Contracts Outline

I.

The Legally Enforceable Promise

a. Basic contract process
i. A contract in legal terms is a situation in which someone
makes a promise and it is enforced
1. Supposed promise is made (time 1) and enacted
(time two)
2. In order to collect damages on a contract, must
establish that there was an enforceable promise and
that it was broken
ii. Life of a contract:
1. Formationcoming to an agreement
2. Validitysome contracts are formed that arent valid
under law
3. Enforceabilityis contract at right stage to enforce
terms
4. Performanceability to complete contract
5. Breachestablishing that at least one promise of
contract was broken
6. Damages
b. The Measure of Damages: Expectation or Reliance?
i. Chart for determining damages:
Expectation
Reliance
Restitution
Contract Legally
Yes, majority of
Yes, giving P back Yes, though
Enforceable
cases are here.
what was put into different category
Example:
contract, minority of justice
Hawkins v.
of cases.
preventing unjust
McGee
Example: Chicago enrichment.
Colisseum
Example: Mobil
Quasi-Contract,
Kind ofin some
No
Yes, only claim P
including
restitution cases
can make in a
Quantum meruit, can get recovery
case of an
restitution, and
equal to
unenforceable
common counts
expectation
contract
ii. Hawkins v. McGee (1929): hairy hand case. Doctor
promised a 100% quality hand when P had a 60% quality
hand, delivered a 20% hand.
1. In court of appeals, applied expectancy, meant
damages needed to amount to 80% of a functional
hand, which is amount P would have received had K
been performed as promised.
2. In trial court, applied reliance, meaning Ps pain and
suffering plus 40% of a functioning hand (difference
between hand before surgery and quality delivered)

3. Other considerations: were doctors words a K? Both

courts say that they were
iii. In relations to goods, expectation is generally standard for
lapse in quality (e.g. a good is promised at 100% but
delivered at 90%, D pays difference)
iv. Expectation will grant what would have been given had
promise been fulfilled. Will not return any enrichment other
party has received from K. For medical field, will only
compensate pain and suffering thats more than original
surgery.
v. Under reliance, goal is to put P back to where he would be
if promise hadnt been made. Will return enrichment and
will compensate any pain and suffering (as if K had never
happened).
vi. Sullivan v. OConnor (1973): another example of how to
consider reliance vs. expectation
1. Reliance: Sullivan would be entitled to 40% of nose
appearance, all plain and suffering, doctors fee,
hospital fee, and any lost wages (though she couldnt
prove this, so amount would be $0)
2. Expectation: 80% nose appearance, no pain and
suffering except for that suffered in third surgery
vii. Third type of recovery is restitution: giving back to P what
she/he was owed.
c. Defining Expectation
i. Measuring expectation
1. Example: A contracts B to construct a fountain for
$5000. A abandons K after $2800 has been paid by
B. Contemplated fountain would reduce interested
buyers in property. Cost of completion is $4000. B
can recover $1800: 5000-2800=$2200 unpaid.
$4000-$2200=$1800
ii. Cost of completion: should a court consider cost to
complete requested activity or difference in cost in land?
Courts will generally go with cost of completion
iii. Groves v. John Wunder Co. (1939): cost to level land was
$60,000, difference in price of land would be $12,160.
Majority view
1. P argued that D should pay for cost of completion
because they willfully breached K and focus should
be on morality, property right, and efficiency
2. D argued that it would be unreasonable, unjust
enrichment and a waste, expectation mandates that
P should be put where he would have been had K
been honored, under this rule would only have to pay
for change in land price.
2

3. Essentially turned into a policy argument: do we

want to encourage breaches for unreasonable cost of
completion? Court concerned that not considering
cost of completion would be a mistake, full recovery
to Groves.
iv. Peevyhouse v. Garland Coal & Mining Co. (1963): similar
facts to Groves but only received price of land ($300) as
opposed to cost of completion ($29,000) Minority view
1. Difference in statute: Oklahoma had a statute that
prevented person from receiving more than they
would had each party performed with their end of K,
NOT final say.
2. References Restatement 346(1)(a) on economic
waste
3. Incidental provision of K
v. Landis v. William Fannin Builders, Inc. (2011)open-ended
case, D did siding of house but Ps were unhappy with it.
Cost of house wasnt affected and it would have been very
expensive to replace so no recovery.
d. Expectation in the UCC
i. Introduction to the UCC
1. Adopted as a statute in 49/50 states, only one where
it doesnt apply is Louisiana.
2. Compellation of common law
3. Only applies to sale and purchase of chattels
(moveable goods)
a. Examples of borderline objects:
i. Installation of a good
ii. Blood transfusions
iii. Transfer of ownership of goods
iv. Rendering an artistic service.
4. While UCC is a statute in MOST states, Restatement
is only a summary of relevant case law
ii. Relevant provisions to expectation:
1. Buyers: UCC Sections 2-711(1)a-b, 712, 713, 715.
2. Sellers: UCC Sections 2-703, 706, 708, 710
iii. Seller Breaches
1. Acme Mills & Elevator Co. v. Johnson (1911): K for
Johnson to sell 2000 bushels of wheat to P for $1.03.
Johnson sold bushels to Liberty Mills for $1.16 a
bushel, after time, price dropped to $0.97
a. Acme Mills sued for $240 (difference between K
price and resale price).
b. No direct damage to Acme Mills: could easily
make another K for lower market price

K Price
$5
$5
$5

c. Some incidental damages: set up fees, wasted

time and MIGHT have some consequential
damages->might have caused Acme Mills to
break their K with bakers due to delay.
Recovered $80 for bags.
d. General rule: if market price has gone down
and there are no other damages, dont ask for
difference
e. Example of how to apply rule in Acme Mills:
Market
Buyers Damages
Price
5
0
6
1
4
0 (and should be
happy)

f. UCC 2-712: if buyer covers, buyer is entitled

sue seller for cost of cover and K price together
with any incidental or consequential damages.
g. 2-715: outlines damages a buyer can
consider incidental and consequential
h. 2-713: what a buyer can recover if there is no
cover
i. Disgorgement sometimes allowed in efficient
breachesnecessary when a better deal is
available to both parties
2. Acme Mills is an example of an efficient breach
example of a breach that doesnt hurt non-breaching
party and breaching party gains as well.
a. Can only apply efficient breach if nonbreaching party requested expectation
b. Policy behind efficient breachwe want parties
to pursue most efficient Ks, if a seller can find a
higher paying buyer, only needs to pay
expectation damages, pockets rest.
c. Covered by Restatement 39 Profit From
Opportunistic Breach (pg 309 of red book)
3. Missouri Furnace Co. v. Cochran (1932): K price was
$1.20 a ton for coke. D breached K in February and P
made a new K after breach for $4 a ton.
a. P suing for difference between new K and old K,
in mean time market price has lowered to
$1.30.
b. Nonsensical timingP made K when there was
a miners strike going on. Was aware that
prices were temporarily inflated. A court will
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check on reasonableness of buyer for cover

and will only grant what buyer deserves.
iv. Buyer Breaches
1. Neri v. Retail Marine Corp. (1972): K to buy a boat,
buyer made a $4,250 deposit for boat but was
unable to make anymore payments after. Total price
for boat was $12,587
a. 2-708: seller doesnt have to resell an item if
buyer breaches, but if theres evidence of a
change in market price, seller is still entitled to
recover damages
b. Issue when buyer breaches is that seller no
longer receives money, immediate
consequences
c. 2-710: incidental damages to seller
d. Neri wants his deposit backargues that
because K price is identical to resale price,
theres no need for damages ( 2-706).
e. D makes argument that hes a lost volume
seller
i. Always has product to sell, could produce
and sell an infinite amount of products so
not selling boat led to loss of net profits.
($2,579)
ii. Seller also alleges incidental damages
($674) and attorneys fees ($1,250 but
ruled irrelevant) for a total of $3253.
Would give Neri $997 of deposit.
f. Applying 2-718: seller can keep some of
deposit, either $500 or 20% of K price,
whichever is less. In this case, court gives
seller $500
2. In case of a breaching buyer, mirror image of seller
breach unless its a lost volume seller
e. Reliance
i. In some cases, calculating damages through expectation is
impractical or unreasonable. When suing for damages,
must have a specific number. Can be difficult to calculate.
ii. In these cases we can sue for reliance: money spent in
preparation for performance that never occurred.
Essentially puts non-breaching party back to where they
were before breach.
iii. Chicago Coliseum Club v. Dempsey (1932): K for a fight
between Jack Dempsey and Wills, Dempsey refuses to
fight.

1. Chicago Coliseum asks for attorneys feescant

recover expenses incurred after breach of K
2. Chicago Coliseum recovered K fee ($10) and an
architects fee ($300). Couldnt recover any lost
profits or salaries that would be based off of ticket
sales.
3. Attorneys shot themselves in footargued earlier
that they needed an injunction because damages of
him not performing would be incalculable. From
there, couldnt recover in subsequent trial.
iv. Security Stove & Mfg. Co. v. Am. Ry. Express Co. (1932): P
wanted to display a stove at a convention, due to Ds
negligence, stove did not arrive on time.
1. Sued for reliance, requested all fees for transport and
that P spent to go to convention..
2. Couldnt recover for lost profits of not displaying
stove because they would be very difficult to
calculate, wasnt seeking to sell stove, so cant
recover price.
3. Issue of common law duty: Difference with Dempsey
because there was a high chance that he would say
no to K, shipping company couldnt refuse to ship
package
v. Restatement 349 Damages Based on Reliance Interest
f. Limiting Compensation: Mitigation Fixed Costs, Expandable
Business, Savings
i. Rule: dont add more to damages already incurred once
notified of breach.
ii. Rockingham County v. Luten Bridge Co. (1929): K to make
a bridge, P asked D to stop working but unclear leadership
so D did work. Asking for drastically different fees for
breach: $18,300 (price of whole bridge) vs. $3,730 ($1900
spent on supplies plus net profit)
1. Court ruled for D: obligation of non-breaching party
to mitigate damages after K has been breached.
Enforcing this case could cause opportunistic
behavior after a breach
iii. Leingang v. City of Mandan Weed Board (1991): D city
breached K. P wants K price minus K specific costs (gas,
repairs, oil, blade replacements), which amounted to $211,
so payout would be $1722. City says that it just has to pay
for lost profits ($386) because rest of K price would go to
overhead expenses (expenses that would have existed
even if K wasnt made).
1. Overhead expenses not considered in subtracting
damages: would be included in original K price,
6

iv.
v.

vi.

vii.

viii.

assumption that they would be recouped over time,

would have received them if they had had a different
K that hadnt been breached.
Revisiting $100 building example, we can get expectation
by either adding costs spent ($60) plus net profit ($10) or
by subtracting expected expenses ($30)
Kearsarge Computer Inc. v. Acme Staple Co. (1976): D
claimed P had done a bad job and terminated K. D found to
be in breach.
1. P asked for $12,000 (K price), D wants to take away
amount saved on costs and gains P received as a
result of breach.
2. Court says no: company was working on various
projects, all of fees were overhead expenses besides
a few incidental expenses for paper and ink.
3. P could have done jobs even if they still had K going,
thus not considered mitigation.
Parker v. Twentieth Century-Fox Corp. (1970): Original K
between Shirley MacLaine (P) and Fox for a movie in which
MacLaine would have played lead and received 750k.
Movie fell through, Fox offered her a K to star in a western
film for same salary. She turned it down.
1. Majority opinion said that there was enough of a
difference that MacLaine turning down offer wasnt
giving up mitigation
a. Big difference between filming a musical movie
and a western, had to give up right for input,
required a trip to Australia vs. filming in LA.
2. Dissent focused on reasonableness, mere fact that
movie was different wasnt enough to allow MacLaine
to turn it down without mitigating damages
Billetter v. Posell (1949): P employed by D on a one year K
for $75 a week for a job as a designer. About halfway
through, D terminates K and offers P a new job for $60 a
week as a floor lady. P turns it down.
1. Employees not required to accept an offer for less
pay, thus by not taking job, she didnt unreasonably
turn down mitigation.
2. Accepting offer at a lower price could have shown
consent to lower salarynot case for Billetter.
In Re WorldCom Inc.: 10 year K between Michael Jordan
and MCI for his endorsement, which would require a
maximum of 16 hours a year of work and would give him
compensation of $2 million a year. In 2002, company faces
issues, cant pay Jordan anymore. Agrees to pay for 2 years

