Contracts Outline – Fall 2011
Professor Schooner
Table of Contents
The Basis of Contractual Obligation ..........................................................................................................3
Mutual Assent ................................................................................................................................................3
Intent to Be Bound – Objective Theory ..........................................................................................3
Ray v. Eurice & Bros., Inc ............................................................................................... 3
Offer and Acceptance .............................................................................................................................3
Bilateral Contracts .............................................................................................................................3
Lonergan v. Scolnick ....................................................................................................... 3
Izadi v. Machado .............................................................................................................. 4
Normile v. Miller............................................................................................................... 4
Unilateral Contracts ..........................................................................................................................4
Petterson v. Pattberg ...................................................................................................... 5
Cook v. Coldwell Banker ................................................................................................. 5
Harlow & Jones, Inc. v. Advance Steel Co. ................................................................. 5
Other Methods of Reaching Mutual Assent ..................................................................................5
Consideration ................................................................................................................................................5
Defining Consideration .........................................................................................................................6
Hamer v. Sidway............................................................................................................... 6
Pennsy Supply, Inc. v. American Ash Recycling Corp. ........................................... 6
Applying the Doctrine of Consideration ........................................................................................6
Dougherty v. Salt .............................................................................................................. 6
Batsakis v. Demotsis ....................................................................................................... 6
Plowman v. Indian Refining Co.................................................................................... 7
Issues in Applying the Concept of Mutual Assent...........................................................................7
Limiting the Power to Revoke............................................................................................................7
James Baird Co. v. Gimbel Bros., Inc. .......................................................................... 7
Drennan v. Star Paving Co. ........................................................................................... 7
Berryman v. Kmoch ......................................................................................................... 8
Pop’s Cones, Inc. v. Resorts International Hotel, Inc. ............................................ 8
The Firm Offer – UCC § 2-205 ............................................................................................................8
The Battle of the Forms ........................................................................................................................9
Princess Cruises, Inc. v. General Electric, Co............................................................ 9
CONTRACTS OUTLINE 1
Brown Machine, Inc. v. Hercules, Inc.......................................................................... 9
Agreeing to Agree....................................................................................................................................9
Walker v. Keith ................................................................................................................. 9
Quake Construction, Inc. v. American Airlines, Inc. .............................................. 9
Electronic Contracts ............................................................................................................................ 10
Brower v. Gateway 2000, Inc..................................................................................... 10
Register.com, Inc. v. Verio, Inc. ................................................................................. 10
Liability in the Absence of a Contract .................................................................................................... 11
Promissory Estoppel ............................................................................................................................... 11
Promises Within the Family ............................................................................................................ 11
Kirksey v. Kirksey ......................................................................................................... 11
Greiner v. Greiner ......................................................................................................... 11
Wright v. Newman ........................................................................................................ 11
Charitable Subscriptions ................................................................................................................... 11
King v. Trustees of Boston University..................................................................... 12
Promises in a Commercial Context ............................................................................................... 12
Katz v. Danny Dare, Inc. .............................................................................................. 12
Shoemaker v. Commonwealth Bank ....................................................................... 12
Restitution ................................................................................................................................................... 13
Restitution in the Absence of a Promise ..................................................................................... 13
Restatements of Restitution § 116 .......................................................................... 13
Restatements of Restitution § 117 .......................................................................... 13
Credit Bureau Enterprises, Inc. v. Pelo ................................................................... 14
Commerce Partnership v. Equity Contracting Co. .............................................. 14
Watts v. Watts ................................................................................................................ 14
Promissory Restitution ...................................................................................................................... 15
Mills v. Wyman............................................................................................................... 15
Webb v. McGowin .......................................................................................................... 16
The Statute of Frauds ................................................................................................................................... 16
General Principles..................................................................................................................................... 16
UCC § 2-201 ................................................................................................................................................. 17
Buffaloe v Hart............................................................................................................... 17
Exam Tips.......................................................................................................................................................... 18
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The Basis of Contractual Obligation
Mutual Assent
Intent to Be Bound – Objective Theory
Classical contract law: concerned with legal rules, not with social policy
Modern contract law: concerned with fairness; reflection of how things are done in the
industry
Meeting of the minds: subjective standard
Mutual assent: objective standard
Ray v. Eurice & Bros., Inc
I.
II.
III.
Facts
Defendant William G. Eurice & Bros., Inc., entered into a contract to build a
house for Plaintiff Ray. After signing the contract, the parties disagreed as to
which specifications were to be used.
Issue: Did the parties create an enforceable contract to build a house?
Holding: Unilateral mistake, unlike mutual mistake, does not prevent the
meeting of the minds required for contract formation.
