Attack Outline

QUESTION 1: WAS THERE AN AGREEMENT FOR PROMISE?

Three Dimensions of Law
 doctrine – the rule
 facts – drive outcome of cases
 theory – the rationale/reasoning for the doctrine

Uniform Commercial Code (UCC)

 attempt to combine contract law for all states – adopted and binding on all states (except Louisiana)
o passed in varying degrees in state law – most states have adopted some form of UCC
 Article 2 – the sale of goods
o if a contract does not involve the sale of goods UCC does not apply – lease of goods, sale of land, employment

Restatement (Second) of Contracts

 attempt to make contract law coherent – to summarize all existing contract law
 not binding – usually very persuasive

Restatement (14)
 1 – contract defined
 2 – promise, promisor, promisee, beneficiary
 3 – agreement defined; bargain defined
 4 – how a promise may be made

Shaheen v. Knight (failed vasectomy)(11)- no contract w/ healthcare provider for guarantee of cure

QUESTION 1: AGREEMENT FOR PROMISE?

THE OBJECTIVE THEORY OF ASSENT

Contract Formation
 requires
o mutual assent of the parties – “meeting of the minds”
o some showing that this assent is the kind the law will enforce

Mutual Assent – “objective manifestations of subjective intent”

 essential to contract, but assent is measured by actions

Restatement (304)
 §17 – requirement of a bargain
 §18 – manifestation of mutual assent, “each party makes a promise or renders a performance”
 §19 – conduct as a manifestation of assent, “if the act is intentional and actor knows B will infer assent”
 §22 – may find mutual assent even if neither offer or acceptance can be defined

Objective Theory of Assent

 parties give actual and apparent consent
 promisor’s subjective intention relevant only to the extent it is manifested to the promisee
 promisee’s subjective intention relevant to the extent that the promisee relied on the promisor

Embry v. Hargadine, McKittrick Dry Goods Co. (employee “I quit”, “you’re fine”) (290)
 rule – intent is determined by outward manifestation of intent; if a reasonable person could believe there was a contract formed a
contract was formed. R2C §17 applies b/c boss promised, employee began performance.

Reasonable Person Standard

 a contract is formed irrespective of parties’ secret intention if:
o a reasonable man would believe a contract had been made; and
 reasonable man – the average person and a reasonable person like the type of person the promisee is
o the plaintiff so understood that a contract had been made
 (a) highly abstractive person – hypothetical image, not an actual person
o most objective
 (b) person like the promisee – same intelligence, experience, shrewdness, etc
o degree of subjectivity and objectivity
 (c) person who would interpret based on the type of person the promisee appears to be to the promisor
o subjective
o look at the situation from the promisor’s perspective
Texaco v. Pennzoil (SEC filing and press release outward, conversations w/ Getty subjective)(323)
 rule – outward manifestations of intent are used, not hidden intent

Lucy v. Zehmer (land contract on bar check)(296)

 rule – subjective intent doesn’t matter; only outwardly manifested intent matter

WHAT IS AN OFFER?

Restatement (316)
 §22 – mode of assent: offer and acceptance
 §24 – offer defined, “so as to justify to another person his assent to that bargain is invited and will conclude it”
 §26 – preliminary negotiations
 §29 – to whom an offer is addressed
 §33 – certainty, “terms of K are reasonable certain if they provide a basis for breach and/or remedy”

UCC (317)
 2-204 – formation in general “court should focus on the existence of an agreement btw. parties, not concerned about technicalities”
 2-206 – offer and acceptance in formation of contract, “unless indicated, acceptance by any manner reasonable”
 2-305 – open price term
 2-308 – absence of specified place for delivery
 2-309 – absence of specific time provisions; notice of termination
 2-310 – open time for payment or running of credit; authority to ship under reservation

Offer and Acceptance

 offer – external manifestation of willingness to enter into a bargain, made in justifying to another person that his assent to the bargain
is invited and will conclude the bargain
 acceptance – an offeree’s assent, either by express act or implication from conduct, to the terms of an offer in a manner authorized or
requested by the offeror, so that a binding contract is formed
 objective determination of whether the offeree was reason to believe the offeror was making a valid offer
o the less clear the offer, the less likely the parties will be bound by acceptance
 certainty – manifestation of intent must be certain for contract to be valid
o difference between an offer and a solicitation
 for a contract to be formed, must show:
o parties have intended to make a contract – outwardly manifested intent
o there is a reasonably certain basis for giving the appropriate remedy

Nebraska Seed Co. v. Harsh (invitations to bargain)(305)

 rule – advertisements are invitations to receive offers, not actual offers, so a party cannot create a contract by “accepting” the ad.
 Would be subjected to suit by each party receiving letter even though his supply exhausted.

Leonard v. Pepsico (308)

 rule – advertisements are only offers if it is clear, definite, explicit, and leaves nothing open for negotiation; can’t make an offer to the
world
 Cf. Carbolic Smoke b/c no “jets waiting” like “$10K in bank”.
 Cf. Lucy- here, everyone in on joke.
 Same as Nebraska, offer open to the whole world

Written Memorial Contemplated

 example – letter of intent

Restatement (322)
 §27 – existence of contract where written memorial is even just contemplated (unless circumstances show agreements are just
preliminary negotiations)
 Emphasis on intent rather than form

Empro Manufacuring Co. v. Ball-Co Manufacturing, Inc. (319)

 rule – letters of intent are not binding if there is evidence that the parties do not intend to be bound
 if intent judged subjectively, every case would go to a jury- highly inefficient.

Texaco v. Pennzoil (found intent to be bound, even where parties contemplated more formal agreement)(323)
 factors to determine if a party intended to be bound by a formal signed writing:
o whether a party reserved the right to be bound only by a written agreement;
o whether there was partial performance that was accepted; (partial perf. evidence that parties believe there is a K)
o whether all the essential terms have been agreed upon;
o whether the contract was so complex that a written contract would be expected
 rule – R1C- letters of intent are binding unless parties explicitly state that they do not intend to be bound

Revoking an Offer
Restatement (333)
 §25 – option contracts, “promise meets requirements of contract, and limits promisor’s power to revoke offer”
 §35 – the offeree’s power of acceptance
 §36 – methods of termination of the power of acceptance: (1)rejection/counteroffer, (2) time lapse, (3) revocation, (4) death
 §37 – termination of power of acceptance under option contract (none of the above kill an option)
 §42 – revocation by communication from offeror received by offeree, “’ee receives manifestation of intent not to enter into K.”
 §43 – indirect communication of revocation “’or take definite action inconsistent w/ intent to enter into K.”