but not 4. MCI arguing that MJ needed to look for new

endorsement deals to mitigate damages.
1. MJ makes 2 arguments
a. Doesnt want to dilute his brandlooking for
new endorsements would make his fame less
powerful.
b. He qualifies as a lost volume sellercould get
an infinite amount of endorsements if he
wanted
2. Contradicting arguments: cant have it both ways,
can either get a lot of endorsements or can protect
his brand but not both. Court says that MJ had a duty
to mitigate damages.
ix. Collateral source rule: a business can consider a new job as
mitigation but cant use unemployment benefits as part of
mitigation.
x. Rule: non-breaching party must do a reasonable search for
other opportunities. If breaching party offers an alternative
and non-breaching party rejects it, court will consider its
reasonableness.
g. Foreseeability
i. Hadley v. Baxendale (1854): Ps were mill owners, broke a
necessary shaft and needed to ship it to have it fixed. D
was delivery service, P asked for fastest service, delivery
delayed due to Ds neglect and P spent several days
without work. Attempting to collect lost profits.
1. Both parties needed to be aware of risks of breach:
only notice D got was that shaft was broken but
could have supposed that mill had a replacement.
2. Saving delivery marketeven today companies try to
rid themselves of liability for failed delivery.
ii. Duty of P to inform D of risks. A promiser is liable as long
as other party communicates special circumstances BUT
damages must be calculable with certainty and clear that
promisee couldnt avoid damages. Cant be grossly
disproportionate.
iii. Restatement on remedies: 344-355
iv. Lamkins v. Intl Harvester (1944):P ordered a tractor with
lights so he could use it at night, D didnt add lights, P sued
for lost profits.
1. Court ruled for D: extremely disproportionate
damages (hundreds of dollars) compared to cost of
lights ($20).
h. Emotional Distress
i. Courts rarely grant damages for emotional distress, realm
of torts.
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ii. Valentine v. General American Credit, Inc. (1984): P sued

for mental anguish over loss of job security when her K was
breached
1. Cant be awarded in most cases, can always make
argument that any breach will cause at least some
emotional distress.
2. Some notable exceptions: Ks protecting emotions
(e.g. loss of a child, marriage, personal liberty).
iii. Hancock v. Northcutt (1991): emotional distress over failed
house renovations isnt laden with emotion, only nominal
recovery.
i. Certainty
i. Essence: non-breaching party cant recover damages that
it cant prove, some degree of certainty necessary when
asking for damages
ii. Freund v. Washington Square Press, Inc. (1974): K breach
by publishing company because it refused to sell book in
form requested by author. Author wants $10,000 for 1)
royalties 2) Loss of promotion 3) cost to publish books
himself
1. Court only awarded nominal damages because all of
damages were too speculativetoo many factors to
consider
iii. Fera v. Village Plaza, Inc. (1976): D mall had K with P for a
lot. Accidentally leased spot to another company. P sued
for lost profits.
1. Usually, especially with a new business, a court
wouldnt allow for lost profit damages (expectation)
BUT P threw so many numbers at jury they had to
deliver verdict in their favor.
j. Restitution
i. Idea that P should regain any undue advantage given to D
1. Ex. P makes K with D for $100 to make a garden. D
expects to spend $90 on supplies. When P breaches
K, D has spent $60 on supplies and has given garden
a value of $40. Under restitution, D would recover
$40.
ii. Expectation is the rule, after that try reliance and finally
restitution
iii. Non-enforceable Contract
1. Boone v. Coe (1913): verbal K between parties that if
Ps moved to Texas D would give them work. Ps sold
land, packed up house and went but when they
arrived, D wouldnt give them work, had to return.
Total of $1387.80 in damages.

a. In Statute of Frauds (pg 885-893 and 894d) not

a valid K, if K longer than a year, MUST be in
writing.
i. Three times when a K must be in writing
1. Longer than a year
2. For sale of land
3. For a price amount higher than
$500
b. Because K is not enforceable, cant recover on
restitution or reliance. Only alternative is
restitution.
c. No benefit to D for Ps moving to Texas, no
damage
i. But if some benefit given to D, can
recover.
2. If its a quasi K, can ONLY recover for restitution
3. Kearns v. Andree (1928): P had K with D to sell
property for a house that was almost completed for
$8500. D was dissatisfied, asked P to alter it. P did
but D refused to pay. House made less sellable by
alterations and P had to sell it for $8250. P seeking to
recover expenses for finishing house as D requested,
cost for redecorating after breach, and $250 for
difference in K and retail price. Because mortgage
was too vague, K considered unenforceable
a. P can recover for finishing house as D
requested, restitution: gave a benefit to D, K
implied by law
b. Cant recover for repainting (occurred after
breach) or difference in prices (when K
unenforceable)
iv. Enforceable Contract breached by D
1. Mobil v. US (2000): K between Mobil Oil and US for
rights to explore and develop a certain portion of
North Carolina shore. US prevented Mobil from
certain permission-seeking opportunities in region,
thus making it impossible for Mobil to fulfill its
conditions. Mobil sues for restitution of money it gave
for rights to land.
a. Restitution appropriate here: no way to allow
Mobil to drill there hence complete breach
b. Expectation difficult to calculate: no way to
know if there was oil so reliance even lower
c. Mobil not seeking to enforce K, so restitution
allows parties to go back to how they were
before.
10

d. Restatement 373, 250, and 243 as

rationale
2. Oliver v. Campbell (1954): D was Ps lawyer, had K
for $850. Just before verdict was read, P fired lawyer.
D argued that under flat fee, P owes him $5000,
must this because of breach.
a. This is a different type of breach, because K
almost performed in full its impossible to put
aside.
b. Damages awarded: $300 of remaining K fee
(expectation)
c. Hypo to consider: If Oliver had broken K after a
week and Campbell had completed $1250 of
work, Campbell would recover $1250. Strange
case: more work less money, less work, more
money.
v. Disgorgement
1. Governed by Restatement 39
2. Allows an injured party to recover profits that occur
from breach of K, generally disfavored by courts
because it allows non-breacher to recover more than
expectation.
3. Only case where this was allowed is Wilt v.
Waterfield.
vi. Enforceable Contract breached by P
1. Britton v. Turner (1834): P agrees to 1 year K to work
on Ds farm for $120 or $10 a month. After 9.5
months, P breaches. D argues that P shouldnt
recover anything because P breached.
a. Court gives P $95: value of work under K price.
P cant recover full K price, but can at least
recover for amount that he has enriched D.
b. Work had an easily calculable valuecan
recover that.
c. Policy argument for P: if an employer D doesnt
have to pay anything when P worker breaches
K, then motivated to make work environment
so unpleasant that worker leaves.
d. Cant recover market value of work, even if its
significantly more than K price.
2. Several cases in which a P cant recover for partially
done work when he breachesex. painting a portrait.
Because work has no value, D was not unjustly
enriched.

11

3. In cases where employee is discharged for good

reason, use strict tests when choosing to not give
restitution
a. In Bright v. Ganas (1937), restitution barred
when employee was discharged for moral
depravity.
4. Pinches v. Swedish Evangelical Church (1887): P
agrees to build church for D. Completed church was
not quite to Ds expectations but used it anyway.
a. Court awarded K price minus decrease in value
due to mistakes made by P.
b. No recovery if breach is malicious or based on
bad work. If breach made in good faith,
compensation is ok.
5. General rule of restitution:
a. If D is in breach, P can recover entire K price.
b. If P is in breach and
i. Breach is despicable=no recovery
ii. Breach is understandable=can just
recover what they have given D
k. Contractual Control on Damage (Liquidated Damages)
i. Liquidated damages clauses put an exact dollar figure on K
in case of breach. Often times parties will put LDC in order
to have predictability, perverse incentive to breach, both
parties have autonomy.
ii. Very rare for a court to not uphold liquidated damages
clauses. Cases in our book are EXCEPTIONS
1. A court wont uphold a liquidated damages clause if
a penalty, if too harsh, or clear that there was
unequal bargaining power. If no damages, then no
recovery, even with LDC.
2. If LDC struck down, will consider expectation
damages.
iii. Relevant UCC and Restatement Sections: UCC Sections 2709 and 2-716; Rest. 2nd Sections 356, 359, 360
iv. Pacheco example: P paid a summer camp $3100 to secure
childs spot. Child cant go, asked camp for a refund, camp
cited LDC in K.
1. Easy to calculate damages, thus LDC wasnt
necessary.
2. Securing new camper easy, few damages, so not
refunding becomes penalty.
3. Unequal bargaining power: camp had good idea what
to expect
4. Counter: parents well aware of consequences of
canceling.
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v. Muldoon v. Lynch (1885): P commissioned sarcophagus for

husbands tomb. Two year delay. LDC for $10 per day of
delay, or $4067.
1. Court found that there were no actual damages to P,
only type emotional damages, werent recoverable at
time.
2. Large amount excessive, D can still recover full K
price.
3. DONT put word forfeit in a K for LDCs: immediately
brings up penalty
vi. Yockey v. Horn (1989): K between two business partners
that wont participate in litigation against each other with
damages of $50,000 for breach. D willfully participated in
lawsuit against D resulted in damages of $111,000.
1. Court accepted K: huge monetary damages to D as a
result of lawsuit and damage to reputation
2. Issue of Ds own actions causing the harm.
vii. Restatement 356 Liquidated Damages and Penalties
allows for liquidated damages as long as its reasonable.
viii. Wilt v. Waterfield (1954)P had K with D to purchase farm
for $19,000, deposit of $1,900 but D sold farm to someone
else. P requested $7,000 in damages, difference between
sale price to new people and K price. Provision in K that
said that either party would have to pay 10% of K price if
they breached K.
1. First: LDC invalid because it amounted to a penalty:
unreasonably high and could apply it to miniscule
breach
2. Second: Difficult to assign value to land because no
parcel of land like it so reasonable price for land was
price it went for, hence Ps awarded expectation.
3. Limited Liability Clause: a clause that is too low to
cover damages but usually its enforced.
ix. LDCs in employment Ks
1. If LDC for original salary in employment K, company
expected to uphold it.
2. Scenario 1: vice-president fired from $75k job.
Receives another one for a vp position for $50k. LDC
upheld? Yes, because would loss to reputation,
humiliation, etc. in damages
3. Scenario 2: still fired, receives a new job for $150k.
LDC upheld? Much less likely, damages arent as
tangible
LDC Amount
Anticipated
Actual Damages
Enforceable?
Damages
$50
$50
$100
Yes, probably
13

$100

$50

$100

$100

$100

$10

$100

$10

$100

A little more
complicated
because it could
appear to be a
punishment, but
generally yes.
No, appears to be
a punishment
Yes, will generally
keep LDC if it
accurately covers
damages

l. Limitation of Liability
i. Instead of a LDC, a K can have a limited liability clause
(LLC)limits dollar amount that a company can be liable
for in case of breach.
1. Same principles as an LDCwill be set aside if
unreasonable but generally upheld
ii. Samson Sales v. Honeywell (1984): D provided a burglar
alarm system to Ps shop. Shop broken into, alarm didnt
go off due to Ds negligence. P asked for $68,303 in
damages for items stolen, D pointed to LLC that limited
damages to $50.
1. Court said that LLC was manifestly disproportionate
to what P had paid D for its protection ($10,500)
iii. Line generally drawn for cheap productscan allow for low
prices by maintaining LLCs that prevent too much recovery
(loss-spreading?)
iv. UCC 2-719 applies: (2): Where circumstances cause an
exclusive or limited remedy to fail of its essential purpose,
remedy may be had as provided in this Act.; allows courts
to overturn LLC when necessary. (3): everything can be
limited or excluded completely. No consequential damages.
m. Specific Performance
i. Equity=natural law, enforcing what is right and fair
ii. Can request specific performance in three types of cases
1. Goods
2. Real Estate
3. Personal Services
a. If requesting personal services, service must be
unique, something that money cant buy or a
unique situation.
iii. Two types of specific performance:
1. Affirmative: requires a specific behavior (delivering
milk, etc.)
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iv.

v.
vi.

vii.

