69 contracts outline

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Contracts Outline:

I. Enforcement:

1) Definitions:

1) promise: promises enforceable by law are called contracts.

2) Consideration: consideration is a benefit by the promisor or adetriment incurred by the promise.

3) Beneficiary: consideration is a benefit received by the promisor or

a detriment incurred by the promise.

2) Express Contracts: an express contract may be oral or written and consists of

an offer, acceptance, and bargained for consideration. It may be either

bilateral or unilateral.

3) Efficient Breach: pareto efficient: something will be efficient if it willmake somebody better off with making anyone worse offallow some

breach if it will allow both parties to be enriched.

4) Bilateral monopoly: when both parties have some interest in the productthis leads to stalemate in bargaining

5) The UCC governs sales of goods.1) UCC 2-102: article applies to sale of goods.

2) UCC 2-105: goods means all things which are movable at the time

of identification to the contract for sale other than the money in

which the price is to be paid, investment securities, etc

3) goods must be existing and identified b/f any interest in them can

pass.

4)Bonebrake-predominate factor test: to determine whether a

transaction is a sale of goods or of services, use the Bonebrake

test.(house is NOT good. Car is. The purchase and installationof a sprinkler system could go either way.

6) Promises enforceable w/out consideration:

1) promissory estoppel: where one party acts to her detriment in

reliance upon a gratuitous promise, the detrimental reliance of the

promise w/in limits will be deemed sufficient for estopping the

promisor from asserting the defense of a lack of consideration.

2) Promise to pay a barred legal obligation: subsequent promises

to perform contractual obligations which had become

unenforceable b/c the promisor was discharged thru bankruptcy

OR b/c of the running of the statute of limitations are enforceable

w/out new consideration.

3) Promise to perform voidable preexisting duty: subsequent

promises to perform contractual obligations which became

enforceable b/c of the assertion of some privilege or defense w/outconsideration, provided the new promise is not also subject to the

same priv or defense.

4) Promise to pay benefits previously conferred: where no

contractual liability previously existed, a subsequent promise to

pay for benefits previously conferred may nonetheless be

enforceable.

4) Implied in FACT contracts: An implied in fact contract is one inferred as a matter

of reason and justice from the acts, conduct, or circumstances surrounding a transaction

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rather than one formally or explicitly stated in words. As w/ express contracts, the source

of obligation in implied-in-fact contracts is the manifested intent of the parties; however,

whereas in express of contracts, all of the terms are expressed by the parties, implied-in-

facts contracts require one or more of the terms of the contract to be inferred from the

conduct of the parties.

a) e.g. may be found when one person renders services to another at the others

request but w/out an express agreement as to the compensation to be paid thereafter.b) In such a case, if the circumstances warrant, a promise to pay the reasonable

value of the services may be inferred.

c) UCC 1-201 (3): recognizes implied in fact contracts.

5) Implied-in-Law or Quasi-Contracts: an obligation imposed upon a person, not b/c of

her intent to agree, but b/c one party has conferred a benefit upon the other under such

circumstances that in equity and good conscience there ought to be compensation for the

benefit conferred. This avoids unjust enrichment of one party at the others expense.

a) e.g. where one party appropriates for her benefit the inventions of another,

she will be liable in quasi-contract for the benefits resulting from such

appropriation.

6) Difference b/n Express, Implied-in-fact, and Implied-in-law Contracts:

I. Express contract v. Implied-in-fact contract.

A contract is said to be ''express'' when it has been stated

in oral or written words, as distinguished from an ''implied-

in-fact'' contract in which the undertaking is inferred from

conduct other than the speaking or writing of words.

II. Implied-in-law contract (quasi-contract).

An implied-in-law contract (quasi-contract) is not actually

a contract at all. It is a fictitious contract where none

actually exists. Although the attributes of implied-in-law

or quasi-contracts are difficult to quantify, the elements

can generally be considered to be:

1) a benefit conferred upon the defendant by the plaintiff;

2) appreciation by the defendant of the benefit; and

3) acceptance and retention by the defendant of the benefit

under circumstances that would make retention of the benefit

inequitable without payment.

7) Common Law Definition:

a) covenant: today, under the UCC, adopted in all states except LA, the

presence or absence of a seal is immaterial in contracts concerning the sale of

goods. In contracts not involving the sale of goods, the seal raises the

presumption that the contract was validly executed or included consideration, or

acts to extend the statute of limitations.b) debt: the promisors obligation in debt was based upon her receipt of a

benefit from the promise, and the action in debt gave rise to the concept of quid

pro quo on the bargain element.

c) assumpsit: the action of assumpsit generally used by a promisee to recover

damages for physical injury to person or property as a result of the failure of the

promisor to perform in accordance w/ her promise. Assumpsit includes failure to

perform at all.

II. Enforcing Contracts:


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1) Basic principles for enforcing contracts:

a. Contract law is intended to provide relief to the promise to make up for

the breach, not to punish the promisor for breaching

b. Relief should put the promise in the position she would have been in hadthe contract been performed, thereby fulfilling the promisees

expectations

c. Relief should be substitutional (money) and not specific performance.2) US Naval Institute v. Charter CommunicationsFocusing on the Injured

Partys Damages:

a. D held the paperback option for a book and released it earlier than it

should have. D was seeking all of Ds profits from the pre-set release

date sales.

b. Issue: Must a breaching party pay the profits it received thru its breach

to the promise?

c. No. Damages for breach of contract are generally measured by Ps

actual loss. Awarding Ds profits that far exceed Ps loss would be a

penalty and punitive awards are not part of contract law.

3) Measure of Damages: When mere reliance damages are not enough: Sullivanv. OConnor:

a. P, an entertainer, got a nose job which was supposed to only require two

surgeries. It ended up requiring three and causing irreparable damage to

the nose.

b. Is reliance the proper measure of damages for breach of a physicians

contract to produce certain results?

c. Yes. Mere restitution would be inadequate. Expectation (an amt

intended to put P in the position she would have been in had the contract

been performed as agreed, would be excessive.

d. Ct couldnt apply expectation damages b/c she didnt ask for expectation.

e. The ct declined to follow Hawkins v. McGree, where an expectation

mearuse of damages would be applied.

4) Reliance v. Expectation Damages:a. Assume that you decide to become a tennis promoter. You engage Serence

Williams to play a match against Lyndsay Davenport for 250K. You pay

Ms. Davenport 150 K and spend 75 K promoting the match and 25K renting

W&M hall. Then Ms. Williams backs out and you cannot find an adequate

substitute.

b. If we use reliance, how much does Ms. Williams have to pay you? 250K

c. What would expectation damagesbe? Dont know revenue.

d. Can you make an argument that you expected revenues of at least 250K?What happens if Ms. Williams can prove that I would not have sold any

tickets at all b/c I am not a competent tennis promoter. Should I still be able

to seek my 250 K in reliance damages. NO. If the defendant can prove that

expectation damages are indeed less than reliance damages, the plaintiff is

entitled only to expectation damages.

5) Ways of Measuring Damages: Reliance damages cannot exceed expectationdamages. Award reliance as a proxy for expectation.

a. expectation damages: an amt intended to put P in the position he wouldhave been in had the contract been performed as agreed. Is the standard


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remedy for contract damages. Not awarded only if too speculative to

calculate or in other special circumstances will courts revert reliance

b. Restitution damages: Not an actual contract remedy. An amtcorresponding to any benefit conferred by P upon D in the performance of

the contract. Can recover restitution on losing contract.

c. Reliance damages: any expenditure made by P and any other detrimentfollowing proximately from Ds failure to carry out his promiseputting P

back in the position he occupied b/f the agreement. Reliance typically used

as an alternative to expectation damages.

d. . Bargain: a bargain promise is not always easily distinguishable from aconditional donative promise. The distinction is how the parties view the

condition. InHamer, abstention was the price of the promise, so there was abargain.

e. RST 71:

i) To constitute consideration, a performance or return promise

must be bargained for.

ii) A performance/promise is bargained for if it is sought by the

promisor in exchange for his promise and is given by the

promisee in exchange for that promise.

iii) A performance may consiste of an act other than a promise,

a forbearance, or the creation/modification/destruction of a

legal relation.

iv) The performance or return promise may be given to the

promisor or to some other person. It may be given by the

promisee or by some other person.

II. ENFORCEMENT BASED ON CONSIDERATION:

1) in order to have a legally enforceable promise, there must be considerationgiven. Consideration is a benefit received by the promisor or a detriment

incurred by the promise. The cts will infer a legal detriment whenever a partyobliges himself through a bargain to perform in a certain manner, even if the

performance is not exactly detrimental as we understand it. The fact that a

promise is bargained for is generally sufficient to make it enforceable.

