A. Mutual Assent
a. Intention to be Bound: Objective Theory of Contract (Ray)
i. Objective theory looks at objective manifestations of an agreement rather than a subjective
“meeting of the minds”
ii. “If it were proved by 20 bishops that either party, when he used the words, intended
something else than the usual meaning which the law imposes upon them, he would still be
held, unless there were some mutual mistake, or something else of the sort.” – Learned Hand
RAY V. EURICE & BROS., INC.
 Ray hires Eurice Brothers to construct a home for him. Ray has very specific plans for construction.
Contract is signed between the parties that includes specifications that were wanted by Ray. Eurice
Bros further sign lender papers that also include specifications. Eurice then realizes specifications and
realized that they cannot fulfill them… says they had never seen that version of the contract
 Trial court rules that D’s did not breach contract because there was not a meeting of the minds
 Appeals reverses saying that Eurice Bro’s conduct shows their acceptance by signatures on paper, and
the contract is thus enforceable (classical approach)
 Contract is subject to an objective test of what a reasonable man in the position of the parties
would think the contract means, not a subjective test of what each party intended it to mean.
 The home-builder’s contrary belief was a unilateral mistake
1) Offer & Acceptance in Bilateral Contracts
 Enforceable contract requires:
o Offer
o Acceptance
o Consideration
 Bilateral Contracts
o Exchange of promises; promise for promise
o An enforceable bilateral contract requires both parties to fulfill their promises (not
contingent on performance)
o Futurity (not present exchange)
 Rst § 24: An offer is the manifestation of willingness to enter into a bargain, so made as to
justify another person in understanding that his assent to that bargain is invited and will
conclude it
 Offer
o Empowers offeree to accept
o May be a qualified offer (only empowers offeree to accept based on certain conditions)
o General rule that advertisements and form letters are not offers
 Mailbox Rule – acceptance is effective upon dispatch; revocation and offers are effective upon
communication
 Receipt Rule--revocation
 Counteroffer – changing the terms of an offer is a counteroffer; when a counteroffer has been
made, the original offer no longer exists
 Rst § 36: Offeree’s power of acceptance can be terminated by
o Rejection or counteroffer by offeree
o Lapse of time
o Revocation by the offeror
o Death or incapacity of offeree/offeror
LONERGAN V. SCOLNICK
 Seller advertised land for sale. Buyer inquired. Seller sent letter labeled “form letter” with the requested
information and told buyer to let him know quickly if he wished to purchase. Buyer answered but seller had
already sold to someone else.
 Form letter indicated a rock-bottom price, but no official offer (just saying “do not negotiate below this
price”)—indication of need of further negotiations = no contract
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Rule: If the person accepting the offer knows that the offerer isn’t making his final offer but a preliminary
gesture to engage in further discussion, then an offer has not been made. Form letters are not offers.
Rst § 26- Manifestation of willingness to enter into a bargain is not an offer if the person to whom it is
addressed knows or has reason to know that the offeror does not intend to conclude a bargain until he has
made a further manifestation of assent
Buyer could not have assented to any of seller’s communication because seller’s letter required something
other than just saying “yes.”
IZADI V. MACHADO (GUS) FORD, INC.
 Buyer P saw ad in newspaper advertising a car at a discounted price which included a rebate and 3k for any
trade-in. Buyer attempted to pay the discounted price with his trade-in in exchange for the truck – buyer
attempted to accept Seller D’s offer. Seller said that buyer misinterpreted the ad (and didn’t read the fine print)
and refused to make the deal. Buyer sues Seller
 Seller was using “bait and switch” technique, which the court finds to be wrongful – court finds that this ad
could be reasonably interpreted as an offer by a buyer
 Williston: The test of the true interpretation of an offer or acceptance is not what the party making it thought it
meant or intended it to mean, but what a reasonable person in the position of the parties would have thought it
meant
 General rule about advertisements – ads are not offers. They are more like a solicitation for an offer – unless
they invite acceptance without further negotiation in clear, definite, express, and unconditional language (“first
come, first serve”)
NORMILE V. MILLER
 Buyer gave seller an offer to purchase property with deadline of 5pm. Seller gave buyer a counteroffer that
buyer neither accepted nor rejected. Seller accepted another party’s offer and informed buyer that the
counteroffer was revoked (“You snooze, you lose”).
 Seller’s counteroffer was a new offer. A counteroffer makes an original offer (and deadline) ineffective.
 Since there was no option contract (exclusive rights—down payment of sorts AKA consideration) in the
counteroffer, the seller could revoke it up to the moment of acceptance. Since buyer did not accept it, seller was
free to revoke his counteroffer and accept another party’s offer.
2) Offer & Acceptance in Unilateral Contracts
 Unilateral Contracts: promise for performance
 Offer to enter into a unilateral contract may be withdrawn until performance.
 ACCEPTANCE of an offer to enter into a unilateral contract IS the PERFORMANCE of the requested
act.
 Rst § 32: In cases of doubt, conclude that the offeror intended to allow the offeree to accept
either by making a promise to perform or by performance
 Rst § 45: Option contract is created when the offeree begins to tender performance as long as
performance is later completed
o But: Cook v. Coldwell says that there must be substantial performance and case precedent
> restatements
PETTERSON V. PATTBERG (1928)
 P owns mortgage on his home and bought bonds from D. D offered to give discount on mortgage, if P paid the
full amount on or before May 31. Before May 31, P goes to D’s home to pay the full amount, knocks on the door
and announces who he is and that he is here to pay the mortgage, D says that he has already sold the mortgage
and won’t accept P’s money
 Unilateral contracts are revocable until the offeree’s full performance of the acts called for in the offer because
that performance is the acceptance of the offer
 DISSENT: It is because the D made performance impossible by refusing to accept payment
 CLASSICAL CONTRACT THEORY HOLDING
COOK V. COLDWELL BANKER/FRANK LAIBEN REALTY CO.