2. Negative: compels D not to do something (cant sing

for a different company)
Affirmative Specific Performance
1. Manchester Dairy System v. Hayward (1926):
agreement between dairy co. and local farmers to
purchase milk from them and store in fridge.
a. Clause in K that prevents buyer from
purchasing milk from market to replace milk
from breacher.
b. K with other farmers must survive and thus
needs continued control over supply and
demand of milk.
2. Curtice v. Catts (1907): unique situation. Though
tomatoes themselves are not a unique good, by not
delivering them co. fall and farmer suffer, thus P can
request specific performance
3. Paloukos v. Intermountain Chevrolet Co. (1978): P
sued for special performance to obtain a 1974
Chevrolet pickup truck that was never delivered by
D.
a. Not a case for special performance: Chevy
trucks are not unique and can be purchased
from another seller.
b. An example of type of car allowed for special
performance would be a one-of-a-kind sports
car.
Special performance under UCC 2-716
Real estate clearest example of special performance:
though each piece of land may be equally good, only one
coordinate can be correct, hence special performance is
norm, not exception.
Negative Specific Performance
1. For personal services, we can only apply special
performance if no damages clause will apply.
a. Dempsey: in order to get injunction, Chicago
Coliseum needed to show that inadequate
damages.
2. Lumley v. Wagner (1852): Wagner agreed to sing for
Lumleys co. but then agreed to sing for a rival
company. Technically breached because assumed in
K that wouldnt sing for anyone.
a. Court allowed injunction on grounds that she
was a unique singer. Generally wouldnt
enforce similar K, since K said nothing about
not singing for other co.

15

b. Lumley then sued Gye (owner of other

company) for interferene on contractual
privilegestort damages
3. Non-Compete agreements
a. In some jurisdictions, regularly enforced by
courts (MA) but in others, more focus on
employee freedom (CA)
b. Two types of non-compete clauses: Implied and
Express
i. Implied:
1. No specific provision in K requiring
performance but that implied by
language
2. Lumley v. Wagner: not as
concerned with Wagners personal
freedom
3. Pingley v. Brunson (1979): P hired
D to play organ in restaurant,
bought organ for him, after working
for nine evenings D refused to play.
P sued for specific performance.
Court ruled for D: several other
organ players of same caliber in
town. Also, damages easy to
calculate, P only wanted specific
performance because knew D
couldnt pay damages.
4. If services not unique, then no
reason to tie someones hand.
ii. Express
1. Obligation to not do something else
is specified in K
a. Dempsey: asked that he not
participate in any other
fights.
2. Fullerton Lumber Co. v. Torberg
(1955)non-compete clause in
agreement that for 10 years
Torburg wouldnt work for another
company within a 15 mile radius of
a city where employed as manager.
Opens lumberyard in same town
after quitting. P requests specific
performance. District court
dismisses complaint: restraint
unreasonable and not helpful to Ps
16

II.

interests, on appeal ruled that 10

years was excessive but 3 years is
ok.
3. If going to protest to support a noncompete clause, must look like a
saint to court: issue in Fullerton
because waited 3 years to file suit,
right when Torbergs company was
becoming successful
c. Some issues with non-compete agreements:
i. Uneven bargaining power because
generally between employer and
employee,
ii. Employer can use large numbers to scare
employee into not suing
iii. Can be shaved down to nothing, lose any
value
d. Remedies to the issues?
i. Ceiling on non-compete clauses
ii. Include a clause about not interfering
with original business (e.g. not poaching
clients)
iii. Let people sit out but pay half their
wages
iv. Uniform trade secrets act protects
interests of company and lowers need for
non-compete clauses.
e. No clear cut solution on non-compete clauses:
will depend on jurisdiction whether they are
upheld or not.
Grounds for Enforcing Promises
a. Consideration
i. A promise becomes a K when there is valuable
consideration on both sides of a bargain
ii. Consideration may be an act or another promise
1. BUT a gift does not count as consideration, so if
nothing given in exchange, not a legally enforceable
K
2. Even if there is promise of a gift, not legally
enforceable. Can only secure gifts requested
immediately after promise.
3. Much of our society runs on giftsex. Donation to a
university in exchange for name on building. In this
case, a conditional gift: must put name on building or
person will take gift back. Looks like a K but no one
would define it as such.
17

iii. Two elements required for valuable consideration:

1. There must be a bargained for exchange between
parties
2. Item bargained for must be considered of legal value,
or must give a benefit to promisor or a detriment to
promisee
iv. Intent important to consideration: if promisors motive to
induce detriment, then is consideration BUT if only
consideration of a promise to make a gift, then there is no
consideration
1. Ex. One party says come to my house and I will give
you my old TV. Though detriment, no consideration
because unlikely that promisor made promise to
induce promisee
v. Gratuitous promise=a promise made with no consideration
vi. Hamer v. Sidway (1891): uncle promises nephew $5000 if
nephew refrains from drinking, and gambling until he turns
21. Nephew does so and when turns 21, uncle agrees to
pay him. Uncle dies, estate argues that he isnt owed
$5000 because it was merely unpaid gift.
1. Money held in trust: nephew earned it, uncle kept it
for him.
2. Uncles estate argued no detriment to nephew nor
any benefit to uncle, hence not legally enforceable.
3. Court disagreed: nephew was uncles namesake and
thus had interest in him developing good habits.
4. Detriment to nephew because couldnt participate in
activities had a legal right to perform. Abstention
from doing something you have a legal right to do
counts as detriment BUT cant cite abstaining from
an illegal act as consideration.
a. Ex. Cant have a legally enforceable K agreeing
to not have marijuana because dont have that
right anyway.
vii. Earle v. Angell (1892)aunt agrees to give nephew $500 if
he comes to her funeral. Legally enforceable? Yes
1. Detriment to promisee, must take travel time to go
to funeral.
viii. Whitten v. Greeley-Shaw (1987): P and D carrying on
extramarital affair, D made a K that entitled her to lots of
money from P, only consideration was that D agreed to not
call P at home or work. P lent D $64,000, wants it back. D
cited K as a reason to not return it.
1. P didnt seek provision, hence K is not legally
enforceable because no meeting of minds.

18

2. Issue because K sounds like extortion: pay me lots of

money or Ill call you BUT court generally hesitant to
take a moral stance and will look for other elements
against K.
3. K unenforceable if it contains illegal elements: cant
enforce a K to sell children, even if it follows all
elements of a K because selling children is illegal.
ix. Restatement 71 and 81
b. How Much is Enough Consideration?
i. Peppercorn theory: if large promise on one side, can still
consider it valuable consideration even if as small as a
peppercorn if thats what other party wanted.
ii. Cant just be nominal consideration: offering 1 for
something worth $200 is not consideration, its a gift.
iii. Court has to be able to sense a bargain, otherwise K not
valid. Must have substance.
iv. K is valid, even after death of one of the parties. Promise of
a gift dies with the person.
c. Settlement of Claims
i. Surrendering the right to bring a claim as valid
consideration
ii. Restatement 74: Surrender of claim that proves to be
invalid not consideration unless uncertainty on facts or law
or surrendering party believes claim may be fairly
determined to be valid. Requirements to justify a claim, my
belief (need to be honest when you say you think you have
a claim) OR a reasonable belief. If a claim is completely
unreasonable, no right to make a claim
iii. Three levels of belief for consideration (buying silence):
1. Dishonestknow you have no claim but still argue
it=no consideration, seems like extortion
2. Honest belief but wrong=consideration
3. Belief and reason=consideration
iv. I know I have no claim but I put it in writing. Why do I get
consideration? Real value but no dishonestywriting
acknowledges you have no claim, no attempt at fraud or
extortion.
d. Promises Grounded in the Past
i. Feeling obliged to give something generally an expression
of gratitude
1. Ex. Go to someones house for dinner and they make
a fancy meal, might feel obligated to pay for part of
cost of food. NOT legally enforceable, only an
expression of gratitude.
ii. Three exceptions to this rule

19

1. Person is a minor: when person reaches age 18,

promises to pay back all favors given to him as a
child
2. Bankruptcy: A person who has successfully filed for
bankruptcy tells an old creditor that they will pay
back debt even though it has been discharged.
3. Statute of Limitations: If SOL expired, creditor cant
come after you, can make a promise to pay debt,
legally enforceable.
iii. Examples of cases grounded in past that would lead to no
recovery:
1. Neighbor sees the backyard is a disaster and fixes it
while person is on vacation. Asks for $200 in
exchange for work. Not enforceable because person
is an officious intermeddler.
2. A person finds another person who has been beaten
up by bandits and helps them without question.
Good Samaritan and no reimbursement for a
spontaneously conferred benefit.
a. Actions done out of love do not qualify for
restitution.
iv. An intervention is alright in exceptional (emergency
situations) and will allow for restitution
1. Doctor sees unconscious person on sidewalk and
helps. Person is expected to pay bill because of
implied consent: want to incentivize doctors to help
when they can.
a. We enforce certain kinds of help (namely that
of professionals) but not all (non-professionals)
2. House on fire, neighbor can put it out using water
from their reservoir. Can be reimbursed because of
emergency situation.
3. Can also request restitution if its clear from
beginning manifest intention to charge: clear not
being done as a favor.
v. Webb v. McGowin (1935): Webb saves McGowins life at a
lumber mill at the expense of seriously crippling himself. In
gratitude, McGowin agreed to pay Webb $15 every two
weeks for rest of his life. McGowin dies, his estate doesnt
want to keep paying Webb.
1. Difficult to apply exceptions: $15 didnt induce
behavior, action not directly related to Webbs job, no
intent to charge for saving Ds life. Arguments wont
help P keep pension.
2. Judge goes back to precedence in law clear price that
was easily estimated. Placed a quantifiable sum on
20

life. Essentially saying that under general common

law exception, benefits conferred in past can be
considered in some circumstances.
vi. Harrington v. Taylor (1945)Ps hand injured while saving
D from being killed by his wife. D promised to pay for Ps
damages but didnt.
1. No, act done out of generosity, hence cant ask for
restitution.
2. Why can Webb recover but not Harrington?
a. Webb had easily calculable damages ($15
every two weeks, Harrington difficult to
calculate)
b. Promise wasnt clearly formulated in Harrington
c. Consistent pay in Webb vs. one time pay in
Harrington
vii. Restatement of Restitution 112: if something is given,
even if giver has an expectation of receiving something
back, cant recover.
viii. Restatement 86: Promise made in recognition of benefit
previously received by promisor from promisee binding to
extent necessary to prevent injustice. Cases in which there
was a promise but no bargain. No restitutionary claims or
contractual claims for kindness.
1. Ex. Youre an unpaid intern at a law firm and work
well, partner decides to give bonus at end of
summer. Others argue that interns are always unpaid
and thus you arent entitled to bonus but you are
entitled to pay because you did work.
ix. In re Schoenkermans Estate: another case of relying on
past consideration, Mother-in-law and sister-in-law helped
Schoenkerman care for his children and run his household
after his wifes death. Wrote two notes promising $500 to
the mother and $1500 to the sister but died before he
could execute them.
1. Court cites 86: unjust to leave women with nothing
after they helped raise the children.
2. Not full restitutionary claim: cant recover full value
of work. Will only grant what promisor agreed to give.
e. Reliance and Estoppel
i. Origins
1. Promissory estoppel allows P to enforce a promise
even if no K. Must show reliance to their detriment on
a promise made by D. Other necessary factors:
a. Promise:some promise must have been made
b. Detrimental reliance: party receiving promise
changed course of behavior in anticipation of
21

K
Promissory
Estoppel
Restitution

promise, promisor could reaonsably see it

coming (foreseeability)
c. Quantification of promise: have to have a dollar
number
d. Must apply to standards of K law: negotiation.
2. Ricketts v. Scothorn (1898): Grandfather promised
Katie $2000 plus interest and suggested no longer
had to work. After promise, grandfather didnt have
$2000, so Katie went back to work. Grandfather dies,
Katie wants to recover $2000.
a. Courts reflecting on importance of gifts,
individuals cash promissory notes even if
intended as a gift.
b. Grounds for equitable estoppel based on Katie
believing she had to quit her job in order to
receive $2000
c. Cant be considered K because there was no
bargaining
d. If we apply restitution, Katie entitled to $520
she lost by quitting her job, not K but loss
incurred by her reliance on what she believed
to be grandpas promise
Expectation
Reliance
Restitution
Yes
Yes
Yes
Yes
Yes
No
No

