Contracts Outline

I. Applicable Contract Law

a. Goods
i. Goods must be moveable/tangible at the time of identification to
the contract for sale and can be severed from the land with no
damage to that land. (information is not a good)
ii. Goods are covered under Article 2 of the UCC. The statute of
limitations on a good is only four years after the good is
acquired/installed. (PROVISION???)
iii. Goods can also be covered under the UN CISG, which applies to
foreign corporations.
iv. Ex-If someone buys a design that is already completed, it is a sale
of goods and thus covered under the UCC.
v. Ex-A specifically manufactured good is different than a service.
b. Services
i. Services are governed by common law.
ii. Construction contracts, information (acquired over internet),
electricity to the house, blood (in some instances)
c. Hybrid
i. Combination of goods and services. i.e. installing an in-ground
swimming pool.
d. Predominant Factor Test
i. Not just cost of materials to cost of service, but which is the
“bigger” part of the contract.
II. Means of Enforcement
a. Meaning of “enforce”
i. Causing relief of promises to redress breach or compel promisors
to perform.
1. Ex. Cases, Naval Academy for books publishing rights and
Sullivan
a. Naval Rule: Damages for breach of contract are
generally measured by the plaintiff’s actual loss.
b. Sullivan: When clear proof exists, a patient can sue
a doctor for breach of contract when he fails to cure
or bring about desired result.
ii. No punitive damages in Contract Law
b. Efficient Breach
i. An intentional breach of contract and payment of damages by a
party who would incur greater economic loss by performing under
the contract.
ii. Theory (not a legal theory-must NEVER use in court)
1. A party should be allowed to breach a contract and pay
damages, if doing so would be more economically efficient
than performing under the contract.

1
 iii. SIDE NOTE: “Constructive Trust”-a trust imposed by a court on
equitable grounds against one who has obtained property by
wrongdoing, thereby preventing the wrongful holder from being
unjustly enriched-(Breaking of a fiduciary contract, which is one
based on trust)…(See pg 6 Note 3)
c. Consideration as a Basis for Enforcement
i. Fundamentals: Bargain Theory of Consideration: The parties
involved in an enforceable contract must have bargained for an
exchange of the promise for the detriment (act or promise), so that
each induces each other.
1. Detriment: Any relinquishment of a legal right. Can take
the form of an immediate act, forbearance, or a partial or
complete abandonment of an intangible right. It can also
be a promise to act, forbear, or abandon the right in the
future.
2. Benefit: The promisor gets what he bargains for. A gain or
advantage to the promisor is not a requirement for
consideration.
3. Bargain: “Manifestation of mutual assent” to an exchange.
(Restatement 2nd § 17) An agreement.
4. The intent of the parties is determined through an objective
test. The parties’ states of mind are not looked into, only
the manifestation of the intent.
5. Entering into an agreement in good faith fulfills
consideration.
6. Rewards: Unilateral contracts of a promise to pay a reward
amount in exchange for the performance of some act.
Unless the reward specifies a specific class of people who
can do the performance, the promisor is bound to pay the
reward to anyone who successfully completes the
designated act (Restatement 2nd § 52). The promisee
MUST have conscious knowledge of the offer prior to the
completion of the act in order to make the promise
enforceable. A performer might not start out the
performance with knowledge of the promise, but as long as
he is aware of the promise prior to the completion of the
act, the promise is enforceable. Therefore, the promisee
must have been induced by the promise in completing the
act in order for it to be an enforceable promise.
d. The Requirement of Exchange: Action in the Past
i. Past performance does not constitute consideration. The
performance must have been induced by the promisor’s promise.
ii. Moral obligations based solely on gratitude or sentiment are not
sufficient of themselves to support a subsequent promise.
Therefore, a moral obligation is only binding when a contract
needs to be enforced to prevent injustice. (See Webb v. McGowin-

2
 injuring oneself to save another’s life-promise made thereafter and
was making payments on the promise)
e. The Requirement of Bargain
i. For enforceable, executory promise must be supported by
sufficient bargained for consideration (Requirement of Bargain,
Kirksey) MUST HAVE BARGAINED FOR EXCHAGE
a. Ex. “If someone finds my pen and returns it, I will
give them $50.”
2. If aware of the award and motivated to turn it in partially
because of that, then have consideration. Bargaining for
performance, unilateral.
3. If person unaware of offer, then not performing.
ii. Continued employment is sufficient consideration for a covenant,
which is part of the original employee agreement. “Part of the
original employment agreement” means that it was signed prior to,
contemporaneously with, or shortly after employment. Promised
continued employment is not consideration.
iii. A non-competition clause signed slightly after employment begins
has consideration where significant employment continues.
1. Begins as unenforceable contract because illusory, not fire
you, up to promisor at at-will employment. However,
compensated with work for raises and promotions is
consideration.
f. Promises as Consideration
i. Unilateral-A promise is made in exchange for a performance
ii. Bilateral-A promise is made in exchange for another promise.
iii. Illusory Promise: General Rule. An apparent promise that is so
qualified, or in respect of which such wide discretion is reserved,
that the apparent promisor makes no binding commitment at all.
The promisor’s promise is stated so that it allows the promisor to
perform or not perform the act depending on his preference. A
promise can be conditional, but the conditions have to be out of the
promisor’s control.
1. Exceptions to Illusory Promise:
a. Requirements Contract- Promises based on
requirements are not illusory. UCC §2-306 states
the general rule the requirement contracts are valid
as long as they are entered into in good faith. The
valid consideration is that the buyer is obligating
himself to the seller for a product essential to the
running of his business. If the buyer does not
receive the product then his business will fail. The
buyer’s requirements are not illusory because the
can be established using a reasonably foreseeable
figure based on past relationship.