UCC (335)
 2-205 – firm offers, only applies to goods, merchants, and signed writings “not revocable for lack of consideration”

REVOCATION

Elements:
1. offer unambiguously changes her mind
2. must be communicated to offeree

4 situations can not revoke:

1. Option
2. Firm offer rule.
3. Reliance
4. Unilateral contract offer, and performance has begun.

Dickinson v. Dodds (328)

 must give notice of revocation:
o express – telling the offeree of the revocation; or
o implied – the offeror takes actions that indicate he does not intend to fulfill the contract and the offeree acquires reliable
information of those action
 options contract – an offer that is included in a formal or informal contract; especially a contractual obligation to keep an offer open
for a specified period, so that the offeror cannot revoke the offer during that period
 rule – an offer can be rescinded any time prior to acceptance (unless it is an options contract); offeror must give either express or
implied notice of revocation to offeree; offeree cannot accept after finding out about a revocation

WHAT IS ACCEPTANCE?

Under Common Law

(UCC rejects mirror image and last shot, go to “additional terms”)

Mirror Image Rule

 mirror image rule –“any qualification of or departure from those terms invalidates the offer, unless the same is agreed to by the
party who made it”

Restatement (338)
 §61 – “acceptance which requests change or addition to the terms is not* invalidated unless acceptance is made to depend on assent
to the changed or added terms” (*is counteroffer)

Last shot rule

 Offer (buyer’s terms) -> Response (seller’s terms) = COUNTEROFFER.
o Either can renig- no contract
o But if buyer accepts the package ->implied acceptance of counteroffer -> contract created on seller’s terms

Ardente v. Horan (house + personal items)(336)

 rule – acceptance may not impose additional qualifications on the offer (if it does it is a counteroffer)
 P’s letter of acceptance was conditional, serves as rejection

Acceptance by Correspondence – The Mailbox Rule

Mailbox Rule (acceptances)

 mailbox rule – an acceptance is effective upon dispatch
o does not matter if the acceptance gets lost – the contract has been made (but enforcement might be a problem)
o offeror cannot rescind the offer or acceptance after the acceptance has been mailed
 the offeror is “master” of the offer and can determine the rules
 exception: option contracts- not operative until received by offeror

Restatement (341)
 §63 – time when acceptance takes effect
 §65 – reasonableness of medium of acceptance

Acceptance by Performance/Unilateral Contracts

Unilateral Contracts
 a contract in which only one party makes a promise or undertakes a performance; a contract in which no promisor receives a promise
as consideration for the promise given
o acceptance by performance
 x promises, y performs
 only total performance is acceptance

Restatement (356)
 §54 – acceptance by performance; necessity of notification to offeror
 Offeror invites acceptance by performance: no notice necessary (unless requested)
 Offeror does NOT invite acceptance by performance + offeree knows ‘or doesn’t know, no contract unless:
o (a) diligently notify offeror; or
o (b) ‘or must learn of acceptance in reasonable time; or
o (c) offer indicates no notice necessary.

Carlill v. Carbolic Smoke Ball, Co. (343)

 rule – the offeror receives notice of acceptance of a unilateral contract when notice of performance is given
 unilateral promise- not duty to notify
 Cf. Pepsi Co.- here, deposited money in the bank

Leonard v. Pepsico (356)

 rule – an offer is not a unilateral contract if the offer is too uncertain

Acceptance by Silence

Restatement (369)
 §69 – acceptance by silence only acceptable where, “(a) knows compensation expected, (b) ‘or says silence ok, (c) previous dealings”

Hobbs v. Massasoit Whip Co. (368)

 rule – a contract can be accepted by silence if there is a previous relationship between the parties that leads one party to understand
that silence is acceptance

E-Commerce and Mutual Assent

Specht v. Netscape Communications (Netscape failure to require users to indicate assent)(370)

 types of licenses
o shrink wrap – if don’t want to enter into contract, return the product
o browse wrap – product can be downloaded without assent (the software here), notice of la on site, can click to
o click wrap – product cannot be downloaded without clicking assent
 rule – assent to a license agreement must occur before use in order for the license agreement (here, arbitration clause) to be binding

Registrar.com, Inc. v. Verio, Inc. (repeated violations of terms, w/ knowledge)(379)

 rule – if an offeree takes a benefit with knowledge of the terms of the offer, the taking constitutes an acceptance of the terms

CONSIDERATION? (615-640)
**watch for past consideration, pre-existing duty rule

R2K §71 -“to constitute consideration, a performance or return promise must be bargained for”
R2K § 74 – settlement of claims and consideration
R2K §79 - court doesn’t assess the adequacy of consideration, except where sham (R2K §364- unfairness, $1 for $100)
R2K §81- consideration does not have to be the only motive, inducing cause
R2K §86 - Past Consideration
R2K §89 – Modification of Executory K
R2K §364. Effect of Unfairness

UCC §2-209 UCC on Modification- “good faith” is backstop. Rejects pre-existing duty rule.

Bargained for K v. Gratuitous Promise (636)

R2K §24 Cmt. B: ‘ee (receiver of the gift) must give promise or performance for offer. Not enough that there is a promise performable on a
certain contingency.

 Is there consideration?
a. Bargained for Exchange  Promise is given as part of a bargain  promisor makes his promise in exchange for promisee
giving of value or circumscription of liberty

i. Bargain for  promisor giving promise in exchange for promisee’s return promise/performance (r2k §71(2))
- Performance = act, forbearance, creation/destruction, modification of legal relationship (r2k §71(3)(a)-
(c))
 - Mutual inducement of promise/performance sought by promisor and promisee

ii. Proposal of a Gift  No consideration (r2k 24)

Johnson v. Otterbein (691)  promise to pay money as a gift (gratuitous promise/conditional gift) lacks consideration

iii. Past Consideration  Not binding if

- Promisee conferred past benefit as a GIFT or
- Extent that the value of the promise is disproportionate to the past benefit received
- want people to feel free to make promises to each other

Moore (Clairvoyant) v. Elmer (639)  Promise must be limited to cases where request implies an undertaking to pay  not mere favor turned
into consideration at later time because it was asked for,

Mills v. Wyman (sick son) (moral consideration)  moral obligation is sufficient consideration for an express promise  is limited to cases
where valuable consideration existed (facts of the case- son was old enough, no consideration)

Webb v. McGowin (falling log) (moral consideration)  “moral obligation is sufficient consideration to support subsequent promise to pay
where promisor received a material benefit”

b. Detriment  Promisee gives up something of value or circumscribes his liberty

i. Non-economic detriment  suffice for consideration

Hamer v. Sidway  “A waiver of any legal right at the request of another party is a sufficient consideration for a promise”  Abandons legal
right as an inducement for the promise

ii. Adequacy  if requirement of consideration is met NO ADDITIONAL REQUIREMENTS (value, equivalence, or

mutuality) (r2k 79)

- Value of some sort must be exchanged but do not have to be equal

 UNLESS  value is easily and objectively measured

- Exception  Pretended Exchange “sham” or “nominal” consideration (r2k 79 comment d)

 Nominal consideration will suffice if formalities are met for Firm Offers (UCC 2-205), Option
Ks (r2k 87), and Suretyship K

New & Snell’s Bank v. Hunter (want of consideration) surrender of worthless piece of paper was of no value to either party, not benefit
received and no loss (easy to tell value of worthless stock). Transaction w/o consideration.

iii. Pre-existing Duty Rule  If party does or promises to do what he is already legally obligated to do or forbears from
doing something he is not legally entitled to do  did not incur detriment for consideration

Stilk v. Myrick (656) Contract was to do anything they could to get ship back safely, included having to work extra for lost seamen.