No

Yes

ii. Promissory Estoppel: Gifts

1. Restatement 90: (1) charitable subscription binding
without proof promise induced action or forbearance;
(2) if a promissory note exists and is signed by donor,
will be enforced BUT this provision is generally not
followed by courts
2. An executory gift is something that was promised
and must be cashed immediately. Once it is
performed, gift is to keep.
iii. Promissory Estoppel should be LAST recoursefirst try to
prove that there was actually a K
iv. Estoppel and Employment
1. Stewart v. Cendant (2003): P laid off of work as a
result of husbands new job in contradiction to what
was promised by boss. Four theories for recovery:
a. Oral K with employer: promise that husbands
job wouldnt affect K, gave up privilege of
going elsewhere
22

i. Employer unclear on whether they were

making new K, need consent of both
parties
b. All Ks have good faith covenant, original K
violated in bad faith.
i. Counter: good faith doesnt change terms
of K at will, need flexibility in economy
c. Relied to own detriment on bosss promise:
promissory estoppel requires she receive
something
i. No detrimental reliance: harm, needs
elements of a real promise, seems like a
casual chat, thus promise not strong
enough.
d. Negligent misrepresentation: duty to not
mislead if giving professional advice
i. Not relevant to our analysis, tort claim.
e. P able to demonstrate reliance because she
suffered a loss of prestige in the community
due to suit, able to recover cover charge lost
by not finding new job.
f. Case goes in Ps favor only because reliance
clear: if no possibility of employment, no
recovery.
v. Promise need not be extremely clear in a promissory
estoppel caseneeds to be stronger in a K setting
vi. Estoppel and Statute of Frauds
1. What if promise in Stewart had been that she would
stay for five years? Would this be enforceable?
a. No, SOF says promises over a year must be in
writing, hence she could only recover for one
year.
2. Restatement 139: (1) a promise which promisor
should reasonably expect to induce action or
forbearance on part of promisee or a third person
and which does induce action or forbearance is
enforceable notwithstanding Statute of Frauds if
injustice can be avoided only by enforcement of
promise. remedy granted for breach is to be limited
as justice requires.
a. Seems to contradict SOF BUT rule only applies
to real estate, never employment cases no
matter how clear it was that everything was
going on, MUST be in writing.
b. Ex. A father lives with one of his daughters and
has two other children. Father tells daughter
23

that house will be hers when he dies. She

doesnt get it in writing but has renovated
house, decorated it, paid taxes on property for
several years. Father dies, 2 siblings try to
claim house. Promisor observing work and
taxes she paid on house, dont need to protect
promisor from false claims, knew what was
going on.
vii. Option Ks
1. Option Kan agreement to keep an offer open for a
specified amount of time before acceptance
2. Generally with offers considered revocable until
acceptednot K until both parties say yes.
3. We can offer an additional promise with offer (wont
revoke for 2 days), will be enforceable if something
is given in exchange for promise (generally a small
sum of money)
4. Restatement 87an offer is binding as an option K
if it
a. Is in writing and signed by offeror, recites a
purported consideration for making of offer,
and proposes an exchange on fair terms within
a reasonable time; or
b. Is made irrevocable by statute.
5. Under a K for service, a promise to keep an offer on
the table is enforceable by statute but only if there is
a double signature by promiseeon the clause and
on the offer.
6. Drennan v. Star Paving (1958): Contractor made
agreement with a subcontractor for job to tile school.
Couldnt accept offer until school accepted
contractors bid. Subcontractor offered lowest price
($7k), but before contractor accepted, subcontractor
revoked bid. Contractor forced to find a cover for
$10k, asked to recover difference in K price.
a. Not revocable because contractor was tied to
bid and had reasonable expectation that
subcontractor flexible.
b. BUT we cant call this case K because no
acceptance, so we have to focus on promissory
estoppel
i. Contractor detrimentally relied on
subcontractor, implied promise
subcontractor wouldnt revoke the offer
until a reasonable time after contractor
had heard from city
24

III.

7. Example of irrevocable offer: Starting work at a small

company, no money to pay person. Instead,
company offers stock at $1 a piece. If business
successful, can buy stock at end of year, risk of loss
if no success. Consideration on both sides because of
employees work
viii. Promissory Estoppel and Damages
1. Goodman v. Dicker (1948): Ps to start a franchise for
Ds company. Three promises made: application
accepted; franchise would be granted; 30-40 radios
would arrive. Franchise agreement at will, so D could
terminate it any time.
a. Ps filing for expectation: lost profits on radios
plus price to set up franchise.
b. Court focuses on promissory estoppel: promise
that franchise had been granted and radios
would be delivered enough to cause
detrimental reliance BUT in went for reliance.
2. Davis v. General Foods Corp. (1937): P wrote to D
offering to send them her recipe. They agreed to
examine it but said that the understanding was that
compensation, if any, was under their discretion.
Chose to use recipe but no compensation.
a. No clear Kvery vague, Ds very careful to
show that there was no K.
b. Cant claim quantum meruit: Ds clear might
not pay.
c. Promise can be interpreted as it is to General
Foods discretion to use it but if they do, there
will be compensation. Why even put in idea of
compensation?
ix. UCC: promissory estoppel and restitution not found in the
UCC BUT they do apply in sales. A little in 1-103 but mostly
in case law.
How and When a Contract Becomes Enforceable
a. Consensus ad idem=meeting of the minds. Required to form K.
b. Assent
i. Raffles v. Wichelhaus (1864)P had K with D to sell 125
bales of cotton to be shipped from Bombay on a ship called
the Peerless. Buyer thinks K was for a ship that was to
leave in October, seller one that left in December.
1. Court sets aside K: clear neither party knew of
ambiguity, P can easily sell the cotton, neither party
in breach.

25

2. No major harm done in this case, thus exception that

proves the rule. Generally court would choose one
side or another.
3. Reasonable person unable to tell which ship. Equally
innocent.
4. Generally, third party will determine best argument.
5. Under 20, parties arent to blame because neither
knew what the other party was thinking
a. Latent ambiguity (neither party has an idea of
what it means) vs. patent ambiguity
(something we expect, such as see you at
sunset. Ambiguous but both parties know
general meaning)
ii. Restatement 20: no manifestation of mutual assent with
different meanings if (a) neither party knows the meaning
attached by the other; (b) each party knows the meaning
attached by the other; manifestations operative in
accordance with the meaning attached by one of the
parties if (a) the party doesnt know there is a different
meaning but the other knows the first partys meaning.
iii. Embry v. Hargadine-McKittrick (1907): P worked at D D
under a 1 year K set to expire in December. After its
expiration, was concerned that D wouldnt renew, so he
went to presidents office to request new K. President told
him to resume his work and go upstairs. President
interpreted this as go away, employee, as an offer to
make a new K.
1. Original jury instruction: can only enforce K if
employer and employee had same meaning in mind.
Court holds instruction incorrect, should apply
whether reasonable person would think that the
presidents words were offer for new K.
2. No meeting of the minds BUT meaning was essential
comparable to Hawkins v. McGee
iv. If one party thinks theres K and reasonable person would
agree, then there is a K. If neither party intended to make
K, then no K.
v. Altered state can excuse one from K, for example if a
person agrees to sell a high-value object for a low price
while drunk.
vi. Claiming in court that there is a secret understanding is
not enoughobjective manifestation of intent is more
important.
c. Offer and Acceptance
i. Mail Box Rule:
Monda Tuesday
Wednesd Saturday
26

y
Offer
sent

Offer
arrives

ay
Acceptan
ce

Acceptan
ce
received
1. System of communication in Ks all have an effect
when they are received by the other side. Offer has
legal effect on Tuesday, first day you can consider
accepting K.
2. Under common law, K begins on the day K is
accepted (Wednesday). Under this reasoning, if seller
gives offer to a third party on Friday, in breach.
Creates uncertainty for offeror BUT someone needs
to suffer uncertainty.
ii. Restatement 63: Unless the offer provides otherwise,
1. (a) an acceptance made in a manner and by a
medium invited by an offer is operative and
completes the manifestation of mutual assent as
soon as put out of the oferees possession without
regard to whether it ever reaches the offeror; but
2. (b) an acceptance under an option K is not operative
until received by the offeror.
iii. Moulton v. Kershaw (1884): D offered to sell salt at 85 a
barrel, P ordered 2,000 barrels. D said wasnt an offer, only
ad. P asked for $800, cover price to purchase salt
elsewhere.
1. Offer=manifestation of wanting to enter K.
2. D argued never used the word sell in ad, only
authorized not an offer. Ad lacked clarity.
3. Court rules for D: no offer, hence Ps letter not
acceptance.
4. Would UCC 2-204 help P? No, ad isnt agreement
and seller isnt seeking to make K so it doesnt
change anything.
iv. An offer must have some definitiveness in the sense that it
needs to appear that both parties wanted to enter into K.
d. Unilateral Contracts
i. A unilateral K binds one party to perform but not the other.
Promisor wants an act, and generally one that takes time.
1. Ex. Brooklyn bridge example: A tells B he will pay her
$100 to cross the Brooklyn bridge, A is bound as
soon as B steps onto bridge but B can turn back at
any point.
ii. Restatement 45guidelines for a unilateral K, act
requested in unilateral K takes time to execute, thus the
promisor bound when the requested act begins, other
party free to walk away.
27

iii. UCC 2-205: promise that the offer is irrevocable for a

certain amount of time, separate clause signed twice.
iv. Carlill v. Carbolic Smoke Ball (1892): D put in ad that if a
person using their product for two weeks who developed
the flu would get 100. P used smoke ball for two weeks
and got sick. Sued for 100.
1. Court said that it was an offer, so D offered four
defenses:
a. No clear offereenot necessary for a K
because it had a limited audience.
i. This applies to most unilateral Ks, for
example if someone loses a dog, asking
for help of anyone, no offeree in
particular
b. Not bought by Pshe was old, probably lost
receipt
c. No notice of acceptanceperformance itself is
acceptance, there needed to be a notification
in original K of notification if Ds wanted it.
d. No consideration, was intended to be a gift
altered behavior, thus there was some
detriment to P
v. How soon to we consider a unilateral K binding? Action
needs to have started, generally not enough to just
purchase items to start action
1. Unilateral K when you pick up item at storeif its in
your cart, its being offered but you can choose not
to buy it at any point before purchase.
vi. Pine River v. Mettille (1983): personnel handbook to some
extent considered a second K with acceptance being
staying at work.
e. Offers: Life Time, Mode of Acceptance, Revocation
i. Caldwell v. Cline (1930): Cline dated and addressed a letter
to Caldwell offering to exchange land on January 29,
specified that he had 8 days to accept or reject. Caldwell
received letter on February 2, telegrammed Cline back on
February 8 that he accepted. Cline refused to honor deal.
1. Yes, if urgency was paramount, Cline would have
specified dates in letterunclear from wording if it
was 8 days after he sent offer or after Caldwell had
received it.
ii. Allied Steel v. Ford (1960): Ford makes order of purchase
from Allied and Allied helps with installation. Several Ks in
past, but in this one Ford includes indemnity clause which
puts Allied at fault for all accidents, even if Ford employees
are responsible. Allied employee injured by Ford
28

employees negligence in September. Allied returns signed

K in November. Ford says Allied must pay damages, Allied
claims that because they hadnt signed K at that point, no
need to pay.
1. Ford asked for acknowledgement copy to be signed
and returned but didnt specify it was only means of
acceptance.
2. Work on K began in August, though Allied didnt sign
K until November, assumed that by sending workers
and installing devices they agreed.
3. Once other side knows of conditions, not signing a
form doesnt shelter them from those conditions.
a. Ex. Kids go on a field trip and damage an
object. Even if their parents failed to sign
required form, they will be held liable for their
kids damages because they were aware of
conditions.
4. Under Restatement 58, should sign then work, not
other way around. We can distinguish Ford from
illustration it presents because they knew of work
being done.
iii. Davis v. Jacoby (1934): Mr. Whitehead asks Davises to
come to CA, tells them that they will inherit everything.
They send a letter agreeing to come, before they can get
there Mr. Whitehead commits suicide. Will interpreted
incorrectly, inheritance would go to Whiteheads 2 other
nephews.
1. Was there a unilateral or bilateral K here?
a. D argues unilateral promise: Mr. Whitehead
wanted action, not just promise of action and
since Davises didnt arrive until after his death,
no K under 36.
b. Davises argue that its a bilateral K: wanted
promise of their arrival, didnt want them to
retain freedom to begin an action and then not
complete it.
iv. Restatement 36offerees power of acceptance may be
terminated by
1. 1) rejection or counter-offer
2. 2) lapse of time
3. 3) revocation by offeror
4. 4) death of incapacity of offeror or offeree
v. If intent of offeror clear, rely on 45. If unclear, look to 32
and 62.