3
 b. Satisfaction Clauses: A contract employing a
satisfaction clause is not unenforceable because of
an illusory promise. The promise was not illusory if
subjected to the good faith test, and it is the court’s
responsibility when there is an alleged breach based
on satisfaction to ensure that the breach was not in
good faith. If a promisor expresses lack of
satisfaction, it does not necessarily mean that the
contract is nullified, just that the performance or
promise exchanged needs to be reconsidered so that
it meets the promisee or promisor’s satisfaction.
i. Must look objectively at promises, not
subjectively.
1. Ex.-Prof hires TA for one year at $10
an hour, doesn’t want you to work
for anybody else, and can fire you if
he wants. (illusory)
2. Ex.-Prof hires TA for one year at $10
an hour, doesn’t want you to work
for anybody else, and can fire you
with 7 days notice. (not illusory)
3. Ex.-I will buy your land if I can find
contract satisfactory to me. (not
illusory since, there is market that
can measure what is satisfactory)
(MUST do a market analysis)
2. Promises in the workplace
a. Can change employee handbook if employees given
notice.
b. Can change handbook if employees suffer no
detriment and in turn makes workplace better. (See
Bankey v. Stoner Broadcasting where the handbook
was changed from being able to fire at-will vs. with
cause-Court ruled that notice must be given and that
everyone must be treated equally
c. Promotions in an at-will employment is
consideration for a contract made as well as
continued employment (See CAB v. Ingram-where
the Court took a bad bilateral contract and turned it
into a good unilateral contract where the promise
not to compete is bargained for the actual
performance of continued employment)
3. Gifts
a. Gratuitous gifts are not enforceable promises and
therefore no contract exists.
b. After a gift is given, giver cannot get it back.

4
 c. Gift promises can be enforceable under reliance
4. Family promises:
a. Generally familial promises are not enforceable.
g. Reliance as a Basis of Enforcement
i. Elements of Reliance
1. Promisor had reason to expect reliance.
2. Promise must induce the reliance.
3. Circumstances only avoided by the enforcement of the
promise
4. Liability limited by promise, until reliance unenforceable.
ii. Promissory Estoppel
1. Generally-Restatement Second §90:
a. A promise which the promisor should reasonably
expect to induce action or forbearance on the part of
the promisee or a third person and
i. The promisor must have manifested an
intent to commit to a particular performance
ii. Whether or not the expectation was
reasonable is subjected to an objective test.
The actual intent of the promisor is
irrelevant.
b. which does induce such action or forbearance is
i. The promisor is not responsible for every
loss or expense the promisee incurs. The
loss or expense must have been induced by
the promise.
ii. The promisee’s response is judged by a
reasonableness standard. The actions taken
in reliance must have been reasonably
justified.
c. binding if injustice can only be avoided by
enforcement of the promise.
i. The promisee must have suffered some
detriment or harm as a result of the reliance,
and the detriment or harm must be specific
and measurable. If there is not loss or
detriment, then there is no need to invoke
the doctrine.
2. Two views of Promissory Estoppel Application:
a. Contract View: Promissory estoppel is a substitute
for consideration. The remedy seeks to place the
promisee in the position he would have been in had
the contract been honored.
b. Tort View: Promissory estoppel is an independent
basis for enforcing a promise based not on bargain
but for accountability for conduct that induces

