I certify that this Contracts outline represents substantially my own work.

Ashley Spencer
What is a Contract?
1. a contract is a promise or set of promises that the law will enforce
2. there are two key elements to the existence of a contact
a) a promise or promises
b) enforcement
6. a promise is a commitment as to the happening or non-happening of some
future event
7. enforcement means legal enforcement.. an award of damages or some other
order by a court of law
8. not all promises are legally enforceable; in some instances the making of a
promise creates a moral obligation but not a legal obligation
9. any contract inevitably involves a legal relationship between at least 2
parties bound by reciprocal promises to one another (exchange
relationships)
10.
at bottom, contract law exists to satisfy the basic impulse that the
reasonable expectations excited by a promise are entitled to recompense in
a court of law, if and when disappointed w/o legal excuse
Two types of Contracts
1. Unilateral: only one party makes a promise in the form of an offer, which calls for
the other to render some type of performance as acceptance
2. Bilateral: both parties makes mutual promises to each other
Has your client made a deal? Determining Mutual Assent
1. Lucy v. Zehmer: D writes a contract to sell his farm to P on a napkin
for $50,000 dollars. When P tries to enforce the contract D claims he
and his wife were only joking about the deal.
2. the law judges an agreement between two persons exclusively from
expressions of their intentions which are communicated, not unexpressed or
secret
3. Not what the offeror meant, but the reasonable impression created
4. if his words and acts judged by a reasonable standard manifest an
intention to agree it is immaterial what may be the real but unexpressed
state of his mind
5. Objective theory of contracts
6. Leonard v. Pepsico: D advertised a competition offering a herrier jet
for 7 million pepsi points. P tried to obtain the jet by sending in
pepsi points and a check for $700,000. D refused, saying the
commercial advertised the jet as a joke
7. an advertisement which a reasonable person would not take seriously and
refers to other material is not an offer
Advertisements are not offers 98% of the time
negotiation does not equal mutual assent

intent not to be bound until agreement is expressed in writing can

indicate no mutual assent, rather mere negotiation
To form a valid contract each party to the contract must have the
intent to promise or be bound
There are two types of intent to contract: objective and subjective
In general, assent to be bound is analyzed in two steps: offer
and acceptance
It is a partys objective intent that will be considered as creating
either an offer or acceptance
The court shall look to an external interpretation of the partys intent
as manifested by action

Offer
1. Restatement Second of Contacts 24: an offer is the manifestation of
willingness to enter into a bargain, so made as to justify another person in
understanding that his assent to that bargain is invited and will conclude it
2. An offer is the manifestation of assent by the offeror that essentially says to
the offeree, I commit to a deal on these terms
an invitation for offers does not operate as an offer to create an
enforceable contract
3. Restatement Second of Contracts 26: advertisements are understood to
be mere requests to consider and examine and negotiate; no one can
reasonably regard them as otherwise unless the circumstances are
exceptional and the words used are very plain and clear
4. Leonard v. Pepsico: an advertisement is not transformed into an
enforceable offer merely by a potential offerees expression of willingness to
accept the offer..
5. Well established rule: advertisements and order forms are mere notices
and solicitations for offers which create no power of acceptance in the
recipient
6. The absence of any words of limitation such as first come, first served
renders the alleged offer sufficiently indefinite that no contract could be
formed
Destroying the Offer
Offers create the power of acceptance in the offeree
Four ways to terminate an offer: Restatement 36
1. Rejection
2. Revocation
3. Lapse
4. Death or Incompetence of the offeror
Rejection
Restatement 38 Rejection: (1) An offeree's power of acceptance is terminated
by his rejection of the offer, unless the offeror has manifested a contrary
intention.
(2) A manifestation of intention not to accept an offer is a rejection
unless the offeree manifests an intention to take it under further
advisement.
Direct Revocation: the offerors termination of her offer

Restatement 42: An offeree's power of acceptance is terminated when the

offeree receives from the offeror a manifestation of an intention not to enter into
the proposed contract.
Indirect Revocation
Dickinson v. Dodds: D sent P a memo in which he offered to sell a piece of
land with the offer held open until 9 am on Friday. P accepted the offer
but did not inform the D. D sold the land to a third party
1. offers may be revoked before acceptance, even impliedly
2. Promises to keep an offer open until a certain time will be only a promise
unless made binding by consideration and acceptance necessary to form a
binding agreement
3. Offeror is in charge until acceptance has been made
4. Offeror can kill first offer by making another offer which is inconsistent with
the first
Lapse of Time
Restatement 41: Lapse of Time: An offeree's power of acceptance is
terminated at the time specified in the offer, or, if no time is specified, at the end
of a reasonable time.
(2) What is a reasonable time is a question of fact, depending on all the
circumstances existing when the offer and attempted acceptance are
made.
(3) Unless otherwise indicated by the language or the circumstances,
and subject to the rule stated in 49, an offer sent by mail is seasonably
accepted if an acceptance is mailed at any time before midnight on the
day on which the offer is received.

Minn. Linseed Oil Co. v. Collier White Lead Co.: P sent telegram to D
saying they would sell oil at 58 cent, on the same day the D accepted P
withdrew the offer. D replied saying sale was effected before the request
to withdraw was received
1. offers have to be accepted within a reasonable time if no time is givenif
not the offer will lapse due to inaction
2. Reasonableness depends on the circumstances
3. Deposited/accepted rule: when acceptance is put into the mailbox you have
a contract Mailbox Rule!
1. When Acceptance Becomes Effective:
a) Mailbox Rule: In most courts, acceptance is effective upon proper dispatch.
(1) An acceptance made in a manner and by medium invited by an offer is operative and completes the
manifestation of mutual assent as soon as its put out of the offeree's possession, without regard to
whether it ever reaches the offeror. 63.

