iv. Was notice of acceptance required?
v. Was notice given?
vi. Is there implied acceptance (by silence)?
e. Can there be liability with incomplete negotiations?
f. Is there definite terms?
4. Are there Statute of Frauds issues?
a. Is writing required?
b. Can the promise be performed within a year?
c. Land
d. Executor
e. Surety ship
f. Are the essential terms written?
g. Can the person recover even if it is not written and should have been?
i. Promissory estoppel
ii. Restitution
MUTUAL ASSENT
1. Meeting of the minds
2. Objective manifestation, not internal intent
a. What would a reasonable person believe?
b. Signing a K
UNILATERAL K’s – one party makes a promise in exchange for performance (consideration)
1. Where the offeror unambiguously says that completion of performance is the only manner
of acceptance
2. Where there is an offer to the public, like a reward, that clearly indicates acceptance by
performance, not by return promise
Offer and Acceptance
1. Res. 32- If the offer is unclear, can be accepted by promising the performance or doing the performance
2. Res. 45-An option begins when performance begins
a. So beginning performance usually means you have an option
i. But the offeror is master and can specify otherwise
ii. Must distinguish between preparation to perform and performance
1. If the offeror’s cooperation is a necessary part of performance, and refuses to give it, only
part performance.
3. Acceptance is when performance is completed. Given a reasonable amount of time to complete the performance,
and can stop performing at any time. Once performance begins, can’t revoke.
BILATERAL K’s (exchange of promises by both parties- accepted by promising or beginning performance)
Offer-manifestation of intent to be bound when accepted
1. Would a reasonable person think there was an offer?
1. Was there an expression of a promise? (not invitation to prelim negotiation-PRICE QUOTES)
2. Is there certainty and definiteness to essential terms?
3. Was there communication to offeree? (ambiguity in favor of offeree)
2. Effective upon communication (when the offeree gets it) and creates power of acceptance
3. Revoked upon communication (when received by offeree directly or indirectly thru reliable source, or act like it) must revoke before acceptance
1. Exception for option K’s, can’t revoke them when supported by consideration
4. Expire in accordance with terms or in a reasonable period of time
5. Courts consider context of offers: Is it in jest? Prob. not enforceable unless a reasonable person would have taken it
to be an offer.
6. Ads are not usually offers, unless a reasonable person would have read it as an offer:
1. Language construed as containing a promise
2. Terms are definite
3. Offeree is clearly identified
i. OR if the ad is deliberately misleading
7. An offer to buy goods for current or prompt shipment
1. Invites acceptance by either promising to ship or actually shipping
2. If ships nonconforming goods, it is a breach of K unless the shipper gave notice to the buyer, which the
buyer can reject.
When is an offer irrevocable?
1.
2.
3.
4.
5.
Option supported by consideration (restatement)
Promise to hold open and reliance on the promise (estoppel)
Implied promise to hold open based on context and foreseeability of reliance (contractor’s)
Where acceptance can be performance and performance has begun
By statutea. Government K’s are all option
b. CISG-if the K says it is irrevocable, reasonable reliance
c. UCC-if an auction has no reserve and has begun
d. Clear and definite promise: UCC 2-205- An offer from a merchant to buy or sell goods in a signed writing,
which by its terms gives assurance that it is not revocable, for lack of consideration during the time stated,
or three months. [ONLY IF NO CONSIDERATION]
i. Perryman-K for land will be held for 120 days. The UCC does not apply-only for the sale of goods
between merchants.
ii. Drennan-Offer to pave schoolyard, does not say it will be held open. UCC doesn’t apply. This is a
service. Also questionable bc it was oral, not written.
iii. How do you know if the UCC applies?
a. Is it for goods or services? Which is more important?
Intended Uncertainty in Bargaining Process
1. Classic Approach: If the vague or indefinite term is material it invalidates the K (Walker v. Keith)
2. formal contract contemplated-agree to be bound+ material terms are all there, then can add other terms.
a. Courts will enforce K’s with objective standard for court to fill in terms, like if it is “determined later by
arbitrator”
3. This is different from an agreement to agree- no intent to be bound and no material terms. All you get here is a
breach of duty to bargain in good faith.