5
 reliance. The remedy seeks to restore the status quo
by reimbursement of expenses and losses.
3. Types of promises enforced using Promissory Estoppel:
a. Gratuitous Promises
i. Familial promises
ii. Gifts
iii. Charitable Donations
b. Promise to convey land
c. Promise coupled with gratuitous bailments
d. Marriage Settlements
e. Certain types of Commercial Promises
i. Informal promises that induce reliance
ii. Promises made during preliminary
negotiations the induce reliance
iii. Promises that fall short of becoming
contractual because of a defect or omission
in the agreement.
4. Remedies- The remedy granted for breach may be limited
as justice requires
a. The promisee is not always entitled to full
contractual relief. The court has the discretion to
award a lesser remedy.
b. Typical remedy is reimbursement of the actual loss
or expense incurred in reliance.
5. Gratuitous promises, which induce detrimental reliance, are
enforceable. Whereas normally this would have been a
gratuitous promise and enforceable, the plaintiff’s reliance
and subsequent detriment invoked promissory estoppel.
6. Cohen v. Cowles Media CompanyThe reporter’s promise
not to reveal the plaintiff’s name is an enforceable promise
under promissory estoppel. Anonymity of sources is a long-
standing journalistic tradition and its practice is supported.
The plaintiff’s reliance on the promise resulted in
detrimental consequences, which he otherwise would have
not incurred.
7. D & G Stout, Inc. v. Bacardi Imports, Inc. The defendant
should have reasonably known that its failure to fulfill its
promise would severely affect the plaintiffs negotiating
strength. The decision not to sell was clearly induced by the
defendant’s promise. Defendant’s failure to fulfill their
promise eventually resulted in the destruction of the
plaintiff’s business and any future negotiating power it had
in trying to sell it.
h. Restitution as an Alternative Basis for Recovery
i. Type not based on promise, but rather preventing unjust
enrichment.

6
 1. Gains through another’s loss are unjust and should be
restored.
a. Ex. A thinks B is willing to pay for work, so does
work on land but then A refuses to pay B.
2. It is not unjust enrichment when the work is forced upon
you.
3. Difference between volunteer and giving compensation to
an officious meddler.
ii. Can have agreement and contract without consideration.
1. Quasi-contract-An implied contract created by law to
prevent unjust enrichment
2. Elements of a Quasi-contract (implied in law)
a. The plaintiff bestowed a material benefit on the
defendant
b. The plaintiff has a reasonable belief based in fact
that the defendant would contract for the services of
goods bestowed if he would have been able. (There
was a direct relationship between the parties).
c. The plaintiff is unjustly enriched
d. There is no other remedy.
3. Enrichment.
a. Implied by law contract, although no facts to
support it.
b. Rests upon no evidence, legal fiction.
c. Parties never intended the contract, yet still
enforceable.
4. Exceptions to Quasi-Contractual Relief:
a. Officious Intermeddler: Grantor conveys a benefit
with the intent of benefiting, but does not have the
recipient’s permission. (Ex: Clipping the hedges
without permission, then demanding to be paid).
Grantor has no basis for relief because the services
were imposed on the recipient without their
knowledge or permission
iii. Cases dealing with restitution interests
1. Cotnam v. Wisdom-A doctor may recover in quasi-contract
reasonable compensation for emergency services provided
on an unconscious victim.
2. Callano v. Oakwood Park Homes Corp.- Cannot hold a 3rd
party liable for the promise of another.
3. Pyeatte v. Pyeatte- Married couples have a lessened chance
to have a contract enforced because there is a presumption
of gratuitous promises.
4. Unmarried cohabitants may have greater success than
married ones in recovering in restitution for homemaker

7
 services since the background assumption of marital
gratuitousness is absent.
i. Reforming the Doctrine of Consideration
i. A few states have statutes that claim that something in writing is
enough for consideration.
ii. Dementas v. Estate of Tallas-there is no consideration for things
in the past…especially when it is a gratuitous gift which was
notorized by the person giving the gift.
III. Remedies
a. Remedy-at-Law/Money
i. Expectation (Main remedy)
1. Placing the non-breaching party in the position they would
have been in had the contract been formed.
2. Specific performance is the purest form of expectation and
the preferred course of remedy.
a. Real estate contracts almost always are granted
specific performance when they are breached.
b. Make breaching party do what they said they were
going to do.
c. If bargain for “goods”/ “goods” must be unique.
d. Money can be substituted for specific performance
if it makes common sense. i.e. job already finished
by another.
ii. Reliance
1. Dependence or trust of a person / puts you back to where
you would have been had the contract not been formed
(restoring the status quo ante).
iii. Restitution (implied in law)
1. Unjust enrichment on the breaching party.
2. Disgorgement of the benefit-The act of giving up
something on demand or by legal compulsion. Makes
breaching party surrender what it took. (In Sullivan, she
would only get back the Dr. fees)
3. Problems with Restitution:
a. Courts normally deny benefits for officious
intermeddler because a benefit was given, but it
wasn’t asked for.
b. Gratuitous acts-there is usually a presumption that
there was no expectation for compensation.
IV. The Bargaining Process
a. The Nature of Assent- Assent policy dictates that contractual obligation
should not be imposed on a person who did not intend to be bound.
i. Intent to be Bound
1. Objective test for assent: Was there a manifestation of
assent that would be understood by a reasonable person in
the position of the party to whom the manifestation was