2) Hamer v. Sidway:1) Uncle promised P that if he would refrain from several vices when he

until he turned 21 and was capable of taking care of 5K.

2) Issue: Does a promisees abstention from legal but harmful conduct

constitute legal consideration for a promise to pay money?

3) Yes. A waiver of any legal right is sufficient consideration for a

promise.

4) Certain Promises must be in Writing to be Enforced.

3) Contract Not to Sue:1) FORBEARANCE: The maj rule is that forbearance to sue is legally

valid consideration whether or not the claim is doubtful, so long as the

claim is reasonable and honestly asserted. Under the minority rule,

where the parties bargain in good faith and the claimant honestly

believes that the claim is valid, the disputed claim need not be

reasonable

2) . Fiege v. BoehmForbearance as Sufficient Consideration


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3) P promised to forbear prosecuting a bastardy suit if D paid for child

support, though D later turned out not to be the father.

4) Is a forbearance to sue, although based on an invalid cliaam, sufficient

consideration to make a promise to pay binding?

5) Yes. Ps forbearance was sufficient consideration as long as P acted in

good faith under a reasonable belief.

6) What if she sued two fathers? Objectiveclaim is legitimately in

doubt. Subjectivehonestly believes 50% of being believed.

7) Doesnt have to tell fathers about each othernondisclosure right now

isnt fraud/only when she lies is it fraud.

8)

4) 1st RST 76: forbearance to assert an invalid claimby one who has not anhonest (subjective test) AND reasonable (objective test) belief in itspossible

validity is not consideration.

5) 2nd RST 74 (1) : forbearance to assert ot surrdender of a cliam or defensewhich proves to be invalid is not consideration unless the cliam/ defense is in

fact in doubt b/c of uncertainty to facts/law (objective test) ORthe forbearing

party believes may be fairly determined to be valid (subjective test) ---only haveto pass one of the tests!!!!!III. QUASI-CONTRACT

1) quasi-contract: when d receives a benefit from P under such circumstances that

D ought to compensate P for the benefit received, the law implies a promise by D

to pay the reasonable value of the benefits conferred.

2) Reason why not rewarding volunteering/officious intermeddling: policy in order

to prevent unsolicited services and concomitant prices w/out consent.

3) NOT a true contractno mutual assent bargained for by both parties. The law

instead creates the contract.

4) Purpose is to avoid the unjust enrichment of D at Ps expense.

5) Elements:

1) P has rendered services or expended property which confers a benefiton B.

2) P rendered such performance w/ the expectation of being paid.

3) P was not acting as a VOLUNTEER

4) To allow D to retain the benefits w/out paying P would result in unjust

enrichment of D.

6) Can be an alternative to contract remedy: can be used for enforcement even if

there was an express contract.

7) Measure of Recovery:

1) unjust enrichment: generally, the recovery is measured by the

reasonable value of the benefit conferred ont eh D.

2) detriment to the P: modern cts have also recognized that in some

instances the proper recovery is the detriment suffered by the P. Thismay be critical in situations where D has really received no benefit,

although P has expended.

3) Cotnam v. WisdomEmergency Services

a) P treated a man after an accident while man was

unconscious.

b) May cts find an implied contract to pay for medical services

provided to a person who is incapable of contracting?


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c) The theory of recovery is implied in law (quasi contract) b/c

implied in fact would mean conscious assent.

d) This was competent professional service during emergency

circumstances.

8) Callano v. Oakwood Park HomesIndirect Benefit1) Shrubbery case.

2) Issue: Is D, w/ no privity of contract w/ P, obligated to pay for the

benefit received on the theory of quasi-contract?

3) No. Here, while D clearly received a benefit, the retention of such a

benefit does not appear unjust. P had no dealings w/ Dthere was no

mistake involved.

4) COMMENT: cannot use the fiction of quasi-contract to substitute one

promisor or debtor for another.

8) subcontractors liens: under callano if a contractor doesnt pay workers, thesubcontractor cant get remedy from owner, even tho the subcontractors have

benefited the owner. However, this has been statutorily remedied by giving

subcontractors a security interest in the property that can be liquidated for debts.

9) Claims b/n SpousesPeyatte v. Peyatte:1) ct held that although restitution is not normally a proper remedy for

services provided during a marital relationship, it may be appropriate

when one spouse took advantage of antoher by not performing his part

of an agreement b/n the parties. BUT THIS IS NOT NORMALLY

THE RULEgenerally the cts consider benefits conferred b/n spouses

as gifts.

2) HOWEVER, later on in Peyatte v. Peyatte, restitution is allowed. The

court had refused to enforce the husbands promise to put his wife

through a masters degree program, finding the agreement too

indefinite as to the time when she would attend and cost of her

program. But although the agreement failed to meet the

requirements of an enforceable contract, [it] still has importance inconsidering the wifes claim for unjust enrichment b/c it both

evidences her expectation of compensation and the unjust enrichment

problem.

10) Gratuitous Services Not Considerationa) Dementas v. Estate of Tallas: Ds promise to P for assisting him was held

not to be legal consideration. Noting that some cts may recognize past

consideration as sufficient under a moral obligation theory, in this case, Ps

services were gratuitous. P had not provided services with the expectation of

being compensated.differs from the Webb case how? I guess b/c no material

benefit (such as life) at stake.

IV. BENEFIT CONFERRED BY PAST ACTION:1) the exchange requirement

2) the modern tendency to a hold a promise to pay a moral obligation

enforceable, at least up to the value of the benefit conferred.

3) MORAL OBLIGATION: a promise is said to be given for moral

consideration when the promisor is motivated by some past event.

Usually the past event is a transaction of some sort b/n the promisor

and the promise which benefited the promisor and placed him under a


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moral obligation to the promise. Webb and the NY statute are really

the only two that support this.

4) Moral Obligation: cts conviction that the promisor ought to do the

thing, plus the promisors own admission of his obligation, may tilt the

scales in favor of enforcement where neither standing alone would be

sufficient.

5) Fienburg v. Pfeiffer CoGratuitous Pension Plan:

a) P was offered a pension, which was a major factor in her

later decision to retire. Ds new president stopped payments

after several years.

b) Is a gratuitous pension plan enforceable if the promise retiresin reliance on continued payments?

c) Yes. Promissory estoppel is now recognized as

consideration. Ps retirement was a change in position made

in reliance on the pension plan.

6) PROMISSORY ESTOPPEL: permit enforcement of contracts

lacking consideration w/out abandoning the doctrine of consideration.

Other theories include treating the act of reliance itself as consideration

and finding a bilateral contract.

7) RST 90: Promise reasonably inducing action or forbearance:

i) a promise which the promisor should reasonably expect ot

induce action/forbearance on the part of the promisee/3rd party

and which does induce such action is binding if injustice can be

avoided only by enforcement of the promise. THE REMEDY

GRANTED FOR BREACH MAY BE LIMITED AS JUSTICE

REQUIRES.

8) EQUITABLE ESTOPPEL: requires that the party being estopped

know facts that the other party does not know. Usually induces

performance of a party by deceit or knowledge of their ignorance.

Usually involves a fact.

9) Mills v. Wyman:

a) P took in Ds son and nursed him. D promised to pay him

for his trouble and then didnt.

b) Does a moral obligation constitute sufficient consideration to

make a promise enforceable?

c) No. A MORAL OBLIGATION IS NOT SUFFICIENT

CONSIDERATION FOR AN EXPRESS PROMISE. THELAW WILL GIVE A PROMISE VALIDITY IF THE

PROMISOR GAINS SOMETHING, OR THE PROMISEE

LOSES SOMETHING AS RESULT OF THE PROMISE.

d) Benefit was not directly conferred on the promisor.

e) Mills is the traditional view re: moral obligation

10) exceptions to moral obligation: promise to pay a debt that is no

longer legally enforceable b/c of statutory limitations has run, and a

promise by an adult to perform a duty imposed by a promise that the

adult made as a minor and could have avoided on that ground. Same is

said of a promise to pay a debt that has been discharged in bankruptcy.

11) Modern ApproachWebb v. McGowin


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a) P injured himself preventing a log from falling on his boss.

D offered to pay him, and then his estate stopped after D

died.

b) Is moral consideration sufficient to support a promise given

in recognition of a past economic benefit received by thepromisor?

c) Yes. Life and health are material benefits, and D retainedhis while P was injured.

12) 86: Promise for Benefit Received: a promise made in

recognition of a benefit previously received by the promisor from the

promisee is binding to the extent necessary to prevent injustice

a) a promise is not binding if the promisee conferred the benefit

as a gift or for other reasons the promisor has not been

unjustly enriched.

b) To the extent that its value is disproportionate to the benefit.