29

1. 45 about making unilateral Ks enforceable once

action taken, 62/32 about allowing offeror to
choose mode of acceptance.
vi. McGurn: K says if we dismiss you within 12 months, you
will receive a severance package, McGurn changes it to
24, fired after 13 months and claims he is entitled to
package. Court rules for McGurn because a well-stocked
office should have caught counter offer.
f. Mutuality
i. In K litigation, oftentimes one party wants to enforce
promise and other wants to show that it wasnt a promise/K
ii. Restatement 77 and 78
iii. UCC 2-306: requirement Ks =will buy as much as it
requires; output K=will buy all seller produces, both ruled
by good faith.
iv. Wood v. Lucy (1917): Lucy gave exclusive rights to Wood
then sold product via catalogs, breached. She claimed that
there was no K because Wood not bound so shes not
bound. Claimed that he could choose to not market her
product at all because up to his discretion.
1. Wood had a motivation to market her products:
needed to take out copyrights and patents on
products, so some consideration.
2. If Wood took no action, then he would be breaching
good faith covenantnot allegation Lucy is making in
this case.
v. Feld v. Henry s. Levy & Sons, Inc. (1975): K between P and
D that D would sell P all breadcrumbs produced at factory
for one year. Cancellation of K required a 6 month notice. D
asked P to raise price of breadcrumbs, P refused. D
stopped producing breadcrumbs, sold machine. Argued
unprofitable hence economically unfeasible.
1. Court sends case back to trial court: need to
determine how economically unfeasible it was. Only
small loss= breach.
2. Damages: how do we calculate in an output K? Based
it on how much D had produced when they were
working, then compared cost under K to market price
and paid difference.
vi. UCC 2-204: K for sale doesnt fail for indefiniteness if
there isnt an explicit price, will use market price. Intent is
main consideration for whether its a K or not.
vii. UCC 1-304: obligation of good faith, also in 1-201(b) and
1-220
viii. Corenswet Inc. v. Amana Refrigeration, Inc. (1979):
Terminated franchisee asked for 2-309 claiming arbitrary
30

IV.

breach. Does it supercede 1-306? No, good faith effort

wont strike out an arbitrary dismissal. Can we use 2-302?
Procedural accountability: superior bargaining party, one
side needs K more than other, party with more power uses
advantage to make an uneven K (unconscionability), goes
against conscious of court, in system to allow court to alter
K, question of law, not of fact. Only possibility for altering a
K.
ix. Important UCC sections: 1-304, 2-309 (implied good
faith effort), 2-302 (safety valve, unconscionability).
g. Certainty
i. Kearns example: K for sale of house, mortgage not
specified, needed to be essence, buyer able to get away by
showing little certainty.
ii. Restatement 33certainty: if a manifestation of intention
intended to be an offer can only accept it if terms are
reasonably certain. If terms left open, can be a sign that
its not meant to be an offer or acceptance.
iii. UCC 2-204even if one or two terms left open, if parties
intended to make a K, then it is a K. and 2-310assumes
any payment is to be made at time of delivery.
iv. Blinn v. Beatrice (2006): P received a job offer from a
Kansas hospital, was assured by his boss they would keep
him on for 5 more years, terminated 8 months later.
1. P says yes, unilateral K, continued work as a form of
acceptance
2. D says no, no intention to create a K.
3. Nebraska takes a strict point of view on promissory
estoppelpromises dont count in a K setting.
4. Need to know another offer on table and for how
long: if until age of retirement and Blinn retired at 68,
not much detriment.
5. Have to look at intent: what do parties want. Can we
identify breach and appropriate remedies? If no, then
we cant use promissory estoppel.
Identifying the Bargain
a. Hypo: assume a K for ABCDEF. We specifically define ABC but
leave DEF for another day. You agree to come back to negotiate
but instead begin negotiating with other parties. Can I sue? If
ABC stand alone, we can sue on those terms, but if DEF are
necessary to K, theres still duty to negotiate in good faith. If
theres enough negotiation to apply duty of good faith, cant just
walk away. Will usually limit remedies to reliance.
b. Parol Evidence Rule
i. Had words (parol) before writing K. Though we can say
everything said in negotiations is out of deal and should
31

ii.

iii.

iv.
v.

only enforce whats in writing, some necessary to

understanding K.
1. Parol evidence only refers to what is said in
negotiations, anything said after formed not valid as
parol evidence.
Mitchill v. Lath (1928): Agreement: Laths to sell farm to
Mitchill for $8400; Said theyd remove icehouse across
street from farm, was on governors property. Ms. Mitchill
made it clear she wouldnt buy farm unless icehouse
removed, but nothing in K. Laths didnt remove it.
1. Laths thought because Mitchill didnt make it clear in
K icehouse important, no longer an issue, didnt have
to remove.
2. Mitchill argued that provision of icehouse wouldnt
naturally be in K wouldnt include property belonging
to someone else. Argued that so obvious, all parties
knew of provision. Also, inadequate damages, hence
specific performance necessary.
3. Ruling for Laths: if so important to K, should be in
writing.
Three part test for parol evidence:
1. Parol agreement must be collateral, meaning on side
but partially attached to K
a. Ex. Give him the goods, and if he doesnt pay,
I will is collateral because not explicit (give
him the goods and I will pay)
2. It cant contradict provisions of written K
3. Agreement must be one that is ordinarily outside a
written K
4. Ex. Seller offered to sell ranch to sister. Deed gave
Seller option to repurchase, but parties orally agreed
that option could not be transferred to a third party.
Oral evidence of agreement is not barred by parol
evidence rule because when family members are
contracting, they would not ordinarily be expected to
put such a term into written K.
Merger clauses: found in written documents, essentially
say thats it in a K, usually cant bring in parol evidence.
Hatley v. Stafford (1978): P leased land from Ds to grow
wheat. In K, clause that allowed Ds to buy out land at no
more than $70 per acre. Did so 8 months into K but P
argued there was a parol provision that this clause only
applied for first 60 days of K.
1. Applying PER, we see that it is admissible:
a. Its a collateral agreement, related to content
of K but not completely
32

vi.

vii.
viii.

ix.

b. It doesnt contradict anything in K because

theres no specified amount of time. Ds argued
that having no time meant that it was
indefinite but court didnt agree.
c. No reason to think that it needed to be in K.
Would be unreasonable for Ds to repurchase
land after P had invested so much in it, belief
that both parties were well aware. Plus, was
unsophisticated K, handwritten and no lawyers
involved, didnt make everything complete.
Different levels of sophistication:
1. Lease less than a yearcan be oral, low level of
sophistication
2. Partially integrated Kmore sophistication, some
factors agreed to orally, generally doesnt involve
lawyers
3. Fully integrated Konly understanding is K at face
value, no other interpretations allowed, no parol
evidence, generally used in businesses for mergers,
are made by lawyers.
Restatement on PER 209, 214, and 216
UCC 2-202: considered two judicial approaches in its
writing:
1. Williston: Times when a judge will see written
documents and if it looks final, then will not hear
parol evidence.
2. Corbin: autonomy of parties most important aspect,
K only fully integrated if parties intended it to be a
fully integrated deal so must look at K AND parol
evidence. From there can decide on how integrated it
is: judge makes choice.
3. Actual approach: intent of parties most important
factor: if they say fully integrated K then it is. Two
provisions change meaning of K
a. Course of dealing (UCC 1-205)usage of
trade, relationship between parties, course of
performance ( 2-208)
b. Evidence of consistent additional terms BUT
cant be used if parties intended agreement to
be a complete statement of terms of
agreement.
PER and warranties (Husky Spray Service Inc. v. Patzer
(1991))
1. Two types of warranties:
a. Fitness to purpose: safe to use, follows
standards of trade, purpose is disclosed
33

i. Ex. When you buy glue to use on wood,

packaging indicates whether it can be
used on wood or not.
b. Warranty of merchantability: useable item,
purpose of transaction is met by product
i. Ex. When you buy glue to use on wood,
expect that if a product is advertised as
working on wood, then it will do so.
2. A seller can try to get around warranties by putting in
a disclaimer of warranties BUT court determined that
language of disclaimers is too generic to knock out
oral representations. Must have a conspicuous
disclaimer of warranties.
a. Ex. On glue, can be disclaimer that wont work
on wood and plastic because meant to work on
paper.
3. UCC provisions that govern warranties: 2-313, 2314, 2-316.
c. Oral Conditions and Fraudulent Inducement
i. Oral conditions as evidence?
1. Hypo: A rents a moonwalk from B for party. Signs an
agreement and gives B an undated check for $100,
only to be cashed if moonwalk returned damaged
(oral agreement). A returns moonwalk undamaged
but B still cashes check. Do we treat condition as
evidence?
a. Yes, will be allowed using Hatley as
precedence.
2. Some judges will allow oral conditions to supplement
terms, but others will say its only admissible if it
expands existing conditions and doesnt create new
ones
ii. Parol evidence is allowed, even if K is fully integrated, in
order to show that there was fraud.
iii. Two types of fraud:
1. Extrinsic fraud: fraud collateral to issues, intentional
misrepresentation or deception outside of transaction
itself. Not contemplated in any part of K.
a. Ex. Convincing litigent not to hire counsel or
answer by dishonestly saying matter will not be
pursued.
2. Intrinsic frauddeception that pertains to an issue
involved in an original action. In K.
a. Ex. Fabrication of evidence, false return of
service, perjured testimony, false or
commercial documents
34

iv. Lipsit v. Leonard (1974): P worked for D, agreement that if

relationship mutually satisfactory, he would become
partner. Supplemented by oral promises that induced him
to leave former employment and to stay. P claims illusory
promise: never intended to make him partner even though
his work was satisfactory.
1. Considered extrinsic by court, could be called
intrinsic too.
2. Needed to show there was no intent to promote him:
kept employee with fake promise of partnership,
when wanted to keep company in family.
3. Damages? P wants specific performance which would
be 10% of companyimpractical; no to expectation
damagesdifficult to calculate real value of work,
but P should be able to recover on a tort suit to
restore his losses.
v. Different approaches to damages in fraud cases
1. In some jurisdictions, a claim for fraudulent
inducement best addressed by forcing fraudulent
party to perform as promised.
2. Others will only restore losses to fraud.
vi. Sabo v. Delman (1957): K for a patent to a new product
and making prototype with shared profits between P and D.
D only made two machines. P wants to cancel K
(rescission) and receive restitution of patent. Court agrees.
1. Expectation damages: performance of K, difficult to
calculate
2. Reliance: tort damages, price paid for loss, only
nominal
3. Cancellation: wants product back, restores
unrightfully given item. Like restitution.
vii. LaFazia v. Howe (1990): Ps sold Ds a deli for $90,000, Ds
paid $60,000 and gave Ps a promissory note for $30,000.
After running business, found that it had been fraudulently
misrepresented, didnt want to pay last $10,000 on store.
Ps sued to recover $10,000, Ds counterclaimed that there
was fraud.
1. Clause said Ds had relied on nothing but their own
representations to buy business, fraud not an
argument
2. Additionally, merger clause: K as it was complete, no
parol evidence admitted
3. Ds had plenty of time to look over K and bring up
objections if they had any.