4. UCC 2-305 Open price term with sale of goods is OK if both parties intend to be bound but do not state price, say
they will agree later and fail to, say it will be fixed by an external factor. OK to say that the seller will set the price
later, but there is an expectation that he will act in good faith.
a. Other UCC Gap-Fillers- price, time for delivery, delivery in lots, place of delivery, duration, best efforts in
exclusive dealing contracts 2-306(2))
b. It is ok to leave a term blank when it is obvious in the industry what it is
5. If no intent to be bound, there can be no K.
6. Subject matter must be clear-court can’t enforce a K if it doesn’t know what it is for
a. If a term that is included is so vague that you don’t know what it means, no enforcement
i. For real estate must include what the land is and price term
ii. For sale of goods, must specify quantity
iii. For offer of services, must specify nature of work to be performed
b. If material terms are vague, conduct can give meaning, but not always [gap-fillers]
7. Modern Common law approach: agreements to bargain in good faith or reasonable efforts to come to a decision
about terms are enforceable and can be implied from conduct.
Acceptance - a manifestation of intent to conclude the bargain, to enter a contract (Res. 50).
1. Acceptance on dispatch-when you entrust it to a designated agent for transmitting the acceptance-when you put it
in the mail box. Risk of non-arrival with offeror. (person receiving acceptance)
2. Except in CISG- does accept the mailbox rule: international acceptances are accepted upon dispatch, but puts risk of
non-arrival on offeree.
3. Generally can’t accept by silence
4. Hasn’t been dispatched if you have given to your own agent
Rejection


Express rejection or implied by counter-offer
Effective when received by offeror


o Then offeror can revive the offer-send the same one again
If it is an option and the offeree rejects or counters, can later still accept the first offer bc it has been held open
unless the offeror has detrimentally relied on the rejection Res. 37
Lapse of time
Counter Offer
1. Rejection, generally (rejection+ new offer)
a. Mirror Image-If the new offer is not a mirror image of the first, it is a rejection
i. Any new or different terms are a rejection+counter-offer
1. Does not include statements that make implicit terms explicit, grumbling, requests for
clarification
b. Last Shot rule- Can only look at the last offer, it is the one accepted, not a prior offer
c. Distinguish between question (Could I have it for less?) which is not a rejection and rejection (I want it for x.
2. Qualified Acceptance [battle of the forms] (non-conforming acceptance)
a. A proposal of different or additional terms is not a rejection, but is an acceptance, unless it is expressly
made conditional on the new terms
i. Distinguish confirmations (paper followed by phone call)
b. UCC 2-207-A definite and seasonable expression of acceptance of written confirmation within a reasonable
time is an acceptance even if it states additional or different terms than those offered, unless acceptance is
expressly made conditional on assent to the additional or different terms.
1. additional terms with a non-merchant: they must be accepted by consumer, are only
proposals until acceptance, when acceptance intended, notwithstanding differences, or
differences material
2. with a merchant they are part of the contract unless:
(a)the offer expressly limits acceptance to the terms of the offer;
1. then go to number 3 and ask if conduct supports a K
(b) they materially alter it; or
(c) notification of objection to them has already been given or is given within a
reasonable time after notice of them is received.
ii. This means you look at the first offer
iii. A material addition is a proposal, but material differences are rejections
1. Material additions must be expressly agreed toiv. If there is a K that had already been formed, followed by writing=if the writings agree, come in. If
not, stay out. This puts us to Section 3 and ask about conduct.