13) New York statute: if consideration is expressed in writing and

would have been valid contract if not for time of promise

14) Webb: significant material benefit

Cases Mills NY Webb--Alabama RST 86

Mills No Yes Xtho mat ben

conferred on son

No

Feinberg No Yes (?) X (?) X

Harrington No No Yes Yes

Webb No No-- Yes Yes

14) MORAL OBLIGATION: the mere fact of promise has been thought

to create a moral obligation, but it is clear that not all promises are

enforced. Nor are moral obligations based solely on gratitude or sentiment

sufficient of themselves to support a subsequent promise.

V. Bargain Requirement

1) Even when a promise is unenforceable when made b/c the promisee is not bound,

it may become binding when the promisee subsequently furnishes theconsideration contemplated by doing what he was expected to do.

2) Conditional Gratuitous Benefit: eg walk w/ me to Wawa and Ill buy you asandwichnot enforceablesomething done to make it easier to give a gift is

not consideration.

3) Early case of no estoppelKirksey v. Kirksey1) P moved onto bro-in-laws farm at his invitation. D later req them to

leave.

2) Is a gratuitous promise legally enforceable after P has suffered loss and

inconvenience in reliance on the promise?

3) No. There was no consideration.

4) Probably the main reason that the court did not invoke promissoryestoppel was the year in which Kirksey was decided, 1845.

4) Mixed motives: if any part of the consideration is bargained for, the rest can

still be a gift. Conditional gift. Depends on whether you actually wantedthe condition or the condition was just part of completing the transfer of

the gift.

5) WAWA Hypo: walk with me to WaWa and Ill buy you a sandwich.


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a) not enforceable if it is something to give a gift is not

consideration BUT

b) giving a gift in exchange for anything, even just

someones company, makes this enforceable

6) Covenant Not to CompeteCentral Adjustment Bureau v. Ingram1) Is a covenant not to compet enforceable if it is signed after the

employee has accepted employment and begun working?2) Yes. Most states have found continued employment alone to be

sufficient consideration for a covenant not to compete.

7) CAB court did not say that any amt of work will do to enforce a non-competitionclause. The rule of reasonableness applies to consideration as well as to other

matters such as territorial or time limitations. Whether there is adequate

consideration to support a non-compete covenant signed during an on-goingemployment relationship depends on the fact of each case.

8) Change in employee handbooks:

1) an employer w/ a written policy requiring discharge for cause may

unilaterally change its policy to one of termination at will, so long as it

provides affected employees reasonable notice of change.

9) Pine River Test:

a) problems along the lines of CAB on whether toenforceability ofemployers promises, often in connection

with employee handbooks. Typically some time after they

have been hired, employees receive handbooks setting out

company policies. Is the employer bound b/c most

employees did not bargain for these.

b) P in this case was fired by the bank president D for seriousdeficienciese in processing over 600K in loans. D failed to

follow the procedure set out in relating to disciplinary policy

in the employee handbook he distributed when he fired P.

c) Ct held that an employers offer of a unilateral contract may

very well appear in a personnel handbook as the employers

response to the practical problem of transactional costs. Ps

continued duties as an employee despite his freedom to quit

constitutes an acceptance of the banks offer and affords the

necessary consideration for that offer, with the bank gaining

the advantages of a more stable work force.

d) An employee can provide consideration for a promise in

a handbook by just showing up to work. This is

consideration b/c the employee is not obligated to do so;

employment at will!!!!

10) Interplay b/n Pine River and Bankey:

a) Pine River followed a standard contract analysis. The

employee handbook is an offer which the employee accepts

by showing up to work. Showing up to work also suppliesthe consideration.

b) Bankey rejects the Pine River approach to employeehandbooks and holds that there is no contract. B/c there is

no contract, the employer can change the terms unilaterally.

The only limit is that the employer must enforce its rules

uniformly.


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11) Employers Change of Policy:

1) Bankey v. Storer Broadcasting Cowhether an employer may

unilaterally change its written policy statements by adopting a

generally applicable policy and alter the employment relationship w/

existing employees to one at will of the employer did not reserve the

right to make a change in the original policy.

2) The employee may legitimately expect that the employer will applywhatever personnel policies are in force at a given time, not that

policies will never change.

VI. Promise as Consideration

1) a contract may be formed by the exchange of promises

2) for a bilateral contract to be legally enforceable, each partys bargained for

promise must be legally sufficient consideration for its counter promise.

3) THE TEST: whether the performance promised would be sufficient

consideration.

4) ILLUSORY PROMISES: if a promisor reserves expressly or by implication analternative by which she can escape performance altogether, she has really not

promised anything at all.

1) Strong v. Sheffieldlack of specificity renders promise illusory

2) Does an agreement not to collect a debt for as long as the creditor shall

elect constitute consideration?

3) No. While P did not foreclose on the note for two years, the test is

what was in the agreement, not what was actually done.

4) The problem was not that P waited two years, but rather that there was

no consideration for the wifes promise in the first place.

5) COMMENT: THE RULE OF THIS CASE WAS CHANGED by

UCC 3-408no consideration is required to create an enforceable

obligation which guarantees an antecedent debt of any kind.

5) RST 77 : a promise is not consideration if by its terms the promisor or

purported promisor reserves a choice of alternative performances unless:1) each side of the alternative performances would have been

consideration if it alone had been bargained for OR

2) one of the alternative performances would have been consideration and

there is or appears to the parties to be a substantial possibility that b/f

the promisor exercises his choice events may eliminate the alternatives

which not have been consideration.

6) ALTERNATIVE PROMISES: under 87 (2): buyer orders goods from sellersubject to a right of cancellation before shipment. Is buyers promise illusory?

The promise might not be illusory b/c the seller is likely to ship b/f the buyer

exercises right to cancel. The promise makes the consideration binding, so even

if the seller does not ship b/f cancellation, we would still have consideration

under the clause.7) Alternative Promises Hypo: the method behind breaking up one

promise into two promises. "If you will pay me $20, I

promise paint your house if I'm in town." I promise to

paint your house or I promise to leave town. I see how the

promises in the end reflect the original promise. I just

don't see the method behind it.

I promise to paint your house or I promise to BE OUT OF


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TOWN. The method behind it is to demonstrate that this

promise can serve as consideration if each of the

alternative promises could serve as consideration: i) paint

your house - yes, ii) be out of town - maybe, but less

likely.

8) Illusory PromisesSATISFACTIONpromise conditional on promisors

satisfaction; objective test is reasonable person standard; subjective test is goodfaith.

9) Using which standard depends on whether the clause is amendable to an

objective interpretation. A satisfaction clause applied to the painting of my

house is. A satisfaction clause applied to the painting of my portraits is not.

10) Good faith standard for SATISFACTION contracts: an expression ofdissatisfaction is not conclusive; the promisor must actually be dissatisfied with

the performance, not with the contract itself.

1) mattei v. hopper: real estate deal

a) Is a promise that is conditional on the promisors satisfaction

w/ a related matter enforceable?

b) Yes. Satisfaction can be either objective or subjective. A

subjective satisfaction promise is still enforceable b/c thepromisor is expected to IN GOOD FAITH be dissatisfied w/

the performance, not w/ the contract itself.

11) Conditioned Promises:

1) that a promise is conditional does NOT make it insufficient

consideration. As long as the promisor has undertaken something of

legal detriment to him, such as becoming bound if the contingency

occurs, the promise is sufficient consideration.

2) REQUIREMENT CONTRACTS: a promisor promises to buy all I

require is actually good consideration b/c it imposes a detrimaent

upon the promisorlimits his choice to buy from anyone but the

promisee.

a) Eastern Airlines v. Gulf Oil Corpb) May a contract be a valid requirements contract even if it

does not specificially approximate the amts involved, as long

as the amts are reasonably foreseeable?

c) Yes. Good faith makes it valid.

d) UCC 2-306: a term which measures the quantity by theOUTPUT OF THE SELLER or THE REQS OF THE

BUYER means such actual output or requirements as may

occur in good faithexcept no quantity unreasonably

disproportionate to any stated estimate or in the absence ofa stated estimate to any comparable prior output or req maybe tendered or demand.

e) Use GOOD FAITH: e.g. a shut down by a requirementsbuyer for lack of orders might be permissible when shut

down merely to curtail losses would not.

f) Got specific performance as their relief. Jet fuel is common,

but the court would be unable to assess money damages b/c

unable to guess the quantity that Eastern Airlines would

require.