35

4. Contributory negligence? Ps were crooks and as

experienced business owners, Ds should have known
to stay away.
5. Affirmed K: made $20,000 worth of payments even
after they knew representations had been fraudulent.
Cant go along with K for so long.
viii. For a claim of fraud, there must be a high standard of
evidence that there was deceptionmostly a torts claim as
opposed to a Ks claim.
ix. Rio Grande v. Data General (1984): Buyer purchased a
computer system but found it didnt work as well as it had
been represented. Sued for negligent misrepresentations.
1. No recovery: disclaimer more specific and obvious,
parol evidence here just induced client to buy and
didnt disclaim.
2. Anything less than fraud in presence of disclaimer is
unlikely to recover. Compare to Husky Spray.
d. Parol Evidence Rule and Statute of Frauds
i. Restatement 156: Statute of frauds makes certain kinds
of Ks unenforceable unless evidenced by a signed memo.
e. Interpretation
i. Pacific Gas v. Drayage (1968)power plant has a steam
turbine to produce energy, hires Ds to install a metal
covering. As a part of their work, they negligently drop
cover and cause $25,000 of damages. Insurance wont
cover it because of negligence. Indemnity clause that
requires D to indemnify P for injuries to Ps property.
1. Two interpretations:
a. P says that this means that D is responsible for
all injuries to property regardless of ownership
b. D says this means that D is only responsible for
injuries to third partys property, general trade
understanding.
c. We need parol evidence to show trade norms
through extrinsic evidence.
ii. Restatement 203(b): provisions we should take for
understanding a K in order:
1. Termsif they have clear meaning, we end there.
2. Performancehint of intent of parties
3. Repeat playerscourse of dealings, other Ks
4. Usage of tradeend of our interpretive process.
iii. UCC 2-202 can also apply.
iv. Parol evidence is allowed when a term is ambiguous and
allowing it will clear up meaning.
v. Restatement 209(2): courts must determine whether K is
fully integrated
36

vi. 214(a): parol evidence must be used to determine

whether a K is fully integrated or not, contradiction with
209(2) and unavoidably circular.
vii. Additional Restatement sections to consider: 205: all Ks
interpreted to be in good faith; 206: if theres ambiguity
and youre aware of ambiguity, goes to other party.
viii. Restatement 212interpretation of an integrated
agreement
ix. Frigaliment Importing Co. v. B.N.S. International Sales Corp.
(1960): P buys chicken from D, claims that it was implied
by K that they meant young chickens, D sent a
combination of young and old.
1. Use of parol doesnt help, in negotiations, parties
used English word chicken because in German
word specifies difference between young and old.
2. Generally parties specify which one they want.
3. Difficult burden of proof to bear, essentially party
that bears burden will lose because court doesnt
favor either definition.
f. Deviant Acceptance and Battle of Forms
i. Acceptance under mirror image rule (common law and
restatement): for acceptance to form a deal, must be
identical to offer. If using 2 documents, then must make
sure acceptance has same terms as offer
1. Ex. Offer says ABC, acceptance says ABCD. D is a
counter offer (rejection). To have a K, offeror must
accept counteroffer.
ii. Livingstone v. Evans (1925): offer by seller to sell land for
$1800, buyer counter offers $1600, seller says he cant
reduce price, buyer says $1800. Before buyer could accept,
seller sold land to someone else. Bound by K?
1. Seller: cannot reduce was a no, so no more offer to
accept
2. Buyer: $1600 merely an inquiry, not a counteroffer,
by saying he couldnt reduce, seller renewed offer for
$1800. Buyer wins.
iii. UCC 2-207different from restatement and common law,
says that acceptance that contains additional terms
doesnt kill deal and still counts as a K. For merchants with
their own forms, only provisions in K are ones that overlap
and then we put in gap fillers to cover any blanks. After
comma in (1), essentially restates mirror image rule.
1. For provisions that are in one form, we consider if
they go in or not by determining if its a materially
altering term.

37

a. Term not allowed in if arbitration or indemnity

clause.
2. Part 2 says that if offeree is unwilling to work on
anything but his own terms, then they are allowed to
issue a counteroffer.
iv. Electronics and Acceptance
1. For electronic material, such as computer programs
and websites, UCC still applies because technically
still a product.
2. ProCD v. Zeidenberg (1996): P offered computer
program with names and addresses in it. Two types:
personal use ($150) and commercial use (~$1000).
D purchased personal use product then used it to
offer product to consumers for a lower price.
a. D argues terms needed to be on outside of box
because K was concluded at time of purchase.
b. P says that K is not complete until CD is in
computer and allows user to see terms of use.
c. Issue because payment occurs before seeing
terms BUT consumer can always choose to
return product if they dont agree with terms.
3. Terms must be such that you cant use product
without accepting to terms. If consumer has an
opportunity to read terms, then bound by K.
4. Hill v. Gateway 2000, Inc. (1997): warranty attached
to computer expired in 30 days, Ps wanted to return
it. Terms in computer box said that 1) they must
resolve all claims through arbitration and 2) that
after 30 days too late to return product.
a. Ps dont want to go through arbitration,
generally not in favor of consumers, though
oftentimes both parties will have an interest in
going to arbitration because it is final, shortens
time of resolution and is secret.
b. Ps want protection of court, arbitration not in
their favor.
c. Arbitration clauses controversial: can argue
they shouldnt be enforced because deprives
parties of judicial protection.
d. Hills lose case: not reading terms isnt an
excuse (duty to read) and 30 day warranty
begins when they receive product, not after
they open box.
e. Warranties have to be conspicuous under 2316, Easterbrook says this only applies to a

38

disclaimer of warranties, not an arbitration

clause.
5. Specht v. Netscape (2002): double technology, no
issue with Communicator, SmartDownload had terms
below download button. License not in obvious space
for invasive service.
a. More wordless other side is, more you have to
let them know of license.
b. Terms were struck out of deal because werent
readily available to customer. No opportunity to
agree and no reason to know where terms were
means no K.
g. Causes of avoidabilityKs not null but qualify for rescission.
i. Misrepresentation
1. Fraudulent
2. Materialsubjective intent element (LaFazia, Sabo)
ii. Non-disclosure ( 161)
1. Rescission allowed when done in extreme bad faith.
Cant actively prevent other side from obtaining
information. (Laidlaw)
iii. Constructive Fraud ( 173)
1. Treated as fraud even if it wasnt, an unintentional
misrepresentation
iv. Mistake ( 154 and 156)
v. Impossibilitychanges that occur after K formation.
Formalism and innovation allows courts to read something
into K if it makes sense (e.g. music hall still being there).
1. Impracticabilitycontrast with impossibility, can be
done (vs. impossibility which cant) but will be
tremendously expensive.
2. Frustration of Purpose
h. Silence as Contract?
i. Starting point is no words means no acceptance BUT can
get much more complicated.
ii. Restatement 69: governing silence. Cases where silence
is an acceptance
1. Reasonable opportunity to reject offer, and offered
with expectation of compensation. Chance to say no
but dont.
a. Ex. Kids in your neighborhood remove snow for
a fee. You see kids come to your house and
start to remove snow but say nothing. Bound to
pay them.
2. Offeror says that silence counts as an acceptance
a. Ex. AmazonPrime offers 1 month free
membership and says that you have to cancel
39

after month if you dont want to pay anymore.

Assumes from your silence (i.e. continuing to
use their service) that you wish to continue
their services.
b. Doesnt apply in cases where one party cant
say no
i. Ex. A company, without your consent,
sends magazines to you for several
months. You read them but have
nowhere to tell them to stop. At end of
year, they send a bill. Not enforceable.
c. Must be consistent with authors ownership. If
theyre not, then K isnt enforceable.
i. Ex. Eating a banana before paying for it,
putting on a dress and taking off tags in a
store.
iii. Hobbs v. Massasoit (1893): K for skins, P sends skins to D
and D either accepts them (silence) or rejects them (sends
them back). Had worked that way for a long time. D
doesnt send back skins but claims that he rejects them.
1. Court says that there is a duty to speak up in this
caseprior deals create expectation, as do
circumstances.
iv. Martin v. Little Brown (1981): P found plagiarism of Ds
book and brought it to their attention. Lawsuit followed and
D won a large settlement. P argued that he was entitled to
part of winnings, D said they were grateful but he never
asked for compensation, gave him $200. P sued for 1/3 of
settlement.
1. First argument: letters createdunilateral K: letters
asking him to send book was company making an
offer and sending book was acceptance of said offer.
Argument fails: company believed he was acting out
of kindness, didnt make intent clear.
2. Second argument: unjust enrichment, company
would not have received a benefit without services,
so P deserves some recovery as a part of a quasi-K.
Problematic: never signaled expectation of
compensation and had plenty of opportunities to do
so. Hes not a professional, so it wouldnt be a
natural assumption that he would charge.
3. Rule to apply here: a person who gives
spontaneously not entitled to compensation unless
they are a professional in an emergency situation.

40

4. Compared to Davies, Davies had a much stronger

caseclear promise, though still not strong enough
to constitute a K.
5. Third argument: emotional distress based on threat
of being sued. Court throws this out.
v. Morone v. Morone (1980): P and D had been living together
for 23 years and had two children but werent married.
Relationship breaks up, Ms. Morone says entitled to half of
everything.
1. First claim: K implied in fact, did work of a housewife,
Mr. Morone said nothing. Conduct implied K.
a. Can also have K implied in law: allows one
party to recover when there isnt a K, can turn
there when there isnt a K.
i. Ex. P works 10/12 months, quits and can
get quantum meruit for work done.
2. Second claim: entered into a partnership agreement
that she would perform housewively duties and
would be entitled to 50% of income. Court says she
has to show that he verbally assented to agreement
at some point, burden on her to do so.
3. Third claim: (not in original claim) unjust enrichment,
most jurisdictions dont allow for recovery under
unjust enrichment for household work. Few
exceptions (Schoenkerman).
4. Difficult to contractualize love, court says K is invalid.
vi. Sharon v. Newton (2002): Ps father signed a waiver when
she was a minor agreeing to not sue her high school if
injured during cheerleading. Injury at 16. Tries to sue at 19,
school points to waiver.
1. Father claims he wasnt bound even when he signed
it, wasnt aware that he was giving away something
so big. Terms too outrageous. Court rejects this
argument, terms were clear.
2. Can argue this was gross negligence, not claim P
made.
3. Because original K enforceable, P cant sue.
i. Non-Disclosure
i. Laidlaw v. Organ (1817): buyer wants deal and knows
tobacco prices will go up due to end of War of 1812. Calls
seller at 5am on Sunday to make K, doesnt disclose that
he knows prices will go up.
1. Under Restatement 161, usually fine to stay quiet,
good faith not necessary in K formation.
ii. 161 continued:

41

1. (c): both of us intend to sell property on lot A but

both actually put lot B. One party likes B better
because its bigger and doesnt say anything. Easy
for other party to go to court and demonstrate that
they both meant A. If one party sees other has made
a mistake, has a duty to inform.
2. (d): pre-existing relationships require disclosureKs
between relatives tend to have a higher level of trust
than most.
j. Mistake
i. Sherwood v. Walker (1887): D had K to sell cow to P for
5.5 a pound. Assumed cow was barren. When they were
about to deliver, found out cow was pregnant. Because of
mistake, D argued that K invalid.
1. D argued mutual mistake: both parties believed cow
was worth a lot less than it actually was.
2. P argued no common assumption: he chose that cow
specifically because he believed it could be breed
despite Ds belief that cow was barren. Assumption
of risk to D because could have easily verified she
wasnt pregnant before selling.
ii. In doctrine of mistake there are three tests:
1. Substancemistake must change essence of K
2. Materialchanges value of K
3. Riskwho has risk and ease of avoidance
iii. Beachcomber Coins v. Boskett (1979): both buyer and
seller think coin is valuable, both equally situated. Coin is
fake. Because both parties knew coin well, easy case for
rescission. Applies Restatement 152: if there is a mutual
mistake, then there is no K.
1. Could argue that buyer assumed risk but because of
lack of doubt, no risk assumed.
k. Unilateral Mistake
i. A mistake by one side can be cause of rescission if no
reliance from other side. If there is reliance, then it cant be
rescinded. (Drennan)
ii. 153can demand rescission if theres no assumption of
risk and if unconscionable to do work or other side can
sense a mistake.
iii. 154party bears risk of a mistake when
1. risk is allocated to him by an agreement of parties, or
2. he is aware that he only has limited knowledge of
facts but treats his knowledge as sufficient, or
3. risk is allocated to him by court.
l. Warranty

42

i. Tribe v. Peterson (1998): Petersons purchased horse on

shared assumption with owner (Tribe) that it was calm and
gentle. When Petersons took horse home, it bucked both
owners off.
1. K focused on quality, not substance so essence didnt
change. Hence Petersons cant rely on doctrine of
mistake.
2. Alleging breach of warranty (with remedies under
2-711, 714, 715) BUT cant claim loss in value
because there isnt one between a gentle horse and
a non-gentle one.
3. Petersons are seeking reliance damages (hospital
expenses)wouldnt be happy with rescission or
expectation.
m. Impossibility
i. Taylor v. Caldwell (1863): agreement between P and D that
P would host a music festival in its concert hall. After K is
formed but before performance, hall burns down. D says
free from contractual obligations because of fire.
1. No conditions on what to do in case of a fire:
unanticipated.
2. Court holds both parties free of obligations: implied
condition that music hall needed to be there for a
concert to take place.
3. Could argue that owners assumed riskduty to
maintain hall or at least insure themselves.
n. Impracticability and Frustration
i. Example: Feldnot profitable to make breadcrumbs, trying
to make an argument for impracticability. Only counts if
they were going bankrupt as a result.
ii. American Trading v. Shell (1972): P and D had a K for P to
deliver goods to India. Agreement was to go through Suez
Canal because fastest route, but when they got there,
found it closed due to unrest in area. Owner asked Shell
what to do, Shell said get shipment to India.
1. Owner understood that he was discharged due to
impossibility and could charge more for longer
voyage.
2. Shell said they werent released, required to perform
in one way or another.
3. Court upholds K: original K doesnt say anything
explicitly about Suez Canal, should have prepared for
potential unrest due to history of region.
iii. Krell v. Henry (1903)P rented his flat to D for 75 to see
coronation. king caught the flu, no coronation. D gave P a