8
 made? It is not what the words or actions did mean to
either party, but how a reasonable person in the context of
the transaction should have interpreted them
a. The mental assent of the parties is not requisite for
the formation of a contract. If the words or acts of
one of the parties have but one reasonable meaning,
his undisclosed intention is immaterial except when
an unreasonable meaning, which he attaches to his
manifestations, is known to the other party.
ii. Types of disputes in which offer and acceptance are relevant.
1. After a series of negotiations or communications, one of the
party contends that a contract was formed, but the other
denies that a final agreement was reached.
2. A contract was definitely formed, but what the actual and
binding terms of the contact were is in dispute.
iii. Offer and Acceptance under the UCC
1. The UCC generally follows common law principles. UCC
§ 2-204 provides that the courts should focus on the
existence of an agreement between the parties through their
words or acts, and if such an agreement is evident, the court
should not be overly concerned about the technicalities of
contract formation.
b. The Offer
i. An offer is the moment at which one person puts himself or herself
at legal risk. An offer creates a power of acceptance in the offeree
so that the offeree can bring a contract into existence through
acceptance. The person making the offer is the “master of the
offer” and dictates what the terms of the contract as well as the
method of acceptance are.
ii. Required elements of an offer:
1. The offer must be communicated or manifested to the
person to whom it is addressed.
2. The offer must indicate a desire to enter into a contract. It
does so by specifying the terms of the offer and method of
acceptance.
3. The offer must be directed at some person or group of
persons.
4. The offer must invite acceptance, but doesn’t necessarily
have to dictate the manner of acceptance.
5. The offer must create the reasonable understanding that
upon acceptance, a contract will arise without any further
approval is required from the offeror.
iii. Indicators to distinguish an offer from preliminary negotiations:
1. The words used in the communications indicate that it is an
offer.

9
 2. A communication that omits significant terms is not likely
an offer.
3. A communication not specifically directed to a specific
person is most likely not an offer.
4. The past relationship between the parties indicates that the
recipient should reasonably understand the communication
as an offer or not an offer.
5. The parties are part of a trade or community and should be
aware of common practices or trade usages.
iv. Examples of communications which are not offers:
1. Preliminary Negotiations-Owen v. Tunison: Giving a
price as to how much he would sell the business for is not
an offer. Held. Letter was not an offer to sell. The letter
was clearly an attempt by the defendant to open
negotiations that might lead to a sale, but not a proposal to
sell.
2. Lowest Bid: Harvey v. Facey: The court established the
general rule that a mere statement of the lowest price at
which the vendor would sell contains no implied contract to
sell at that price to the persons making the inquiry.
3. Quotation:Fairmount Glass Works v. Crunden-Martin
Woodenware Co.: Plaintiff and defendant exchanged
telegrams arranging the sale of goods by the defendant to
the plaintiff. Plaintiff had requested lowest price for sale
for a particular set of goods; defendant replied with a quote
of the prices of those goods, and plaintiff sent a second
telegram to enter an order of those goods and in what
amount. Defendant sent second telegram indicating it was
impossible to complete the order. Plaintiff sued for specific
performance arguing that a contract was closed by last
telegram requesting order. Held. The defendant’s answer
was not a quotation of prices, but a definite offer to sell on
the terms indicated after the terms had been accepted. This
is an exception to the general rule, which states that
quotations of price are not offers. The defendant’s
inclusion of the phrase “for immediate acceptance”
specified a method of acceptance and if the plaintiff
accepted this as well as the terms of the quote, if became a
contract.
4. Advertisements: Lefkowitz v. Great Minneapolis Surplus
Store: The general rule is that ads are not offers, but
preliminary negotiations. However, this ad, unlike most
ads, specified terms for acceptance (first come, first serve),
which made it distinct from the general rule.
5. Mistaken Bids:Elsinore Union Elementary School
District v. Karstoff: The general rule is that mistaken bids

10
 are enforceable unless the mistake can be justified under
the rescission doctrine (an honest mistake followed by
promt admission).
v. Revocable Offers
1. Common Law: All offers are revocable unless the offeree
has given consideration in exchange for the offeror’s
promise to keep the offer open.
a. The general rule is that promises to keep an offer
open do not bind offerors to their offer unless they
are exchanged for consideration. The memo was an
offer, but until acceptance was given by the
plaintiff, the defendant had the power to change the
offer or rescind it all together.
vi. Irrevocable Offers
1. Common Law
a. General Rule: There must be valid consideration
given by the offeree for an offer to be irrevocable
under common law.
b. Options: A promise to keep an offer open for a
stated period of time. Under the Restatement 2d §
87, options are binding as a contract if they are in
writing and signed by the offeror, recite a purported
consideration for the making of the offer, and
propose an exchange on fair terms within a
reasonable time. Otherwise they are not.
i. Options granted within a specific contract
are separate from an option to keep an offer
open. Options within the contract do not
require separate consideration.
ii. Promissory Estoppel: a promise by the
offeror to not revoke an offer for a certain
period of time can be enforced using
promissory estoppel despite the lack of
consideration from the offeree.
(Restatement 2d § 87(2)). In order for
Promissory Estoppel to apply, the offeree
must have acted in detriment to the promise
to keep the offer open. If the offeree has
suffered no loss in reliance on the promise,
promissory estoppel does not apply.
iii. Ragosta v. Wilder: If financing is obtained
prior to the offer, there cannot be a claim of
reliance.
c. Exceptions
i. Statute dictates that certain types of offers
are irrevocable.