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3) IMPLIED PROMISES: even where a bilateral contract apparently

contains no promise at all on one side, the contract may still be upheld

if the surrounding facts fairly imply a promise of performance by that

party.

a) UCC 2-306 (2): indicates that in exclusive sales contract themanufacturer impliedly agrees to use his best efforts to

supply the goods and the distributor impliedly agrees to use

his best efforts to promote their sales.

b) Woods v. Lady DuffExclusive Contracta) Where P did not specifically promise to use reasonable

efforts to promote Ds goods, and all compensation to D

under the contract is to come from such efforts, is there a

valid promise by P?

b) Yes. The circumstances make such an implication

reasonable. It was an exclusive dealing contract D gaveto P; any return to D was to come from Ps profits. This

meant if D was to get anything at all, P had to perform.

c) Implied duty of best efforts or good faith.but bewarethere is some 20th C contra authority.

c) Lady Duff claimed he didnt give her reciprocal exclusivity

or any guarantee to try to sell her products.

d) However, Cardozo said unless he gives efforts, she getsnothing. So the P had duties and therefore there is a

promise.

VII. RELIANCE AS AN ALTERNATIVE BASIS FOR ENFORCEMENT

1) detrimental action or forebearance by the promisee in reliance on a promise bythe promisor will constitute a substitute for consideration.

2) RST 90:

1) a promise which the promisor should REASONABLY expect to

induction action or forbearance on the part of the promisee and which

DOES induce action or forbearance is binding if injustice can be

avoided only by enforcement of such a promise.

2) A CHARITABLE SUBSCRIPTION OR MARRIAGE SETTLEMENT

IS BINDING W/OUT PROOF THAT THE PROMISE INDUCEDACTION OR FORBEARANCE.

3) More liberal than first restatement: where reliance is less than

substantial, partial enforcement of the contract may still be granted.

ALSO, the doctrine can be applied to bargain as well as gift situations.

3) Promissory estoppel enforced in 4 categories prior RST 90 in 1932

a) family promises:

b) promises to convey land: cases involving promises to

convey land on which the promisee had relied upon movingonto the land and making improvements.

c) promises coupled with gratuitous bailments: although agratuitous bailment imposes no duty on one to insure, etc the

goods, such a duty arises from a promise to do so.

d) Charitable subscriptionsAllegheny College: wrote anestate pledge which was not payable until 30 days after her

death. She later repudiated her promise. Cardozo found


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consideration for her promise in the return promise of the

college to set up a memorial fund in her honeor.

4) Ricketts v. ScothornGratuitous Promissory Note1) Ps grandfather offered her gift of money. Granfathers executor

refused to pay the note b/c no consideration.

2) Is a gift promise enforceable if it induces the promisee to take

detrimental action in reasonable reliance on the promise?

3) Yes. B/c P suffered reasonably foreseeable detrimental b/c of the

promise of the note, the promise is enforceable.

5) Promissory Estoppel as Consideration: In Feinbureg v. Pfeiffer usedpromissory estoppel to enforce promise. Is this compatible with RST 90? Atthe time the plaintiff retired she was 57 years of age. At the time the payments

were discontinued she was over 63 years of age. It is a matter of commonknowledge that it is virtually impossible for a woman of that age to findsatisfactory employment

6) Quantum meruit: damages awarded in an amt considered reasonable tocompensate a person who has rendered services in a quasi-contractual

relationship.7) Vastoler: sued his employer for breach of a promise of greater pension benefitswhen he claimed he had relied in taking a promotion from an hourly lithographer

to a salaried supervisor. Ct of appeals found that the trial ct erred in failing to

recognize that absorption of the stress and anxiety inherent in supervisory

positions could be one of the factors that constitutes detrimental reliance.

8) ENFORCEMENT TO PREVENT INJUSTICE

1) the test under RST 90 (1) is NOT whether the promise should be

enforced to do justice, but rather to PREVENT injustice.

2) Cohen v. Cowles: Reporters promised to keep Coehns identity

confidential and then didnt. Cohen was fired from job. The ct noted

it would be unjust to allow the newspapers to break their promises, esp

since the newspapers themselves believed that they generally mustkeep promises of confidentiality.

3) Schott v. Westinghouse: suggestion card from employee used by

corporation. Ct found that it resulted in savings to Westinghouse

approximating unjust enrichment since it did not appear that he

expected no payment nor intended to confer a gratuity.

9) D &G Stout v. Bacardi ImportsRELIANCE INTEREST ON PROMISE1) Liquor distributor relied on Bacardis promise to stay w/ them and

didnt sell. When Barcardi left, P had to sell at a much lower price.

2) May a party who promises to maintain a business relationship become

liable for damages when the promisee relies to its detriment on the

promise?

3) Yes. The relationship b/n P and D was always terminable at will.BUT, a prospective employee cannot sue for lost wages b/c can have

no reasonable expectation of any determinable period of pay. BUT can

recover for expenses incurred in moving for a job.

4) Distinction is b/n expectation and reliance damages. P is not seeking

lost future profits. P seeks lost value of its sale opportunity.

VIII. OFFERS1) The usual test applied is the objective theory of contractswhat a reasonable

person in the position of each of the respective parties would be led to believe by


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the words or the conduct of the other party. WHAT A REASONABLE

PERSON, STANDING IN THE PLACE OF THE RESPECTIVE PARTIES,

WOULD UNDERSTAND THEM TO MEAN.

1) modern cts reject the req that there be any actual, subjective meeting of

the minds. Each contracting party must be able to rely on the other

partys apparent intentions w/out regard to his secret thoughts or

mental reservations.2) Lucy v. ZehmerContract made in Subjective Jest:

1) sale of farm on a napkin

2) Issue: is a contract enforceable if one of the parties mentally agreed to

it only in jest?

3) Yes. The mental assent of the parties is not required for the formation

of a contract; a persons undisclosed intention is immaterial if his

words and acts have but one reasonable meaning.3) RST 71: OBJECTIVE THEORY OF ASSENT mental assent of the parties

is not requisite for the formation of a contract. If the words of one of the parties have

but one reasonable meaning, his undisclosed intention is immaterial except when an

unreasonable meaning which he attaches to his manifestations is is known to the

other party.

3) Factors that influence enforcement:

1) equal bargaining position of both parties

2) absence of fraud or misrepresentation

3) admitted fairness of price

4) The offer:

1) an offer is a proposal by one party to the other manifesting a

willingness to enter into a bargain and made in such a way that the

other person is justified in believing that her acceptance to that bargain

is invited, and if given, will create a binding contract b/n

2) RST 24: OFFER: an offer is the manifestation of willingness to

enter into a bargain, so made as to justify another person inunderstanding that his assent to that bargain is invited and will

conclude it.

3) Requirements for a valid offer:

v) manifestation of present contractual intent.

vi) Certainty and definiteness of terms.

vii) Communication to the offeree. The offer must be

communicated to the offeree; in no other way will it create a

power of acceptance in him.

4) Requirement of manifestation of present contractual intent:

a) the words or conduct used in the proposal must be words of

an offer rather than of preliminary negotiation.

b) The test: Would a reasonable person in the shoes of theofferee feel that if he accepted the proposal, a contract would

be complete?

c) To whom made: a proposal made to the public or a largegroup of persons (such as in advertisements) is more likely

to be construed as a mere invitation to make an offer.

d) Certainty/Definiteness of Terms

5) Gentlemans Agreement:


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1) arises in firm-commitment underwriting of corporate stock, a

transaction in which the corporate issuer sells an entire issue of stock

outright to a group of underwriters, who in turn sell to a larger group of

dealers, who then sell to the public.

2) Since they have to turn in a registration statement to SEC, the issuer

wants some assurance of the availability of underwriters.

3) The solution has been in having the underwriters write to the issuer a

letter of intent which is then signed by the issuer, and which sets out

terms of underwriting but reserves liability.

4) Investment banks worried about riskso why not just make the

promise conditional (Ill buy these securities if the market is not bad)?

B/c they dont know exact paraments. Enforced rather by reputation

and social sanctions.

5) Gentlemens agreements typically are not contracts b/c the reasonable

person doesnt believe that the other side intends to bind themselves;

the other side has told them that they do not intend to be bound (note

that somethmes a different rule in the big business/consumer sitch b/c

consumer may not pay close attention and may mis the disclaimer).

6) A letter of intent can be a contract(Type I contract) if a reasonable

person would believe the parties intended to bind themselves (assent)

and there are enough terms to satisfy terms of definiteness.

6) Winston v. Mediafare Entertainment Corp: factors to determine whether theparties meant to be bound absence by a document on both sides

1) whether there has been an express reservation of the right not be bound

in the absence of a writing

2) whether there has been partial performance of the contract

3) whether all of the terms of the alleged contract have been agreed upon

4) whether the agreement at issue is the type of contract is usually

committed to writing

7) Price Quotations: a simple quotation of price is usually construed merely as aninvitation to the buyer to make an offer.

1) Owen v. Tunison

a) P offered to purchase Ds property for 6 K. D responded to

P by letter saying that he could not sell for less than 16K. P

then replied he accepted Ds offer whereupon D decided not

to sell.

b) A STATEMENT SPECIFYING A MINIMUM FOR

THE SALE OF PROPERTY DOES NOT

CONSTITUTE AN OFFER.