Alaska Packers (Contract modification/Preexisting Duty Rule)  No consideration because new K was to “render exact services as stated in K
simply for more money”  cannot take advantage of other party (coercion)
Cf. Stilk- while both lacked consideration, Stilk sailors had to do more work- assumed signed on when signed up

Doctrine of Unforeseen Circumstances

Brian Construction v. Brighenti  if burdensome conditions not anticipated and not within the contemplation of the parties at the time K was
created arise and new dealings are reasonably contemplated by parties  New K has consideration

- Modifications  binding if
 Fair and equitable (r2k 89(a))
 If justice so requires because of reliance (r2k 89(c))

iv. UCC 2-209  Modifications  need NO consideration to be binding

- Must be good faith
- No oral-modification clause must be complied with
- Rejects the pre-existing duty rule as a way of policing problem of the “extortion of modification” in favor
of a more direct approach.
Settlement of Claim

 Dyer v. National-by-Products (P was promised lifetime employment if he didn’t sue, and then laid off ) “forbearance of legal claim is
sufficient if there is any reasonable ground for P’s belief that it is just to enforce his claim”  must be asserting claim in good faith
- Claim must be asserted on good faith, doesn’t mean claim will WIN
QUESTION 2: REASON AGREEMENT SHOULD NOT BE LEGALLY
ENFORCEABLE?

STATUTE OF FRAUDS
R2K §110
R2K §125 Land
R2K § 129 Reliance and land
R2K §130 1 Year provision
R2K §139 Reliance as COA
R2K §143 Unenforceable K not inadmissible evidence
R2K §131 Writing Requirement
R2K§ 133 Writing not required?
ESIGN ACT 2000 – electronic signatures count

UCC §2-201 (Art. 2 SoF)

- applies to goods > $500. Two rules: 1) state how many, and 2) Answer the Damn Letter Rule

1. Does the STATUTE OF FRAUDS Apply? Is the K in writing? (r2k 110) (511)
a. About Enforceability, not existence of K
b. Restatement
i. Types
- Executor, Suretyship, Marriage
- Land K  (r2k 125)
 Exception  Short-term Lease (r2k 125(4))
 Even if not in writing…Action in Reliance (r2k 129) Specific Performance available if
reliance was
o Reasonable and consented to AND
o P changed position or detrimentally relied (PE)
- 1-Year  (r2k 130)
 If complete performance of the contract is impossible within one year from the making
 subject to SOF (r2k 130(1))
 Complete Performance by one party does not prevent enforcement of the promises if not
in writing (r2k 130(2))

Boone v. Coe (511)(family traveled to promised farm land)  “damages can not be recovered for K in violation of SoF” Exception for
compensation of improvements does not apply because D was not unjustly enriched.

Schwedes v. Romain (520) (vacation home, attny “no need to travel”)  Oral promise was not legally binding for land K. No part performance
only acts undertaken in contemplation of eventual performance.

ii. Writing Requirement

- Signed Writing with (r2k 131)
 Reasonably IDs subject matter AND
 Sufficient to indicate K was made about subject matter between parties or offered by
signor to other party AND
 States essential terms with reasonable certainty
- Need not be memorandum of K (r2k 133)
 Just must be signed by party against whom enforcement is sought

Leonard v. PepsiCo (524) No writing to evidence a contractual relationship or referring to the transaction. Commercial ≠ writing. Order only
has P’s signature.

iii. Unenforceable K can be used as evidence for other purposes (r2k 143)

c. UCC 2-201
i. K for sale of goods over $500 must be in writing sufficient to indicate K made and signed by party against
whom enforcement is sought (2-201(1))
ii. Merchants (2-201(2)) if arrives
- Within reasonable time
- Signed by party against whom enforcement is sought
- Receiving party has reason to know of writing’s contents
- Valid UNLESS written objection in 10 days
iii. Exceptions
- Specially manufactured (2-201(3)(a))
 Not suitable for sale to others AND
  Manufactured for buyer AND
 Substantially began production prior to notice
 Riley v. Capital Airlines
- Admission of K (2-201(3)(b))
- Payment made and accepted

Riley v. Capital Airlines (made special methanol container)  Unexecuted portion is unenforceable because not in writing. Already paid for
completed portions but can recover for the loss of expenditures reasonably incurred in reliance (i.e. tanks, equipment, etc.)

d. E-SIGN Act  Emails and e-signatures generally satisfy requirements of SOF

Cloud Corp v. Hasboro (World Wide Aquarium) Emails and electronic signatures satisfy requirement of a writing with signature for SOF. “A
K or other record relating to the transaction should not be denied legal effect merely because it is in electronic form and sender’s name on an e-
mail satisfies the signature requirement of SoF”

In re Real Networks  Looks to dictionary definition of a writing at the time of drafting Federal Arbitration Act. Finds electronic writing
sufficient to satisfy SOF because easily printable and storable.

PROMISSORY ESTOPPEL
R2K §87 Option K
R2K §90 c/a based on PE
R1K §90 “…act and forbearance of a DEFINITE AND SUBSTANTIAL CHARACTER…”
R2K §530 Misrepresentation

Elements:

1) Promise
2) Reasonable expectation by promisor that promisor’s conduct and intent will induce reliance
3) Promise does induce action/ forbearance
4) Injustice can be avoided only by enforcement
5) Remedy may be limited as justice requires

 Williston – PE as substitute to/alternative form of consideration.

o Williston: The written agreement has a unique and powerful force of influence. To the extent that the written agreement is
clear in meaning to a reasonable person, that written agreement is the superseding force that dictates the terms of the
contract (to the exclusion of parol evidence to the contrary). FOCUS: The integration practices of reasonable persons
acting normally and naturally. Expectancy.

 Corbin – PE as alternative and independent basis for enforcing promises- a separate theory of obligation; redressing harm in absence
of bargained for K.
o Corbin: The written agreement only contains the unique and powerful force when the parties intend the agreement to have
such a force at the time the written agreement is executed. If there is compelling evidence that one of the parties did not
intend for the written agreement to be the final say on the matter, then that evidence must be considered by a jury if the
evidence is sufficiently compelling. FOCUS: The intention of the parties. Reliance.
 R2k 90 – generally consistent with the Corbin view.
o If we went the Williston route, Hoffman would have been left high and dry b/c lack of mutual assent to be legally bound.
o The Williston view has not disappeared, but Corbin has been incorporated into r2k 90.