 Offeror orally announced that its employees would receive varying bonuses based on their commissions at the
end of the year. Later (September) offeror said that they would be paid the following March instead of at the
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end of the year; at this time, offeree had reached the maximum tier of bonuses. Offeree stayed at offeror’s
company in reliance on the promise of a bonus. Offeree quit to accept a position elsewhere the following
January and offeror told her she would not get her bonus.
Offer to enter into a unilateral contract cannot be withdrawn after the offeree has tendered substantial
performance.
 Substantial performance may act as consideration
3) Postponed Bargaining: The “Agreement to Agree”
WALKER V. KEITH
 Landlord leased to tenant for at 10-year term at $100/month with an option provision for an additional 10year term under the same terms and conditions with rent to be fixed on the comparative basis of rental values
reflected by the comparative business conditions at the date of the renewal. Tenant gave proper notice to
renew the lease but the parties could not agree on the new rent.
 There is no contract to renew because the parties have neither determined a rent term nor determined a
sufficiently certain method of calculating one (based on “business conditions” is too vague)
 An agreement must be sufficiently definite. Terms may be left for future determination by a prescribed method.
 “To be enforceable and valid, a contract to enter into a future covenant must specify all material and essential
terms and leave nothing to be agreed upon as a result of future negotiations”
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Restatement § 33 – Certainty
For sale of goods under UCC § 2-305
a) Parties can conclude a contract for sale without settling the price if they so intend. The price
is a reasonable price at the time of delivery if
a) Nothing is said as to price, or
b) Price is left to be agreed by parties and they fail to agree, or
c) Price is to be fixed by some standard set by a third party and it is not set
QUAKE CONSTRUCTION, INC. V. AMERICAN AIRLINES, INC.
 American Airlines solicits bids from general contractor through their agent, Jones. Quake submits a bid, Jones
notifies Quake that their bid won. Jones writes of intent to Quake (includes a cancellation clause), later
American Airlines hosts party and announces Quake as their general contractor. After the party, America
Airlines terminates their agreement with Quake. The court is deciding whether the letter of intent from Jones to
Quake is an enforceable contract such that a cause of action may be brought by Quake.
 Court found the language of the letter is ambiguous as to whether the parties intended to be bound; it is a
question of fact for the jury; parole evidence is admissible to determine parties’ intent
 Intention to be bound is supported by the detailed terms of the letter, the statement that the letter “authorizes
the work,” the short time between when the letter was sent and when work was to begin, and the cancellation
clause suggesting that the letter was something that might need to be cancelled. Intention not to be bound is
supported by the contemplated formal contract and the cancellation clause.
B. CONSIDERATION
 Benefit/Detriment Test
o Benefit to the promisor, OR detriment to the promisee
 Bargained-for-Exchange Test
o Did the parties bargain for the promise or performance exchanged?
o Rst. § 71: Performance or return promise is bargained for if it is sought by the promisor in
exchange for his promise, and given by the promisee in exchange for that promise
 Adequacy of the consideration will not be judged
 Past consideration ≠ consideration
1) Defining consideration
HAMER V. SIDWAY (DETRIMENT TO PROMISSEE)
 Offeror uncle promised offeree nephew that if offeree would refrain from drinking, using tobacco, swearing,
and gambling until he was 21 years old, offeror would pay him $5,000. Offeree notified offeror when he turned
21 that he had fully performed. Offeror said he would keep it for a bit longer, then died without having paid the
money to his uncle. (mezzanine assignee)
o We want to respect private autonomy: anything that you give up is just as good as an action
 The mere abstention from a permissible legal conduct is sufficient consideration
 Courts will not ask whether the consideration was of substantial value to the parties.
PENNSY SUPPLY, INC. V. AMERICAN ASH RECYCLING CORP. (BENEFIT TO PROMISOR)
 Pennsy Supply had been hired as a subcontractor for a school project. Part of their job was to pave the parking
lots. Pennsy received approval to use Aggrite as a base aggregate. The Aggrite was being given away for free by
American Ash because it was a hazardous material and expensive to dispose of. Pennsy finished the job and
then a few months later the parking lot had extensive cracking. Pennsy was contacted and repaired the work at
no cost, but then had a bunch of Aggrite needing to be disposed of. American Ash was contacted but refused to
remove and dispose of the Aggrite. Pennsy then incurred $385k in costs and is suing American Ash for the
costs.
 The consideration was the subcontractor picking up the aggregate (this induced the promise, and the promise
was induced by this).
 Supplier’s promise to supply subcontractor with aggregate free of charge induced subcontractor to assume the
detriment of taking title to the aggregate (and assuming its disposal responsibilities), and it was this detriment
which induced the supplier to make the promise to provide free aggregate to the subcontractor.
 This is not a conditional gift situation because although there was no active bargain, the promise induced the
consideration and the consideration induced the promise.
 WILLISTON’S TRAMP EXAMPLE: A benevolent man tells a tramp that if he goes around the corner, he may there buy
a coat on the man’s credit. No reasonable person would understand that the short walk was requested as
consideration for the promise but rather that in the event that the tramp go to the shop, the promisor would
make him a gift.