(2) The mailbox rule does not apply if the offer provides for otherwise.
(3) In order for the mailbox rule to apply it must be properly dispatched and addressed correctly.
b) If both an acceptance and a rejection are sent, then the one that is sent first will reign. Rejection
must be received before the acceptance. However, acceptances are effective on dispatch.
c) Option Contracts: the acceptance of an option contract is effective upon receipt by the offeror,
not upon dispatch.
d) Mistake in Transmission: Mistake is on the sender if the receiver does not know or have reason
to know that it was a mistake.
2. Indefiniteness: No contract will be found if the terms of the parties agreement are unduly indefinite.
a) The court will supply the missing terms. But if the court believes that the parties intended to

contract and the court believes that it can supply a reasonable value for the missing term, it will
do so.
Parol Evidence:
The parol evidence rule limits the extent to which a party may establish
that the discussions or writings prior to the signed written agreement
should be taken as a part of the agreement.
In interpreting and enforcing a contract, questions as to the parties intent
often arise. Where the parties to a contract express their agreement in
writing with the intent that it embody the full and final expression of their
bargain, any other expression-written or oral-made prior to the writing, as
well as any oral expression contemporaneous with the writing, are
inadmissible to vary the terms of the writing. This rule is designed to
enforce the apparent intent of the parties.
Integration: A document is said to be integrated if it is intended to be a final
expression of the agreement.
Partial Integration: a partial integration is a document that is intended to be
final, but that is not intended to include all details of the agreement. 210
When a writing is a partial integration no document or oral evidence may
be admitted if it contradicts a term of the writing.
Thompson v. Libby (Objective): Extrinsic evidence is inadmissible to
contradict or vary the terms of a valid written instrument.
Total Integration: is a document that is not only an final expression of the
agreement but also included all the details of the agreement. 210
If a document is totally integrated no term can be altered or even added
by temporaneous agreements or negotiations.
Taylor v. State Farm (subjective): a writing itself cannot prove its own
completeness.
Nanakuli Paving v. Shell Oil: Evidence of trade usage is only admissible if
the party offering the evidence can prove that such usage exists. However,
it that usage conflicts with the express terms of the K it is inadmissible.
Roles of Judge and Jury: most courts hold that the judge, not the jury,
should decide whether the writing was intended as an integration, and if
so, whether its partial or total.
Courts disagree about how the judge should make these decisions. Two
extreme positions:
Four Corners: the judge decides whether there is an integration by
looking at the document alone, and nothing else.
Corbin View: looks at a available evidence including testimony, to
determine the parties actual intent.
Merger Clause: states the writing constitutes the sole agreement between
the parties. Most of the time if a contract has a merger clause it will be
considered totally integrated.
Situations Where the Rule doesn't apply:
Fraud, Mistake, or other voidability: Even if a writing is a total
integration, a party may always introduce evidence of earlier agreements
to show illegality, fraud, duress, mistake, lack of consideration, or any
other fact that would make the contract voidable.

Death or incapacity of the offeror

Restatement Second of Contracts 48: an offerees power of acceptance

terminates when the offeree or offeror dies or is deprived of legal capacity
to enter into the proposed contract
The death of a party who had the right of revocation or withdrawal of an
offer to contract renders the completion impossible and terminates the
negotiations at the very point where they were when he died
Acceptance

Restatement Second of Contracts 50(1): 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
An effective acceptance requires 3 things:
1. A manifestation of assent by the offeree to the terms of the offer
2. The acceptance must be made in the manner invited or required by the
offer; and
3. The acceptance must occur while the offer is still open if the offer has
already been revoked, the acceptance is not effective
4. a binding contract is not formed until acceptance has been communicated
to the offeror. An uncommunicated intention to accept an offer is not an
acceptance
5. Communication of acceptance of an offer to ones agent is not sufficient and
does not bind the offeror
6. Unless the offer is supported by consideration, an offeror may withdraw his
offer at any time before acceptance and communication of that fact to him
7. Offer minus withdrawal plus acceptance equals NO CONTRACT
8. An agent is a fiduciary steps into the shoes of the principal
Adams v. Lindsell: D sent a letter to P offering to sell them 800 tods of
wether fleece upon receipt of their acceptance in the course of post. The
letter was misdirected by the D, in consequence of which it was received
late. P wrote back agreeing to accept, however D sold to someone else
1. an offer is accepted upon mailing of the acceptance MAILBOX RULE
2. The mailbox rule applies because once the acceptance is mailed it is out of
the hands of the offeree
3. Everything possible has been done to accept the offer
4. Mailbox rule doesnt apply to withdrawals because they have to be actually
communicated
Carlill v. Carbolic Smoke Ball Co.: D placed various ads in various
newspapers offering a reward of 100 pounds to any person who used the
smoke ball 3 times per day and contracted influenza. P used the ball as
directed and caught influenza. P made a claim for the reward and D
refused to pay
1. an offer for a reward becomes binding upon the performance of the
conditions requested in the offer
2. In cases where the offer can be accepted by performance only, notification
of acceptance does not need to precede performance
Marchiondo v. Scheck: P brought suit against D to recover his broker fees
based on the fact that he communicated Ds offer to sell his real estate to
his client and had received an acceptance before D revoked his offer
1. part performance of an offer of a unilateral contract results in a contract
with a conditionwhich is full performance by the offeree