Offer and Acceptance
Bilateral Contracts
Bilateral contract: promise for promise
Offer: RSC 24; a proposal that a contract be entered into; offeree has the power of
acceptance
Acceptance: offeree manifests an intent to enter into a contract;
Counteroffer: a proposal by the offeree to enter into a contract different than the one
proposed by the offeror; effectively erases old offer
Lonergan v. Scolnick
I.
II.
III.
Facts
Plaintiff Lonergan, responded to an ad placed by Defendant, Scolnick for land the
Defendant was interested in selling. Plaintiff corresponded with Defendant
through a series of letters. Defendant sold the land to a third party.
Issue: Did the parties enter into a contract?
Holding: There was no offer, but rather an invitation for offers and preliminary
negotiations. An invitation for offers does not operate as an offer to create an
enforceable contract.
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Izadi v. Machado
I.
II.
III.
Facts
Plaintiff Izadi attempted to purchase a vehicle from Defendant Machado Ford,
but ultimately did not when he was unable to take advantage of Defendant’s
advertised trade-in allowance. The advertisement contained small print
indicating it was only good towards two vehicle models and that the trade-in
must be worth at least $3,000 to apply to other models.
Issue: Can Plaintiff bring a breach of contract claim against Defendant?
Holding: A misleading advertisement may operate as an offer based on the
misunderstood meaning even if the party creating the advertisement does not
subjectively intend for it to be an offer. This is an exception to the general rule
that ads are not offers, but rather invitations for offers.
Normile v. Miller
I.
II.
III.
Facts
Plaintiffs Normile and Segal both attempted to purchase a piece of real estate
from Defendant Miller. Normile first submitted a bid, but Defendant responded
with a counteroffer. Prior to Normile’s acceptance of Defendant’s counteroffer,
Defendant sold the property to Segal.
Issue: Was there a contract? Was there an option contract? Was there an
acceptance of the counteroffer?
Holding: A counteroffer acts as a rejection of the original offer and does not
contain the terms of the original offer. The counteroffer, like the original offer,
must be accepted before it is revoked. There was no option contract on the
counteroffer.
Unilateral Contracts
Unilateral contract: promise for performance
Acceptance
Classical view: act requested must be completed, no exceptions; offer can be
revoked before the act is completed
Modern view: partial performance or promise to perform can terminate an
offeror’s power to revoke
Types of Damages
Expectation: puts the non-breaching party in the position he would have been in
had the promise been fulfilled; specific performance is a type of expectation
damage; usual damages for breach of contract cases
Reliance: puts the non-breaching party in the position he would have been in had
the promise never been made; usual damages in promissory estoppel cases
Restitution: disgorges the unjust enrichment of the breaching party; usual damages
in implied contracts cases
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Petterson v. Pattberg
I.
II.
III.
Facts
Plaintiff, the executrix of Petterson’s estate, is seeking $780 in damages from
Defendant, Pattberg. Petterson came to Defendant’s home, having met the other
conditions, to pay off the remaining principal minus $780 pursuant to the
Defendant’s offer. Defendant refused to accept the money and informed
Petterson that the bond and mortgage had been sold to a third party.
Issue: Was the offer revoked prior to acceptance?
Holding: A unilateral contract may be revoked at any time prior to the
performance of the requested action. This is the old, formalistic rule.
Cook v. Coldwell Banker
I.
II.
III.
Facts
Plaintiff Cook was a real estate salesperson for Defendant Coldwell Banker at
the time Defendant instituted a bonus program. After receiving the first part of
her bonus, Plaintiff was informed that receiving the remaining portion of her
bonus was contingent on continued employment. When Plaintiff left her job,
Defendant refused to give her the remainder of her bonus.
Issue: Was the offer revoked before it was accepted?
Holding: An offer to enter into a unilateral contract may not be revoked once the
offeree has made substantial performance. This is the new rule in the
Restatements.
Harlow & Jones, Inc. v. Advance Steel Co.
I.
II.
III.
Facts
Harlow and Advance spoke on the phone to make a deal. Neither party signed
the other party’s form. There is a late shipment, and Advance wants to cancel
because it says Harlow breached the contract. Harlow says their contract is
binding, so Advance can’t cancel.
Issue: In a Battle of the Forms, whose form is binding?
Holding: A contract may be inferred by conduct of the parties under UCC § 2204. When there is no formal written contract, the written papers of both
parties can serve as confirmatory memoranda. Whatever doesn’t match is not in
the contract. The gaps are filled by the UCC>
Other Methods of Reaching Mutual Assent
UCC Article 2: applies to all sales of goods; certain provisions only apply to merchants
Consideration
Consideration Tests
1) Bargained-For Exchange: Did the promisor bargain for the result of the contract?
2) Benefit/Detriment: Was there a benefit to the promisor or a detriment to the
promisee?
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Defining Consideration
Hamer v. Sidway
I.