2) Harvey v. Facey: Ct held that acceptance of a price term that has not

been specified as an offer to sell was in fact an offer itself. In this

case, the court held that a communication regarding only a price termis inadequate to constitute an offer. Facey was negotiating to sell

certain property to the town of Kingstone for 900 pounds. Harvey, a

soliciter in Kingsston, sent Facey a telegraph, asking if Facey would

sell to Harvey and what he lowest price was. Facey answered the

lowest price was 900 pounds. Harvey answered that he agreed to buy

the property for 900 pounds. Harvey then sued for specific

performance. The trial ct held that there was no contract. The

appellate ct reversed. Facey appealed to Privy Council, which held


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that there was no contract b/c Facey had provided only a price term.

Facey never stated whether he would sell to Harvey, and Harveys last

telegram was actually an offer of sale thatFacey never accepted.

3) Fairmont Glass v. Grunden-Martin Woodenware Co.

a) P asked for the lowest price at which D (Fairmount) would

sell to P 10 carloads of jars. D replied w/ a quote and terms

for immediate acceptance and shipment. P replied bytelegraph w/ an order and included an additional clause req

the jars be top quality. Same day, D said could not filled

order. P then sued.

b) DOES A QUOTATION OF PRICES FOR IMMEDIATE

ACCEPTANCE CONSTITUTE AN OFFER TO SELL?

c) Yes.

8) Moulton v. Kershawthe salt trade case: Kershaw wrote to Moulton: in

consequence of a rupture in the salt trade we are authorized to offer Michigan fine

salt in full car load lots of 80-85 barrels, delivered at 85 cents per barrel. Kershaw

sent noted letter requesting shipment of two thousand barrels. Moulton didnt ship

b/c ct held that the language is not such that a businessman would use in making an

offer to sell.. a definite amount of property.IX. ADVERTISEMENTS

1) advertisements are generally deemed invitations to deal, rather than offers.

1) advertisements are usually indefinite as to quantity and other terms

2) sellers ought to be able to choose w/ whom they deal

3) adverts are typically addressed to the general public, so that if they

were considered to be offers, a seller might find her offer

overaccepted.

2) Lefkowitz v. Great Minneapolis Surplus StoreException to the general

rule

1) ad advert in a paper that it would sell fur stoles for one dollar.

2) Issue: CAN AN ADVERT TO THE GENERAL PUBLIC BE A

BINDING OBLIGATION REQ THE SELLER TO SELL THEADVERTISED MERCHANDISE?

3) The advertisement offered specific merchandise at a stated price to the

first person to present himself. There was no room to negotiate as the

offer was clear, explicit, and definite.

3) Leftkowitz: explicit first-come, first served, so exception to advertisement rule.

4) Fairmont Glass: language more specific immediateacceptance/circumstances: response to inquiry from specific customer.

5) Moulton v.Kershaw: Kershaw wrote to Moulton re: selling 80-95 barrels acarload (but w/ no specified carload number) at a certain price. Moulton wroteback and requested shipment of 2K barrels. Ct held that no contract created b/c

the language was not such a businessman would use in making an offer to sella definite amt of property. Harder to imply offer if no quantity specified AND

cant reasonably assume that offeror gave the offeree the right to choose quality.

6) BAIT AND SWITCH ADVERTISEMENTS: sellers try to attact customers byadvertising a product at a exceptionally low price (the bait) which the seller has

no intention of selling, in order to sell the cusotomer another product that willbring the seller a higher profitUniform Deceptive Practices Act makes this

prohibited.

7) RST 153: UNILATERAL MISTAKE:


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1) where a mistake of one party at the time a contract was made as to a

basic assumption on which he made the contract has a material effect

on the agreed exchange of performances that is adverse to him, the

contract is voidable by him if he does not bear the risk of the mistake

under 154 AND

2) the effect of the mistake is such that enforcement of the contract

would be unconscionable, OR3) the other party had reason to know of the mistake or his fault

caused the mistake

4) the other party can be returned to status quo

8) RST 154: When a Party bears the risk of a mistake:

1) the risk is allocated to him by agreement of the parties

2) he is aware, at the time the contract is made, that he has only limited

knowledge w/ respect to the facts to which the mistake relates but

treats his limited knowledge as sufficient

3) the risk is allocated to him by the ct.

4) judgment rather than clerical mistake

5) neglected a legal duty9) MISTAKEN BIDDERElsinore Elementary v. Kastorff:

1) Where P had an irrevocable option to accept Ds bid but learned of Ds

mistake of computation b/f accepting, is D entitled to rescission?

2) Reasons:

a) P knew that there had been a unilateral mistake by D.

b) D was not guilty in negligence in preparing the bid

c) D informed P promptly.

d) Would be unconscionable to enforce b/c mistake was

substantial portion of Ds bid.

3) the reason why court let the mistake go b/c the school would incur no

detriment while the contractor would incur detriment. However, if the

school had relied to its detriment on the contractors bid, the case couldhave gone the other way.

X. ACCEPTANCE

1) Requirements for a valid acceptance:

1) who may accept: generally, the offer may be accepted only by the

person to whom it is made.

2) Acceptance must be unequivocal: If the acceptance is qualified, then

it is not an acceptance but rather a counter offer, which works as a

rejection of the offer.

2) Unilateral versus Bilateral contracts:1) bilateral contracts: the mere giving of the counter promise to the

offeror is all that is required. The obj theory of contract prevails.a) BUT the offeree must have knowledge of the offer, and

notice of acceptance to the offeror is generally required

exception: when the offeror specifies no notice.

2) unilateral contracts: unilateral contract may be accepted only by doing

the act requested by the offeror, w/ knowledge of the offer and w/ the

intent to accept it.

a) normally notice to offeror is not required.


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b) Exception: when offeror requires that notice be given or

where the offeror has no reasonable means oof knowing that

the requested performance has been rendered.

3) Methods of Acceptance: Whether a contract is unilateral or bilateral makes abig difference in acceptance and revocation.

1) If all the offeror wants is a return promise, then if such a promise is

given, revocation becomes impossible2) But if the promisor requests act of acceptance, then the act itself must

be perfomed or the offeror can still revoke the offer.

3) RST 31: where the offer is unclear as to whether a bilateral or

unilateral contract is contemplated, it is the policy of the law to

construe it as an offer for a bilateralcontract.

4) Rationale: a bilateral contract affords immediate rights and complete

protection to both parties, since a contract arises as son as the offeree

promises to perform, whereas an offer for a unilateral contract does not

ripen into a binding contract until performance is actually rendered.

5) UCC 2-206: the UCC states that unless an offer to buy goods

expressly limits acceptance to shipment of the goods, it is to beconstrued as inviting acceptance either by shipment or by prompt

promise to ship the goods.

4) International Filter v. Conroe GinNo notice requested1) Must notice of acceptance be given if the offeror does not require it?

2) No. Here D, although using a form provided by Ps salesman, was the

offeror and made no stipulation as to notice of acceptance. On the

contrary, the agreement specifically provided that it would become a

binding contract when approved by an executive officer by P.

3) The real offeror was ConroeAccepted 2/10/1920. Once

approved by International Filter, it became a binding contract.

4) The notice did not specify that the executive officer had approved it,

but it did say We acknowledge and thank you for your order. Woulda reasonable person construe this as acceptance?

5)

5) RST 54: ACCEPTANCE BY PERFORMANCE Necessity of Notificationof to Offeror:

1) where an offer invites an offeree to accept by rendering a performance,

no notification is necessary to make such an acceptance effective

unless the offer requests such an notification.

2) If an offeree who accepts knows that the offeror has no means of

learning of performance no contract unless:

a) the offeree exercises reasonable diligence to notify the

offeror of acceptance.

b) The offeror learns of the performance w/in a reasonable timec) Offer indicates no notice was required

6) RST 56: ACCEPTANCE BY PROMISENOTICE:1) except as stated in 69 where the offer manifests a contrary intention,

it is essential to an acceptance by promise either that the offeree

exercise reasonable diligence to notify the offeror of acceptance or that

the offeror receive the acceptance seasonably.

7) RST 69: ACCEPTANCE BY SILENCE:


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1) silence as acceptance only works when:

a) where an offeree takes the benefit of offered services w/

reasonable opportunity to reject them and reason to know

that they were offered w/ expectation of compensation.

b) Where the offeror has stated/given offeree reason to believethat assent may be manifested by silence, and the offeree in

remaining silent intends to accept the offerc) Where b/c of previous dealingsit is reasonable for offeror

to assume he would be notified if no acceptance.

b) Hobbs v. Massasoit: eelskins sent w/out order but accepted/paid

several times. Last time no payment but no notice of rejection. Past

dealings created duty to notice rejection.