- Family Promises  promise to make gift by one family member to another

Ricketts v. Scothorn  When the payee changes her position to her disadvantage in reliance on a promise, a right of action on the promise arises

Greiner v. Greiner (promise to convey land) reliance reasonable because family member remained silent in face of significant expenditures in
reliance on promise  indicates intention to be bound. Factors: ‘ee acted as he wouldn’t w/o promise, ‘or is aware of reliance, ‘or remains silent.

- Promises of a Pension

Feinberg v. Pfeiffer  P reasonably relied on promise of pension and became disqualified from obtaining other good employment

- SubContracting Bids  when sub-contractor makes a bid to the general contractor and he relies on
the bid in computing his own master bid on a job  PE used to make sub-bid temporarily
irrevocable (if writing does not speak to it  look to the circumstances, customs of the trade)

James Baird v. Gimble Bros (HAND)  PE shall not be applied in cases where there is an offer for an exchange, as the offer is not
intended to become a promise until consideration is received  language of contract said acceptance of estimate bid does not occur until
general K is awarded. “Unless there are circumstances to take it out of the ordinary doctrine, since the offer was w/drawn before it was
accepted, the acceptance was too late.”. Should have paid for a firm offer option.
Drennan v. Star Paving  made an implied promise which they should have reasonably expected would induce the P to submit a bid based
upon it, the action occurred and fairness and equity support enforcement Subcontractors are subject to an implied promise of irrevocability.

Blatt v. USC  P suffered no real detriment, real promise was that he would be eligible not that he would necessarily get in. Promise made was
not actually breach; “eligible for coif”. Starting to get to PE as c/a…

ii. As Alternative Cause of Action  Corbin (no enforceable/bargained for K  just reliance)  No intent to be
legally bound but want to give some kind of remedy

Goodman v. Dicker  by own language or conduct (told they were getting the franchise), leads another to do something (hired people, rented
space), person shall not be subject to loss/injury in reliance  no promise in this case b/c no intent to be legally bound by company. “he who by
his language or conduct leads another to do what he would not otherwise have done, shall not subject such person to loss/ injury by
disappointing the expectations upon which he acted.” Expectation damages not appropriate.

Hoffman v. Red Owl  Promise for purpose of PE does not have to be so comprehensive that a K would be created upon acceptance by
promisee. Red Owl representative- misrepresented what would generally happen if Hoffman performed such acts.

- Elements for Cause of Action (r2k 90)

 Promise
Spooner v. Reserve life Ins. (Illusory)  action in reliance upon a supposed promise creates no obligation on and individual whose only
promise is wholly illusory. Illusory= “so indefinite it can not be enforced OR by provision makes its performance optional or entirely
discretionary on the part of the promisor”
 Reasonable reliance
 Reliance in fact/actual reliance, AND
 Injustice results if no enforcement

2. Is the K void or voidable due to DURESS, MISREPRESENTATION, UNCONSCIONABILITY or CAPACITY?

a. CAPACITY
i. Definition and Types R2k 12  persons who cannot manifest assent to contract
- Under guardianship
- Infant
- Mentally ill/defective
- Intoxicated
- “no one can be bound by K who does not have the legal capacity to incur at least voidable K duties”
ii. R2k 15  K void if by reason of mental disease or defect
- Not able to understand nature of the transaction OR
- Unable to act in reasonable manner in relation to transaction AND
- Other party has reason to know of other’s incapacity

Ortelere v. Teacher’s Retirement Board- applies modern rule of mental capacity “disruptions in personality count, despite cognitive abilities”.

b. MISREPRESENTATION 
i. Misrepresentation = assertion not in accord with the facts r2k 159
ii. Misrepresentation that is Fraudulent v Material r2k 162
- Fraud  knows/believes does not match facts, does not have confidence in truth, OR does not have
basis
- Misrepresentation material when likely to induce person to manifest assent
iii. Both fraud and material voidable.
iv. Even honest misrepresentations matter under K law.
v. Inducing cause R2K 167
- Misrepresentation= inducing cause when “substantially contributes” to party’s decision to manifest
intent.

Vokes v. Arthur Murray -> dancing grandma gets her day in court.

Halpert v. Rosenthal -> termites. Even innocent misrepresentation of facts warrants granting a claim for rescission.

c. DURESS
R2K §175 (p.1011) – “Assent is induced by threat that leaves the other party w/ no reasonable alternative”
R2K §176 – When threat is improper
R2K §177 – Undue influence makes K voidable
d. UNCONSCIONABILITY
i. UCC §2-302 and common law (R2K §208), “ Unconscionable terms may void part of contract or entire
contract.”
ii. Procedural unconscionablity- unfair surprise. Problem w/ agreement process.
iii. Substantive unconscionability- oppressive terms.
iv.

Williams v. Walker Thomas Furniture ->Expensive stereo equipment to woman with 7 kids
 e. PRINCIPLES OF ENFORCEABILITY: party based, standards based, process based

Marvin v. Marvin ->autonomy to contract

Morone v. Morone-> decline to recognize a contract implied from rendition of services

Posner v. Posner-> pre-nup void where wealthy husband lacked good faith and candor

QUESTION 3: WHAT ARE THE TERMS OF THE AGREEMENT?

DISCERNING THE AGREEMENT

Objective Interpretations of Assent

 hierarchy
o did both parties subjectively assume the same meaning of the term?
 course of negotiation, performance, duties
o if no subjective agreement can be shown, there is a misunderstanding – does one party know or have reason to know that
the other party has attached a different meaning to the term? what is this meaning?
 if so, there is a manifestation of intent to this meaning
o what is the objective meaning of the terms?
 if the objective meaning can be determined and one of the parties mistakenly interprets a word with an objective
meaning, that party is still bound by the objective meaning
 formula
words of contract > course of negotiation > course of performance > course of dealings > usage of trade

Interpreting the Meaning of the Terms

Problems
 vagueness – whether a term was meant to apply beyond its clear core meaning
 ambiguity – what meaning of the term applies
 in interpreting the meaning of terms, courts have adopted an objective approach with a subjective twist

Ambiguous Terms- “subj/obj meaning of terms relevant: obj normally controls, unless both parties share the same understanding”

Restatement (408)
 §200 – interpretation of promise or agreement
 §201 – whose meaning prevails: same meaning if both interpret; meaning of the unknowing party if both interprets diff.. Neither party
bound by meaning of other, even though may be failure of mutual assent.
 §202 – rules in aid of interpretation

UCC (409)
 1-205 – course of dealing and usage of trade
 2-208 – course of performance or practical construction

Raffles v. Wichelhaus (ex Peerless) (396)

 objective approach – parties judged by their conduct
 subjective approach – each party’s interpretation
 rule – when terms are ambiguous there is no meeting of the minds and therefore no contract
 “mutual mistake” voids contract.