II.
III.
Facts
Defendant Story agreed with his nephew Plaintiff William that if Plaintiff would
refrain from drinking, using tobacco, swearing, and playing cards or billiards for
money until he became 21, Defendant would pay him $5,000. When Plaintiff
became 21 he wrote a letter to Defendant stating that Plaintiff had performed
his part of the agreement and had earned the $5,000. Plaintiff and Defendant
agreed that $5,000 plus interest should remain with Defendant until Plaintiff
was capable of taking care of it. Defendant died without paying Plaintiff the
$5,000 plus interest.
Issue: Is forbearance of rights a valid consideration?
Holding: In general, a waiver of any legal right at the request of another party is
sufficient consideration for a promise.
Pennsy Supply, Inc. v. American Ash Recycling Corp.
I.
II.
III.
Facts
Pennsy Supply was subcontracted to do some paving; the people who put up the
contract mentioned that American Ash had some free AggRite for the project.
Pennsy used it; the paving cracked, and they had to redo it and dispose of the
AggRite, which is classed as toxic waste. Pennsy sued American Ash for the
disposal costs, which it only incurred because the product was defective, and
which it saved American Ash by using it for the project.
Issue: Was there consideration?
Holding: It wasn't a gift because American Ash received a benefit from the
arrangement, which was the reason they were offering it free in the first place.
Applying the Doctrine of Consideration
Dougherty v. Salt
I.
II.
III.
Facts
Aunt was visiting Plaintiff, her eight-year-old nephew, and stated that she
thought Plaintiff was a nice boy. Aunt then expressed a desire to take care of
Plaintiff by issuing him a promissory note. When she handed the note to Plaintiff
she said “[y]ou have always done for me, and I have signed this note for you.”
The note was written on a form containing the words “value received.”
Issue: Is the note enforceable?
Holding: Although a note states that value has been received, if value has not in
fact been received, the note is unenforceable as a contract for lack of
consideration.
Batsakis v. Demotsis
I.
II.
Facts
Plaintiff, Batsakis, loaned Defendant, Demotsis, 500,000 drachmae. In exchange
for the loan, Defendant signed an instrument promising to pay Plaintiff $2,000 in
U.S. currency. The 500,000 drachmae were worth approximately $25.00 at the
time.
Issue: Was the consideration inadequate?
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III.
Holding: Inadequacy of consideration alone will not void a contract.
Plowman v. Indian Refining Co.
I.
II.
III.
Facts
Plaintiffs, Plowman and seventeen others similarly situated or their estates,
worked for Defendant Indian Refining Co., for many years. Defendant offered to
pay Plaintiffs one-half of the wages currently being earned. Plaintiffs remained
on the payroll, receiving the offered money, but did not render any services
other than coming to the office for their remittance. The payments were made
for almost a year before Defendant informed Plaintiffs that they were
terminating the arrangement.
Issue: Was there sufficient consideration to make the agreement an enforceable
contract?
Holding: Past consideration or past performance is not consideration.
Issues in Applying the Concept of Mutual Assent
Limiting the Power to Revoke
James Baird Co. v. Gimbel Bros., Inc.
I.
II.
III.
Facts
The Defendant, Gimble Brothers, Inc. (Defendant), was a New York merchant in
the business of selling building supplies. The Plaintiff, James Baird Co. (Plaintiff),
was a contractor, preparing a bid for the construction of a public building in
Pennsylvania. Defendant received the specifications for linoleum needed for the
building and sent a bid to Plaintiff, which erroneously quoted roughly half of the
linoleum, which was needed to complete the job. After Plaintiff won the contract,
it sued Defendant for breach after it refused to perform, declining to recognize
the existence of a contract.
Issue: Can promissory estoppel be used to enforce an offer that is not meant to
become binding until consideration has been received? Does promissory
estoppel render a subcontractor’s bid irrevocable?
Holding: Promissory estoppel cannot be asserted to compel an offeror to
perform where the offer is not meant to become a binding contract until
consideration has been received. Promissory estoppel does not render a
subcontractor’s offer irrevocable even if the contractor has relied upon it in
submitting a bid for a general contract.
Drennan v. Star Paving Co.
I.
II.
Facts
Plaintiff received a bid from Defendant for paving. Based on Defendant’s bid for
the paving work, Plaintiff compiled and submitted a bid for the job. Plaintiff was
awarded the job. The day after Plaintiff was awarded the job, Plaintiff stopped
by the Defendant’s office. Defendant told Plaintiff that a mistake had been made
and the paving could not be done for the price indicated in Defendant’s bid.
Issue: Can Plaintiff enforce Defendant’s bid as a contract? Can Plaintiff enforce
Defendant’s bid based on promissory estoppel?
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III.