8) Magazine example: if one were reading the magazines, cutting them up, etc, this

would be inconsistent w/ her claiming that they really were still the offerors

magazines, not hers. She would effectively claiming ownership of the magazines

and thereby accepting the offer.

9) RST 56 says that a bilateral contract demands that the offeree communicate or

attempt to communicate the acceptance.

10) White v. Corlies &Tift:1) D sent note to P indicating that he could begin work immediately if he

would agree to finish w/in two weeksP never answered but

immediately purchased lumber and began work.

2) Issue: If an offer requests a promise, will Ps beginning performance

be sufficient to create a binding contract?

3) NO. No effective notice given or was tried to be given on this

acceptance of a bilateral contract.

4) The notice wasnt effective b/c done in his shop.

5) Couldnt claim reliance b/c materials used were customarily used in his

business.

6) All the offeree did was buy wood and work in his office, which wereall normal aspects of his job.

11) RST 32 INVITATION OF PROMISE OR PERFORMANCE:

1) In case of doubt an offer is interpreted as inviting the offeree to accept

either by promising to perform what the offer requests, or by rendering

the performance, as the offeree chooses.

12) COMPARE TO RST 62: Effect of Performance by Offeree where offerinvites performance or promise.

1) where an offer invites an offeree to choose b/n acceptance by promise

and acceptance by performance, the tender or beginning of the invited

performance or a tender of beginning of it is an acceptance of

performance.

2) SUCH AN ACCEPTANCE OPERATES A PROMISE TO RENDERCOMPLETE PERFORMANCE.

3) Ambiguous whether promise or performance is wanted.

13) INTENTION TO ACCEPT:1) obj theory: if a reasonable offeror would be justified in relying upon

the apprarent intent of the offeree as manifested by his conduct, then

acceptance will be deemed to have occurred, irrespective of an actual

intent of the offeree.


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2) does a sellers shipment of nonconforming goods constitute an

acceptance of the buyers offer to purchase?

3) NO. Price lists are mere quotations, esp D reserved right to change

prices.

21) UCC 2-206 Shipment of GoodsAcceptance v. ACCOMODATION:1) Unless other specified:

2) an offer to make a contract shall be construed as inviting acceptance in

any manner

3) An order to buy goods for prompt shipment shall be construed as

inviting acceptance either by a prompt promise to ship or by the

prompt shipment of conforming OR nonconforming goods, BUT THE

SHIPMENT OF NONCONFORMING GOODS IS NOT AN

ACCEPTANCE IF THE SELLER SEASONABLY NOTIFIES THE

BUYER THAT THE SHIPMENT IS OFFERED ONLY AS ANACCOMODATION TO THE BUYER.

XI. REVOCATION/REJECTION

1) Revocation of the Offer by the Offeror: when the offeror communicates arevocation b/f an acceptance by the offeree, the offer is terminated.

2) Requirements of effective revocation:1) words or conduct must be sufficient for a reasonable person to interpret

as a revocation.

2) The revocation must be communicated to the offeree

3) The revocation is generally held to be effective UPON RECEIPT

3) RST 42: an offeres power of acceptance is terminated when the offereereceives from the offeror a manifestation of an intention not to enter into the

proposed contract.

4) Revocation of Offer to the Public: may be revocked by publicity equivalent tothat given the offer.

5) OPTION CONTRACTS:UCC 2-205: FIRM OFFERS: an offer by aMERCHANT to buy or sell goods in a signed record which by its terms gives

assurance that it will be revocable, for lack of consideration, during the time

stated, OR if no time stated, for a reasonable time (no longer than three mos.)

ANY SUCH TERM OF ASSURANCE MUST BE SEPARATELY SIGNED BY

THE OFFEROR.

6) A firm offer is a promise not to revoke. Like any promise, it can be enforced ifwe have consideration. Similarly reliance may do if we can satisfy promissory

estoppel (RST 90). In contrast w/ promises generally, the law may enforce b/c of

mere formality (RST 87 (1), UCC 2-205). Finally the law may even be willing to

imply the promise (RST 87 (2)).

1) IN order to protect consumers, 2-205 only applies if both are

merchants to protect consumers.2) Offers for Consideration: RST 87: binding IF

a) in writing and signed by offeror, recites a purportedconsideration for making the offer, and proposes an

exchange on fair terms w/in reasonable time

b) is made irrevocable by statute.


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3) recitals: general rule has been that this recital is not conclusivects

reserve the right to see if consideration was actually paid. But

generally accepted.

4) Often small consideration accepted.

5) 87 (1) does not actually require consideration. If there is actually

consideration (e.g. something bargained for) the period can be

arbitrarily long. Remember, as long as there is a bargain.

6) RST 63: an acceptance under an option contract is not operative

until received by the offeror.

7) 45: partial performance by an offeree makes the offerors offer an

option contract, but the offeree hasnt accepted until the end of

performance. (this is forunilateral promises only).

7) RST 87 and 87 (2) : an offer which the offeror should reasonably expect toinduce action or forbearance ofa substantial characteron the part of the offeree

before acceptance and which does induce such action or forbearance is binding as

an option contract to the extent necessary to avoid injustice.

a) so under 87 (2) one can get reimbursed preparation costs.

8) When hedging a bet against price, the recital is probably not enough. The courtwill probably say the purported option is not for a reasonable time. A

reasonable time depends on how volatile the market.

9) TERMINATION BY LAW:

1) by lapse of time

2) Offers revocable where specified to remain open: offeror might still be

able to revoke

3) By death or destruction of the subject matter of the offer

4) By death or insanity of the offeror or the offeree.

5) By intervening illegality of the proposed contract.

10) RST 37: TERMINATION OF POWER OF ACCEPTANCE:1) the power of acceptance under an option contract is not terminated by

rejection or counter-offer, by revocation, or BY DEATH OF THEOFFEROR, unless the requirements are met for the discharge of a

contractual duty.

11) RST 48: an offerees power of acceptance is terminated when the offeree orofferor dies or is deprived of legal capcity to enter into the contract.

12)Dickinson v. DoddsRevocation of Offer Prior to Specified Term:1) Even if an offeror says he will hold his offer to sell open for a given

time period, may he sell the property to a third party prior to the

expiration of the specified time?

2) Yes. D can revoke the offer at any time prior to acceptance by P.

3) D had offered to sell property to P indicating tha thte offer was to

remain open until 9 on June 12. On June 11, P made up his mind to

buy the property. In the afternoon P was informed by a third party that

D had offered or agreed to sell the property to another person. IN theeven, P delivered his acceptance to Ds mother in law and D finally

received it at 7 am on June12.

4) B/f accepting Ds offer, P learned that D was going to sell to antoehr

person. This is sufficient constructive notice of Ds revocation of the

offer.


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5) The ct held that D was not bound by the option b/c there was no

consideration for it. The common law requirement for consideration

has been modified by UCC 2-205 which allows a merchant offero to

make an irrevocable offer by using a signed writing.

13)Ragosta v. WilderRevocation Prior to Acceptance by Performance1) An offeror may revoke an offer at any time b/f the other party accepts

by performing (in this caseby paying), as long as there is no

consideration for the option?

2) In this case, Ps secured financing and said that this was detrimental and

should constitute consideration for Ds promise to keep offer open.

However, while detriment may be considered consideration in some

circumstances, it can only be consideration if it is bargained for.

14) Rejection by the Offeree: if an offeree later attempts to accept the offer afterher previous rejection, her acceptance is a mere counteroffer.

1) qualified acceptance: generally acts as a counteroffer, and is

therefore a rejection of the original offer.

2) the line b/n qualified and unqualified acceptance is not always clear.

a) conditional acceptance: usually acts as a counteroffer.HOWEVER, if the condition was implicit in the offer or if

the offeree had a legal right to insist upon the condition

under the terms of the offer, the acceptance will be

considered unqualified acceptance.

b) Eg X accepts Ys offer to sell land but includes a condition

that Y give X good title.

3) Mother-in-law problem: Sara Hodgkin, a wido who lived alone her farm,

wrote her daughter and son-inla in Missouri offering the use and income of the

famr if they would move to Maine and take care of Hodgkin during her life.

They moved, and later problems developed. The mother tried to force them out,

and court said her promise was unilateral promise, so the offerees held an option

contract. So the daughter could move out or stay, and the old lady had to pay ifshe stayed until her death.

3) Minneapolis RR co v. Columbus Rolling Mill CoOrder specifying

quantity

a) Is an order that specifies a quantity not covered by the offer

a conditional acceptance and thus a rejection?

b) Yes. D had quoted prices for 2-5K tons of iron rails. P had

placed order for 1.2K tons. D then informed that wouldnt

work. The P tried to reorder 2K tons, and D said no.