43

V.

deposit of 25 and was to pay rest after. P suing for

remaining 50.
1. D claims K should be discharged, couldnt use
apartment for its intended purpose.
2. P claims that theres nothing in K explicitly about
coronation, hence it cant be invalidated.
3. Judge rules for D but is concerned about a slippery
slope for a hypo like following (though ultimately
concludes wording of ad makes it ok):
a. Parents want to fly out for graduation and get
plane and hotel tickets. At last minute, they
find out their child wont graduate. Can they be
reimbursed for pricesseems ridiculous to say
so, ads dont explicitly state that fare is for BU
graduation.
o. Prevention by Government Regulation
i. Restatement 264If performance of a duty is
impracticable by having to comply with a regulation or
order, regulation or order is an event non-occurrence of
which was a basic assumption on which K was made.
Reasons to Invalidate a Contract
a. Competency: a K is considered invalid if influence of any of below
named factors (to varying degrees):
i. Infancy (complete understanding of incapacity)children
can use age as a shield if they were a minor when they
entered K (no representative adult). In most cases is easy
to enforce, only an issue for those very close to adulthood
performing adult-like activities (17 year olds). Idea is that
we dont want children to saddle themselves with lifelong
debts.
1. Restatement 12-14
ii. Mental Competence (intermediate understanding of
incapacity)difference in how to treat cases with someone
with a mental illness
1. Two factors considered when dealing with mental
incapacity:
a. Cognition: if person has a low IQ and doesnt
understand what is happening, very easy to
invalidate K
b. Volition: cognitably able person but is making
decisions that they normally wouldntmore
difficult to invalidate.
2. Issue of whether to protect more or enable more,
essentially a battle between wanting to protect
mentally incompetent people and wanting to let
them keep right to enter a K.
44

3. Restatement 15-16
4. Ortelere v. Teachers Retirement Board (1969): Ps
wife was a teacher, had a breakdown and was ruled
mentally incompetent. Forced to retire as a result,
chose to change her plan to a highest payout but no
benefits after death after her diagnosis. Died 2
months later. Husband says change unenforceable
because she was mentally incompetent.
a. Main provision is Restatement 15(2): did
retirement board have reason to know of her
illness. If they didnt then K is valid as much as
its been performed.
b. Court rules for husband: she had an
appointment with school psychiatrist and they
had reason to know of her breakdown.
5. Faber v. Sweet: Faber bought real estate all over but
his family said he was unable to make decisions
despite seeming competent.
iii. Undue Influence or Over-Persuasion: decision made under
pressure of other party. One party temporarily under
domination of other side.
1. Ex. A homosexual teacher is told by other teachers
that he must resign or else they will reveal his
homosexuality to school.
2. Restatement 177
iv. Intoxication (low understanding of incapacity): addiction
considered mental illness, would fall under 15. Otherwise
its enforceable assuming other side didnt purposefully
cause intoxication.
b. Duress, Legal Duty, Modification
i. Originally, duress was limited to proximate physical threat.
Has since expanded to include economic constraints.
ii. Alaska Packers Association v. Domenico (1902): workers
on a ship agreed to work for $60 a week, plus 2 per
salmon. Once on ship with no way to turn back, they tell
captain that they wont continue work unless theyre paid
$100 a week. Captain amends Ks because theres no way
to get new workers. On return, P says new Ks invalid.
1. Trial court: no breach in K, company waived it by not
suing and old K set aside. New consideration to start
K, so valid.
2. Appellate court reversed: K forced on captain who
had no other choice BUT before economic duress was
allowed. Instead focus on legal duty rule: there was
no new consideration to make new K, not valid
consideration to not breach old K.
45

iii. Wolf v. Marlton (1959): Ps agreed to buy a house for

$24,500 from D and put down a 10% deposit. Marriage fell
apart, so they cancelled K. D offered to return $1,450 but P
wanted $2000. He said that if D didnt return money, he
would go through with K and then sell house to an
undesirable buyer. D said yes but then refused to pay
anything, P sued to recover down payment.
1. No loss to D, able to resell house.
2. P argued that his words dont count as a threat if
something he had a legal right to do.
3. Issue for jury is how real threat seemed to D. Overimposition qualifies as duress but only if its feasible.
iv. Levine v. Blumenthal (1936): K to lease grounds for a store
from 1931-32 (start of Great Depression). In 1931, rent was
$175 a month ($2100 a year) and in 1932 rent was $200 a
month ($2400 a year). Ds say that they cant pay
increased price in 1932, P has 3 options:
1. Stick to guns, find someone else to fill lease
(unlikely)
2. Be nice, reduce price in K
3. Allow reduction but reserve rights if business
improves->P goes with this option
D argues continued presence acted as consideration for
new K, neither party anticipated Great Depression ( 89)
v. Accord and Satisfaction: I owe you $200, but you really like
a pair of glasses, so I give them to you to satisfy my debt,
no matter how much they cost. If you took them, cant sue
for $200. Not valid in Levine because lower price wasnt
accepted for fresh consideration.
vi. Payment of a lesser amount is usually invalid unless debt
is:
1. Disputedyou think I owe you $200, I think I owe
you $150, pay $175 as a compromise
2. Liquidatedneither of us know how much it is and
we estimate it
3. Immatureowe you $200 2 years from now but
agree to receive $175 today.
vii. Schwartzreich v. Bauman-Basch (1921): Employment K
between P and D, P received an offer for higher pay, asked
D if he would increase pay. D agreed to do so, ripped up old
K and wrote a new one.
1. New K valid even though theres no new
consideration because both parties effectively
rescinded old K.
viii. Restatement 89

46

ix. UCC 2-209: departure from common law. An agreement

modifying K within this article needs no consideration to be
binding. General requirement of good faith, makes sense
for parties to modify K because something has changed.
x. Legal Duty Rule
1. Hypo: crossing guard near a dangerous road to make
sure children cross safely, parents pay her $10. She
must still work, even if parents dont pay her
because she has a K with school.
2. K unenforceable unless there are unanticipated
consequences from other parties. Often in
construction, will find original plan doesnt work, new
plan pricier.
c. Unconscionability
i. Williams v. Walker-Thomas (1965): deal to purchase items
from D to be paid in installments. Company held right that
if buyer defaulted on any payment, they could repossess
any items that they had purchased.
1. Trial court: agreement was disgusting but nothing to
fix it.
2. Court of appeals reversed, said that it was
unconscionable and shocked conscious of court.
ii. Two branches of unconscionability
1. Procedural: way in which K was entered, if both
parties had lawyers, fine BUT if one party did and
other didnt, then unconscionable
2. Substantive: look at terms of K, doesnt make sense
that someone who has paid $500 shouldnt be able
to keep anything.
iii. UCC 2-302: a K can be invalidated if its unconscionable.
Generally avoided because courts dont want to make
public policy.
d. Standardized Terms
i. Weisz v. Parke-Bernet (1971): Ps purchased paintings from
D gallery that were attributed to Raoul Dufy but ended up
being fakes. Sued to recover cost of paintings. D claimed
there was a disclaimer in its catalog that paintings were
sold as is.
1. Argument for Ps that they didnt except a disclaimer
given gallerys presentation, too overwhelmed by
information. Gallery bears burden because they have
resources to check authenticity
2. Argument for Ds: ProCD and Hill, risk should be on
buyer because they know price isnt fixed, should
bring in someone to verify.
ii. Restatement 211
47

VI.

e. Public Policy
i. Restatement 178 and 179
Conditions and Breach
a. Covenant: old expression for agreement, main fact of an
agreement and one of agreements between two parties. Idea of
covenants found in K books to distinguish dependent and
independent
i. Dependent: can only be performed if each step is
completed, so compensation only due if other side
performed. Performance of one promise conditioned on
another. Presumption of simultaneity, unless in language of
K, we assume that both performances must occur
simultaneously.
ii. Independent: performed separately, different performance
times.
b. Interdependence of Promises
i. Restatement 234 and 238: order of performance; effect
on other partys duties of a failure to offer performance.
ii. Bell v. Elder (1989): K to purchase undeveloped land for
$25,000 and to build a house, Ds supposed to furnish
culinary water. Deal collapsed, Ps asked to rescind K on
grounds Elders breached by not furnishing water. Elders
argued hadnt furnished water because Ps hadnt gotten a
building permit. Ps argued that they didnt want a building
permit until they knew they could build there.
1. Court: K was silent on times, assumption of
simultaneity, neither party in breach because neither
performed.
2. Forfeiture of deposit: court has no problem inflicting
a forfeiture on a P who hasnt acted as they should
have.
3. Essentially stalemate with no restitution.
iii. Conley v. Pitney-Bowes (1994): employee believed he was
denied benefit claims, initiated action against his employer.
Employer argued that he couldnt do that until he had
exhausted administrative procedures, Conley claimed that
employer hadnt put procedures in letter denying him of
benefits.
1. Though this type of K is usually unilateral, in this
case its bilateral, obligation from both sides.
2. Timeline as laid out in handbook:
Accide Appli Denial and
Administrative
Sue in
nt
es
information on
procedure
court
appeal
exhaustion

48

Conley skipped exhausting administrative procedures

because he didnt receive information on how to
appeal
3. Public policy argument: we uphold a public policy of
exhaustive remedies, dont want to crowd judicial
system.
4. D also attempts a constructive fulfillment argument:
he had access to info before suit.
iv. Wholesale Sand & Gravel v. Decker (1993): agreement
Wholesale would pave Deckers driveway. No times
specified but payment had to occur within 90 days, so
assumption was that work had to be completed before
then. Problems with driveway (too wet), Wholesale decided
to wait. Decker called three times asking for reassurance,
each time Wholesale said theyd come but never did. Gave
them one last chance on July 29, then terminated K. Decker
argues that Wholesale in breach because its actions are a
repudiation.
1. Needed have good faith attempt to perform,
Wholesale didnt make this effort hence they were in
breach.
2. Even if they had said they would be done in a week,
no K because theres no new consideration.
v. K&G v. Harris (1910): Agreement between a contractor and
a subcontractor, agreed that if they submitted a requisition
on 25th of each month, would receive pay on 10th. Day
before payment, subcontractor causes $3400 worth of
damage to a house. Insurance unwilling to cover it because
due to negligence. P withheld paycheck after D refused to
pay. D continued work for another month then quit work.
Said hed come back if P paid. P refused, got a new
subcontractor. Sued for cover.
1. P argued not bound to pay because of money owed
to him.
2. D argued P was in breach because he was refusing to
pay.
3. Court found for P: withholding pay was a partial
breach, K still valid and thus D breached completely
when stopped work.
vi. Partial breach vs. Total breach:
1. A partial breach allows for recovery based on
damage caused by one side.
2. A total breach allows for no recovery from breaching
side (apart from quantum meruit). Generally avoid
compensating party in breach because it appears to
reward bad behavior.
49

vii. Entire or Divisible Contracts

1. Three types of Ks:
a. Entire/indivisible: performance of one side has
to be completely finished before any
performance required by other side
i. Ex. No compensation for half a painting
(not even )
b. Divisible/severable: K performed in
installments, sets of equivalent performances
i. Agree to deliver 3600 sweaters, each
sweater worth $1, a delivery of 100
sweaters=payment of $100
c. Separate: Two Ks, each K is individually agreed
upon, performance or breach of first has no
impact on second and vice versa
i. Carusos K with BU: teaching and
research expected, pay after completing
both. What would university do if she
stops doing research? It would be
considered a breach, partial breach but
so material and grave that it goes to
heart of K, argument that there are 2
different Ksone for 9 months to teach
and one for 3 months to research
2. UCC 2-307 and Restatement 233
3. Restatement 240: part performances as Agreed
Equivalents
c. Interpreting Conditions
i. How do we distinguish between a warranty and a
representation?
1. Language: well should have capacity to pump 300
gallons of water per minute. Should have=warranty,
if it said has instead, would be a representation.
2. Warranty is a bit promise, affirmative remedy of
enforcing a K
ii. Howard v. Federal Crop Ins. Corp. (1976): Ps lost large
portion of their crop due to rain and filed for insurance. In
K, said that they had to leave stalks. Ps cut them down to
begin replanting. D claims that this prevents Howard from
recovering anything because it was a condition, Howard
says it was a promise.
1. Wording in K didnt make it clear that it was a
condition, specifically referred to a different section
as a condition.