2. An offer may not be revocable after performance has begun

Acceptance by Silence or Inaction
Restatement Second of Contracts 69 1 (c): Where an offeree fails to reply to
an offer, his silence and inaction operate as an acceptance Where because of
previous dealings or otherwise, it is reasonable that the offeree should notify the
offeror if he does not intend to accept.
Imperfect Acceptances: any change to an offer makes it a counteroffer.
Restatement 39 Counter-Offer: A counter-offer is an offer made by an offeree to his
offeror relating to the same matter as the original offer and proposing a substituted
bargain differing from that proposed by the original offer.
1. A counteroffer is simultaneously an implied rejection of the original offer
and a new offer which the offeror now has the power to accept
2. An imperfect acceptance can also take the form of an acceptance with a
condition
3. Acceptance cannot add anything to the offer. Acceptance must
correspond with the offer, with only minor discrepancies tolerated today
(Mirror Image Rule)
Restatement Second of Contracts 32: a contract is valid if it is so definite in
its terms that the performances to be rendered by each party are reasonably
certain
Restatement Second of Contracts 34 (a):
Under Restatement Second of Contracts 21 express manifestations of the parties
that their legal relations are not to be affected are generally accorded deference
by courts
Consideration
ONE purpose of the law of consideration is to distinguish between gratuitous and
non-gratuitous promises
Restatement 71: to constitute consideration, a performance or a return
promise must be bargained for...
a performance or return promise is bargained for if it is sought by the
promisor in exchange for his promise and is given by the promisee in
exchange for that promise
the performance may consist of:
1. an act other than a promise
2. a forbearance
3. the creation, modification, or destruction of a legal relation
The performance or return promise may be given to the promisor or
to some other person. It may be given by the promisee or by some
other person
mere gratuitous promises arent enforceable
Gift promises may have conditions that do not represent consideration
Past consideration is not consideration at all
A gift is enforceable when it is given
Consideration itself shows that the party is serious about the contract
Consideration: both benefits and determents incurred by both parties in the
same exchange
in general a waiver of any legal right at the request of another party is a
sufficient consideration for a promise

Forbearance of legal rights can serve as consideration

A valuable consideration in the sense of the law may consist either in some
right, interest, profit, or benefit accruing to the one party, or some
forbearance, detriment, loss, or responsibility given, suffered, or
undertaken by the other
Doesnt matter if consideration benefits the other party
o Schnell v. Nell: Ds wife, who owned no property of her won, died after
inserting in her will to leave $200 dollars to P and two other people. The
agreement stipulated that the 3 parties would pay one cent in return for
the $200 dollars payments. P brought suit against for nonpayment
While inadequacy of consideration will not vitiate an agreement, it does not
apply to a mere unequal exchange of money
The exchange would have been valid if the cent had been particular or was
of indefinite value
A moral consideration only will not support a promise
o Restatement 75: one promise can be consideration for another promise.
The promise is enforced by fact of bargain
Gratitude or moral obligations arising from past acts are not sufficient
consideration to create a valid contract, thus the promise to compensate P
for her injuries is unenforceable
Past consideration is not valid consideration
Exceptions to moral obligation being consideration
Moral obligation is consideration if there is a revival of the promise that the
law otherwise quashed
Moral obligation is sufficient consideration in only some cases: debts barred
by SOL; debts incurred by infants; and debts of bankrupts
These may be enforced b/c they merely remove an impediment created by
law to enforce debts that are due, but which public policy protects debtors
from having to pay
In this case, Ds expenses were not bestowed at his own request
The court held that moral obligation is a sufficient consideration for an
express promise is to be limited in its application to cases where at some
time or other a good or valuable consideration has existed (an exception)
o Webb v. McGowin: P worked at a mill and fell with a 75 pound block so
that the block would be diverted and would not fall on McGowin. P was
badly crippled for life as a result, and McGowin agreed to pay P $15
dollars every two weeks for the rest of Ps life. The payments were made
until McGowin died, P sued his estate for payments
where the promisee cares for, improves, and preserves the property of the
promisor, though done w/o his request, it is sufficient consideration for the
promisors subsequent agreement to pay for the service b/c of the material
benefit received
3. Non Promises:
a) Illusory Promises: A statement which appears to be promising something, but which in fact
does not commit the promisor to anything at all. Promisor cannot reserve a choice. 77.

(1) One main type is when the promisor reserves the right to change his mind.

b) Alternative Promises: A promise which reserves to the promisor several alternatives

performances is generally consideration IF each would have been consideration if they had been
bargained for by themselves. 77(a).
c) Right to Terminate: if the contract allows for one or both parties to terminate the agreement

then the promise may be illusory

d) Implied Promises: Courts try to avoid striking down agreements for lack of consideration. One
way to do this is to find implied promises. Wood v. Lucy, Lady Duff Gordon.
o Restatement 86: Promise for Benefit Received
(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
(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 unjustly enriched; or
(b) to the extent that its value is disproportionate to the benefit
Promissory Estoppel
Restatement 90: 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
Offers a mechanism whereby a purely gratuitous promise might be enforced
Ricketts v. Scothorn: Ps grandfather gave her a promissory note for $2,000
dollars and stated that none of his grandchildren worked and neither should
the P. P left her employment on the reliance of the promise. The grandfather
died and his estate refused to pay claiming the promise lacked consideration
Promissory estoppel prevents a promisee from using lack of consideration as a
defense to breach of contract
A promise can be enforced even though it was given w/o consideration if the
promisee has foreseeably and reasonably relied on the promise to her detriment
Claims of promissory estoppel only succeed where all other elements of a contract
exist, but consideration is lacking
There is no gap for promissory estoppel to fill when consideration exist
Statute of Frauds
Because of the statute of frauds, some agreements are not enforceable unless
there is special proof that the agreement was made
What is the Statute of Frauds? an act for prevention of frauds and perjuries.
It required that certain kinds of agreements must be in writing to be legally
enforceable
The primary purpose of the statute of frauds is to provide reliable evidence of the
existence and terms of the contract, and the classes of contracts covered seem for
the most part to have been selected b/c of importance or complexity
Restatement 110: Classes of Contracts Covered
(1) the following classes of contracts are subject to a statute, commonly called the
statute of frauds, forbidding enforcement unless there is a written memorandum or an
applicable exception;

