2022 Scholz Contracts Outline

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2022 - Scholz Contracts Outline
Contracts (Florida State University)
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CONTRACTS—SCHOLZ—SPRING 2022
LEGAL THEORIES FOR ENFORCING PROMISES
A. WHAT DO WE MEAN WHEN WE TALK ABOUT "CONTRACT LAW"?

Contract: mutual assent + consideration
 Mutual assent = offer + acceptance
 Elements in a Transaction→ to be called a contract (K):
1. The agreement in fact between the parties,
2. The agreement as written (which may correspond accurately to the agreement-in-facts, and
3. The set of rights and duties created by (1) and (2)
 Executory Contracts: agreements that call for future performance
B. THE STRUCTURE OF CONTRACT LAW

To Analyze a K 
1. Formation: begins with an agreement by the parties (2+); is there a K at all?
2. Interpretation by Implication: what does the K say?
3. Defenses to Enforcement: even if parties have engaged in a traditional contract, a party may have a basis
for avoiding it
 2 main types:
o Misconduct by one party in the making of the agreement that allows the other party to avoid the
contract
o Events that have taken place that affect the agreement
4. Remedies: is there a consequence for violating the K?
C. THE SOURCES OF CONTRACT LAW

1. JUDICIAL OPINIONS
2. STATUTORY LAW
 1677 English Parliament created the Statute of Frauds (SoF), Uniform Commercial Code (UCC) was
created in the 1940s
3. THE RESTATEMENTS
 American Law Institute created these starting in 1923, Restatements of the Law, Restatements of Contract
was adopted by the ALI in 1932
4. LEGAL COMMENTARY
5. INTERNATIONAL COMMERCIAL LAW: CISG
 MEANING OF ENFORCEABLE PROMISES

ALLEN V. BISSINGER & CO. (1923) Allen (Π) is trying to recover fees for furnishing defendant a copy of the
official report of certain proceedings before the Interstate Commerce Commission (ICC) from Bissinger (Δ) –
objective standard
 RULE: The apparent mutual assent of the parties essential to the formation of a K must be gathered from
the language used by them, and the law imputes to a person an intention corresponding to the reasonable
meaning of its words and acts.
 If his words or acts, judged by a reasonableness standard, manifest an intention to agree to the matter in
question, that agreement is established, and it is immaterial what may be the real but unexpressed state of
his mind upon the subject. (Aka ‘manifestation of mutual assent’)
 Absent fraud or misconduct on the offeror’s part, once an offeree has accepted the offer, it will not be
relieved of its bargain merely because the bargain turns out to be burdensome or unprofitable.
MEYER V. UBER TECHNOLOGIES, INC. (2017) Π argues that he should not have to agree to
arbitration b/c he never agreed to it – objective standard

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 RULE: A smartphone app user has reasonably conspicuous notice of the app’s terms of service if a
reasonably prudent user would have known about the terms and the conduct that would be required to
assent to them.
 Clickwrap terms = before completing the purchase of the product, the purchaser must click a button
labeled “I agree,” “submit,” or some equivalent phrase.
o By clicking “Register” his manifestation of assent was unambiguous.
o Clickwrap agreements are fine as long as the layout and language will be noticed to manifest
into an agreement
 To form a contract, there must be mutual manifestation of assent, whether by written or spoken word or
be conduct. (Specht)
 Inquiry Notice: the communication of information that would cause an ordinary person of average
prudence to inquire as to its truth. Clarity and conspicuousness of arbitration terms determine if a
reasonable prudent person would be on inquiry notice
 Constructive Notice: knowledge of a fact that is imputed to an individual who was under a duty to
inquire and who could have learned of the fact through the exercise of reasonable prudence
 Reasonable prudent: touchstone; they would know what underlines the hyperlink; it is important they
know these are the terms
FORMATION
OFFER & ACCEPTANCE IN BILATERAL CONTRACTS

 Formation: one of the parties must make an offer, the other party must accept the offer, & consideration
(something of value) must be exchanged. The manifestation of 2 or more parties' mutual assent to an
exchange of performances, supported by consideration
o Restatement (Second) §17: formation of a contract requires "a bargain in which there is a
manifestation of mutual assent to the exchange and a consideration."
Offer and Acceptance in Bilateral Ks 

 Bilateral Contract (K): (most common) promise for a promise - where there is an exchange of promises
in which each party promises to do something for the other
o Contract formed by the exchange of promises involve the exchange of reciprocal commitment
 Forming a K in a Bilateral Contract
o Preliminary Negotiations = Willingness to bargain is NOT an offer if the person to whom it is
addressed knows that the person making it does not intend to conclude a bargain until he has
made a further manifestation of assent.
o Offeror puts out an offer = A direct and complete proposal that provides for performances.
 Once an offer has been made, the other party gains the power of acceptance.
o Offeree gains the power of acceptance:
 1. Can accept
 2. Can reject
 3. A counteroffer (a rejection; old offer is dead, and this initiates the same situation on
the other side)
 Offeree can make a counteroffer = reject of original offer, now a new offer
and a power of acceptance
 Conditional Acceptance: If the seller purports to accept but changes/modifies
the terms of the offer, he makes what is referred to as a qualified or conditional
acceptance, which amounts to a counteroffer and a rejection of the buyer’s offer.

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o SCHOLZ: A conditional promise (“if”, “unless,” “until”) means a

party's duty to perform will be affected by the occurrence or failure
of the condition.
 4. Offer can lapse after a certain point (indeterminate period; question of law or fact,
wiggly room and courts try to avoid this)
 5. Offer can be revoked by offeror at any time before acceptance and the offeree
cannot accept
 When the offeror tells the offeree of the rejection OR when the offeror takes
definite action inconsistent w/ the proposed action and the offeree acquires
reliable info. to that effect.
 As long as the revocation is conveyed to the offeree, the offer is revoked (even if
the offeree doesn’t actually read or hear of the revocation – ex. doesn’t check
their voicemail).
 6. Death or incapacitation (different if accepted before death)
 Objective vs. Subjective
o Subjective standard – “meeting of the minds” where the actual intent of a party, rather than that
party’s conduct, is considered.
o Objective Standard - we judge what an agreement [conduct] is based on what a reasonable
person would think of the K in the parties’ outward expressions
RAY V. WILLIAMS G. EURICE & BROS., INC (1952) original K was changed from 3 to 5, and contractor
did not read it before signing it, architect house specific specifications case with hillibillies
 Illustration of objective approach—they are bound by what they sign
 RULE: The law is clear, absent fraud, duress, or mutual mistake, that one having the capacity to
understand a written document who reads and signs it, or, without reading it or having it read to him,
signs it, is bound by his signature in law.
 Cts like objective theory of Ks since without written text to the contrary, then it’s easy to say the
subjective mindset could be anything
 W/ objective theory, they cannot change what actually happened, it adds more stability to those who want
to use the K system; It is harder to threaten
 A contract may still be enforced even though one of the parties made a unilateral mistake in interpreting
the agreement.
 Only a mutual mistake (RST § 152) will prevent a meeting of the minds and thereby defeat the existence
of an enforceable contract. A party’s outward manifestations of an intent to contract are sufficient to bind
him or her to the agreement. A party who is damaged by his or her lack of diligence in reviewing the
contract has no remedy.
o SCHOLZ: Mutual mistake (RSC§ 154) Party bears the risk of mistake if:
 (a) risk is allocated by the parties expressly or impliedly
 (b) party making erroneous assumption is aware s/he has limited knowledge and treats
that as sufficient
 (c) the risk is allocated by the court because it is reasonable to do so.
Lucy v. Zehmer (1954)—Court enforced a contract when the Δ claimed they were joking because of their past
relationship (history and dealings b/w them) allowed them to determine it was serious.
Leonard v. PepsiCo, Inc. (1999)—Δ was not contractually liable b/c it would be unreasonable to a prudent person
to interpret the advertisement in that way to think they could cash in on 7 million Pepsi Points

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2. OFFER AND ACCEPTANCE IN BILATERAL CONTRACTS

 Requires commitment on both sides: an exchange of promises in which each party promises to do
something for the other → bilateral contracts
 Bilateral is a term of art, has to be at least 2 parties, but can be many more than 2
 Offeree has the "power of acceptance"
o If one party manifest acceptance, contract comes immediately into being
o Or a party can respond with a counter-offer
o If offeree waits to long, the offer can be terminate either explicitly or implicitly
o An offer's withdrawal = revocation of his offer
LONGERGAN V. SCOLNICK (1954) newspaper ad for a $2.5k deal, Δ said no K

 Are advertisements offers? Typical no— Invitation to receive offers that than an actual offer
o Unless the seller is trying to deceive, fraudulent behavior or specific wording, court can
punitively determine it as an offer
 RULE: There can be no contract unless the minds of the party have met and mutually agreed upon some
specific thing. (Section 17 of R3S of Contracts)
 R3S (2nd) of Contracts §24: an offer invites assent to conclude the bargain
 R3S (2nd) of Contracts §26: provides that a communication is not an offer if the person making the
communication does not intend to enter into a bargain until the person has made a "further manifestation
of assent" (Kerns v. Range Res.)
 “Mailbox Rule” (only for acceptances): If acceptance by mail is permissible, acceptance occurs as soon
as the offeree deposits a properly stamped and addressed acceptance in the mailbox. The burden is on the
offeree to prove proper dispatch.
o This rule does not apply if the offeror has stated (expressly or by implication) that he must
receive the acceptance for it to be effective
Types of Contracts
 Bilateral Contracts: typical contracts, acceptance by return of the promise
 Option Contract: promise + consideration, in which the offeror receives consideration, to not revoke an
offer for an amount of time
1. Offeree must make a contract to hold it open
2. What makes it open consideration
Restatement of Contracts (Second): § 87. Option Contract
 (1) An offer is binding as an option contract if it
 (a) is in writing and signed by the offeror, recites a purported consideration for the making of the offer,
and proposes an exchange on fair terms within a reasonable time; or
 (b) is made irrevocable by statute.
 (2) An offer which the offeror should reasonably expect to induce action or forbearance of a substantial
character on 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.
 Unilateral Contracts: invites a contract only by performance, once performance is done then it becomes
binding
 **Implied promise when you offer to do, implied subsidiary open, once performance has begun**
(does not apply to bilateral contracts)
OFFER & ACCEPTANCE IN BIILATERAL CONTRACTS
NORMILE V. MILLER (1985) Δ lists property, 1 buyer wants it but sells it to buyer 2, buyer 1 says Δ violated
the K

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 The common law “mirror image rule” = acceptance must be unconditional w/ no modifications or else
it’s a rejection.
 Absence of an option-contract no one has the power to hold open a K [limited time period]
 In the absence of an explicitly offer to whole the offer open + valuable consideration = no binding
obligation
o Normile was wrong to think this contract in this case was going to be held open
 RULE: An offeree cannot enforce a contract to sell property if he did not accept the offer to sell until
after the offer had been validly revoked.
Notes:
 Power of Acceptance: created by an offer will be terminated by the offer's rejection (R3S of K § 36)
 An acceptance must be unequivocal and unqualified in order for a K to before §§ 57 and 58'
 Silence by the offeree rarely amts to acceptance, but in some limited circumstances an offeree's silence
may result in the formation of a K (R3S § 69)
 Qualified acceptance constitutes only a counter-offer § 59
 Rule of Termination by Counteroffer is not stated as an inflexible one, but a default principle. (§39(2))
indicates that effect should be given to the expressed intention of either offeror or offeree to the contrary
 An option contract involves a promise to keep an offer open, a promise that is binding on the offeror
(§25)
**At common law, modifications require consideration, under the UCC they require only good faith.
OFFER & ACCEPTANCE IN UNIILATERAL CONTRACTS

o Unilateral - is a K in which performance is based on the wish, will, or pleasure of one of the
parties.
 Instead of a promise in exchange of a promise, it’s a promise in exchange of performance
 An offer to make a unilateral K is accepted when the requested performance is rendered.
 The consideration is in the performance of the promise
o The main difference between unilateral and bilateral contracts is the mode of acceptance. In a
unilateral contract, an offer is accepted by performance of an act requested by the offer.
COOK V. COLDWELL BANKER/FRANK LAIBEN REALTY CO. (1998) realtor bonus program, Π sues to
collect bonuses
 RULE: A promisor does not receive a promise as consideration for his or her promise in a unilateral
contract.
 Acceptance could be manifested with substantial performance (restatement)
 R3S § 45: in the context of unilateral contracts, the offer may not be revoked where the offeree has
accepted the offer by substantial performance.
Notes:
** 2nd Restatement gets rid of substantial, just once they begin
** Any effort is substantial → default rule (usually)
** Vs. in the 1st Restatement it requires substantial because they are concerned about detrimental reliance
**When in doubt 2nd restatement is normally the majority rule, when you see multiple approaches analyze
both the 1st statement and 2nd restatement
CONSIDERATION
 Consideration: benefit to the promisor or detriment to the promisee
 K= mutual assent (requirement of agreement) + offer + acceptance + consideration
 Sometimes seen in terms of exchange (R3S of K §71)
(1) The Benefit-Detriment Theory: there needs to be a benefit to the promisor or a detriment to the
promisee as determined by the Ct.

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o Giving up something they are legally entitled to

(2) Bargained-For-Exchange: promise must induce the detriment, and the detriment must induce the
promise consideration for a promise if its performance would be part of this, in which one party's
performance is the price of the other [most courts today use the Bargain Theory]
 Absence of consideration may be problematic in commercial situations
o Reciprocal inducement: promise must induce the detriment and vice versa; one is the cause of
the other
o EX: someone is painting a house b/c of the promise to pay, they promise to pay so I would paint
the house
o See Pennsy Supply and Marshall Durban Cases
HAMER V. SIDWAY (1891) nephew agreed to not smoke, drink, gamble, or play cards to uncle for $5K until he
turns 21
 Older approach to consideration – (Hamer) Benefit/detriment test.
 But the Ct says they won’t really look into the quality of the detriment, its enough that something is
promised and one is suffered
 RULE: A party's agreement to incur a detriment constitutes adequate consideration.
 Part of the contract is consideration so the waiver to the legal rights he does have probably makes it
enforceable
PENNSY SUPPLY, INC. V. AMERICAN ASH RECYCLING CORP. OF PENNSYLVANIA (2006)

construction company subcontracted for paving, left over biproduct
 RULE: There may be sufficient consideration to form an enforceable contract even though the parties
have not bargained for the specific terms of the agreement.
 There’s no oral or written back-and-forth (bargain) between the parties but this is not important. The
relationship is one of reciprocal inducement, and this is enough to make a K.
 How to tell the difference between a contract and gift?
o Difficult to tell, rule of thumb would be if the outcome of the condition would benefit the
promisor
 Conditional gift: EX: homeless person, somebody says go to the store and get someone, no reasonable
person would think it is a contract
o Promise was made, it was not made with inducing a detriment
 The bargain theory of consideration does not actually require that the parties bargain over the terms of
the agreement.
 What is at stake whether or not there is a contract?
o Mutual assent and consideration then you have your contract
 There was a reciprocal inducement: test for it: detriment induce the promise
DOHRMANN V. SWANEY (2014) man offered to change his son’s middle names in exchange for women with
Alzheimer’s estate/will – shows the outer limits (narrow case)
 Circumstance of Unfairness “shock the conscious”
 RULE: A contract will be invalidated for gross inadequacy of consideration if the provided consideration
is illusory.
 Mr. Dohrmann Theory of the Case made an illusory offer, so it needs to be weighed and balanced against
the promise.
 The contract failed and was rendered void when there was a gross inadequacy of consideration—illusory
{can be found either by illusory consideration, or unfairness/unequal bargaining power}

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CONTRACT FORMATION UNDER THE UNIFORM COMMERCIAL CODE

Article 2 of the UCC
 Definition of goods has to be moveable person property, software has been grandfathered in, not IP, not
limited to commercial sellers
 Purpose of UCC: goal was to simplify commercial practice, keep people out of court, instead of acting
like a reasonable human being
 Doesn't replace common-law it’s a supplement
 Default is the same unless UCC has specific common law rules if it is silent
Article 2: §2-204
 Don’t need mutual assent
 Parties don't fail for indefiniteness is nothing a reason for a contract to be voided, if there is a basis for
understanding [essential terms]
JANNUSCH V. NAFFZIGER (2008) festival food business is sold, then given back when it does not produce
the intended profits
 A contract for the sale of goods for the price of $500 or more must comply with the writing requirement
of UCC §2-201 or fall within an exception. Jannusch was one of those exceptions
 RULE: In Illinois, an oral contract that is predominantly for the sale of goods may be enforced under the
Uniform Commercial Code, so long as the essential terms are agreed upon.
How do you know something covered by UCC?

 (1) Predominant Purpose Test: transfer of goods by the UCC was the main purpose. Not goods then it is
covered the common law [determine if K follows under the scope of Article 2 of the UCC]
o (1) language of K, (2) nature of the business of the supplier, (3) the intrinsic worth of materials
 (2) Statute of Frauds: how can you have a contract that is not written that is valid? Via and exception: if
an exception applies, don't need writing
 Part Performance Exception: if delivery has been made to the other party, and you have begun then you
do not need it in writing
 Purpose: gets rid of the fear of someone lying if part performance has happened
Does this relaxed rule for contract formation favor buyers or sellers? Helps seller more, Buyers--need more
protection. 2 features: (1) lowers amount of litigation in deals; (2) it benefits either party, little bit helpful to
sellers
E.C. STYBERG ENGINEERING CO. V. EATON CORP. (7TH CIR. 2007) manufactures enters in a contract
with Eaton for inertia breaks, parties disagree over terms of the agreement
 RULE: A price quotation is considered an invitation for an offer, rather than an offer to form a binding
contract. [order form is typically an offer]
 E.C. vs. Jannusch – why are the outcomes different? In this case only preliminary negotiations had
happened, whereas in Jannusch all essential key terms of a K were agreed upon.
Qualified Acceptance
 Common Law Last Shot: last set of terms govern, if an offer goes through, then there's a counteroffer,
then finally their actions/specific performance can show you accepted the offer
o Get rid of the mirror standard
 Gravamen of Action Test = looking where the damages arose from, whether it was a problem with goods
or services
 Mirror-Image Rule (2nd R3s): a qualified or conditional acceptance proposes an exchange different from
that proposed by the original offeror. Such a proposal is a counteroffer and ordinarily terminates the
power of acceptance of the original offeree.

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 §2-207 Additional Terms in Acceptance or Confirmation—contrasts with mirror image rule

o Exceptions: material operations
** UCC does not use the mirror image rule or the last show rule **
PRINCESS CRUISES, INC. V. GENERAL ELECTRIC CO. (4TH CIR. 1998) Suit arises out of a maritime
K btw General Electric Co. and Princess Cruises, Inc. for inspection and repair services relating to Princess's
cruise ship
 Predominate Purpose Test: Coakley Factors: Fourth Circuit uses 3 factors to determine the nature of a
K: (1) language of a K, (2) nature of the business of the supplier, and (3) the intrinsic worth of the
materials → Coakley & Williams
 HOLDING: this is a common law case b/c it is for the sale of services
o Minority gravamen of the action test: we will interpretative that K to be one for goods or
services, depends on what the problem grows out of it, see section 4 pg. 170
 Mirror Image Rule: gives a varying acceptance the effect of only a counter-offer, preventing the contract
from being made on the terms of the original offer
o The court applies this in the Princess Case
o Inline with the R3S § 59 and 1st R3S § 60
 Qualified acceptance: a qualified or conditional acceptance proposes an exchange
different from that proposed by the original offeror
 2nd Restatement has a varying acceptance issue
 Last Shot Rule: classical courts applied this to determine when a counter-offer was accepted. Under that
rule, a party impliedly assented to and thereby accepted a counter-offer by conduct indicating lack of
objection to it
o Princess also applied this rule, the Princess Cruises accepted the counter-offer by conduct: by not
objecting to its terms; by accepting the services performed by GE; and by paying the price stated
in GE's counter-offer
§2-207. Additional Terms in Acceptance or Confirmation

How do we know if a K has been formed?
(1) A definite and seasonable expression of acceptance or a written confirmation which is sent within 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. [explicitly the
opposite of the mirror image rule]
(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
(c) notification of objection to them has already been given or is given within 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 do not otherwise establish a contract. In such case the terms of the
particular contract consist of those terms on which the writings of the parties agree, together with any
supplementary terms incorporated under any other provisions of this Act.
BROWN MACHINE, INC. V. HERCULES, INC. (1989) K for trim presses

 Still using 2-207
 Issue: Does the seller have to indemnify the seller?
 Indemnity clause: contractual offer of risk from one party to another
 Rules:

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o U.C.C. art. 2 governs transactions involving the sale of goods. U.C.C. § 2-102 (1977). Because
the term "offer" is not defined in the code, the common law definition remains relevant.
o U.C.C. § 1-103. An offer is made when the offer leads the offeree to reasonably believe that an
offer has been made. An "offer" is the manifestation of willingness to enter into a bargain, so
made as to justify another person in understanding that his assent to that bargain is invited and
will conclude it. The general rule is that a price quotation is not an offer, but rather is an invitation
to enter into negotiations or a mere suggestion to induce offers by others. However, price quotes,
if detailed enough, can amount to an offer creating the power of acceptance; to do so, it must
reasonably appear from the price quote that assent to the quote is all that is needed to ripen the
offer into a contract.
o Is a price quotation an offer? Just an invitation for an offer, usually not an offer
o Is the purchase order an offer? Yes, generally an offer → acceptance
 §2-207: "...unless acceptance is expressly made conditional on assent to the additional or different
terms."
 Holding: Purchase order was K, so Brown’s order acknowledgment = acceptance. And indemnity clause
was not in K because of the 2-207(2)(a) exception
INCOMPLETE CONTRACT NEGOTIATIONS: AGREEMENTS TO AGREE
** generally, no agreement to agree with two exceptions: (1) rental agreements, (2) letters of intent
WALKER V. KEITH (1964) Rental agreement, but with an option to renew (lessor/lessee case)
 RULE: To be enforceable and valid, a contract to enter into a future covenant must specify [sufficiently
define] all material and essential terms and leave nothing to be agreed upon as a result of future
negotiations.
 Traditionally, a renewal covenant in a lease leaves the renewal rental to be fixed by future agreement btw
the parties has generally been held unenforceable and void for uncertainty and indefiniteness, however in
some minority of jurisdictions they accept this.
 Ct using its power for paternalism:
o Cts are called not to enforce an agreement or to determine what the agreement was, but to write
their own concept of what would constitute a proper one.
o In doing so, courts run the risk of committing parties to an agreement which is contrary to the
deliberate design of all of them.
 Rationale: "the promise gives rise to no legal obligation under the future agreement"
 Consideration:
o Cassinari v. Mapes (1975)—The renewal option is part of the consideration and bargain of the
original lease. Majority of courts use this.
o Bargain approach
o Realistic approach vs. classical approach
 General rule: material term, agreements to agree, and hasn't been determined --unenforceable
o This is agreement to agree → unenforceable
 Issue in Walker: nothing is definite enough to enforce, so I am not enforcing this
 If we don't uphold on rental agreements to agree it would have a negative effect on the economy
 Material terms specified → enforceable K
 Material terms left open to negotiation → not enforceable
 Rent = material term
o If it does not specify exact dollar amt. of the rent, but has a definite method for calculating rent
that K can be enforceable
o Here the clause did not specify, and the method was confusing—comparative business conditions
= not enforceable