2. Applying the Consideration Doctrine
DOUGHERTY V. SALT
 Aunt promisor gave nephew promisee a promissory note for $3,000 on a printed form stating “Value Received”
(which is supposed to signify consideration), and said “You have always done for me, and I have signed this
note for you. Now, do not lose it.”
 Nothing is consideration that is not regarded as such by both parties
 A mere recital of consideration cannot serve as consideration if the facts speak otherwise
 Past acts cannot serve as consideration
 No actual consideration for the note. It was a voluntary promise of a gift to be executed in the future. The
promisor had a number of methods to make the note legally enforceable that she failed to employ (executed
gift, testamentary gift, gift in trust)
BATSAKIS V. DEMOTSIS
 Lender agreed to lend borrower 500,000 drachmae in exchange for a letter in which the borrower promised to
pay the lender $2,000 plus 8% interest at the end of the war or when she could access her U.S. money. The
drachmae were actually worth $25.
 Court found consideration even though there was a disparate value
 Inadequacy of consideration (bad deal) will not void an otherwise enforceable contract
PLOWMAN V. INDIAN REFINING CO.
 Employer needed to lay off some of its workforce. Then-VP separately arranged with individual employees to
keep the employees on payroll at one-half their current salary, minus insurance premiums, if the employees
retrieved the check from the office, for their long and faithful service. Employees say VP told them the
payments would last as long as they lived; VP said he told them the payments were terminable at the
company’s pleasure. VP did not have the authority to make this arrangement and there are no records of it. A
new VP replaced the one who made the arrangement and the payments to employees stopped.
 There was no consideration because there was no benefit to the promisor, detriment to the promisee, or
bargained-for exchange
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Past consideration (long and faithful service) is no consideration because it happened before the promise was
made and so had not been bargained for with respect to the promise. Picking up the checks was not a benefit to
the employer or a detriment to the employees, but in fact was the opposite.
instead, it was a conditional gift
C. Contract Formation Under Article 2 of the UCC
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1. Mutual Assent Under the UCC
Purposes of the UCC
o to make commercial law reflect the actual agreements between the parties, rather than applying
formalistic principles
o to have commercial law reflect actual current business practices; they like to look at what business people
actually intend, instead of what the theoretically intend
o imposes a duty of good faith to parties in commercial txns
2-204:
o may be made in any manner sufficient to show agreement, including conduct by both parties which
recognizes the existence of such a contract
o may be found even though the moment of its making is undetermined
o even though one or more terms are left open a contract for sale does not fail for indefiniteness; look at
intent of parties
Jannusch v. Naffziger
 Owner of festival foods business is suing defendant “buyers”. Owner made agreement with buyers to sell the FF
truck, assets, and business to buyers for $150k. The buyers paid 10k up front and agreed to pay the remainder
once their loan money came through. The buyers took possession of the truck and worked events, replaced
inventory, paid employees and taxes. At end of season the buyers decided that they were not interesting in FF
and left the truck at the storage lot that the seller had kept it previously. Seller was notified that it was there –
brought suit shortly after.
 HOLDING:
o sales article of Uniform Commercial Code (UCC) applied;
o parties' agreement contained essential terms and was sufficiently definite to form a sales contract;
o statute of frauds applies because the sale of goods was over $500 – but there are exceptions: party
admits that there was an agreement/contract or payment has been made or accepted;
o agreement was not a mere agreement to make an agreement;
o alleged uncertainty of date of agreement did not render contract nonexistent in light of one buyer's
admission of agreement; and
o buyers breached contract
E.C. Syberg
 Syberg sells i-brakes. Eaton became interested in i-brakes and made a small order to test them out. After this,
Syberg and Eaton entered in negotiations for a larger order. Eaton had made it clear that they would commit to
the minimum purchase order. Syberg at first agreed but then realized that they wanted a larger order to cover
costs. However, Eaton never agreed to anything other than minimum purchase. Syberg sent a production
schedule to Eaton, but this was never specifically approved. Eaton never submitted a formal purchase order to
Syberg. Some i-brakes are produced for Eaton, but soon after Eaton cancels the order.
 No enforceable contract when essential terms are disputed (minimum purchase order was disputed)
 Price quotation was an invitation of an offer, not an offer to form a binding contract
 look to “course of dealing”
o Syberg had always previously obtained purchase orders and the fact that they did not obtain a
purchase order from Eaton means that they deviated from their normal practice
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2. Firm Offer
Firm Offer Elements
 (1) There must be an offer
 (2) Offer must be made by a merchant
 (3) Offer must be for goods
 (4) Offer must be in writing
 (5) Terms must give assurance that it won’t be revocable
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 (6) Must have a specific amount of time (no more than 3 months)
Firm Offer v. Option K
 Firm Offer needs: six elements, doesn’t need consideration
 Option Contract: does not require signed writing, merchants, and needs consideration
3. Qualified Acceptance: Battle of the Forms
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Offer made on the offeror’s pre-printed form (1st form)
Second form will have additional and/or different terms OR could be the same
Why use pre-printed forms?
o saves time, especially if you do business with the same people over and over
o consistency
o do not have to keep paying an attorney each time
o make fewer mistakes
o limits the power of agents
 salespeople have the incentive to make bargains
 forms will limit the authority of people
Cons to forms
o these forms often do not reflect the actual agreements made between parties
Conduct by both parties that recognize the existence of a contract is sufficient to establish a contract for sale even if
the writings do not establish a contract. The terms of such a contract are those terms on which the writings agree.