Holding: A general contractor may enforce a subcontractor’s bid where there is
reasonable detrimental reliance under a theory of promissory estoppel.
Berryman v. Kmoch
I.
II.
III.
Facts
Plaintiff signed a written option agreement drawn up by Defendant. The
agreement stated that “[f]or $10.00 and other valuable consideration” an option
would be granted for 120 days. However, the $10.00 was not paid. Prior to the
duration of the 120 days, Plaintiff contacted Defendant and asked to be released
from his obligation under the option agreement. The parties were unable to
work out anything definite. Plaintiff then sold the land to another person. After
Plaintiff sold the land, Defendant attempted to exercise the option. Defendant
was informed that the land had already been sold. Defendant continued in his
attempts to exercise the option.
Issue: Can Defendant enforce the option agreement as an option contract? Can
Defendant enforce the option agreement under promissory estoppel?
Holding: An option contract without consideration is an offer to sell, which may
be withdrawn at any time before acceptance.
Pop’s Cones, Inc. v. Resorts International Hotel, Inc.
I.
II.
III.
Facts
Plaintiff, Pop’s Cones, Inc., is seeking damages from the Defendant, Resorts
International Hotel, Inc., for losses they claim resulted from reliance on
promises made by Defendant during lease negotiations.
Issue: Can Plaintiff proceed with their suit to recover losses incurred from their
reliance on Defendant’s statements?
Holding: A plaintiff may survive a motion for summary judgment on a
promissory estoppel claim by presenting evidence allowing a reasonable jury to
find that a defendant made a promise with the expectation that a plaintiff would
rely on that promise and that a plaintiff did reasonably and detrimentally rely on
a defendant’s promise.
The Firm Offer – UCC § 2-205
Elements to Determine if it Applies:
1. An offer
2. By a merchant
3. To buy or sell goods
4. In a signed record
5. Gives assurance that it will be held open, even without consideration
An offer by a merchant to buy or sell goods in a signed writing that, by its terms, gives
assurance that it will be held open is not revocable (even if there is no consideration for
the option contract) for the time stated, but not to exceed 3 months.
If no time is state, then it is open for a reasonable time, not to exceed three months.
Any such terms on a form supplied by the offeree must be separately signed by the
offeror.
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The Battle of the Forms
Princess Cruises, Inc. v. General Electric, Co.
I.
II.
III.
Facts
Plaintiff, Princess Cruises, Inc., entered into a contract with the Defendant
General Electric Co. for Defendant to perform inspection and repair services on
one of Plaintiff’s ships. Plaintiff’s purchase order and Defendant’s price
quotations contain different terms and conditions. Defendant’s terms and
conditions limit Defendant’s liability and the type of damages that can be
recovered from Defendant.
Issue: Do Plaintiff’s terms and conditions govern the agreement between the
parties?
Holding: Under the common law, if an acceptance varies from the offer’s terms,
the acceptance is a counteroffer and operates as a rejection of the original offer.
Brown Machine, Inc. v. Hercules, Inc.
I.
II.
III.
Facts
Plaintiff, Brown Machine, Inc. sold a trim press to Defendant, Hercules, Inc. An
indemnity provision was included in Plaintiff’s acknowledgement of order form,
but not in Defendant’s purchase order. Plaintiff is bringing the present cause of
action to enforce the indemnity provision.
Issue: Was the indemnification provision included in the purchase contract?
Holding: Under the UCC, additional terms become part of a contract between
merchants unless the offer expressly limits acceptance to the terms included in
the offer, the additional terms materially alter the contract, or notification of
objection to the additional terms has been given or is given within a reasonable
time.
Agreeing to Agree
Walker v. Keith
I.
Facts
Plaintiff lessee, entered into a 10 year lease agreement with the Defendant lessor.
The lease agreement included an option to renew the lease for an additional ten
years, but did not set the rent amount for the additional ten years.
II. Issue:
Can Plaintiff enforce the option to renew the lease?
III. Holding: Under the traditional approach, there must be substantial certainty as to
the material terms for an agreement to be enforceable. Courts using the traditional
approach will not enforce an agreement if a material term is indefinite or
ambiguous.
Quake Construction, Inc. v. American Airlines, Inc.
I.
Facts
The Plaintiff submitted a bid to Jones. Jones notified the Plaintiff orally that the
Plaintiff had been awarded the contract. The Plaintiff was informed that a written
contract prepared by Jones would be received shortly. To aid the Plaintiff in
securing subcontractors, Jones sent the Plaintiff a letter of intent. The letter of intent
indicated that a written contract would be prepared and that Jones could cancel the
CONTRACTS OUTLINE 9
letter of intent if the parties failed to agree on a fully executed subcontract
agreement.