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 Agreement to agree is not enforceable, renewal clause is unenforceable. Walker, agreeing to enter a
future covenant requires a level of certainty.
o Cassinari v. Mapes (Nev. 1975)—The renewal option is part of the consideration and bargain of
the original lease. Majority courts use this MORAL: this case is an example of why an agreement
to agree isn’t allowed
 Good case to argue for both sides and how facts/language are persuasive
 Legal realist judges = Cassinari or a formalist judge = Walker
QUAKE CONSTRUCTION, INC. V. AMERICAN AIRLINES, INC. (1990) airline K case

RULE: A letter of intent to enter into a K will be enforceable if the parties intended the letter to be contractually
binding. [unless the parties don’t want them to be enforceable]
HOLDING: Affirmed the appellate court's decision. Remanded to be decided.
REASONING:
 Although letters of intent may be enforceable, such letters are not necessarily enforceable unless the
parties intend them to be contractually binding [letters alone are ambiguous]
 To determine if parties intended to reduce their agreement to writing, these factors must be
considered whether:
o (1) type of agreement at issue is one usually put into writing;
o (2) the letter of intent involves few or many details;
o (3) the agreement at issue involves a small or large amount of money;
o (4) the agreement at issue is one that requires a formal writing to express all terms;
o (5) the negotiations have indicated that the parties intended to reduce the agreement to a formal
writing;
o (6) if negotiations were abandoned, where in that process that occurred;
o (7) the extent to which the party now disclaiming the existence of a contract provided assurances
to the other party; and
o (8) the reliance of the party who seeks to enforce the contract on the completion of the transaction
[other factors: reasons for abandonment, extent of assurances]
 Finds the cancellation clause ambiguous = enhances the other ambiguities in the letter
 Need to consider parol evidence is a K is confusing
 Pennzoil v. Texaco case—intent is controlling to determine if a letter of intent is a binding K
INCOMPELTE CONTRACT NEGOTIATIONS AND THE ROLE OF RELIANCE
** liability in the absence of acceptance option contracts, offeree reliance, and statutory limitations on revocation
 Principle of Free Revocability of an Offer: traditional method of mutual assent was through the process
of offer and acceptance
o An offer is revoked when the offeror communicates the revocation to the offeree or “when the
offeror takes definite action inconsistent with an intention to enter into the proposed contract
AND the offeree acquires reliable information to that effect.” (Restatement (Second) § 43).
o Common Law Rule: an offer is revocable unless and until it is accepted by the offeree, even if
the offer itself expressly state that it cannot and will not be revoked (Normile Case)
o Free revocable is not natural law
o Article 16 of CISG:
 (1) Until a contract is concluded an offer may be revoked if the revocation reaches the
offeree before he has dispatched an acceptance.
 (2) However, an offer cannot be revoked:
 (a) If it indicates, whether by stating by stating a fixed time for acceptance or
otherwise, that it is irrevocable; or
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 (b) If it was reasonable for the offeree to rely on the offer as being irrevocable
and the offeree has acted in reliance on the offer
 Baird (bad law) and Drennan developed good common law cases
BERRYMAN V. KMOCH (1977) option K, $10 dollar case

2 Theories →
 (1) An option contract to purchase land to be binding must be supported by consideration the same as
any other contract. If no consideration was given, then the trial court correctly found there was no more
than a continuing offer to sell.
o Option contract theory= mutual assent + consideration
 USE CONSIDERATION
 Bargain theory: bargain on a benefit
 (2) If no consideration then  RULE: Promissory Estoppel can only be invoked if the promise was
made under circumstances where the promisor intended and reasonably expected that the promise would
be relied upon by the promisee (Marker v. Preferred Fire Ins. Co.)
o (1) promise was made under circumstances that the promisor reasonably expected the promisee to
act in reliance on the promise
o (2) promisee acted as could reasonably (reasonable reliance) be expected in relying on the
promise
o (3) a refusal by the court to enforce the promise must be virtually to sanction the perpetration of
fraud or must result in other injustice
 USE REASONABLE RELIANCE
 Here there was not a strong argument for this
 Polk, purported option contract without consideration is merely continuing offer, may be revoked any
time before acceptance, and will be terminated by the offeree's rejection or counter-offer
 Nominal consideration is not effective, even if they did offer it under the 2nd R3S
 Berryman, holds that nominal consideration can serve an effective consideration to make an option
contract irrevocable
o This however, conflicts with the 2nd R3S of K → adds a requirement of writing signed by the
offeror
 R3S also states that the mailbox rule does not apply to option contracts, but not all courts agree
 Option contractors do not offer itself to the rejection rules of § 36
How would you terminate an option-contract if you wanted to?

 You would have to discharge an agreement, or sign a new contract
 Need to get rid of their power of acceptance
 Berryman recognizes that in an option contract, the offeror's power of revocation may be bargained
away in exchange for return consideration.
2. Offeree's Reliance on an Unaccepted Offer as Limitation on Revocability

 Berryman case rejects the idea that if an offer does not attempt to revoke before the offeree has made an
acceptance, that the offeree can claim that her reliance provides a sufficient reason to hold the offeror to
his offer
JAMES BAIRD CO. V. GIMBEL BROS., INC (1933) linoleum offer was rejected
 Idea here is subcontractor knew they made a mistake, misquote bid price and acceptance
 RULE: The doctrine of promissory estoppel cannot be asserted to compel performance if the promisee
has not provided consideration to the promisor. [no reliance b/c he accepted the bid from the company
that did not create a K]
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 R3S of K § 35: Unless there are circumstances to take it out of the ordinary doctrine, since the offer was
withdrawn before it was accepted, the acceptance.
DRENNAN V. STAR PAVING CO. (1958) low bid mistake leads to K

 Restatement Second of Contracts § 90: Promise Reasonably Inducing Action or Forbearance
[subsidiary promise] (1) a promise which the promisor should reasonably expect to induce action or
forbearance on the part of the promisee or a third person and which does induce such action or
forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy
granted for breach may be limited as justice requires; (2) a charitable subscription or a marriage
settlement is binding under Subsection (1) without proof that the promise induced action or forbearance.
 Holding: there is promissory estoppel b/c the bid is viewed a promise. The promise was reasonably relied
on.
 Most every Ct now applies Drennan, not Baird, b/c Drennan = legal realism
R3S § 87: § 87. Option Contract

 (1) An offer is binding as an option contract if it
o (a) is in writing and signed by the offeror, recites a purported consideration for the making of the
offer, and proposes an exchange on fair terms within a reasonable time; or
o (b) is made irrevocable by statute.
 (2) An offer which the offeror should reasonably expect to induce action or forbearance of a substantial
character on 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.
ELECTRIC CONTRACTING
Shrinkwrap: item is wrapped in plastic and if buyer notices an issue with it, they can return it virtue ,
1.
mail order on the phone [historical, policy is everywhere, terms are in the package]
o Substantive terms: disclaimers of warranty, limitations on liability, exclusions of consequential
damages, etc.
o Procedural: choice of law or forum provisions, arbitration clauses, etc.
o Sometimes shrinkwrap terms are also called rolling contracts, lawyer contract, money now,
terms later
o Software or tangible products—usually has this kind of k
o Vendor is the “master of the offer”
o When the customer first purchases the product, that is not the offer
o The vendor makes the offer by shipping the product to purchaser with the vendor’s terms of sale
included
DEFONTES V. DELL, INC. (2009) shrinkwrap case, software UCC case
 Klocek v. Gateway, Inc. —Π (appellees): MINORITY SIDE –Policy considerations: K is based on
mutual assent, and claim that a purchaser who receives a product and only thereafter is informed of the
terms of sale has "consented" to those terms simply by failing to return the product strains the concept
of consent
o Klocek gives purchases greater rights, but both parties are bound when the vendor accepts
payment and either ships or promises to ship – Court rejects this
 ProCD and Hill Opinions: Δ (appellants): MAJORITY – Court chooses this approach
o Offer: Dell sends product
o Acceptance: shifts to buyer to either accept or deny it; consumers keeps goods
 (1) when a purchaser places an order in person, by phone, or over the internet, the purchaser has not
made an offer
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
(2) vendor makes the offer by shipping the product to the purchaser with the vendor's terms of sale
included—vendor = master of the offer
 RULE: Under the UCC, additional terms in a shrinkwrap agreement will only become part of the contract
for the sale of goods if the agreement explicitly provides that the consumer can reject the terms by
returning the goods.
2. Clickwrap: before completing the purchase of the product, the purchaser must scroll through the seller's
terms of sale and click a button labeled "I agree" or "submit" [sometimes initials]
o Strongest, powered by policy [most common]
o If buyer does not agree to these terms, cannot purchase item
3. Browsewrap: click on a hyperlink, involves information made available by internet providers on their
websites, often but not necessarily free of charge, and often involving information that the user accesses
but does not always download
o Use of the site agrees to these terms—consumer doesn’t have to claim they have no seen or
agreed to the seller’s terms
o Weakest
LONG V. PROVIDE COMMERCE, INC. (2016) browsewrap case
 Specht: pop up, not mutual assent b/c there was no notice, if the offer was not clear
o it was appearing ‘submerged’ on the screen and it was placed below the download screen
 Nguyen: more conspicuous, nothing that brought them to the terms and condition, its applying the
different standard, link was visible without scrolling and a bright line rule was created
o Conspicuous hyperlinks on every page, but no notice to users to prompt them to take affirmative
action, is insufficient to give rise to constructive notice.
 Agree with the Nguyen court that a textual notice should be required
o (a) browsewrap terms are not contractually binding unless the user clicks "I agree" or similar
button
o (b) a prominent hyperlink to terms and conditions alone is never sufficient to amount to
agreement, even if the link is conspicuous
 RULES: The validity of the browsewrap contract depends on whether the user has actual or constructive
knowledge of a website's terms and conditions. Absent actual notice, the validity of a browsewrap
agreement turns on whether the websites put a reasonably prudent user on inquiry notice of the terms
of the contract.
 Browsewrap agreements should be enforceable even if the user has not clicked an agreement button, if
four requires are met
o (i) user is provided with adequate notice of the existence of the proposed terms
o (ii) user has a meaningful opportunity to review the terms
o (iii) user is provided with adequate notice that taking a specified action manifests assent to the
terms
o (iv) user takes the action specified in the latter notice
Difference between clickwrap and browsewrap transactions

o Is with clickwrap the terms are available for review, and the purchaser must click an agreement
button in order to complete the transaction
o With browsewrap the terms of use are normally accessible from the provider's home page by
clicking a button, but the user is not required (or encouraged) to scroll through the terms of use,
and is not required to click any agreement button
PROMISSORY ESTOPPEL
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 Promissory Estoppel: R3S 2nd—a promise which the promisor should reasonably expect to induce action
or forbearance of a definite and substantial character on the part of the promisee, and which does not
induce such action or forbearance is binding if injustice can be avoided only by enforcement of the
promise = goal to prevent in justice
 Can be used to enforce a promise that would not be enforced but for forbearance
HARVEY V. DOW (2008) promissory estoppel case, daughter moved to the land of the parents
 When the donee has made substantial improvements to the land, and the donee has made the
improvements in reliance upon the promise convey the land, courts will enforce the promise
 Applying a promise to an action it is reasonably to rely on this type of promise
Wright v. Newman, court found he owed child support for that kid, he held himself he was the father of this case
for 10 years, court found this sufficient to pay child support, he was also on the birth certificate
 Policy problem: could lead to involuntary issues, goes back to justice, redefining of what they intended
to do, creates an involuntary obligation, matches with how people read interactions
Bouton v. Byers, Π alleged that she was induced by her father to leave her job as a law professor to come work on
a cattle rank. Appellate court argued this was not a proper assertion, she should have known her father's offer was
not binding
CHARITABLE SUBSCRIPTIONS—species of promissory estoppel

KING V. TRUSTEES OF BOSTON UNIVERSITY (1995) MLK decided to submit his papers to BU
 RULES: Charitable Subscription is an (1) oral or written promise to do certain acts or give real
personal property to a charity or for a charitable purpose; (2) be supported by a consideration or reliance
 HOLDING: a jury could reasonably infer here that there was a charitable gift supported by reliance
 Charitable Subscription, 2nd Restatement section 90(2): A charitable subscription or a marriage
settlement is binding under Subsection (1) w/out proof that the promise induced action or forbearance
(AKA reliance)
 SCHOLZ: The elements of a charitable subscription are: (1) a promise (2) which the promisor
reasonably expects will induce action or forbearance on the part of the promisee or another
person, (3) does induce such action or forbearance, and (4) injustice would occur if the promise
were not enforced. Restatement (Second) of Contracts §90. Restatement §90(2) has it that
reliance on or consideration for the donation is not required for charitable subscriptions.
However most, courts have rejected this approach (See King), consider elements two and three.
o Maryland National bank v. United Jewish Appeal Federation (Md. 1979) also rejects this b/c
then anytime someone made a promise to a charity they could potentially be hauled into Ct to
enforce the promise. King rejects for same reason!
o In re Bashas’ Inc. (D. Ariz. 2012) accepts section 90(2)! BUT promissory estoppel was still not
found in this case b/c no injustice.
 The Bailor-bailee relationship established in the letter could be viewed by a rational factfinder as
security for the promise to give a gift in the future of the bailed property, and thus as evidence in addition
to the statement in the letter of an intent of the donor to be bound.
o We should be taking a broad view in looking at the bailment
o Submit to the jury to interpret the language and donative intent
 As a bailee: they had to use scrupulous care, evidence of reliance to maintain ownership, emphasize there
is some donative intent
KATZ V. DANNY DARE, INC. (1980) injured worked, incentivized by pension to retire [voluntarily]
 Katz stated if he would not have retired if the pension had not been offered, however Katz did not get
fired, he voluntarily retired after the board promised him a set amount in pension for the rest of his life.
He relied on the promise to his detriment.
 If the promise was not what the promise is not what the Π relied upon the PE cannot be used
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 Feinberg, applies § 90, she had relied upon the pension, court held it was immaterial, reliance was giving
up her job
 RULE: Promissory Estoppel: elements (1) a promise, (2) a detrimental reliance on such promise; (3)
injustice can be avoided only be enforcement of the promise.
Notes:
 RST (Second) § 90 does not use detrimental reliance that is commonly used to refer to the section's
requirement that the promise induce action or forbearance by the promisee
 Hayes v. Plantations Steel Co. (1982), the Court ruled the opposite of Katz because under the theory he
was required to show detrimental reliance, but he could not do so because his decision to retire
preceded the promise
ACEVES V. U.S BANK, N.A. (2011) bankruptcy case filling payments

 Clear and unambiguous promise: "To be enforceable, a promise need only be defined enough that a
court can determine the scope of the duty, and the limits of performance must be sufficiently defined to
provide a rational basis for the assessment of damages.
 Reasonable and foreseeable reliance: A party’s misguided belief in relying on a statement is not
justifiable reliance
o Here, in reliance on a promise by US Bank to work with her in reinstating and modifying the
loan, Aceves did not attempt to save her home under chapter 13 (reasonable and foreseeable
reliance).
RESTITUTION
 Restitution: R3S (3rd) of Restitution § 1, a person who is unjustly enriched at the expense of another is
subject to liability in restitution
o (1) enrichment of one person under circumstances
o (2) where the retention of benefits would be unjust to another person
 Restitution was traditionally K based, but has achieve independence and on reliance
 Use restitution in the absence of a promise!
 Words for restitution  quasi-K, implied-in-law, unjust enrichment, quantum meruit
CREDIT BUREAU ENTERPRISES, INC. V. PELO (2000) Pelo was bipolar and received court order
medical treatment, but does not want to pay; quasi-contract theory is applied R3S (3rd) Restitution
 ISSUE: Does duress apply to restitution cases or only contract? ONLY K cases, does not apply to
restitution cases
 RULE: A person who performs, supplies, or obtains professional services required for the protection of
another’s life or health is entitled to restitution from the other as necessary to prevent unjust enrichment,
if the circumstances justify the decision to intervene w/out request.
o Contract implied by law (constructive): no mutual assent, by the law implies a K
o Unjust enrichment: to receive property or benefits without consideration under unjust
circumstances, limitation on this principle—general presumption can be overcome
 Officious Doctrine: volunteering one's services where they are neither asked nor needed; if for which one
did not request or knowingly accept
 Ct in Pelo points out: the Restatement 1st of Restitution section 116 provides for restitution in favor of
one furnishing emergency services in a situation where serious bodily harm or pain will otherwise result,
provided the P acted inofficiously.
 Sec. 20 of the Restatement 3rd of Restitution, Protection of Another’s Life or Health, provides:
o A person who performs, supplies, or obtains professional services required for the protection of
another’s life or health is entitled to restitution from the other as necessary to prevent unjust
enrichment, if the circumstances justify the decision to intervene w/out request.
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o Unjust enrichment under this section is measured by a reasonable charge for the services in
question.
 General Rule: where one renders services of value to another with his knowledge and consent, the
presumption is that the one rendering the services expects to be compensation, and the one to whom the
services are rendered intends to pay for the same, and so the law implies a promise to pay.
 §107. Effect of Existence of Bargain upon Right to Restitution
 Implied in law (restitution) → not real contracts
o Quasi-contractual liability was founded on unjust enrichment
o 1st R3S of Restitution rejected the term quasi
 Implied-in-fact → real/true contracts
 Right to restitution when a person acts to protect the property of another, rather than his life or health
COMMERCE PARTNERSHIP V. EQUITY CONTRACTING CO. (1997) class situation of contractors is

not in direct communication w/ subcontractor, unjust enrichment
 An unjust enrichment cannot exist where payment has been made for the benefit conferred.
 To have a case for quasi-K against an owner, the subcontractor must have exhausted all remedies against
the subcontractor and the owner needs to have not paid anyone. there needs to be enrichment and it needs
to be unjust. Here, the owner paid the subcontractor, so not unjust enrichment.
 K implied in law (quasi-K) – obligation created by the law w/out regard to the parties’ assent by words
or conduct
 Elements: (1) the Π has conferred a benefit on the Δ (2) the Δ has knowledge of the benefit (3)
the Δ has accepted or retained the benefit conferred and (4) the circumstances are such that it
would be inequitable for the Δ to retain the benefit w/out paying fair value for it
 K Implied in Fact: one form of an enforceable K; it is based on a tacit promise, that is inferred in whole
or part from the parties conduct, not solely from their words
o e.g. give dress to dress cleaner, slip is received that says Mon. Agreement to make payment is
inferred when you pick up the dress.
 Policy arguments:
o To prevent subcontractors without get paid
o Owners argue, allowing subcontractors to recover, might deprive the general contractor--also
unfair, why should be on the hook, when the contractual relationship is with the general
contractor
 Court held: subcontractor could maintain a quasi-contract action against an owner, provided that it pled
and proved 2 elements to establish that the enrichment of the owner was unjust
o (1) subcontractor had exhausted all remedies against the general contractor and still remained
unpaid
o (2) the owner had not given consideration to any person for the improvements furnished by
the subcontractor
o However, the court reversed under the circumstances – wrong for implementing
 Equity failed to establish Commerce did not make a payment to any party for the benefits conferred on
the property
 Mechanics Lien: alternative source of relief; to prevent an owner from being obligated to pay for an
improvement for an improvement more than once. It was not intended, nor shall we interpret it to permit
it to permit an unjust enrichment
Contract: Mutual assent + Consideration

Promissory Estoppel= promise + reliance
Restitution= benefit + injustice
Promissory Restitution= promise + benefit + injustice
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PROMISSORY RESTITUTION
 Promissory Restitution: when services are rendered and then an express promise to pay is made
 [This theory is very rare, applies in extreme injustice]
 Mills v. Wyman, a kind act in the past can't support the beneficiary's later promise to pay the kindness
back—adopts a different rule in Webb
WEBB V. MCGOWIN (1936) Webb fell with the block and got injured and spared McGowin, Promissory
Restitution
 Can't say there was a contract? No mutual assent in advance Promissory estoppel? No reliance on the
promise. Problem with Restitution? How would you know it was not done just out of goodness?
(gratuitously). Was this rendered gratuitously? None of these theories fit, look at this situation applies
o A material, substantial benefit conferred in the past constitutes consideration for a voluntarily
assumed promise of compensation later. The Webb Court applies if a person receives a material
benefit from another, other than gratuitously, a subsequent promise to compensate the person for
rendering such benefit is enforceable.
o Cites: Boothe v. Fitzpatrick, obligated to take care of the cow, even without; human life is
quantifiable, must be gratuitous. [a promisee’s care, improvement and preservation of a
promisor’s property is sufficient consideration to enforce a promisor’s subsequent agreement to
pay for the service]
 Harrington v. Taylor, Π saves husband from an ax, Holding: material benefit, compensation, but case
refused to uphold it, b/c no promise. Ct ruled a voluntary, humanitarian act is not consideration.
 HOLDING: Promissory Restitution is here. Moral obligation is a sufficient material benefit. Unlike in
Harrington, the promise was thoughtful.
 The services were not gratuitous b/c there was an agreement to pay and an acceptance of payment –
evidence that both parties thought this service was worthy of compensation (AKA consideration).
Notes:
 Restatement 2nd sec. 86 adopts The Material Benefit Rule (AKA promissory restitution)
o § 86. Promise For Benefit Received
o (1) 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.
o (2) A promise is not binding under Subsection (1)
 (a) if the promisee conferred the benefit as a gift or for other reasons the promisor has not
been unjustly enriched; or
 (b) to the extent that its value is disproportionate to the benefit.
 Limits: if the enforcement of the promise would be disproportionate to the reasonable value of the benefit
received, enforcement may be limited to that value
THE STATUTE OF FRAUDS

 SoF is an Affirmative Defense (the must be brought by the Δ, and quickly or else it’s waived)
 Failure to comply w/ SoF will make it unenforceable; some actions must be in writing
 Most common exceptions: performance or reliance
Statute of Frauds
R3S (2nd) §110. Classes of Contracts Covered
(1) following types [cases] of statutes are subject to the SoF unless there is a written memorandum or an
applicable exception:
(a) K for an executor or administrator to answer for a duty of his decedent (executor-administrator
provision)
(b) K to answer for the duty to another (the suretyship provision)
(c) K made upon consideration of marriage (marriage provision)
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(d) K for the sale of an interest in (the land contract provision)