Additional or different terms:
o For Non-Merchants:
 Additional / different terms do not become enforceable
 Apply §2-207(2): additional terms are proposals for addition to the contract when the contract is not
between merchants
o For Merchants:
 Additional / different terms become part of the K unless…
 Acceptance of the offer is LIMITED EXPRESSLY to the terms of the original offer (boilerplate rejection
of conditional acceptance can prevent additional/different terms being included in the K)
 The term materially alters the agreement (it would result in a surprise or hardship to the other party)
 Things than can constitute hardship or surprise: indemnification clauses, arbitration clauses,
warranty disclaimers, assumption of liability, attorney’s fees
 NOT MATERIAL: interest provisions
 Notification of objection (of the additional/different terms) has already been given or is given within
a reasonable time of receipt of the acceptance
§2-207(3): Conduct by both parties which recognizes the existence of a contract is sufficient to establish a
contract for sale, although the writings of the parties do not otherwise establish a contract. In such case the
terms of the particular contract consist of those terms on which the writings of the parties agree, together
with any supplementary terms incorporated under any other provisions of this Act.
o Knockout Rule – when all additional and different terms are knocked out of the contract
Common Law Solutions to Battle of the Forms
o Mirror Image Rule – Acceptance must exactly match the offer for there to be a contract (otherwise the
“acceptance” is a counteroffer)
 Rst. § 59 – A reply to an offer which purports to accept it but is conditional on the offeror’s
assent to terms additional to or different from those offered is not an acceptance but is a
counteroffer
o Last Shot Rule – A party impliedly assents to and accepts a counteroffer by conduct indicating lack of
objection to it; last form governs the contract
PRINCESS CRUISES, INC. V. GENERAL ELECTRIC CO.
 Buyer (Princess) issued Purchase Order for services to be performed by seller (GE) plus terms and conditions,
with a proposed price of $260,000. Seller received Purchase Order and sent buyer a Fixed Price Quotation with
a detailed service description and parts list plus its own terms and conditions, with an offering price of
$201,888. Seller sent buyer Final Price Quotation with price of $231,925 and sellers’ terms and conditions,
including limited liability to repair/replace defective goods or damaged equipment resulting from defective
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service. Buyer gave seller permission to proceed on the price in Final Price Quotation by phone. Seller sent
confirmatory letter restating price and specifying that seller’s terms would govern the contract. During
services, the rotor was damaged, causing buyer to cancel two lucrative cruises. Buyer did pay the full $231,925.
Buyer sues for breach of contract.
RULE: In determining whether the UCC applies to a mixed contract, the predominant purpose (Coakley Test)
of the contract must be the sale of goods.
o (1) language of contract,
 the purchase order requested service functions and the quotation was titled “Quotation for
Services,”
o (2) nature of the business of the supplier, and
 The seller company was a manufacturer of goods, but the seller’s correspondence came from
their Installation & Service Engineering Department
o (3) intrinsic worth of the materials.
 The intrinsic worth of the parts cannot be determined, but rather both parties’
correspondence blend the prices together into the final price of a services contract
There was a mixed contract primarily for services, so it will be governed by common law
The Purchase Order was an offer. The Final Price Quotation materially altered the offer’s terms and was a
counteroffer. Buyer accepted the counteroffer with its phone call, by not objecting to the confirmatory letter,
and by paying the price of that counteroffer. That counteroffer determines the terms of the contract, so seller’s
terms are part of the contract.
BROWN MACHINE V. HERCULES (indemnity provision, boilerplate language)
 Issue: Was the indemnification clause included in the purchase contract and did it become part of the contract?
(acceptance with different or additional terms?)
 Written purchase order from Hercules given to Brown = the offer
o Includes express limits phrase
 In order for the indemnity provision to become part of the contract, Hercules would have had to expressly agree to it.
Also the inclusion of the indemnification provision would have materially altered the agreement between the parties.
 Plaintiff’s acknowledgment that all other “specifications” were correct wasn’t an assent to the additional terms, but
talking about specifics of the trim press
 Indemnification was not part of the contract
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2-201 (1)
 two conditions: exchange of writings (boilerplate writing going back and forth) AND an oral agreement
following boilerplate writings
 there must be an offer; then a “definite and seasonable expression of acceptance”(meets the legal
definition even if it adds/changes some of the terms)
 offered: written agreement
 agreed upon: oral agreement
o if the two forms don’t match; but then the conduct suggests that there is an agreement; the matching terms
are in the contract; everything else is subject to the knock out rule
D. Electronic and “Layered” Contracts
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Jurisdiction matters
the UCC may apply, but may not be relevant (2-204, 2-207)
3 basic fact patterns:
o Shrinkwrap terms: shrinkwrapped item (usually software) + “READ ME FIRST” packet: pay first, terms
later with T&C; if you are unhappy with the terms, box everything back up and send it back; if you don’t
send it back (usually w/i 30 days), we are assuming you accept terms
o clickwrap terms: before you buy the product, you get the terms before you confirm; you have affirmatively
assented to the terms (hotel reservations, airline tickets, etc)
 might get shrinkwrap terms with the product later
 considered the most objective manifestation
o browsewrap terms: somewhere on the website, there are a bunch of terms and conditions, but you do not
have to look at them to enter the site; on the site, there might be efforts to get you to look at them, but it’s
not required
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Hines v. Overstock
o Hines buys vacuum from Overstock, retuns it, gets charged a $30 re-stocking fee and is submitted to
arbitration in Utah
o this case considered browsewrap: terms were available at the very bottom of the page
o court does not find proof of assent: no evidence that she was aware of the terms and conditions (no actual
or constructive notice)
o **just because the UCC applies, doesn’t mean we need it
Defontes v. Dell, Inc.