Oswald v. Allen (coin collection)(407)

 rule – there is no contract if there is an ambivalent term in a contract and no way of choosing between the two parties’ different
interpretations of that term

Vague Terms
 where unclear whether term was meant to apply beyond its plain meaning
hierarchy of context (cf. UCC §1-205) p. 410
 1.express terms
 2. course of performance (b/t parties on this particular contract)
 3. course of dealing (b/t parties, in other interactions)
 4. usage of trade (what industry usually does) (R2C §202 (3)(b)) Technical terms and words of arts
given industry meaning

Weinberg v. Edelstein (“dresses”) (411)

 rule – look to the hierarchy of terms to determine the proper interpretation of an ambiguous term. Here, usage of trade.

Frigaliment Importing Co. v. B.N.S. International Sales Corp. (415)

  rule – “if the plaintiff wants to construe terms in a manner narrower than their normal use, then the plaintiff must show that the
narrower meaning was the intent of the parties or is universally accepted in trade usage.”

IDENTIFYING THE TERMS OF THE AGREEMENT

Agreements to Agree

Filling Gaps in the Terms

Gap-Filling
 implied in fact – terms that are those that the parties actually, albeit implicitly, had agreed to
 implied in law – terms that are thought to be imposed on parties without their consent
 supplying terms – when a court “fills in the gap” when contracts are silent on an issue
 default rules – the legal rules that the parties can avoid or vary by means of an express clause that differs from the term a court will
otherwise supply by default
 immutable rules – legal rules that may not be varied by consent and will override any express clause to the contrary

Pros and Cons

 pros
o save parties the expense of negotiating because they don’t have to negotiate for every term – the UCC will fill in the term
(especially true for business)
 cons
o negotiation costs shifted to the courts (and thereby the taxpayers)
o the courts might impose a term that neither party wants
increases the chance that parties will have agreements imposed on them

Restatement (427)
 34 – certainty and choice of terms; effect of performance or reliance
 204 – supplying an omitted essential term, “a term which is reasonable in the circumstances is supplied by the court”

UCC
 §2-204- formation in general, “doesn’t fail for indefiniteness if parties intend K and there is reasonable certain basis for giving
appropriate remedy”
 §2-206 – offer and acceptance in formation of a contract
 §2-305 – open price term, allow contracts w/o fixed price term
 §2-308 – absence of specified place for delivery
 §2-390 – absence of specific time provisions

Sun Printing & Publishing Assn. v. Remington Paper & Power Co. (422)
 rule – the court cannot gap-fill if there are so many terms left uncertain that a contract does not exist (time gap left unfilled),

Texaco v. Pennzoil (428)

 rule – there is a contract if the indefinite terms are not essential to the contract
 Cf. Empro where indefinite terms and indefinite intention to be bound. Two parties can come together to agree, can have intent but
terms indefinite.

Illusory Promises
 Issue in following cases is whether promise is illusory b/c they leave complete discretion to perform (or not) in hands of purported
promisor. Court fills gap in manifestation of assent by supplying “good faith” requirement.

UCC (444)
 2-306 – output, requirements, and exclusive dealings, “when a contract measures quantity by the seller’s output or buyer’s
requirements, this means the actual outputs or requirements as may occur in good faith.”
o “Quantity tendered or demanded may not be disproportionate to any estimate, or if no estimate, to any normal or
otherwise comparable outputs.”

New York Central Iron Works Co. v. United States Radiator Co. (429)
 rule – a contract cannot be increased in bad faith due to speculation
 requirement contracts-

Eastern Airlines, Inc. v. Gulf Oil Corp. (431)

 rule – can look to long-standing estimates to determine quantity to fill in any indefiniteness in the quantity in a requirements contract
 Contract void for mutuality of obligation and indefiniteness of terms? “No, at all times Eastern acted with the good faith of a
merchant. Lack of mutuality and indefiniteness of contract resolved by court with reference to objective evidence of volume of goods
required to run business”
Wood v. Lucy, Lady Duff-Gordon (434)
 rule – a party’s duties can be implied from a contract; exclusive dealings contracts imply the best efforts of the seller

Form Contracts/Contracts of Adhesion

Form Contracts
 a standard-form contract prepared by one party, to be signed by the party in a weaker position, usually a consumer, who adheres to the
contract with little choice about the terms

Restatement (455)
 211 – standardized agreements
o (3) where the party has reason to believe the party manifesting such assent would not do so if he knew the writing
contained a particular term, the term is not part of the agreement.
 Pros: utility of standardization, assent to unknown terms- eliminates bargaining, review of unfair terms- gov. reg.
 Form clauses can not preclude recovery

Carnival Cruise Lines v. Shute (445)

 rule – forum-selection clauses are valid as long as they are fair (here, may prevent higher ticket prices on cruises)

Caspi v. Microsoft Network (453)

 rule – forum selection clauses are valid as long as they are fair and reasonable and there was notice

Which Terms Were Agreed To?

UCC (467)
 2-207 – (1) A definite and seasonable expression of acceptance or a written confirmation which is sent w/in a reasonable time
operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless
acceptance is expressly made conditional on assent to the additional or different terms.
 (2) The additional* terms are to be construed as proposals for addition to the contract. Between merchants such terms
become part of the contract unless:
 (a)The offer expressly limits acceptance to the terms of the offer;
 (b)They materially alter it; or (Cmt. 4 “material= surprise or hardship to the other party)
 (c)Notification of objection to them has already been given or is given w/in a reasonable time after notice of
them is received.
 (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 don't otherwise establish a contract. In such a 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.
*section (2) applies only to additional terms. Two schools of thought on whether applies to “different” terms- 1) inadvertent, (2)
should apply to different terms as well, or 2) b/c not discussed here, different terms must be disregarded; hence, can never become part of the
contract.
*Note: “written confirmation” aspect of 2-207. Rule: if oral contract, and after one or both send written confirmations that vary
original oral agreement, any add/diff terms must be treated as proposals (207-2).

 2-316 – exclusion or modification of warranties

Step-Saver Data Systems, Inc. v. Wyse Technology (457)

 rule – terms inserted by the offeree are ineffectual if (1) the offer expressly limits acceptance to the terms of the offer, or (2) if the new
term (a) makes a material alteration in the sense that consent cannot be presumed, and (b) there is not showing that the offeror in fact
consented to the alteration, whether expressly or by silence

Union Carbide Corp. v. Oscar Mayer Foods Corp. (470)

 rule – parties are not bound if there is a material alteration of the contract; parties cannot be bound by an alteration to a contract that is
surprising or unexpected

Terms That Follow Later

UCC (467)
 2-207 – additional terms in acceptance or confirmation (battle of the forms)

ProCD v. Zeidenberg (473)

 rule – parties are bound by licensing agreements if they use the product and fail to return it. Here, acceptance is not when the product
is purchased, but instead when he read and accepted the license terms.
 This is not a battle of forms- 2-207 doesn’t apply. Only one form.