(e) K that is not to be performed within one year from the making thereof (the one-year provision)
 Old English SoF applied to Ks for sale of goods
 NOW: Ks for sale of goods for a price of $500 or more to be evidenced by a writing signed by the party
against whom enforcement is sought, unless some exception to the statute applies
 Acronym: MY LEGS: The Statute of Frauds forbids the enforcement of a contract unless it is set down in
a signed writing. There are six classes of contracts that fall within the Statute of Frauds: (1) marriage
contracts, (2) contracts that cannot be performed within one year, (3) land contracts, (4) executor-
administrator contracts, (5) sale of goods contracts for $500 or more, and (6) suretyship contracts.
Restatement (Second) of Contracts § 110 (1981). For land contracts, an exception exists if the injured
party has incurred a detriment by making significant repairs or improvements to the land. Id. at § 129.
A. General Principles: Scope and Application

 (1) Is the K at issue one of the types to which the SoF applies, so that a signed memorandum will be
required for its enforcement (within the statute)?
o If No. SoF has no application to this case, and Π is free to prove her K by any combination of
relevant evidence, written or oral, direct, or circumstantial.
o If Yes. (2) Is the SoF satisfied? Some type of written statement, memo, of its terms signed by the
Δ that is sufficient to mee the statute's requirements?
 If Yes, no bar to enforcement.
 If No, (3) Are there other factors in the case, such as performance or reliance by
the Π, which might invoke an exception to the statutory bar?
CRABTREE V. ELIZABETH ARDEN SALES CORP. (1953) - agreement to hire makeup manager case
 This is w/in the statute of frauds though b/c of how unlikely it is to fit the 1-year provision.
 Majority view of separate docs – sufficient connection between the docs is established by a reference to
the same transaction. Parol evidence can be used to provide context and connect the docs.
 UCC: it does not have to be singing w/ wet ink, any symbol name w/ intent to authenticate a doc and in
this case, if a person of authority is signing in place of the secretary is enough
o The Docs must be signed by the Δ (AKA the party they are being enforced against).
 RULE: to permit satisfaction of the SoF by a series of signed and unsigned writings contains 2 strict
threshold requirements 
o (1) Construction of the statute which requires that the connection btw the writings and Δ's
acknowledgement of the one not subscribed (a contractual relationship between parties), appear
from examination of the papers alone, w/o the aid of parol evidence
o (2) sufficient connection btw the papers are established simply by reference in them to the
same subject matter of transaction
 Court likes this view: if supported by parol evidence, serves only to connect the separate
documents and to show that there was assent, by the party to be charged, to the contents
of the one unsigned
 If testimony does not connect the unsigned to signed papers, the statute has not been
satisfied.
 Unsigned document = parol evidence to refer to subject matter
SoF: Writing: duration, parties, terms, and signature of the party to be charged
 Can pieced together by reference if they are clearly talking about subject that allows signed and unsigned
to be pieced today (as long as they clearly refer to the same subject matter)
o Rule court rejects: has to be an explicit reference to the specific, signed has to be directly linked
o Too limited, standard is too high-- going to have other contracts thrown out
o Court is trying to balance not letting people just making things up to connect K
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ALASKA DEMOCRATIC PARTY V. RICE (1997)—RULE: The doctrine of promissory estoppel can be
invoked to enforce an oral contract that is subject to the Statute of Frauds-- can make a promise enforceable. An
oral promise that would be unenforceable under the statute of frauds may be upheld under the doctrine of
promissory estoppel if there was reasonable reliance on the promise and enforcing it is then only way to avoid
injustice.
Freedman v. Chemical Constr. Corp. (NY 1977) – The Π alleged that the Δ had orally promised to pay him a
commission for procuring a K for the construction of a chemical plant in Saudi Arabia. The Π’s fee was to be
payable on completion of the plant. Some 9 years passed b/w the making of the alleged promise and the plant’s
completion. Holding: The Ct held the K not to be w/in the 1-yr clause; the whole process COULD have taken
place w/in 1 year, even if that would have been unlikely or improbable.
STATUTE OF FRAUDS UNDER THE UCC
The Sale of Goods Statute of Frauds UCC §2-201

 Convention for the International Sale of Goods (CISG) contains no provision similar to SoF
o Article 11 in the CISG expressly negates any requirement of a writing or other formality, and
provides that. Contract for sale may be proved by the witness
o CISG Article 12 & 96: state may "declare" that its statutory writing requirements will apply
when any part to a contract has its place of business in that state
 UCC § 2-201: Ks for the sale of goods for a price of $500 or more must be evidenced by a writing signed
by the party against whom enforcement is sought.
o Writing requirement: 1. Contains a writing sufficient to indicate a K of sale between parties 2. Is
signed by the party or authorizing agent against whom enforcement is sought 3. States a quantity
UCC § 2-201. Formal Requirements; Statute of Frauds. **NOTE: UCC sec. 2-201(2) is a big UCC only
exception!
 (1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or
more is not enforceable by way of action or defense unless there is some writing sufficient to indicate that
a contract for sale has been made between the parties and signed by the party against whom enforcement
is sought or by his authorized agent or broker. A writing is not insufficient because it omits or incorrectly
states a term agreed upon but the contract is not enforceable under this paragraph beyond the quantity of
goods shown in such writing.
 (2) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient
against the sender is received and the party receiving it has reason to know its contents, it satisfies the
requirements of subsection (1) against such party unless written notice of objection to its contents is given
within 10 days after it is received.
 (3) A contract which does not satisfy the requirements of subsection (1) but which is valid in other
respects is enforceable
 (a) if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in
the ordinary course of the seller's business and the seller, before notice of repudiation is received and
under circumstances which reasonably indicate that the goods are for the buyer, has made either a
substantial beginning of their manufacture or commitments for their procurement; or
 (b) if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in
court that a contract for sale was made, but the contract is not enforceable under this provision beyond the
quantity of goods admitted; or
 (c) with respect to goods for which payment has been made and accepted or which have been received
and accepted (Sec. 2-606).
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BUFFALOE V. HART (1994) tobacco farms case with selling the tobacco box cars
 Part performance exception [most important]– a K is enforceable when payment was made and
accepted or the goods were received and accepted
o Can also be an exception under common law statute of frauds.
 Merchant Admissions Exception– a party who admits the making of a K but is not supported by writing
is an enforceable K
 Holding: The Statute of Frauds needs to be satisfied here b/c the barns are goods, and they are over
$500. The statute of frauds here is not satisfied – no writing. BUT here, there is the partial
performance exception b/c payment was made and accepted.
 Exceptions come into play, when there is no K at all, wasn't an agreement
 Part performance existed: Evidence of purchasing the barns, reimbursing the Δ for insurance, paid for
improvements, took possession, enlisted and aid of an auctioneer
 Framework= is within the statute, is there a significant memorandum
 COMMON LAW—PART PERFORMANCE (and the UCC §2-201)
CONTRACT INTERPRETATION AND BREACH

Two steps: Interpret the contract
- What are the terms of the contract?
- What did the parties intend these terms to mean?
– Did one or both parties breach their duty to perform under those terms?
• If yes, is the breach partial, material, or total?
CONTRACT INTERPRETATION
 The issues affecting the outcomes of contractual disputes can be divided roughly into questions of
"substance" and "form"
 Actual assent → concerns substance of their agreement
 Form  Statute of Frauds: the expression of an agreement in particular medium and with a particular
indicium of assent
Approaches to Contract Interpretation 

§ 201 Whose Meaning Prevails
 (1) Where the parties have attached the same meaning to a promise or agreement or a term thereof, it is
interpreted in accordance with that meaning
 (2) Where the parties have attached different meanings to a promise or agreement or a term thereof, it is
interpreted in accordance with the meaning attached by one of them if at the time the agreement was
made
o (a) that party did not know of any different meaning attached by the other, and the other knew the
meaning attached by the first party; or
o (b) that party had no reason to know of any different meaning attached by the other, and the other
had reason to know the meaning attached by the first party
 (3) Except as stated in this Section, neither party is bound by the meaning attached by the other, even
though the result may be a failure of mutual assent.
Different Approaches to Contract Interpretation →

 Modified Objectivism: § 2-201 of the 2nd restatement, he was worried about objectivism b/c it could
enforce contracts against parties where they did not; main theory of objective, tempers the interpretation
of foundation, evidence is relevance
o If only one party has reason to know of meaning, then will be bound by the other meaning
(meaning that controls)
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 One that didn't have reason to know, that is the one's that fails & unfair
 Objective Approach: Would a reasonable party intend to enter into the contract? If, yes K was formed.
Even if both of them did not intent to be bound. We interpret what is read, based on what a reasonable
person intends for it to mean [Holmes argued for the conduct of the party, not what they are thinking]
o Fairness: More fair b/c if you have subjective rule it ignores the reasonable approach, thoughts
vs. actions are very subjective, allows someone to get out of a contract very easily
o Efficient: makes them more realistic
 Subjective Approach: we try to define what both parties are thinking, if matched we enforced it, if not
then we don't
o Makes enforcement harder, courts must access their credibility, working makes it objective
evidence
o Example Raffles v. Wichelhaus: 2 merchants entered into a contract for the sale of cotton to arrive,
2 ships named Peerless that were sailing from Bombay one leaving in October and one leaving in
December. in a sense the buyer won because there was no meeting of the minds, subjectively, we
cannot enforce it
 Justice Holmes criticize the subjective theory of interpretation on two grounds, and stated that courts
should adopt an external approach to contractual interpretation
o (1) subjective approach made enforcement of contracts too difficult
o (2) external method was fair because a speaker should always expect his words to be understood
in accordance with their normal usage
§ 2-201. Formal Requirements; Statute of Frauds. (Modified Objective)

Primary tabs
(1) Except as otherwise provided in this section a contract for the sale of goods for the price of $500 or more is
not enforceable by way of action or defense unless there is some writing sufficient to indicate that a contract for
sale has been made between the parties and signed by the party against whom enforcement is sought or by his
authorized agent or broker. A writing is not insufficient because it omits or incorrectly states a term agreed upon
but the contract is not enforceable under this paragraph beyond the quantity of goods shown in such writing.
(2) Between merchants if within a reasonable time a writing in confirmation of the contract and sufficient against
the sender is received and the party receiving it has reason to know its contents, it satisfies the requirements of
subsection (1) against such party unless written notice of objection to its contents is given within 10 days after it
is received.
(3) A contract which does not satisfy the requirements of subsection (1) but which is valid in other respects is
enforceable
(a) if the goods are to be specially manufactured for the buyer and are not suitable for sale to others in the
ordinary course of the seller's business and the seller, before notice of repudiation is received and under
circumstances which reasonably indicate that the goods are for the buyer, has made either a substantial beginning
of their manufacture or commitments for their procurement; or
(b) if the party against whom enforcement is sought admits in his pleading, testimony or otherwise in court that a
contract for sale was made, but the contract is not enforceable under this provision beyond the quantity of goods
admitted; or
(c) with respect to goods for which payment has been made and accepted or which have been received and
accepted (Sec. 2-606).
CONTRACT INTERPRETATION
JOYNER V. ADAMS (1987) action for rents allegedly due under the terms of a lease, base lease gets split in
individual lot lease, example of the modified objective theory of K interpretation
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 Contra proferentem - Ambiguity in contract terms must be construed most strongly against the party
which drafted the contract. This rule is usually applied in adhesion contracts or where 1 party is in a
stronger bargaining position; if both parties are equally sophisticated, using this rule is not proper.
 The maxim should be used only when other means of interpretation cannot be used to decide an
ambiguity (need to run the Restatement 2nd section 201 first).
 Here, both parties had different meanings, Tr Ct used contra proferentem rule. App Ct ruled that the Tr Ct
erred in using the rule, both parties bargained from equal positions of power. App Ct further held that
instead of relying on the contra proferentem rule, they should rely on the “reason to know” rule.
 Have to apply the Restatement 2nd sec. 201 test.
o Test: Did one party know or have reason to know the meaning of the other party when the other
party did not have this knowledge?
 Use canon of interpretation: in tight cases and figure out what we should do when there is an
ambiguity .Π’s burden needs to persuade the court that the agreement exists, that it means with the Δ
contended to mean, it is attached to one of them
 Court does not want to use the constructive canon, effectively finds that the trial court erred in awarding
judgment
 RULE: Court should apply the Rule § 201 Whose Meaning Prevails: R2 § 201(2): If one party attaches
a particular meaning to a term or to the agreement, not knowing or having reason to know that the other
party attached a different meaning, and the other party knows or had reason to know of the first party's
meaning, the first party's meaning will prevail.
FRIGALIMENT IMPORTING CO. V. B.N.S. INTERNATIONAL SALES CORP. (1960) Controversy over
stewing chicken vs. fowl
 Court holds a twist on the 2nd R3S, says this is ambiguous, do analysis on § 201
 RULE: If the parties to a K subjectively, but in good faith, construe an ambiguous term differently, courts
may look to external factors to determine the proper interpretation of the term.
 PLAIN MEANING RULE: Court will look at this if they should have reason to know of another
party's reading:
1. Actual contract language
2. Negotiated history: [course dealings: actions taken by the parties in carrying out the contract as
issue]
3. Course of performance: what happened as the K was being executed, shipping of the chickens
to the other party
4. Industry standards (trade usage)
5. Government regulations:
6. Transactional context (market conditions) --extra
 Analysis:
o Step 1: court looks at the language whether the contract itself offers any aid to its interpretation
 Ambiguity →
 Plain Meaning: extrinsic evidence is admissible only if they conclude the contract is
ambiguous, 2nd R3S does not require that
 Latent Ambiguity: one not apparent from the words alone (at least in their common
meanings) but visible in the light of surround circumstances
 Courts permit receiving and consider extrinsic evidence to determine whether
there is an agreement
 Argues there is no specific usage of the word arises
 Patent Ambiguity – when the language itself is ambiguous
o Step 2: Court’s Analysis goes through each of the factors to see if inconclusive or favors Δ of Π,
does not have to be all one way or another
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o Plain meaning governs, but extrinsic evidence can come in at certain

 Bohler-Uddeholm Am., Inc. v. Ellwood Group –justification for plain meaning and latent ambiguity, has to
be used to support a reasonable understanding
C&J FERTILIZER, INC. V. ALLIED MUTUAL INSURANCE CO. (1975) burglary w/ visible marks
insurance policy
 Emphasized the agent of the insurance company, arrives at premises explains what the insurance is
supposed to do → visible evidence of a burglary, defined it in a specific way
 Reasonable Expectations Doctrine (Second Restatement)– the objectively reasonable expectations of
applicants and intended beneficiaries regarding the terms will be honored even tho the provisions would
have negated those expectations – cited in Rodman v. State Farm Mutual Insurance Co.
o This applies mostly to insurance contracts (adhesion contract); for other standardized contracts,
Cts are hesitant to apply
o Adhesion contract = a standardized form and some degree of imbalance of bargaining power,
involving a “take it or leave it” approach.
o SCHOLZ: Rule for contract of adhesion: A contract or provision that does not fall within
the reasonable expectations of the adhering party will not be enforced against him.
o Courts worry that applying this to other Ks would fear that this rule would swallow the whole
and create uncertainty in the law
 NOTES FOR EXAM: This case is the opposite approach to the Plain Meaning Rule.
o ***Apply both the PMR and the reasonable expectations doctrine on an exam and then choose
which approach would carry the day for x, y, or z reason***
o Also, Reasonable Expectations vs. Duty to Read (ref. Eurice Bros.)
Why insurance? [potential policy argument]

 Difference in the absence of choice, things that are not necessary that are of a small dollar value
 Doctrine of unconscionable: Court applauds this
 Critique of the adhesion contract, basic. Unfairness and a recognition that persons' rights shall be
controlled by private lawmakers without the consent, express or implied, or those affected
o Worry: you need to have insurance, insurance companies craft terms in a certain way to minimize
what they have to pay out, there is this idea
 Can an agent present the terms in one
 Send terms to a different interpretation
o Abdication of judicial responsibility:
 Idea: huge pervasive societal issue, everyone needs insurance, huge incentive for the commissioner of
insurance to take advantage of them
 Regulation is relatively weak in most instances, and even the provisions prescribed or approved by
legislative or administrative action ordinarily are in essence adoptions, outright or slightly modified of
proposals made by insurers' draftsmen
 We should not abdicate the responsibility in these types of cases
o Here- Contract of adhesion – was take it or leave it
 Finally contract that could be reasonably assumed by plaintiff to accord with the writing
 Dickard terms: rather than just heeding a situation, parties go back and forth
o Yuris Brothers was not adhesion, b/c it was over serious of month --not take it or leave it
o Ability for insurance to allow to hide things expressly or implicitly with agents or potential
clients
 Why is this unequal? b/c there is a take it or leave it basis, unequal bargaining power
 Deni Associates of Florida, Inc. v. State Farm Fire & Cas. Ins. Co. (Fla. 1998)—The FL SCt declines
to adopt the doctrine of reasonable expectations. There is no need for it if the policy provisions are
ambiguous bc in FL ambiguities are construed against the insurer.
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THE PAROL EVIDENCE RULE
 R3S Rule applies the Parol Evidence Rule, Contract of adhesion, substantive law
 Contracts adhesion factors are:
 (1) Use of standard form
 (2) Inequalities of bargain power
 (3) Absent of a choice other than to accept or reject
 Policy Rule: power to set the set the terms of a contract, especially one for a lot of people, is
for the power to make law
o Some courts limit it to ambiguity, and limit it entirely
o Majority of courts have the doctrine of reasonable expectations but apply it to solely
to insurance law
 Doctrine of unconscionability: Implied duty of good faith, is in every contract
 Implied in fact: Wood (implied promise of reasonable or best efforts)
 Implied in law (default rules): E.g., UCC gap fillers apply unless express terms say otherwise
 Implied in law (mandatory rules)
 Promise of good faith and fair dealing (common law)
 Promise of good faith (UCC)
Parol Evidence Rule—an expression of contract law’s preference for agreements to be in writing
Categories of Parol Evidence

Explanatory Additional Contradictory
Fully integrated Yes No No
Partial Integrated Yes Yes No
**WALKTHROUGH ON EXAM**
 Questions to ask to run thru the parol evidence rule:
o Is the contract fully or partially integrated?
o Are there any exceptions that would allow this evidence to be brought in nonetheless?
 Complete Integration = a writing that is intended to be a final and exclusive expression of the agreement
of the parties.
 Partial Integration = a writing that is intended to be final but not complete bc it deals w/ some but not all
aspects of a transaction b/w the parties.
 Two approaches to see if contract is complete:
o (1) FOUR CORNERS APPROACH
 Need ambiguity for the contract to be incomplete! If there is no ambiguity, then the
contract is fully integrated
 Merger Clause - says the contract is complete. In the absence of a merger clause, full
integration can be determined by the number of essential terms e.g. the more terms, the
more fully integrated
 Complete integration: R3S (1st) § 228, R3S (2nd) § 210, refers to writing that
is intended to be a final and exclusive expression of the agreement of the parties
 Application of the Rule
 (1) court first determines whether the writing in question is intended to be
a final expression of the parties agreement, and, if so,
 (2) whether it is a complete or partial statement of the contract terms?
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 Four Corners Approach → four corners of the writing without resort to

extrinsic evidence
o (2) Second Restatement (Corbin Modern R3S Approach)
 Don’t need ambiguity to determine the contract is incomplete.
 A merger clause does not necessarily mean the contract is complete.
 Step 1: The court considers the evidence that is alleged to determine the extent of
integration, illuminate the meaning of the contract language, or demonstrate the parties’
intent; consideration of evidence can be excluded when the meanings vary, are
contradictory, or are unreasonable/extraordinary
 Step 2: Apply the parol evidence rule and preclude admission of the extrinsic evidence
that would vary or contradict the meaning of the words
 Kinds of evidence
o Additional Terms (Supplementary Evidence)- silent on a topic but does not contradict, nothing
in the contract that say it is in there, parties would want to bring these in, whole new terms, hard
to bring in, depends on court deciding if it was partially or fully integrated
o Explanatory - defines a word; but plain meaning rule sometimes even bars this
o Contradictory- evidence is incompatible, not allowed regardless
 Exceptions. The parol evidence rule does not apply:
o To exclude evidence offered to interpret or explain the meaning of the agreement
 (most important according to Scholz, comes up the most often)
o To agreements made after the execution of the writing
o To evidence offered to show that effectiveness of the agreement was subject to an oral condition
precedent.
 E.g., I told the painter that this contract would only go forward if I obtained paint at this
price, but I didn’t and now he’s trying to sue me. I can bring in this evidence.
o To evidence offered to show that the agreement is invalid for any reason, such as fraud, duress,
undue influence, incapacity, mistake or illegality
o To evidence that is offered to establish a right to an equitable remedy, such as reformation of the
contract
o To evidence introduced to establish a collateral agreement between the parties
 E.g., a lot of the time companies are negotiating multiple contracts btwn each other.
 Not a rule of evidence, evidence rule incorporated into substance law, in order to vest and speak to the
objective actions, parties to take the time → policy
 Parol Evidence Rule: a form of agreement expressed in a formal writing, over various other modes of
expression, both oral and written; when the parties to a contract have mutually agreed to incorporate (or
integrate) in a final version of their entire agreement in writing, neither party will be permitted to
contradict or supplement that written agreement with "extrinsic" evidence (written or oral) of prior
agreements or negotiations between them
o Not considered to be a rule of evidence but a rule of "substantive law"
o Located in the R3S 2nd of Contracts §§ 209-218; Uniform Commercial Code UCC §2-202: the
parol evidence rule applies to extrinsic evidence of any prior agreements, as well as to any
contemporaneous spoken agreements. See U.C.C. § 2-202 (2002). The Uniform Commercial
Code (UCC) does not favor disclaimers of express warranties that undermine the buyer’s
bargained-for expectations through an unexpected, generic exclusion of “all warranties,
express and implied.”
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o The rule does not define what evidence is affirmatively admissible, it only operates to exclude
evidence
THOMPSON V. LIBBY (1885) 4 corners approach dispute over logs in a contract

Seller is the one who sues, looking for the purchase money
 Warranty – express/implied promise [UCC §2-313] that something is guaranteed by one of the
contracting parties
 Implied Warranty of Merchantability under UCC Art. 2 §314 – every sale of goods has an implied
warranty. This rule would apply if the case were held today, buyer of logs would win. BUT back then the
UCC wasn’t around.
o If you’re selling a good, it has to be merchantable. If the logs were that bad, the Δ would have
had this defense today.
 HOLDING: Δ could not bring in evidence of a warranty to supplement the contract
 Rationale  "Founded on the obvious inconvenience and injustice that would result if matters in
writing, made with consideration and deliberation and intended to embody the entire agreement of the
parties, were liable to be controlled"
 Fully integrated: can include explanatory parol evidence, cannot include additional terms (warranty
terms)
TAYLOR V. STATE FARM MUTUAL AUTOMOBILE INSURNACE CO. (1993) 2nd R3s Method
 Policy reason - courts don’t want judges to substitute what they think is ambiguous or not with what the
parties could have thought is ambiguous
 Parties bring out the evidence, then courts weed out the evidence that contradicts the meaning of the
words of the contract
 The evidence Taylor wants to bring in is to explain the terms of the contract, not supplement the terms, so
he has a lower bar to meet to get the evidence to be admissible.
o This falls into an exception of the Parol Evidence Rule: evidence brought in to interpret a fully
integrated contract.
o Taylor released all contractual rights in connection with the collision, but he says he didn’t release
all torts rights.
NANAKULI PAVING & ROCK CO. V. SHELL OIL CO. (1981)

 An example of how far you can potentially take explanation (interpretation)
 The high point of a very modern approach to contract resolution
o Trade usage was able to overcome what would appear to be the plain meaning of a contract.
 Cts can admit evidence of trade, course of dealing, and course of performance
 Applies an expansion modern version of the parole evidence rule
 RULE: trade usage may be used to qualified agreement, to cut down express terms but not cut down
completely -- good faith
IMPLIED TERMS: THE IMPLIED OBLIGATION OF GOOD FAITH
 Implied Terms; The Implied Obligation of Good Faith

o 2 reasons a Ct might imply a term:
 Implied in Fact: The parties would have agreed upon this if they had actually talked
about it at the time of making the agreement, OR
 implicit in the parties’ words or conduct
 Implied in Law: Imposed as a matter of law b/c of fairness or public policy.
o The obligation of good faith – the UCC 1-304 and the Restatement sec. 205 both have this
implied obligation.
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 At a bare minimum good faith implies honesty in fact.