50

iii.

iv.

v.
vi.
vii.
viii.

2. Insurance company could argue that wording was put

in to prevent fraud and K should be interpreted as a
whole->court prefers treating it as a promise.
3. Because its a promise, D can sue for damages but
cant prevent P from recovering.
4. Nonfulfillment of a condition=no recovery, K
breached vs. breach of promise=recovery and opens
Ps to counterclaims.
5. Doctrine of preclusion? Inspector should have arrived
earlier and thus insurance company caused breach.
Moore v. Brown and Root (2000): General
contractor=Brown & Root, entered into K with
subcontractors Moore and Lane (K2); K1=Owners of road
(TRIP) assign job of building highway to Brown, one of
partners of TRIP is also partner of Brown; KF=K of Owners
to Lenders; Bond between Brown and Highlands (insurer).
Pay when paid clause is common in subcontracts
protects contractor if owner doesnt pay.
1. Change of Scope clauses allowed in almost every
construction Kprotects builders if something
doesnt work
2. Clause not taken seriouslyowner might not pay
anything and subcontractors would be at a huge loss,
major forfeiture.
Constructive conditions: not explicitly written into K but
deal doesnt make sense without them
1. Ex. Taylor v. Campbellif music hall isnt there, cant
hold a concert.
Conditions will generally be upheld as long as there is no
significant forfeiture BUT no chance of success if upholding
condition would result in large forfeiture of other party.
Condition considered against person who drafted it if any
dispute.
Restatement 227: Standard of Preference with regard to
conditions
Options when applying conditions:
1. Fulfillment: can thus ask for other sides performance
2. Non-fulfillment: forfeiture, cant ask for other sides
performance and will lose what you invested in K
3. Excused:
a. Constructive fulfillment: essentially fulfilled
condition
b. Prevention: couldnt fulfill condition because
other party made it impossible
c. Impossibility: impossible to fulfill

51

d. Waiver: intentional relinquishment of a known

condition, party that can claim right has no
interest in it anymore.
e. Interpretation: represent to court that you have
substantially performed K to extent cant be
rescinded.
f. Disablement: something happened, party
couldnt comply with condition (Hathaway)
ix. UCC 2-209: with sales of goods, treated differently from
common law on its face: modification entered into with
good father by both sides is enforceable. No oral
modification allowed. Under (5) if there has been a waiver,
can revoke it on condition that other side hasnt relied
detrimentally on it.
1. Hypo: buy a machine, hire an engineer to inspect
who meets with sellers engineer. They notice
modifications are necessary and make an oral
agreement to fix them. Enforceable? Seller says that
they complied with K1 so its fine, buyer says there
was a breach because they didnt comply with K2.
a. Under common law: K2 is ok, by making an oral
agreement that both parties agreed to follow,
seller essentially waived right to no oral
modification clause.
b. Under UCC: K2 seems unenforceable because
no oral modification clause ties hands of
parties BUT under 2-209(4) oral modifications
can act as a waiver and thus condition is
waived. Can only disregard if we find a waiver
AND this discussion is only for Ks with no oral
modification clauses.
x. Waivers
1. Clark v. West (1908): K for P to write a series of
textbooks for D and would receive $2 a page. If he
abstained from drinking, would receive an additional
$4 a page. Clark drank but still wanted to collect $6
per page, argued condition waived.
a. Clarks argument: West intentionally waived
condition (e.g. saw Clark drinking and explicitly
made a reference to $6 per page).
b. Wests argument: it was a promise to give
consideration and doesnt rely on waiver. Its at
heart of deal because companys reputation
needs to be protected.
c. Court: treats provision as a condition but
struggles with issue of waiver.
52

2. A waiver is an intentional relinquishment of a known

right. Compared with estoppel, must be a small
provision in K, cant be at heart of matter. In
comparison, estoppel can occur inadvertently, relies
on a promise and can go to heart of promise. Only
invoked when there is detrimental reliance.
3. Schultz v. LA Dons (1951): football player injured
while under his K, team says hes terminated his K
and argued that he didnt follow condition that he
needed to inform team of his injury.
a. Constructive fulfillment: football players
doctors informed team and hence they knew of
his condition.
b. Condition of good health in original K: if injury
occurred prior to his K, then there was never a
K because he had a condition of good health.
c. Damages? He wants an injunction because
other teams have prevented him from playing
for themdoesnt work because no forced
association. Instead asked for remainder of
salary under K
xi. Conditions of Satisfaction
1. For a condition of satisfaction, one must use a
reasonableness test: its not fair to withhold
satisfaction on unreasonable grounds so generally a
third party will evaluate.
2. Someone must be satisfied:
a. If satisfaction not given condition not fulfilled
b. If withholding satisfaction, must do so in good
faith
i. If standard is reasonableness, will be set
aside if satisfaction withheld
unreasonably
ii. Loss from breached calculated through
small damages
3. Nolan v. Whitney (1882): P to complete mason work
on two buildings in Brooklyn, K paid in small
installments. Last one was to be $2700 and was
dependent an him obtaining an architects
certificate. P finished work but architect withheld
certificate, hence D wouldnt pay him.
a. Condition set aside because it would result in
tremendous forfeiture, architect withheld
certificate because of $200 worth of damages,
unfair to forfeit salary. Allows him to recover
price minus damage to D.
53

b. Varying standards on quantum meruit: in

Pinches it was easy to recover but in NY (where
Nolan took place), very difficult for breaching
party to recover on quantum meruit. Because
of this, court prefers to not treat case as a
breach.
c. Approval unreasonably withheld: if that is case,
can still recover most of K price.
4. Van Iderstine v. Barnet Leather (1926): two Ks for
vealskins. Upon inspection, D rejected 6,000 of them.
Brokers evaluating quality of leather.
a. If broker was dishonest and withheld certificate
in bad faith, K is not upheld. BUT more
technical, more reason to hold to a reasonable
person standard.
b. Ultimately K is upheld: P cant recover but can
sell skins to someone else, hence no loss.
5. Restatement 229: unfair to enforce forfeiture but
very vulnerable to appeal (better to use different
argument).
6. Fursmidt v. Hotel Abbey (1960): P ran valet and
laundry services in Ds hotel, written agreement to
render services for a three year period and give D
$325 in compensation. Clause in K said that services
needed to meet Ds standards. D terminated K and
hired a service that only paid $250 in compensation.
P filed for breach, D counterclaimed for breach for
failing to render adequate and proper service.
a. Which standard do we use, subjective or
objective? Court says that because its for
aesthetics, we use a subjective standard based
on Ds tastes.
b. After that, have to show rejection was in good
faithcan point to new employee for that,
indication that hotel was willing to take a loss
to replace P speaks volumes.
d. Breach
i. Levels of Performance
1. Full performance: what is specified in K
2. Substantial performance is demonstration that K
hasnt been performed to a quality emblematic of full
performance but that enough work has been done to
merit compensation.
3. Less than substantial performance: breach, cant
recover on K but can recover on quantum meruit in

54

ii.

iii.

iv.

v.

some jurisdictions. Others will refuse quantum meruit

because it encourages poor work.
4. Bad faith breach: No compensation
Consideration of performance
1. Is performance due yet? Consider in relation to other
side.
2. Have conditions been met? In some cases, some
events must happen before performance. If these
events arent done, performance isnt due.
Plante v. Jacobs (1960): P built a house for Ds and had
been paid $20,000 of $26,000. Established a lien: if person
doesnt pay, builder can sell house to recover what person
owes him and then gives person rest. Ds havent paid even
though they are living in house. Ds counterclaim that there
are damages based on faulty performanceliving room
wall in wrong place, no cabinets.
1. Court determines that K has been substantially
completedfrom there its a matter of determining
damages
2. Living room wall cuts a foot off of living room. Ds
want cost of completion to fix it, court offers them
nominal damages (loss of value) instead because
doing so would be a lot of work for only a small
convenience, large forfeiture for P. Additionally, K
vague, only blueprints, difficult to insist on position of
wall.
3. Cabinets, other small fixes are entitled to cost of
completion
Jacob & Youngs v. Kent (1921): P built a country house for D
and had received all but $3,483.46 of payment. D realized
that pipes used in house were not Reading pipes, as
promised in K
1. Strong waiver argument: Ds architect saw pipes and
said nothing, D living in house almost a year without
noticing.
2. Pipes same quality as Reading pipes, only difference
in name.
3. Only nominal damages suffered by having wrong
pipes vs. HUGE expenditure to replace them. If D had
an agreement with Reading and it was important, it
needed to be in K.
Worcester Heritage Society v. Trussell (1991): D restoring a
house for P, purchased it and proved he had enough
money to restore it but lost his job shortly after. P wants to
rescind K because they cant hire any workers to fix house
when D has no money.
55

vi.

vii.
viii.

ix.

1. Court points to provision in K: P can hire workers at

Ds expense if he fails to get work done in a
reasonable amount of time. Even if he cant pay
workers, he can sell house and P can use profits to do
so.
2. K performance is too far advanced, rescission would
penalize Trussell and cause forfeiture of work hes
done on house.
Hathaway v. Sabin (1891): D owns a concert hall in
Montpelier, VT, K with Ps to play a concert and receive $75
in compensation from D. Huge snowstorm night before
concert and D assumes snowstorm will make it impossible
for other side to perform, thus doesnt prepare hall.
Musicians make it to Montpelier, sue to recover
compensation.
1. D assumed disablement freed him from his
obligation, Ps showed otherwise hence this cant be a
defense.
2. Assumption of risk goes to D: wealthy concert hall
owner, in a better position to prepare for cancellation
than musicians plus K says nothing of who assumes
risk.
3. D argues that musicians should have attempted to
mitigate losses, unreasonable because it was in
middle of a snowstorm.
Restatement 251 and 268 and UCC 2-609: if they fail to
reassure you of performance can call K off BUT make sure
that its reasonable to request assurance.
Buyers power: can request an performance of perfect
tender meaning test is exact performance, allows buyer
to reject product if any part of goods are imperfect.
Allowed under UCC 2-601.
Printing Center v. Supermind (1984): P is a printing center,
publishes books for D but most are damaged, pages are
wrong color, etc. P argues breach of warranty by sample,
everything that parties said and did considered for
performance. P argues UCC doesnt apply, a service.
1. D shows borderline servicesstill counts as transfer
of goods because clear chattels.
2. P argues D rejected books in bad faith, had an
obligation to notify seller as soon as he found
defects.
3. But reasonable to expect books to follow
merchantability warranty, hence that is standard for
this case. D wins.

56

x. Proper rejection: A party must have time to reasonably

review a product because they accept it. Obligation to alert
seller of defects as soon as they find them. If you dont
salvage goods, counts as a wrongful rejection which is an
acceptance.
xi. Plateq v. Machlett (1938): P making tanks for D lab. Small
defects in creation process, brought to attention of seller
and fixed. Last day, Ds engineer inspects tanks, says
theyll send trucks next day. D doesnt send trucks,
terminates K instead.
1. K not specific, buyer assumed there would be time to
reject and saw many things wrong.
2. K slips into realm of 2-608 when there is
acceptancecan only reject a product if there is a
substantial impairment.
3. Now burden on buyer to show there was no
acceptance, said that because there was no
installation, no acceptance.
xii. Fortin v. Oxbow Marina (1990): Ps purchase a boat and find
there are substantial issues with it. Brought it to attention
of seller and fixed some but not all of issues. After taking
boat out for 6-7 weeks, return it, saying that they havent
accepted it yet.
1. Pleaded nonconformity and merchantabilitytoilet
and engine that work basic provisions of
merchantability which makes it a case of no
acceptance
2. Even if there was acceptance, there were substantial
issues from beginning to end, hence can recover on
2-608.
xiii. 2-606 best argument for seller (failure to make a proper
rejection), can also use 2-508 (duty of buyer to bring up
defects)

57