11
c. The Acceptance
i. Acceptance is the offeree’s manifestation of assent to the offer.
ii. Must be a volitional act. Intent to enter into a contract is
determined objectively. Would a reasonable person have
understood the manifestation as acceptance?
iii. Only the offeree can accept the offer.
iv. A voluntary act of the offeree where he exercises the power
conferred upon him by the offer, and then the offree creates a
binding agreement.
v. The offeror as master: The offeror is only bound by the terms that
he prescribes. If he did not bind himself to notify the defendant of
receipt of acceptance, then he is not bound to do so.
vi. Preparing to perform v. commencement of performance. Preparing
to perform is not actual performance and an offer can still be
revoked during a preparation for performance. Commencement of
performance is generally characterized by the acquisition of
specific materials unique to the type of performance requested;
loading of materials and travel to the location of performance.
1. Acceptance of an offer must be manifested in some way,
which would be understood by the offeror that his offer has
been accepted. Uncommunicated intent or an act in and of
itself no indication of acceptance is not acceptance
a. Exception:
i. When a offeror has begun work which were
specifically directed at fulfilling the
offeror’s contractual obligations to the
offeree, notice of commencement of
performance is not required in a unilateral
contract. Ie. loading a truck and driving to
the location (especially out of state)
2. Purchasing of materials for the project does not constitute
acceptance because there is no way that it could serve to
notify the defendants that the plaintiff had accepted their
offer.
vii. Notice in a Unilateral Contract
1. General Rule: No notice of acceptance is required if the
offeror is bargaining for performance, unless the offeror
has required notice.
2. Exceptions: If the offeree knows or should know that the
offeror has no reasonable way of learning that he accepts
the offer, then the offeree has a responsibility to provide
some sort of notice that he has accepted the offer.
viii. Notice in a Bilateral Contract
1. General Rule: Notice of acceptance is required.
2. Exceptions: The offeror specifies that no notice is required.

12
 ix. Shipments in response to a buyer’s order is an acceptance—Using
U.C.C. 2-206 (1) provides that an order “for prompt or current
shipment shall be construed as inviting acceptance either by a
prompt promise to ship or by the prompt or current shipment of
conforming or non-conforming goods.”
1. Shipment of non-conforming goods as acceptance: A
shipment of non-conforming goods does not constitute an
acceptance if the seller seasonably notifies the buyer that
the shipment is offered only as an accommodation to the
buyer.
x. Silence is not an acceptance- the offeror is powerless to alter the
rule.
1. Exceptions:
a. If the standard practice was to be silent for
acceptance, it is an acceptance. See Hobbs v.
Massasoit Whip Co.
2. Absent a notice of rejection if the standard practice was to
remain silent, there is acceptance. Creates the “ this is how
we have been doing it,” and thus they have an obligation to
reject.
xi. Rules from Cases dealing with Acceptance:
1. If the offeror only suggests a method of acceptance, other
methods can be used to accept the offer.
2. A seller’s price list is not an offer to the buyer, and a
following partial shipment of the buyer’s order is not an
acceptance sufficient to form a contract.
xii. Key Terms For Acceptance:
1. Indemnification Clause- The payment by a corporation of
expenses incurred by the officers or directors as a result of
litigation involving the corporation.
d. Termination of the Power of Acceptance
i. Lapse of an Offer
1. After some period of time, an offer lapses. If no period is
specified in the offer, it lapses after a reasonable time. A
reasonable time depends on the circumstances.
2. Ordinarily, an offer made by one to another in a face-to-
face conversation is deemed to continue only to the close of
their conversation, and cannot be accepted thereafter.
ii. Revocation
1. Common Law: All offers are revocable unless the offeree
has given consideration in exchange for the offeror’s
promise to keep the offer open.
2. Revocation is only effective on receipt by the offeree
a. Direct revocation: revocation of the offer is clearly
indicated to the offeree, or at least the offeree
should be reasonably aware of revocation.