 Reasonable commercial standards and fair dealing
 Bad Faith – Conduct in violation of the spirit of the contract. Denying one of the parties
the fruits of the contract unfairly.
 Obligation of good faith in there in common law, R3S (2nd) and UCC (goods) reflects and contains
provisions for the duty of good faith
 Issue here is what does it mean? What is the scope of good faith? Bare minimum is honest and
fact; UCC adds in reasonable commercial standards of fair dealings--violation of the spirit the
contract
WOOD V. LUCY, LADY DUFF-GORDON (1917) fashion contract to market and sells designs
 An example of IP case: no sale of goods, implied in contract
 Best efforts doctrine/reasonable efforts: Wood bound himself to take reasonable efforts (implied in fact)
to market Lucy’s designs. So, there is consideration.
o This can be inferred since Lucy gave Wood the exclusive right to market her designs. This affects
her whole livelihood.
o Without reasonable efforts, the contract would be illusory
 UCC implies duty to use “best efforts.” Most Cts define “best efforts” in terms of reasonableness or
diligence. This standard is objective and it accounts for context and characteristics of the party.
o There is not much difference b/w the UCC best effort and common law reasonable efforts
o UCC section 2-306(2) imposes a “best efforts” obligation in cases where the contract for sale
calls for “exclusive dealing.”
LEIBEL V. RAYNOR MANUFACTURING CO. (1978) – UCC: Implied Obligation of Reasonable Notice of
Termination (implied in law)-distributorships with garage door dealer
 UCC § 2-309(3):
o Cts are reluctant to deem provisions unconscionable when both parties have business
sophistication.
o Termination on the happening of an agreed event is always okay b/c there is notice in these
situations.
o UCC – implied terms (ex. place of delivery, risk of loss, right of inspection) under UCC are gap-
fillers, subject to preemption by the parties’ express agreement
 Knock out rule—A rule courts apply in cases of conflicting contract terms, under which, if an
expression of acceptance contains terms that are additional to or different from those in the offer, the
conflicting terms in both the offer and acceptance are knocked out of the contract and replaced by
UCC gap-filler provisions.

 Raynor provided written notice, but the court ruled this was not reasonable; good faith was required to
account for inventory expenses and damages
 General Rule: to understand §2-309 subsection 3, it requires 1 party notify the party, either party can
terminate. An agreement dispensing with notification, or limiting the time for the seeking of a substitute
arrangement, is of course valid under this subsection unless the results of putting it into operation would
be the create of an unconscionable state of affairs
o Effect of terminating a contract without notice = unconscionable
o Doctrine is applies to parties that have limited business decision
o Would need to have more facts to apply to a manufacturer
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 HOLDING: disagreed with trial court; only actually notice would be required; remand to apply
reasonable notification to the trial court
SEIDENBERG V. SUMMIT BANK (2002)

 Π's ended up be driven out; all these contentions Δ's created this idea they would work together on a
marketing program
 Implied covenant of good faith and fair dealing has been applied in three general ways →
o (1) covenant permits the inclusion of terms and conditions which have not been expressly set
forth in the written contract
o (2) covenant has been utilized to allow redress for the bad faith performance of an agreement
even when the Δ has not breached any express term
o (3) covenant has been held in more recent cases, to permit inquiry into a party exercise of
discretion expressly granted by a contract's terms
 ****Bad faith/ill motive must be present; this standard is judged at the Trial level and should be judged
carefully and not over-read
 The equal bargaining power is a factor in determining whether the covenant of good faith can be applied
but it is not determinative
 Parol Evidence Rule (PER) doesn’t apply b/c the implied covenant of good faith and fair dealing is
IN the contract, so the PER can’t be used to exclude a part of the contract.
 The implied covenant didn’t need to be written down b/c it’s already inherently in the contract.
GOOD FATH – OBLIGATION TO PERFORM EXPRESS CONDITIONS
MORIN BUILDING PRODUCTS CO. V. BAYSTONE CONSTRUCTION, INC. (1983) Contract for
aluminum siding for walls of a company
 Satisfaction Clause/ Doctrine: Courts prefer subjective standard if its easier to read the contract
 The reasonable person standard (objective approach) is employed when the contract involves
commercial quality, operative fitness, or mechanical utility which other knowledgeable persons can judge.
o The standard of good faith (subjective approach) is employed when the contract involves
personal aesthetics or fancy.
 Ct used the objective standard, even tho there was the usage of “artistic standards” in the contract, it was
# 17 on a list of things and it seemed to still be for functional purposes.
o Also, under the subjective standard, Morin could still win b/c the perfect finish of the aluminum
was unachievable.
 2nd Restatement section 228: the objective test should be preferred when it is “practicable to determine
whether a reasonable person in the position of the obligor would be satisfied.”
o Comment a to section 228: the subjective standard should be used only where “the agreement
leaves no doubt that it is only honest dissatisfaction that is meant and no more.”
ENXCO DEVELOPMENT CORP. V. NORTHERN STATES POWER CO. (2014)

 ***NOTE: Restatement says if another interpretation is reasonable then it Is not going to be an express
condition. LOOK FOR ALTERNATIVE INTERPRETATION FIRST
 Express condition – courts typically need the express condition to be stated in unambiguous language b/c
express conditions must be literally performed or satisfied; substantial performance is not sufficient.
Conditional language must also be used i.e. if, unless etc. [condition to which parties subsequently agree
o Constructive Condition – a condition applied by law to avoid in justice
 SCHOLZ: Three types of condition:
o Express. Interpreted literally and strictly.
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o Constructive. Where one party's performance interpreted to be conditioned on the other's, court
construes condition to have occurred either when (full performance & substantial performance)
 The Condition Precedent = an event that must occur before the performance is due.
 Holding: There were express conditions BUT the Ct was not sympathetic to enXco’s excuses of
temporary impracticability and disproportionate forfeiture.
 EnXco Argues 2 Theories:
o Doctrine impracticability: you can be excused from a performance when you have this fact
pattern, and it wasn't the fault of the party being excused
 Arguing delays were impracticability
 Court says you can't use that doctrine for nonperformance
 Nonoccurrence → fail this test
o Temporary Impracticability: not good enough, they could have done it ahead of time so it’s
their fault for not doing it earlier. It was definitely possible.
o Disproportionate of forfeiture: denied compensation, idea here is the strict enforcement of
terms, if it would cause a party that gives up thing
 Equitable doctrine, unlikely to do this when parties understand
 Ultimately find this is not a persuasive argument
 Problem with this → still maintain possession here
 There was forfeiture, of the likelihood of the loss that they suffered
o Another theory is: Doctrine of Prevention = a condition is excused if the promisor wrongfully
hinders or prevents the condition from occurring.
o Maxton Builders v. Lo Galbo (NY 1986): Facts: A real estate contract. RULE: Courts will
enforce express conditions to the letter. Reasoning: B/c a written letter was not received in the
period of the express condition, the Ct found the express condition not satisfied, even tho a phone
call was made to the seller’s counsel and a certified letter was sent but did not get to the seller
until after the period in the express condition. Substantial performance does not apply here b/c
there was an express condition.
MATERIAL BREACH
JACOB & YOUNGS, INC. V. KENT (1921)

 RULE: Adopted the substantial performance (doctrine of constructive conditions): principle provides
that each party's duty of performance is implicitly conditioned on there being no uncured material failure
of performance by the other party. R3S § 237
 Minor or immaterial deviations from the contractual provisions do not amount to failure of a condition to
the other party's duty to perform
 Material Breach: Total breach relieves/discharges the nonbreaching party from his duties under the
contract; a partial breach does not discharge the non-breaching party, who must continue to perform his
obligations
 Express conditions – will be strictly enforced even if the conditions are harsh.
o No substantial performance if there are express conditions. This result happens only if this
condition is met = express condition
o Constructive condition is governed by substantial performance tho. Constructively in this
contract, the performance of payment was conditioned on providing reading pipe.
 Substantial performance – If someone basically completes a project but there’s like one more thing that
needed to be done, that person is still entitled to partial payment.
o Considers equity considerations and what is fair to both parties.
 Failure to use the Reading pipe was a breach, the difference in pipe wasn’t a substantial deviation from
the contract. Kent still had an obligation to pay
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 Corbin View/2nd Restatement: a willful breach does not automatically bar recovery, but the motive of
the breaching party is a factor to be considered in determining whether performance was substantial.
 Willful transgressor: if someone decides one thing is better than another than that is not okay. If you can
show the party deliberately chose to not get away with it, rather the nonbreaching party will be justified
 SCHOLZ: Jacobs & Young holds that this remedy will be limited to loss in market value rather than
substitute performance where substitute performance would involve “waste”.
SACKETT V. SPINDLER (1967) guy misses payments purchasing newspaper stocks

 RULE: A party can repudiate a contract when a Total breach of contract-- sufficiently serious to justify
discharging the nonbreaching party from her obligations to perform the contract, R3S §242 identifies
various factors to guide courts in making this determination -- no duty
o SCHOLZ §242: circumstances significant in determining when remaining duties are discharged
 (1) The effect of a statement as constituting a repudiation under § 250 or the basis for a
repudiation under § 251 is nullified by a retraction of the statement if notification of the
retraction comes to the attention of the injured party before he materially changes his
position in reliance on the repudiation or indicates to the other party that he considers the
repudiation to be final.
 (2) The effect of events other than a statement as constituting a repudiation under § 250
or the basis for a repudiation under § 251 is nullified if, to the knowledge of the injured
party, those events have ceased to exist before he materially changes his position in
reliance on the repudiation or indicates to the other party that he considers the repudiation
to be final.
o Other party may refuse to perform without behind held responsible for the beach of contract
o Can recover actual damages accrued as a result of the breach and also future damages that will
reasonably flow from the breach -- R3S 2nd §234(4)
 Partial breach of contract-- other party risks unlawful repudiation if it refuses to perform
 Distinguishing them helps to (1) determine the effect of the breach, (2) determine damages
 Difference btw material breach and total breach
 Material breach R3S (2nd) § 241 → CONTAINS A REVISED LIST OF FACTORS
 If it becomes total → discharges the other party from their remaining duties to be performed
 RSC § 242: Circumstances significant in determining when remaining duties discharged
 RSC § 241: Circumstances significant in determining when remaining duties are discharged
 Was Sackett’s breach of contract total or partial? After a total breach, the injured party is entitled to
recover actual damages from the breach and future damages that reasonably flow from the breach
o A partial breach produces a right to damages only for the actual harm that has resulted to date, not
for future harm
 SCHOLZ: Does one party's breach discharge the other party from a duty to perform, or must the other
party perform and then sue for damages? (It depends).
o Partial (does not discharge other party)
o Material (allows non-party to suspend, and will discharge if not cured w/in reasonable time)
o Total (discharges other party's duty)
Anticipatory Repudiation: When can one party anticipatorily repudiate a contract w/out breach
o Repudiation = When a party evidences a lack of ability or will to perform their contractual
obligations
o When the other party says it is not going to perform
o When you can adduce thru the other party’s conduct that they have repudiated the contract
 But will a judge really find that the other party’s conduct amounted to repudiation?
o A repudiation is: RST (second) § 250
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 (a) A statement by the obligor to the oblige indicating that the obligor will commit a
breach that would of itself give the obligee a claim for damages for total breach under §
243, or
 (b) A voluntary affirmative act which renders the obligor unable or apparently unable to
perform without such a breach
 You can nullify your own repudiation as long as the contract has not been already
terminated.
 UCC § 2-609. Right to Adequate Assurance of Performance.
o A contract for sale imposes an obligation on each party that the other's expectation of receiving
due performance will not be impaired. When reasonable grounds for insecurity arise with respect
to the performance of either party the other may in writing demand adequate assurance of due
performance and until he receives such assurance may if commercially reasonable suspend any
performance for which he has not already received the agreed return.
o (2) Between merchants the reasonableness of grounds for insecurity and the adequacy of any
assurance offered shall be determined according to commercial standards.
o (3) Acceptance of any improper delivery or payment does not prejudice the aggrieved party's
right to demand adequate assurance of future performance.
o (4) After receipt of a justified demand failure to provide w/in a reasonable time not exceeding 30
days such assurance of due performance as is adequate under the circumstances of the particular
case is a repudiation of the contract.
o ***Note: circumstances may well make it reasonable to demand a faster response.
o RST requires a party to respond to a demand for assurances w/in a reasonable time but does not
set a max time period
 Factors from R3s (1st) §275: Whether a breach of K is total or partial depends upon its materiality:
extent to which the injured party
o (1) will obtain the substantial/anticipated benefit
o (2) whether damages adequately compensate for lack of complete performance
o (3) extent the failing party partially performed or prepared to perform
o (4) greater or less hardship on the party failing to perform in a terminating contract
o (5) whether the party failing to perform acted willful, negligent, or innocent behavior of the party
failing to perform
o (6) greater or less uncertainty that the party failing to perform will perform the remainder of the K
 Sackett meets 5 & 6
 Unlawful repudiation: already had enough actions by the time of the letter, response to the letter
 Difference between total and material breach
o Time to take it from material breach vs. total breach
o A promise rather than an express condition, once the breaching party has reached the level of
material breach → risky position
 Riskier to sue under material breach
ANTICIPATORY REPUDIATION
Tools of Anticipatory Repudiation

 When is a party justified in quitting when it is ahead? Aka calling off their performance before another
party was due to perform
 Repudiates: when there is a lack of willingness, inability to perform
TRUMAN L. FLATT & SONS CO. V. SCHUPF (1995)

 RULE: One may rescind anticipatory repudiation if the other party has neither materially relied upon it
nor provided notice that it considers the contract repudiated.
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 What happens if a party retracts repudiation? The contract has to be treated how it originally was – go
along with how it was written
 Repudiation does not stick unless it has been agreed upon or there has been reliance
 You can retract a repudiation at will unless reliance or told you that they were going to rely on then
you cannot retract it
 Common law rule -- we are declining to change the common law rule
 Repudiation: have to rely or say they are relying on it
HORNELL BREWING CO. V. SPRY (1997) Arizona Tea UCC Case; EXAMPLE of UCC §2-609
 Request for reasonable assurances:
o Once Hornell has been given reason to believe that the buyer’s performance has become
uncertain, it is an undue hardship to force him to continue his own performance.
o THIS IS AN ISSUE OF FACT depending on various commercial factors:
 The buyer’s exact words or actions,
 The course of dealing or performance b/w the parties, and
 The nature of the sales contract and the industry.
o Once the seller determines it has reasonable grounds for insecurity, it must properly request
assurances from the buyer.
 The UCC requires the request be made in writing, but Cts have not strictly adhered to this
formality as long as an unequivocal demand is made.
 Commercial Responsibility: SPRY was making deals with other companies. Doesn’t make Hornell feel
comfy
STEPS TO K
➔ 1. Is there a contract? Formation
➔ 2. What are the terms?
➔ 3. When is performance due, what counts as breach?
➔ 4. What are the defenses to enforcement?
➔ Steps to Challenge a Contract:
◆ There’s no contract
◆ Look to defenses
◆ Challenge the terms of the contract
◆ Performance and breach
◆ Challenge Damages
AFFIRMATIVE DEFENSES TO BREACH
VOIDABLE CONTRACTS: MINORITY AND MENTAL INQUIRY
 Defenses – this might be a prima facie case for a valid contract; however, I can avoid liability through this
defense
 Estoppel, waiver, disproportionate forfeiture
 Estoppel: purpose to prevent the unfair assertion of rights by a person who has acted
inconsistently with those rights
 Waiver: a party’s voluntary abandonment of contractual right
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 General rule of waivers for unilateral contracts: is that there needs to be consideration
for a modification of a rights, and it cannot be validly relinquished under a unilateral
contract
 Disproportionate Forfeiture: a court can decline to enforce full enforcement under their
discretion for one party where doing so would have a disproportionately harsh impact on the
other party
 Statute of frauds → a concern with the competency of parties to make an agreement, with the
bargaining process by which an agreement is reach, and with the substance of any resulting agreement
DODSON V. SHRADER (1992) – Minority

 Holding: Ct applies a modified modern rule, where the minor cannot recover the full price if the K was
willful; he can recover the value minus depreciation/damage
 Traditional rule: if minor contracted, discretion of recission to the minor w/ full recovery [restitution]
 Modern rule: balance minor’s rights against merchant’s rights
 Limitations on the Traditional Rule:
o Liability for “necessaries” – even under the traditional rule, minor is liable for the value of
necessaries, items one needs to live e.g. food, clothing, shelter
o Tortious conduct – minor’s ability to disaffirm may also be restricted if the minor engages in
tortious conduct such as misrepresentation of age or willful destruction of goods
 Clickwrap agreement affirming age of majority, if a child lies and misrepresents their age,
the minor would fall under the tortious conduct exception and cannot disaffirm
o Ratification after reaching age of majority
 The K is not void but only voidable at the election of the minor. Once the minor reaches
the age of majority, she has the power to affirm or ratify the K, in which event the minor
is bound.
 Ex: Lebron James waived this power tho by waiting too long (18 months) after he
reached the age of majority to challenge a contract he made while a minor
o Policy argument: Minors are vulnerable and needs protection; however, minors could lie to
recover full price and scam merchants
 Minor Rules:
 (1) Benefit Rule: holds that upon, rescission, recovery of the full purchase price is subject to a
deduction for the minor's use of the merchandise
 (2) Oregon Rule-Minor's recovery of the full purchase price is subject to a deduction for the
minor's use of the consideration he or she received under the contract, for the depreciation
or deterioration of the consideration in his or her possession
 Depreciation Rule— forces the infant takes to take responsibility for the item when it is in their
possession
 Court accepts the modified form of the Oregon rule → Minors can void the contract, but will get back
the contract prices minus the depreciation rule
 Justification: minors are actors in the economy and do not want to have a rule to not do business
with them
 E.K.D. v. Facebook, court rejected the Π's minority argument, it found that FB's forum selection
clause was reasonable and enforceable
 E.K.D. v. Facebook, Inc. (S.D. Ill. 2012)
 Facts: Involved a class action by minor Πs claiming that FB’s terms and conditions, which
allowed FB to use a subscriber’s name, profile picture, and “like” for ads, violated state privacy
laws. The Πs claimed the forum selection provision designating Santa Clara, CA, as exclusive
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judicial venue was unenforceable b/c they were minors when they clicked the “agreed” button
and began using FB.
 Holding: a minor must accept or reject the entire contract; a minor cannot keep the benefits of the
contract by continuing to use FB while rejecting a provision that the minor finds burdensome.
SPARROW V. DEMONICO (2012) 2 sisters contract over family home

 Holding: b/c of lack of medical evidence, Demonico could not prove temporary mental incapacity as a
defense.
 At common law, contractual incapacity is allowed and there are two standards 
o Older: Traditional/ Cognitive Test: a person lacks capacity to enter into contract, only when they
understand they are about to enter a contract = high bar
- Modern Test (volitional test): [Restatement (Second) § 15] whether the person is unable to act
reasonably under their condition
 How reasonable the decision actually is: reasonable + known
 Goes into the wrongfulness of the other party
 Burden of proof is on the party seeking to avoid the contract & you need medical evidence
VOIDABLE CONTRACTS: BARGAINING MISCONDUCT, MISREPRESENTATION

Duress: RST §175 exists where: {bad faith}
 (1) Improper threat, wrongful/ could be tortious, in bad faith [one party voluntarily accepts the terms]
 (2) lack of reasonable alternative
 (3) threat actually induces the assent
o Arguably one more element
Undue Influence: RST §177 (over persuasion) - requires being vulnerable to have economic duress
 (1) party needs to show undue susceptibility to other, vulnerable to another
 (2) or weakness [over persuasion] there needs to be excessive pressure
o Often with a confidential relationship
 Undue influence: (1) involves the use of excessive pressure to persuade one vulnerable to such pressure,
pressure applied by a dominant subject to a servient object; (2) elements of undue susceptibility in the
servient person and excessive pressure by the dominant person make the latter's influence of undue --
Does not requires a special relationship
o Susceptibility: consists of total weakness of mind which leaves a person entirely without
understanding, or a lesser weakness which destroys the capacity of a person to make a contract
even if they are not totally incapacitated
o This is not present here, not enough here to prove this
 What is generally meant by over persuasion? Weakness—mismatch between the parties, and also this
application of strength, unfair advantage
o How much pressure is too much pressure to apply to a vulnerable person
o Undue influence cannot be use as a pretext to avoid bad bargains or escape from bargains which
refuse to come up to expectations
o Need factors to look for specific factors of abuse not just general conclusion of abuse
 Elements: (1) discussion of the transaction at an unusual or inappropriate time, (2) consummation of the
transaction in an unusual place, (3) insistent demand that the business be finished at once, (4) extreme
emphasis on untoward consequences of delay, (5) the use of multiple persuaders by the dominant side
against a single servient party, (6) absence of a third-party advisers to the servient party, (7) statements
that there is not time to consult financial advisers or attorneys
Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline Service Co. (1978) economic duress
 3 Elements of Economic Duress:
o 1. One party voluntarily accepted the terms of another,
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o 2. Circumstances permitted no other alternative, and

o 3. Such circumstances were the result of coercive acts of the other party.
 The victim has to have no choice but to agree to the other party’s terms = lack of reasonable alternatives
o Reasonable alternatives: availability of the goods and services somewhere else, a legal suit
against the party, etc.
o A lack of reasonable alternative: an alternative isn’t reasonable if the delay in pursuing that
remedy would destroy the business.
o HOLDING: Here, there is a sufficient issue of fact whether economic duress does exist.
 Free will: (1) one party involuntary accepted the terms of another, (2) circumstances permitted no other
alternative, and (3) such circumstances were the result of coercive acts of the other party
 Wrongful acts: wrongful does not just mean tortious, some courts require that; general rule: it is in bad
faith; there needs to be an involuntary acceptance based on a wrongful threated by the Δ - tortious,
criminal or just morally wrong, threatening to breach a contract of bad faith
4th Element Of Economic Duress:

 Selmer Co. v. Blakeslee-Midwest Co. (7th Cir. 1983)
o It’s not enough that there’s financial hardship and the other party knows about the financial
hardship, the other party has to have caused the financial hardship for there to be a finding of
economic duress.
o ***Some Cts apply this 4th element and some don’t.
ODORIZZI V. BLOOMFIELD SCHOOL DISTRICT (1966) mental duress

 Gay man persuaded to quit by school while under duress
 ***DO NOT need medical evidence to show undue influence but it helps. Not required
 Over persuasion is generally accompanied by certain characteristics which tend to create a pattern. The
pattern usually involves several of the following elements:
o (1) discussion of the transaction at an unusual or inappropriate time,
o (2) consummation of the transaction in an unusual place,
o (3) insistent demand that the business be finished at once,
o (4) extreme emphasis on untoward consequences of delay,
o (5) the use of multiple persuaders by the dominant side against a single servient party,
o (6) absence of third-party advisers to the servient party,
o (7) statements that there is no time to consult financial advisers or attorneys.
o ***Before applying these factors, make sure there is some vulnerability on the side of the weaker
party
 If a # of these elements are simultaneously present, the persuasion may be characterized as excessive.
 HOLDING: In this case, undue influence was present b/c all 7 factors were met.
 Actual Fraud: basically lying, conscious misrepresentation of material fact that induces a party to enter
the contract—failed to assert the elements
 Constructive Fraud: more subtle, a broader duty to be helpful or honest with someone (reliance), they
are counting on you for their interests and you outright lie
 Claimed he didn't set forth any facts to represent a relationship with the facts to show a
relationship
 Kelly v. Provident Life & Accident Ins. (S.D. Cal. 2010)—even if none of the Odorizzi factors
are present, the Π could still bring an undue influence claim where mental illness was present and
the Δ knew of the illness and took advantage of the Π. The Δ conducted an investigation in bad
faith and engaged in other harassing activity to pressure the Π into dropping his disability claim.
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** IMPORTANT: Need bad faith in duress BUT NOT IN UNDUE INFLUENCE
VOIDABLE CONTRACT: MISTAKE
Mistake: something is wrong with this agreement, in particular someone did something wrong
 Something law allows a party to avoid the expectations of a contraction if their a mistake of expectations
LENAWEE COUNTY BOARD OF HEALTH V. MESSERLY (1982)

 The Pickles (appellees) purchased a 600-sq-ft tract of land that has a three-unit apartment building from
the appellants, William and Martha Messerly that had unknown sewage system issue
 Ct adopted RST approach of risk allocation – recission is denied to the party who assumed the risk of loss
 Ct held the purchasers assumed the risk of loss, demonstrated by the as-is clause in the contract § 154(a)
 Risk of loss = who bears responsibility for costs and expenses
 Mistake – a disappointed expectation that the law may see fit to rectify.
 Sherwood v. Walker – Ct permitted recission when the seller and the buyer were mistaken of the fertile
condition of the cow that was sold
o There is a mistake of to the ‘essence’ versus the value
 ***Note: mistake is given based on the discretion of the Ct. Different Cts may come out differently on
similar fact patterns. Hard to win on this defense.
 Conscious ignorance: assumption of risk can be applied against this, § 154(b), the court rejected the
estate's claim of mutual mistake b/c the representative was aware of the possibility
NON-PERFORMANCE EXCUSED BY CHANGED CIRCUMSTANCES
 Three Doctrines: all thought of involving changes in circumstances that occur between the making of the
contract and time set for performance
 Paradine v. Jane (English Case 1647)– SL FOR BREACH. If you have an obligation to pay and you
don’t pay it, that’s strict liability.
 Taylor v. Caldwell (1863)—Doctrine of Impossibility: §§ 262, 263, 264
o Δ agreed to rent a music hall to the Π, but several days later the hall burned down, Taylor sued
for breach of K. Court absolved Caldwell of liability hold that b/c the hall itself was essential to
the performance of the K, parties had contracted on the basis of continued performance
o Impossibility – when a person/thing necessary for performance of the agreement dies, is
incapacitated, destroyed, or damaged, the duty to perform is excused (Restatement)
 Mineral Park Land Co. v. Howard (1916)—Doctrine of Impracticability §§ 261, 266
o Δ contractor had agreed to purchase and extract from Π's land, at fixed prices, all the gravel
required for the construction of a concrete bridge, Δ only did partial b/c of the water level and to
go deeper would cost 10-12X more, court held extreme increase in the cost extraction justified
the Δ's nonperformance--even thought it was not literally impossibly (subjectively impossible)
 Looks like a mistake case
 You don’t requirement of it being literally impossible
o Hard to win cause there is always a counter argument
o Natural disaster/war – Cts have been unwilling to find frustration of purpose/impracticability in
cases of natural disaster/war, high standard for these defenses
o Impracticability based on terrorism – Bush v. ProTravel: 9/11 WTC attack, court decided in favor
of plaintiff who argued the phone lines were down, the P could not cancel trip in time
o Foreseeability – defenses of impracticability/frustration of purpose are not necessarily decided
based on foreseeability. Foreseeability is relevant but other factors should be considered,
foreseeability does not necessarily establish allocation of risk
 Krell v. Henry (1903)—Frustration of Purpose: §§265, 266
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oΠ wanted to rent a room to see the king pass by, but plans changed, Δ was absolved from duty to
pay-- not viewed a true impossibility b/c it could have been performed
o The more exceptional the event is, the more likely you can use this defense
o Frustration of purpose—change in circumstances after agreement cause a contract’s value to be
lost to the Δ
HEMLOCK SEMICONDUCT OPERATIONS, LLC V. SOLARWORLD INDUSTRIES SACHSEN
GMBH (2017)
 Impracticability: Applies only if an unanticipated circumstance has made performance of the promise
vitally different from what should reasonably have been w/in the contemplation of both parties when they
entered the contract. The defense is viable only if an unforeseen event occurs and the non-occurrence of
that event was a basic assumption on which both parties made the contract.
 Elements required for frustration of purpose/impracticability: requires disadvantaged party to show
o (1) either an extreme change in the nature of performance (impracticable) or an extreme reduction
in the value of the other party’s performance so as to render it nearly worthless (frustration of
purpose);
o (2) the occurrence of an event, the nonoccurrence of which was a basic assumption of the
contract;
o (3) without the party’s fault; and
o (4) the party seeking relief does not bear the risk of that event’s occurrence either under the
language of the contract or the surrounding circumstances
 ***Note: The majority view is that it’s not automatically impracticable if it is not foreseeable. But
foreseeability is probative to see if the promise is impracticable. Run thru the elements above!
 Ct held no frustration of purpose, purpose was to provide polysilicon at fixed price and no commercial
impracticability
o They couldn't foresee the specific event but can foresee changes in the market price
MEL FRANK TOOL & SUPPLY, INC. V. DI-CHEM CO. (1998) city told a lessee, a chemical distributor
that it could no longer use its leased premises to store hazardous chemical b/c of ordinance
 3 Conditions To Demonstrate Frustration of Purpose (RST) § 265 (2nd) R3S:
o (1) the purpose that is frustrated must have been a principal purpose of that party in making the
contract;
o (2) the frustration must be substantial, must be so severe that is not within the risks assumed in
the contract;
o (3) the non-occurrence of the frustrating event must have been a basic assumption on which the
contract was made
 Rationale: ‘as long as there is a serviceable use still available’ then they have not frustrated the purposes
enough (Conklin v. Silver)
o A good argument would be that their whole purpose is frustrated (could or could not work)
 Government regulation – Courts are more likely to grant the defense of impracticability/frustration b/c
of a supervening governmental regulation
o Government regulation frustrating the purpose courts are willing to grant relief rather than a
natural disaster, war/terrorism or market change
Iowa v. Silver, lease was only to be used for a metal business, and prohibited them from engaging in unlawful
business, statute was passed, lessee that the statute made their property unlawful -- frustration of purpose
example
Grounds of discharging of the obligor's contractual duty:

 (1) circumstance of own performance impracticable
 (2) obligor may claim that some circumstance has so destroyed the value to him of the other party's
performance as to frustrate his own purpose in making the contract
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 (3) obligor may claim that he will not receive the agree exchange for the obligee's duty to render that
agreed exchange, on the ground of either impracticability or frustration
 Courts are more likely to grant if it’s in supervening governmental regulation
 This isn't a situation where the statute was already passed or a reason the gov't should have known
 If something is passed by the gov't it could be the basis for excusal if you can meet the other elements →
see M.J. Paquet, Inc. v. N.J. Dot, (2002)
NON-PERFORMANCE EXCUSED BY OVERREACHING OR IMPROPER TERMS:

UNCONSCIONABILITY
WILLIAMS V. WALKER-THOMAS FURNITURE CO. (1965) furniture case that “shocks the
consciousness”
 These cases vary in outcomes since despite duress, fraud, undue influence, etc. the court doesn’t not want
defenses to swallow the cases
 Unequal bargaining power is a factor in see in if there is a lack of unreasonable choice
 The terms are to be considered “in the light of the general commercial background and the commercial
needs of the particular trade or case” to see if there was fairness b/w the parties.
Unconscionability § 208
 Procedural unconscionability – unfair one-sidedness, a lack of meaningful choice, despair of bargaining
choice – AKA something is wrong with how the contract was made
 Substantive unconscionability – looking substantively on whether or not the terms are one-sided. Just
look at the terms of the contract!
 ***NOTE: Some Cts require both forms of unconscionability and others don’t.
o A court that finds an unconsciously term has a lot of freedom on how they give redress
o This is a bit like illegal contracts since the contract is so unconscionable
o But this doesn’t mean it void, it can be voidable or just that part is voidable
 Restatement 2nd § 208: If the contract is unconscionable at the time a contract is made, the Ct may not
enforce the contract, may enforce some of the contract but not the unconscionable term, or more limit the
application of the unconscionable term.
**Both the RST and the UCC indicate that excessive price may be a basis of unconscionability.
 RST (Second) §208, Comment c; UCC §5.108(4)(c). Reasons for this: If the consumer lacked
information about reasonable prices, if the consumer was subject to raises in sales taxes (?), the interest
rate can unfairly change in certain ways, etc.
o A lot of Cts are finding that agreements can found to be unconscionable on the basis of things like
an interest rate being too high.
o Unconscionability is a bit more of a defense than the book lets on.
 UCC §2-302 and RST (2nd) §208 further provide that unconscionability is to be judged as of the time
that the contract is made. Accordingly, Cts generally emphasize that contracts should not be judged
based on developments after the contract was formed.
HIGGINS V. SUPERIOR COURT OF LOS ANGELE COUNTY (2006) extreme home makeover
 To find unconscionability, you need BOTH procedural and substantive unconscionability, but you don’t
need them to the same degree. The more substantively oppressive one term, the less evidence of
procedural is required and vice versa
o Some Cts find a contract being adhesion itself tho is enough to prove procedural adhesion
o Other courts find that something more is needed in addition to the adhesion contract to be found
unconscionable
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AGAINST PUBLIC POLICY

**NOTE: there needs to be a clear basis in statutory provisions or well-established judicial precedent to use a
public policy defense
VALLEY MEDICAL SPECIALISTS V. FARBER (1999) restrictive covenant for MD in certain areas
 In Public Policy Contracts there has to be a protectable interest and the restraint has to be reasonable.
o Reasonable – considers the public interest and the interest of the promisor.
o Geographical reach, time restraints, are factors. Also look at what the public interest is and the
restrictions needs to be reasonable
 Reasonableness of Covenant—Elements: A restriction is unreasonable and will not be enforced:
o (1) if the restraint is greater than necessary to protect the employer’s legitimate interest; or
o (2) if that interest is outweighed by the hardship to the employee and the likely injury to the
public
 Ct: each case must be decided on its own unique facts.
 Blue Pencil Rule - Cts will “blue pencil” restrictive covenants, eliminating grammatically severable,
unreasonable provisions; they will enforce the lawful part and ignore the unlawful part.
 HOLDING: doctor & patient relationship deserves a protection
o Dr. Farber he may not be at the bargain advantages
o Restrictive covenants are frowned upon for attorneys, the ABA outlaws this b/c they want clients
to be able to choose
REMEDIES
 What remedies should be available to a party who has been injured by the other party's unjustified
failure to perform her contractual obligation?
 Specific performance damages are rare, $$$ is almost always what is awarded
 R3S (Second) §346(2)
PURPOSES OF AWARDING DAMAGES → {Fuller and Perdue Modern Approach to K Remedies}

1. Restitution Interest—Π has in reliance on the promise of the Δ conferred some value on the Δ: Δ fails to
perform his promise, court may force the Δ to disgorge the value he received from the Π
a. Protection from unjust enrichment
b. Measured by the number of things that were transferred from the Π to Δ
c. The restitution interest involving a combination of unjust impoverishment with unjust gain,
presents the strongest case for relief
2. Reliance Interest— Π has in reliance on the promise of the Δ change his position
a. put someone in a good of a situation as they were before; compensate for what they got in the
reliance interest
3. Expectation Interest—without insisting on reliance by the promisee or enrichment of the promisor, we
may seek to give the promisee the value of the expectancy which the promise created
a. Normal what people end up going for, usually the most
b. How could you make me whole as I would have occupied if the Δ would have performed
 R3S (Second) §344— Fuller and Perdue analysis, sets out both the reliance and restitution interests can
be, and often are, a basis of assessing damages against a breaching Δ
 R3S (Second) § 347: Benefit of the Bargain
Computing the Value of Plaintiff's Expectations

 Expectation: gain the Π would have realized if the K between the Π and Δ had been fully performed as
promised
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o Specific performance
 R3S (Second) § 347: formal for damages to the Π's expectation interests may be computed
o CLAIM FOR DAMAGES
 (1) breach may cause the injured party a loss by depriving that party, at least to
some extent of the performance expected under the contract
o Difference between the value to the injured party of the performance that should
have been received and the value to that party of anything → loss in value
o Loss in value = difference to the value to the buyer of the goods that were to
have been delivered and the value of the goods that were actually delivered
 (2) breach may cause the injured party loss other than loss in value and the party is
also entitled to recovery for this, subject again to limitations such as that of
unforeseeability
o Referred to as other loss, incidental and consequential damages
 Incidental damages: additional costs incurred after the breach in a
reasonable attempt to avoid loss, even if the attempt is unsuccessful
 Consequential damages: items as injury to person or property caused by
the breach; bigger losses, injury and losses to the person or property
caused by the breach, can overwhelm the entire thing; ex: car with a
warranty for $20k that had an engine problem, as a result of engine
problem caused an accident that caused an injury of $50k-- that’s a
consequential damages
 (3) if the injured party terminates and claims damages for total breach, the breach
may have a beneficial effect on that party by saving it the further expenditure that
would otherwise have been incurred
o Cost avoided: ex: builder outweighs a bunch of cost as a result of their breach
 (4) if the injured party terminates and claims damages for total breach, the breach
may have a further beneficial effect on that party by allowing it to avoid some loss
by salvaging and reallocating some or all of the resources that otherwise it would
have had to devote to performance of the contract
o Loss avoided: ex: salvaging the resources to avoidance of the; ex: injured party
distinguishes the actual loss avoided
o (1) Loss in Value and (2) Other Loss = adverse to the injured party and increases damages
o (3) Cost Avoided and (4) Loss Avoided = beneficial to the injured party and therefore
decrease damages
General measure = loss in value + other loss - cost avoided - loss avoided
 In cases for partial breach, only the first two terms apply
Examples:
Case 1→
 Loss in value (200,000-70,000) = 130,000
 Other loss (incidental + consequential damages) = 0
 Cost avoided (difference between builder expected to pay, and what the builder did pay) = 180,000-
95,000=85,000
 Loss avoided (extra materials that builder solder) = 10,000
Case 1: (130,000) + 0 - (85,000) - (10,000) = 35,000
Case 2→
 Loss in value: $75,000
 Other loss: $1,000
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 Cost avoided (no cost avoided b/c she didn’t purchase anything, as a result of breach something was
avoided): 0
 Loss avoided (she got a job): $45,000
Case 2: 75,000 + 1,000 - 0 - 45,000 = 31,000
Case 3→ alternative expectation damages for construction

 Expected net profit: $200,000-$180,000 = $20,000.00
 Unreimbursed expenses: expenses: $95,000 (work done) , paid $70,000, getting $10,000 of resale of
materials: $95,000-$80,000 = $15,000.00
 $20,000 + $15,000 = $35,000.00
 Damages: House Construction Example
***Note: can only be awarded only one type of monetary damages. On the exam, calculate all three and argue
which side would want (but expectation damages are most commonly awarded)
EXPECTATION DAMAGES
Expectation damages RST (2nd) §347 = loss in value + other loss - cost avoided - loss avoided
 Other loss = incidental damages + consequential damages
 Incidental damages: additional costs incurred after the breach in a reasonable attempt to avoid loss, even
if the attempt is unsuccessful.
 Consequential damages: such items as injury to person or property caused by the breach.
** ‘put the aggrieved party in the same position they were in before the breach’
CRABBY'S, INC V. HAMILTON (2008) other loss case

 Buyers under a contract for sale of real estate appeal the trial court's judgment awarding Seller damages
due to Buyers' breach of contracts, seeking difference in sale price
 Jury awarded 95k in damages but the difference in the rent was 55k
o The court determined this was fair cause other losses was utilities
 Expectation Damages = fair market value – purchase price
o (For seller when the buyer breaches)
o BUT When the seller breaches, the buyer must show that the property had a value of more than
the market price.
 Formula:
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o Loss in value 290,000 – 235,000

o Other loss: taxes, etc.
o Cost Avoided: 0
o Loss Avoided: 0
 Expectation damages: 55,000 + ? = 95,547.30 (Tr Ct finding, but this Ct agrees w/ this #)
HANDICAPPED CHILDREN'S EDUCATION BOARD V. LUKASZEWSKI (1983)
 SLP blamed high pressure on her reason for breaking the job contract, but really wanted this other day
care job, Board sued her.
 The Board lost the benefit of the bargain when they had to hire Δ’s replacement
o The Board properly mitigated its damages when they hired Δ’s replacement.
o The Board did not seek to hire a more educated or expensive teacher than the Δ, so the extra costs
they have to pay this new teacher is a damage b/c this cost was imposed upon the Board from the
Δ’s breach.
 The measure of damages is the difference of cost of replacement and employer cost
LIMITS ON DAMAGES: FORESEEABILITY, CERTAINTY AND CAUSATION
Limits on Damages
 § 351. Unforeseeability And Related Limitations On Damages
o (1) Damages are not recoverable for loss that the party in breach did not have reason to foresee as
a probable result of the breach when the contract was made.
o (2) Loss may be foreseeable as a probable result of a breach because it follows from the breach
 (a) in the ordinary course of events, or
 (b) as a result of special circumstances, beyond the ordinary course of events, that the
party in breach had reason to know.
o (3) A court may limit damages for foreseeable loss by excluding recovery for loss of profits, by
allowing recovery only for loss incurred in reliance, or otherwise if it concludes that in the
circumstances justice so requires in order to avoid disproportionate compensation.
 Expressly gives the courts to not give recovery to something for other fair reasons
 Reasonable foreseeability itself with broad interpretation means a clever
judge can find many things on the margins and can determine what is or not
foreseeable.
 Rare though, courts don’t need to rely on this really since they can exercise
discretion and think what is jest
HADLEY V. BAXENDALE (1854) mill case where the crank broke

 Hadley (mill operator) sued, and the lower court awarded damages for the loss of production [loss
profits]
 This case is an introduction to the concept of foreseeability and how it limits the damages award!! The
Special Circumstances were NOT foreseeable here.
 Damages from breach of contract are only recoverable if
o (1) the damages occur naturally from the breach, or
o (2) are a result from special circumstances communicated at the time the contract was formed.
 Here, the Ct refers to 2 types of damages: those that arise naturally from the breach of contract and those
that result from special circumstances communicated at the time the contract was formed. These 2 types
of damages have various labels:
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o Damages that arise naturally are often referred to as “general” or “direct” damages – AKA loss
in value
o Damages flowing from special circumstances are usually called “consequential” damages
although the term “special” damages is sometimes used.
 Policy Breach Rationale: limit with consequential damages is the principle for had the special
circumstances been known the parties may have provided special terms to deal with the breach.
[foreseeability=special damages/ other losses]
o More important type of consequential damages = lost profits
FLORAFAX INTERNATIONAL, INC. V. GTE MARKET RESOURCES, INC. (1997)