The Plaintiff and Jones discussed changes to the contract and Jones again told the
Plaintiff that a written contract would be drawn up. At a meeting with the Plaintiff’s
subcontractors and government officials, Jones announced that the Plaintiff would
be the general contractor for the project. Immediately following the meeting, the
Defendant told the Plaintiff that their involvement with the expansion was
terminated.
II. Issue:
III. Holding:
Electronic Contracts
Brower v. Gateway 2000, Inc.
I.
Facts
Brower bought a computer over the phone. (This was a class action, with multiple
people buy by phone, mail, or Internet.) Upon delivery, the computer had a shrinkwrapped agreement on the outside of the box that had 16 paragraphs and had
“NOTE TO CONSUMER” in big letters on the front. The plaintiff says that he had
problems with customer support and service. The agreement that was shrinkwrapped had an arbitration clause.
II. Issue:
1. Was the arbitration clause agreed upon?
2. Is the arbitration clause unconscionable?
III. Holding
1. The arbitration clause was agreed upon because the offer was made when
Gateway mailed the computers and accepted when the plaintiff failed to return
the computer within 30 days as specified in the terms.
2. The arbitration clause is unconscionable because it is prohibitively expensive.
The plaintiff could buy a new computer for a lower price.
Register.com, Inc. v. Verio, Inc.
I.
Facts
Register is a company that supplies domain names to interested website owners.
They are bound by an agreement with ICANN which requires that all submitted
requests for domain names through Register post as a WHOIS file containing
contract information that is accessible to the public. The information includes phone
numbers, email address, and home addresses and is updated daily. Verio is a
company that markets internet services to website owners (which Register also
does on the side). Verio set up a robot to perform multiple daily queries into
Register’s system to get WHOIS information. Verio solicits the Register customers
via e-mail, mail, and phone calls. The solicitation contains Register’s name, so
customers thought Register was doing the soliciting or approving of the soliciting.
Register asked Verio to stop, but Verio only stopped the solicitation via e-mail.
Register sued.
II. Issue: Was Verio bound by the terms and conditions contained in the e-mail that
also had the WHOIS information that they used for soliciting customers?
III. Holding: Verio is bound by the terms and conditions because they submitted many
queries to the system and thus received the terms multiple times. Had Verio only
CONTRACTS OUTLINE 10
done one query or sporadic queries, they would have a defense because terms of
this type (browse-wrapped) are not always fair to the consumer.
Liability in the Absence of a Contract
Promissory Estoppel
Elements of Promissory Estoppel
1. A promise
2. Reasonable expectation of reliance
3. Actual reliance
4. Injustice
A promise can be implied in fact or express.
Promises Within the Family
Most promises in the family context are likely to be actuated by feelings of affection and
altruism rather than by the expectation of a quid pro quo in return.
Kirksey v. Kirksey
I.
II.
III.
Facts
Plaintiff Kirskey, was the sister-in law of Defendant Kirksey. After Plaintiff’s
husband died, Defendant offered to put up Plaintiff on his land. Plaintiff gave up
her land and moved to Defendant’s property, but approximately two years later
Defendant made Plaintiff leave his property.
Issue: Is a gratuitous promise enforceable where a party has reasonably relied
on that promise and has suffered loss and inconvenience?
Holding: A gratuitous promise is not enforceable even if a party has reasonably
relied on that promise and has suffered loss and inconvenience. This case
represents the old formal rule.
Greiner v. Greiner
I.
II.
III.
Facts
Plaintiff Maggie Greiner, asked Defendant, Plaintiff’s son Frank Greiner, to move
from another county to live on land she was planning to give him. Defendant left
his homestead and moved into the house Plaintiff moved to another tract of land
for him. Plaintiff indicated to several people that she was giving this tract of land
to Defendant, but never included a provision in her will or executed a deed to
Defendant.
Issue: Was there sufficient reliance to support promissory estoppel?
Holding: The relocation of a party in reliance on a promise by the other party is
sufficient consideration to make the promise enforceable.
Wright v. Newman
Charitable Subscriptions
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No consideration is required (according to the Restatements) in cases of charitable
subscription. Not all jurisdictions follow that idea.
King v. Trustees of Boston University
I.
II.
III.
Facts
Defendant asked King if he would deposit some of his papers in its library’s
newly expanded special collections. Several other universities approached King
around the same time. Plaintiff testified that King thought the papers would be
safest at Defendant’s library, but thought placing them there could subject him
to criticism.
King deposited some of his papers with Defendant, but in a letter to Defendant,
King indicated that the papers would remain his legal property unless otherwise
indicated. Two statements from the letter are most important:
“All papers and other objects which thus pass into the custody of [BU] remain
my legal property until otherwise indicated, according to the statements below.”
Later the letter indicates that the papers will be transferred to Defendant in
installments until all have been transferred.