13
 b. Indirect revocation: the offeror takes clear action
inconsistent with the continuing intent to enter into
a contract, and the offeree obtains reliable
information of this action. Ie. “I don’t know if I
want to sell it.” This is inconsistent with the
continuing intent and thus the offer is revoked.
c. Revocation of General Offers: In the case of a
general offer, such as one addressed to the general
public by an advertisement, it will ordinarily be
impossible for the offerer to actually communicate a
revocation to all of the persons who are aware of
that offer. The offeror can be required to give a
notice of revocation publicity equal to that given the
offer.
3. Option Contracts:
a. A promise made by an offeror that effectively limits
the offeror’s power to revoke. Usually an option
contract expresses, directly or indirectly, a fixed
period within which the offeree must exercise, or
“pick up,” the option.
b. If the offer clearly calls for performance as the only
means of acceptance, the offeror is obligated to
allow the offeree a reasonable amount of time to
complete performance. During this time, the offer
becomes irrevocable. The offeree must have
commenced performance, however, not just started
to prepare to perform.
c. Promises to keep an offer open do not bind offerors
to their offer unless they are exchanged for
consideration. Normally this consideration if that
the offeree gives the offeror something. (common
law)
d. Promissory Estoppel: a promise by the offeror to
not revoke an offer for a certain period of time can
be enforced using promissory estoppel despite the
lack of consideration from the offeree.
(Restatement 2d § 87(2)). In order for Promissory
Estoppel to apply, the offeree must have acted in
detriment to the promise to keep the offer open. If
the offeree has suffered no loss in reliance on the
promise, promissory estoppel does not apply.
4. “Firm Offers” under the Code
a. UCC 2-205: An offer by a merchant for the sale of
goods must be in writing and signed for the offer to
be irrevocable. The offer will only be irrevocable

14
 for a maximum of three months under the UCC. No
consideration by the offeree is required.
b. Requirements:
i. Must be made by the merchant (offeror)
ii. Needs to be in writing
iii. Writing must state that it is a firm offer
iv. If there is no time in the writing, it says open
for a reasonable time, but no more than 6
months
v. Do not need consideration for a firm offer
c. If a merchant had previously done something in
hopes to get something else, but did not rely on the
offer from the defendant, they cannot make a claim
for specific performance or reliance.
iii. Death of an Offeror
1. Offeree’s power of acceptance terminates when he dies
2. If an option contract and offeror dies or is incapacitated, the
offer remains open.
3. If the offeror dies before the offeree accepts, the offer is
terminated.
4. If the offeror dies after the offeree accepts, the acceptance
is valid.
5. If the offeror dies before receiving the acceptance, but after
the acceptance has left the hand of the offeree, the contract
is valid.
iv. Rejection
1. The offeree outright rejects the offer on no uncertain terms.
The offeree cannot recant the rejection. The offer is dead.
2. If the offeree tries to change the terms of the offer, this is a
counteroffer and is equivalent to a rejection.
3. A rejection or couteroffer is only effective upon receipt.
4. The Mirror Image Rule
a. Common Law General Rule of Mirror Image:
Acceptance must correspond exactly w/ the terms
established by the offer. The contemporary view is
toleration for minor discrepancies and to apply the
rule only where there are material changes in the
transaction proposed by the offeror. A non-
conforming response is considered a counteroffer.
The counteroffer is both a rejection and a new offer
to the original offeror.
b. 3 ways to lessen the “Mirror Image”
i. a court may decide that what seemed to be
an additional or different term in the
acceptance was an “implied term” in the
offer, so that language at first appeared to

15
 vary the terms of the offer did not really do
so.
ii. A court may conclude that the language of
the acceptance relating to an additional or
different term is only precatory
(recommending, requesting, or expressing a
desire, but usually in a non-binding way
iii. Even where neither of these mitigating
techniquest is available and no contract has
been made, parties often act on the
assumption that their promises are binding
and the transaction is carried out without
incident.
c. “Last Shot”-Under the mirror image rule, if parties
have begun performance, but have disputes about
certain details, the party that sent the last form
before performance began usually prevails. Each
later form operated as a counter-offer.
5. The Battle of the Forms: Opening Skirmish
a. Because each party strives to make a contract on the
terms of its own, a mismatch of terms is likely,
raising questions about whether a contract has been
formed and if so, on what terms. This can occur
with standardized forms with fine print on the back
but it can also occur with individualized messages.
Rule-A proposal to accept, or an acceptance, upon
terms varying from those offered, is a rejection of
the offer, an puts an end to the negotiation, unless
the party who made the original offer renews it, or
assents to the modification suggested. The other
party having once rejected the offer, cannot
afterwards revive it by tendering an acceptance of
it. Common law rules are not really equipped to
handle these battles.
6. Rejection of an Irrevocable Offer:
a. Irrevocable offers are not killed by the rejection of
the offer, however the offeror of an irrevocable
offer can act on reliance in a rejection by the offeree
and raise equitable estoppel as defense.
b. An irrevocable offer remains open for the certain
“time period” even if it was rejected by the offeree
prior to the final date.
c. Required Elements:
i. Mistake of material fact
ii. Unilateral mistake