 GTE knew when they were signing with Florafax, this was going to be the biggest contract with their
client
 Loss of future or anticipated profit-- loss of expected monetary gain -- is recoverable in a breach of
contract action [foreseeability requirements]
o (1) if the loss is made within the contemplation of the parties at the time the contract was made
o (2) if the loss flows directly or proximately from the breach -- i.e. if the loss can be said to have
been caused by the breach --
o (3) if the loss is capable of reasonably accurate measurement or estimate
 Typically factors of 2 & 3 are not that hard to prove
 GTE knew the importance of this contract as well in advance in the beginning → they have to pay major
loss profits this is how foreseeability works (know of have reason to know)
 Reasonable certainty rule of loss profits: before lost profit damages are recoverable, it must be shown
that the profits were reasonably certain to have been made by the non-breaching party absent the breach.
They cannot be speculative or hypothetical.
 Causation = some kind of relationship b/w contract and damages seen
 Another argument GTE raises is the 60 days - helpful about Osborn v. Commanche Cattle Industries,
Inc., Π contract allowed the loss profit issue to go the jury, for only nominal damages were appropriate
 Note 3: Contemporary Mission Inc. v. Famous Music Corp.— catholic priest ban, loss profits resulting
from this – reasonably certain
LIMITS ON DAMAGES: MITIGATION
 Mitigation Rule – an injured party must take all reasonable steps to mitigate their damages.
Rockingham County v. Luten Bridge Co. (1929) commissioners and bridge building case
 Mitigation Doctrine - A P may not recover damages for breach of contract that might have been avoided
by reasonable efforts (The RST)
 There is no duty to mitigate, but not mitigating will cause losses that could have been avoided
 Economic purpose - gives non-breaching party an incentive not to engage in conduct that would waste
resources
o Also, damages are not meant to be punitive on the D, they are simply to make the Plaintiff whole
 Doctrine of Avoidable Consequences: Π may not recover for those injurious consequences of the Δ's
breach that the Π herself could by reasonable action have avoided
 Prevents the Π increasing the damages, by racking up more damages, sometimes the doctrine requires the
damages, flowing through the harm— refusing to be taking a comparable job
 Includes the preclusion of damages without hurting the Δ
o After 1 party breaches, you don’t have the right to build the whole rest of the house (increasing
the damages) and demand payment.
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Maness v. Collins (2010) P sulked up like an old possum so was fired case
 Duty of Good Faith And Non-Interference - A party cannot impede/hinder the performance of the other
party
o New ownership hindered the performance of Maness and undermined his authority/job duties
 The failure to mitigate damages is an affirmative defense. It is on the Δ to prove this defense.
o If a breaching Co. gives the job back, they can mitigate the damages if it’s not risky, burdensome,
or humiliating to the Π
 Burden of proof is on the breaching employee to find there was reasonable comparable employment
available to the employee (majority view)
o Parker v. 20th Century Fox Film Corp.—Lead Actress dropped from a role in a feminist film,
given a supporting role in a film w/ different theme. Ct held that the new role was not comparable
enough to the first. Early cases held that employees are not required to accept employment in an
inferior rank/position nor work which is more menial/arduous. Long term negative economic
consequences.
RELIANCE DAMAGES
 Reliance: looks to the position the Π would have been in had the K been never made
 ***NOTE: Expectation damages are from contract, reliance damages from Promissory Estoppel;
however, expectation damages are also possible under PE (limited as justice requires)
WARTZMAN V. HIGHTOWER PRODUCTIONS, LTD. (1983) - entertainer flagpole case

 When expectation damages cannot be proved w/ reasonable certainty, the Π is entitled to reliance
damages.
 The lawyers in bad faith did not fulfill their obligation, Hightower depended on the stock offering and
reliance damages were appropriate
o Because of reasonable reliance and the fact the lawyer had the money, they did not have the duty
to mitigate
 Δ can only persuade the Ct not to award those reliance damages if they can prove w/ reasonable certainty
that Π would have suffered/lost profits had the K happened.
o If you are certain to have lost profits upon full performance of the contract, you cannot get
reliance damages.
o But this reasonable certainty defense for Δs is only applied for reliance damages!!!! [Also, this is
really hard to show. A rare defense to be successful] (Home Depot was a case that showed it)
 If the breach prevented an expected gain and proof of loss is too speculative, the injured party has a right
to reliance damages minus any loss the injured party would have suffered if the contract was performed
(must be proven w/ certainty by breaching party)
 Fuller and Perdue criticized 1st restatement for a distinct between essential and incidental reliance (pg.
1009).
WALSER V. TOYOTA MOTOR SALES, U.S.A., INC. (US CT OF APP 1994)

 Toyota has a 3-step process to establish dealership contracts. (1) Application, (2) Letter of intent, (3)
conditions satisfied
 As we know, letters of intent can be binding K but they are looking at promissory estoppel here
 Conditions satisfied – formal dealership agreement approved by Toyota
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 Walser did the 1st step and Toyota said the letter of intent would soon be approved.
o It’s difficult to see where the K comes in when we didn’t even get to the letter of intent.
o Hard to find mutual assent here.
 BUT when Toyota told Walser “you’re are dealer” that’s a source of liability for promissory estoppel.
 The remedy granted for breach may be limited as justice requires – reliance damages based on promissory
estoppel
o Reliance damages are discretionary, Ct is in the best position to measure damages and is only
questioned for abuse of discretion.
 Here, out of pocket damages only was not err; Ct’s goal is to have the parties in the same position they
were before the breach and the P has a valuable piece of land now
 Majority View → PE: expectation damages are available to plaintiffs, however courts can limit them to
reliance damages for plaintiffs with their discretion
o Default from contracts should be available for promissory estoppel: same remedies should be
available
 Minority View → Western District of Texas Case: they should be limited to reliance interests. Doctrine
has evolved into a separate entity
An example of getting expectation damages for promissory estoppel is Drennan
SPECIFIC PERFORMANCE
 Not a remedy a Π is automatically entitled to, in the Ct’s discretion

o Specific performance should be more available than it traditionally has been. growing mindset
of some judges
 Ct should consider:
o 1. Money damages could be inadequate depending on the context
o 2. Equitable factors should be considered i.e. harm to D
o 3. Practical difficulties of enforcing specific performance
 Why don’t we have specific performance at times?
o Life goes on – litigation is lengthy
o Things can change considerably; ex: seller can sell a house to someone else – can’t take the house
from an innocent party
o Hostile relationships—Ct doesn’t want to constantly have to intervene in the parties’ relationship
in the future
CITY STORES CO. V. AMMERMAN (1967) - shopping center case

 5 considerations in the Ct granting specific performance here:
o 1. Ct says, Cts should not be focused on the difficulty of performance. We should specifically
enforce this unless the difficulty of enforcement outweighs the importance to the Π.
o 2. In this case, damages would not do a good job putting the Π in the position they would have
been w/out the breach. Even if it were possible to arrive at the amount it would cost (which is
not) money damages do not give back the right to participate and it’s not countable from future
loss
o 3. There are a lot of specific terms in this agreement
o 4. The terms are going to be very similar to terms in other like contracts in the shopping center
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o 5. Just b/c some things have to be determined later, doesn’t mean specific performance is off the
table
 Court never has to offer specific performance [would have to convince them they are inadequate ]
 Money is not the same thing as performance
o 1st thing to get specific performance damages is that money damages are inadequate
o 2nd thing- needs to be substantial burden, courts take into account burden on defendant and third
parties
o 3rd thing is how difficult is going to be to enforce a decree
o Hardship to the defendant—unreasonable hardship to the party in breach or hardship to third
parties, court finds that none of these equitable factors mitigate it
RESTITUTIONARY DAMAGES
Pg. 1020
 Restitution Measurement: Reasonable value of Π’s performance:
o (1) Increase in wealth of the recipient OR (2) market value of the Π’s service(s)
o RST (2nd) section 373: Limitations on restitution damages—
 If the Π has completed her performance and the only thing left is the D to pay on the
contract, you must elect for payment on the contract, not restitution.
UNITED STATES EX REL. COASTAL V. ALGERNON BLAIR (1973) - construction and crane rental case
 Coastal is looking for quantum meruit [value of the services]. District court says: Coastal lost money
had they completed performance, denies them recovery, b/c they would have lost money if they
completed the contract.
 Quantum meruit recovery is not limited to an action against the prime contractor but may also be
brought the Miller Act surety, as in this case.
o Recovery is reasonable value of performance (R3S of K § 347)
 You can have breach of contract as the source of liability, and restitution can be sought as the form of
relief.
 If the nonbreaching party has fully performed his obligation under the K and the breaching party's only
remaining duty of performance is the payment of liquidated or specified sum of money, the nonbreaching
party may not elect a restitutionary recovery but a limited to expectation damages. R3S (2nd) § 373(2)
 In a losing contract, the Π gets more under restitution damages than expectation damages.
o The Δ, who is the breaching party, shouldn’t be entitled to retain the benefit of the bargain (even
in a contract that is a losing contract for the Π)
o Here, restitutionary damages were granted.
o POLICY: some scholars do not agree w/ this holding, risk allocation is a part of contracts and
restitution damages eliminate the risk element, so as a matter of fairness these damages shouldn’t
be granted.
LANCELLOTTI V. THOMAS (1985) - luncheonette business rental
 Breaching Δ can recover for restitution damages - breaching party is not inherently bad
 Modern rule: breaching party can recover value of performance minus harm caused by the breach;
traditional rule used to prohibit this
 Presence of bad faith on the party seeking relief can be a factor on whether there will be relief
VENTURA V. TITAN SPORTS (US CT OF APP 1995) - wrestling case

 This is a classic case of taking something of value and not paying for it
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o Intellectual property rights were unjustly retained by Titan. Fraud was involved, Ventura wasn’t
barred from seeking restitution.
 Dissent: Restitution was fine for written portion, not oral portion
o Π didn’t know it was valuable at the time, so they can’t come back asking for restitutionary
damages
Contracts – Scholz [Spring 2022]

PREWRITES
Legal Theories for Enforcing Promises

Ìntroduction - Meaning of Enforceable Promise – Allen v. Bissinger & Co. (1923), Meyer v. Uber
Technologies, Inc.
- Allen v. Bissinger & Co. (1923), created the objective reasonableness standard which is a
manifestation of mutual assent to agree, to judge whether the party’s words and conduct
manifests an intent to agree to a contract. While at common law the standard was traditionally
just “meeting of the minds.” This term is still used, but it’s important to apply the objective
reasonableness standard.
- To form a contract there must be mutual manifestation of assent, whether the contract is in
writing oral, or by conduct. An offeree in a contract cannot be bound to its terms by
inconspicuous contractual provision that is unaware and not on notice of. (Meyer v. Uber
Technologies, Inc. (2017)).
- A contract needs mutual assent (offer plus acceptance) and consideration.
Formation
Òffer & Acceptance in Bilateral Contracts— Lonergan v. Scolnick, Ray v. William G. Eurice &
Bros., Inc.
- The “meeting of the minds” where the actual intent of a party, rather than a party’s conduct is
considered is a subjective standard. Subjective intent of the parties includes the actual intentions
of the party rather than the party’s conduct.
- Court use objective standards to determine assent to contractual intent. The Restatement
(Second) § 21 rejects the subjective intent approach.
- Parties are bound to what they sign, and not reading a contract, is not a valid mistake. (Ray v.
William G. Eurice & Bros., Inc. (1952)). In Ray, it illustrated the objective approach and how a
contract can still be enforced even if there is a unilateral mistake as long as there is no fraud,
duress, incapacity issue, or mutual mistake.
o Contracts can be enforced even if one party claims they were joking because of past
relationships of the history to determine it was actually serious. (Lucy v. Zehmer (1954)).
o If a contract to a reasonable prudent person would not find it to be serious, then there is
no contractual obligation, as we saw in Leonard v. PepsiCo, Inc. (1999). The court found
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an advertisement to cash out on 7 million points could get you a jet as it was
unreasonable to believe this was real and clearly a joke.
o In Raffles v. Wichelhaus “Peerless” (1864), two merchants agreed on a shipment from a
boat Peerless yet were referring to two different Peerless. The court ruled there was no
offer at this point since there was no “meeting of minds.”
o There are two issues with interpreting contract though, one being some courts may
decline this doctrine and use the Deni Associates, and this goes against the duty to read
(Eurice). Under Deni, the court declines to use the reasonable expectation doctrine from
the fact ambiguities are construed against the insurer anyways.
- Bilateral Contracts requires an exchange of promises in which each party promises to do
something for the other. Bilateral is a term of art, can be more than two parties. (RST (Second)
§9).
- There can be no contract unless the minds of the party have met and mutually agreed upon some
specific terms. An offeror must make a clear offer in order for the offeree to accept it, merely
asking if they are interested in purchasing it, is not sufficient. (Lonergan v. Scolnick (1954)).
o Restatement (Second) of Contracts §26, provides that a communication is not an offer if
the person making the communication does not intend to enter into a bargain until the
person make a further manifestation of assent. Advertisements constitute invitations for
an offer not an actual offer. (RST (Second) §26)
o Restatement (Second) of Contracts §24, an offer invites assent to conclude the bargain.
o An alternate basis for the Longergan result, is the “mailbox rule” that states that an offer
and revocation by offeror must be received to be accepted by the offeree, but in most
circumstances will be treated as effective as soon as it was dispatched (mailed,
telegraphic, etc.) by the offeree. (2nd R3S §63).
- Option contracts require a (1) promise to hold a contract offer open until a specified date plus (2)
consideration in which the offeror receives consideration to no revoke an offer for the amount of
time. (RST (second) §87). Consideration can be nominal. It can be held upon by either writing
signed by the offeror or irrevocable by statute. (RST (Second) §87(2)(b)).
- Unilateral contracts invite a contract only by a performance, once performance is done then it
becomes binding. There is no exchange of a promise, instead of promise for performance. The
consideration is performance.
- The main difference between unilateral and bilateral contracts is the mode of acceptance. In a
unilateral contract, an offer is accepted by performance of an act requested by the offer. Starting
performance makes an offer irrevocable only for unilateral contracts.
- Acceptance under the UCC is relaxed in comparison to the common law, “unless otherwise
unambiguous indicated by the language or circumstances (a) an offer to make a contract shall be
construed as inviting acceptance in any manner and by any medium reasonable in the
circumstances.” (UCC §2-206).
Òffer & Acceptance in Bilateral Contracts (cont.); Offer & Acceptance in Unilateral Contracts—
Normile v. Miller, Cook v. Coldwell Banker
- An offer is freely revocable unless and until it is accepted by the offeree or there is consideration
making it an option contract. (Normile v. Miller (1985)).
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o An offer is rejected by communication or indirect definite actions. (RST (Second) §§ 42

and 43). An offer is revoked when the offeror communicates the revocation to the offeree
or “when the offeror takes definite action inconsistent with an intention to enter into the
proposed contract and the offeree acquires reliable information to that effect.”
(Restatement (Second) § 43).
- If the offeror amends or changes a term of the offer, then the original offer has been rejected and
there is a counteroffer [under the common law]. An offeree cannot accept the original offer once
it has been revoked. (Normile v. Miller (1985)).
- An offeree’s power of acceptance may be terminated by (a) a rejection or counter-offer by the
offeree, (b) lapse of time, (c) revocation by the offeror, (d) death or incapacity of the offeror of
offeree; (2) in addition, it is terminated if the nonoccurrence of any condition of acceptance
under the terms. (RST (Second) § 36).
o If an offer is silent on the timing of acceptance, then the offer terminates after a
reasonable time. (See Restatement (Second) of Contracts § 41(2)).
o The simplest way for an offer to terminate is simply for it to “lapse.” The basic rule
about lapse is quite consistent with simple interpretation: an offer lapses after a
reasonable amount of time. That is, you can’t accept an offer if reasonable people would
no longer think the offer is on the table because too much time has passed. This time
requirement can be subjective and needs to be determined by the court on the basis of the
facts of the situation.
o Although, one can interpret UCC 2-205, that there is a three-month period in which firm
offers remain irrevocable, to be extended to all contract reasonableness times, however,
this is not set in stone except for firm offers.
o There’s one specific “lapse” rule that’s not necessarily dependent on general
reasonableness; it’s just another bright-line “expression rule”: offers made during a
conversation lapse, by default, at the end of the conversation. This is probably a rough
guess at reasonable interpretations in most circumstances.
- An offeree may rarely accept a contract by silence in limited circumstances. (RST (Second) §69).
- Qualified acceptance that is conditional on the offeror’s assent is not an acceptance but a
counteroffer. (RST (Second) §59).
- “Acceptance of an offer is a manifestation of assent to the terms thereof made by the offeree in a
manner invited or required by the offer.” (RST (Second) §50).
- The offeror can create a specific time period to accept an offer under the RST (Second) § 36.
- Once an offer is made, there are five possibilities: (1) acceptance, (2) rejection or rejection by
counter-offer, (3) offer lapses, (4) offer revoked by offeror, (5) death or incapacitation of offeror
or offeree terminates the power of acceptance. (Restatement (Second) § 36).
- An acceptance must be unequivocal and unqualified in order for a contract to performed. (RST
(Second) §§ 57 and 58).
Ùnilateral Contracts:
- RST (Second) § 45 states that an offer in an option contract becomes irrevocable when the
offeree tenders or begins performance.
- In Cook v. Coldwell Banker/Frank Laiben Realty Co. (1998), the court held that a promise does
not receive a promise as consideration for his or her promise in a unilateral contract. This
acceptance manifests through substantial performance (1st RST §45 - minority rule) or just once
they begin performance (RST (Second) §45 - majority/default rule).
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- The First Restatement which is now the minority rule requires substantial performance because
there were concerned with detrimental reliance. The majority rule is now in the Second
Restatement gets rid of the substantial performance and is the default rule, it’s just once they
begin.
`Consideration—Hamer v. Sidway, Pennsy Supply Inc. v. American Ash Recycling Corp., Dohrmann v.
Swaney
- There are two theories for determining consideration: the Benefit-Detriment Theory, which is
now more of the minority approach, and the Bargained-for Exchange Theory, which is the
common analysis—majority.
- While rarely used, the historically significance of the Benefit Detriment Theory shows how
contract law has evolved. Benefit-Detriment Theory defines consideration in terms of the benefit
to promisor or the detriment to the promisee. Basically, asks two questions: Did the person
making the promise get a benefit in return for their promise? Did the other party suffer a
detriment? (See Hamer and Daughtery cases).
- However, the main approach to contract formation is the Bargain-for Exchange Theory of the
RST (Second) §71. The Bargain-for Exchange Theory states there is consideration for a promise
if its performance would be part of a bargained-for exchange. One party’s performance is the
price of the other’s, aka a reciprocal inducement must induce the detriment and vice-versa. (See
Pennsy Supply).
- In Hamer v. Sidway (1891), the nephew gave up something he was legally entitled to do, which
constitutes a detriment that adequate consideration under the Benefit-Detriment Theory. He
therefore was entitled to enforcement of the contract.
- Under the Bargained-for Exchange Theory, the parties do not necessarily have to bargain over
the terms of the agreement for there to be sufficient consideration to an enforceable contract.
(Pennsy Supply Inc. v. American Ash Recycling Corp. (2006)).
o Here American Ash provided the AggRite to Pennsy for the purpose of the project, which
saved American Ash thousands of dollars they would have spent on disposal costs of the
materials. There was reciprocal inducement here of a benefit and a detriment to each
party.
o Performance or return of a promise is bargain for itself and given by a promise in
exchange for that promise. (RST (Second) §71).
- The general rule from the RST (Second) §79 is that there no requirement for the equivalence in
values exchanged, and that courts will not inquire into the adequacy of the consideration.
However, in Dohrmann v. Swaney (2014), the court held that a contract can be invalidated for
grossly inadequacy consideration if it is illusory and shocks the conscience. This case involved
an illusory offer for a man to change his son’s middle name in exchange for the will and estate of
individual with Alzheimer’s.
`Contract Formation under the Uniform Commercial Code –Jannusch v. Naffziger, E.C. Styberg
Engineering Co. v. Eaton Corp.
- Article 2 of the Uniform Commercial Code (UCC) regulates the sale of goods. It requires the
traditional elements of mutual assent (offer and acceptance) and consideration. (UCC §2-102). It
applies to both consumer and commercial sales of goods.
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o Goods are general expected to be movable property. (UCC §2-105(1)). Personal property
like trademarks and patents are not governed by the UCC.
o UCC has a lower standard for mutual assent as you don’t need it as long as “it is made in
a manner sufficient to the agreement, including conduct by both parties which recognizes
the existence of the contract.” (UCC §2-204(1)). A term in the contract can be left open if
the parties have the intent to be bound. (UCC §2-204(3)).
- Anything that is not strictly prohibited in the UCC adopts the common law rules as stated in
UCC §1-103(b): “preexisting principles of law and equity supplement the Code unless they are
displaced by particular provision of the code.”
- The Court in Jannusch v. Naffziger (2008), applied the predominant purpose test to determine
whether the contract was governed by Article 2 of the UCC or the common law. The
predominant purpose test looks at (1) the language of the contract, (2) the nature of the business
of the supplier, and (3) the intrinsic worth of materials (also called the Coakley Factors). If the
transfer of goods is the main purpose, then UCC governs, if not then it is outside the scope and
common law governs it.
o The minority test for determining if the contract is governed by the UCC or the common
law is the gravamen of action test, that looks at where the dispute arise (See Princess
case).
o Then you have to look at the statute of frauds and see if it is a valid contract that does not
need to be written, if an exception applies you don’t need writing, or if it does then you
must follow the state of frauds writing requirements. (UCC §2-201).
o There is also the part performance exception, if delivery has been made, and you have
begun performance you do not need writing (See Buffaloe v. Hart).
- A price quotation is not an offer but an invitation for an offer. (E.C. Styberg Engineering Co. v.
Eaton Corp. (2007)).
`Contract Formation under the Uniform Commercial Code—Princess Cruises, Inc. v. General
Electric Co., Brown Machine, Inc. v. Hercules, Inc.
- Contracts have the requirement of qualified acceptance there must be an accurate description of
the exchange of performance, risks involve, and specifics of the parties’ rights.
- After analyzing the Predominant Purpose Test, the court determined in Princess Cruises, Inc. v.
General Electric Co. (1998) that this was a contract for services is governed by the common law
[Bone Brake test].
o The minority test for the main purpose is the gravamen of the action test: we will
interpretative that contract to be one for goods or services, depends on what the problem
grows out of it.
o The common law has the Mirror Image Rule and the Last Shot Rule. The mirror image
rule states the offeree must accept the exact terms of the agreement. If they don’t, any
change to a contract constitutes a counter-offer not acceptance. (RST (Second) §59).
o The Last Shot Rule goes along with the Mirror Image Rule in which in a back-and-forth
bargain-for exchange the last offer unless objected to will constitute the accepted counter-
offer. (RST (Second) §59).
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o In Princess Cruises they did not object to the counter-offer and performed by paying the
price stated in GE’s counter-offer.
- The UCC rejects the Mirror Image Rule and the Last Shot Rule in UCC §2-207. The UCC
modification for the merchant rule states, a “definite and seasonable expression of acceptance
operates an acceptance even though it states terms additional to or different from those offered.”
(UCC §2-207). Basically, minimal changes with an acceptance of an offer does not count as a
rejection and counter-offer like in common law, but an acceptance. There has to be a change so
big to amount to a material altercation in order to constitute a counter-offer. (UCC §2-207(2)).
- Under UCC 2-207(1) additional terms for nonmerchants become proposal rather than part of the
contract because the terms have already been accepted [offer for a collateral agreement].
- The second prong of UCC §2-207 applies to just merchants; “(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 (c) notification of objection to them has already been given or is given
within a reasonable time after notice of them is received.” (UCC 2-207).
- A price quotation is generally just an invitation for an offer, but a purchase order is an offer. (See
Brown Machine, Inc. v. Hercules, Inc. (1989).
Ìncomplete Contract Negotiations: Agreements to Agree—Walker v. Keith, Quake Construction,