(a) a contract of an executor or administrator to answer for a duty of his decedent

(b) a contract to answer for the duty of another
(c) a contract made upon consideration of marriage

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

(e) a contract that is not to be performed within one year from the making thereof
1. a writing for the sale of land must contain an express statement of consideration,
a description of the land, signature of the party to be bound, and the parties to
the contract. Also the general terms and conditions upon which the sale will be
made
2. identification, description, mechanism, and terms and conditions
3. if a party has relied on an oral promise and rendered part performance the other
party should be estopped from asserting the statute of frauds
Expect damages: benefit of the bargain damages
Offers are more formal than promises
Statements of future intent do not constitute a promise
All offers contain promises
Promissory estoppel cannot be based on preliminary negotiations
Reliance must be reasonable and foreseeable
Fraud & Misrepresentation
6 Elements for the seller:
1. Seller made a representation
2. Of present fact
3. One or more was false
4. It was material
5. Seller knew it was false
6. Made to induce the buyer
3 Elements for the buyer:
1. Reliance upon misrepresentation
2. Reliance was justified
3. Buyer was injured
3 types: innocent, negligent, fraudulent
***based upon common law and common sense
the action is generally a suit for rescission to make an agreement unenforceable
in determining whether an agreement should not be enforced or should be
rescinded courts generally look to (1) how important the misrepresentation
was, (2) whether the other party relied on that misrepresentation, and (3)
if that reliance was reasonable
Absent a false statement, the concealment of a known defect is not actionable
Lack of Capacity
Kiefer v. Fred Howe Motors, Inc.: The contract of a minor, other than for
necessaries, is either void or voidable at his option.

DEFENSES
Duress and Undue Influence

Restatement 175: there is duress when assent is induced by an improper

threat that leaves the victim no reasonable alternative. Outside of threats to ones
person or property, claims for duress usually involve threats to a persons
economic interests.
a contract is voidable on the ground of duress when it is established that
the party making the claim was forced to agree to it by means of a wrongful
threat precluding the exercise of his free will

Immediate possession of needful goods is threatened, or more particularly,

by proof that one party to a contract has threatened to breach the
agreement by withholding goods unless the other party agrees to some
further demand
It may also appear that the threatened party could not obtain the goods
from another source of supply and that the ordinary remedy of an action for
breach of contract would not be adequate
In economic duress there is no way out
Restatement 177: Undue Influence
WHEN UNDUE INFLUENCE MAKES A CONTRACT VOIDABLE
1. Undue influence is unfair persuasion of a party who is under the domination of
the person exercising the persuasion or who by virtue of the relation between
them is justified in assuming that that person will not act in a manner inconsistent
with his welfare.
2. If a party's manifestation of assent is induced by undue influence by the other
party, the contract is voidable by the victim.
3. If a party's manifestation of assent is induced by one who is not a party to the
transaction, the contract is voidable by the victim unless the other party to the
transaction in good faith and without reason to know of the undue influence
either gives value or relies materially on the transaction
a. A party may rescind an agreement by showing such agreement was the
result of undue influence
b. Undue influence is a shorthand legal phrase used to describe persuasion
which tends to be coercive in nature, persuasion which overcomes the will
w/o convincing the judgment
c. By statutory definition, undue influence includes taking an unfair advantage
of anothers weakness of mind, or necessities or distress
d. to make a good contract a man must be a free agent
e. In essence undue influence involves the use of excessive pressure to
persuade one vulnerable to such pressure pressure applied by a dominant
subject to a servient object
f. First aspect: Undue susceptibility may consist of total weakness of mind or
spirit which leaves a person entirely w/o understanding
g. Second aspect: involves an application of excessive strength by a dominant
subject against a servient object
h. There are limits to persuasion with adults (Hammond)
i. 7 factors of over-persuasion:
1. Discussion of the transaction at an unusual or inappropriate time
2. Consummation of the transaction at 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
Illegality and Public Policy
Restatement 181: Effect of Failure to Comply with Licensing or Similar
Requirement

If a party is prohibited from doing an act b/c of his failure to comply with a licensing,
registration or similar requirement, a promise in consideration of his doing that act or
of his promise to do it is unenforceable on grounds of public policy if
(a) The requirement has a regulatory purpose, AND
(b) The interest in the enforcement of the promise is clearly outweighed by the public
policy behind the requirement
Restatement 178: a promise or other term of an agreement is unenforceable on
grounds of public policy if legislation provides that it is unenforceable or the interest in
its enforcement is clearly outweighed in the circumstances by a public policy against
the enforcement of such terms
R.R v. M.H.: P and his wife entered into a surrogacy agreement with D. D
changed her mind prior to giving birth and expressed a desire to keep the child
1. Surrogacy agreements that compensate the birth mother directly, provide
compensation in excess of expenses, and obtain the birth mothers consent to a
custody agreement prior to birth violate public policy
The Blue Pencil Rule: eliminating grammatically severable, unreasonable
provisions
1. Where the severability of the agreement is not evident from the contract
itself, the court cannot create a new agreement for the parties to uphold the
contract
Unconscionability: contract law reasons for NOT enforcing contacts
prevents one party to a contract from taking undue advantage of the other and
enforcing a too one sided deal
Two types of unconscionability:
1. Procedural: absence of meaningful choice by one of the parties
Oppression: unequal bargaining power between the parties
Surprise: the unconscionability is hidden in legal jargon
2. Substantive: unreasonably favorable contract terms to one of the parties
***both must be shown however, in some situations one is okay if
an extreme amount is present
where the element of unconscionability is present at the time a
contract is made, the contract should not enforced
Mistake: Contract law reasons for not enforcing contracts
a contact entered into by mistake is voidable
Restatement 151: A mistake is a belief that is not in accord with the facts at the time the

contract was entered into

Sherwood v. Walker: case of the not so barren cow!
1. A mutual mistake regarding the substance of the subject matter of a contract may
render that contract unenforceable.
2. There is no contract if there is a difference or misapprehension as to the substance
of the thing bargained for, or if the thing actually delivered or received is different
in substance from the thing bargained for and intended to be sold.