16
 iii. Prompt notice upon recognition of the
mistake
iv. The parties can be returned to status quo
v. Mistake was not due to the neglect of legal
duty
vi. Plaintiff knew or should have known that
the defendant was making a mistake (not
always essential to rescission)
7. The “Mailbox Rule”: Contracts by Correspondence
a. An acceptance is effective upon dispatch from the
offeree to the offeror
b. A revocation is only valid when it reaches the
offeree
c. If an acceptance is lost in transit even if the offeror
does not know that the mail has reached him, it may
be valid unless the offeror explicitly says that it is
only valid upon receipt.
d. If a revocation is lost in transit the revocation is
considered invalid.
e. If an offeror receives a rejection notice without
knowledge of prior acceptance they are not bound
by the agreement.
f. If the offeror receives a rejection notice with
knowledge of prior acceptance the offeror is bound
to the agreement.
v. The Battle of the Forms and the UCC
1. UCC § 2-207
a. A definite and seasonable expression of acceptance
or a written confirmation, which is sent within a
reasonable time, operates as an acceptance even
though it states terms additional to or different from
those offered or agreed upon, unless acceptance is
expressly made conditional on assent to the
additional or different terms.
b. The additional terms are to be construed as
proposals for addition to the contract. Between
merchants such terms become pat of the contract
unless:
i. The offer expressly limits acceptance to the
terms of the offer;
ii. They materially alter it; or
iii. Notification of objection to them has already
been given or is giving w/in a reasonable
time after notice of them is received.
c. Conduct by both parties, which recognizes the
existence of a contract is sufficient to establish a

17
 contract for sale although the writings of the parties
do not otherwise establish a contract. In such case
the terms of the particular contract consist of those
terms on which the writings of the parties agree,
together w/ any supplementary terms incorporated
under any other provisions of this Act.
2. Acceptance Varying Offer: UCC 2-207
a. Offer must be have a definite and seasonable
acceptance or a written confirmation.
b. Under the UCC 2-207, both confirmations and
acceptances operate as acceptances so that the
minor changes in the oral agreements and the
confirmations do not void the contract.
c. the offeree can prevent the formation of a contract if
its definite acceptance is conditioned on the
offeror’s assent to the additional or different terms
in the expression (seasonable expression) of
acceptance.
3. Materiality- if an additional term materially alters the offer,
there is no contract. A material offer is a type of surprise or
hardship and to which the standard in the industry is used
to determine if an additional term materially alters the
contract.
a. For disclaimer of warranties and arbitration
provisions, must find the standard in the industry.
b. “At least in the absence of some industry custom
setting a limit on warranties that do not specify a
duration… any limitation on the length of the
warranty in the offer would be a materially different
term.”
c. Examples—a clause negating such standard
warranties as that of merchantability or fitness for a
particular purpose in circumstances in which either
warranty normally attaches—a clause reserving to
the seller the power to cancel upon the buyer’s
failure to meet any invoice when due. Also, an
additional arbitration clause is a material addition.
d. Examples of clause that don’t result in surprise—a
clause fixing a reasonable time for complaints—a
clause providing for interest on overdue invoices.
e. Step-Saver-The disclaimer of warranty and
limitation of remedies terms of the box top license
did not become a part of the parties’ agreement
because they materially altered the initial contract.

18
 f. Itoh-If there is no definite agreement, use 2-207(3)
(performance). Use Article 2 to fill in the gaps
missing (Gap fillers)
4. Different or Additional Terms:
a. Additional terms are pat of the contract unless:
i. Offer expressly limits acceptance to terms of
offer;
ii. Additional terms materially alter the terms
of contract; or
iii. Offeror notifies offeree within a reasonable
time that he objects to the additional terms.
b. For different terms, there are three options to use:
i. Knockout Rule (majority)- terms are
knocked out of the contract and filled by
provisions in the UCC
ii. Dropout Rule (minority)-Different terms in
acceptance drop out, but the different terms
in the offer are part of the contract.
iii. Typo Rule-Different terms are treated as
additional terms and must determine
whether they materially alter the contract.
5. Shrink-wrap and Click-wrap Terms: The Battle of the
Form?
a. Only after a party receives and opens the box or
shrink-wrap of a good, do they find the seller’s
additional terms.
b. Contract terms listed inside of packaging are not
universally void. There was no contract until after
the buyer used the product. The buyer had a
reasonable opportunity to review the terms, and
then choose not to accept them by returning the
product. Not including the terms on the outside of
the packaging is a practical consideration, but
shouldn’t make terms listed inside ineffective, as
long as the buyer is given sufficient notice of them.
vi. Precontractual Liability-no actual contract
1. Must determine:
a. Whether both parties intended to be bound.
b. Are the terms sufficiently definite?
c. Whether there was consideration
2. Revocability of Subcontractors’ Bids
a. General contractors are not bound to sub-
contractors, but sub-contractors may be bound to
general contractors. There is a reliance of the
general contractors on the subcontractor’s bids. (the
difference between this case and Kastorff is that in