Hill v. Gateway 2000 (479)

 rule – parties are bound by license terms even if they don’t read them if there is enough notice of the existence of the terms
 view vendor as offeror, and acceptance is after the party has had time to inspect the item.
Klocek v. Gateway (483)
 different from ProCD and Hill – 2-207 does apply (2-207 allows assent by silence for merchants; since K is not a merchant he must
expressly consent to the terms of the license).
 Views customer as making the offer, and company is making the acceptance by shipping the item.
o don’t want to make this binding – have not appealed it; if it remains a district court decision it is not binding
 rule – must have express assent to a license (but this is a minority opinion so this isn’t really a “rule”)

PAROL EVIDENCE RULE

UCC §2-202
 To the extent that parties execute a writing that is and is intended to be a final expression of their agreement, no parol evidence may be
admitted to supplement, explain, or contradict it. However, to the extent that the writing is not a final and complete expression of
agreement, parol evidence that is consistent but not contradictory may be admitted to supplement or explain parts not finally
expressed.

R2K §213
I. Integration
 Total/Completely Integrated (r2k 210(1)) No evidence of prior or contemporaneous agreements may be admitted AT ALL (r2k
213(2)) Possibly admitted for ambiguities.
 Partially Integrated (r2k 210(2)) no evidence of prior or contemporaneous agreements or negotiations may be admitted that
contradict a term of the writing (r2k 213(1))

II. Consistency
 Completely integrated- no parol evidence
 Partially integrated- consistent evidence permissible (including in situations where the writing is silent on the term)(R2K §216)

R2K §214 Evidence of Prior/ Contemporaneous Agreements and Negotiations, allowed for:
1. Integration
2. Complete/partial integration
3. meaning of writing
4. invalidating causes: fraud, duress, mistake, etc
5. grounds for granting/ denying rescission

Thompson v. Libbey (logs) ->”parol ev. inadmissible to alter terms of agreement”, eventually rule allowed parol evidence for some things

Brown v. Oliver (hotel furniture)  look to intent of parties and if the particular thing is mentioned in the writing

PG&E v. Drayage (indemnity for steam turbine) offered evidence must be relevant to prove meaning of language  No 4 corners

Trident  Inadmissible to interpret, vary or add to terms of unambiguous integrated writing  disagrees with PG&E

QUESTION 4: DID EACH PARTY DO AS THEY WERE SUPPOSED TO?

QUESTION 5: ANY EXCUSE FOR NOT DOING AS SUPPOSED?

 Only after a material and total breach, and the promisee’s expectations under the contract are totally dashed, does he have the right to
terminate the contract- that is end the transaction and sue the breacher for whatever relief is necessary to compensate him for the loss
of his bargain.

QUESTION 6: WHAT ARE THE CONSEQUENCES?

DAMAGE INTERESTS
R2K §346- if the breach caused no loss or if the amount of the loss is not proved, only nominal damages will be awarded. (No punitive)

Three Damage Interests (discuss all three- discuss away)

 expectation – put the promisee in the position in which he would have been had the promise been performed (no breach)
 reliance – put the promisee back in the position he would have been in if the promise had not been made
 restitution – put the promisor back in the position he would have been in if the promise had not been made

Expectation
 preferred because it causes people to breach only when it makes at least one party better off, and no one worse off (ie. encourages
efficient breaches)
R2K §347. Measure of Damages in General.

General Measure (Expectancy)= loss in value + other loss- cost avoided- loss avoided

 Loss in value: Difference to the party of the performance that should have been received and the performance that was actually
received. Hard to establish when profits were uncertain.
 Other loss: Loss other than loss in value (incidental and consequential damages).
o Inc- costs incurred by breachee in trying to cover or mitigate losses. Seller’s expenses in stopping delivery, or transporting
or caring for goods after a buyer’s breach (UCC 2-710), or buyer’s expenses in covering (UCC 2-715(1)).
o Consq- damages suffered by victim that extend beyond expected value of performance- “foreseeable”, “w/in
contemplation of the parties at the time of contract.” (in our ie, need R2C book to tutor kids, and Benforado knows about it
and he doesn’t give it to you).
 Cost avoided: Expenditures the injured party doesn’t have to occur as a result of the breach. (Didn’t pay Benforado $10 for the book)
 Loss avoided: Savings that results to the injured party that is able to salvage or reallocate resources already devoted to the
performance of the contract. (Didn’t have to go back and buy wood to build a bridge)

Hawkins v. McGee (Hairy hand)(63)

 Dr. may be held liable for perfection, “utterance of words may be taken at face value by the patient, when they induce them to consent
to op”
 rule – damages = value of perfection – value of screwed up + incidental damages

McGee v. US Fidelity & Guaranty Co. (66)- Dr.not covered where made promise for perfect cure or guarantees result

Nurse v. Barns (Iron mills) (71) – special damages are allowed in breach of contract.

RELIANCE AS AN ALTERNATIVE TO EXPECTATION

Why Would a Court Give Expectation Instead of Reliance?

 Used when profits are too uncertain to determine, but P can show expenses.
 want people to rely on contracts
 psychological impact allows courts to avoid over- or under-compensation
 hard to calculate loss of opportunities (expectancy)
 may deter breaches

R2K §349 (125) Damages based on reliance interest

 “ip has a right to damages based on his reliance interest, including expenses made in preparation for performance, or in
performance, less any loss that the breacher can prove the ip would have suffered.”

Sullivan v. O’Connor (botched nose job on professional entertainer)(72): see below

Why Reliance Over Expectancy? (from Sullivan)

 expectancy too harsh
 fear of accessing the liability
 don’t want to award expectancy in a noncommercial area

MEASURING THE EXPECTATION INTEREST: “EXPECTANCY VS. CONTRACT PRICE/MARKET DIFFERENTIAL”

UCC (84)
 2-105 – definitions: transferability, “goods”- “all things moveable at the time of indemnification of the K”
 2-106 – definitions: contract; agreement

UCC (91)
 1-106 – remedies to be liberally administered
 2-712 – “cover”; buyer’s procurement of substitute goods, “by making good faith and w/o unreasonable delay any reas. Purchase”
 2-713 – buyer’s damages for non-delivery or repudiation, “diff btw. mkt price at time when buyer learned of breach and the contract
price together w/ any incidental and conseq. damages”
 2-715 – buyer’s incidental and consequential damages

J.O. Hooker & Sons v. Roberts Cabinet Co. (78)

 Contract for mixed services, more substantial form dictates (here, installation of cabinets was NOT governed by the UCC)
 rule – party can only recover costs that would not have been incurred without the breach

Tongish v. Thomas (86)

 rule – market price/contract price damages encourage efficient breach, but it might not be fair to all parties

LIMITATIONS ON DAMAGES
Foreseeability of Harm

“reasonably foreseeable at the time of contract formation”- under both common law (Hadley) and UCC §2-715.