o class action suit against Dell complaint about sales tax on the service agreement. Arbitration clause in
dispute—Dell says the P’s accepted the T&Cs when they accepted the delivery of goods and did not return
o this case considered shrinkwrap (they had the ability to return)
o UCC (2-204/206) makes the consumer the offeror, then the seller accepts by shipment; in so shipping, the
seller has included the shrinkwrap terms that become proposals for addition to the contract; they do not
become part of the contract unless they are expressly assented to
o alternative approach: buyer solicits an offer, the seller makes an offer by shipping, the buyer accepts by
keeping the item and terms (we now don’t have 2-207 because there now are no additional terms to accept
or deny)
o court (likes the Easterbrook method) and finds as a matter of fact that the customer was not explicitly
given the right to return the goods
 they wouldn’t have known that by keeping the computer, they had agreed to all of the terms and
conditions
Easterbrook model (ProCD) (thought of primarily with electronic) (“majority”):
o consumer’s order is merely an invitation; supplier sends the goods with T&C which constitutes the offer;
buyer that keeps the goods “accepts”; there may or may not be temporal constraints on time to return
Minority view—2-206:
o buyers order is the offer, seller accepts by shipping, T&C are additional proposals that must be accepted
Chapter 3: Liability in the Absence of Bargained-for Exchange: Promissory Estoppel and Restitution
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Review:
o Contracts – promise for a promise
o Promissory Estoppel – promise w/o consideration
o Restitution – NO promise!
o Promissory Restitution- promise after the fact
These bargains have NO CONSIDERATION, but courts are looking for a basis of finding a primise
Restatement §90:
o is there a promise?
o should the promisor reasonably expect reliance?
o is there actual reliance?
o can injustice be avoided only be enforcement of the promise?
A. Protection of Promisee Reliance: Promissory Estoppel
1. Promises Within the Family
 un-bargained-for reliance may sometimes be substitute for consideration
 Kirksey v. Kirksey
o Promisor’s letter to promisee (widowed sister-in-law) stated, “I would advise you to obtain
your preference, and sell the land and quit the country, as I understand it is very unhealthy,
and I know society is very bad. If you will come down and see me, I will let you have a place to
raise your family”
o Promisee received the letter, abandoned her land, and moved to the promisor’s land
o After 2 years, promisor required her to move to another house and then required her to leave
o one judge said there was consideration (abandoning possessions); majority said it was a
gratuitous gift
o no promissory estoppel yet… also dealing with land rights of women, so not hard to believe
that there was no remedy
 Harvey v. Dow
o family has a lot of land and want to eventually pass it on, but nothing is definite or in writing
Daughter decides she wants the land now; after being denied a building permit, her dad gets it
for her and helps her build the house (“sweat equity”)
o general promise alone would not have been enough for PE, but when coupled with the
parents’ actions
o several manifestations of reliance, but several essential terms are missing (boundaries of land,
how many acres, dates); the building permit tips the scales (suggests consent/assent; could
not have happened but for him getting the permit)
o the reliance could be seen as reasonable
o Looks like parents are fraudulent if they don’t carry out promise – they duped daughter into
building a house on their land… unfair
 Grenier v. Grenier
o mom promised land to disinherited son after father dies
o one of the favorite sons convinces her to take the land away from disinherited son
o Disinherited son should get the land; classic case of PE: woman made the promise knowing
that the son would rely and move, son does rely, and there is now injustice that he was kicked
out
 Wright v. Newman
o issue: can adoptive father be held to legal obligation of child support if he never made an
express promise to do so? YES
o He promised to act as father, he expected mom to rely on this promise (parents have a legal
obligation to provide for children), she did rely on his support, only way to avoid injustice is to
make him keep paying support
2. Charitable Subscriptions
 detrimental reliance need not be bargained for; while in consideration, all that we care about is the
bargain
 §90(2): doesn’t require actual reliance
o courts more sympathetic to charitable organizations
o not widely accepted
 King v. Boston U
o BU sought to add Dr. King’s papers to its library. Dr. King deposited some papers with BU, with
a letter. Letter stated that King authorized removal of most of his papers to BU and that it was
his intention that at the end of each year, more papers would be sent to BU. All papers sent to
BU would remain King’s legal property until otherwise indicated. If, despite scrupulous care,
the papers were lost or damaged, BU was absolved from liability. King stated that it was his
intent to each year name a portion of the papers to become the absolute property of BU as an
outright gift, until all papers belonged to BU, and that in the event of his death all materials
deposited with BU became BU’s property.
o Reliance: induction ceremony, indexing of papers, making available to public
o A charitable subscription is an oral or written promise to do certain acts or to give real or
personal property to a charity for a charitable purpose.
o To enforce a charitable subscription there must be a promise to give some property to a
charitable institution and that the promise was supported by some reliance. [This court rejects
90(2), which does not require consideration or reliance for a charitable subscription]
o
3. Promises in a Commercial Context
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Katz v. Dare
o Man worked for employer (family) for 25 years, was injured when he tried to catch a thief.