“In the event of [King's] death, all . . . materials deposited with [BU] shall become
from that date the absolute property of [BU].”
Issue: Was this a charitable pledge?
Holding: Where there is donative intent and evidence that could support a
finding of a promise supported by consideration or reliance, the case is properly
submitted to the jury.
Promises in a Commercial Context
Katz v. Danny Dare, Inc.
I.
II.
III.
Facts
Plaintiff Katz suffered a head injury while employed by the Defendant Danny
Dare, Inc. Plaintiff was subsequently convinced to retire after being offered a
pension. After retiring, Plaintiff worked for Defendant on a part time basis, but
after two and a half years Defendant cut and then eliminated Plaintiff’s pension.
Issue: Can Plaintiff enforce the promise by Defendant to pay him a pension?
Holding: Plaintiff has met the elements of promissory estoppel and should
receive the pension owed to him by Defendant.
Shoemaker v. Commonwealth Bank
I.
II.
III.
IV.
Facts
The Shoemakers couldn’t afford to keep their insurance and let it lapse. The
Bank told the Shoemakers that if they didn’t buy insurance, the Bank might be
forced to do so. The Shoemakers say that they told the Bank to buy the
insurance. The Bank insures the property for a bit and then lets it lapse. The
Bank says they sent a letter to the Shoemakers telling them that they were not
going to be paying for the insurance any longer. The Shoemakers house burns
down months later, and the house is found to be uninsured.
Issue: Is there enough evidence of promissory estoppel to go to a jury?
Holding: Summary judgment is inappropriate for a promissory estoppel claim
where a genuine issue as to each element is present.
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Restitution
Restitution in the Absence of a Promise
Contract implied in law: quasi contract; an obligation imposed by the law without
regard to either party’s expressions of assent either by words or acts.
Contract implied in fact: an agreement that typically meets all of the requirements of a
contract, except it wasn’t expressed; assent can be implied from the circumstances
rather than the words.
Posner’s theory of transaction costs: in a case with high transaction costs, the fictional
agreement should be binding, and the person who offered services should be
reimbursed.
Quasi Contract Elements (RSC § 86):
1. The plaintiff has conferred a benefit on the defendant.
2. The defendant has knowledge of the benefit.
3. The defendant has accepted or retained the benefit conferred.
4. The circumstances are such that it would be inequitable for the defendant to keep
the benefit without paying the fair value for it.
Restatements of Restitution § 116
A person who has supplied things or services to another, although acting without the
other’s knowledge or consent, is entitled to restitution therefor from the other if:
a) He acted unofficiously and with intent to charge therefor; and
b) The things or services were necessary to prevent the other from suffering serious
bodily harm or pain; and
c) The person supplying them had no reason to know that the other would not consent
to receiving them, if mentally competent; and
d) It was impossible for the other to give consent or, because of extreme youth or
mental impairment, the other’s consent would have immaterial.
Restatements of Restitution § 117
A person who, although acting without the other’s knowledge or consent, has preserved
things belonging to another from damage or destruction, is entitled to restitution for
services rendered or expenditures incurred therein, if:
a) He was in lawful possession or custody of the things or if he lawfully took
possession thereof, and the services or expenses were not made necessary by his
breach of duty to the other; and
b) It was reasonably necessary that the services should be rendered or the
expenditures incurred before it was possible to communicate with the owner by
reasonable means; and
c) He had no reason to believe that the owner did not desire him so to act; and
d) He intended to charge for such services or to retain the things as his own if the
identity of the owner were not discovered or if the owner should disclaim; and
e) The things have been accepted by the owner.
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Credit Bureau Enterprises, Inc. v. Pelo
I.
Facts
Pelo tried to kill himself and was arrested. The magistrate found probable cause that
he was a risk to himself and others. He was involuntarily hospitalized. Pelo refuses
to sign the release form or to pay or allow his insurance company to pay for the bill.
He is later woken up at 5:00am and told that he has to sign the release form in order
to get his belonging back. He signs it. Pelo’s wife files an application for involuntary
hospitalization. In an evidentiary hearing, it was said that although he suffers from
bipolar disorder, there is not enough evidence to support involuntary
hospitalization. Pelo later refuses to pay his bill.
II. Issue: Was there an implied in law contract (quasi contract)?
III. Holding: There was an implied in law contract because the situation fulfills the
requirements of RSR § 116 and there was no reason to think Pelo would not have
consented had he been of his right mind.
Commerce Partnership v. Equity Contracting Co.
I.