Restatement (108)
 §351 – unforeseeability and related limitations on damages

Test of foreseeability: “determine whether D would have agreed to the K price had he known of the extent of his liability”

Hadley v. Baxendale (not liable for shut down mill b/c not foreseeable)(93)
 rule – parties are liable for what was reasonably foreseeable when the contract was formed unless notice of special circumstances is
given

Hector Martinez and Co. v. Southern Pacific Transportation Co. (liability for lost profits found where D delayed and damaged machinery)
(104)
 rule – notice of special circumstances is not necessary if the foreseeability of harm could be seen by a reasonable person (consider the
intrinsic value of the goods)

Foreseeability
 Hadley – parties assume liability if the risk is foreseeable
 Martinez – parties assume liability if the risk is foreseeable and if parties are aware of the risk

Morrow v. First National Bank of Hot Springs (no liability where the bank did not inform P of safety deposit box availability)(109)
 rule – liability determined by proof of notice and express assent to the liability. Tacit agreement test required here is the minority and
rejected by the UCC.

Certainty of Harm

Restatement (125)
 346 – availability of damages
 349 – damages based on reliance interest
 352 – uncertainty as a limitation on damages, “damages not recoverable beyond an amt. that evidence permits to be established w/
reasonable certainty”

Chicago Coliseum Club v. Dempsey (112)

rule – (1) cannot recover damages if the value of the damages is uncertain; (2) cost incurred in preparing a contract is not recoverable; (3)
attorney’s fees and court costs are not recoverable unless stipulated so in the contract; (4) costs incurred in preparing for the performance of a
contract are recoverable

Anglia Television Ltd. v. Reed (125)

 rule – can recover damages that occurred before the contract if the parties know that the expenditures would be wasted if there was a
breach (exception to the general rule)

Mistletoe Express Service v. Locke (128)

 rule – if the plaintiff selects reliance damages, can recover for expenditures made because she was deprived of an opportunity to
recoup those expenditures; burden on the defendant to show that the plaintiff would have lost that money anyway

Burden Shifting
 expectation – ip has the burden to prove the amount that they’re claiming as damages (Chicago Colesium Club had to show damages)
 reliance – ip can claim investments as damages; b has the burden to show that the ip never would have gotten some of those
investments back (losing contract) (Mistletoe)

Avoidability of Harm

Mitigation
 mitigation forces people to act in non-wasteful ways
 lessens the amount awarded in expectancy
 cost avoided and loss avoided part of equation for expectancy.

Restatement (153)
 §350 – avoidability as a limitation on damages, “damages not rewarded for loss ip could have avoided w/o undue risk, burden, or
humiliation except where ip has made reasonable but unsuccessful efforts to avoid loss”

UCC (157)
 2-706 – seller’s resale including contract for resale:
o Damages= resale price – contract price +incidental damages – expenses save in breach
 2-708 – seller’s damages for non-acceptance or repudiation:
 o Damages= mkt. price at time of breach – unpaid contract price + incidental damages- expenses saved in breach
 2-710 – seller’s incidental damages
 2-712 – “cover”- buyer’s procurement of substitute goods
 2-713 – damages for non delivery or repudiation
 2-715 – incidental/ consequential damages
 2-718 – liquidation or limitation of damages; deposits

*Note: seller’s duty to mitigate much less than buyer’s. Seller has options: 1) resell and recover diff. between resell and K price 2) not resell and
recover diff. btw. mkt. price and unpaid K price, 3) recover lost profits that do not require mitigation

Rockingham County v. Luten Bridge Co. (131)

 rule – it is the ip’s duty to do nothing to increase the damages incurred after a breach; ip can only recover damages that occurred as a
result of the breach, not as a result of the ip’s actions after the breach

Shirley MacLaine Parker v. Twentieth Century-Fox Film Corp. (142)

 rule – employees are required to mitigate their losses by making reasonable efforts to find new employment, but do not have to
mitigate if the mitigation is inferior to the prior employment. “Same field, same quality”
 New film substantially different- diff. location, different type of film, loss of creative control, idiosyncratic value to MacLaine

Rule
 b should only be responsible for damages that it caused by breaching – b is not responsible for the damages that result from the
decisions of the ip
 burden of proof on D to prove P didn’t mitigate damages

Neri v. Retail Marine Corp. (154)

 lost value doctrine – a seller can recover the cost and profits of goods if they lost volume of sales because of the buyer’s breach
 rule – UCC 2-708
 special because here is a boat sales place (more than one thing to sell)

Loss of Profits
 personal services – ip benefits by gaining leisure
 volume sale of goods – ip loses a sale

CONTRACTING AROUND THE DEFAULT RULES OF DAMAGES

Express Limitations on Consequential and Incidental Damages

UCC (160)
 2-718 – Liquidation or limitation of damages, must be reasonable term
 2-719 – contractual modification or limitation of remedy, cannot be unconscionable

Restatement (172)
 §355 – punitive damages
 §356 – liquidated damages and penalties, apply only when actual damages can’t be ascertained

Liquidated Damages v. Penalty Clauses

Liquidated/Stipulated Damages
 an amount contractually stipulated as a reasonable estimation of actual damages to be recovered by one party if the other party
breaches. if the parties to a contract have properly agreed on liquidated damages, the sum fixed is the measure of damages for a
breach, whether it exceeds or falls short of the actual damages

Kemble v. Farren (theater breach = £1000)(163)

 as applied challenge – apply the liquidated damages clause to the situation
 facial challenge – look at the nature of the liquidated damages clause
 rule – liquidated damages are not allowed where they act as a penalty, even if state “not a penalty”

Wassenaar v. Towne Hotel (breach of 3 year employment contract)(165)

 rule – if a liquidated damages clause is valid, mitigation does not matter

Reasonableness Test for Whether Stipulated Damages Clause is a Reasonable Estimate of Damage:
 subjective intent of the parties – not usually used
 difficulty of ascertaining damages
 reasonableness of the forecast (the amount of the liquidated damages compared to what it applies to)
 must look at all the facts – can’t just mechanically apply the test

Benefits of Stipulated Damages

 controls exposure to risk
 corrects inadequate judicial remedies
  avoids the expense of using the courts
 allows the parties to fashion a remedy consistent with economic efficiency
 beneficial to society – preserves freedom of contract and judicial economy

Problems of Stipulated Damages

 should compensate parties for contract breaches, not punish the breacher
 unfairness in bargaining
 allows private parties to assume the judicial role

Lake River Corp. v. Carborundum Co.(173)

 Posner: not allowing penalty clauses is paternalistic – if parties want to put penalty clauses in contracts they should be allowed to do
so (sophisticated parties)