Employer tried to induce him to retire: accepted a pension plan of 13k per year for life that
was approved by the BoD
o man retired in reliance; began working part-time elsewhere, then back with employer;
employer stopped sending checks
o Can a promise for lifetime pension be binding if there is no consideration? YES: if there is
reliance on a promise to the promisee’s detriment, then promissory estoppel applies and
promise is enforceable
o **do not look at intent of promisor; we are focused on the detrimental reliance of the
promisee
**P sent back the check for $250 because if he accepted it, if would be considered “accord and
satisfaction”: most juris will treat keeping the check as your acceptance and satisfaction with
the amount
Aceves v. US Bank
o Aceves files for chapter 7 bankruptcy, which imposes an automatic stay (bank cannot act
against her, it is now up to the court to manage the liquidation process)
o told the bank that she wanted to file for chapter 13 (will slow down payments and bring loan
up to current)
o bank told her not to go for the 13; they will renegotiate her payments; ask her to lift the stay;
she does this; they foreclose on her home and put it up for auction; sell the house and evict her
o reliance: she doesn’t convert the bankruptcy, lost her automatic stay, could have had some of
her husbands money for help = clear reliance
o it is FOS: why else would they have made the promise if they didn’t want her to rely on it
o injury: she lost her home and all options to save it
o
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4. Limiting Revocation: Preacceptance Reliance
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an offer is revocable up until performance/acceptance
here, we are looking if pre-acceptance reliance is sufficient to make an offer binding
much of this litigation has to do with prime v. subcontractors
Baird v. Gimbel Bros.
o Supplier sent an offer to supply linoleum to many contractors likely to bid on a particular job,
guaranteeing that the contractor awarded the contract would have those prices and “offering
these prices for reasonable prompt acceptance after the contract has been awarded.”
Contractor factored supplier’s offer into his bid. Supplier realized it had miscalculated and
sent out a withdrawal, which contractor received after bidding. Contractor awarded the job a
couple days later and then formally accepted supplier’s offer. Supplier does not recognize a
contract because of the withdrawal.
o offeror withdrew before the oferee officially accepted bid; sub-contractor’s (linoleum)
contract was conditional upon contractor winning the bid
o judge says no unilateral contract, and no PE (still evolving)
Drennan v. Star Paving Co.
o Star Paving (D) submitted a subcontractor bid to Drennan (P), a general contractor, for a
public school construction project. Drennan used Star Paving’s bid of $7,100.00 to prepare his
final bid and was awarded the contract. The next day Star Paving informed Drennan that it had
underestimated the cost of the project and refused to do the work for less than $15,000.
Drennan hired another subcontractor to do the work for $11,000 and sued Star Paving for the
difference between $11,000 and $7,100
o promissory estoppel here:
 sub’s offer was a promise to perform if contractor got the bid
 sub had reason to believe that contractor would select them if they were the lowest
bid
 contractor relied on the bid (used it to compute his own bid, naming the sub) – there
was partial performance which helps show reliance
 **wouldn’t work if contractor had reason to believe sub’s bid was too low
 sub made the mistake and contractor should not be responsible for it
what are limitations on pre-acceptance reliance:
o if it was expressly stated that Paving could have revoked it at any time until acceptance
o bid shopping/chopping
o you cannot run up the damages (not so here because contractor looked hard for the next
lowest bidder)
Berryman v. Kmoch
o Seller’s option agreement stated, “For
o and other valuable consideration, I grant you an option for 120 days after date to purchase
the real estate.” $10 was never paid. Seller sold to someone else after asking potential buyer to
be released from option contract. Buyer went to bank to arrange to buy the land and was
informed that it had been sold. Buyer attempted to exercise option.
o option contracts MUST be supported by consideration
time and money spent by realtor cannot be consideration because that is to be
expected
o no PE argument here because there is no detrimental reliance… need to show out of pocket
expenses
Pop’s Cones, Inc. v. Resorts International
o (1) Resorts promised to give them space in the hotel
o (2) Pops told Resorts that they need to renew their lease, Resorts told them not to renew their lease
o (3) Pops didn’t renew their lease, put stuff in storage, stop having the potential to generate income,
terminated a business in reliance on new business opportunity
o (4) They lost all the income from not having a location, didn’t open back up until July 1996 (expenses
of putting things in storage, finding new location)
 Big hotel company taking advantage of the small family business, Resorts didn’t act in good
faith
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B. Liability for Benefits Received: Restitution
1. Restitution in the Absence of a Promise
o Implied-in-fact contract – agreement that typically meets all the requirements of a contract but is not
express or formal (but can be inferred from circumstances—LOOK AT PARTIES’ CONDUCT)
 (expectation damages—put the party in position had the contract been executed)
o Implied-in-law / quasi contract – obligation imposed by law without either party agreeing
 (restitution—give back the value that they received unjustly)
o Law and Economics: Posner:
 high transaction costs:
 if they had waited until Pelo was competent, he would have been dead  high transaction
costs if they had waited
 when costs are high, it makes more sense for the law to impose obligations on parties who
might not have entered into an agreement willingly
 compare to violinist playing under a window: the total amt of txn costs would have been for
the violinist to knock on door before he played
 asking after would be officious
 difference between paid professional, Good Samaritan, and the one that butts in
officiously
o cannot reward the good Samaritan (has no “intent to charge”)
 Credit Bureau Enterprises v. Pelo
o Patient made threats of self-harm and purchased a shotgun; police took him to a hospital.