c. Vocab
i. Shrink wrap terms- the item you buy is wrapped in plastic, with terms inside. By unwrapping and
keeping product you agree to terms (Brower v. Gateway: the arbitration clause was not a material
addition in the shrink wrap terms, so it is agreed upon when the consumer kept the computer)
ii. Click wrap terms-terms and conditions online, when you click you agree
iii. Browse wrap terms-online you go looking for terms, no clicking, but implicit agreement to them
Reasons not to enforce a K
1. Unconscionability
a. Common Law- no meaningful choice + terms unfairly one-sided
b. Goods: UCC 2-302: 1) If the court finds a K to be unconscionable, it can refuse to enforce it. 2) If the court
thinks a K is unconscionable, the parties get a chance to explain its commercial setting, purpose, and effect.
i. Unconscionability includes:
1. Oppression or unfair surprise
2. Imbalances of bargaining power
3. Shocks to the conscience
2. K of Adhesion
a. Take or leave the deal with no negotiation or chance for the person with less bargain power to change the
terms
b. Not automatically unenforceable-lots of products come with K’s of adhesion.
i. Only unconscionable when there are no other options for the consumer or includes high pressure
tactics and deceptive language
3. Statute of Frauds Some K must be in writing to be enforceable (can have more than 1)
a. What does it cover? Restatement 110
i. Executor/administrator
ii. Suretyship
1. Is it original or collateral?
a. Original if credit extended primarily because of guarantee. If Original-outside
statute
b. Collateral-inside the statute
2. Must be to a third party-not to the debtor , no substitution of credit (you get rid of their
debt and make it your debt), not for promisor’s primary benefit (not selfish)
iii. Consideration in marriage (not mutual promises to marry)
iv. Interest in land
1. Could include an agreement to loan money so that other person can buy land, mortgages,
leases
v. A contract that takes more than 1 year to perform -Must be impossible to do in 1 year
b. UCC 139- If no recovery permitted under SofF, can still possibly recover under promissory estoppel.
c. UCC 2-201-1) a K for the sale of goods for >500 is not enforceable unless it is in writing. The person against
whom enforcement is sought must sign. 2) between merchants: if writing is given in reasonable time, and
the receiving party has reason to know what it says, the K is valid unless the party objects in writing within
10 days. Enforceable even without writing: if the goods are specially made for the buyer and cannot be
resold, if production has begun, payment has been accepted and goods already given up to the quantity
paid for or received.
i. Not received if lost in mail
d. To analyze:
i. Is this K within the statute (does it need to be in writing to be enforceable?)
ii. Is the statute satisfied? (is it is writing? material terms? If property must be identifiable)
e. So if it falls within the categories, but isn’t in writing, it is within the statute, but the statute is not satisfied.
f. Writing requirement (could include email if it serves authentication function)
i. Minority approach- signed documents that reference the unsigned
ii. Parol evidence is admissible to show connection and assent
iii. Purpose of writing doesn’t matter
iv. The person who signs is the person who pays
v. Must contain essential terms
vi. “bits and pieces approach” put together documents to form a whole that has material terms. But
signed writing must reference the unsigned. (other courts more relaxed)
g. In some jurisdictions promissory estoppel can support enforcement, even if the statute of frauds has not
been satisfied. Clear and convincing evidence of a promise required. (Alaska Dem. Party v. Rice-the contract
was within the statute, but the statute was not satisfied. Rice moved across country in reliance on promise
of job in Alaska, so she could recover under promissory estoppel).
h. Equitable estoppel-one person lies to another about whether a writing is required or one has been
prepared, and the other party relies on the misrepresentation
4. Parol Evidence Rule - K intended to be final and complete can’t be varied by prior or contemporaneous extrinsic
evidence
a. Keep out extrinsic prior or contemporaneous evidence that contradicts a signed integrated document
i. Integrated- A K is final and complete (if just one term-is that term final and complete?)
ii. Partially integrated-A K is final, but not complete
iii. Parol evidence that happened after the K was signed can come in
iv. Not relevant: when you are arguing that there is no K bc no meeting of the minds, offer revoked
before acceptance, no consideration, unconscionability
v. Relevant: assume enforceable K-for something different or in addition?