Facts
Commerce was the owner of an office building. Their prime contractor was World
Properties. The subcontractor was Equity. The owner inspected the job on a weekly
basis. The owner did not pay the prime contractor the money it was owed for
completing the job. The prime contractor did not pay the subcontractor. The owner
wanted the sub contractor to perform other remedial work. The sub contractor
asked for partial payment and the owner couldn’t pay. The subcontractor sued the
prime contractor, but the prime contractor went bankrupt. The subcontractor is
suing Commerce saying that it was unjustly enriched because it accepted services
without paying.
The subcontractor was suing under “Quantum Meruit.” They thought it meant
contract implied in fact. The owner thought it meant contract implied in law.
The owner says they paid $223,065.04 to the prime contractor and paid $64,097.00
to three subcontractors who the prime contractor didn’t pay. This is more than the
contract cost.
The subcontractor won at the trial level.
II. Issue: Can a subcontractor recover from an owner under a quasi contract theory?
III. Holding: For a subcontractor to recover from an owner under a quasi contract, the
subcontractor must show that the owner did not pay anyone for the services
rendered by the subcontractor.
Watts v. Watts
I.
Facts
The defendant and the plaintiff started living together when she was 19 and
working as a nurse’s aid. She moved in with him, and he indicated that he would
provide for her. They lived together like husband and wife and did several things
that would indicate to other people that they were husband and wife. They had two
kids together, who have his last name. She also has his last name. She worked for
his business and also had a business with his sister-in-law. She cooked and cleaned
for him. She says, by the end, the relationship was so intolerable, she was forced to
leave and that the defendant kept her from her business.
II. Issues
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1. They were a family so she is entitled to equitable division of the property under
the Family Code
2. The defendant is precluded by estoppel from using the defense that they are
not married.
3. The defendant breached an express or implied in fact contract.
4. The defendant was unjustly enriched by the plaintiff.
5. The plaintiff is entitled to partition of the assets under the partition statute.
(Partition is a suit in which a co-owner files to force the other co-owner to sell
the property and give the co-owner his share.)
III. Holding: If one party in the illicit relationship was unjustly enriched, it is not fair to
allow the other party no form of relief on moral grounds because both parties are
as guilty, and this would give incentive to one party to take advantage of the other
party.
1. Family Code: Doesn’t apply because the legislature didn’t intend for the Family
Code to apply to non-married couples.
2. Defendant estopped from using defense: Because the first issue failed, this one
does to.
3. Contract: The plaintiff can take this issue to trial because all of the defendant’s
defenses fail:
4. Unjust enrichment: The plaintiff can take this issue to trial.
5. Partition: The plaintiff can take this issue to trial because there are sufficient
facts to suggest that there was a joint partnership under which real property
and personal property was purchased (as husband and wife).
Promissory Restitution
Promissory restitution: when there is an express promise to pay for services rendered
that is made after receipt of services, but the person who received the services doesn’t
pay. This would be an exception to the rule of past consideration detailed in Plowman.
Assumpsit: a form of action at common law for the recovery of damages caused by the
breach or non-performance of a simple contract, either express or implied, and whether
made orally or in writing.
These are often called moral obligation cases.
If a child incurs expenses, the parent is obligation to pay for it.
Mills v. Wyman
I.
II.
III.
Facts
Son, age twenty-five, suddenly became ill while returning from a voyage at sea.
Plaintiff took Son in and cared for him until he died. After hearing what Plaintiff
had done, Defendant offered to pay for the expenses Plaintiff incurred while
caring for Son.
Issue: Is Defendant’s promise enforceable?
Holding: Past consideration and moral obligation alone are insufficient
consideration to make a promise enforceable.
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Webb v. McGowin
I.
II.
III.
Facts
Webb was clearing a floor by throwing blocks from the second story to the
ground. He was in the process of dropping another 75 pound block when he saw
McGowin walking below. In order to avoid hitting McGowin with the block, he
had to use his own body to divert the rock. He was crippled for life as a result.
McGowin promised to pay him $15 every two weeks until Webb died. McGowin
died eight years later and the payments stopped. Webb sued his estate to
reinstate the payments.
Issue: Is McGowin’s promise enforceable?
Holding: A moral obligation is a sufficient consideration to support a subsequent
promise to pay where the promisor has received a material benefit.
The Statute of Frauds
General Principles
Statute of frauds: certain contracts must be in writing or with written memoranda. Only
should be raised if there is a statute saying that a certain contract has to be in writing.
Congress will publish a statute of frauds if they think there is a good public policy to
favor written agreements.
Types of Contracts Covered
A contract for an executor of an estate; Will
Surety (or any contract that requires one to answer for the duty of another)
In consideration of marriage (I’ll give you $1000 if you marry my son.)
Sale of land; commission to real estate agents (in some jurisdictions)
Any contract that will be performed a year or more from when it is created.
o A contract to cater your graduation party three years from now.
o A contract to work that begins next year.
o A contract to work for 9 months that begins in more than 3 months.
o A contract to work for life starting today is not covered by the statute of
frauds.
o A contract to lease land for more than a year.