15) UCC 2-207: Additional Terms in Acceptance or Confirmation:a) a definite and seasonable expression of acceptance operates

as an acceptance EVEN THOUGH it states terms additional

to or different from those offered, unless acceptance isexpressly made conditional on assent to the additional or

conditional terms.

b) ADDITIONAL TERMS ARE UNDERSTOOD ASPROPOSALS FORADDITIONS TO CONTRACT.

c) BETWEEN MERCHANTS, the proposalsbecome part ofcontract unless:

i) the offer expressly limits acceptance to termsof offer


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ii) they materially alter the offer

iii) notification of objection has already been given

or is given w/in a reasonable time after notice of

them is received.

16) Grumbling Acceptances: acceptances which express dissatisfaction but placeno condition on the acceptance generally are considered unqualified. When a

change is listed as a demand, it goes beyond mere grumbling acceptance andoperates as an implied rejection of the offer.

17) Inquiries/Requests: acceptances which include inquiries or requests by theofferee for a better deal generally do not impair the original offer.

XII. MAILBOX RULE

1) Acceptance effective on dispatch. 63.

2) Everything else effective on receipt 40, 42.3) Exceptions:

i) RST 63 (b) acceptance of option

contracts effective on receipt.

ii) RST 40: non-overtaking acceptance

4) general rule is that an acceptance is effective on dispatch, but all othercommunications are effective on receipt. The reason is that at the moment of

dispatch the offeree has done all that he can reasonably can to manifest assent.

5) Acceptance: to be effective, dispatch must be timely and made in a propermanner. Generally, dispatch should be in manner that the offer was sent.

6) Revocation: a revocation by the offer is effective only on receipt.

7) Rejection: a rej of the offeree by the offeree is effective only upon receipt. If anofferee sends a rejection and then an acceptance, there is no contact even thoughthe rej arrives after the acceptance was dispatched.

8) W/drawing acceptance: the general rule is that the power to w/draw a letter ofacceptance from the mail does not affect the formation of a contract when the

letter is deposited in the mail.9) LAST SHOT RULE: A sends an offer to B. B sends back an acceptance that

proposes an additional term. This additional term converts B acceptance into a

rejection and counter-offer. If A and B conduct their business as if they had

reached an agreement, a court may find that A accepted Bs counter-offer by

performance. B/c B sent the last form (fired the last shot) the terms in Bs form

will govern.

10) RST 40: rejection or counteroffer by mail/telegram does not terminate offeruntil received by oferror, but limits the power so that a letter/acceptance started

after the sending of an otherwise effective rej is only a counteroffer unless the

acceptance is received b/f he receives the rej/counteroffer.

11) RST 42: REVOCATION BY COMMUNICATION FROM OFFEROR

RECEIVED BY OFFEREE: an offerees power of acceptance is terminatedwhen the offeree receives the offeror a manifestation of an intention not to enter

into a proposed contract.

12) RST 63:

1) unless an offer provides otherwise, an acceptance made in a manner

and by a medium invited by an offer is operative and completes the

manifestation of mutual assent as soon as put out of the offerees

possession, w/out regard to whether it ever reaches the offeror


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2) BUT an acceptance under an option contract is not operative until

received by the offeror.

13) Overtaking acceptance:

1) e.g.: Day 1: Oliver sends offer.

2) Day 2: Anne sends rejection.

3) Day 3: Annie sends acceptance.

4) Day 4: Oliver receives acceptance.

5) Day 5: Oliver receives rejection.

14) Overtaking rejection: if acceptance doesnt arrive first and was sent alter, then

NO CONTRACT, mere counter offer.

1) Day 1: Oliver sends offer.

2) Day 2: Anne sends rejection.

3) Day 3: Anne sends acceptance.

4) Day 4: Oliver receives rejection

5) Day 5: Oliver receives acceptance.

15) ACCEPTANCE THAT DIFFERS FROM THE OFFERa) Battle of the Forms: typically a buyer send a purchase order to the seller.

The purchase order typically contains printed terms favorable to the buyer.

After receiving the order, the seller sends a written acceptance or

confirmation to the buyer. The acceptance contains the basic terms of sale

but also contains terms favorable to seller. The sellers terms may conflict

w/ buyers tersm.

i. Common Law: standard contract requires mirrorimageany variance therefrom material or not constitutes a

rejection of the original offer. It becomes a counteroffer.

ii. UCC 2-207: on the premise that both parties recognize acontract despite their clashing forms, the UCC establishes a

general rule that a contract can be formed under such circs,unless the responding offeree (the seller) specifically statesthat there shall be no contract unless his set of terms is

accepted by the original offeror, in which case the offerees

response is treated merely as a counteroffer.

b) Proposed additional terms: if the offerees response contains terms

additional to those contained in the original offer, a contract exists consisting

of the terms on which the offer and acceptance agree. The additional terms

are deemed a proposal for additions to the contract. Where the parties are

merchants the proposals become part of the contract unless:

i. the offerors original offer expressly limits acceptance to the

offered terms (take it or leave it)

ii. the additional terms are a material alteration of the contractc) Proposed inconsistent terms: If the offerees response contains terms

which are actually inconsistent w/ those contained in the original offer, the

parties conduct to determine whether they acted as tho a contract had been

formed. The conflicting terms cancel each other out.


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XIII. Pre-Contractual Liability

1) Exceptions to no liability before contract: one party, in reliance on theexpectation of a contract, confers a benefit on the other party and can seek

restitution to prevent unjust enrichment. In some circumstances, however,a

party who relies on an offer but does not confer a benefit on the other party

may still have a claim.

2) Promissory Estoppel: w/in limits, detrimental action or forbearance by thepromisee, in reliance on a promise, constitute a substitute for consideration and

renders the promise enforceable to some extent. The promisees detrimental

reliance is deemed sufficient reason to estop the promisor for asserting the lack

of consideration. For similar reasons, a growing number of courts hold that an

offerees foreseeable, detrimental reliance on an offer will serve as a substitute

for consideration, so as to create an option and prevent the offeror from thereafter

revoking the offer for at least a reasonable time.

3) 45: provides that an option contract is created when the offer invitesacceptance by performance and the offeree tenders or begins the invited

performance.

4) Drennan v. Star Paving CoLiability of a Subcontractora) When a general subcontractor relies on a subcontractors bid

but the subcontractor later declines to perform, does that

refusal constitute a breach of contract?

b) Yes. P received a clear and definite offer. Ps reliance wasreasonable and foreseeable by D. P relied to his detriment,

so this is sufficient to imply a subsidiary promise by D not to

revoke its offer.

c) Modern cases hold that if the reliance was reasonable andforeseeable, and if the reliance produced detriment, then the

subcontractor will be bound to this bid. This is a distinct

change from the old rule which required the general to

formally accept the subs bid b/f a binding contract existed.

5) Why is not 90 to enforce this case as if a promisors promise inducesforbearance then it is bindingThere is NOpromisethe bid is not a promise.

In order to invoke promissory estoppel, we need a promise.

6) Rule of Drennan: logic is that the sub makes an offer, the general relies on that

offer, relies on that implicit promise w/in that offer not to revoke the offer, and it

would be unjust for the sub to pull the offer.

7) In order toprevent bid shopping: general contractor cannot reopen bargainingwith another sub after learning of and claiming a continuing right to accept the

original offer.

8) The main difference b/n Drennan and Elsinorethe Elsinore ct placed great

emphasis on its belief that the school board could roughly be no worse off if the

general contractor were released.9) Holman Erection Co. v. Orville MadsenLiability of General Contractora) D used Ps bid and listed P as a sub. D won the contract but

used another sub, a minority-owned business, instead of P.

b) Does a general contractor accept a subcontractors bid

merely by listing the subcontractor in its bid?

c) No. The generally accepted rule is that the listing of a

subcontractor bid in a gen. contractors bid does not

constitute acceptance of the subs bid. This is true even


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though the sub is bound to his bid as submitted on the theory

of promissory estoppel.

d) The reason is that the general subcontractor relies on thesubcontractors bid. The subcontractor does not reliy on a

particular general contractor.

e) The nature of the bidding process requires that the general

contractor have flexibility in selecting the sub it hires.Subcontractors ordinarily submit their bids only house b/f

the general bid must be submitted. This does not leave the

general contractor with time to work out the specifics;

specific details must be negotiated after the award is made.

This prevents bid shopping and allows general contractorstime after award to evaluate subcontractors on factors other

than just the price of the bid.

f) THE GOVERNMENT is required by 1963 statute to use the

use subs listed unless they had a) lost license, or b) declaredbankruptcy. The government could chuck one off of the list

but only after a hearing for shoddy work.