b. Questions to analyze:
i. Is the K intended to be final?
ii. Is the K intended to be complete?
iii. What does the K mean? (if you don’t know what it means, you don’t know if parol will contradict)
c. UCC 2-202 –If you agree to have a final written agreement, you can’t supplement it with parol evidence. If a
writing is final only in part, you can supplement with parol, but you can’t contradict
d. Restatement 213 –The new agreement sweeps away all old agreements
e. Rule of substantive law-objections can occur at any time, in diversity state law is applied.
f. How do you know if the writing is integrated?
i. Look to what the writing says. If it doesn’t appear to be missing anything, it is prob. Integrated
ii. Merger clause
g. Four Corners Rule- Parol evidence can be used to uphold what the written agreement says or clarify it, but
not contradict it (look at the agreement itself)
h. Modern Approach- look to all the circumstances around an agreement to see if it is susceptible to the
offered meaning
i. ICES
i. Invalidation: Introducing parol evidence about why the WHOLE k shouldn’t be enforced
(unconscionability) is allowed in
ii. Collateral agreements- Courts allow parol on agreements separate from the K in question. Egwarranties separately bargained and paid for
iii. Explanation
iv. Subsequent Evidence
j. Typos-if you can show by clear and convincing evidence that there was a typo, can admit parol. Like trade
usage.
k. Trade usage, prior agreements, is let in
5. Reasonable Expectation
a. If it is a K of adhesion non bargained for terms will be construed in accordance with reasonable
expectations of the non-drafting party even if the express language of the K is contradictory
b. Exceptions:
i. The language is bizarre or oppressive (bc it would be unconscionable)
ii. Eviscerates bargained for terms
iii. Defeats the purpose of the K
c. Mostly occurs when there is disagreement over term. D thinks one thing and P thinks another
i. Fertilizer case: D thinks burglary means marks on the building, P thinks burglary means my stuff got
stolen.
ii. Insurance cases-mostly rule for the applicant even if study of policy would prove otherwise
d. If the K was bargained for, reasonable expectation doesn’t usually apply bc the parties should have talked
about what they meant when they were bargaining
6. Misunderstanding (not mistake)-misunderstanding of intent-what the other party meant when they spoke or wrote
a word or set of words
i. Occurs when there is objective agreement, subjective disagreement (chicken case)
ii. Rule for resolving misunderstanding1. If neither had reason to know other’s meaning-no K
2. If both parties had reason to know-no K
3. Only K if one party had reason to know other’s meaning. K is formed on innocent party’s
terms.
Consideration
(Res. 71) – (1) a performance or return promise must be bargained for (2) when sought by the promisor in exchange for the
promise. Can include: an act other than a promise, a forbearance, or the creation, modification, or destruction of a legal
relation. (3) it may be given to the promisor or another person
Res. 72- any performance which is bargained for is consideration (it is ok if it also benefits the promisee)
 Value of consideration- no inquiry into the adequacy of consideration if it really was inducement for the promise.
[peppercorn theory]
 However when there is an imbalance in consideration, it could trigger application of another doctrine like
unconscionability, mistake, duress, fraud (something wrong with bargaining process that gave rise to exchange)
o See this in surrender of claims area- generally require at most a reasonable and good faith belief that the
claim exists (giving up a claim you think you have is consideration)
o Reject consideration in name only– not enforceable
o Modern trend to contrary, but minority
1. It IS: a promise to do something or not do something
a. a benefit to the promisor or a detriment to the promisee
b. promise induce detriment and the detriment induce promise (the reason why you promised, not a
condition of a gift)
c. Actually bargained for (but not always)
d. Mutual-consideration must exist on both sides of the contract. If one side doesn’t have to promise/do
something, that is illusory-one party is bound and the other is not
2. It I NOT:
a. warm fuzzies
b. conditional gift (tramp)
c. Worthless claims cases-giving up a worthless claim is not generally regarded as consideration for someone
else’s promise
d. Past consideration (unless you talk about promissory restitution)
e. Performance of a legal duty (Res. 73)
f. Consideration in name only or sham consideration (saying I will give you a million dollars in exchange for
your shoe)
3. Moral obligation based on past benefit generally not consideration bc not bargained for, but exception for K
originally supported by consideration but made unenforceable by law (SOL, minors not bound before 18,
bankruptcy)
PROMISSORY ESTOPPEL –you cannot promise to do something then change your mind if the other party has detrimentally
relied on your promise. (reasonable reliance is substitute for consideration)


Can’t plead future detriment, must have already happened bc you relied on promise
Remedy-limited as justice requires, reliance damage-bring you back to your position before promise
Elements:
1. The promisor should reasonably expect the action or forbearance (in reliance on the promise)
2. The promise is of definite and substantial character
3. Such action or forbearance was induced
a. The promise influenced someone to take an action that would be detrimental to them without the promise.