3. When parties to a contract agree upon an object, taking for granted that it
will not change, a change in the nature of the object could void the contract.
It is easier for the party adversely affected by the mistake if the mistake is mutual
Restatement 152 Mutual Mistake: Mutual mistake occurs when both parties
to a contract are under substantially the same erroneous belief as to the true
facts at the time of the exchange
Elements of mutual mistake:

1. The mistake of both parties must be as to a basic assumption as to

which the contract was made
***the shared mistake must change the essential nature of the
contract
2. The mistake must have a material effect on the agreed exchange of
promises
3. ***it must be demonstrated that it would be too unfair to enforce the
bargain called for in the agreement
4. The party seeking to avoid the contract must not bear the risk of that
mistake
Conditions: an excuse for not doing what one agreed to do
The non-occurrence of an express condition can provide an excuse to any legal
obligation to perform that contract
Restatement 224 Condition Defined: a condition is an event, not certain to
occur, which must occur, unless its non-occurrence is excused, before
performance is due
Non-occurrence of condition excuses performance
Restatement 225 Effect of the Non-Occurrence of a Condition:
performance of a duty subject to a condition cannot become due unless the
condition occurs or its non-occurrence is excused
the non-occurrence of a condition is not a breach
1. a contract is not binding where a condition precedent to performance
of the agreement was not met
2. a condition precedent is a factor event which that parties intend must
exist or take place before there is a right to performance
3. if the condition precedent is not fulfilled the contract is not
enforceable
conditions are intimately tied to promises the condition must occur before the
contract is activated
conditions are giant exercises in logic (Hammond)
conditions can always be viewed from each parties perspectives
Two types of conditions: express and implied
Express conditions are actually spelled out in the text of the contract
Implied conditions: condition agreed upon by the parties as
evidenced conduct of the parties
The three consequences of an express condition language in a contract are
straightforward and easy:
1) Excuse of performance: non-occurrence of a condition excuses any duty
to perform
2) Strict compliance: occurrence of a condition requires strict compliance
with the contract language of condition
3) No breach: the non-occurrence of a condition is not a breach of contract
The party to the contract who is the seller would have to be the party to excuse
the non-occurrence of the condition
Peacock Const. Co. v. Modern Air Cond.: P subcontracted with D and
written subcontracts provided that D would pay P in full w/in 30 days after
completion of the work. However, D would not pay b/c the owner had not
paid in full

1. Unless expressly agreed, a subcontractors payment is not conditioned upon

payment to the contractor by the owner
2. Provisions calling for payment after written acceptance do not set condition
precedents, they constitute absolute promises to pay, fixing payment by the
owner as a reasonable time for making payment to the subcontractor
Excusing Conditions! (Avoidance of forfeiture or Prevention)
Avoidance of forfeiture or prevention excuses/extinguishes the excuse for going
what you agreed to do so that you are obligated to do what you agreed to do
Restatement 229 excuse of a condition to avoid forfeiture: to the extent
that the non-occurrence of a condition would cause disproportionate forfeiture, a
court may excuse the non-occurrence of that condition unless its occurrence was
a material part of the agreed exchange
Prevention: a condition will be excused if the party favored by the condition
wrongfully prevents or hinders the fulfillment of the condition
Modification
Modification requires good faith by the party seeking the modification and
new consideration to support the modification
Modification requires consideration a modification is a promise and can thus be
modified with mutual consent
Parties can show mutual consent by their behavior
Cannot accept something while calling it a breach
Cannot waive something and attempt to take the waiver back later
May Centers v. Paris Croissant: if an obligee accepts a performance by the
obligor that differs from what is due, the duty is discharged ***by their own
actions the parties modified the contract*** (Restatement 278)
Impossibility: occurrence of something not provided for in the K as an excuse
to not perform
Restatement 263: If the existence of a specific thing is necessary for the
performance of a duty, its failure to come into existence, destruction, or such
deterioration as makes performance impracticable is an event the non-occurrence
of which was a basic assumption on which the contract was made.
Impossibility applies when an unexpected event occurs which makes performance
by a party objectively impossible
1. Provides a defense to a breach of contract whereby the Ds duties have
been validly discharged
Taylor v. Caldwells to allow P to use its musical hall for concerts, however the
hall was destroyed by fire. It was no ones fault, but the P sued
2. If contract performance depends on the continued existence of a person
or thing, and that person or thing ceases to exist, performance may be
excused for impossibility of performance
Impracticability
Restatement 261: Where, after a contract is made, a party's performance is
made impracticable without his fault by the occurrence of an event the nonoccurrence of which was a basic assumption on which the contract was made, his
duty to render that performance is discharged, unless the language or the
circumstances indicate the contrary.
Impracticability excuses performance when it would be unreasonably costly for a
party to carry out its obligations