EQUITABLE REMEDIES

SPECIFIC PERFORMANCE

UCC (211)
§2-716 – Buyer’s right to SP or Replevin

Specific Performance
 land
 unique goods
 services- never get SP on a service contract

Terms
 equitable remedy – a remedy, usually a nonmonatry one such as injunction or specific performance, obtained when legal remedies,
usually monetary damages, cannot adequately redress the situation
 injunction – a court order demanding or preventing an action
 specific performance – the rendering, as nearly as practicable, of a promised performance through a judgment or decree; specifically, a
court-ordered remedy that requires precise fulfillment of a legal or contractual obligation when monetary damages are inappropriate or
inadequate, as when the sale of real estate or a rare article is involved

Contracts for Land

Why Specific Performance?

 land is presumed to be unique, so monetary damages would be inadequate – personal property is not considered unique (unless it is an
extremely rare item)

Loveless v. Diehl (P rented and improved land, selling to TP, SP enforced)(198)

 rule – specific performance is given for contracts for land as a matter of course because land is presumed to be unique

Contracts for Goods

 damages are the ordinary relief for breach of contract
 specific performance can be awarded if the item is unique:
o land
o goods – if they are rare, have a particular value, and cannot be recovered on the open market

UCC (211)
 2-716 – buyer’s right to specific performance or replevin

Cumbest v. Harris (stereo equip)(203)

 rule – specific performance can apply to goods if the goods are unique

When Can Specific Performance be Ordered for Goods?

 burden on the plaintiff to prove:
o there is no adequate remedy at law
o the goods are of a peculiar, sentimental, or unique value
o the goods are not readily obtainable due to scarcity

Scholl v. Hartzell (1962 Corvette- not that unique)(206)

 rule – specific performance should not be awarded if cover is available

Sedmak v. Charlie’s Chevrolet, Inc. (oral K for limited edition corvette pace car= unique)(208)
 rule – specific performance can be ordered for goods that are not technically unique but have circumstances surrounding them that
make them unique

Contracts for Personal Services

General Rules
  negative injunction for enjoinder is an appropriate remedy (Lumley) if:
o the party in breach has special skills or knowledge (Dallas Cowboys); or
o the breach was in bad faith (Duff)
 exception case – negative injunction or enjoinder is essentially specific performance, so it is not an appropriate remedy (Ford)

The Case of Mary Clark, A Woman of Color (indentured servant)(212)

 rule – specific performance is inappropriate for personal services

Lumley v. Wagner (Injunction granted preventing D from performing elsewhere)(216)

 rule – negative injunction is an appropriate remedy for personal services where negative stipulation specifically written in K

Ford v. Jermon (No injunction granted to keep D from acting in another Theater)(222)
 rule – negative injunction is NOT an appropriate remedy for personal services because it eliminates the “realness” of the person’s
actions; granting SP indirectly (injunction) would be even more injurious to D and less beneficial to P

Duff v. Russell (injunction granted preventing D from performing at competitor)(224)

 rule – negative injunction is an appropriate remedy for personal services if the breach was in bad faith

Dallas Cowboys Football Club v. Harris (Unique)(232)

 rule – negative injunction is an appropriate remedy for personal services if the party has special skills or knowledge

RESTITUTION AS A DAMAGE INTEREST AND CAUSE OF ACTION

In General
 one party has conferred a benefit on another without intending to
 might arise as part of damages for an injured party
 might be given to the party in breach
 might be given if there was no contract
 sometime called “quasi-contract”

Restitution for Breach of Contract

Restatement (256)
 371 – measure of restitution interest, “reasonable value to other party, or extent to which value of property has been increased”
 373 – restitution when other party is in breach “ip no right to restitution if he’s performed his duties, and all this is left is $ exchange”

Bush v. Canfield (flour sale while market price changed)(250)

 rule – restitution damages = money advanced + interest, even where D supposedly saved P loss due to market.

Restitution to the Party in Breach

Restatement (265)
 374 – restitution in favor of party in breach

Britton v. Turner (laborer quit ¾ into term w/o being paid)(256)

 rule – b can recover restitution for partial performance less damages done by breach if the partial performance conferred a benefit on
ip; in employment context, part-performance is necessary, otherwise employers would fire ‘ees right before end of K.

Vines v. Orchard Hills, Inc. (condo down payment)(260)

 rule – if the b makes partial performance as part of a reasonable liquidated damages clause, then the b is not entitled to restitution for
value of the partial performance. To get restitution, must prove unjust enrichment.

Restitution and “Quasi-Contract”

“Implied in Law” contract:

Cotnam v. Wisdom (Dr. performed surgery on street) (265)
 implied in law – there was no way a contract could actually have been formed, but the court wanted to provide a remedy
 rule – can recover damages for an implied contract

Measuring Restitution Enrichment

 factors
o net enrichment; or
o cost avoided of having to obtain assistance elsewhere
 use most generous measurement unless there is a breach – but for emergencies use the smaller amount (the benefit received almost
always outweighs the expenses)

“Implied in fact”
Martin v. Little, Brown, and Co. (269)
 implied in fact – look at the facts of the case to determine if there was a contract made
  rule – in order to find an implied contract from a course of conduct between two parties, an intention to pay on the part of the alleged
promisee must be reasonably inferable; volunteers (as P here) have no right to restitution because there was no unjust enrichment

Restitution
 no recovery unless defendant has received a measureable enrichment
 no recovery if the plaintiff intended to act gratuitously
 no recovery if defendant refuses to accept the benefit unless it is the result of a legal duty
 no recovery for benefits conferred without suitable opportunity to decline
 general principle – one who without intent to act gratuitously, confers a measurable benefit on another, is entitled to restitution if he
affords the other an opportunity to decline the benefit or else has a reasonable excuse for failing to do so. if the other refuses to receive
the benefit, he does not have to pay restitution, unless the actor justifiably performs for the other a duty imposed by law
 FINAL RECAP

Multiple Choice:
- “Restatement problems” (calculating the three types of damages under different scenarios)
- Where unclear whether term was meant to apply beyond its plain meaning
 hierarchy of context (cf. UCC §1-205) p. 410
 1.express terms
 2. course of performance (b/t parties on this particular contract)
 3. course of dealing (b/t parties, in other interactions)
4. usage of trade (what industry usually does)
- Does it constitute an agreement if the offeree found out the offeror had sold the land to someone else, while the offeree was spying on the
offeror from behind a bush?
- Does the UCC reject the mirror image and the last shot rule?
- Parol evidence rule/ integration
- Implied in fact v. implied in law

Issue Spotter Essay:

- Ambiguity
- Offer (on a napkin, signature separate)
- Contract violation where there was reliance by a corporation
- Promissory estoppel

Policy Essay:
Proposed adoption of a statute that would require a clause stating “I agree to the terms of the contract” and both parties signature before any
contract would be recognized under law.