19
 this case, the courts cannot restore the status quo
ante).
3. Liability when Negotiations Fail
a. If during the course of the negotiations one party
has conferred a benefit on the other, the recipient of
the benefit may be required to make restitution.
However, claimants seeking recovery for services
performed during negotiations have rarely
succeeded.
b. If the usual course of business requires that one
company do something to enrich themselves, and
the negotiations fail, there is no unjust enrichment
to the defendant (no restitution), nor is there
reliance. (See Songbird pg 233)
c. If services are designed only to benefit the
defendant, and the negotiations fail, the defendant is
unjustly enriched. Recovery is then measured by
the unjust enrichment only. However, can try for
reliance to get more $.
d. A negotiating party may not with impunity,
misrepresent its intention to come to terms, and
liability for misrepresentation includes reliance
losses.
e. “Where damages are appropriate, but difficult to
prove, the law eschews the necessity of
mathematical exactitude.” A measure of unjust
enrichment will be the market value. Hartford
Whalers- The best figure to use would be the
contract price. The contract price was a
representation of the fair market value of the service
provided. This is best judgment of the way to purge
the benefactor of the benefit received because it
reflects the value of the service provided.
f. Hoffman-Promises made during the pre-contractual
negotiation period can be enforceable through
promissory estoppel. The defendant’s promises
satisfy the requirements of promissory estoppel,
although the parties had not yet entered into a
contract.
g. Employment at will and reliance recovery: whether
at will employment will give rise to liability for
withdrawing the offer. The court held that Grouse
should be compensated for a reasonable time of
employment at the salary of his old job. Because
this is what he would have been making had Group
Health never made the offer, thereby returning

20
 Grouse to the status quo ante, even though this may
appear as an expectation interest it is a reliance
interest. Grouse was never given a good faith
opportunity to perform his duties and those injustice
requires the enforcement of the promise. Damage
options: salary old job for a reasonable time or
salary VA hospital for a reasonable time (he could
have taken this position and thus may be able to
receive that amount)
h. Public Policy reliance enforcement-MTA v. Kajima-
The court held that bid preparation costs could be
recovered because of Kajima’s reliance on the
statutory language but that lost profits could not be
recovered due to the financial damage which would
occur to the MTA and other governmental entities.
A public entity’s statutory violation should allow
for remedy based on policy benefits.
i. Cyberchron Corp.- Since the weight of the systems
was never agreed upon, there was no contract, but
there was a reliance. After being told that they
would work out the weight at a later date, the
plaintiff continued to perform. They were awarded
reliance costs from the time that they were told not
worry until the negotiations failed. Can also get
“overhead costs” and “shutdown costs” in reliance
claims.
vii. The Requirement of Definiteness
1. Generally, no contract comes into being if the parties leave
a material aspect of the agreement indefinite and the
process of the interpretation or construction cannot resolve
the uncertainty.
2. Indefiniteness under the UCC: §2-204: A contract for the
sale of goods with terms left open “does not fail for
indefiniteness if the parties have intended to make a
contract and there is a reasonably certain basis for giving an
appropriate remedy.”
3. Indefiniteness under Common Law: Restatement 2d § 33:
The contract terms are reasonably certain if they can
provide a basis for determining the existence of a breach,
and for giving an appropriate remedy. But, open terms of a
contract may show that the parties did not intend to enter
into a contract.
4. Forms of Indefiniteness
a. Vagueness and ambiguity
b. Omitted terms
c. Unresolved terms

21
5. Causes of indefiniteness
a. They do not want to take the time or trouble to do
so, but prefer to rely on the terms that a court will
supply in case a dispute arises
b. They are reluctant to raise difficult issues for fear
that the deal may fall through.
c. They do not foresee the problem that happens to
arise.
d. They prefer not to disclose information that could
give the other party an advantage.
6. A party who has performed under an agreement that it
unenforceable for indefiniteness is entitled to restitution.
7. If terms are indefinite, the courts attempt to fill in certain
gaps such as price if there has been a price term left open.
As long as the courts are able to determine what the current
“rate” is, they often apply that rate and make the contract
valid. See Restatement § 33.
8. Assent Revisited
a. Oglebay Norton Co. v Armco, Inc.
i. In this case, the price was left open
determined by the pricing mechanisms.
Unfortunately these mechanisms had failed
and the court needed to determine the
results.
ii. They looked at the closeness of the
relationship between Oglebay and Armco,
the improvements of $95 Million by
Oglebay, which Armco should have known,
and the intent of the parties to negotiate
throughout their long lease.
iii. Was there sufficient detail to find intent and
to craft a remedy? Yes.
iv. This court used specific performance, but in
a very unique way of setting prices.

22