4. Res. 90(1)-A promise that the promisor should reasonably expect to induce action in reliance on the part of
promisee, and reliance occurs, the promise is enforceable to prevent injustice.
a. The Res. 2nd omitted that the promise needs to be of def. and subs. Character. Also allows reliance
damages-just gives back what the person lost in reliance on the promise.
RESTITUTION (unjust enrichment, K implied in law, quasi K)
**You cannot have both an express K and a claim for restitution
1. Benefits cannot have been conferred officiously
2. The services provided were necessary
3. The actor did not anticipate that there would not be consent
a. If it is impossible for a party to give consent, it doesn’t matter
4. Res. 20- Professional services. Is the intent of the person asking to be paid to provide a professional service or are
they being a good Samaritan?
5. Res. 21-Protection of Another’s Property: compensation is reasonable if the circumstances justify the claimant’s
decision to act and it is reasonable for the claimant to think the defendant would want the act performed.
6. Res. 116 and 120 – When a person unofficiously and non-gratuitously confers a benefit on another in a setting in
which it would be inequitable to allow the benefit without payment
a. when a benefit is requested it is not officious
b. when it is impossible to ask (emergency) it is not officious
c. If it was an intended gift, no restitution
Typical Restitution Claim:
1.
2.
3.
4.
Benefit (to promisor, receiver of action)
Appreciation/knowledge
Acceptance/retention
Equity/justice
Promissory Restitution

Promise for a past benefit
o A material benefit that was previously conferred (not as a gift)
 Like unrequested acts in emergency situations (saving life-McGowin) or acts asked for
o The promise must be proportional to the benefit conferred Res. 86
o Recover money-based on benefit
o Act like the promise happened before the past action then all the stuff that happens is consideration
1. Wyman-
a. Moral obligation is usually not consideration, but can be if it will prevent injustice
b. One sided-care induced promise, but promise didn’t induce care
i. This would be ok if it was care for the person who promised, but it was care for his adult son. He
had no duty to care for his son, so he didn’t receive a direct benefit for the care he received.
c. Can still claim restitution if the person cared for dies
2. MGowin
a. Here the benefit was directly to the promisor, so the promise can be held binding.
b. Past consideration can be ok, as long as it really is consideration and there is a promise is writing
i. The consideration of saving the life happened before the promise, but the promise was made in
writing which makes the consideration valid.
c. If you have a contract, or a pre-existing duty to act, you can’t claim restitution.
Charitable Subscriptions (charitable pledges are a sub category)
1. Promise not statement of intent
2. And either consideration or reliance
Subscription- “I promise to give you a gift” doesn’t need an immediate transfer of property
Pledge-requires transfer of property into the custody of donee without immediate transfer of title.
Bailment-delivery property upon a contract that says the property will be returned when/if the person reclaims it. The
other party has the duty to take care of the property while it is in his possession.
1. Res. 90 (2)- a charitable subscription or marriage settlement is binding without proof that the promise induced
action or forbearance.
Warranties UCC section 2-314 2-315 (material term?) 2-316