If the original contract is covered by the statute of fraud, any modifications are
covered as well
Writing Requirements
1. Identify the subject matter.
2. Indicate that an agreement has been made.
3. State the essential terms. (Not all are always required)
a. Price
b. Quantity
c. Delivery date
4. Does not have to be words on paper
a. Print
b. Typewriter
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c. An intentional reduction to tangible form (video/audio)
5. A series of writings may suffice
6. It does not have to be contemporaneous with the actual execution of the contract.
7. If both parties testify that the writing existed, it doesn’t need to be present in
physical form.
8. Signed or authenticated by the breaching party.
UCC § 2-201: in a contract for the sale of goods for $500 or more, there must be writing;
very flexible writing requirement; only quantity of goods is necessary.
Exceptions:
1. A contract that has been fully or partially performed and will be enforced to the
extent of the performance.
a. If you received the goods, you have to pay for them.
b. If the goods are specially made and cannot be sold to another buyer, you
have to pay for them.
2. If the party you are trying to sue admits in court that a contract was made, you
don’t need writing.
3. If you have been paid for the goods, you have to deliver them.
Failure to comply with the statute of frauds makes the promise unenforceable.
Compliance with the statute of frauds doesn’t necessarily, by itself, make the promise
enforceable.
Legal Analysis:
1. Is there a statute that requires that this bargain be in writing?
2. Is there sufficient memoranda that complies with the statutory writing
requirement? Is there some writing that reflects the bargain? The writing should
be for the breaching party.
3. If there is not sufficient writing, is there an exception to the state’s statute of
frauds?
c. Statutory exceptions
d. Case-based exceptions
UCC § 2-201
Buffaloe v Hart
I.
Facts
Tobacco farmer says that he rented tobacco barns from the landowners, based
on an oral contract. It was customary to use a handshake and an oral agreement
to make deals. He did not think it was necessary to reduce the agreement to
writing because he trusted them. The landowners agreed to buy insurance for
the barns. The farmer paid $2000 for the barn rent and $992.64 for the tobacco
rent. Later, the farmer decided he wanted to buy the barns. So he made the
landowners an offer of $20,000 for the five barns to be paid over four years in
installments of $5000. No interest was discussed. This agreement was also made
on a handshake.
The farmer left the barns on the landowners’ land because he agreed to farm
their land with the tobacco he rented from them. He agreed to pay for the barns
entirely if he got approved for a loan. He had trouble getting a loan from the
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II.
III.
bank as well as insurance. The landowners agreed to provide insurance for the
year 1989 if the defendant paid them back. The plaintiff did pay them back very
promptly.
The farmer decided to sell the barns for $8000 each. He sold two to Mr. Mohorn
(with a $500 deposit), two to Mr. Stainback, and one to Mr. Elliot. Mr. Stainback
paid $1000 as a deposit for his and Mr. Elliot’s barns. He told the landowners
that he would pay for all of the barns because he was selling them for $8000
each. He gave her $5000 soon after. She offered to give him a receipt, but the
farmer said the check was sufficient as a receipt.
The day after the farmer gave the landowner the check, she called and said that
she sold the barns to someone else. She tore up his check, and she removed his
name, her name, and the memo line. The farmer put the check back together and
found that he only had the price and the signature left. The farmer was shocked
to discover that the landowner sold the barns to Mr. Mohorn, Mr. Stainback, and
Mr. Elliot.
The farmer had been acting as the owner of the barns, paying for repairs for
them. He told people he had bought them and was going to sell them. He was
going to auction them off if he didn’t sell them.
The landowners say that the original agreement was to pay for the barns over
five years. However, the farmer wanted to make new arrangements to pay for
them all at once because he was applying for a loan. When the loan wasn’t
approved, the farmer wanted to go back to the original deal, but the landowners
weren’t interested. They mailed the torn up check back to the farmer.
Issue
1. Is a personal check signed by the farmer, describing the property involved,
and containing an amount representing partial payment sufficient to
constitute writing under the statute of frauds?
2. Did the farmer accept the barns, and did the landowners accept the
plaintiff’s check, which would take the contract out of the statute of frauds?
Holding
1. The oral contract does not fall under the statute of frauds because there is
no sufficient written memoranda.
2. The jury could have found that the farmer fell under the Partial Performance
Exception, so there is no error in judgment.
Exam Tips
1. Is there an enforceable contract?
2. What does the party want? This will determine what damages they are looking for.
3. Is than another remedy?
a. Promissory Estoppel
b. Restitution – Unjust Enrichment
i. No Promise
ii. Promissory Restitution (Promise after consideration)
4. Either start with your strongest argument or the best possible outcome
5. When are family promises or gifts actionable?
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