Performance may be impracticable because extreme and unreasonable difficulty,

expense, injury or loss to one of the parties will be involved
Frustration of Purpose
Nearly identical to the doctrine of impossibility
Performance remains possible but the expected value of the performance to the
party seeking to be excused has been destroyed by the supervening event
Restatement 265 Discharge by supervening frustration: Where a partys
principal purpose is substantially frustrated w/o his fault by the occurrence of an
event of which the nonoccurrence of which was a basic assumption on which the
contract was made, his remaining duties to render performance are discharged,
unless the language or the circumstances indicate the contrary
Krell v. Henry: D contracted to use Ps flat to view the coronation
procession of King Edward. The coronation was postponed and D refused
to honor the agreement although the purpose was not expressly stated in
the contract
3. Performance will be excused when the purpose of a contract is frustrated
by an unforeseeable event and the purpose was w/in the contemplation
of both parties when the contract was executed
4. A contracts purpose may be inferred from surrounding circumstances
Mel Frank Tool & Supply v. Di-Chem Co.- D leased premises from P but
vacated after the city informed that it could no longer store chemicals on
the premises.
1. A contract can only be avoided under frustration of purpose when the entire
purpose for entering into the contact is frustrated
2. So long as there is a serviceable use for the property, a partys performance
is expected even though the remaining uses are less lucrative
Anticipatory Repudiation: unwillingness or inability to perform as an excuse for
nonperformance
Restatement 250: Repudiation is: (a) a statement by the obligor to the
obligee 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.
Consists of words or conduct by a party to a contract that a reasonable person
would interpret as an expression of refusal to render any further performance
Hochster v. De La Tour: P entered into a contract with D to accompany D
on a trip. D changed his mind before the trip and refused to pay P any
compensation
1. If two parties enter into a contract to be performed at a designated time in
the future, a party may sue before the contract was to be performed
2. A party need not wait until the time for performance has passed
Material Breach
One is excused from performing because of the other guys breach only when the
other guys breach is a material breach
Restatement 237: it is a condition of each partys remaining duties to render
performances to be exchanged under an exchange of promises that there be no
uncured material failure by the other party to render any such performance due
at an earlier time

In order for there to be a breach there must be substantial non-performance of a

constructive condition and the issue must be material to the contract
Nichols v. Raynbred: P promised to deliver a cow to D in exchange for 50
shillings. D did not pay, nor did P deliver the cow.
In a promise for a promise a party need not perform before recovery on the
contract is allowed.
In an exchange of a promise for a promise, each promise is treated as independent
of the other. Each party is therefore entitled to sue the other for nonperformance,
even if the party bringing suit had not performed

What constitutes a material breach?

o the measure of damages for a trivial and innocent omission is not the cost of
replacement but the difference in value
3. Substantial performance mitigates material breach
4. A promisor who has substantially performed is entitled to recover,
although he has failed in some particular to comply with his agreement
5. However, one who tenders a performance so deficient that it can be
remedied only by completely redoing the work for which the contract called
has not established, as a matter of law, that he has substantially performed
his contractual obligation
6. Substantial does not excuse failure to perform an express condition
5. Where the breach is not material and the contract does not explicitly
state that an immaterial breach will excuse further performance,
termination of the contract is improper, and the injured party is limited
to damages for the breach
Election of Remedies: when a party breaches a K the non-breaching party
must choose between two remedies it can elect to terminate the contract
and recover liquidated damages or it can continue the contract and recover
damages solely for the breach
Once a party elects to continue the contact, it can never thereafter elect to
terminate the contract based on that breach, although it retains the option
of terminating the contract based on other subsequent breaches
Waiver v. Election of Remedies:
1. Waiver a party may by words or conduct, waive a provision in a
contract or eliminate a condition in a contract which was inserted
for its benefit
2. Election of Remedies: an election is not a waiver of any rights
under the contract but rather a choice between two inconsistent
remedies for breach of the contract
In essence, the election of remedies doctrine is implicated only
in .the absence of waiver
The remedy of termination is available only where one party has materially breached
the contract

Restatement 243 Total Breach: with respect to performances to be

exchanged under an exchange of promises, a breach by non-performance gives
rise to a claim for damages for total breach only if it discharges the injured
partys remaining duties to render such performance

Total Breach: if the breach is material, then the non-breaching party is justified
in suspending its performance and if it is sufficiently serious, cancelling the
contract; it may also then sue for damages measured by the breaching partys
failure to perform now and in the future
Partial Breach: if the breach is not material or there is an argument that the
other side accepted the material breach and continued performance there is still
a breach and there is still a remedy in damages but only for the present breach,
not for future obligations

Specific Performance
1. Specific performance is an order by the court requiring a party to perform
exactly what was promised under the contract
2. Van Wagner Advertising v. S & M: A court should award specific
performance in breaches of real estate contracts and in other breaches
where the uniqueness of the property in question raises uncertainty in
valuing it.
The imposition of an equitable remedy must not itself work an inequity,
and specific performance should not be an undue hardship
3. Walgreen Co. v. Sara Creek Property Co.: P operated a store in Ds mall. The
lease contained a clause in which D promised not to lease any space in the
mall to anyone wanting to operate a pharmacy
Injunctive relief is appropriate when money damages are difficult and
costly to calculate and would not cure the ill the P wants
Damages
I.

Expectation, Restitution, Reliance

a.
Generally, damages must be determined with certainty, courts dont commonly
make parties adhere to contracts, usually makes one party pay other party for damages
caused.
i.

Punitive damages are not usually given in breach of

contracts disputes.
II.
RELIANCE: Damages that put promise in position had he never entered the
contact at all.
a.

Typically used when:

i.
ii.

Profits are too uncertain to determine but can show expenses

No enforceable contract, but entitled to something under promissory

estoppel
iii.
Failure to perform on land contract and jurisdiction doesnt allow
expectation damages.
1.
Reliance = expenditures made in preparation of performance expenses saved in
breach

b.

CASES:

i.
Sullivan v. OConnor (Messed up nose job on entertainer)
I: Should the damages be based on reliance?
F: had two operations done to her nose by . claimed that had promised to
enhance her beauty and improve her appearance, and sued for breaking his
promise.
R: Contracts usually issue expectation damages except here, where the court makes an
exception for medical breaches of contracts.
H: can bring breach of contract action against because he made pro-mises of a
specific conclusion, and that pain and suffering beyond that contemplated were
compensable.
III.
EXPECTATION: (compensatory): damages that put promisee in condition
that he would have been if transaction occurred, the normal damages offered in
contract law.
a.
Expectation measures are preferred because it causes people to breach only when
it makes at least one party better off and no one worse off, i.e. encourages only efficient
breaches
b.
Expectation = loss in value to him of the other partys performance caused by its
failure or deficiency + any loss, incidental or consequential, caused by breach any
cost or other loss that he has avoided by not having to perform.
c.