Inc. v. American Airlines, Inc.
- Agreements to agree are generally not enforceable with the exceptions of rental agreements and
letters of intent. (See Walker v. Keith (1964)).
- A contract to enter into a future covenant must specify the material and essential terms leaving
nothing to be agreed upon in the future. (Walker v. Keith (1964)). The material terms have to be
specified, and rent is seen as a material term.
o The minority approach that some jurisdictions adopt in subsequent decisions have
allowed parties to enforce lease-renewal option agreements despite not having an agreed
upon rent. (See Berrey v. Jeffcoat (1990)).
- However, the UCC §2-305, states that open price terms will not necessarily prevent enforcement
of a contract. (Modern Approach). If parties fail to establish a price, courts may impose a
reasonable price.
- A letter of intent to enter into a contract can be enforceable if the parties intended it to be
(majority approach). (Quake Construction, Inc. v. American Airlines, Inc. (1990)).
o The majority approach is either the parties intended to be bound to a construction contract
or they didn’t by signing the letter of intent. (Corbin approach).
o The minority approach found the cancellation clause to cancel the intent of the letter, not
to canceling the contract. The good faith in signing it was an attempt to reach an
agreement while reserving the right to terminate their negotiations.
- To determine if parties intended to reduce their agreement to writing, these factors must be
considered whether: (1) type of agreement at issue is one usually put into writing; (2) the letter of
intent involves few or many details; (3) the agreement at issue involves a small or large amount
of money; (4) the agreement at issue is one that requires a formal writing to express all terms; (5)
the negotiations have indicated that the parties intended to reduce the agreement to a formal
writing; (6) if negotiations were abandoned, where in that process that occurred; (7) the extent to
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which the party now disclaiming the existence of a contract provided assurances to the other
party; and (8) the reliance of the party who seeks to enforce the contract on the completion of the
transaction [other factors: reasons for abandonment, extent of assurances]. (RST (Second) §27
contains a similar list of the factors that were stated in Quake).
Ìncomplete Contract Negotiations and the Role of Reliance—Berryman v. Kmoch, James Baird Co.
v. Gimbel Bros., Inc., Drennan v. Star Paving Co.
- The common law rule allows an offer to be revocable unless and until it accepted by the offeree,
even if the offer itself expressly states that it cannot and will not be revoked. (RST (Second)
§42).
- An offeror can bargain away their exchange in return for consideration under an option contract
and cannot revoke the offer. (See Berryman v. Kmoch (1977)). Nominal consideration of $10 in
this case was adequate consideration to hold the offer open.
o However, this is consistent with the RST (Second) §79 that says generally nominal
consideration is insufficient if it is “grossly inadequate.” This determination has to be
made by analysis the public policy of interpreting whether the nominal consideration is
appropriate or not, and if it creates an illusory promise.
- Berryman offered two theories either create an option-contract or if there is no consideration then
promissory estoppel.
o Option contracts use consideration, while promissory estoppel uses reasonable reliance.
- Baird is bad law, and is only shown to see how contract law has evolved.
- Drennan v. Star Paving Co. (1958), distinguishes that acting in justifiable reliance on an offer
may in some cases serve as reasons for making a promise binding. (RST (Second) §90). The
subsidiary promise serves to preclude the injustice that would result if the offer could be revoked
after the offeree had acted in detrimental reliance thereon.
o In a unilateral contract an offeree is protected against revocation when the offeree has
relied on the offer by beginning performance. (RST §45).
o Promissory Estoppel requires (1) promise was made under circumstances that the
promisor reasonably expected the promisee to act in reliance on the promise, (2)
promisee acted as could reasonably (reasonable reliance) be expected in relying on the
promise, and (3) a refusal by the court to enforce the promise must be virtually to
sanction the perpetration of fraud or must result in other injustice. In Drennan, there was
promissory estoppel because the bid was viewed a promise in which the promise was
relied upon. (RST (Second) § 90).
Àssignment 9: Electronic Contracting—DeFontes v. Dell, Inc., Long v. Provide Commerce

- There are three types of electronic contracts: shrinkwrap, clickwrap, and browsewrap.
- In Specht, a browsewrap case, the court held that the pop up was not mutual assent because there
was no notice, and the offer was not clear [inconspicuous]. It was appearing ‘submerged’ on the
screen and it was placed below the download screen.
- Klocek gives purchases greater rights, but both parties are bound when the vendor accepts
payment and either ships or promises to ship. (minority view that DeFontes rejects).
- In Shrinkwrap cases, under DeFontes v. Dell, Inc. (2009) an offer was made when Dell sent the
products, and the acceptance is made when the buyer opens the goods and decides to keep them
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or ships them back and rejects them (within the specified window. (DeFontes chooses
Hill/ProCD’s approach which is now the majority).
o Under the UCC, additional terms in a shrinkwrap agreement will only become part of the
contract for the sale of goods if the agreement explicitly provides that the consumer can
reject the terms by returning the goods.
- Browsewrap agreements can be enforceable even if the user has not clicked on an agreement
button if, these four requirements are met to show constructive notice, (1) user is provided with
adequate notice of the existence of the proposed terms, (2) user has a meaningful opportunity to
review the terms, (3) user is provided with adequate notice that taking a specified action
manifests assent to the terms, and (4) user takes the action specified in the latter notice. (See
Long v. Provide Commerce, Inc. (2016)).
`Promissory Estoppel—Harvey v. Dow, King v. Trustees of Boston University, Katz v. Danny Dare,
Aceves v. U.S. Bank, N.A.
- When the donee has made substantial improvements to the land, and the donee has made the
improvements in reliance upon the promise convey the land, courts will enforce the promise.
(Harvey v. Dow (2008)).
- Corbin’s work created the reliance principle from §90 of the 1st Restatement.
o Promissory Estoppel requires (1) promise was made under circumstances that the
promisor reasonably expected the promisee to act in reliance on the promise, (2)
promisee acted as could reasonably (reasonable reliance) be expected in relying on the
promise, and (3) a refusal by the court to enforce the promise must be virtually to
sanction the perpetration of fraud or must result in other injustice. This doctrine survived
with minimal changes in the Restatement (Second) § 90.
- In King v. Trustees of Boston University (1995), the Court held that MLK’s papers were
charitable gifts. A Charitable Subscription is an (1) oral or written promise to do certain acts or
give real personal property to a charity or for a charitable purpose; (2) be supported by a
consideration or reliance. (RST (Second) §90).
- Feinberg applies §90, because she had relied upon the pension, court held it was immaterial,
reliance was giving up her job, and this was detrimental reliance. (Katz v. Danny Dare, Inc.
(1980)).
- RST (Second) §90 does not use detrimental reliance that is commonly used to refer to the
section's requirement that the promise induce action or forbearance by the promisee.
- Promissory estoppel’s role is to avoid injustice and that’s why these promises are enforceable.
- Here, in reliance on a promise by U.S. Bank to work with her in reinstating and modifying the
loan, Aceves did not attempt to save her home under chapter 13 (reasonable and foreseeable
reliance). (Aceves v. U.S. Bank, N.A. (2011)).
`Restitution—Credit Bureau Enterprises, Inc. v. Pelo, Commerce Partnership v. Equity Contracting Co.
- In the Restatement (Third) of Restitution §1, a person who is unjustly enriched at the expense of
another is subject to liability in restitution. If the (1) enrichment of one person under
circumstances, (2) where the retention of benefits would be unjust to another person.
- Pelo received medical treatment required by the state, and the court ruled it would unjustly
enrich him if the treatment was not payed for. There is an implied promise to pay in an implied-
in-law contract. (Credit Bureau Enterprises, Inc. v. Pelo (2000)).
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- Duress does not apply to restitution cases only contract cases, so Pelo was not under duress.
- When a person requests another person to perform services for him or to transfer property to
him, the law will infer a bargain to pay, and are called, implied-in-law contracts or quasi-
contracts. While implied-in-fact contracts are express and true contracts. The deference between
them can come down to requesting a benefit. (RST (Third) of Restitution §107).
- To have a case for quasi-contract against an owner, the subcontractor must have exhausted all
remedies against the subcontractor and the owner needs to have not paid anyone. There needs to
be enrichment and it needs to be unjust. Here, the owner paid the subcontractor, so there is not
unjust enrichment. (See Commerce Partnership v. Equity Contracting Co. (1997)).
- Subcontractor could maintain a quasi-contract action against an owner, provided that it pled and
proved two elements to establish that the enrichment of the owner was unjust (1) subcontractor
had exhausted all remedies against the general contractor and still remained unpaid, and (2) the
owner had not given consideration to any person for the improvements furnished by the
subcontractor.
`Promissory Restitution—Webb v. McGowin

- Promissory restitution is when there are services rendered and there is an express promise to pay.
This theory is very rare.
- The material benefit rule in Webb v. McGowin (1936), holds that if a person receives a material
benefit from another, other than gratuitously, a subsequent promise to compensate the person for
rendering such benefit is enforceable. Later the Restatement Second §86 adopts a version of the
material benefit rule [AKA promissory restitution].
- The Webb Court applied the rule of if a person receives a material benefit from another, other
than gratuitously, a subsequent promise to compensate the person for rendering such benefit is
enforceable.
`Statute of Frauds—Crabtree v. Elizabeth Arden Sales Corp.

- The following types [cases] of statutes are subject to the State of Frauds unless there is a written
memorandum or an applicable exception a: (a) contract for an executor or administrator to
answer for a duty of his decedent (executor-administrator provision), (b) contract to answer for
the duty to another (the suretyship provision), (c) contract made upon consideration of marriage
(marriage provision), (d) contract for the sale of an interest in (the land contract provision), (e)
contract that is not to be performed within one year from the making thereof (the one-year
provision), and (2)(a) a contract the sale of goods of $500 or more (UCC §2-201). (RST
(Second) §110).
- The analysis of if the statute of frauds (SoF) applies goes through these questions. Is the contract
at issue one of the types to which the SoF applies, so that a signed memorandum will be required
for its enforcement (within the statute)? If, no. SoF has no application to this case, and plaintiff is
free to prove her contract by any combination of relevant evidence, written or oral, direct, or
circumstantial. If, yes. (2) Is the SoF satisfied? Some type of written statement, memo, of its
terms signed by the defendant that is sufficient to meet the statute's requirements?
o If yes, no bar to enforcement. If no, (3) Are there other factors in the case, such as
performance or reliance by the plaintiff, which might invoke an exception to the statutory
bar?
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- In Crabtree v. Elizabeth Arden Sales Corps. (1953), the majority rule to permit the satisfaction of
SoF by a series of signed and unsigned writings must contain (1) construction of the statutes and
the defendant’s acknowledgement of the one not subscribed without the aid of parol evidence,
and (2) sufficient connection between the papers the establish them in the same subject matter.
o The court rejects the minority rule that you can link together by reference papers if it is
clear that they are on the same subject matter.
- In Crabtree, the contract was governed by the one-year provision of the SoF which required it to
be in writing. The writing memoranda must have the duration, parties, terms, and signature of the
parties to be charged to be valid under the SoF.
o Under the formal requires and statute of frauds requirements UCC §2-201, there is “some
writing sufficient to indicate that a contract for sale has been made between the parties
and signed by the party against whom enforcement is sought by.”
`Statute of Frauds under the UCC— Buffaloe v. Hart
- The UCC §2-201 contains the statute of frauds for sale of goods. It states that contracts for the
sale of goods for a price of $500 or more must be evidenced by a writing signed by the party
against whom enforcement is sought. The writing requirements: must (1) contains a writing
sufficient to indicate a contract of sale between parties, (2) is signed by the party or authorizing
agent against whom enforcement is sought, and (3) states a quantity. There also is a requirement
of written notice within 10 days of any objection after it is received; “between merchants if
within a reasonable time a writing in confirmation of the contract and sufficient against the
sender is received and the party receiving it has reason to know its contents, it satisfies the
requirements of subsection (1) against such party unless written notice of objection to its
contents is given within 10 days after it is received.”
- The court held in Buffaloe v. Hart (1994), that the statute of frauds needs to be satisfied here
because the barns are goods, and they are over $500. The statute of frauds here is not satisfied
because there was no writing. BUT here, there is the partial performance exception b/c payment
was made and accepted.
- The partial performance exception is when a contract is enforceable when payment was made
and accepted or the goods were received and accepted. This exception is from the common law
and is not in the UCC. The court accepted the evidence of purchasing the barns, reimbursing the
defendant for insurance, paying for the improvements, and more.
- The barns were classified as moveable goods under UCC §2-105(1).
`Contract Interpretation and Breach

`Contract Interpretation—Joyner v. Adams, Frigaliment Importing Co. v. B.N.S. International Sales
Corp., C & J Fertilizer, Inc. v. Allied Mutual Ins. Co.
- Contract questions can basically be boiled down into substance and form questions. Was an offer
truly made? Was an acceptance manifested?
- There are three different approaches to contract interpretation.
- The Modified Objectivism (RST (Second) §2-201), if only one party has reason to know of
meaning, then will be bound by the other meaning (meaning that controls). This is the majority
approach as Corbin stated.
- The Objective Approach asks would a reasonable party intend to enter into the contract? If yes,
contract was formed. Even if both of them did not intent to be bound. We interpret what is read,
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based on what a reasonable person intends for it to mean [Holmes argued for the conduct of the
party, not what they are thinking].
- The Subjective Approach is when we try to define what both parties are thinking, if matched we
enforced it, if not then we don't. This makes enforcement harder, courts must access their
credibility, working makes it objective evidence.
- In Joyner v. Adams (1987), the Court stated a term of a contract cannot be enforced if parties
understand it differently— “no meeting of the minds.” They should apply the modified objective
theory of contract interpretation in Restatement (Second) §201, “If one party attaches a particular
meaning to a term or to the agreement, not knowing or having reason to know that the other
party attached a different meaning, and the other party knows or had reason to know of the first
party's meaning, the first party's meaning will prevail.”
o In tight cases apply the canons of interpretation.
- If parties subjectively construe an ambiguous term in their contract in good faith, the court can
look to external factors to apply the plain meaning rule (UCC §1-303). (See Frigaliment
Importing Co. V. B.N.S. International Sales Corp. (1960)). Courts will look at (1) the actual
contract language, (2) negotiated history, (3) course of performance, (4) industry standards [trade
usage], (5) government regulations, and (6) transactional context). The first step of the analysis is
to look at the contract and see if there is a latent or patent ambiguity or if it clear. Step two is to
go through the list of external factors. A latent ambiguity is not visible from the words alone, and
a patent ambiguity is that the language itself is ambiguous.
o If the plain meaning of the language is ambiguous then the court can allow for external
evidence. Where a contract is facially clear a court should not look for its meaning
beyond the court to receive and consider extrinsic evidence to determine where there may
be a latent ambiguity.
o UCC §1-303, allows for the usage of trade, but express terms way more than course of
performance.
o Buyers can reject the goods if they deviate from the contract, even in a nonmaterial way
under the perfect tender rule of UCC §2-601.
o The perfect tender rule applies to merchants and nonmerchants. (UCC §2-601).
- The ambiguity [contra proferentem] in contract terms must be construed most strongly against
the party which drafted the contract. This rule is usually applied in adhesion contracts or where
one party is in a stronger bargaining position. If both parties are equally sophisticated, using this
rule is not proper.
- The court applied the reasonable expectations doctrine of the second restatement to this case and
found that explicit language of an insurance policy will not be enforced when it could not have
been within the objectively reasonable expectations of one of the parties. (C&J Fertilizer, Inc. v.
Allied Mutual Insurance Co. (1975)). This standard applies to insurance contracts [adhesion
contracts] because there is an imbalance of bargaining power. This doctrine is also in the RST
(Second) of Contracts §211, and it is slightly narrower.
`The Parol Evidence Rule—Thompson v. Libby, Taylor v. State Farm Mutual Auto Ins., Nanakuli
Paving & Rock Co. v. Shell Oil Co.
- The Four Corners Approach would bar bringing in evidence for a fully intergraded contract. (See
Thompson v. Lobby).
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- Contracts adhesion factors contain: (1) the use of standard form, (2) inequalities of bargain
power, and are (3) absent of a choice other than to accept or reject.
- The parol evidence rule does not define what evidence is affirmatively admissible only operates
what evidence to exclude.
- There are two approaches to see if a contract is complete and if parol evidence can be admitted.
There is the classical approach: the Four Corners Approach and the modern Second Restatement
(Corbin) Approach. The Four Corners Approach needs an ambiguity for the contract to be
complete. If there is no ambiguity the contract is fully integrated. Complete integration refers to
the writing and intentions of the parties (RST (Second) §210). If the contract is missing any
portion or intent, then it is partially integrated. The merger clause says the contract is complete
when it merges with the four corners of the contract. To apply the Four Corners, approach the
court (1) looks whether the writing in question is intended to be a final expression of the party’s
agreement, (2) if so determines whether it is complete or partial statement of the contract terms.
If it is fully integrated the test tells us to look at the four corners of the writing without resorting
to extrinsic evidence.
- The Second Restatement (Corbin) Approach (RST (Second) §§209-218 can be used even if there
is no ambiguity. A contract can be incomplete without an ambiguity. Step one the court will
consider evidence that is alleged to determine the extent of integration, illuminate the meaning of
the contractual language, or demonstrate the parties’ intent. Then second step is to apply the
parol evidence rule and preclude admission of the extrinsic evidence that would vary or
contradict the meaning of the words.
o Under this approach, all evidence is brought in, with or without ambiguity being present,
then the court applies the parol evidence rule to remove evidence that would contradict
the meaning. (See Taylor v. State Farm). Supplementary evidence is allowed to be
brought when the contract is partially integrated, but if it is fully integrated it is very hard
to bring in.
- The parol evidence rule under the UCC located in §2-202, memoranda between parties must be a
final expression of their agreement.
- In Thompson v. Libby (1885), the court stated the purpose of the parol evidence rule is to let the
parties that have already come to an agreement in final terms be looked at first if it unambiguous,
applying the Four Corners Approach. Here they concluded that this contract was fully integrated
and that warranty terms were additional terms and not allowed.
- The evidence Taylor wants to bring in is to explain the terms of the contract, not supplemental of
the terms, so he has a lower bar to meet to get the evidence to be admissible. (Taylor v. State
Farm (1993)). This falls into an exception of the Parol Evidence Rule: evidence brought in to
interpret a fully integrated contract.
- Trade usage may be used to qualified agreement in good faith and be admitted. (See Nanakuli
Paving & Rock Co. v. Shell Oil Co. (1981)).
Ìmplied Terms; The Implied Obligation of Good Faith—Wood v. Lucy, Lady Duff–Gordon, Leibel v.
Raynor Mfg. Co., Seidenberg v. Summit Bank
- There is an implied duty of good faith in every contract (UCC §1-304), and under the common
law there is the good faith plus also the requirement of fair dealing. (RST (Second) § 205).
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- UCC section 2-306(2) imposes a “best efforts” obligation in cases where the contract for sale
calls for “exclusive dealing.”
- In Wood v. Lucy, Lady Duff-Gordon, (1917), Wood bound himself to take reasonable efforts
(implied-in-fact) to market Lucy’s designs using good faith. The Court stated in Wood that there
the UCC implied a duty of good faith that is determined on a reasonableness standard and an
objective theory. You must look outside the four corners of a contract sometimes to see the
surround circumstances. This is the majority approach to use reasonable efforts. However, the
minority rule is to refuse to enforce clauses on grounds of vagueness.
- The UCC has “gap-filling” provisions in Article 2 that are justified on fairness and because they
are the probable intentions of the parties on an issue (also called default rules).
- Leibel v. Raynor Manufacturing Co. (1978), represents that distributorship agreements are likely
to fall under Article 2 of the UCC because UCC §§2-306 and 309 eliminate the problems of lack
of consideration or lack of mutuality via the implied default rules.
o The UCC required Raynor to give Leibel reasonable notification of its intention to
terminate their agreement [have to when contracts are at will]. Which was required by
UCC 2-309(3): termination of a contract.
- The majority rule for good faith requires subjective honesty and objective reasonableness, but a
minority of courts just require honesty in fact under the UCC §1-201. The doctrine of good faith
just requires a court to consider that the contract should already be fair and reasonable, and they
should not treat that separately.
- Implied covenant of good faith and fair dealing has been applied in three general ways: the (1)
covenant permits the inclusion of terms and conditions which have not been expressly set forth
in the written contract, (2) covenant has been utilized to allow redress for the bad faith
performance of an agreement even when the defendant has not breached any express term, and
(3) covenant has been held in more recent cases, to permit inquiry into a party exercise of
discretion expressly granted by a contract's terms. In Seidenberg v. Summit Bank (2002), the
implied covenant of good faith falls into the first category, that may allow for a finding of breach
even if no express term has been violated.
o The Court in Seidenberg also held that establishing a breach under the covenant of good
faith would require showing either bad faith or ill motive.
`Good Faith (cont.); Obligation to Perform: Express Conditions—Morin Building Products Co. v.
Baystone Construction, Inc., enXco Development Corp. v. Northern States Power Co.
- There two standards under the implied covenant of good faith and an obligation to perform
expression conditions—reasonable person standard (objective approach-majority) and standard
of good faith (subjective approach). The court in Morin Building Products Co. v. Baystone
Construction, Inc. (1983), applied the objective approach in deciding whether contract’s
satisfaction clause was met.
o The satisfaction of work to be done generally is based on functionality not beauty, and
depends on good faith judgement (Morin Building Products).
o The Restatement (Second) § 228 states that the objective test should be preferred when it
is practicable to do so over the subjective standard.
- If you fail to satisfy a condition precedent rather than an ordinary express contract term, there is
strict enforcement, and the defendant would be able to terminate a contract. (See enXco
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Development Corp. v. Northern States Power Co. (2014)). The Restatement says if there is
another interpretation is reasonable then it is not going to be an express condition. The court held
there were express condition, but the Court won excuse enXco on the theory of temporary
impracticability and disproportionate forfeiture.
o Under RST (Second) § 229, non-occurrence of a condition would cause a disproportionate
forfeiture, a court may excuse the non-occurrence, if it was a material part of the contract.
However, there was nothing lost by enXco, instead he maintained property rights.
o Courts do not allow for the excuse of temporary impracticability when a government is late in
issuing a permit because this is probable.
- The difference between a promise and a condition is that a promise only requires substantial
performance (see Jacob & Youngs), but if a condition fails, the obligor is discharged from further
obligations under the contract.
`Material Breach—Jacobs & Young, Inc. v. Kent, Sackett v. Spindler