County magistrate found that he was seriously mentally impaired and likely to injure himself,
and entered an emergency hospitalization order. Patient refused to sign a form that would
make him or his insurance liable for the bill. Patient ultimately signed form when woken up at
5am by a nurse and told that he would not get his belongings back if he did not sign it. Patient
released from hospital a few days later. Hospital sought payment for medical services during
his stay
o consent is moot because he was found mentally incompetent
o hospital did not act officiously—they were just doing their job
o unjust enrichment and thus, responsible for payment regardless of whether the service was
expressly agreed to
o contract implied in law (quasi-contract)
o in these, we are worried about the party that gave the benefit
 Restatement 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:
o He acted unofficiously and with the intent to charge therefor, and
o The things or services were necessary to prevent the other from suffering serious bodily harm
or pain, and
o The person supplying them had no reason to know that the other would not consent to
receiving them, if mentally competent, and
o It was impossible for the other to give consent, or, because of extreme youth or mental
impairment, the other’s consent would have been immaterial
 Cause of action for implied in law contracts:
o P conferred a benefit on D
o D knows about the benefit
o D has accepted or retained benefit
o It would be inequitable for D to retain benefit without paying fair value for it
 Commerce v. Equity
o Equity did stucco work for prime contractor, and never got paid because contractor became
bankrupt. Commerce, who hired everyone saw the work that Equity did, inspected the work, etc
o burden on Commerce to show that they paid someone (does not have to be directly to the
subcontractor), then they have not been unjustly enriched
o burden on Equity to show that no consideration had been paid to anyone (Commerce
shouldn’t have to pay twice)
o Where there is no enforceable express or implied in fact contract but where the
defendant has received something of value, or has otherwise benefitted from the service
supplied, recovery under a quasi contractual theory may be appropriate
o Court uses two part Maloney test
 The sub has had to exhaust remedy options
 Here, Pelo sued the general contractor first to try to get his money
 The owner’s benefit was conferred without paying consideration to anyone… must
ask did the owner pay somebody for the work?
 Here, it appears that Commerce made payments to the general contract, on
remand the parties must prove or disprove the payments.
 Watts v. Watts
o unmarried cohabitants, parents
o James said that he would provide for Sue if she quit her job and moved in with him. Held
themselves out as married: she took his last name, took out insurance, joint banking account,
etc = reliance on his promise. She contributed to the household and worked for his company
for free. James said that she would “share equally in the increased wealth”
o court thinks that she could make a case for either an actual contract, or an implied in law
contract. Sue Ann needs to show that she conferred benefit and he was unjustly enriched: he
gets free labor, all the work she did for his employees, joint tax returns, contributed property,
the work she does with his sister, he’s not paying for childcare; AND needs to show that he
knew of the benefit (he wasn’t oblivious, this should be easy); AND that he accepted the
benefit that was unjust
o **general rule: services rendered by family members to each other are presumed to be
gratuitous
2. Promissory Restitution
 allows for recovery for services rendered even if no contract was formed
 must: give benefit to another that was not paid for, AND the other party must expressly promise to pay
after the benefit was received
 cannot have past consideration
 different from restitution in absence of a promise BECAUSE here there is a promise, but the promise
comes later (moral obligation) + unjust enrichment
 Mills v. Wyman
o 25-year-old son gets sick abroad and is taken care of by man. Dad sends a letter saying that he
will pay for man’s services, then takes promise back
o Rule: moral obligation is sufficient consideration for an express promise ONLY IF at some
point good/valuable consideration existed; must be a preexisting obligation
o son was not under father’s responsibility when he died, services to care were made w/o his
request = no sufficient consideration and no preexisting legal duty
 Webb v. McGowin
o Promisee McGowin was dropping large pine blocks off an upper floor of a mill in the scope of
his employment. He realized that the block he was moving would fall on and severely injure or
kill the promisor, below, if he dropped it. The only safe and reasonable way to prevent serious
bodily harm or death to promisor was to hold and fall with the block, diverting it from hitting
the promisor. Promisee was crippled from the fall. Promisor promised to pay him $15/week
to support him for the rest of his life. Promisor made these payments until his death. The
payments continued for a few weeks after his death and then stopped.
o A moral obligation is sufficient consideration for a subsequent promise to pay where the
promisor has received a material benefit from the promisee
The promisor’s agreement to pay and the promisee’s acceptance of payment show that the
services were not gratuitous. The promise is enforceable because the promisor received a
material benefit, his life, from the promisee’s services and subsequently promised to pay in
recognition of this.
o Rst. § 86
moral obligation:
o pre-existing legal duty, this obligation no longer exists for some reason, so moral obligation
takes over (otherwise you would have still been bound, so this takes over)
o

Chapter 4: Statute of Frauds
 When does a contract have to be in writing to be enforceable?
 Look at the statute in each state: if the contract falls within the statute, but it is not in writing, then it is
UNENFORCEABLE
 Why are written contracts favored?
o they reduce fraud
o we tax land: want to see what is purchased
o they are easier to enforce if it is in writing (harder to rely on testimony)
o makes parties focus or clarify that they are entering into an agreement
 For analysis:
o is there a statute of frauds that requires that the contract be in writing?
o If yes: is there sufficient memorandum that complies with statutory requirement?
 do you have enough in writing to reflect parties’ bargain
 doesn’t all have to be on one paper
 writing has to reflect non-performing party’s agreement (“breaching” party)
o if no: is there an applicable exception?