CASES:
i.

Hawkins v. McGee (Infamous hairy hand case/ promise of 100% perfect hand)

I: Can oral guarantee of 100% success in operation hold a doctor liable when operation
fails? (i.e.: when a special contract is made?)
F: McGee is a doctor and Hawkins was his patient. Hawkins paid McGee to perform
surgery on his hand. Hawkins testified that McGee guaranteed the hand would turn out
100% perfect or 100% good. It did not turn out that good, and Hawkins sued.
R: The Damages that should be awarded are the difference between the value of what P
would have received if the contract had been carried out and the value P currently
possesses (plus incidental losses resulting from the contract being breached).
H: Yes, utterance of words are done with the intention that they would be taken at face
value by patient inducing them to consent to operation. D went beyond offering a
medical opinion when offering a perfect hand
IV.
RESTITUTION: Damages that relinquish benefits provided to promisor
derived from promise covers any benefits conferred by P on D in the performance (NOT
available when P has fully performed).

a.
Restatement 371 Measure of Restitution Interest If sum of money is awarded
to protect a parties restitution interest, it may as justice requires to be measured by
either
i.
The reasonable value to the other party of what he has received in terms of what
it would have cost him to obtain it from a person in the claimants position, or
ii.
The extent to which the other partys property has been increased in value or
his other interests advanced.
V.
LIMITATIONS ON DAMAGES (THREE)
a.
Remoteness or Foreseeability of Harm, Certainty of Harm, and Avoidability of
Harm.
i.
REMOTENESS OR FORSEEABILITY OF HARM
1.
Restatement 351 Unforseeability and related limitations on damages.
a.
Not foreseeable NO DAMAGES
b.
Foreseeable if:
i.
Loss follows in ordinary cause of events (consider separation in time and
space between breach and consequences, customs of the trade, etc.)
ii.
Party in breach knows of special circumstances
c.
Exceptions to foreseeability damages
i.
Excluding loss of profits, paying only reliance damages
ii.
If giving damages exults in overcompensation
d.
Damages can be curtailed by excluding recovery for lost 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.
e.
Test of foreseeability: Determine whether D would have agreed to the contract
price had he known the extent of his liability.
2.

CASES

a.
Hadley v. Baxendale (Failure to deliver on time shaft that runs mill)
I: Is D liable for loss of profits?
R: Must be foreseeable. For special situations, damages can be awarded only if P
informs D of the special situation or if the damages were reasonably foreseeable. Note:
this encourages information sharing when deviating from a default rule.
H: NO! Damages limited to what was contemplated at the time of contract.
b.

Hector Martinez v. South Pac. Trans. (Delay and damage of dragline trans)

I: Due to delay and damage of Ps machinery, should D be held liable for Ps loss profits
without and conveyance of special circumstances notice?
R/H: Yes, as long as its foreseeable and not remote to a reasonable person.
ii.

UNCERTAINTY OF HARM

1.
Restatement 352 Uncertainty as a Limitation on Damages: Damages are not
recoverable for loss beyond an amount that the evidence permits to be established with
reasonable certainty.
2.
CASES
a.
Chicago Coliseum Club v. Dempsey (Boxing match breach by boxer)
I: What damages to provide when expected profits cannot be determined?

R/H: Only RELIANCE and RESTITUTION expenses that flow from and are the result of
the breach.
b.
Anglia Television v. Reed (Actor breaches contract to appear on television film)
I: Since D cannot determine lost profits due to breach can they claim wasted
expenditures (reliance damages) BEFORE contract signed?
R/H: Yes, P can collect damages even prior to contract provided that it was foreseeable
loss due to breach.
iii.
AVOIDABILITY OF HARM
1.
Restatement 350 Avoidability as a Limitation of Damages: Damages not
rewarded for loss that injured party could have avoided without undue risk, burden or
humiliation except when injured party has made reasonable but unsuccessful efforts to
avoid loss.
a.
Mitigation forces people to behave in non-wasteful ways
b.
Under the mitigation of damages doctrine, a person who has suffered an injury or
loss should take reasonable action, where possible, to avoid additional injury or loss.
i.
Failure of a plaintiff to take protective steps after suffering an injury or loss
can reduce the amount of Ps recovery.
c.
Buyers duty to mitigate is embodied in the duty to cover, (i.e: he must attempt to
purchase substitute goods from another supplier) no attempt to recover limits damages
to recover only the difference between the market price at the time when the buyer
learned of the breach and the contract price.
d.
Sellers duty to mitigate is much less than the buyers. If a buyer repudiates
before delivery or rejects delivery seller has a choice of remedies:
i.
Resell and recover difference between resale price and contract price
ii.
Not resell and recover the difference between market price at the time and
place for tender and unpaid contract price
iii.
Recover lost profits that do not require mitigation.
e.

CASES
i.
Rockingham County v. Luten Bridge (breach of buyer on construction of
bridge)
I: Should D be liable for damages sustained by P post notification of breach???
R/H: No, it Ps duty to do nothing to increase the damages flowing from breach.
Damages = expenses incurred prior to breach + expectancy interest (profit expected)
f.

Buyers Breach/Sellers Remedies

i.
Sellers Resale (2-706)
ii.
Damages = resale price contract price + incidental damages expenses
saved in breach
1.
g.