10) Failed Negotiation:a) Sometimes negotiations involve considerable time and

expense by the parties. Where one party confers a benefit on

the other while working toward a formal contract, the

beneficiary may be required to make restitution if

negotiations fail.

b) Estoppel: During negotiations, one party may makerepresentations that induce the other party to incur expenses.

In such cases the party making the representations may be

estopped from disclaiming liability for natural consequences

of his conduct.

c) Ragosta v. Wilder: the ct noted that the trial ct had relied on

a part performance theory to allow the plaintiffs to recoverthe cost of obtaining financing. While this theory was

inapplicable to the case,promissory estoppelmight have

justified recovery. Plaintiffs entitled to enforcement of Ds

conduct if:

i) the promise induced them to take action of

a definite and substantial character

ii) injustice can be avoided only enforcement

of the promise.

11)Hoffman v. Red Owl Stores: Promise Incomplete as an Offer

a) If P relies to his detrimenton a promise made by D, andsuch detrimental reliance is foreseeable to D, P can recover

damages even though all details of the proposed transaction

are not included in the promise.

b) Promissory Estoppel applies here even though the promise

which was relied upon by P does not contain all the

necessary elements to form contract (here the plans for

construction, etc had not been decided upon).

c) Important!!!!: extends the promissory estoppel doctrinesince it does not rationalize it in terms of reliance as a


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substitute for consideration. Here, there wasnt even an

offer. There is simply negotiation. The implication is that

parties must bargain ingood faith.

d) Ct claimed Red Owl committed fraud because dont know if

they knew about the higher price before. B/c this apromissory estoppel case, they think, they should only give

reliance, which puts one back in the positon you were in b/fthe K happened.

12) Cyberchron Corp v. Calldata Systems: Estoppel to Avoid Injustice:a) If the parties never agreed to a material term of a contract,

but the buyer induces the seller to incur development costs in

the hopes that an agreement would be reached, the seller isentitled to damages under promissory estoppel.

b) NY has three elements for promissory estoppel:

i) a reasonable and foreseeable reliance by

the party to whom the promise is madeii) a clear and unambiguous promise

iii) an injury sustained by the party asserting

the estoppel by reason of the reliance.c) Trial ct found that Ds behavior, especially its abrupt

termination of Ps purchase order to purchase heavier,

inferior equipment from another party, was unconscionable.

d) D had directed P to proceed with production as if there had

been agreement on the weight issue, on the understanding

that they would resolve the purchase order terms in the

future.

e) Denied recovery for overhead, etc b/c couldnt prove they

were the result of relying on D.

13) Channel Home Centers v. GrossmanObligation to Negotiate in Good Faitha) A property owners agreement to negotiate in good faith and

to w/draw the premises from the market during thenegotiation binds the owner for a reasonable period of time.

b) Parties may agree to negotiate in good faith, and this

agreement may constitute a binding contract.

i) both parties manifested an intention to be

bound by agreement

ii) the terms of the agreement are sufficientlydefinite to be enforced

iii) there was consideration

c) In this case the letter of intent and the activities of both

parties, including planning by P and Ds efforts to obtainzoning variances, show that both parties intended to be

bound by an agreement to negotiate in good faith.d) D claims there was no consideration given but in reality the

letter of intent P gave D was valuable to D b/c D needed it to

secure financing. When P showed intered, D requested a

letter of intent that D would use to help secure financing. P

provided the letter of intent, which provided that D agree tow/draw the space from the mkt and that P otain necessary

zonig permits. D later told P that neogtioations were


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terminated b/c P did provide a mutually acceptable lease

w/in thirty days of the letter of intent. The next day, D

signed a lease w/ A RIVAL OF Ps for a higher rent than P

had negotiated.

XIV. Definiteness

1) RST 33 Requirements of Definiteness and Certainty of Terms: terms must be

sufficiently cler and complete so that the court can determine what the partiesintended and can fix damages in case ofnon performance.

2) Essential Terms: express or implieda) parties to the contract

b) subject matter of contract

c) time for performance

d) price

3) TRIBUNE I Contracts: a fully binding preliminary agreement which is createdwhen the parties agree on all the points that require negotiation (including whether to

be bound) but agree to memorialize their agreement in a more formal document.

Such an agreement isfully binding; it is preliminary only in form on ly in the the

sense that the parties desire a more elaborate formalization of the agreeemtn. It binds

both sides to their ultimate contractual objective in recognition that, despite the

anticipation of further formalities, a contract has been reached.

4) TRIBUNE 2 Contracts: dubbed a binding preliminary commitment, buy JudgeLeval, is created when the parties agree on certain major terms but leave other terms

open for further negotiation. The parties accept a mutual commitment to negotiatetogether in good faith in an effort to reach a final agreement. In contrast to tribune I,

a type II agreement does not comit the parties to their ultimate contractual obligations

but rather to the obligation to negotiate the open issues in good faith in an attempt to

reach the objective w/in the agreed framework. Indeed, if a final contract is not

agreed upon, the parties may abandon the transaction as long as they have made a

good faith effort to close the deal and have not insisted on conditions that do not

conform to the preliminary writing.

5) Implication of reasonable terms: the general trend of the courts is to adopt a policyof liberal construction so as to uphold the reasonable expectation of the parties; thus,

the court will usually imply reasonable terms (i.e. implied-in-fact terms from the

dealings and relationship of the parties) where none are expressly covered by the

parties. (e.g. failure to specify price may not invalidate the contract.)

a) Where price is completely omitted: where the parties have made noprovision for price but a charge was intended, the court will normally implya reasonable price. (e.g. fair mkt value for goods).

b) Where the price stated is indefinite: Often, however, where the partieshave made some attempt to include terms on the price but it is stated in such

a vague way as to unintelligible, the courts will refuse to imply a reasonable

price, and the contract will be unenforceable due to lack of certainty on anessential term (e.g A agrees to employ B at a rate not exceeding 300 dollars

per week).

6) UCC 2-204: in contracts for sale of goods, the omission of one or more essentialterms does not render an offer invalid, as long as it appears that the parties intended

to make a contract and there is a reasonably certain basis for giving an appropriate

remedy.

7) RST 33: restatement takes the same approach in effect.

8) Toys v. F.M BurlingtonConditional Exercise of Option:


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a) If an optionee gives notice of exercising the option but later disputes the

terms of the agreement, may the optionee enforce the option agreement.

b) An acceptance that varies from the offer does not create a contract. A replymust exceed the terms of the proposal without qualifying the acceptance,

however where the addition is merely a requestbut NOT a condition.

c) In this case, P clearly had notified D of its intention to exercise the option.

The subsequent dispute about the rental rate could be construed as anagreement by the parties to a withdrawal of Ps notice of intention to

exercise.

d) The consideration Toys gave was the previous 5 year leasethis was

consideration for the option to renew.

9) Oglebay Norton Co. v. ArmcoOmission of Specific Price Term in Long-TermContract

a) Iron ore case. A party can enforce a long-term service contract where the

price is not specified and the parties must periodically resort to the court to

determine a reasonable price.

b) D claims here it never consented to be bound by a contract once the specifiedpricing mechanisms had failed, and that the contract was therefore

unenforceable. However the evidence of a long-standing and close business

relationship; supports the courts findings that the parties intended to be

bound, even in the event the pricing mechanisms failed.

c) RST 33 and UCC 2-305 (1): If the parties intend to conclude a contractbut the price is not settled, the price is a reasonable price at the time of

delivery if the contract requires the price to be set by some standard and it is

not so set.

d) UCC much more willing to fill terms in than is common lawincludingprice. The only thing it wont fill in is quantity.

e) Cts willing to fill in terms for Oglebay b/c there were 2 methods forprice. The contract, as well as the long term business relationship, led the ct

to believe that parties intended to be bound. The intent to bind that matters is

during the formation of the first agreement which was made in 1957.

f) BUT SHIPPING not a good, so RST 33 rather than 2-305 was used tofill in.

10) STATUTE OF FRAUDS

a) Statute of frauds is a necessary but not sufficient condition of contractlaw. Even if you satisfy the s.o.l. this does not make the contract

enforceable BUT failure to have a writing is enough to make the contract

Unenforceable.

b) 6, 8: Unless a promise, contract, etc, is in writing and signed by the partyto be charged no action shall be brought in any of the following cases

i) upon any contract for the sale of real

estate or for the lease thereof forMORE THAN A YEAR

ii) upon any agreement that is not be

performed WITHIN a year

c) Courts usually only enforce the within a year requirement if the agreement

is not THEORETICALLY possible, even if it is not PRACTICALLY

possible.

d) What if I agree to work for the law school for the rest of my life?

Theoretically could die w/in a year, so doesnt have to be in writing.


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e) What if

69 contracts outline

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