- A material breach is sometimes seen as a total breach by the court, and even though they can be
seen as different, the courts usually accept them as synonymous. A total breach
relieves/discharges the nonbreaching party from his duties under the contract. A material breach
allows non-party to suspend, and will discharge if not cured within reasonable time, and they can
sue for damages. A partial breach does not discharge the non-breaching party, who must continue
to perform his obligations.
- The substantial performance, Restatement (Second) § 237 (doctrine of constructive conditions):
principle provides that each party's duty of performance is implicitly conditioned on there being
no uncured material failure of performance by the other party. (See Jacob & Youngs, Inc.
(1921)).
o Under the Second Restatement, if a party has performed substantial performance, not full
performance the oblige has a claim for the unpaid balance and the obligor has a claim for
only damages. If there has not been substantial performance the obligee has no claim for
unpaid balance, but he may have a claim for restitution. (RST §237(d)).
o Cardozo stated in Jacob & Youngs, that willful transgressor will not be entitled to recover
the substantial performance doctrine.
- A party can repudiate a contract when there is a total breach, sufficient to justify discharging the
nonbreaching party from obligations. (See Spackett v. Spindler (1967)). Sackett used the factors
in the First Restatement of Contracts §275, which have been adopted in the Second Restatement.
In the Restatement (Second) of Contracts §241 it lists the factors courts can use to distinguish
between a material and total breach, and §242 states how they can be discharged from their
duties. The court will consider (a) extent to which the injured party will be deprived of the
benefit, (b) extent to which the injured party can be adequately compensated for the part of that
benefit of which he will be deprived, (c) extent to which the party failing to perform or to offer to
perform will suffer forfeiture, (d) likelihood to cure his failure, and (e) extent to the which the
breaching party comports with standards of good faith and fair dealing.
Ànticipatory Repudiation—Truman L. Flatt & Sons v. Schupf, Hornell Brewing Co. v. Spry
- Anticipatory repudiation is when “(a) a statement by the obligor to the oblige indicating that the
obligor will commit a breach that would of itself give the obligee a claim for damages for total
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breach, or (b) a voluntary affirmative act which renders the obligor unable or apparently unable
to perform without such a breach.” (RST (Second) §250).
o The UCC anticipatory repudiation rule requires a clear and unequivocal communication
that a party cannot complete their work. (See UCC §2-610). A party can retract their
repudiation unless the aggrieved party has materially altered their position or considered
the repudiation final. (UCC §2-611).
- A party can ask for adequate assurance that a party will be able to complete the performance of
the contract, or they can repudiate. (UCC §2-609).
o Once the seller determines it has reasonable grounds for insecurity, it must properly
request assurances from the buyer. (See Hornell Brewing Co. v. Spry (1997)).
- One can retract their repudiation [it becomes nullified] under §251 if it happens before the injury
party material changes his position in reliance on the repudiation or indicates to the other party
that he considers the repudiation to be final. (RST (Second) §256(1) See Truman L. Flatt & Sons
v. Schupf (1995)).
o The court in Truman refuses to change the common law rule that an anticipatory
repudiation may be retracted until the other party has commenced an action thereon or
has otherwise changed his position.
Àffirmative Defenses to Breach

`Voidable Contracts: Minority and Mental Incapacity—Dodson v. Shrader, Sparrow v. Demonico
- The modern rule for voidable contracts concerning minors is the minor cannot recover the full
price if the contract was willful, but he can recover the value minus depreciation and damages.
(See Dodson v. Shrader (1992)).
o The traditional rule was a balance of the minor’s rights against the merchant’s rights and
allowed a minor to disaffirm or a void a contract, even if there was full performance.
o There’s also the Benefit Rule that hold upon rescission, recovery of the full purchase
price is subject to a deduction for the minor’s use of the merchandise. The Oregon Rule
for full recovery of the purchase price is subject to a deduction for the minor’s use of the
consideration, for the depreciation and deterioration of the consideration in his or his
possession was accepted by the Dodson Court.
- To prove temporary permanent mental incapacity as a defense at common law there are two tests:
the cognitive and modern volitional test. The older/traditional cognitive test is when a person
lacks capacity to enter into a contract, only when they understand they are about to enter a
contract. This is a high bar.
- The court in Sparrow v. Demonico (2012), adopts the modern volitional test from the
Restatement (Second) §15, that determines where the person is unable to reasonable understand
their condition. It requires reasonable and know that can get rid of frivolous claims. Sparrow also
requires medical evidence to prove this, not necessarily a medical doctor.
`Voidable Contracts: Bargaining Misconduct, Misrepresentation—Totem Marine Tug v. Alyeska

Pipeline, Odorizzi v. Bloomfield School District
- If the victim has no choice but to agree to the other person’s terms, then are a lack of reasonable
alternative and this is economic duress. (See Totem Marine Tug & Barge, Inc. v. Alyeska Pipeline
Service Co. (1978)).
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- In Totem Marine Tug v. Alyeska Pipeline (1978), the party under economic duress was released
from the obligation to perform the contract.
- The elements of duress are (1) one party voluntarily accept the terms of another [free will], (2)
circumstances permitted no other alternative [reasonable alternatives], and (3) such
circumstances were the result of coercive acts of the other party and induces the party into
making a contract. Duress used to only be allowed in terms of a person’s property “duress of
goods” and now it expanded to “economic duress.” (RST (Second) §175).
o Contracts made under economic duress as in Totem Marine, are deemed voidable not
void.
o The Restatement (Second) §§175 and 176 use the term “improper threat.”
- Under Restatement (Second) §174, physical force to appear to sign a contract or manifest assent
atomically voids a contact.
- Undue influence involves the use of excessive pressure by a dominant party in overcoming the
will of a vulnerable person (RST (Second) §177). (See Ordorizzi v. Bloomfield School District
(1966)).
o The court in Ordorizzi establish factors when there is vulnerability on one side to
determine undue influence or mental duress. Over persuasion is generally accompanied
by certain characteristics which tend to create a pattern, usually involves several of the
following elements: (1) discussion of the transaction at an unusual or inappropriate time,
(2) consummation of the transaction in an unusual place, (3) insistent demand that the
business be finished at once, (4) extreme emphasis on untoward consequences of delay,
(5) the use of multiple persuaders by the dominant side against a single servient party, (6)
absence of third-party advisers to the servient party, (7) statements that there is no time to
consult financial advisers or attorneys.
- The courts will interpret the contract against the drafter when choosing among reasonable
meanings. See Restatement (Second) of Contracts §206.
`Voidable Contracts: Mistake—Lenawee County Board of Health v. Messerly

- Under RST (Second) §152 when a mistake occurs of both parties at the time the contract was
made, on the assumption the contract was made and was a material effect on the agreed upon
exchanges it makes a contract voidable if one party notices it or enforce it.
- A party bears the risk of a mistake when the risk is (a) allocated to him by agreement of the
parties [as-is clause], or (b) he is aware at the time the contract was made, but he has limited
knowledge with respect to the fact to which the mistake relates but treats his limited knowledge
as sufficient, or (c) the risk allocated to him by the court on the grounds it is reasonable to do so.
(RST (Second) §154).
- The court in Lenawee County Board of Health v. Messerly (1982), held the purchasers assumed
the risk of law, demonstrated by the as-is clause in the contract. (RST (Second) §154(a).
Assumption of risk is based on conscious ignorance of all relevant facts before entering a
contract.
- Under a mutual mistake the equitable relief is usually rescission along with any restitution that
may appear appropriate.
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`Non-Performance Excused by Changed Circumstances—Hemlock Semiconductor Operations, LLC

v. Solarworld Industries Sachsen GmbH, Mel Frank Tool & Supply, Inc. v. Di-Chem Co.
- Risk of supervening events changing value of performance. Impossibility/Impracticability of
performance or frustration of purpose (RSC§§ 261, 263, 265) (UCC § 2-615).
o Has an event occurred that renders one party’s performance impossible or impracticable
or frustrates a party’s purpose?
o If yes, did parties make a basic assumption that the event would not occur?
o If the terms of the agreement identify and allocate the risk of this type of event, then the
contract is not voidable.
o If the risk is not allocated by the parties or the court, the contract is voidable by the party
whose performance has been rendered impossible/impracticable or whose purpose is
frustrated.
- The Doctrine of Impossibility states that it is a literal impossibility for the event or thing promise
to occur. There is an objective and subjective impossibility, however. The objective possibility is
the only one that matter, because there has to be a 0% chance of something occurring, subjective
impossibility has been rejected (See Taylor v. Caldwell (1863)). (RST (Second) §§ 262, 263,
264).
- The Doctrine of Impracticability applies when events following contract formation are so
different from the assumptions on which the contract was based, that it would be unfair to hold
the adversely affected party to its commitments it can be based on foreseeability. (RST (Second)
§§261 and 266).
- The Doctrine of Frustration of Purpose is when the exchange called for by the contract had lost
all value to the defendant, because of a supervening change in extrinsic circumstances (see Krell
v. Henry (1903)). (RST (Second) §§265 and 266).
- The elements required for frustration of purpose/impracticability: requires disadvantaged party to
show (1) either an extreme change in the nature of performance (impracticable) or an extreme
reduction in the value of the other party’s performance so as to render it nearly worthless
(frustration of purpose); (2) the occurrence of an event, the nonoccurrence of which was a basic
assumption of the contract; (3) without the party’s fault; and (4) the party seeking relief does not
bear the risk of that event’s occurrence either under the language of the contract or the
surrounding circumstances. (RST (Second) §§261 (impracticability) and 265 (frustration of
purpose)).
o The majority view is that it’s not automatically impracticable if it is not foreseeable. But
foreseeability is probative to see if the promise is impracticable. (Hemlock
Semiconductor Operations v. Solarworld Industries (2017)).
o UCC §2-615 is similar to the Restatement test and would apply to the sale of goods
contract in Hemlock.
- The lessee in Mel Frank Tool & Supply, Inc. v. Di-Chem Co. (1998), failed to demonstrate that by
not being able to store hazardous chemical because of an organize that they had a frustration of
purpose defense.
- The three conditions to demonstrate Frustration of Purpose are: (1) the purpose that is frustrated
must have been a principal purpose of that party in making the contract; (2) the frustration must
be substantial, must be so severe that is not within the risks assumed in the contract; and (3) the
non-occurrence of the frustrating event must have been a basic assumption on which the contract
was made. (RST (Second) § 265).
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- The main differences between the doctrines of frustration of purpose and impracticability is that
impracticability is comparable to impossibility, but not fully impossibly so we can do it.
However, the impracticability creates an extreme hardship on the party seeking to avoid the
contract. While frustration of purpose is not on the party seeking to avoid the contract liability to
do the job, because the job can be done however, because of a supervening event there is
absolutely no value to that purpose.
`Non-Performance Excused by Overreaching or Improper Terms: Unconscionability—Williams v.

Walker-Thomas Furniture Co., Higgins v. Superior Court of L.A. County
- The court in Williams v. Walker-Thomas Furniture Co. (1965), stated that unconscionable
provision in a contract that shocks that conscience are not enforceable. The Williams court states
the unconscionability is “an absence of meaningful choice on the part of one of the parties
together with contract terms which are unreasonably favorable to the other party.”
- If a term of the contract was unconscionable at the time the contract was created it is voidable by
the court to avoid an unconscious result. (RST (Second) §208 and UCC §2-302).
o There is procedural unconscionability where there is unfair one-sidedness, and lack of
bargaining choice. Then there is also substantive unconscionability that looks on whether
or not the terms are one sided and unfair.
o To find unconscionability as a valid defense, you need both procedural and substantive
unconscionability, but you do not need them in the same degree. (See Higgins v. Superior
Court of L.A. County (2006)).
 In an adhesion contract, sometimes procedural unconscionability is enough.
Àgainst Public Policy—Valley Medical Specialists v. Farber

- Contracts can be unenforceable for public policy reasons including agreements on restraint of
trade, or covenants of not to compete. (See Valley Medical Specialists v. Farber (1999)). The
court has to evaluate the reasonableness of the covenant.
- A restriction is unreasonable and will not be enforced: (1) if the restraint is greater than necessary
to protect the employer’s legitimate interest; or (2) if that interest is outweighed by the hardship
to the employee and the likely injury to the public.
- Covenants not to compete need to be reasonable. Even when covenant is justified, it must be
reasonable in terms of the time or length of non-competition period, area in which competing
activities are prohibited, and areas of activity of the prohibited activities.
- Three general approaches by states: (1) apply reasonableness analysis to the terms as stated by
the parties (Valley Medical), (2) apply the “Blue pencil” approach permits courts to strike certain
words to render covenant reasonable and enforceable, or (3) courts can enforce terms only up to
the extent they are reasonable (e.g. shortening a 5-year period to 1 year).
`Remedies
Èxpectation Damages—Crabby’s, Inc. v. Hamilton, Handicapped Children’s Education Board v.
Lukaszewski
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- Expectation damages are measured by the [loss in value + other loss – cost avoided - loss
avoided]. (RST (Second) §347). Loss in value = value of goods expected – value of goods
received. Other loss = incidental loss + consequential damages.
o Consequential and incidental damages can include estate and property taxes, mortgage
interest and utilities. They are limited to (a) damages that are reasonably foreseeable from
the breach, (b) harm must be measured with reasonably certainty, and (c) the duty to
mitigate.
o The default rule under the UCC (and the common law) is that consequential damages
(CD) are available to successful plaintiffs for breach of contract. If a party to a contract
does not want to be liable for CD, they must make sure language is in the contract
specifically limiting remedies to non-consequential damages (as we saw in Princess, for
example). [Note that doesn't work for personal injuries, CD always available for injuries
to person.]
o Damages may not be recovered to the extent that they could have been avoided or
minimized by reasonable efforts. They are limited by foreseeability, certainty, causation,
and mitigation.
- There are three purposes of awarded damages under the Fuller and Perdue modern approach to
contract remedies (RST (Second) §344). The restitution interest is when his interest in having
restored to him any benefit that he has concerned on the other party. The reliance interest is when
the interest is being reimbursed for loss caused by reliance on the contract by being put in as
good of a position as he would have been in had the contract not been made. Then lastly,
expectation interest which his interest in having the benefit of the bargain by being put in as good
as a position as he would have been in had the contract been formed.
- Damages for the loss of the bargain are calculated as the difference between the contract price
and the market value of the property at the time of breach. (See Crabby’s Inc. v. Hamilton
(2008)). Market value can be provided by real estate appraisers.
o Damages under the UCC are similar to the Restatement, as they are measured by the
seller’s nonacceptance or repudiation of the buyer as the difference between the market
price at the time and the place for tender and unpaid contract price. (UCC §2-708).
- The court in Handicapped Children’s Education Board v. Lukaszewski (1983), ruled that the
Board mitigated their damages for finding a new employee when Lukaszewski breached the
contract and thus are entitled to have the benefit of the bargain restored.
`Limits on Damages: Foreseeability, Certainty and Causation—Hadley v. Baxendale, Florafax Int’l

v. GTE Market Resources
- In Hadley v. Baxendale (1854), the court refers to two types of damages those that are occur
naturally from the breach [general or direct damages] and those that result from special
circumstances [consequential damages].
- “Special circumstances must have been known, the parties might have specially provided for the
breach of contract by special terms as to damages in that case; and of this advantage it would be
very unjust to deprive them.” (Hadley v. Baxendale (1854)).
o Hadley created a foreseeability of the loss rule that limits expectation damages that has
now been adopted by the Restatement (Second) §351 and UCC §2-715(2). The Hadley
test is based on the (1) defendant’s knowledge at the time of the contract formation, (2) is
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the loss foreseeable, (3) foreseeability of risks on the breaching party, and (4) foreseeable
as probable result of breach.
- The Florafax International, Inc. v. GTE Market Resources, Inc. (1997), has a reasonable
certainty rule for loss of profits. The loss of future or anticipated profits is recoverable if (1) loss
in made within the contemplation of the parties at the time of the contract was made, (2) if the
loss flows directly or proximately from the breach, and (3) if the loss is capable of reasonably
accurate measurement or estimate. There is a causation requirement between the damages and
the contact.
`Limits on Damages: Mitigation—Rockingham County v. Luten Bridge Co., Maness v. Collins

- The duty to mitigate damages principle states that a plaintiff has a reasonable duty to mitigate
damages if it is reasonable to do so. If the plaintiff fails when they could have then they will be
unable to collect damages from the defendant as seen in Rockingham County v. Luten Bridge Co.
(1929).
o The economic purpose gives the non-breaching party an incentive not to engage in
conduct that would waste resources.
o There also is the doctrine of avoidable consequences in which a plaintiff may not recover
for those injurious consequences of the defendant’s breach that the plaintiff herself could
by reasonable action have avoided.
- The count of Maness sulking and spending long hours playing solitaire constituted bad faith by
the employer’s conduct. (Maness v. Collins (2010)). The burden of proving that the employee
failed to mitigate damages is on the employer. There is a duty of good faith and noninterference,
that a party cannot hinder the performance of the other party.
`Reliance Damages—Wartzman v. Hightower Productions, Inc., Walser v. Toyota Motor Sales, U.S.A.,
Inc.
- If full performance can be shown to exert a net loss, the plaintiff cannot escape the consequence
of a bad bargain by getting reliance interest damages. However, where the breach prevented an
anticipated gain and made proof of loss difficult to ascertain, the injured party has a right to
damages based on the reliance interest, including expenditures made in perpetration of
performance. (See RST (Second) §349 and Wartzman v. Hightower Productions, Inc. (1983)).
o Basically, if expectation damages cannot be proved with reasonable certainty, the plaintiff
is entitled to reliance damages.
- Walser v. Toyota Motor Sales (1994) created a dealership contract with three parts (1)
application, (2) letter of intent, and (3) conditions satisfied. The majority view set out in Walser
is the for promissory estoppel, expectation damages are available to the plaintiffs, but the court
can limit them to reliance damages with executing their discretion. Drennan is an example of
collecting expectation damages for promissory estoppel. In Drennan, the damages were
calculated by subtracting the defendant’s bid price from the price the plaintiff had to pay another
subcontractor for the goods or services in question.
o Default damages from contracts should be able for promissory estoppel. The minority
view from the Western District of Texas Case, stated that they should be limited to
reliance interests.
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`Specific Performance—City Stores Co. v. Ammerman

- Specific performance is not an automatic damage, it can be awarded through the court’s
discretion. The court should consider money damages and their adequacy, equitable factors of the
harm/substantial burden to the defendant, and practical difficulties of enforcing specific
performance before they grant these.
- Specific performance is an adequate damage to impose if does not cause extreme hardship to the
defendant that is unreasonable. (See City Stores Co. v. Ammerman).
`Restitutionary Damages—United States ex rel. Coastal v. Algernon Blair, Lancellotti v. Thomas,

Ventura v. Titan Sports
- If a party cannot prove expectation damages with reasonable certainty, she may still recover
damages measured by her reliance interest. (RST (Second) §349).
- Modern contract law allows the nonbreaching party to elect for restitutionary rather than
expectation damages for a breach of a contract. (RST (Second) §373). A breaching party can
sometimes be entitled to restitutionary damages based on part performance. (RST (Second)
§374).
- Quantum meruit [value of services] is a valid for restitution under unjust enrichment. (See
United States ex rel. Coastal v. Algernon Blair (1973)). You can have breach of a contract as the
source of liability, and restitution can be sought as the form of relief.
- The traditional rule for restitutionary damages used to prohibit the breaching party from
recovering the value of performance. However, in Lancellotti v. Thomas (1985), the modern rule
it adopted allows the breaching party to recover the value of performance minus the harm caused
by breach. There also is a requirement of good faith.
- Quantum meruit can be recovered as damages by a party when an express contract exists. (See
Ventura v. Titan Sports (1995)).
`Legal Formalities: pgs. 114-115

- Today’s system is less concerned with legal formalities that the old English Common law
system. One example is an execution of a will. The seal of the will means a contractual
obligation.
- While today the seal has little or no force in most jurisdiction.
o The evidence of the existence and purpose of the contract in case or controversy is the
evidentiary function. There needs to be writing, attestation or a certification for this legal
formality.
o The cautionary function serves the purpose of a cautionary or deterrent function by acting
a check against inconsideration action.
o The most important function is the Channeling Function, a legal formality may perform a
function not yet describe can be shown the seal. The seal notates satisfactory memorial of
the promise and includes deliberation in the making of it.
- Formalism prioritizes the formal application of rules of the law with little or no reference to the
purpose of the rules or realities. (Example: Normille v. Miller).
- A realist thinks of how the law is situated in society and what the law is really doing. They
promote the social ends that society wants.
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o Drafter of UCC §2-207 were realists, who were dissatisfied with the common law mirror
image and last show rules. The UCC offers a more realistic flexible process when it
comes to transactions.
`Flow Charts
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2022 - Scholz Contracts Outline

Contracts (Florida State University)

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LEGAL THEORIES FOR ENFORCING PROMISES

A. WHAT DO WE MEAN WHEN WE TALK ABOUT "CONTRACT LAW"?

B. THE STRUCTURE OF CONTRACT LAW

C. THE SOURCES OF CONTRACT LAW

 MEANING OF ENFORCEABLE PROMISES

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OFFER & ACCEPTANCE IN BILATERAL CONTRACTS

Offer and Acceptance in Bilateral Ks 

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o SCHOLZ: A conditional promise (“if”, “unless,” “until”) means a

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2. OFFER AND ACCEPTANCE IN BILATERAL CONTRACTS

LONGERGAN V. SCOLNICK (1954) newspaper ad for a $2.5k deal, Δ said no K

OFFER & ACCEPTANCE IN BIILATERAL CONTRACTS

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OFFER & ACCEPTANCE IN UNIILATERAL CONTRACTS

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o Giving up something they are legally entitled to

PENNSY SUPPLY, INC. V. AMERICAN ASH RECYCLING CORP. OF PENNSYLVANIA (2006)

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CONTRACT FORMATION UNDER THE UNIFORM COMMERCIAL CODE

How do you know something covered by UCC?

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 §2-207 Additional Terms in Acceptance or Confirmation—contrasts with mirror image rule

§2-207. Additional Terms in Acceptance or Confirmation

BROWN MACHINE, INC. V. HERCULES, INC. (1989) K for trim presses

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INCOMPLETE CONTRACT NEGOTIATIONS: AGREEMENTS TO AGREE

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QUAKE CONSTRUCTION, INC. V. AMERICAN AIRLINES, INC. (1990) airline K case

INCOMPELTE CONTRACT NEGOTIATIONS AND THE ROLE OF RELIANCE

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BERRYMAN V. KMOCH (1977) option K, $10 dollar case

How would you terminate an option-contract if you wanted to?

2. Offeree's Reliance on an Unaccepted Offer as Limitation on Revocability

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DRENNAN V. STAR PAVING CO. (1958) low bid mistake leads to K

R3S § 87: § 87. Option Contract

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Difference between clickwrap and browsewrap transactions

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CHARITABLE SUBSCRIPTIONS—species of promissory estoppel

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ACEVES V. U.S BANK, N.A. (2011) bankruptcy case filling payments

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COMMERCE PARTNERSHIP V. EQUITY CONTRACTING CO. (1997) class situation of contractors is

Contract: Mutual assent + Consideration

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THE STATUTE OF FRAUDS

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(d) K for the sale of an interest in (the land contract provision)

A. General Principles: Scope and Application

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STATUTE OF FRAUDS UNDER THE UCC