All aspects of resale should be reasonable. (Boat case)

Sellers Breach/Buyers Remedies
i.
Substitute goods in good faith without unreasonable delay (2-712)

1.
Damages = cost of substitute cover contract price + incidental/conseq damages
expenses saved in breach.
ii.
Damages for non-delivery or repudiation
1.
Damages = market price @ breach contract price + incidental/conseq damages
expenses saved in breach.

a.
Incidental damages: inspection, receipt, transportation, care, custody of goods
rejected
b.
Consequential damages: any loss resulting from general or particular
requirements and needs of which the seller @ time of contracting had reason to know
and which could not be prevented by cover or otherwise, any injury to person or
property proximately resulting from any breach of warranty, collectible if parties
foresee the possibility of such harm and agree on an estimated amount.
ADDITIONAL REMEDIES
SPECIFIC PERFORMANCE (SP): Awarded when money damages are not adequate,
i.e. sentimental value, priceless items, land, special, unique items, items with
subjective value, hard to value items, agreements not to compete, transfer controlling
block of shares.
I.
SP is not allowed if:
a.
adequate damage compensation is available
b.
indefinite contract terms, i.e. indefinite time
c.
difficulty in enforcement and supervision
Cases:
I. Land: For cases brought in equity, will be used primarily in real estate deals or other
personal property that is tough or impossible to value or otherwise replace.

Loveless v. Diehl (SP on option to purchase land improved upon)

I: Whether or not SP can be awarded when the breached contract at issue involves real
property? Should SP be upheld in sale of land promised to one party and sold to 3rd?
R/H: Yes, land is special, damages are clear and Ds would be unjustly enriched
otherwise, P had invested improvements in land.
SN: If no SP, people would not want to enter purchasing deals.
II. Personal Service: SP for personal service are usually DISFAVORED!
Cases:

The Case of Mary Clark, a woman of Color

I: Whether Ps service, although involuntary in fact, shall not be considered voluntary
by operation of law, being performed under an indenture voluntarily executed? SP?
R/H: State of servitude produced by direct or permissive coercion will not be
considered voluntary either in fact or in law, therefore, no SP.
Lumley v. Wagner (Contracted singer breaches in attempt to sing at competitors
theater)
I: May a court impose a negative injunction on an individual, preventing her from doing
something she indirectly contracted not to do?
R/H: Since the court cannot order SP, will attempt to bind parties to contract by
preventing her from doing something she bound herself not to do injunction allowed
due to negative stipulation specifically written into contract.

Ford v. Jerman (Contracted singer breaches in attempt to sing at competitors

Theater)
I: Can specific performance be awarded for the breach of a contract requiring the
personal service of an actor?
R: Specific performance cannot be awarded for breach of a personal service contract,
especially when the specific performance is requested of an actor.
RESTITUTION (breach of contract)
Restitution generally pertains to situations where one person has without intending
to make a gift conferred a benefit on another.

Quantum meruit: Restitution can also provide an independent cause of action when
there is no contract at all.
Case(s):

Bush v. Canfield (agreement of delivery of flour priced per barrel)

I: Should the damages suffered by an innocent party under a delivery contract under
which an advance has been paid be calculated by referring to the price of the goods at
the time of delivery?
R/H: When a party pays an advance under a contract for the delivery of goods, the
proper measure of damages in the event of breach is to refund the advance.

371 MEASURE OF RESTITUTION INTEREST

If a sum of money is awarded to protect a party's restitution interest, it may as justice

requires be measured by either (a) the reasonable value to the other party of what he
received in terms of what it would have cost him to obtain it from a person in the
claimant's position, or (b) the extent to which the other party's property has been
increased in value or his other interests advanced.

373 RESTITUTION WHEN OTHER PARTY IS IN BREACH

Injured party has no right to restitution if he has performed all his duties under the
contract and no performance by the other party remains due other than payment of a
definite sum of money for that performance.

Cotnam v. Wisdom (Surgeons attempt to be compensated for accident victim on

street)
I: Is there an implied contract when surgeons fetched to the scene of an accident seek
to help the accident victim who later dies from injuries? Can Ps take into account
victims financial condition?
R1: implied contract : an insane person, idiot, or a person completely devoid of
senses at the time and reason by sudden stroke of an accident or disease may be held
liable for necessaries furnished to him in good faith while in that unfortunate and
helpless condition.
R2: Because surgical operation is conceived to be performed with due skill and care,
the price to be paid does not depend on the result
R3: financial condition of patient cannot be considered where there is no contract and
recovery is sustained on an implied contract unless trade custom proves otherwise
except in situations of emergencies when implied contracts require only reasonable
compensation.
A. Statute of Frauds:
1. Suretyship: a promise to pay a debt for another is subject to the SOF, and is
therefore unenforceable unless put into writing.

a) Main Purpose Rule: if a promisor's chief purpose in making his promise of

suretyship is to further his own interest, his promise does not fall within the
SOF. 116.
2. Marriage Provision: a promise for which the consideration is marriage or a
promise of marriage is within the statute.
3. Land Contract Provision: a promise to transfer or buy any interest in land is
within the SOF.
4. One Year Provision: If a promise contained in a contract is incapable of being
fully performed within one year after the making of the contract, the document
must be in writing.
a) Time runs from the making. This means that the one year period is
measured form the time of exicution of the contract, not the time it will take
the partied to perfomr.
b) The one year provision applies only if complete performance is impossible
within one year after the making of the contract. It is only the possibility of
performance, not the possibility of discharge, that takes the contract out of
the one year provision. Thus, the fact that the contract may be dischargedby
impoissibility or frustration does not take it out of the SOF.
5. Sale of Goods: if the oral agreement is for the sale of goods over $500 it is
subject to the SOF, unless there is some writing sufficient to indicate that a
contract has been made. However, there are some exceptions.
a) Exceptions: Specially Manufactured Goods, Estoppel, Goods Accepted or

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