 Restatement § 110(1)
(a) A contract of an executor/administrator to answer for a duty of his decedent (any agreement not
to be enforced during the lifetime of the promisor)
(b) Suretyship Provision – A contract to answer for the duty of another (Suretyship – I will be
responsible for the debt or liability of another)
(c) Marriage Provision – A contract made in consideration of marriage (like a dowry, not a marriage
license)
(d) Land Contract Provision – A contract for the sale of an interest in real property
 Usually long term (>1 year) leases have to be in writing
(e) One-Year Provision – A contract that is not to be performed within one year (if there is any
conceivable way that the contract can be performed in the next 365 days, there is no requirement
to put it in writing)
 needs to be from the time of agreement (if there are certain days)
 Restatement § 131: A contract under the statute of frauds is enforceable if it is evidenced by any
writing, signed by or on behalf of the party to be charged, which
(a) Reasonably identifies the subject matter of the contract
(b) Is sufficient to indicate that a contract with respect thereto has been made between the parties or
offered by the signer to the other party
(c) States with reasonable certainty the essential terms of the unperformed promises in the contract
 Crabtree v. Elizabeth Arden Sales Corp.
o Crabtree (P) negotiated an employment contract for a sales manager position with Elizabeth Arden
Sales Corporation (D). Crabtree accepted Arden’s offer of a two-year contract based on an annual
salary of $20,000 for the first six months, $25,000 for the second six months and $30,000 for the
second year plus expenses.
o Ms. Arden’s personal secretary prepared a memorandum on a telephone order blank. A ‘pay-roll
change’ card was prepared and initialed and forwarded to the payroll department. Crabtree received
the first scheduled increase but Arden refused to approve the second. P filed a complaint for breach of
contract. D denied the existence of any agreement to employ P for two years and further contended
that, even if one had been made, the statute of frauds barred its enforcement
o court held that writings combined contained all essential terms (salaries, job position)
o Restatement § 132: memorandum may consist of several writings if
 Beaver v. Brumlow (**an exception to SOF)
o
o
o
o
o
P had verbal agreement to purchase land after working for D for 10 years; P went to work for
competition and D got mad and reneged and evicted P from the land
LOTS OF RELIANCE: took possession of the property and made valuable, permanent, and substantial
improvements to the property (landscaping, etc)
Test for unequivocally revocable: there can be no other plausible explanation for the part performance
(P did part performance because he assumed he was getting the land)
P also tried incredibly hard to get D to put things in writing
Restatement § 129: court is raising the bar: “Action in Reliance”
UCC and Statute of Frauds
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§ 2-201
 (1) A contract for the sale of goods for $500 or more in not enforceable without sufficient writing. A
writing is not insufficient because it omits or incorrectly stats a term in the contract but a contract is
only enforceable for the quantity of goods shown in the writing.
 (2) Between merchants if a writing is received by one party who has reason to know its contents, it is
sufficient for an enforceable contract if not objected to within 10 days
- Merchant confirmation exception – one of the merchants must send a confirmation of
the contract in writing within a reasonable period of time after the contract was formed
that must be sufficient against the sender. If it meets these requirements it is sufficient
to comply with the statute of frauds even though the recipient does not sign it, but it is
not necessarily conclusive that there was a contract.
 (3) A contract that does not satisfy (1) but is otherwise valid is enforceable
o If the goods are specially manufactured and not suitable for sale to others
o If the party against whom enforcement is sought admits in court that a contract for sale was
made
o For goods for which payment has been made and accepted of which have been received and
accepted (partial performance)
 Buffaloe v. Hart
o Sale of goods: bards are goods and are >$500
o Buyer rented 5 barns from seller then negotiated to purchase them, with an oral agreement to do so.
Buyer tried to get a loan and told seller that he would then pay for them with one payment rather than
in installments; buyer did not get the loan and reconfirmed the earlier agreement. Buyer had made
improvements to the barns and held them out as his own. Buyer arranged with other people to
purchase the barns from him. Buyer gave seller a check to seller dated, payable to seller, signed by
buyer, and “for” the five barns. Seller called buyer the next day and told buyer she didn’t want him to
sell them to other people. A few days later seller mailed buyer back the check, ripped up.
o check is ruled not to be sufficient writings (memorandum requirement is not met); but they turn to 2201(3): partial performance because when you receive the price, it constitutes an unambiguous overt
indication that was what the agreement was for
 2-201-1
 $500 requirement
 2-201-2
 Between merchants, a merchant receives the written contract but doesn't do anything
(you don't object), then it is enforceable
o Don't have to acknowledge, just have to be aware
o Failure to reject basically means assumed assent
o This is because merchants are assumed to be professionals and should know
how to respond. If don't respond in 10 days, then the contract will be
enforceable
 Buffaloe fails this
 2-201-3
 Only get here if contract doesn’t satisfy above requirements
 Here, in Buffaloe – considering the check
 The D receiving the price indicated that this is what the agreement was for.
3 remedy theories
 Restitution (3)
o Stop looking at non-breaching party
o Instead look at breaching party
o
o
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Focused on the fact that we want the breaching party to give back their unjust enrichment
If you breach contract and benefit from it, then you will need to give back your benefits to the person
harmed by the breach
Reliance (2)
o I relied on your promise and something went wrong
o Put me in the position that I would have been in if you had never made the promise
o Because bad things happened because I relied on your promise - then you are liable for the bad things
Expectation (1)
o Most common type of damage remedy in contract law
o Trying to recognize the harm that the party suffers because the bargain did not work out
o Put the non-breaching party in the position that he/she would have been in if the contract had been fully
performed
 What would the benefit of the bargain been
o Usually damage remedy most popular to non-breaching party